I’ve been hearing these terms but don’t really understand what they mean, when and why are they used by the government and how exactly they affect prices and general standard of living.
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Quantative easing:
The govt sell bonds. You can imagine them like a savings account at the bank of england. Someone gives pounds to the UK govt on the agreement that after a set period of time the govt will give the money back plus interest.
I say “someone” – its sometimes a person. Most often its pension funds, insurance companies, banks etc.
With quantatitive easing, the govt buys back the bonds early in order to change savings into liquid assets. Basically the govt (BoE) transfer money from a savings account to a current account.
The joke on all of us is the bit where the govt tell us they bailed out the banks by giving them back their own assets.
Basically QE is a con.
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