The Future

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Quantitative easing aims to support the economy by encouraging people to save less and a bit more

The Corona Virus-a pandemic has struck a massive blow to the economy, jobs and businesses hard. The Bank of England is expected to announce billions of pounds worth of additional support for the economy in Another Round of "quantitative easing".

So, what does this mean in practice?

What is meant quantitative easing to do?

people worry When the economic times are hard, to lose their jobs, and to grow suspicious about the expenditure of money. Companies see their customers stay. You start to lose money, and possibly layoffs.

Normally, The Bank of England would try to make things better, by lowering interest rates.

Lower prices means that you get less interest on their savings, so that it is saving less attractive, money than spend it. And lower interest rates make it cheaper to borrow money, so it is easier to buy a new house, or car, or expand Your Business .

people to buy things, and helps companies to invest, to stay the economy is healthy, secure jobs.

But the interest rates are currently barely above Zero - There is no room for Another big cut.

This is the reason why The Bank 's quantitative easing (QE) has. It is a different way to promote consumption and investment.

How does QE work?

The Bank of England supervised by the British money Supply - so he can New Money electronically. (The QE Will sometimes print to as "money", although no new Bank notes are printed).

The Bank spends most of this money in the purchase of government bonds.

the state bonds are to be repaid by promises, a certain sum in The Future , and pay interest in the meantime.

purchase of billions of pounds worth of bonds pushes The Price When the demand increases, The Price usually goes up to.

Many of the interest rates offered by banks to businesses and individuals affected by The Price of government bonds.

So, if these bond prices rise, the interest rates for these loans, Making It easier to borrow and spend.

more QE to make it easier to find a mortgage?

In addition, many investors buy government bonds in times of crisis as a safe place to put their money, as the British government has failed the never, to the repayment of a bond.

When The Bank of England drives The Price of these loans that security Will be more expensive. to buy

Those investors Will be encouraged to share or lend money to companies Will again help both the economy support.

Has it happened before?

The First QE programme in the UK was launched in the year 2009, as the financial crisis threatens the economy, unemployment rose and the stock markets were in free fall.

The Bank of England had already cut rates from 5% to 1%, but it is felt that more was needed. So on the 5. In March, it cut rates to 0. 5% and announced a £75 billion programme of quantitative easing.

Since then, the number has risen to £645bn, as The Bank 's new rounds of QE launched after the Euro-Zone debt crisis, the Brexit referendum and the Corona-Virus-pandemic.

A Number of other countries started QE programmes after 2009, including the US, the Eurozone and Japan.

What was the impact of QE?

Most of the research suggests that QE contributed to the Economic Growth of the wages is stronger, higher, and unemployment lower than they would otherwise have been.

But, QE has some perverse effects.

As well as bonds, it increases prices for things like stocks and real estate. This tends to benefit wealthier members of society who already these things,

in the Meantime, younger people are finding it harder to buy have to build your first houses and savings.

it Was bad for pension funds?

Another important Side Effect of QE hit the pensions. Courses of the state bonds used to estimate how much it Will cost to provide pensions in The Future .

When bond prices rise, increasing the cost of providing pensions in The Future . As a result, many companies were forced to have larger payments to the pension systems, reducing invest the money somewhere else.

And, in many cases, QE Will have contributed to the decision to close the pension altogether.

Does QE, The National debt help?

More Than 30% of government debt bought by The Bank of England through QE.

After these eager buyers with very deep pockets makes it easier for the government to earn more money through the sale of bonds.

give it more room to borrow for other measures to combat the economic impact of the pandemic, from holiday schemes to make extra money for the NHS and support for the company.

The government pays too much about other lenders - Another burden lifted from The Public finances.

uk economy, unemployment, pay, coronavirus pandemic, pensions, bank of england

Source of news: bbc.com