Bank wants extra £50bn for 'fragile' economy

[mgt23]

http://www.independent.co.uk/news/business/news/bank-wants-extra-16350bn-for-fragile-economy-1768481.html

Bank of England extends quantitative easing to prevent relapse in UK growth

By Sean O'Grady, Economics Editor

Friday, 7 August 2009

The "fragile" state of financial conditions and the continuing shortage of lending by the banks were cited by the Bank of England as its reasons for a substantial expansion in its policy of quantitative easing.

A further £50bn of "QE", which is likened to printing money, was authorised by the Chancellor Alistair Darling yesterday, a clear signal that the authorities remain concerned about the speed and strength of a recovery, despite a run of better news in recent days on the property market, manufacturing output and business confidence.

Some £125bn has already been pumped into the economy since the policy was launched in March. Most has been spent buying gilts, with smaller amounts devoted to the commercial paper and corporate bonds market.

In his letter to the Chancellor, the Governor of the Bank, Mervyn King, wrote: "The future evolution of output and inflation will be determined by the balance of two sets of forces. On the one hand, there is a considerable stimulus still working through from the easing in monetary and fiscal policy and the past depreciation of sterling.

"On the other hand, the need for banks to continue repairing their balance sheets is likely to restrict the availability of credit, and past falls in asset prices and high levels of debt may weigh on spending."

The Bank's Monetary Policy Committee (MPC) also announced it would keep interest rates at 0.5 per cent.

Some analysts were surprised by the news about the additional QE, and the pound fell sharply after the announcement. Almost all of the City's economists have spent the past few weeks reading radically different interpretations into the public utterances made by members of the MPC, which reflected an unusually large uncertainty about where the Bank's thinking was heading. Nonetheless, most welcomed the move.

While the consensus is that the UK will return to growth in this quarter, the dangers of a "relapse" or "double dip" are also strong. Richard Snook, of forecasters CEBR, said: "The impact of rising unemployment and the inevitable fiscal contraction in 2010 means that strong monetary stimulus is needed to prevent a fragile recovery turning into a double-dip recession."

In his letter responding to the Bank, Mr Darling said that he welcomed the consultation into the policy to be extended to supply chain finance, as business wants.

Critics have argued that the subdued growth in the money supply and lending means that the banks have been "sitting" on the extra cash and refusing to lend it as they rebuild their capital, though that very sluggishness is perhaps a reason to intensify the policy. Others point to the way that QE has bid up the price of gilts, depressing their yield and attractiveness to investors and thus helping revive equity and corporate bonds markets – important sources of alternative finance for larger firms. That could leave more finance for smaller firms and homebuyers.

There is conflicting evidence on lending to smaller enterprises; the trend in mortgage approvals has been upwards, from low levels. Improving share and bond values have also helped banks and insurers trim writedowns.

Bank officials point to the inflation target as the rationale for QE. Having fallen below the 2 per cent target to 1.8 per cent last month, it will fall much further soon. The scale of unused capacity and the feebleness of wage pressures suggest that it will not return to that target easily. The Bank will extend the range of gilts to be purchased to all conventional types of over three-year maturity.

Yesterday the European Central Bank left rates unchanged at 1 per cent and signalled no move towards QE, pointing to signs the recession is "bottoming out".

[scorpio]

A further £50bn of "QE", which is likened to printing money, was authorised by the Chancellor Alistair Darling yesterday

Likened to printing money? No, that is printing money.

"On the other hand, the need for banks to continue repairing their balance sheets is likely to restrict the availability of credit, and past falls in asset prices and high levels of debt may weigh on spending."

Translation: Continue to bilk $$$ out of the taxpayers for the bank's risky and fraudulent investments.

While the consensus is that the UK will return to growth in this quarter, the dangers of a "relapse" or "double dip" are also strong. Richard Snook, of forecasters CEBR, said: "The impact of rising unemployment and the inevitable fiscal contraction in 2010 means that strong monetary stimulus is needed to prevent a fragile recovery turning into a double-dip recession."

So much double talk from the state controlled ziomedia. Things are getting better, but they make get worse again....unless you give the banksters some more of your money

Yesterday the European Central Bank left rates unchanged at 1 per cent and signalled no move towards QE, pointing to signs the recession is "bottoming out".

The recession is bottoming out? What magical event is going to make it get better?
This is the same BS they're peddling here in the states.
If I didn't know better, I'd think the same people are running both our countries
The lies just get bigger and bigger. How much BS do they think people are gonna swallow?

What happens once they've looted and stolen everything? What then?

[sullivan]

50 billion is the equivalent to 4 trillion once the fractional reserve scam has done its work.  Yet more theft of wealth from the unsuspecting populace.

[Chargeemquick]

50 billion is the equivalent to 4 trillion once the fractional reserve scam has done its work.  Yet more theft of wealth from the unsuspecting populace.

Meanwhile,that "paltry" 50 billion/4 trillion is not making even a scratch let alone a dent in the the quadrillions of toxic debt(which is also accruing interest exponentially) which our "British" banks have helped run up in the name of international debt-worship.
As DBS has said before,it`s a miracle that this monstrous behemoth is still on the road,even if all the markets and the "numbers" are openly being manipulated.
I just can`t see how the zio-criminals will be able to offload all their toxic debt waste on to governments.