Thursday, 5 March 2009

Are You Interested? (Part II)

Well it happened, then! Not only did the Bank of England lower the interest rate to 0.5% to discourage savers and to turn us into a nation of spenders, it also announced that it is to create £75billion of new money in an attempt to revive lending and an economy that is on the ropes.

This policy, apparently called quantitative easing, is about pouring money into the whole system rather than just into the banks. Mr Darling has given the Bank of England permission to extend this £75billion to up to £150billion.

Don't get too excited though, the Bank wont be printing a shed load of tenners, rather boringly it will be buying assets like bonds and gilts.

I may own a pair of red braces but I'm no financial guru but even I can see that if this is not policed properly by the Treasury, it could lead to higher inflation or even, heaven forbid, hyperinflation.

Everyone who stayed awake during history lessons at school knows what happened to the German economy in in the 1920's.

Just make sure history doesn't repeat itself, Mr Darling!

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