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Quantitative Easing in England
1.
2. 1. Summary of the article
2. What is QE?
3. Voices in favor of QE
4. Voices against QE
5. Conclusion
3. - Source
- Context and actors
- The UK economy according the Bank of England
- Quantitative easing
- Voices in favor and against-Skeptics
- Conclusion
4. - Central banks normally set the Price of money, using official
interest rates to regulate the economy
- Higher interest = less borrowing = more saving
- Lower interest = more borrowing = less saving
- When interest rates go close to 0, there is a gap between the
official rate and the one offered by lenders.
- Quantitative easing consists in injecting money to the economy
by crediting the central bank account
5. - Central bank can lose money on its purchases.
- It could destroy the value of the currency, generating inflation.
- It could destroy confidence in the economy which could bring
negative future effects.
- If it is not implemented aggressively enough it may not work to
stimulate economic agents and increase demand.
- No one knows how much quantitative easing is needed and how
much is not enough.
6. - UK growth from the global economy point of view needs injecting
more fresh money, as said by the policymakers.
- QE could solve debt problem (long term view) and stalled
householding spending
- The underlying rate of growth would be close to zero in the fourth
quarter, so indicators suggest raising another QE.
- Injecting more money than most in the markets were expecting
will help Great Britain to go throw this crisis.
- Inflation was likely to fall back sharply in 2012
- The British economy would stall without the combination of
ultra-low interest rates and the extra £75bn in electronic money.
7. - The effectiveness of the measures from QE1 are not fully certain.
- The major concerns rely on the amount of money to inject.
- One major issue is the uncertainty of the action.
- It is possible that there will be no effect.
- Money injected could not be used properly.
8. - QE2 is not the best policy to boost the economy taking into
account the current situation.
- Even the Bank of England has already used QE1 to boost the
economy, its effects on boosting the economy are still on doubt.
- The effects of QE2 are uncertain.
- If QE2 does not succeed, that would have very negative effects on
the economy.
- There are more direct methods to stimulate growth.