Rabu, 04 Juli 2012

Savers and pensioners horrified as Bank of England prepares to launch third round of quantitative easing to boost flagging Britain

Savers and pensioners horrified as Bank of England prepares to launch third round of quantitative easing to boost flagging Britain

By Hugo Duncan

PUBLISHED: 16:28 EST, 4 July 2012 | UPDATED: 16:32 EST, 4 July 2012

The Bank of England looks set to unleash a third round of money printing in a desperate bid to drag Britain out of recession.

The monetary policy committee is widely expected to approve another tranche of quantitative easing on top of the £325billion it has already pumped into the economy.

The prospect of a third round of money printing â€" dubbed QE3 â€" will horrify Britain’s army of savers and pensioners who have been hammered by dwindling returns on their cash.

Panic station: The Bank of England is expected to approve another round of money printing

Panic station: The Bank of England is expected to approve another round of money printing

But another grim set of figures has fuelled fears that Britain is trapped in a prolonged downturn â€" forcing the Bank to act. A closely-watched survey by research group Markit said firms in the services sector, which includes everything from hairdressers to stock brokers, suffered their worst month since October and one of the worst since they started recovering three years ago.

The extra bank holiday for the Queen’s Diamond Jubilee depressed the economy, the report said, as additional spending on the high street was offset by fewer working days.

The purchasing managers index â€" a key measure of activity where anything above 50 represents growth â€" fell from 53.3 in May to 51.3 in June.

Combined with similar surveys for construction and manufacturing over the past three months, Markit said it pointed to a 0.1 per cent decline in GDP in the second quarter of the year.

That would follow a 0.4 per cent decline in the final three months of 2011 and a 0.3 per cent slump in the first three months of 2012 â€" back-to-back quarterly contractions that put Britain in its first double-dip recession since 1975.

Chris Williamson, chief economist at Markit, said the latest round of gloomy news ‘probably cements the case’ for more QE with the Bank expected to inject another £50billion or £75billion into the economy. But the move will outrage savers who have lost out since the Bank slashed interest rates to a record low of 0.5 per cent in March 2009 and started printing money. Campaigners claim QE â€" which is used to buy government bonds â€" has impoverished pensioners by driving down annuity rates attached to gilt yields.

The Bank argues that if it had not taken such dramatic action the downturn â€" already the longest for 100 years â€" would have been even worse.

Four members of the nine-strong MPC wanted to print more money last month â€" including governor Sir Mervyn King â€" but they were out-voted by the other five.

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This £50bn will be used to buy depreciating assets to give banks / speculators cash to use for speculation / leverage against commodities, stocks and other depreciating assets. The result is a £50bn increase in the size of commodity, stock and asset prices, so import inflation on energy and fuel goes up for starters. The stock market will go up of course, some idiot savers will pile in just before traders take profits. Nice. The £50bn could be used to build factories, but that would create real jobs and the government don't want that.

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Responsible savers are clearly paying the price for the irresponsible actions of borrowers - on the make and on the take.

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Throwing it from the rooftops would make more sense

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The monopoly money being 'printed/borrowed to be paid back later' ....--- Ursula, London ---- I can assure you the BoE will never unwind the money they are currently "printing". It is a joke to call it QE as too do so means you intend at some stage to reverse it. Its is also my prediction that the next round of QE and the next and the next thereafter will be just as successful as the previous rounds. Far better too spend £15Bn on a VAT cut so people spending £1K on say a new sofa can enjoy a 65p saving and that’s only if the retailer decides to pass it on.

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@ Bob , UK, 05/7/2012 00:47 The country is doing 'ok' if the money it 'turns over', which is the costs plus all the profits, is greater than the costs. The monopoly money being 'printed/borrowed to be paid back later' is used to pay the public sector so fewer of them are made redundant. They then have money to carry on their life fairly close to normal spending in the shops which is good. Some public sector workers are not replaced when they retire and some are made redundant which saves costs. The banks are also given money for similar reasons, but they also have the pressure of not being allowed to fail because our society is dependant on banks and we also trade with overseas businesses who will turn away if the UK banking sector collapses. The banks employ lots of people too. Another thing is that banks lending with low interest rates will tend to make it easier to borrow a larger amount which keeps the house prices high, giving sellers a chance to sell before a collapse.

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Am I missing something here, Osbourne and Cameron keep on saying Labour would just print money! Where is this "new" money going? I guess not on building a better future, just pocketed by the rich! anyone know how we the workers and savers get hold of this fresh new cash?

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yet another shed load of money that will disappear into the bowels of the banking system never to be see again, instead of building new social housing, a water grid and renew our ageing electricity grid, which would get people working, paying tax along with spending in our shops. But its obvious the government doesn't want that to happen. This money could be put to good use doing that, instead it will get spread around the rich bankers and their mates the MPs.

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Hardly surprising. An economy that relies on consumer spending, government spending, welfare payments and domestic construction must eventually hit the wall.

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Perhaps Mervyn King might like to try "removing the banking licences from those establishments that are not reporting LIBOR within 0.1% of the BoE base rate by the close of business tomorrow? After all, the "fiddle" we keep hearing about is still going on all the while the quotes of banks CONTINUE to run way above the proper base rate do they not? No amount of QE or Rate cuts will have any effect until banks are forced to lend at rates as they should be.

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I think I know what you are saying Royston,but would need a new world order of sharing what the world has "in store" in order to protect the resources."over-indulgence" by one or more sectors of the world would upset things a bit. Also a really civilised world would be needed.That's very,very unlikely just looking at the world in general today. On top of all that all "spiv activity" for personal gain would have to be eradicated.Better not say any more or I will cause a lot of abuse from the heirarchy of these forums.Very extreme honesty would have to be rule number one,with fair play as rule number 2. Oh ! and one world currency of course ( in whichever form it takes).

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