The theory is that using QE to purchase gilts puts money in the hands of banks, which then lend it out – so causing a rise in the total money supply. But instead, credit growth remains negative, and most negative of all for small to medium-sized enterprises. The only effect has been that the government has been able to finance its deficits at very low cost: £375bn of QE has been enough to fund three years of deficits with printed money. The government bill for debt interest is unusually low, at the expense of savers. QE has no effect on credit because banks are being asked by regulators to hold massive amounts of equity capital, penalising lending. Bank regulation urgently needs to be eased if we are to get credit and the economy moving properly again. Meanwhile, QE must be stopped and reversed so that savers can once again get a proper return.
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