All told though the consequence is that not only has no QE been repaid, but the chance it ever will be is remote, in the extreme. Because repaying it would mean that the deficits that have been funded by QE (because that is what it has done) would actually have to be paid for out of higher taxes or by all investment funds being directed to government bonds, and not to create new investment but just to reshape the Bank of England balance sheet. Both actions would have a profound impact on the economy: they would create a massively negative environment in which growth would become a distant memory, there would a shortage of government created money to underpin credit in the economy, and there would most likely be heavy deflation – exactly what QE was meant to prevent. No government of any persuasion is ever going to pursue such a policy: it would be economic suicide.
So let’s be clear about three things:
a) QE has not created inflation, try as people might to suggest it has
b) QE has delivered modest growth, but not universally
c) QE will forever remain on central bank balance sheets, never to be unwound.
The chance that Yvette Cooper is right that People’s Quantitative Easing would have to be repaid is so remote that no-one, anywhere, need ever worry about it. In fact, all they should worry about is that someone in such authority thinks it might be wise to even countenance such a thing. I am deeply baffled as to why she should. The harm from doing so would be enormous.
Sigh, both the BoE and the Fed have already told us how QE will be unwound.
They purchased gilts and Treasuries across a range of maturities. As such, some of the ones they bought have already matured. And so they, when that happened, went out into the markets and purchased more, so as to maintain the stock as some bonds matured. The way they will unwind it is simply to not replace bonds as they mature. They can do this at any level of granularity they like: replace 0% of bonds maturing, replace 99% of them, as circumstances dictate.
Given that governments very rarely do actually retire debt, rather than roll it over, as they don’t make market purchases to replace maturing debt the government will be selling new debt into the markets to replay those maturing at the BoE. And that money will then be cancelled.
There’s nothing secret about any of this. Bot organisations have said publicly that this is how QE will be reversed. So, what’s Ritchie blathering about then?