And would Ritchie, now one fifth of a professor, please shut the fuck up?
The Bank of England electronically creates new money and uses it to purchase gilts from private investors such as pension funds and insurance companies. These investors typically do not want to hold on to this money, because it yields a low return. So they tend to use it to purchase other assets, such as corporate bonds and shares. That lowers longer-term borrowing costs and encourages the issuance of new equities and bonds and that should stimulate spending. When demand is too weak, QE can help to keep inflation on track to meet the 2% target.
QE does not, as is sometimes suggested, involve printing more banknotes. And QE is not about giving money to banks. Rather, the policy was designed to help businesses raise finance without needing to borrow from banks. And also to lower interest rates for all households and businesses.
It just ain’t about banks.
Meaning that our 1/5th of a Professor is either ignorant or lying.
If banks increase their holdings of gilts as the BoE increases its holding of gilts then the BoE ain’t buying gilts from the banks, is it?