First, this is the second instalment of QE this year, bringing the total to £300 billion.
Second, as with the first instalment of £200 billion this one is being created before large issues of government debt take place as a result of the deficit that the coronavirus is creating.
Third, the sequencing is the key issue here. In effect the Bank of England is deliberately injecting the funds required to buy new debt issues into the market in advance of those debt issues taking place to guarantee an increase in demand for gilts by doing so, and in the process is ensuring all new debt issues will be fully subscribed.
We’re often told that the markets are crying out for more government debt. Because that’s safe savings, at present people want to be safe therefore they’re all lining up to buy gilts.
We’re also told, here, that the BoE needs to be injecting new money into the markets so that people will buy gilts. If left to themselves people wouldn’t bother.
These are contradictory positions, opposite to each other. And yet they come from the same man. That is interesting, isn’t it?