Cookie policy
Follow this topicFollow this topic Knowledge » Inflation

Bank May Start Printing Money Soon

Ed Bowsher
by Lovemoney Staff Ed Bowsher on 11 February 2009  |  Comments 9 comments

We heard more rotten economic news today. The Bank of England may have start to printing money soon, and that means the pound could fall further.

Mervyn King, the Governor of the Bank of England, said today that the current measures to revive lending may not work. He also spoke about a `deep recession' and said `further easing in monetary policy may well be required,' according to Bloomberg.

In other words, cutting the base rate to zero looks likely, and the Bank looks set to begin quantitative easing.  It will start buying corporate bonds next week.

The bank also cut its forecasts for economic output and inflation in 2009. On top of all that, unemployment rose to 1.97 million in January - the highest figure since August 1997.

What now?

The pound has dropped against the dollar this afternoon, and I suspect we'll see further falls.

That's bad news for those of us who want to travel or invest overseas, but it's good news for exporters who will be able to sell goods more cheaply abroad. A falling pound should boost prices in the UK and reduce the chances of the UK experiencing deflation.

Another concern is that Mervyn King may be too aggressive in his attempts to boost the money supply. If that happens we could suddenly switch from worrying about deflation to worrying about too much inflation. It's very hard to know what the correct balance is.

So overall, a depressing day but I'm determined not to get too gloomy. We will get out of this mess one day. It just may take a while...

More: Crosby Should Never Have Been Appointed To FSA

Enjoyed this? Show it some love

Twitter
General

Comments (9)

  • peepobaby
    Love rating 49
    peepobaby said

    In the 1970s the combination of an inflexible labour market and powerful unions forced the UK into an upwards wage spiral whilst unemployment was rising. Today we have a highly flexible labour market. So if anything, we're at the start of a downwards spiral in wages.

    And by the way, no money gets printed at all. The form of QE that the BOE has set out just encourages people that are hoarding cash (generally overseas) to give it to UK banks to lend out. It increases money available for borrowing and takes borrowing rates up.

    Printing money is when the government start to pay for goods and services using money that they have literally printed.

    Report on 12 February 2009  |  Love thisLove  0 loves
  • elainesteed
    Love rating 0
    elainesteed said

    peepobaby

    I would check with Alistair Darling if I were you

    Report on 13 February 2009  |  Love thisLove  0 loves

Post a comment

Sign in or register to post a reply.

Related content

Our top deals

Credit card
company 		Balance transfers rate and period Representative
APR 		Apply
now

Barclaycard 27Mth Platinum Visa

0% for 27 months (3.5% fee) Representative 18.9% APR (variable) Apply
Representative example: assumed borrowing of £1,200, representative 18.9% APR (variable). Purchase rate 18.9% PA (variable). BT fee is reduced from 3.9% to 3.5% (T&Cs apply).

NatWest Platinum MasterCard

0% for 26 months (2.65% fee) Representative 18.9% APR (variable) Apply
Representative example: assumed borrowing of £1,200, representative 18.9% APR (variable). Purchase rate 18.95% PA (variable).

Royal Bank of Scotland Platinum MasterCard

0% for 26 months (2.65% fee) Representative 18.9% APR (variable) Apply
Representative example: assumed borrowing of £1,200, representative 18.9% APR (variable). Purchase rate 18.95% PA (variable).
W3C  Thank you for using CGWEBLIV1