Money: the Bank of England has pumped £100 billion into the UK economy to ease the strain caused by the Covid-19 crisis – but you won’t see a single penny of it. In fact, you are more likely to be asked to pay back the investment.
This is a wake-up call.
If you’ve seen reports that the Bank of England is bailing out the UK economy with £100 billion of what’s called QE (quantitative easing), you may have been lulled into a belief that everything’s going to be fine.
You would be mistaken.
The UK economy has taken a pounding because of the Covid-19 crisis. We are currently in the grip of an economic recession that makes the 2008/9 financial crisis look like the temporary misplacement of a back-pocket fiver.
In March, the economy shrank by around six per cent. In April, it shrank by a further 20.4 per cent. This Site doesn’t have numbers for May and June.
That meant 600,000 people lost their jobs between March and May. Many more found themselves suffering 20 per cent pay cuts as they were put on the government’s furlough scheme.
Employers were also put under extreme pressure as they have to pay what’s known as “overheads” – rent/mortgage on the land/buildings they use, power, supplies if they are perishable, and so on.
It is an established economic fact that money pumped into a financial system has a far more beneficial effect, if it goes to the poorest people – those who were hardest-hit by the current crisis, as they were by the financial crisis of 2008/9 before this.
They didn’t see a single penny of the QE that came into the economy after the recession of 11/12 years ago, and they won’t see a penny of the new £100 billion.
In fact, they’ll be told to pay back the cash that the government has provided for them, even though they’ve been given less than enough to survive comfortably as it is.
If This Writer recalls correctly, QE for the financial crisis went no further than the large financial institutions the Bank of England deals with on a day-to-day basis.
These would then lend the money to businesses and other organisations, with a view towards receiving the cash back – with interest – in the future.
The businesses then increase the prices of their goods while depressing the pay they give their workers.
Have you spotted the reason this won’t work?
Source: Coronavirus: Bank pumps £100bn into UK economy to aid recovery – BBC News
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