Quitting QE may be harder than the Bank of England believes

Financial Times/Tommy Stubbington

Repost from 8-17-2021

cartoon image of a man watering gold coin-money tree with ideas“The central bank last week offered the first detailed plan of how it aims to get rid of [government bonds], as it gradually tightens monetary policy following the Covid-19 pandemic. It made the process sound positively serene.”

USAGOLD note: But serene it is not, according to Stubbington. Far from it. And what makes it troublesome, he goes on, is revealed in an FT survey of big bond investors that uncovered “a widespread belief that the BoE’s QE programme was a thinly veiled scheme to finance the government’s deficit.” Those who regularly read this page will know that we will not quarrel with that assessment. In fact, we have seen financing of federal government debt the primary intent of quantitative easing all along. So when we are told by the Wall Street Journal recently that 74.6% of the federal debt issued by the federal government since the pandemic began now sits on the Fed’s balance sheet, it it does not surprise us. This article concentrates on the Bank of England’s QE program, but the message applies to all central banks engaged in the practice (which is most of them). I will leave it a determination of our studied readership as to what that tells us about the future of tapering.

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