It's only a Game .....
The lockdown has though given me more spare time than I know what to do with and simultaneously ruined my sleep schedule. So apart from eating and drinking far too much I have found myself reading very dry economic articles in the early hours of the morning in the hope of falling asleep.
I freely admit that in the past when I have seen QE written down with a number after it, I made the assumption that the article was some how referring to the Queen Elizabeth cruise liners or something to do with how the royal family got paid their stipend from our taxes. Economic articles were bloody boring and I never bothered reading them. (And yes my level of pure ignorance on this topic has made me shudder and feel rather embarrassed over the past couple of weeks).
QE as you probably know stands for Quantitative Easing and according to Investopedia the main things to take away from QE is that
• Quantitative easing (QE) is a form of monetary policy used by central banks as a method of quickly increasing the domestic money supply and spurring economic activity.
• Quantitative easing usually involves a country's central bank purchasing longer-term government bonds, as well as other types of assets, such as mortgage-backed securities (MBS).
• In response to the economic shutdown caused by the COVID-19 pandemic, on March 15, 2020, the U.S. Federal Reserve announced a quantitatve easing program that amounted to over $700 billion.
Which all seemed pretty good to me, more money and an improved economy are both positives and this policy seems at first to be a magic salve to cure the world's ills.
As I live in Britain it is easier for me to use my nation as a point of reference as I began to look at what QE really entails as it seemed too good to be true. And the simplest explanation I found was this flow diagram
Lots of articles in the news mention previous times that QE has been
successfully used and other articles state that the Bank of England is still 'deciding' on what to do next as
'Rates have already been slashed to the historic low of 0.1% and another £200 billion of quantitative easing (QE) has been unleashed as part of the Bank’s measures to try and keep the economy afloat during what is expected to be the steepest recession in living memory.
The Bank has largely exhausted its ability to cut interest rates, while most experts believe it will hold off on further QE – for now.'
This simple policy would and has kept the wolves from the door for a long time in our modern day world. So from my reading I began to notice that the option of QE was being banded about everywhere globally. I now know enough to say 'quantitative easing' and give a knowing nod and blag that I understand it.
In truth a lot more research is necessary on my part across the board to really get to grips with this topic. Although if put in the simplest form it appears that the answer to a nation having no money is to print more and just hide this fact by changing the form it is presented in. I was sure there must be something that I was missing, as even I know that creating something from nothing is bound to have consequences.
More money is printed so people hopefully spend more money and everyone can go on with their lives hoping that everything is or at least is on route back to their idea of normal. But all it takes though is for interest rates to rise or another wave of lockdown measures and everything will take a definite turn for the worst.
Because if interest rates go up inflation decreases as people have less disposable income and the economy markedly slows down
or grinds to a halt. I finally came to the understanding that in the simplest form QE is, the tactical release of more funds into an economy to hopefully stimulate growth or at minimum prevent stagnation.
By now my brain is pretty frazzelled and I'm trying to keep this simple but this whole QE solution now all seems to be based on tactically ignoring debt and just prolonging what is now an inevitability. With my limited grasp of how things work I can see why cryptocurrencies with finite supplies have been lauded as the future and solution to our debt backed society.
Whilst looking further into how the world economy works I have ended up on several websites which would probably make complete sense to most with a rudimentary grasp of business and economics . I will be referring back to them over the next few weeks, in the hope I can learn more. To be totally honest I have never been very
bothered good at retaining information, so some of these websites and their explanation's may as well have all been written in Greek.
But to conclude my ranting in a manner QE does and has worked in the past and it may stave off or limit this coming Depression. It is though an inevitability that this delaying tactic of what amounts to an economic band aid cannot last for ever. All it will take is just one misstep and everything may very well collapse. Which leaves me wondering what the next options or possible solutions are?
So in the end I have come to realise that a more informed grasp of world economics will give me a better footing on which to make decisions in my life on every front as to be forewarned is to be forearmed. As the lock down continues I hope to improve my understanding of how things work and what may be coming in the future.
I was always naive through my own laziness but for any of you who have read this far I will end with the simplest explanation and surprising truth that for all accounts and purposes the backbone of the economic world appears to be Monopoly rule number eleven.
Greek to Cyrillic