Book review: Bank of England clueless on QE
Senior Bank of England (BoE) insiders acknowledged they did not know what a second round of quantitative easing (QEII) would do to gilt yields.
According to The Bank – Inside The Bank Of England, by former bond trader Dan Conaghan, the BoE’s monetary policy committee’s justification for a further £125bn
The fact remains that, to date, no one really knows whether QE is working, has worked or will work
of buying back gilts with ‘printed’ money was “embroidered with caveats”.
The book’s publication coincides with analysis from the National Association of Pension Funds, claiming QEII has hiked UK scheme liabilities £90bn by depressing gilt yields.
Conaghan quotes Charlie Bean, BoE deputy governor, admitting: “We will probably never know how effective the policy of QE has been.”
He also quotes anonymous City insiders dismissing as “propaganda” BoE claims the first wave of the policy increased gilt yields 1% and economic growth 1.5%.
And he himself adds: “The fact remains that, to date, no one really knows whether QE is working, has worked or will work.
“It remains an enigma, and in the end the BoE can – and does – fall back on the ‘counterfactual’, the last refuge of the economist.”
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