Quantitative Easing — An explanation

It’s like Eat Out to Help out. It stimulates the economy. Just not the part of the economy anyone really wants us to look at.

I’ve tried to explain Quantitative Easing before. The essence of it is simple. In short it’s a way of stimulating the economy, a bit like Eat out to Help Out did for a month in August in the UK. But not the economy we can see, on the high street, the one we can’t — financial markets.

To understand exactly how the activity of QE stimulates the economy is a little more challenging than ‘Eat out to Help Out’. One of the reasons it’s hard for people to understand QE is a lot of people don’t really know anything about financial markets and the stuff sold there. The problem is that even though you might not own any of this stuff, this doesn’t mean this has nothing to do with you. If you have a pension, if you rely on the £ being worth something, this is all linked. But I get it’s hard to visualise. After all, many of the places they are traded takes place behind closed doors.

But let’s imagine we can see them. Imagine, just like restaurants that were subsidised in Eat Out to Help Out, they exist on our high streets. This isn’t going to work perfectly as a metaphor but I think it does work, so stick with it (if you want a more…