In an announcement that is sure to get the blood boiling of the vast majority of British citizens the Bank of England revealed that its quantitative easing program has only benefited the country’s richest people.
The bank made the revelation as it clumsily attempted to defend its policy of Quantitative easing against growing accusations that the scheme has made pensioners worse off. Since March the bank has tried to stave off recession by buying up to £375 billion of government bonds with the aim of forcing investors to put their money elsewhere such as in shares or investment opportunities.
The Commons treasury committee said: “Without the Bank’s asset purchases, most people in the UK would have been worse off,” it said in a paper prepared in response to queries from the Commons Treasury committee.
The Bank’s strategy has been criticised by groups representing savers and pensioners because of its impact on interest rates, annuity rates and gilt yields, but the bank was unrepentant.
“Economic growth would have been lower. Unemployment would have been higher. Many more firms would have gone out of business. This would have had a significant detrimental impact on savers and pensioners along with every other group in our society. All assessments of asset purchases must be seen in that light.” Growth? what growth?
The Bank paper admitted that the benefits of ultra-low borrowing costs and asset purchases had not been shared equally.
“Some individuals are likely to have been adversely affected by the direct effects of QE. Many households have received lower interest income on their deposits. But changes in Bank rate – not asset purchases – have been the dominant influence on the interest households receive on bank deposits and pay on bank loans.
By pushing up a range of asset prices [such as equities and bonds], asset purchases have boosted the value of households’ financial wealth held outside pension funds, although holdings are heavily skewed with the top 5% of households holding 40% of these assets.”
Many people on lower incomes have been finding it extremely difficult to save money since the bank slashed interest rates to the historically low level of 0.5%. At a time when politicians are preaching to the masses to be more careful with their cash and telling them to save people have become increasingly disillusioned with the banks handling of the economy. The current crisis has been rolling on for years now and people are starting to wonder whether it will ever end. Economic leaders and politicians don’t appear to have a clue as to how to sort out the mess which has only exacerbated the situation. Anger is already high in Britain and many nations as regular people become increasingly fed-up with seeing the wealthiest in society get richer at their expense.
Despite the Banks claims that its policies have in fact benefitted pensioners, the director general of the Saga financial group (which targets the over-50s) Ros Altmann said; “”The Bank fails to properly address the impact of QE on… the 21 million over-50s who have been negatively impacted,” she said.
“It is asserted, but not proven, that pension savers are no worse off due to QE gilt-buying, because the value of their pension savings has gone up to offset the fall in the annuity income they will receive when converting their pension fund into a pension income.
“This assertion is simply not correct and the reality is very different for those recently or soon-to-be-retired.”
Regardless of whether the Bank has impacted pensioners, the 95% of people that have not benefited from the scheme are growing increasingly frustrated at the lack of action to improve the UK economy. Whoever said the Class war was over got it wrong.
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