Don't Steal--The Government Does Not Like Competition

It's Redistribution, But Not As We Had Thought of It

Quantitative easing has been a massive thievery of ordinary citizens and a redistribution of wealth to the monied classed operating in the financial sector.  A Mckinsey report documents how this has played out in the UK (and in the US, and Europe in general).

Here's the evidence that QE has harmed the UK economy

By Jeremy Warner Economics  
Daily Telegaph
Last updated: November 15th, 2013

[In] . . . a report this week by the management consultancy McKinsey has attempted to quantify the distributional consequences of central bank asset purchases (so-called quantitative easing) which I referred to in my column this morning. Pretty terrifying reading it makes too, hammering home the point that QE has been extremely beneficial to indebted governments and other borrowers, but on the whole very damaging to households, particularly elderly ones reliant on fixed income forms of saving.

. . . .  the big beneficiaries of QE since the onset of the crisis are governments. The UK government alone has saved itself approximately £120bn of net interest payments as a result of the ultra low interest rate environment that QE has brought about, or more than two years worth of interest costs at the current burn rate.

The big losers, on the other hand, have been households, which have been deprived of a similar amount of interest. This may come as a surprise, as one of the justifications of QE was to support highly indebted households. Well, no doubt such borrowers have benefited, but households as a whole are overwhelmingly net savers. Just to put this in a more brutal fashion, QE has deprived the UK economy of £110bn of household spending and or saving that would otherwise have taken place.

Most certainly the profligate have been bailed out at the expense of the thrifty, but it is not even clear that there is a net economic benefit from propping up the overborrowed. In the end, it may have been at best a zero sum game. More spending sustained among the overstretched has very possibly been cancelled out by less spending by those with the foresight to save. 

QE has resulted in a massive transfer of wealth from households the governments. . . .

Thankfully New Zealand has largely escaped such brazen theft and profligacy.  This, coupled with the increasing world demand for our soft-commodity products, helps explain the persistently high New Zealand dollar against almost all other currencies. 

And when, you ask, will QE end?  How long does it take an addict to kick heroin?