Quantitive easing?? How does it help?

[AfternoonsandCoffeespoons]

Just watching the news that a few billion pounds is being/has been printed today. I understand (thanks to a thread the other day) how this is bad in the long term but I don't understand why its good in the short term. Where does the money actually go? Who spends it and on whta?

Because Edam I suspect the answer is because it would take too long. The mechanisms for bonds are already in place.

Giving money directly to citizens is not. As I said in another thread, it would take a gargantuan amount of organisation to set up and at the end of it you'd probably be well passed the time you wanted to inject the money into the markets. So instead of taking a few days to inject the money, it would probably take years and involve a stupid govt IT project which no doubt would run over budget and under deliver.

Ditto really for investing in infrastructure. It's ok in theory but who decides where to "invest" this money. Do we build more roads? Do we REALLY need more roads? Even if we decide we do, you can bet your arse there will be years of planning and environmental protests. Ditto with railway lines, power stations. It doesn't matter what's proposed, someone will object.

We probably don't need more roads or railway lines. We certainly need more houses and more renewable energy.

Clearly these sort of projects take time, but the money generated through QE isn't actually getting anywhere useful in a hurry anyway is it? As to who decides what infrastructure to invest in, surely that's what government is for.

Stephanie Flanders remarked that QE reminded her of the joke "my fake plant died because I forgot to pretend to water it", ie QE doesn't actually do very much at all except send out a signal that we are doing something.

But that's my point Zephirine. OK, let's say the govt thinks the economy is in the tank. The Euro's on a precipice, businesses are not investing, consumers are not spending. So they decide to stimulate the markets and instead of using QE to buy £80 billion of gilts, they decide to spend £40 billion building social housing & £40 billion on renewable energy (using your example).

First, where do we build said houses? Let's say we decide to build some near you. What's the first thing that happens? Residents suddenly get a big dose of NIMBY and petition their MP, councillor, the press and object for all their lifes worth. Cue the next two years of legal wrangling, no houses being built and the only ones getting "rich" are solicitors.

Ditto with renewable energy. Build a load of wind farms in Scotland? Before you know it, people will be objecting that it ruins the countryside.

All that happens is you spend the next few years wasting much of the money you wanted to spend in the first place to fix the economy NOW. Not in 2-3 years time. NOW. In 2-3 years time you may not have an economy left to fix!