I took a look at the information being provided by the Bank of England on this policy, and found it lacking in any kind of detail whatsoever. One of the documents that I found on the Bank of England website was a report on a press conference on the subject, which showed that the press were simply not asking the right questions. In fact, although it sometimes appears that they are asking some cutting questions, their performance brings the word supine to mind. They failed to ask any of the most basic questions that should have been asked.
The Bank of England is about to embark on a very drastic and radical policy, and the press completely failed to ask for any detail on how the policy would operate. The policy will mean a massive increase in Bank of England intervention in various markets, and that this will have profound implications for the economy, but the press asked for no detail....???
As such, I have sent a copy of the following to the Bank of England email address for press enquiries, and a copy to their general information address:
I write for Cynicus Economicus, and have had some trouble finding clear information regarding the Bank of England's policy on Quantitative Easing (QE).This is the second time that I have sent a letter to the Bank of England, and the first letter was on a related subject. I asked them to confirm that they were planning to report the amount of money they created under the QE policy. They ignored the last letter, so I hope for a response this time.
As such, I would be most grateful if you could provide the following information:
In any reply, please do not refer me to documents that do not answer the specific questions that are being asked. The questions are very direct and very clear, as I believe that my readers would like very clear and direct answers. There is considerable concern about the policy of QE, commonly referred to as 'printing money', and I am sure that you would wish to provide the information necessary for people to understand this policy, and how it will operate.
- What quantity of money will the Bank of England be adding to base money in the period March-May, and the period June-August 2009? Please give totals or ranges under consideration, and any projected figures that you are using as the most likely scenario?
- In what form are you planning to add the money? This is the question of which assets the Bank of England will buy as part of the QE operations? Can you give a projected split / proportion of which type of assets will be purchased in the period March-May, and the period June-August 2009? Please give totals or ranges under consideration, and any projected figures that you are using as the most likely scenario?
- Can you give a clear description of how the split/proportion of assets to be purchased under QE has been determined?
- If you are unable to answer questions 1,2, & 3 can you confirm that this is because you have no firm plans for what you will be undertaking in relation to quantitative easing? If there are no plans, can you give a clear description of your criteria for the decision making that you will use in determining how much you will purchase of which kind of asset, under what circumstances?
- Can you give a clear description of the method you will use to purchase each asset class? In particular will you undertake any action to purchase gilts, or an other form of UK government bonds, directly through the UK Government Debt Office auction process or any other direct means?
- In a recent press conference Mervyn King suggested that the reporting of QE would be undertaken in the minutes of the MPC. Can you confirm in detail exactly what information will be provided in the minutes?
- The MPC minutes are not (I believe) intended as a reporting tool for activity such as QE. As such, why is the policy and action of QE not being reported in a formal publication dedicated to this policy? In particular, QE is widely seen as a radical policy, which Mervyn King describes as 'unconventional'. Under such circumstances, with significant implications for the operations of markets and the broader economy, why is no formal and transparent method of reporting being implemented?
Thank you in advance for a full reply that answers these questions in a way indicative of a desire to be open and transparent in reporting your activity.
The reason that I am writing the letter is that I dislike conspiracy theory, and will always seek to clarify any suspicions that I might have. In this case, if the Bank of England is doing nothing that might alarm people, I can see no reason why they might not respond. To not respond to one email might be an administrative oversight, but to fail to answer two starts to look like they do not wish to reply.
I would also expect that my questions might prompt them to issue a press release, as these are all perfectly reasonable questions that people might reasonably want answered. After all, printing money to buy government debt is something about which the public might have concerns. My email simply highlights the kind of questions that might be asked.
I will let you know next week whether I have been sent a reply.
I have just seen that on my last post but one, the headline was poorly written. I have now changed it. Inevitably, with no editor I will make many errors, but to make a crass error in the headline has left me rather shame-faced. The error was writing Its instead of It's ....
In light of the rather bad error, I have simply changed the headline. Normally, if I make any change to the content of the blog will add a note including the date and nature of the change. In this case, I have not left a note on the original post, but thought I should mention the change somewhere. Thus this note...
Note 2: Thank you for the many comments on the last post. I can see that many share my concerns. As you may have noticed I have been busy with posts on QE which has left me little time to reply to comments, so please accept my apologies for not responding on this occasion.
Note 3: It may actually be a good idea to start a campaign on this subject. I really do find that this opacity is quite shocking, and do not think that the government should get away with it. As such might I suggest a letter writing campaign to your local MP. You can find the email address for your local MP here (click on the map for your constituency).
This is is my suggested letter which you can copy and paste, or alternatively write your own version:
I am writing as I have very increasing concerns over the recent Bank of England policy to implement quantitative easing. In particular, I am worried about the following:
- There is no policy document that clearly outlines how this policy will operate, what quantity of money will be created, what assets the money will be used to purchase, and what method will be used for the purchases.
- In addition to this Mervyn King has suggested that the method of reporting for Quantitative Easing will be through the MPC minutes. This is not the purpose of the MPC minutes, and there is no requirement for full disclosure of activity in such a method of reporting.
I am very concerned at such opacity in consideration of the fact that the Bank of England will be using money creation to purchase gilts. In this situation the Bank of England will therefore be creating ('printing') money to purchase government debt. This might be seen as government operations being funded by printing money.
Under such circumstances, it would be reasonable to expect the Bank of England to offer a transparent and detailed discussion of the policy as a formal policy document, as well as a formal, full and transparent procedure for reporting their activity.
I would therefore be most grateful if you could, on my behalf, seek to clarify why this process is being undertaken in such an opaque manner, and clarify exactly what the policy will be. I would also be grateful if you could press for a proper method of reporting on the policy of quantitative easing.
Additions, suggestions for improvement will be welcomed. Just leave a comment below.