Thursday, February 19, 2009

A Letter Requesting Information on The Policy of Quantitative Easing (Printing Money)

Over my last two posts (UK Government and Money Printing - More 'Funny Business'? and It's Official - the UK Government is Now Bankrupt), I have highlighted that the Bank of England is about to finally embark on the policy of 'Quantitative Easing', otherwise known as printing money. They have suggested that, amongst the assets that they will be buying will be gilts, which is a purchase of government debt. This means that the Bank of England will be, in some way, funding government borrowing through printing money.

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).

As such, I would be most grateful if you could provide the following information:
  1. 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?
  2. 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?
  3. Can you give a clear description of how the split/proportion of assets to be purchased under QE has been determined?
  4. 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?
  5. 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?
  6. 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?
  7. 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?
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.

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.
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.

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.

Note 1:

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:

  1. 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.
  2. 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.
This is all very opaque.

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.


  1. Ha ha... Surely you appreciate the rhetorical nature of your enquiry! If you are genuinely hoping for a response - good luck, I refer you to one of our contributors who quoted Chomsky in saying 'Propaganda is to a democracy what the bludgeon is to a totalitarian state'.
    And you yourself evoked the metaphor of the magician's elephant on the stage...

    And I made the point that as Hobbes said, the first job of the state is to protect the people from themselves, to engender cooperation and prohibit anarchy...

    You can't really expect an answer to this can you?

    The truth hurts...

  2. I have sent to Mark Hoban for Fareham.

    As Original with the exception of some links to the relevent artical here and an invite for him to join in the comments section.

  3. Surely this has to be made as a Freedom of Information Act 2000 Request?

    Otherwise the BoE is under no obligation to respond to you.

    I note that the information Commissioners Office (overseeing the FoIA) considers any transfer of wealth from the state to private bodies to have 'an overriding public interest', and any requested exemption would need prior authourisation if the FoIA request is to be turned down.

    Food for thought ...

  4. I have sent to Mark Prisk for Hertford and Stortford.

    As original.

    I hope we won't be kept in the dark once again..!

  5. I'll hand it personally to our MP and PPC. But pigs will fly before you get any useful response to this from anyone. (You may get a very generic 'nothing to see here, please move on' type response, but that's about it.)

    Might I recommend that all regular readers start posing the same type of questions *everywhere*. I'm sure, between us, we frequent discussion boards, web sites and chattering corners all over the place. I've been doing so, but following CE's latest post I'll step up my efforts.

  6. Dear CE,
    Due to national security reasons we are not able to answer your questions. Should our partners realise what we are doing we will destabalise the pound and further harm the economy.

    Up Yours,

    HMG & Her Treasury.

  7. If they don't want to make it clear how much they are printing and where it will go, why have they told us they are printing any money at all? I thought the law change meant they don't have to report it.
    In the past this govenment has leaked possible policy to get a reaction and see if they should go ahead or not. Are they waiting to see if the pound sinks, so that if it does they can change their position and get it to bounce back? If it keeps it's value then it's a green light to print.

  8. Have you seen this, any knowledge of such a document?

  9. I will send a letter to my local MP and will also be asking for clarification on how it will be deemed to have been successful, and what measure will be adopted to remove surplus money supply from circulation.

    This is all deeply worrying.

  10. Jonpaul:

    You are absolutely right - the government has tested the water before initiating policy before and I think your supposition is a good one.

    The pound does appears to be holding - probably because other countries have had dire economic news and so their currencies have depreciated more - so I guess the BoE have the green light.

  11. coshbrew,

    This is typical Telegraph. It talks about EU as a whole but then focuses on euro. How much of those 25 trillion are on british or swedish banks? How much are on eurozone banks?

    Sure, the eurozone has lots of problems but in telegraph's case, I believe that they try to find or even create, someone worse than the UK.


  12. Hi Cynicus,

    I think you'll find this radio interview with Michael Panzner:


  13. Hi Cynicus,

    I think you'll find this radio interview with Michael Panzner:


  14. Hi Cynicus

    Some very interesting charts:


  15. A quick note to mention to a commentator that I did not publish their comment due to the use of bad language. Please feel free to comment again, without such language, and I will be pleased to publish your thoughts.

  16. juntiYour predications have been amazingly good CE - in the 9 months or so I've been reading your blog. You have been miles ahead of the curve of media analysts and economists and politicians, your self-titled "doomster" predictions are conistenently being shown to be true. However, as the competition catches up, does this lower the unique value of your blog?

    Will you keep predicting bad news? Where can your blog go from here? I see that regulars from Guido Fawkes site also post here. I hope your previously wonderful site doesn't descend into a "2-minute hate". I find Labour and the Tories equally ridiculous and discussion of their relative merits about as socially useful as debate about who should win x-factor.

    Perhaps it is time to talk about what economy will emerge from the rubble. I read Adam Smith at your recommendation and then struggled through most of Marx's Capital.
    Both I think contain logic fallacies that can be easily dismissed. (First example how can anyone still believe that an individual pursuing his own self-interest NECESSARILY promotes the good of a community / society? There is no causal link there)

    Free market capitalism is going to take a battering in the next few years, perhaps as a believer you can start using your skills in intelligent defence of it (rather than the black/white eithor/or arguments we get, from people with ideological poistions set long ago -- that will be stuck to despite any evidence from reality). F.eks; what kind of markets/economies will emerge from this?

    I am interested in seeing where your analysis and ideology intersect.

    many thanks and regards

  17. I sent the letter as suggested to Mark Todd, South Derbyshire, on Fri night at 10.20pm. I received a response by 10.25am on Sun morning. He replied:

    Thank you for your email. I'd broadly agree. Quantitative easing is not a particularly novel policy in itself but the mechanism used is certainly unfamiliar (because we are implementing it within the split of responsibilities agreed in 1997). What is likely is a detailed exchange of letters between the government and the Bank. I will see what clarification can be obtained.

  18. BBC reporting on the money printing.

    Lets look at the check-list to see if the BBC is following government lines:

    1.Conspicuous non use of the phrase "money printing" when describing Quantitative Easing. Tick

    2. stressing the danger of deflation while ignoring completely the dangers of hyper-inflation.

    3.Mention of Japan to show QE in good light.

    Yep seems the Beeb is being kept firmly "on message"

  19. Have sent a copy of the letter to my local MP (Labour, Scotland). His reply:
    Thank you for your email and I do appreciate your concerns at the current economic crisis. I am quite unsure as to the alternative that you believe may help steer our financial institutions out of the current mess?!

  20. Good luck with that. Do you really think your local MP's assistant can read to the standard required?

  21. Finally got a response from Christopher "Chopper" Chope MP (Con,Christchurch) - former treasury spokesman.

    Has made representations on my behalf to "the Minister"! Awaiting response ... zzzzzzzzz


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