The bond purchasing programme undertaken by the Bank of England, spent £325,000 million, yes £325 Billion. This is known as the Quantative Easing Programme.
What is rarely reported in the media is the long term consequences of the programme. So the Bank of England created £325 billion of new money, used this cash to buy assets from the clearing banks, such as UK Government Gilts (UK Government Bonds), High Quality Corporate Bonds. These assets are bought by the Bank of England, the clearing banks then get relieved of these assets of their balance sheet, and in return get newly created cash from the Bank of England.
It is hoped that this fresh new cash is then pushed into the economy by creating loans for businesses, individuals and mortgages.
However has £325bn then injected into the economy ?
It is likely to be a figure much higher, perhaps 3 times that of £325bn. Why ?
Simple, the money multiplier. The £325bn that hits the balance sheet of the clearing banks, is lent out. This cash then hits other banks, and that gets re-lent. It is the foundation of our banking system, Fractional Reserve Banking, so in reality, perhaps the Quantative Easing Programme that created £325 bn could have created over £1 Trillion in credit.
We see rising assets prices in UK Housing, UK Shares. Is there a link ? Definitely Maybe.