So the Bank of England will now spend a whopping £325bn on its quantitative easing programme.
Clearly there are some big questions: about whether the Bank was right to resume its pumping operation today – in the face of relatively encouraging news on the UK economy – and, perhaps more importantly, whether the scheme is working at all. We’re covering both angles on Sky News today.
But another deeper problem with QE is that despite the enormous sums spent on the operation, the whole thing still seems so unreal – partly because it’s hard to conceptualise any number in units of billion. So here, to make life easier for you, is what you could buy with £325bn:
1. The entire Premier League.
In fact, in the run up to the decision to restart QE a few months ago, Bank policymakers joked that perhaps, instead of using the money they are creating to buy gilts, they could have bought up every club in Britain’s elite football league – players and all. Though even this financial firepower is unlikely to improve England’s odds in Euro 2012. Perhaps Sir Mervyn, a keen Aston Villa fan, might put his hat into the ring for the vacant manager’s job?
Given you could potentially buy the Premier League for a few billion (estimates vary), the Bank would have plenty of change left for other things, for instance, erm:
2. Every moving vehicle in Britain
For a mere £193bn, the Bank could have bought every single vehicle – car, truck, train, plane – in Great Britain. And still had plenty of extra change leftover.
Yep, the Bank could have bought every property – big and small – in Scotland. That would have set it back only £255bn, according to figures from Lloyds Banking Group. If it were feeling more parsimonious it could have snapped up all Welsh property for just £145bn. What a steal!
4. Every farm in Britain
Actually, the reality is that the Bank could afford to buy every farm in Britain, every agricultural asset, from threshers to combine harvesters, for the £50bn it is due to spend on QE in the next three months alone. What a fillip that would be for Britain’s long-suffering farmers. And who hasn’t longed for a picture of Charlie Bean on a tractor?
The Bank has a notoriously poor website. So why oh why hasn’t it spent its cash on an internet company rather than all those government bonds? Google, one of the world’s biggest companies, is worth around $200bn – about £126bn. Which means that the Bank would have more than enough cash to fork out for something like, well, Facebook.
6. Some coins
If the Bank were feeling particularly mischievous, it could ask the Royal Mint to coin £325bn worth of pound coins. If those coins were piled on top of each other they would reach to the Moon – and then back, and then back up to the moon again. They would stretch around the circumference of the earth 25 times. But then again minting that many pound coins would consume 2.16m tonnes of copper, which would single-handedly overwhelm the metal markets.
7. The most almighty tax rebate in history
Legendary American economist Milton Friedman used to talk about the emergency “helicopter drop” a central bank could carry out if in dire straits. If the worst came to the worst, he said, the central bank could print money and literally (although I suspect, with disappointment, he meant figuratively) chuck it out of a helicopter. What that would mean in real terms is a tax rebate financed by central bank money creation. And with the £325bn the Bank is now spending, it could afford to give every member of the UK population – man, woman and child – a whopping £5,240. Not bad.
Instead, though, as we all know, almost every single pound of the Bank’s QE has been spent on government bonds – gilts. The upshot has been that interest rates around the economy have been lower than would have otherwise been the case. The Bank also reckons it pushed up economic growth by about 1.5%.
Fair enough, but at the very least it has deprived us of the opportunity of seeing Sir Mervyn take over from Mark Zuckerbag in charge of Facebook – or indeed becoming the owner of the biggest fleet of vehicles in modern history. Which is surely a great shame.