"PRINTING MONEY" scream the newspaper headlines. Not surprisingly many of you are getting worried about the possiblities of inflation. We have all been taught printing money is a recipe for economic calamity.
The Bank of England has decided to introduce quantitative easing.
Remember Weimar in Germany; the wheelbarrows of cash required to buy a loaf of bread? Or Mugabe's Zimbabwe, where inflation is running at 230 million percent because the central bank has printed so much cash? You can stop worrying. Now.
There is a world of difference between the so-called quantitative easing being introduced by central banks like the Bank of England, and running the money printing presses willy-nilly thus stoking hyperinflation.
First and foremost, inflation in major economies like the U.S. and EU is falling Today the fear is deflation. The money being printed is actually trying to turn that around. There is little danger of sudden hyperinflation before we have a chance to do something
Secondly, the money is being used to buy government and corporate bonds. It is being channeled through the banks, and hopefully onto consumers. It is not being handed to the government to pay everyday bills with no thought to how or where. In previous disasterous cases the money was used to pay wages, and there was no end in sight. It was out of control.
Finally, this is all being done in the full glare of the markets and transparency. We know how much has been approved and when. Government and central bankers have a firm hand on what is being done and why. We also know that there is an exit strategy for when the economy does turn around.
For those who are worried about the environmental effects of all this printing (well, of course, they are not actually going to print bank notes): Commercial banks have accounts with the central bank. Those accounts will be topped up automatically and electronically. Literally, the accounts will suddenly be much healthier and richer.
Yes, this is new territory for most countries, and the bankers admit they don't know quite how it works, but they are doing it carefully and with thought.
Are you still worried ?
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