It is the Bank of England, through its operations in financial markets, purchasing government securities of a given duration, typically from non-bank financial institutions such as life insurance and pension funds, whose accounts are credited with the proceeds such that the asset purchases are financed through the creation of central bank reserves held on the accounts of commercial banks at the Bank of England”. And that explanation, it was hoped, would provide the general public with the confidence needed to encourage them to spend. You can be the jury in deciding how well this might have been achieved. There was a different explanation, and conversation, with the public that could have been had. It might have gone something like this: Q: “Andy, is QE money-printing?” Andy: “Yes. And when you get some, make sure you spend it.”  10  All speeches are available online at www.bankofengland.co.uk/speeches  10  I fully accept that this would be the wrong side of the over-simplifying line for some people. But if doing so delivers the desired policy outcome – building public confidence to support spending – that may be the better side of the line on which to err. Just saying. (b) Conversation At the Bank’s first Open Forum in 2015, Gillian Guy, Chief Executive of Citizens Advice, said something that has stuck with me. In a panel discussion on the role of finance in society, all panellists agreed on the need for improved public understanding of finance.
CN: What has been designed by various countries – bearing in mind the structure of their economies and the relative importance of the automatic stabilisers – is probably the right balance between what needs to be done to stimulate global demand and the necessity to retain the credibility of the fiscal policy and budgets over time. It is especially important in European countries where we have the feeling that the so-called Ricardian effects can play a role. So if we were to give the impression to citizens that public finances were to deteriorate by too much and for too long consumers might increase their savings ratio to prepare themselves for tax increases in the future that they might regard as inevitable, or the reduction of benefits and pensions. So you have to keep the right balance between long term credibility and immediate stimulation. As far as we can judge, that balance is probably appropriate. That will have to be reviewed according to future economic developments. A related issue is the fact we all agree that a condition for the revival of the global economy is that financial systems everywhere are stabilised and that stabilisation is convincing the markets. I have the impression that we are a little more advanced in that regard in Europe than in the US. It is clear that the US authorities are making every effort to reach that goal, but that is probably as important as the size of the stimulus itself if we want to stabilise the economy.