QE

After July’s meeting on Thursday, the BoE announced historically low interest rates would be held at just 0.5% and that they would be injecting another £50 billion into a struggling economy. This comes at a time when the UK is already in a double dip recession and fears are growing that the recession will continue for yet another quarter or perhaps be upgraded to a full-blown recession in the months to come.

The Monetary Policy Committee acted after the Bank’s Governor, Sir Mervyn King, stated in previous days that he was in shock over the state of financial affairs in Britain and how they had degenerated continually within the past half year. This was revealed during the twice-yearly Financial Stability Report which had been made public the previous week.

According to economists, the UK economy is continuing to shrink and perhaps in the best case scenario, remains flat as of the second quarter of 2012. This would mean that the final quarter of last year as well as the first two of the current year have been mired in recession and does not bode well for prospects in the near future. Although there is no actual way to define a ‘depression’ which can be agreed upon within the UK or in other countries, it is generally labeled as such when a country sustains a recession for at least two years in a row.

Even so, this new round of QE is not expected to provide great yields but may boost confidence a bit. The Deputy Director General of CBI states that the UK should also consider alternatives such as investing in “high grade corporate paper and bank bonds.” He further contends that although this isn’t the final solution, it will give a boost to some businesses during this difficult time.

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The German interior minister, Hans-Peter Friedrich, has said that Germany is actually prepared to come to the aid of Greece but only if they agreed to help themselves by honouring the agreements set forth in bailouts.

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Long-term effects of QE still a mystery

While many bankers and economists feel that another round of quantitative easing is needed to help kick-start the economy, one leading banker in Britain is actually warning against pumping more money into western economies. In the words of Standard Chartered banks chief executive, Peter Sands, this will jeopardise financial stability by “laying the seeds for the next crisis.”

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Leading economists urging Chancellor to change strategies

According to 100 of the UK’s leading economists, Chancellor Osborne should take drastic measures immediately in order to avoid another recession. They are calling for a ‘Plan B’ in order to salvage existing jobs whilst creating new ones in order to forestall an economic catastrophe.

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Eurozone being called epicentre of global financial turmoil

Chancellor Osborne has asked that leaders in Europe become decisive in their plan of action over the debt crisis that has been building in the eurozone. In fact, global leaders are now calling the eurozone the epicentre of all the mayhem within global markets.

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BoE stands ready for next round of QE as borrowing tops records

According to the latest statistics, government hit a record high for August borrowing due to an increase in spending. Public finances are now under even greater pressure and BoE is at the ready to begin printing money for another round of quantitative easing. This could come as soon as October if given the go ahead.

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