So what is Quantitative Easing I hear you say. I don't know about you but I have trouble spelling the blasted thing let alone having to explain it. Nevertheless, after much personal research I have managed to get to grips with it and will now attempt to explain it through analogy.
If you wish to replicate my explanation yourself at home with your family you will need the following;
This is best represented through the use of a person. Economies are rather organic in their nature and not very scientific at all despite what economists tell you so a person fits the bill perfectly. I used five of these 'people.'
Yes quantitative easing is all about those friendly,
Yes money. Money has been described as, "The perfect liquid asset" and with this in mind I think a liquid makes good sense too. For this analogy I lined up several dozen few bottles of gin.
The Bank of England
Obviously at the top of the pile this is the major player and it is imperative to get this in somewhere otherwise your simulation will be open to ridicule and we don't want any of that sort of thing do we. For this simulation I used a distillery
Right so simply place your barman behind a bar at a discreet distance, may be cleaning the glasses, you know the sort of thing and get your 'economy' to inflow the first 'money.' The 'Economy' is very pleased with this and therefore they all offer the 'bank' some of the 'money' as a sign of their contentment. Obviously not much happens here and in this case that reflects a perfectly healthy economic situation. The barman is happy polishing the glasses and enjoying a little drinkie and the 'economy' is happy has it has received an 'inflow.' Marvellous.
This inflow process carries on until both the 'Economy' (the people) and the 'bank' (the barman) are absolutely plastered out of their heads and I'm talking really gone here. No light tipsiness or feeling a little woozy, no sir! I really mean it! Soused, blotto, planked, totally and utterly newscasted.
|Bank of England|
So this is where the quantitative easing comes in. The distillery (not wanting to end up in council run accomodation) starts distilling, or printin, more and more of its 'money' and simply hands it over to the barman to distribute to the 'economy' The idea being that with lots of free and cheap 'money' floating around everybody will eventually get bored of drinking it, start sobering up thus will be able to put their hands in their wallets and start eventually paying for the booze thus stimulating the 'economy' again and everything will be great.
What actually happens though is that with all that free 'money' flowing in to the pub the barman (bank) simply starts drinking the lot for himself and his chums and starts using it to pay for vast swathes of land and property across the globe for his own selfish bleeding greed and gluttony leaving the 'economy' completely starved of any 'money' at all.
The moral of this analogy? If you want to rob a bank just go and bloody work for one.