University economics expert condemns QE ahead of MPC meeting

Posted on 09 March 2015

A Keele University expert on economics has condemned the Bank of England’s policy on Quantitative Easing (QE) as unfair and unequal ahead of its Monetary Policy Committee meeting this week (March 5).
Colm Fitzgerald, a Senior Teaching Fellow in Financial Markets at Keele University, says QE has been mis-sold to the public and is merely a means of making the rich richer.
He says: “On the surface, QE seems to have worked. Since it started, economic growth has picked up and lending has increased but this simplistic perspective is hiding the real story behind QE.
“QE involves the Bank of England printing money and using that money to buy bonds, but that is only part of the QE story – in a nutshell QE drives up the prices of assets, making those with assets wealthier.
And he adds: “Since QE started, economic growth and lending have increased but mainly for the relatively better off, with just crumbs from the rich man’s table for the poor. QE has been unfair and unequal, but due to the complicated nature of QE, this unfairness has yet to come to the surface”.
According to Fitzgerald, of the Keele Management School: “QE makes the rich richer, both directly and indirectly.
“The more assets that you have, the more you will have gained from QE. Those with the most gain the most. However, relatively speaking, everybody becomes poorer than those who were richer than them in the first place. If you have no assets or very little assets, you have gained nothing or only very little - but will have become relatively much poorer”. Indirectly, QE has also made the rich richer. Banks only lend to those who they consider creditworthy. QE has made the rich proportionately more creditworthy and consequently improved their access to credit. Those who have little or no assets have not seen any significant improvement in their access to credit”.
He says the Bank of England’s own analysis backs up his argument: