A good question,

I have long thought about the effect of quantitative easing and how this effects the individual. Obviously it devalues our currency. As no one is getting pay rises this means that the price of everything that is imported and depends on imports (which is pretty much everything) is becoming relatively more expensive for everyone.

But further than that I have been wondering where all this money is going too. Correct me if I am wrong but I believe the newly created cash is being injected into the economy via the bank of England lending money at below the inflation rate which is subsequently lent on by the financial institutions of this country.

So when the bank of England gets the money paid back it will be getting back less than it was worth at the time it was lent.

So what does this mean for savers. Well you obviously can't compete with that, who would want to save and when you go to withdraw your money you receive less back less worth than you put in.

But for those that have loans this is great news, borrow money now and payback less, (or maybe the same after the banks take their slice) at the time of repayment.

So it was people that borrowed an excessive amount in the first place that created this whole mess and now they are being rewarded with this quantitative easing.

The savers who had no part in creating this mess, other than trying to get a return on their money are being punished in a big way.

Now what should the Government do. That is the question. If there is any justice in this world they would stop the bank of England lending at a rate savers can not compete with and let interest rate go sky high, and reward those that truly deserve it.

Now what the effect of that would be on the economy I can not say for sure, I have a feeling it would be prity major. There would be a lot of repossessions house prices would collapse. Many people would declare them self s bankrupt., the banks would loose a lot of money.

But hay it's the right thing to do, the only thing to do if this was a free market like it is ment to be. The banks would have to lick their wounds and hopefully this would make them think harder about the kind of credit they give out in the future.

I'm sure life would go on one way or another...

Hi all - hope you're all well and enjoying the Great British Summer (!),

A House of Commons Treasury Committee report on the Budget released today has indicated that pensioners and savers are being hit hard by the redistributional effects of quantitative easing and low-interest rates.

Now, forgive me for being a bit blunt here but...haven't we known this for some time?

For anyone who'd like a read, the document is here: http://www.parliament.uk/documents/commons-committees/treasury/HC%201910%20Budget%202012.pdf

But...should the government and Bank of England be doing more to help savers and pensioners? And what sort of thing should they do? Would this put the economic recovery at risk?

Graeme
Community Manager
graeme.delap@moneysupermarket.com