Thursday, August 6, 2009

Bank of England Increases Asset Purchase Program by 50B Pounds

The Bank of England (BOE) has just announced this morning that it will increase the size of it's asset purchase program by 50 Billion Pounds, or 40%, to 175 Billion Pounds. For most folks - and especially economists, the BOE's decision came as a surprise. Bloomberg reported that out of 44 economists deemed significant enough to be polled on the matter, nearly half responded that they expected the BOE to halt, or at least not increase the size of the asset purchase program. The Pound immediately withered like a snail doused with salt upon the announcement of the Bank's decision.

The Bank of England is headed down a path that will prove increasingly treacherous for the nation. To speak generally, England's economy embodies most every negative attribute of the American economy, without enjoying any of the positives. It's really very similar to a recent episode of Entourage, in which Ari Fleischer became furious at the stress he had incurred while lying to help cover up a friend's affair. Ari screamed at this friend and said "Damn it, I will not have the stress of an affair without any of the sex!". This is similar to England's relationship with America. They rely heavily on the finance/financial services industry for employment, borrow too much like Americans, and spend too much like Americans. What England doesn't possess is a large industrial base, a reserve currency, or the status as a store of the world's excess savings. Apparently though, the Bank of England would prefer to test the gilt markets, and see just how much the asset purchase program can distort the nation's primary means of funding itself. Good luck boys, and enjoy the stress of the affair. Sphere: Related Content

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