Quantitative what????

So it's official. The Bank of England are now printing money. Which of course was a wildly successful course of action in pre Nazi Germany. Oh and Robert Mugabe has done it brillliantly too.

Although of course, silly me. That's NOT what they're doing. They're not apparently printing anything, because the process of quantitative easing (printing money) is all about releasing funds into the marketplace to get people spending again. So to do this, the Bank of England has exchanged all the IOUs that the banks hold against all their creditors for funds so they can start investing again. At least, I think that's how it works.

Now ok, I am not an economist. Nor am I a banker. If truth be known, numbers and me have never got along.

But run this by me again. The banks. The responsible banks who've been lending blithely to people who can't afford to repay them and investing in dodgy deals that were no business of theirs, are now being repaid for their efforts in bringing down the economy by being released from at least some of their debts. How does this work now. Does the Bank of England now pay those IOUs.

I feel incredibly sorry for anyone who has got in over their head (encouraged no doubt to do so by their responsible bank manager), or anyone who has lost their job thanks to the collapse of the financial system (I am lucky to be married to a dentist, I know, but believe you me even dentists aren't going to ride this recession out), but....

And it is a big big but....

How is it that all the people who have been profligate and extravagant in the times of plenty are not having to face up to the responsibility of their excess now? With interest rates at an all time low, if you have a huge mortgage you can't really afford, you will be getting some respite, even if all the experts I've been listening to seem to think that the low interest rates aren't going to make a blind bit of difference to kick starting the economy. All it's doing is punishing the savers - the people like us who have been careful and husbanded our money.

Spouse and I came out of university just before the last recession. It was a similar time of greed and excess, and Hooray Henrys and Loadsamoney. We bought our first house, a two up two down railway workers' - the estate agent said cottage, we said hovel - for the princely sum of £85 000. At the time prices were rising, and we naively thought we'd stay a couple of years, make a quick buck and sell, as so many people this time around have thought. Little did we know that we were buying at the peak of the market. Within six months our own little shangri-la was worth several thousand pounds less then we paid for it. We were very fortunate not to go into negative equity, but it was seven years before we were able to make the move we'd blithely assumed would happen so easily. In the first year we had the house, we were victims of Norman Lamont's dodgy dealings with the erm and our mortgage repayments shot up from £300 a month which we could pay very comfortably, to £900. It was a salutary lesson, which I'm immensely grateful for learning so young, to live within your means.

Ever since then Spouse and I have been very cautious about debt (I doubly so, because I came out of university in debt and the horror of trying to pay it off when the bank is charging you for your overdraft, and whacking up the interest and then writing to tell you and charging you for the letter, still haunts me now), so during the last boom we have worked very hard to get ourselves debt free and save money for the kids so that they can come out of university without a huge millstone round their necks.

For eight years after no 1 was born Spouse didn't even take a fortnight's holiday because we couldn't afford it, and the most exotic thing we've ever done since we had the children was take them to Menorca. We do run two cars - one is now twelve years old - but neither of them are flash, and yes, the one luxury Spouse has afforded himself is the Caterham, but by and large we live I think a reasonably modest kind of life, when I suppose we could have been indulging ourselves with flash holidays, a bigger house and faster cars.

So I find it a little bit galling now to see Gordon Brown (for which read architect of all this mess) talking about getting people spending/borrowing again. Part of the reason we are in this situation is people have borrowed too much, and have got used to the idea that they can have all the technical goodies they want (built no doubt in some slave labour camp in China) for a pittance, and upgrade them as soon as they are obsolete (usually about a week after you've bought them). People have been encouraged to spend beyond their means, and of course the majority of those who are now paying the price are probably the ones who could least afford it in the first place. It makes me mad as hell to think a LABOUR government has in effect impoverished a generation (in more ways then one. Don't get me started on education). And yet, since we have come to the time of reckoning, no one seems to be calling a halt, and saying come on folks time to tighten your belts, party's over.

Nope, we are instead being encouraged to spend our way out of recession. Run that by me again??? I owe squillions to the bank, which I already cannot afford to repay, and I should borrow more??? How on earth does that work?

I suppose the trouble is no one really knows wtf to do, so (from my very very limited understanding of this) quantitative easing has been introduced because (I may be wrong about this, but I think I read this somewhere) it is apparently part of Keynesian economic thinking, and had the world been bolder in the 1920's we wouldn't have had the Depression. But the same article in which I read this also said this strategy is meant to be applied when you're coming OUT of recession not going into it.

I cannot see how releasing extra money into the economy whether you call it quantative easing or printing money can actually make any difference at all apart from cutting the savings of people like me even further. Surely it just devalues the economy further and we end up in even more of a mess?

Like I say I am not an economist so I may be understanding this all wrong, and all the financial pundits I heard on the radio yesterday seemed to think it was the way forward, but...

When one of them was asked by the interviewer what happens if it DOESN'T work, the response was a shrugged, well we'll deal with that problem later, ie, no one probably has a fucking clue if this is going to make things better or worse. Guess which outcome my money's on...