Friday, August 24, 2012

Sharing the austerity?

The Bank of England's quantitative easing (QE) programme, intended to revive economic growth ( the BofE prints money to buy up government gilts — effectively pumping money into the economy), has delivered a massive boost to the wealth of the most prosperous 10 per cent of households in Britain while delivering relatively scant returns for the poorest, a new analysis indicated. The wealthy have been the biggest winners from the decision to print an extra £375 billion

The Bank said it successfully pushed up share prices and other asset values, delivering an overall boost to the net financial worth of UK households of around £600bn. The Bank said this worked out at an average benefit of around £10,000 per person. But an analysis reveals that the wealthiest 10 per cent of households would have benefited from QE more than 240 times as much as the poorest 10 per cent.

In July showed that the wealthiest 10 per cent of British households held £2.5 trillion in pension wealth at the end of 2010, while the poorest 10 per cent held just £2bn. The ONS also estimated that the richest 10 per cent of households held £569bn in financial assets at that time, as against the poorest 10 per cent, who, in contrast, owed around £9bn. If the monetary stimulus programme successfully boosted asset values by 28 per cent over the last two years to the ONS data, it showed that quantitative easing delivered a benefit to the wealthiest households of £870bn, while the poorest households benefited by just £3.5bn.

With 2.5 million households in the poorest 10 per cent and the same number in the wealthiest 10 per cent, that means the richest households gained by an average of £350,000 each from quantitative easing, while the poorest benefited by an average of £1,400 – more than 240 times less.

Rich people have lots of assets and poor people don't. That's, of course, one of the things that makes the rich rich and the poor poor. The top 5% of households hold 40% of assets. So in that sense it's hardly a surprise that the Bank of England's money printing programme, which was specifically intended to boost asset prices across the economy, has ended up disproportionately benefiting the rich.

1 comment:

pete21 said...

Just had a message from someone saying that they are having a great time reading my blogs. Well SOYMB. Blogs.

YFS