Will there be Taxing Time for everybody or just savers?

Many times as I have surveyed the credit crunch era, it has been apparent to me that economic policy in the countries affected is set to benefit borrowers and debtors. For example, we saw an initial response of lower official interest rates across the developed world apart from places like Japan which had operated such a policy for some time. Then we saw intervention in longer-term interest-rates via polices such as quantitative easing (QE) and the European Central Bank’s (ECB) Securities Markets Programs.

In other words, government bonds were purchased by central banks in an attempt to lower their yield. Also, we have seen interventions in mortgage markets with the general driver here being – yes you have guessed it – to lower mortgage rates, with many people quickly hopping onto a remortgage calculator to see whether they can get a better rate for their household mortgage. This happened at different times in different places though. For example, purchases of mortgage backed securities were an early and ongoing part of US QE and the ECB decided to purchase covered bonds back in May 2009 (this ECB program is mostly ignored in the media, showing again that the best place to hide something is in plain sight). You could therefore argue that the Bank of England, with its Funding for Lending scheme, was a latecomer to this particular party – let alone the coalition government with its Help To Buy schemes.

That is quite a list and I would love to think that the world economy is now “saved”, and the UK economy’s current mini-boom will extend to the end of time. But, you see, such phases were present in the Great Depression of the 1920/1930s and the clue is in its name.

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— EconMatters

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