Quantitative easing
the US$ 400 billion already moved. Currently, the average of long-term Treasury bills is close to 0% with bonds of 5-years maturities dropped into negative value.
3.5
3
2.5
2
Interest Rate of Government Bonds Long-Term Average
1.5
1
0.5
0
Fig. 4 US government long-term bonds average interest rate Source: Federal Reserve
The UK economy deteriorated into recession after the financial crisis in 2008, and the subsequent declining number of those in employment also became a challenging issue. Therefore, in March 2009, Britain announced a £75 billion asset purchase programme (APG) by the issue of central bank reserves. Within the programme, UK government bonds (known as gilts) and high-quality private corporation bonds would be bought. The GDP nearly stopped slipping in Q2 2009, and then showed a moderate pace of recovery. For securing the upturn, the APG was expanded three times in 2009 and the figure rose up to £200 billion in November 2009. After the late 2010, the UK economy showed signs of recession again due to the intensification of the Eurozone sovereign-debt crisis. Although Britain does not use the euro, the Eurozone is still its largest trading partner. The increasing concern about many Eurozone countries being insolvent hit confidence. The GDP contracted in Q4 2011 and went into ‘double-dip’ recession in Q1 2012. The BOE then started raising the size of APG in October 2011 and the latest increase pushed the figure to £375 billion, five times the original plan three years ago.
100 101
90 91 92 93 94 95 96 97 98 99
Employment (all aged 16 & over) Hours (total weekly hours)
GDP
Index number, 2008 Q1=100
Fig. 5 UK GDP and employment Source: Office for National Statistics
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