Have you ever wondered what happened to the \u00a3375 billion, equivalent to \u00a36,000 for every man, woman and child in the UK, created by the bank of England electronically? Maybe you didn’t even know that the Bank of England could do this, or that they ever had. Sounds suspiciously like a magic money tree doesn’t it?<\/p>\n\n\n\n

From 2009 to 2012 the Bank of England (BoE) created \u00a3375 billion<\/a> out of thin air, before adding another \u00a370 billion to the bill in 2016. But this is not solely and BoE practice, between 2008 and 2015, the US Federal Reserve created more than $3.7 trillion to pump into the economy, whilst the EU have created around $600 billion across the Eurozone.<\/p>\n\n\n\n

But how on earth is it possible to just create such vast sums of money out of nothing? Well that is where a concept called Quantitative Easing comes along.<\/p>\n\n\n\n

What is Quantitative Easing?<\/strong><\/p>\n\n\n\n

When a national economy is struggling<\/a>, as was the case around the world in the wake of the 2008 crash, governments often look for ways in which they can pump in money in order to keep the economy from stagnating.<\/p>\n\n\n\n

They do this by electronically creating money \u2013 this is as simple as adding numbers to the Central Bank\u2019s computer – and using it to buy bonds from investors such as banks or pension funds. The theory goes that this will increase the amount of money in the system and encourage businesses to spend.<\/p>\n\n\n\n

There is a risk of causing inflation to rise too fast by inputting so much extra money into the system, so it is important that the money is distributed and filtered into the economy in a controlled way.<\/p>\n\n\n\n