Fresh from getting David Laws fired, The Telegraph reports that "the Bank of England made £8bn profit from quantitative easing fund."

Er, come again?

Quantitative easing is one of those infuriating concepts that, while it seems easy to understand, economists will merrily tell you that it's not that simple.  In your first ever lesson in economics, you will learn that printing money causes inflation. End of.  Ah, but this is the economists' very own version of the naked short sell.  You sell money you don't have in the hope that you can buy it back in the future before it's had a chance to cause inflation.  In the meantime, it can be used to provide much-needed liquidity to the markets.

It reminds me of a joke about a smoker trying to quit - because he was one day going to stop, there would be thousands of packs of cigarettes he would save in the future, so he was bloody well going to have one of them now!

Anyhow, given that QE is fundamentally just a balance sheet entry - debit assets today, credit assets in the future - I don't really see how we can make a profit on the deal.  Are these the first signs of inflation?  I think our learned economists really should explain to us.

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Filed under: Economics with tags bank of england, inflation, quantitative easing, telegraph