Quantitative easing (QE)provides the BoE with the ability to buy assets, securities like corporate bonds or commercial paperand Govern/ ment bonds from commercial banks / insurance companies that currently hold them.
Here is your chance to play the bemused academic crossed fingers specialist .... Mervyn King
British Airways (The worlds favourite airline) have bonds they have issued ..lots of 'em.
Yesterday Standard & Poor's Ratings Services lowered its rating on British Airways' long-term corporate credit from investment grade to "junk," falling from BBB- to BB+, .. plus a warning they might be downgraded further. (Moodys show them as equivalent Ba1 details here )
They gave resons, plenty of 'em why they had downgraded them.
S&P said Friday it was looking at;
1. BA's losses
2. Worsening demand, particularly on BA's high-dollar premium passengers across the Atlantic
3. Currency losses from the weakening British pound
4. Failing UK economy
... and er ... other factors... order book with Boeing for more planes etc.,
"As a result of the more challenging industry environment, we believe that BA's financial risk profile and credit measures are no longer, nor are likely to be, appropriate for an investment-grade rating over the next several years," said Standard & Poor's credit analyst Leigh Bailey.
Now as Mervyn .. or one of his double firsted henchmen ... do you buy this crap ?
The holders will gladly take the proffered loot and run .... and invest it , squirrel it away on the busted balance sheet, handsome salaries, bonuses, boxes at Man United, sponsoring Rugby Union, Newcastle United, Newcastle Rugby ....
After all, what is there to stop them ? If there is Mervyn has not told us what it is..no doubt they will "monitor" the situation as did the BoE previously... with the same people doing the monitoring ... and the same bankers pissing the money away.
Now are you really convinced that QE is a really great idea to get the UK economy moving ?