Printing Their Way Out Of Recession.

The Bank Of England has just announced that they are about to create another £50bn of new money to be used mostly to buy government bonds.

As Edmund Conway points out in his telegraph blog, the yields on the bonds (which are the perfect indication of level of reluctance in the market to purchase them ) went up in anticipation of BoE announcement and went down sharply when the announcement was made.

The message is simple - while you're buying the bonds, we'll buy some too. Once you're out of the market - we'll follow you through the door.

That more or the less leaves BoE and it's Governor (who is appointed by PM ) as the main (potentially, only) buyer of Government bonds - in other words, the only lendor still willing to lend money to the Government.

So, when the Government tells us that they are going to "borrow" some astronomical sums to service their client state, it should be clear that they actually mean to print the money they need. If only each of us could have had this option - to add arbitrary sums of money to our current account to cover any past or future excessive expenses...

What happens next ? It's quite simple really - unlimited supply of any substance devalues it. Sand might cost money in other parts of the world, but try selling it in Sahara. As there are no real limits to the amount of money BoE will need to create to keep this spendaholic Government afloat for the next year or so, pound is in real danger of becoming Sahara's sand ...