For Sale

The Bank of England has, for the last several months, been attempting to increase the amount of lending and spending in the UK by increasing the amount of money in circulation. So-called "Quantitative Easing" sounds more like an advanced Physics lesson. Or the solution to a bout of constipation.

The Bank has done this by buying up government debt from banks using money that it has "created", electronically. However, it seems that the banks are doing what economists would describe as "rational" - using the money to shore up their balance sheets. The result: less impact on lending and spending than Mervyn King would like. Some of the cash has even gone overseas. Also rational.

Well, I am no expert in macroeconomics, but I would like to suggest a simple solution. The BoE is wasting its time targeting banks and investors. It should target ordinary consumers. After all, we are much less likely to have the willpower to act rationally. When faced with extra cash, we will buy the latest fashion, games console or smash 'em up DVD by Clarkson. There is no better way to kickstart the economy than to give unexpected cash to ordinary consumers. In this vein, I would like to announce that my mortgage is up for sale.

It is a simple solution: buy my mortgage from the lender, cancel it and save me a shedload of cash each month. I may use that money to bolster my reserves, as have the banks, but more likely I will spend it on consumption, especially at this time of year. Businesses benefit from increased sales and cash flow, reducing the need for emergency credit from the banks, which is hard to come by. My lender benefits from increased cash reserves, which it may use to lend or it may not; even if the money goes to capital-building that is no worse than the current situation. In addition, increased traffic through the doors on the High Street increases confidence and improves the overall mood of retailers (it couldn't get much worse than one year ago, can it?).

I am surprised that Mr. King has not thought of this, as it is such a simple concept: put the money in the hands of the people who are most likely to spend it the way you want them to. Of course, there is the issue of moral hazard, but then again, Mr. King has not exactly won that argument, has he?