According to a Guardian report, the Bank of England's quantitative easing experiment has been a failure. Since 2008, the Bank has created £325,000,000,000 of funds to buy UK government bonds, and today it owns about one third of all traded government debt. Supporters point to the fact that QE has prevented steep falls in equity and asset prices. However, most of the gains from this go to the top 10% of society. In the initial period after the crisis, borrowers, and mortgagees benefited at the expense of savers (mainly the over 50s). However, borrowing rates have since crept up and inflation has affected all sectors of society, particularly pensioners. Has QE resulted in economic growth? Doubtful. Has QE redistributed wealth within society. Most definitely! Banks, the wealthy and borrowers have benefited at the expense of the prudent, savers, the elderly, and the poor.
As an undergraduate, I was taught about the failure of Herstatt Bank in 1974 and Herstatt risk. This bank was only the 35th largest bank in Germany at the time so why would anyone be interested in studying its failure? Herstatt failed because of its involvement in risky foreign exchange business. When it closed its doors on 26 June 1974, counterparty banks (mainly in New York) had not received dollars due to them because of time-zone differences - this is known as settlement risk. The cross-jurisdictional implications of its failure resulted in the Bank for International Settlements setting up the Basel Committee on Banking Supervision and Herstatt's failure was a key reason for the establishment of real-time gross settlements systems, which ensures that payments between two banks are executed in real time. The Bank of England's Ben Norman has an interesting post on Herstatt over at the Bank's new blog ( Bank Underground ). As well as giving an excellent overview of