I plucked the £1 trillion figure out of thin air for impact:) ,only joking heres the link http://www.guardian.co.uk/politics/real ... ng-bailout
The £1 trillion firewall was esentially set aside to be used but it wasent needed. The point still remains that over £1 trillion of tax payers money was at risk due to the banking sectors "ingenuity"....
The debts racked up by the labour gov would arguably not have been racked up if the banking sector had not been allowed to use excessive leverage resulting in phantom gdp that in fact was reliant on asset prices continuing to soar.
If you look at Labours spending during their years in power their budget defeceit never exceeded the 3.5% level up until the crisis in 2007/2008. Not that im singing their praises, just pointing out the facts that they never broke any fiscal golden rules.
QE was in response to plummeting investor and consumer confidence which resulted in the collapse of asset prices globally, causing the nationalising of RBS and thus the assets on the banks balance sheet became the assets of the tax payers.
In order to support the share price of the bailed out RBS QE was used to buy up gilts reducing the rate the government could borrow at and also gentally encouraging fearful investors out of the government bond markets into the stock market in search of real yield to preserve the purchasing power of their capital.
QE in conjunction with record low interest rates allowed both companies and households to continue to pay back borrowed money on mortgage and card debt .
Thus supporting individuals asset prices allowing them to continue consuming, helping the economy to grow albeit somewhat anaemically but better than increasing interest rates resulting in a countrywide epedemic of non performing loans, further impairing the balance sheet of the banks which we now own and inevitably leading to the use of the whole £1 trillion.
So QE in effect was used to support the share price of the bailed out banks, support the asset prices now transferred onto the governments balance sheet, support consumption and the paying down of corporate and consumer debt, to reduce the borrowing rate of the government enabling them to support the ailing economy, and also had the beneficial side effect of inflation devaluing sterling making our exports more attractive and imports less attractive helping to rebalance the economy.
Not to mention that inflation also reduces the overall debt burden of both the government and individuals. Ok, it comes at a trade off which is a slight rise in the standard of living but that was probably overdue given the consumption mad model we have become accustomed to over the last decade.