As the UK prepares for a second wave of coronavirus cases moving into the cold winter months, the UK has pledged £3b to the NHS to provide the resources they may well need.
This gave me cause to go and check the status of the money supply at the Bank Of England.
Here is what I found:
Source: https://www.bankofengland.co.uk/monetary-policy/quantitative-easing
The increase in the money supply looks nice and steady doesn't it?
The trouble is, the 5 bars are not equal spaces apart in time.
First Increase: £200b up to £375b
Time gap: 2 years 8 months
Second Increase: £375b to $435b
Time gap: 4 years 1 month
Third Increase: £435b to £645b
Time gap: 3 years 7 months
Forth Increase: £645b to £745b
Time gap: 3 months
The biggest bulk of this is in 2020. March saw a £210b increase and June saw another £100b increase.
Average monthly increase from November 2009 to June 2020:
£545b increase over 127 months = £4.3b per month.
Crypto rewards for anyone who finds a flaw in my calculations.
I'm not having a go at the Bank Of England here, this recent spike in QE was in response to covid.
What Should The Chart Look Like?
QE is newly created money that is used to buy newly created government bonds. Thus it turns into public sector debt.
The chart above plots the data on a month by month basis.
I am pleased to say that our government is smart enough to pay down it's debt when it has spare cash. See how some of those dots are below the 0 line?
Unfortunately, you see how much the government has had to borrow to deal with covid. It completely obliterates the steep increase in borrowing you see in the middle of the chart which coincides with the 2007 financial crisis.
So What Is My Point?
I've used these charts just to illustrate the point as to how data can be displayed in different ways to tell different stories. Even though it's the same data.
My advice (if you want a clear view of what is going on) is to look at the data from lots of different points of view. Look at it displayed in a variety of different ways.
Only then will you be able to build up a 3D picture of what is going on.
Then you can decide for yourself what it means.