‘Quantitative easing’ is all the rage today after the Bank of England announced it is "increasing the size of its asset purchase programme by £75 billion to £275 billion".
You what? Most people won’t have a clue what that means.
Quantitative easing sounds like some kind of over-the-counter medicine or an A-level maths test.
The reality is it refers to the printing of money to pump into the economy to help stimulate growth – well, that’s the plan anyway. And £75bn is the extra cash the Bank is planning to print.
But why does it have to be this complicated?
So many financial terms are difficult to understand, making it hard for the average punter to know what exactly is going on.
On BBC’s Newsnight yesterday, one contributor talked about ‘credit default swaps’ (insurance taken by lenders in case their borrowers don’t pay loans back). He didn’t include the bracketed explanation, so how on Earth are most people to understand what that means?
The pensions industry is among the worst offenders. ‘Trivial commutation’ (where you can take all of a small pension pot as a lump sum) is one term used, which sounds more like a board game than a mechanism to draw retirement income.
Is it just because we’re British and like to make things complicated? I always remember the first time I flew to Australia, the in-flight map told me we were flying over the Great Sandy Desert somewhere in the middle of the country.
I remember thinking "they call it like it is". It’s a great big desert that’s very, er, sandy, hence the name.
I’m no expert on the Australian financial market so maybe their punters are also fazed by jargon too, but you get my point.
If only we could make things so simple.
Are there any other financial terms that bamboozle you? If so, or if you want to discuss anything related, you can do so in the Financial Jargon forum post.
