London, United Kingdom (PressExposure) December 08, 2009 -- Sources close to analysts at "Zen International" say that the extension of the quantitative easing experiment may serve to cripple the British pound. The stark warning came after the Bank of England announced its intention to create another £25bn to buy government debt in a bid to channel more liquidity into the economy.
Britain's economic recession has proven far more stubborn as evidenced by the shock 0.4% contraction in gross domestic product in the third quarter of 2009.
Despite the announcement, sterling rallied against the currencies of its main trading partners although "Zen International" analysts apparently attributed this to the fact that the markets were expecting the Bank to plump for a £50bn expansion.
The new, higher figure takes the total of quantitative easing to an unprecedented £200bn and will see the Bank of England owning 20% of the country's debt, a situation described by "Zen International" analysts as "extremely dangerous".
Some of the money being created by the QE policy is being used by banks to speculate on markets in an effort to rebuild their balance sheets more quickly than they could by simply lending to businesses and individuals who may default.
"Zen International" sources also suggested that the decision this week to add another £30bn to the total of the biggest banking sector bailout in the world by purchasing equity in two British banks shows that the UK government does not have a viable plan to drag the country out of recession.