How QE2 will hit share prices and your wealth

You've got to hand it to those bankers. They've managed to freak out the financial markets again. Their prize is - you've guessed it - another big wad of money. Over the next four months, the Bank of England is going to hand a £75bn cheque to our banking system, as it launches the next batch of quantitative easing (QE2). At first glance, the stock market loved it. The FTSE 100 jumped by almost 4%. And yields on UK gilts fell. The Bank would argue that this is just what it wants to see. But the bad news for the Bank – not to mention the rest of us – is that this is just a short-term reaction. QE2 will do more harm than good. Here's why…