Dumb question: when the media states Bank of England 'injecting' 50 billion pounds into economy,

[closeupready]

what does that mean, in simple terms? What exactly are banks doing when they are characterized by the media as doing this (as is being reported this morning)? I never had any formal education in business or economics, so consider me stupid, lol.

[Oregone]

1. Sometimes...

Central banks just buy up the debt notes from private banks (liquidate them). Then private bank would now have that much more in cash to lend (theoretically), which would eventually be put into the economy.

Im not sure about the specifics in the case you are referring to, but that is one way; just ensuring banks have liquidity.

[closeupready]

2. See for example this story:

Bank of England to pump another £50bn into economy

The Bank of England is pumping another £50bn into the UK economy in a further attempt to lift it out of recession.

Britain's central bank will raise the total amount of new money created under the quantitative easing (QE) programme to £175bn. The move is bigger than economists had expected, with the Bank admitting the recession had been "deeper than previously thought". It also noted that the world economy is still in recession.

City economists broadly welcomed the decision, which sent the FTSE 100 index up to a new high for this year of 4729.58, but pushed sterling down against the dollar.

http://www.guardian.co.uk/business/2009/aug/06/bank-england-quantitative-easing

I realize our education system isn't as good as many other nations, but still, I find it hard to believe that the average citizen of the UK can explain what the story here really means.

[muriel_volestrangler]

3. No, it's not something that most of us can explain

Oregone's description is roughly what's happening; the Bank of England is buying up the government debt currently held by banks, with money 'created' just for this - which is why it's known as 'printing money'. The idea is that the banks then have money now that they can lend out, getting the economy going again (whereas normally, they'd have had to hold the debt for the number of agreed years until they got the money for it).

What exactly has the Bank of England decided to do?

Mervyn King and his colleagues on the Bank's decision-making monetary policy committee surprised almost everyone by announcing that they would create an extra £50bn – on top of the £125bn already spent – to buy back government bonds and other assets. This drastic policy, known as "quantitative easing", is designed to boost demand and fight off deflation.
...
Has quantitative easing worked so far?

It's hard to say: loans to businesses are still falling and mortgages remain hard to obtain, which suggests banks are hoarding the money given to them by the Bank, instead of lending it out. Share prices have increased rapidly, perhaps suggesting the beneficiaries of quantitative easing are spending the money on other assets.

Will all this cost taxpayers money?

No: the Bank is using the vast majority of the £175bn to buy government bonds, known as gilts. Alistair Darling, the chancellor, is borrowing more than £220bn this year by issuing gilts to meet the cost of collapsing tax revenues and rising benefits payments. The Bank, in turn, is buying government bonds back, using money created electronically by simply crediting the accounts of banks, insurers or pension funds. When the worst of the downturn is over, the Bank should be able to sell the gilts back to investors, or hold them until they mature. But for the time being, quantitative easing should help to hold down the cost of borrowing for the government.

Won't pumping money into the economy store up inflation for the future?

That is the fear among some in the City; but inflation is caused by the balance between supply and demand in the economy. After the sharpest fall in GDP since the 1930s, and with unemployment still rising, there is huge spare capacity in the economy. Even a sharp pick-up in growth would be unlikely to drive up prices, in other words, because there is so much slack in the economy – for example, a huge pool of workers who could be hired cheaply. As and when the Bank does believe inflation is starting to take hold, however, they can respond aggressively, with their standard policy tool: increasing interest rates.

http://www.guardian.co.uk/business/2009/aug/06/quantitative-easing-questions-and-answers

It's not a simple thing to understand or explain; no education system is falling down if the average person doesn't understand it. I don't think economists are agreed on the results of it - some think it's a good thing to do, some don't.