Quantitative easing

Discussion in 'Current Affairs' started by chieftiff, Mar 5, 2009.

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  1. chieftiff

    chieftiff War Hero Moderator

    I'm having problems getting my head around this, I'm fairly good at Maths and thought I had a fair grasp of economics but this has just got me going around in circles, perhaps someone who works in the economic sector (if there is anyone left) could explain it.

    According to the news this morning the Bank of England have a new tool in their arsenal against economic meltdown: quantitative easing. Now, because their attempts to prop up the economy by reducing interest rates has failed they are going to reduce them further? In addition they are going to put more money in the economy to encourage lending by banks............. now is it just me or won't putting more money in the economy just devalue that which is already there? Do I see inflation about to raise it's ugly head and haven't we been here before in the 70's? Am I missing something here? or do these questions still seem unanswered:

    Why will this make the banks lend more money?
    Will it not effect the exchange rate and value of the pound making imports more expensive? (exports possibly more viable I suppose)
    Aren't the people who prop up the entire financial system (savers and investors to the tune of 1 trillion pounds) being further screwed?
    Are we about to see inflation go through the roof and a lot of old people (lets remember we are all going to be there one day) fall into extreme poverty - not to mention all those who have just been forced to take pay cuts or receive no pay rise this year?

    Leading questions I know, but answers on a postcard to: Mervin.......

    Edited to add: That's not Mervyn King, Governor Of the BoE but Mervin the chimp at my local zoo who now appears to be running the economy.
  2. Seaweed

    Seaweed War Hero Book Reviewer

    Inflation destroys savings and erodes the value of private pensions and thus penalises the 'bourgoisie' who are seen as enemies to the advance of Socialism, and is therefore a valuable item in the Socialist toolkit. The captive Labour vote on the State payroll is of course protected - until the roof falls in.
  3. I read recently that the euro would not survive a recession,basically 'cause there is nothing to back it up in the vaults. Didn't someone sell off the Bank of England's goldie bits so that is the case wi9th the Pound ?

    No Goldie bits
  4. chieftiff

    chieftiff War Hero Moderator

    Lower interest rates are of course already doing this forcing many of us to look elsewhere, other than our local bank, to safely invest (or not so safely if you are that way inclined, sod the socialists capitalism is about opportunity ): Lending your savings Banks not lending hasn's reduced the need to borrow fortunately :wink:

    But that's an aside, can this "new" idea work when it has failed so obviously in the past both here and elsewhere in the world?
  5. When I was at school, I elected to follow the science and technology stream and not economics. In conversation with one of my E stream pals, I learned the principle that “only Governments can create inflationâ€. That is achieved by printing more money than the Economy can support. I don’t recall any mention of the Economy shrinking to beneath the level that the money in circulation would warrant, though.

    What we are to be inflicted with is the former. It’s a form of free market currency devaluation. Harold Wilson would have loved it for the “pound in our pocketsâ€.

    Some twonk on the wireless, this morning said that Britain will experience, for the first time, “quantitative easingâ€. Yes we have! It’s simply the first time we’ve given it a bloody stupid septic title.

    I’m so glad that I have no debt and a lifetime worth of savings. I can now feel so generous that I’m now subsidising and financing the feckless, greedy and stupid! It certainly makes me appreciate the plight of the âœwhites†in Zim.
  6. Quantitative easing, isn't that what happened in Zimbabwe?
    As soon as any country starts to print more money to solve it's financial problems that country goes deeper in the sh!t,
    What we need is a period of restraint.
  7. It's just NuLabor teying to make it look as if they are not shafting you the way they used to. Every post war labour government has ended up having to do the same to try and get the country out of the hole they have dug for it.
  8. Just how much longer hove we got to endure this bunch of wazzocks for??? Whens the next scheduled General Election???
  9. Looking forward to my first £100,000 note.
  10. The last election was May 5 2005, so the next one must be by May 5 2010 unles Gordon uses his majority to change the law
  11. I'm not looking to provide the Labour Government with an escape hatch ref this new money creation scheme but isn't the bank of England working on a loose leash on this one?

    I think the finger of accusation should be pointed more at Mad Mervyn for not keeping his Economics textbooks now he has got the top job and sinking us deeper into the shit as a consequence
  12. May 2010. Not convinced it'll help, nobody else has anything credible to say about the economic situation. Vince Cable is pretty convincing, but the Lib Dems are saddled with the ''social liberal'' ex-labour rump from the SDP
  13. Not addressing your questions I realise, but in general a reasonable degree of inflation is a Good Thing (tm), deflation is a very Bad Thing (also tm).

    As far as I can work out the process of devaluation should help stimulate some increased inflation, as long as they're pretty quick off the mark when that happens then it should be manageable. There are a lot of ifs, buts and maybes in there though.

    While I'm not all that comfortable with the prospect I don't actually see any alternatives. Interest rates are now so low their value as a control is lost.

    I don't think there are any right answers, the challenge is identifying the least wrong.
  14. Yes but didn't our dear leader give control of interest rates etc to the Bank of England (I think there was some posh name for it, CRAFT moment) some years ago? So now Merv or whoever is in control has to take all the siht.
    Yes, we did see similar in the 70's, deflation, printing of more money etc.old, new, who cares, all liebour's doing!!!!
  15. Whilst the BoE is perhaps on a looser lease than they used to be at the end of the day they are VBrown/Darling placemen. they hold their positions due to government patronage, so whose bidding do they do. King is not going to turn arround and say Great Gordon has f*cked up we need to do XYZ. After all we have just seen a government shot accross the bows for the ONS because they dared to publish figures the Govt didn't like.
  16. I hear what you say Peter but the poor sod is very firmly in the "damned if I do; damned if I don't" box at the moment.

    The whole point of Chancellor Brown disengaging the BoE from Number 11 was to allow the "professionals" to take what action was needed (even when it was unpopular) to maintain UK financial stability (and let the Govt off the hook when it WAS unpopular)

    Now that Chancellor Brown has moved next door and swopped hats he can't turn around and instruct Merv to do a U-Turn without being clearly pinged as a hypocritical tosspot - even though we all know he is one.
  17. He has no option but to make sure that what he does is approved in No 10. If he goes against the party line the proverbial will hit the fan and that nice retirement package will disapear in a poof of smoke. He will get it in the neck and be blaimed for the lax regulation etc etc. His freedom weas as it was very limited, just interest rates and even then against a very restrictive measure. Perhaps if Gordon had been a trifle more dynamic we would have had the BoE remit changed a year ago when the writing was on the wall and perhaps some earlier action may have been taked. I suspect King plans to retire about the time Browns resignation honours list is published.
  18. I believe the good people of the Weimar Republic came up with one after 'quantitative easing' stuffed them down the pan after the crash of 1929 - elect an extreme right wing nutter with a gift for oration who then decides 'stuff Europe and America, we can sort ourselves thank you very much without you pushing us around' and proceeds to reboot the economy.

    Okay, so then he went off the rails a little with megalomania and declared war on most of the rest of the world and exterminated millions of people, however he did manage to turn what was rapidly approaching a third world country into a world superpower in 6 years.
  19. Why doesn't Gordon Brown simply call Ocean Finance and consolidate all his debt into one easily affordable loan?
  20. Once again the prudent savers get a severe kick in the forks.

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