Monday, Jan 19, 2009
An irresponsible and irreversible act...
Mail: Bank is given the green light to print more money
It should now be clear to all, that Gordon Brown does not care in the slightest about either savers or savings.
''The Bank of England was today given a licence to print more money to bail out the failing economy. In a drastic new twist to the financial crisis, the Bank's monetary policy committee has been told it can increase the money supply if it believes more cash is needed to kick-start the financial sector.''
Posted by hpwatcher @ 06:53 PM (915 views) Add Comment
12 Comments
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1. hpwatcher said...
Gordon Brown is engaged in an act of asset stripping of all in the UK. We are heading for a bloated marxist state.
2. titaniccaptain said...
Off topic and yet not off topic
3. plato said...
The FED, ECB, BoE will all be printing.
Titan......
If gold threatens cash it will be confiscated: http://www.usagold.com/analysis/confiscation.html
4. hpwatcher said...
If gold threatens cash it will be confiscated: http://www.usagold.com/analysis/confiscation.html
In times of war, it seems that the government have the right to confiscate.......anything!
5. amjidk said...
Gold Conspiracy??
6. luckyjim said...
Trying to control the economy through control of the money suppy like trying to tow a car with a bungy cord.
7. inbreda said...
How long does everyone think it will take before it affects RPI? Didn't take long in Argentina. Our savings could be wiped out in the space of a few months. I am starting to get scared that things are about to get 100 times worse at any moment.
8. luckyjim said...
imbreda
Yes, and if savings get wiped out so do debts. A big mortgage with a spectacularly low fixed interest rate starts to appeal.
9. paul said...
Haaaang on a second. Not so fast.
Okay, if reflating was as simple as printing money, it would have been used some time ago by Japan and on a few occassions since then by the US and UK.
The problem is the transmission mechanism. You dole out money to taxpayers, and some of them will save it some will spend it and some will just save in lieu of it.
The Bank of England can buy houses and sell them to people, but who will buy them while the threat of deflation and recession hangs over the economy. And if the Bank of England does that, won't they affect the asset worth of commercial banks' loan books? After all, if your're negating debt, you're also negating the repayment of debt, and if you've got nothing to counter that, the remaining commercial banks will go bankrupt quicker than you can say "fiscal responsibility".
And how will you compensate savers who depend on their money to eat? Will you just let them go hungry? And what of other commercial investors owning investment vehicles, to be repaid or redeemed in future? Can you imagine how the market for that debt would collapse in a very nasty and untidy way?
No, rest assured, it really isn't as simple as printing money to cancel out debt and savings.
10. 51ck-6-51x said...
The £50bn they speak of in the article is not being printed, it's being borrowed.
11. 51ck-6-51x said...
^^ Report in The Telegraph
12. kruador said...
You have GOT to understand how banks create money before making any judgement on government printing money.
Banks are not limited to merely lending out money that was deposited. They are permitted by the regulators to lend more - much more - than was deposited. As long as customers don't take their savings out, this fraud goes unnoticed. The regulators, depending on the home country of the bank, either require a fraction of every deposit to be retained (by the multiplying effect of much of the borrowed money being redeposited, the effect is squared) or require a certain level of capital in the bank to cover the money considered to be at risk. The latter principle is operated in the US and UK using a measure called Value At Risk, which I've mentioned here before.
Basically you can sum the alternatives up as follows:
- Government borrows money from banks. We have to pay it back later with interest, even though the bank created it from nothing
- Government prints money. It makes a little money from seignorage.
Which plan makes more sense to you?
The thing that causes inflation is excess money supply. It doesn't matter whether it was bank-created by lending to bad risks or by government printing too much. Currently the government has to create more money somehow as so much is being destroyed by market falls.