Tuesday, Feb 23, 2010
Mervyn King: Quantitative easing may have to restart •
The Guardian: Mervyn King: Quantitative easing may have to restart •
Nothing to see here...move on, move on
Posted by magnaman @ 11:24 AM (3052 views) Add Comment
60 Comments
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1. inbreda said...
Oooh. That wasn't very predictable, was it.
2. mrflibble said...
There is no 'may' about it. Once you pop...
3. fallingbuzzard said...
Currency market interventions may have to start, reading between the lines
4. mark wadsworth said...
*sigh*
Those who said this would continue were right, I have never expressed a view either way.
Those who said that QE was (a) going to wreck the economy or (b) going to save the economy were both wrong, and I have always expressed the view that QE is just paper shuffling - instead of govt borrowing money by issuing gilts it is borrowing money from the commercial banks (who in turn are being propped up with the proceeds of all this government borrowing, that's how mad things are with Home-Owner-Ist economics).
Ergo, QE will not have any big impact either way (although the overall impact is bound to be slightly negative, it always is when the government does something).
What we DO have to worry about is the underlying borrowing, not the manner in which it is done.
*/sigh*
5. freemanphil said...
Feeling Queasy? "This phenomenal 'queasing' is greater by far than anything Weimar Germany tried"
They have a decision, deflationary collapse, sucking the big corporations under, or, more quantitative easing. Look at this graph for the dependency now. Imagine getting rid of that whopping deficit.
6. freemanphil said...
Mark, that graph above, from the BOE demonstrates that QE has been used to expand Gilt purchases. And they have done double what Weimar Republic did. You are woefully positive about this Mark, possibly in denial. When you understand the shocking truth that hyperinflation is coming, you will be shocked.
7. mander said...
Dear Merv,
People do not need money but what they really need is value for money. So printing money without having the opportunity to effectively invest it is futile. Now either let inflation soar taking everyone to square one or let deflation create more value for money.
8. chrisa said...
QE may have to restart:
Translation: Merv is now pretty certain that without QE the UK will not be able to sell its debt and will have auction failures. It is no secret that around 99% of QE has been used to buy UK Government debt. He and the rest of the BoE are still spinning away merrily. Gits.
9. inbreda said...
MW - surely at the very least this is maintaining gilt prices and therefore allowing IRs to stay stoopidly low. How can this carry on without any effect. Are you sure that just by shuffling money using QE teh government can keep IRs at 0.5% forever?
10. David47 said...
This is frightening isn't it? He has a policy which so far only appears to have helped create inflation and yet he wants to do more of it. I was reading an online blog the other day which itemised the losses we must be making on QE and yet still he wishes to start again!
11. hpwatcher said...
Yes, it's all about keeping interest rates low, and thereby house prices high.
12. mountain goat said...
Merv is dipping his toe into the shark pool. Testing to see if the sharks smell GBP/gilt blood yet. But the sharks may act uninterested for now, waiting till further government spending drives the deficit even higher and it is too late to back track.
Economists are lining up to say the government must spend spend spend, only stop if there is a market throws up. But by then it will be too late. Watch FT's Martin Wolf speak in this way http://www.ft.com/cms/84d2eba2-2a26-11dc-9208-000b5df10621.html
We are between a rock and a hard place.
13. maddison said...
The problem with looking at all this QE and deficit stuff you have to look at it with all the other economies together. It is all relative. We just need to be a better investment than the competition. Italy, Spain,portugal,ireland,greece and even Germany and France don't look like great places to put your money either... I have always thought that although we have a big deficit it wouldnt be too hard to bring it under control as lot of the spending is discretionary - High wages for Public sector employees, quangos, ( the education budget as gone up £30bn pa in the last 10 years and there has not been a dramatic improvement), hospital management consultants, there are 100 employees for every aircraft in the RAF. I could go on... Other countries have less discretionary spending such as huge pension and social benefits, or risk major industrial relation problems if they try and cut back. Look at the difference between Ireland and Greece and you will see what I mean.,
14. freemanphil said...
What you all forget, particularly middle class folk like Mark Wadsworth, tricked into believing that the financial elite care about and need them, is that the Bank of England have no interest in solving problems. They are gleefully looking forward to revolutionary moves towards world government off the back of this. If you are still in denial about that, watch again Gordon Brown's call for a global constitution for and by the banks.
15. mountain goat said...
Sorry this link gets you straight there
http://www.ft.com/cms/84d2eba2-2a26-11dc-9208-000b5df10621.html?_i_referralObject=14628177&fromSearch=n
16. freemanphil said...
Brown is literally giddy with excitement about the revolutionary reforms about to be shoved up our asses on the back of this engineered financial "crisis", which is infact nothing more than a well co-ordinated bank robbery.
17. braindeed said...
15. freemanphil said...
Brown is literally giddy with excitement about the revolutionary reforms about to be shoved up our asses on the back of this engineered financial "crisis", which is infact nothing more than a well co-ordinated bank robbery.
I read it as him refering to making scams like CDS illegal and an international approach to policing tax avoidance.
I look forward to the day that billionaires' stashes have nowhere to hide.I thought that Obama came in with a promise to do just that.....wrong so far admittedly.
18. mark wadsworth said...
FreeManPhil said: "QE has been used to expand Gilt purchases"
Wot? As as simple matter of fact, and your graph shows it, gilt issues and QE buy backs more or less net off to nothing. Ergo, I refer you back to my original statement that the government is not borrowing by issuing gilts, it is borrowing by asking commercial banks to deposit money at Bank of England.
He also said: "When you understand the shocking truth that hyperinflation is coming..."
We'll see about that. As a matter of fact and observation, you only get hyper-inflation if there are also currency controls. The UK does not have currency controls, ergo we won;t get hyper-inflation. They might introduce currency controls, at which stage, I agree, we are doomed. But if they go that far, what's to stop them from taking foreign currency balances held by UK people and forcibly converting them back into sterling?
Inbreda said: "MW - surely at the very least this is maintaining gilt prices and therefore allowing IRs to stay stoopidly low. How can this carry on without any effect. Are you sure that just by shuffling money using QE teh government can keep IRs at 0.5% forever?"
Agreed, that was the whole point of borrowing via QE instead of borrowing by issuing gilts, well spotted. It can carry on for a few weeks, a few months, a few years (see Japan), that I do not know.
Further, interest rates are NOT AT 0.5%. That is merely the rate that the BoE pays on deposits by commercial banks. It is NOT the rate at which it will lend to commercial banks, and has precious little to do with real interest rates in the real market (whether for gilts, mortgages, credit cards or anything else).
19. mark wadsworth said...
FMP then went a bit too far, IMHO, and said this: "What you all forget, particularly middle class folk like Mark Wadsworth, tricked into believing that the financial elite care about and need them..."
When did I ever say that 'the financial elite' cared one way or another? More to the point, the Home-Owner-Ists don't care either, so what?
20. debtfree said...
I'd recommend reading this:
http://matterhornassetmanagement.com/2010/02/11/sovereign-alchemy-will-fail/
As usual they are spot on and have been for many years.
21. Fraggle said...
@12 "The problem with looking at all this QE and deficit stuff you have to look at it with all the other economies together. It is all relative."
Yes, but that doesn't mean the entire world can go printy printy forever, just because everyone else is doing it. What you'll end with is all fiat currencies losing value against the hard currencies ie commodities (not just precious metals, but everything that actually exists!) You can't print commodities so when the currencies are in a race to the bottom, the result is hyperinflation everywhere!
@4 "I have always expressed the view that QE is just paper shuffling - instead of govt borrowing money by issuing gilts it is borrowing money from the commercial banks"
That seems a bit counter-intuitive to me. The QE money didn't exist before it was given to the banks, and while you can argue that the banks aren't doing anything with it directly, having it has enabled them to do *something* (like buy gilts). To the extent that they've done something they wouldn't otherwise have done, QE has been distortionary. If that something is indeed buying gilts, then government has been able to borrow (and thus immediately spend) money it otherwise would not have been able to. What's not clear to me is who's going to left holding the bag when it gets recalled. It looks on the surface to be giltholders, but I don't see them standing for that.
22. p. doff said...
Who are these 'financial elite' and how much money do they have to have to qualify for entry to the club. Are they all pals with one another, all having a single purpose and acting in their joint best interests, or are they all busy independently feathering their own nests? Are they all Bilderburgers perhaps? Do they all live in the same country? Do they all have the same political views? Are there various levels of 'elite' like godfather elite and underdog elite or trainee elite. Do they hang out on the same superyachts together. Where do they all plan and discuss how to mobilise the New World Order and how do they decide which politicians and bankers to lean on to further their cause?
Just wondering how it works, that's all.
23. fallingbuzzard said...
Perhaps they become politicians
24. mountain goat said...
Just to elaborate on what I mean by "between a rock and a hard place". What I mean is there are no easy choices here. It is easy to criticise Brown and Bernanke but if they had done nothing in 2009 most of us would be out of a job right now. You can say their policies led to this dangerous situation but they weren't the ones to invent fiat currency, or who made the rules on bank lending. These things all have a long history. Personally I am a bit bored of this Elite New World Order stuff. People in power make mistakes and they often lie. That is enough for me to know.
There are no easy conclusions. If you believe in hyperinflation then take on debt and buy now because your cash will be worth little in a few years time. This is a site called housepricecrash, start your own site about houseprice hyperinflation if you like. It is no secret that I don't expect hyperinflation. Things are going to get tough. Make sure your savings are safe and try keep your job, is the most sensible thing I can come up with, because house prices are going to keep coming down from their peak in 2007 and there will be a better time to buy one day.
25. hpwatcher said...
16. braindeed said... I look forward to the day that billionaires' stashes have nowhere to hide.I thought that Obama came in with a promise to do just that.....wrong so far admittedly.
Who can blame anyone by wanting to avoid theft by socialism.
.....what a surprise, it's Braindead!
26. braindeed said...
And I thought 0ld H Pee was sounding relaxed too……Ho hum, he’s consistent, though
27. shipbuilder said...
hpwatcher - in reality now, rather than a fantasy 'what might have happened' scenario - are you happy paying more tax to make up for what is hiding in offshore havens? That's mighty generous of you.
28. freemanphil said...
P.Doff, Membership to the financial elite is not based on the quantity of money you own, it is based on the power to print money. Membership of the elite is not about wealth it is about power over and power to produce wealth. Power to control and manipulate it via the printing press, both by inflation and deflation.
Mark Wadsworth, the currency is already hyperinflated. The absence of deflation is the initial result of the hyperinflated currency, because we should, in free market conditions have already experienced a deflationary collapse that would have bankrupted and broken up the mega banks and corporations. This deflation would have inflated the value of savings, so that those who had been prudent could have purchased those assets at pennies on the pound and made the productive. Instead of that, government subsidized unproductive businesses that should have gone broke.
Inflation figures show that hyperinflation has begun, gold is about to break out on a mega leg up, RPI inflation is 3.7% officiall, far higher on shadow stats, and oil just ballooned by 8% this week. Oil should have crashed to, and stayed at $20/barrel or lower, and that would have fuelled a real recovery, but don't worry, deflation is a coming, because the plug will have to be pulled on QE very soon.
Braindeed, your analysis is perfect. Global governance is indeed about the globalized legalization of fraudulent banking alongside a global socialist system of bailouts and support for the big players in that game. We also see global regulations to make corporate production practices compulsory and to outlaw grass roots alternatives, e.g. forcing us to use cfl lightbulbs, the attempts to regulate nutritional supplements via codex, attempts to force the public to take vaccines like swine flu via WHO, UN attempts to get all countries contributing to wars chosen by the military industrial complex. And, most sinisterly, global enforcement of population reduction, as stated in policy by the UN's own biodiversity assessment:
A reasonable estimate for an industrialized world society at the present North American material standard of living would be 1 billion. At the more frugal European standard of living, 2 to 3 billion would be possible. - United Nations, Global Biodiversity Assessment
29. p. doff said...
Phil Ridley. So Merv's an elite then - and the MPC members who also have the 'power'. Do you become an unelite when you resign your post then? If so, it all seems a bit of a waste of time if you can't capitalise lonterm on your brief period as an elite.
30. braindeed said...
25. shipbuilder said...
hpwatcher - in reality now, rather than a fantasy 'what might have happened' scenario - are you happy paying more tax to make up for what is hiding in offshore havens? That's mighty generous of you.
Spot on......he thinks he should subsidise Hans Rausing, http://www.guardian.co.uk/uk/2002/apr/11/nickdavies2 ,,,,,I'm doing old Coco a disservice
31. hpwatcher said...
hpwatcher - in reality now, rather than a fantasy 'what might have happened' scenario - are you happy paying more tax to make up for what is hiding in offshore havens? That's mighty generous of you.
Well, most people in this country are going to end up losing most - if not all of their savings - so why resent others because they are able to save something? Besides the Labour Government have stolen far more off people using other methods i.e. QE, taxes etc. But it's always been part of government policy to stir up hatred for those who appear to not be playing by the rules - think about it.
But it's funny that braindeed can't see the contradiction of being a socialist and also being a member of a website that effectively advocates, and desires, a house prices crash. Something which is more than likely, than not, to depend upon a proportion of the population losing their homes......
32. This comment has been removed as it was found to be in breach of our Blog Policies.
33. This comment has been removed as it was found to be in breach of our Blog Policies.
34. techieman said...
Mountain Goat @ 22 - yep, you pays your money and takes your choice. It was quite sad though predictable that we would get where we are (exactly when was the googol $ question) whoever was in charge. We may have got here sooner or later but we still would have got here.
Personally i dont blame Gordy for where we are - i only blame him for thinking 1. He didn't aid and abet [and yes i do think its quite criminal] us getting here and 2. He thinks he can (or perish the thought has) get us out of it.
It amazes me that people fall for the line "aha its a Global recession so nothing we could do" but but but... arent we part of a global economy??
Hang on a minute.... its just a NWO ..... I've woken up at last ;-)
35. techieman said...
HPW i am afraid i have to report that because (and i have had my own run ins with B/deed and your good self) but really that has put my off my quails eggs and truffles.
36. braindeed said...
Coco @29 said…
“it's funny that braindeed can't see the contradiction of being a socialist and also being a member of a website that effectively advocates, and desires, a house prices crash.”
Something which is more than likely, than not, to depend upon a proportion of the population losing their homes.
It's all about labels, isn't it, Coco. Try another - I'm not a member of any party, have almost equal distain for Britain’s 'Hobson’s Choice' of a two party farce. I'm a free marketeer in principle....but the basic requirements of human survival, like Universal Education,housing, food, water, and warmth need management for the benefit of the many - therein lies social cohesion. Something I care about.
Our young people are being robbed of their hopes and aspirations, and no party dare say it out loud for fear of offending the grey block vote and Redtop, readers like you.
And don't think blowing your brains out will get you sympathy.
37. braindeed said...
Tetchie @ 32...that has put my off my quails eggs and truffles.
Surprising - had you down as a liver and fava beans sort of chap.
@31 more in common than I thought.
38. techieman said...
"Our young people are being robbed of their hopes and aspirations" - true b/deed. However as i said above that could have been the previous generation or the next. I don't think you can (although you no doubt will (the billionaires?), and HPW certainly will (Gordy) ) blame anyone. Its just what happens ... "eventually".
Hobson's choice is about right.
39. techieman said...
"@31 more in common than I thought." not really you want to blame Gordy, i dont blame him for where we are. And i think Davy would have done the exact same thing re the economics at the time of the 'crash', which is why actually i think we should de-politicise the dismal science.
Now how to do that is an interesting question.
40. braindeed said...
Tetchie @35
I don't think you can blame anyone. (paraphrase)
The electorate.....thirty years of laissire faire,. I can't see a way out now, the truisms are too firmly entrenched and the necessary capital is hidden.
Old Wien revisited sometime coming up, methinks.
41. techieman said...
apologies b/deed i responded to you as if you were HPW, @ 34.
Perhaps the truffles were magic mushrooms!?!? That Sophocles.... b'stard!
http://www.visit4info.com/details.cfm?adid=82248
42. techieman said...
yes braindeed "us" throughout history is the answer. We put the politicans in place don't we, and of course we vote for more and more prosperous so long as someone else ends up paying; and we get bailed out when it goes wrong.
By the way Dow is having a bit of a stutter as we speak, not that would interest you too much i'm guessing.
43. mountain goat said...
Hi Tm - was wondering if my comments only appear on my own computer! Yeah I suppose what I was saying can be taken as Gordy saved the world. But as you say any politician would have (tried to save us by spending our future tax money), once they got into the habit of trying to fine tune the mild inflation economy. With gaping regulation and oversight holes and all too human flaws in the economics models the wheels are bound to come off every now and then. The NWO folk are so darn idealistic, like it would all be so perfect if it wasn't for the political elite. Yeah right!
44. braindeed said...
Tetchie @ 39
By the way Dow is having a bit of a stutter as we speak....
Old beth ? She's always been temperamental
45. techieman said...
MG - lets wait for Malct / Troy /Freemanphil etc to say "Mountain goat .... you just dont get it". Maybe we will have a few videos too... all the fun of the fair!
46. str 2007 said...
Hi techieman
You were pretty close the other day with 'the S&P retracing upto about the 1100 level.
I assume it's dropped a few points today because of the US consumer Confidence numbers.
Are you still expecting further falls from this level or to continue to bounce around awhile longer ?
47. titaniccaptain said...
A very long time ago a nasty chap called Satan decided he didn't like us very much so he waged a spiritual war against us which he was doing rather well in by leading us into sin until Jesus died for our sins.
I personally believe that the prince of darkness is still manipulating world events with his friends in secret organisations which some call the global elite.
NOW THEN...........do I think that those in public positions (Mandelson/Brown/Herman Van Rompuy/ The Bushes/ Royal family are behind the conspiracy lead by Satan?
No I do not.
They are nothing but puppets willing or unknowing participants in a conspiracy to enslave mankind in a totalitarian system that is packaged as "The New World Order".
I believe the real evil power mongers in this world is much more surreptitious and you would not see his or her face on the television or know his or her name.
A 78 year old retired school teacher from Leeds who races pigeons is much more likely to be in charge.
But I have just realised something.
To try and oppose this system is to oppose God's plan laid out in the book of Revelations which predicts all this.
So bring it on.
Roit I izz orf for a vegan milkshake and all the best chaps...............speculate all you want, the will of God cannot be changed and for some reason he wants the world to be exactly where it is right now and as it is right now.
48. techieman said...
STR S&P cash around 1098. The whole premise of this is that we are heading for a "3rd wave" down, and that the 2nd wave does all it can to get everyone (the bears) out, before they have their picnic.
The question then becomes (as a bear) where do you get in and where do you add to positions? So as i said the danger is that you are not in when it falls OR you get in too soon while it doesnt either fall then or fall at all!
Personally - as you know - i bought back at around the 1050 - 1060 levels, although i still maintained some @ 1132 which i have added to as, if you like a trading profit, i.e. -1132 [ (+ 1050[to 1060]) - 1080 -1099 +1099 - 1109]. I actually got out of those 1099s at b/even and re-shorted at 1109. All basis march. So basically as far as i am concerned i have a trading profit from going long @1050 to 1060, and covering those at 1080 and 1109, so in effect i am still short @ 1132. [i "scratched" the 1099s]
Since my potential "reward" is much bigger than my risk IMO, i am - in effect - running the short @ 1132. [ i will keep the stop level to myself].
As you know (basis cash) we got up to around 1112, and i THOUGHT we would have some downside off the discount rate increase last Thursday... which we didnt ... which (the fact we didnt have downside follow through) i am sure caused many bears to liquidate. Lets face it 12 points is quite significant, and really i never said it would get to 1100 (let alone 1112) i just said it wouldn't look out of place @ 1100!
So now IF we have consolidation and a close below 1100, then i expect some further falls and not to re-test that 1112, before retesting the 1044s. But to be perfectly honest i didnt expect it to get THAT high after 1044. A close below 1096 would break the 100day Moving Average (march) and i would expect some more falls if that happens.
As you know all of these thoughts are what i think will PROBABLY happen. Of course others probably will think i am wrong - maybe they are right!
I wont be back online till later or even tomorrow... so it might be interesting to touch base then. The next few hours of trading are critical... more so than normal i would say.
49. general congreve said...
YEAH!!!! GO MERV!!! My hero. Got gold?
50. p. doff said...
Hey TC you're not going all religious on us are you?
Maybe the will of God cannot be changed and maybe he does want the world to be exactly where it is right now, but cripes, that would mean Bush and Blair were correct in their belief that they were just doing God's work :-)
51. alan_540 said...
@33 Braindeed... that was an uncharacteristically articulate outburst old chap, well done.
52. alan_540 said...
@30 hpwatcher... purrrrrrrrrrrrleeeeze.... that's put me right off me guacamole & breadsticks thank you very much!
53. str 2007 said...
Thanks for your insight there techieman, always much appreciated.
54. alan_540 said...
@44 Titanic Captain... have you been overdoing the rum ration?
55. titaniccaptain said...
@P doff
"that would mean Bush and Blair were correct in their belief that they were just doing God's work :-)"..........I know annoying isn't it when you think of it in true religious terms even though the acts of Blair and Bush could be viewed as evil they are still potentially part of a scheme which ends in Evil being vanquished but their master plan must unfold first.....
All this depends on us being in the end times as predicted in Revelations....but if we are not in end times then it all gets a bit confusing and makes me want to do press ups listening to Barry Manilow dressed as a balding rat.
Yes I am converting over to the Orthodox faith after many years trying out different churches but failing to find one that satisfies my musical requirements.
This is what I like to listen to when I go to church.
http://www.youtube.com/watch?v=I8QsuUh-Crw
@Alan_540
"have you been overdoing the rum ration?"
Nope
Anyway enough of my technical analysis of the housing market lol Im off to pick up something heavy.
TTFN
56. p. doff said...
@TC. 'Im off to pick up something heavy'.
Would that be the press-ups to Barry Manilow ? :-)
Nos Da.
57. str 2007 said...
Well techieman
What do you make of that ?
Very exciting towards the close even if it was in the wrong direction.
58. techieman said...
str2007 - As i said i was busy last night so couldnt come on here. I think a few points up at the close is ok - as i said it closed below 1100.
Technically there is resistance around 1106 to 1112. All the bodies of the candles have been contained within the 1108 level, which is around trendline and fib resistance. If we have an "inside day" [http://www.investopedia.com/terms/i/inside_day.asp] or if we breach yesterdays low then the confidence for the bears goes up. If we break 1100 and close above or even hit the 1112 high, then there is something "wrong" IMO.
There may be an announcement today that could move the market.... Lets see!
59. letthemfall said...
titanic
"This is what I like to listen to when I go to church."
Very beautiful. A form of plainchant?
Do you listen to other early music - Palestrina, Tallis, etc?
60. str 2007 said...
Hi techieman
Don't want to speak too soon but looks as though the S&P is closing with an inside day (thanks for that one, I wasn't aware of those and their possible meaning).
But closing higher I think than hoped.
Apparently rallying on Bernankes speach.
It looks as though it'll close near the 1106 resistance you mentioned, which as I look at the daily goes back to Nov/Dec.
Back down again tomorrow, or do you think closing so close could push it up higher again tomorrow ?