Saturday, Feb 06, 2010
Under the radar (nice try)
NAYE: A New Unconventional Monetary Policy for the UK
After yesterday’s announcement from the Bank of England after its regular monthly meeting that it was suspending asset purchases via its Quantitative Easing (QE) programme one might reasonably assume that this was the last word on such a policy for the day. After all any similar policy should be announced then one might think. However it has turned out that this is not true. Later in the day it transpired that the Chancellor of the Exchequer has authorised the Treasury/Bank of England to continue with a similar policy.
Posted by devo @ 05:47 PM (730 views) Add Comment
5 Comments
- If you do not have an admin password leave the password field blank.
- If you would like to request a password allowing you to add comments and blog news articles without needing each one approved manually, send an e-mail to the webmaster.
- Your email address is required so we can verify that the comment is genuine. It will not be posted anywhere on the site, will be stored confidentially by us and never given out to any third party.
- Please note that any viewpoints published here as comments are user's views and not the views of HousePriceCrash.co.uk.
- Please adhere to the Guidelines
1. Nobody777 said...
The only flaw in this action is the amount of gilt issuance now goes up another £50bn on top of around £200bn needed to be sold so Who is going to buy these gilts?
The additional supply of the exploding gilt issuance must put more upward pressure on soverign interest rates but probably would rig the corporate bond market lower hence boosting companies profits so if banks wont lend the tax payer will.
I am not to sure what to make of this but its a joke the independent BOE failed to mention it.
2. Mark Wadsworth said...
I managed to read as far as the first factual error...
"1. It will be paid for by the issue of Treasury Bills and not the Bank of England creating money."
*Oh dear*
Whether a government borrows by printing physical notes (in theory never need to be redeemed), by printing gilts (long term) or treasury bills (short term), by typing numbers on an electronic screen at the BoE (repayable on demand) is neither here nor there in the grander scheme of things, all these liabilities are fungible.
QE was just swapping replacing longer term liabilities (gilts) with repayable-on-demand liabilities (deposits with BoE). As and when banks ask their deposits to be repaid, the BoE could (in theory) repay it with coins and notes. When the government issues gilts (i.e. borrows money) you could in theory pay for it in coins and notes, or hand over Treasury bills that happen to fall due for repayment on teh day the gilts are issued, if you're a bank with a deposit at BoE, you could buy gilts with that money. It all just sloshes around.
*/oh dear*
3. mark wadsworth said...
I managed to read as far as the first factual error...
"1. It will be paid for by the issue of Treasury Bills and not the Bank of England creating money."
*Oh dear*
Whether a government borrows by printing physical notes (in theory never need to be redeemed), by printing gilts (long term) or treasury bills (short term), by typing numbers on an electronic screen at the BoE (repayable on demand) is neither here nor there in the grander scheme of things, all these liabilities are fungible.
QE was just swapping replacing longer term liabilities (gilts) with repayable-on-demand liabilities (deposits with BoE). As and when banks ask their deposits to be repaid, the BoE could (in theory) repay it with coins and notes. When the government issues gilts (i.e. borrows money) you could in theory pay for it in coins and notes, or hand over Treasury bills that happen to fall due for repayment on teh day the gilts are issued, if you're a bank with a deposit at BoE, you could buy gilts with that money. It all just sloshes around.
*/oh dear*
4. fallingbuzzard said...
Underhand enough for the general public to be unaware.
5. Shaun said...
My name is Shaun and I am notayesmanseconomics. Firstly thank you to the person who posted the link to my blog as one of the purposes of it is to generate a debate.
Having seen Mark Wadsworth's comment above I would like to reply.
The statement he quotes as an error is not one. Those wishing to check might like to look at the letters I put as a link on my blog by the Chancellor of the Exchequer. If we move now to opinions Mark appears to believe that because in his view these liabilities are fungible they are essentially the same. I disagree with this as a twenty year obligation is different to a 3 month one. Looking at Greece's current difficulties some of them are around this issue and Greece would face a lot happier future if Mark was right.
Anyway thank you for the comment.