Wednesday, Sep 22, 2010
Must keep up with the yanks
City Wire: Bank indicates QE2
Looks like its coming then?
Posted by chrisch @ 11:58 AM (2352 views) Add Comment
56 Comments
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1. khards said...
Another FTSE rally then?
2. hpwatcher said...
Easy to start, not so easy to stop. I think the economy will be on life support till it collapses. There may be deflation later, though that will be after the currencies have been destroyed .
3. mark wadsworth said...
Discovering Japan.
4. mark said...
There is no need to holiday in japan these days, just stay in the UK
5. mick rupert said...
Silly question... but how does this impact on (nominal) house prices? Stable/up??
And gold? Up, up, UP??
Quids are going to be like Italian Lire all too soon...
6. techieman said...
Hpw "There may be deflation later, though that will be after the currencies have been destroyed ." - so you mean hyperinflation first and then deflation??!?!?
7. hpwatcher said...
Silly question... but how does this impact on (nominal) house prices? Stable/up??
And gold? Up, up, UP??
Quids are going to be like Italian Lire all too soon...
The money could be used to maintain low interest rates
8. Crunchy said...
6. techieman said...Hpw "There may be deflation later, though that will be after the currencies have been destroyed ." - so you mean hyperinflation first and then deflation??!?!?
It will not be that cut and dry tech. Personally I think the Americans will suffer most, because they have the reserve currency.
The axis for change.
9. alan_540 said...
hpwatcher, you appear to have a fragile grasp on reality old son.
10. mrflibble said...
Back in October last year David Cameron said; "Sometime soon QE will have to stop, because in the end, printing money leads to inflation."
Inflation is it then Dave, thanks, hope you rot in the hell you are creating for us all...
11. hpwatcher said...
hpwatcher, you appear to have a fragile grasp on reality old son.
Thank you. But I am fully aware of what I am suggesting.
Hpw "There may be deflation later, though that will be after the currencies have been destroyed ." - so you mean hyperinflation first and then deflation??!?!?
I would say something like - providing QE continues, and it looks like it will - a currency crisis of some kind. After which, a new currency will be introduced and it is against this new currency a mild form of deflation will occur - though this will depend on it's introduction.
Perfectly logical.
12. icarus said...
"The main worry..... is that if inflarion....remains well above the 2% target people will begin to believe that it is permanent. But most committee members believe there are few signs that is a risk yet as wage growth remains well below inflation".
So it would be irrational to believe that prices can keep on outstripping wages and that living standards for the majority will decline? Why?
13. hpwatcher said...
So it would be irrational to believe that prices can keep on outstripping wages and that living standards for the majority will decline? Why?
Most people probably won't be able to see part the value of their houses.
14. techieman said...
"Perfectly logical".. ok i got it... blimey hpw you had me going for a minute since i thought you were serious... irony is often lost in the written word ... innit ;). And to think i thought you didnt have a sense of humour :).
15. general congreve said...
In answer to some of you above:
A simple answer to the whole deflation/inflation debate is this, we have/will get inflation in fiat currencies because the pound etc. is being debased to keep interest rates low and the economy on life support. We will also have deflation of everything in gold, the only long term viable currency (because it cannot be debased).
Thereby the conundrum is roundly solved and can already be observed, CPI in UK at 3.1 = inflation, gold up £700 an ounce at the beginning of the year to £827 today = deflation against gold.
The whole scenario can also be summarised as a choice of massive economic deflationary depression, which equals huge unemployment, spirally government debt because of lower taxes and a trashed currency anyway cos the economy backing it has collapsed. Or an hyper/inflationary depression as govts. attempt to QE they're way out of trouble, thereby destroying the currency and storing up bigger troubles for later. Option 2 appears to have been chosen, gold is a winner either way as the currency crashes (although a bigger winner in the second scenario).
The situation can also be summarised as - We are now poor in the west, having exported much of our production and spunked all our money up the wall, there is no avoiding it either way. When the dust settles the West will be poorer relative to the East.
What can you do? If you're broke and/or in debt nothing, that's life. If you have depreciating savings, stick a bunch of it in physical gold, you'll come out smiling at the end of this.
16. hpwatcher said...
"Perfectly logical".. ok i got it... blimey hpw you had me going for a minute since i thought you were serious... irony is often lost in the written word ... innit ;). And to think i thought you didnt have a sense of humour :).
Just a matter of interest, but how much have your savings lost this week, I mean in inflation?
I assume you are putting your money where you mouth is ;-)
17. techieman said...
shall i use the old HPW "i refuse to answer because its a leading question" response? sh1t i cant , the bells rung and playtime is over...
Well since my stash is in a variety of currencies and yields along the curve and since about 10% of the money i have in those "savings" [and should we include gold too?] will be used to purchase a house when the time is right then i am sure you will understand its a bit of a difficult question to answer.
But if you can work out how much you have "made" this week "in inflation" then please go ahead.
Now if you ask trading profits / losses then thats another story. And to please you over the last week its about 37 bps in the red. Not really sure why you are fixated with what i have done - but still there you go. Diversionary tactic is it?
18. debtfree said...
Isn't deflation the precipice for hyperinflation before the currency is destroyed ?
can't see how you would have deflation after the currency is destroyed as it no longer exists.
what odds would you give General C for gold to be £1000oz within 6 months ?
19. hpwatcher said...
So why buy gold - I mean, if you are following the deflationary argument? Surely you should be thinking it would drop in price?
Not changing the subject at all. I believe inflation will continue and there is a good chance the currency will be trashed. The signs for rampant inflation are, in my view, looking quite convincing.
20. hpwatcher said...
Isn't deflation the precipice for hyperinflation before the currency is destroyed ?
Once a currency is destroyed, something else will need to be introduced - gold standard anyone?
21. alan_540 said...
Yes quite logical to you maybe hp, so what's this new currency tp be called then? hp-sauce perchance?
22. hpwatcher said...
Yes quite logical to you maybe hp, so what's this new currency tp be called then? hp-sauce perchance?
How very big of you. Please stay on topic, or don't bother posting.
23. peter said...
We seem to be on course for 1970s style stagflation.
Money printing will prop up malinvestments from the boom. These will suck in resources and sit there festering, which will prevent any real recovery in the economy.
Meanwhile, the value of the pound will fall.
Since the government can't print it, gold will be the best store of value.
24. techieman said...
to hpw "Please stay on topic, or don't bother posting." handbags? Are you the webmaster too now?
as for gold (i assume you are asking me) - anyone that has followed this blog for a few years - and thankfully you havent, will know that i have gold going back a fair number of years. [when it was completely out of "fashion"] i sold a fair chunk in march of 2008 but just have some for insurance. I have consistently advocated having SOME gold just not having all your money in it. As i said - and maybe this is wrong - we have imo had the majority of the move up. Yes we cvould get more but frankly it doesnt bother me one way or the other.
Again everyone else is wrong and you are right. Alan is right your logic isnt.
25. general congreve said...
@17 - Difficult to give odds, as no one knows the future. I have seen most analysts be wrong most of the time, so not prepared to say it'll be £1000 in six months, but it is getting on at around that pace so far.
What I can say is that this crisis is ballooning ever more rapidly. As a result, some of the things that will continue to boost the gold price are:
- Competitive devaluations of currencies - See BoJ and Fed's moves in the last week to weaken their currencies to promote exports. It's a race to the bottom and gold will win as a result, as it can't be debased.
- It is widely held that there is nowhere near enough physical gold in the world to fulfil all the paper contracts out there, GATA rumour the ratio of physical to paper to be 1:45. This was recently supported by news that big players in the gold market are demanding delivery of the metal to secure their holdings. Such has been the demand for delivery that the LBMA had to cover demand by taking delivery of gold from other sources via the BIS, as they did not have the metal they were supposed to have to fulfil the order. This is the big one, when finally an order for delivery cannot be met, that could really blow gold to the moon and make instant fortunes for those holding gold.
- The continuing threat of sovereign debt default. It is highly unlikely many countries in the west can really pay their way out of the debt they have created, especially the PIIGS. This is being recognised in the bond markets where recent issuances in Ireland, had spreads of over 6% for longer dated bonds. It won't be long before the issue of default is raised again. The only way out is open default or more money printing and bailouts to paper the cracks and ensure default is kicked down the road or happens by stealth. Either way it'll be rocket fuel for gold.
26. Crunchy said...
20. alan
"Ban,,, Mark1" I love to tease.
27. khards said...
RE: Gold prices.
If gold is not a bubble and it just a select basket of currencies deprecating why is it steeply apreciating against ALL currencies ?
I would really like to know the answer to this otherwise you could say that all currencies and imported goods depreciated steeply against houses during the boom! Not that houses houses were overpriced..
Puzzled..
28. debtfree said...
@18 hpwatcher
posted this many times, hopefully, this will be the last time.
historically, gold does well during deflationary times.
if you think it doesn't, then please explain why the gold price in YEN rose during japans deflationary lost decade ?
29. hpwatcher said...
Since the government can't print it, gold will be the best store of value.
You'll have techieman after you with talk like that. He doesn't like gold, not anyone that buys it - he's a terminal deflationist.
My thinking is that gold will be the only store of value that everyone can agree on. I only see a real breakout if some other factors come into play.
30. khards said...
Why would US & Europe go back to a gold standard after selling it all? It is not in there best interests.
31. hpwatcher said...
posted this many times, hopefully, this will be the last time.
historically, gold does well during deflationary times.
if you think it doesn't, then please explain why the gold price in YEN rose during japans deflationary lost decade ?
I don't think it pays to consider Japan too much in isolation, there are a number other keyfactors to consider; also gold is priced in the dollar and didn't make significant gains during that time. If the currency was strong against the dollar, then that's something else.
Moreover, I'm not sure that gold does do that well during deflationary times; unless you are thinking of the US in the 30's, but there was a gold standard, so all prices had to fall against that - and we are not in the same place now.
32. general congreve said...
@25 - Look at the charts from today, you can actually see it falling in Euro and CHF (Swiss Francs) because investors are piling into them as a safe haven too (idiots). Now look at the dollar price. This should give you an indication that gold is behaving as a currency, although the strongest on average in the complete basket of currencies.
http://www.usagold.com/gold-price-forex.html
33. general congreve said...
@28 - It's a bit like saying, I don't want to grow old and die, so why should I. They won't willingly go onto a new gold standard, they can't, they're broke. Hence why they're trying everything in vain to change the situation. But reality will force the outcome eventually, you can't get something for nothing. Having said that, the US has military dominance par none, when reality bites war may well be the outcome.
34. general congreve said...
@29 - HPWatcher "Moreover, I'm not sure that gold does do that well during deflationary times; unless you are thinking of the US in the 30's, but there was a gold standard, so all prices had to fall against that - and we are not in the same place now."
Actually what we have now is a defacto gold standard. Those with monetary wealth are turning to gold and everything is losing value relative to it. Same result at the end of the day. As I stated earlier we are in deflationary times, if you hold your wealth in gold. Otherwise prepare to see it inflated away.
35. techieman said...
"You'll have techieman after you with talk like that. He doesn't like gold, not anyone that buys it - he's a terminal deflationist." Am i?
i dont think so - as i have said many times, yes i do think we have deflation (and actually are -having - although you want to ignore the evidence of a contraction in money supply) first but eventually we may very well have quite big inflation or worse. However there is no evidence that we will have that in the near future, until the aggregates turn the other way then yes we might. if you can show me some evidence then please you have the floor! MW asked you the other day when you think the banks will stop hoarding because that is your support for why we dont have inflation yet. The answer?
The silence was deafening.
If dont know where you get this hyperinflation followed by deflation stuff, if you can point to a source then we can try and follow a well presented argument... no?
Talking of leading questions what do you do hpw when you are not posting here, and not getting wound up by anyone who has the audacity to point out the potential flaws in your argument? There is no way on earth you ever went to oxbridge because (besides your lack of logical thought) people there just dont debate the way you do. Well actually it isnt debate is it, its just blind dogma.
36. techieman said...
"He doesn't like gold" - how selective is your reading? perhaps you didnt read 23!
As for not liking anyone that holds it - just a weird statement. Still not the first one you have made and on present form unlikely to be the last!
37. techieman said...
As for golds performance in recessions - in USD see - http://www.elliottwave.com/images/charts/deflation/deflation-gold-relationship-big.gif
38. hpwatcher said...
Blimey - what a mouthful; glad I didn't read it.
As for golds performance in recessions - in USD see - http://www.elliottwave.com/images/charts/deflation/deflation-gold-relationship-big.gif
I'll take a look, but personally, I prefer to think of gold as a hedge against bad government as opposed to anything else.
39. techieman said...
"Blimey - what a mouthful; glad I didn't read it." - too many long words?
40. hpwatcher said...
Actually what we have now is a defacto gold standard. Those with monetary wealth are turning to gold and everything is losing value relative to it. Same result at the end of the day. As I stated earlier we are in deflationary times, if you hold your wealth in gold. Otherwise prepare to see it inflated away.
I still think the move to mainstreet is yet to come; when that happens I think there will be bigger moves in gold - though hopefully not too big.
41. hpwatcher said...
"Blimey - what a mouthful; glad I didn't read it." - too many long words?
Nah, just same old, same old.
42. timmy t said...
"There is no way on earth you ever went to oxbridge because (besides your lack of logical thought) people there just dont debate the way you do. Well actually it isnt debate is it, its just blind dogma."
WHAT? He didn't go to Oxbridge? I demand his access to this site be banned and we aren't forced to listen to the dirty little thing any longer.
Pompous tw@7
43. techieman said...
Timmy do you have a seconder?
44. timmy t said...
Nah mate - timex - and learn to spell - you obviously didn't go to Oxbridge either
45. techieman said...
Actually i might have mixed hpw up with someone since i thought he told me once he went to cambridge - i thought, and studied the classics. Which is why i made the comment - if thats not the case i apologise for being inaccurate !
I did a quick search on here and couldnt find the reference so maybe i was mistaken! To err is human after all. Can you be divine Timmy?
46. Gaztops said...
Surely the answer's easy - biflation (as has been discussed elsewhere):
"Biflation is an economic environment in which inflation of commodity-based assets (grain, cotton, silver, etc) occurs simultaneously with deflation in debt-based assets (houses, credit in general).
...I’ve heard a lot of people describe it as inflation in the things we need and deflation in the things we want, or inflation in services with deflation in durables"
47. techieman said...
Touche timmy (how do you do accents? ) and i think its spelt sekonda if you really want to be pedantic. You are right Cleethorpes Comp.
48. hotairmail said...
Counter intuitively the new money will simply lead to more asset price inflation. Property, stocks, bonds will all cost more as yields tend to zero. People strive to save more and more towards homes and pensions reducing demand in the productive economy. To the BoE it will look like success as everyone feels better off but it fails to kickstart CPI.
Ask the next generation though.
THE SNAKE IS EATING ITS TAIL.
49. alan_540 said...
Golly hp , I didn't realise we needed your permission to post.
Tell you what, if you ask my permission before every post of yours & I'll then ask yours for mine.
Petulant little thing aren't you?
50. smugdog said...
"I argue very well.
Ask any of my remaining friends.
I can win an argument on any topic, against any opponent.
People know this, and steer clear of me at parties.
Often, as a sign of their great respect, they don't even invite me."
Ah the great Mr Barry, nice evening out there.
51. general congreve said...
@45 - Asset price inflation is inflation, QE is inflationary. However, priced in gold, stocks are actually going down, even when they appear to move up, because gold is appreciating in value at a faster rate.
The future is golden.
52. titaniccaptain said...
53. titaniccaptain said...
Two bee or not two bee that is the equation.
54. quiet guy said...
@Titanic Captain
Hee hee! All good fun but remember what happened in late February 2009. Nothing moves in a straight line.
55. sureseam said...
Quiet Guy @ 51: "Nothing moves in a straight line."
DEFINITELY.
Precious metals look simple from a distance but they are exceedingly volatile and unforgiving.
Things feel toppy in that quarter to me but I am often out with my timing.
56. Crunchy said...
55. sureseam said..."Things feel toppy in that quarter to me but I am often out with my timing."
Banks are long gold now, the fun hasn't even started.