Friday, Jul 07, 2017

Tightening comes in many forms

Pound Sterling Live: British pound up on us dollar

Carney takes the option of micro-managing the banks over decisions presumably they are running calculations on themselves to avoid raising rates. Tacitly stating that without his guidance the banks would still inevitably run themselves into serious defaults (which is probably true). From where are these counter cyclical reserves sourced? Could they be sourced from the addional liquidity that Carney has himself printed into existence? There is about 200 billion of unsecured debt held by uk households. So tapering, would be when QE went into reverse i.e. the printed money would head back to the central bank and the +x,-x cancel out. i continue in a comment..

Posted by stillthinking @ 01:09 AM (5000 views) Add Comment

1 Comment

1. stillthinking said...

Sorry for the long wind..
Does anybody believe that Carney is doing this because he is concerned about defaults?? NO.

My point is that this is not just defacto tightening as the article states, this is functionally exactly the same as tapering. Except instead of the cb selling or allowing gilts to run off, which is withdrawing cash from the economy through the government (i.e. awkward..), the bank is pulling the money out of the economy directly.

anyway my point is that banks keeping money at the central bank because they are legally obliged to do is no different from that cash being owned by the central bank and it is in effect repayment of QE.If i had 10 pounds that my wife put in a locked box, then threw the key away, i don't really have that money anymore and my ownership of it is without meaning.

Friday, July 7, 2017 02:31AM Report Comment

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