[Newsnight - A Dr Promoting Quantitative Easing]

1. The new Banking Act allows them to do it secretly.

Do you have a link for this legislation?

It makes zero sense for them to do it secretly. Maintaining confidence is paramount.

[Newsnight - A Dr Promoting Quantitative Easing]

Not at any time did they mention the cost of QE! another debt on top of all the rest...

What debt? The normal route of expanding the narrow money supply is through the issuance of new government debt. QE, on the other hand, is new money created without a corresponding debt.

softened up? soften up who? who watches % wise of Uk pop.? anyway they don't care what we think Bonzo the prime chancellor will do anything to keep himself in power

The bond market. The government has to be totally up fromt and transparent about this to have any hope of maintaining market confidence. They need to spend some time talking about QE and if/how/when they plan to do it, and to guage the market's reaction to the idea.

The market allowed Japn to do it. Looks like its going to allow the US to do it. Its quite possible the market would balk at a small, weak economy trying it. Remains to be seen if the UK gets the ok.

[Bond Markets]

I have to say what makes the most sense to me is to deliberately target the destruction of high price measures (where they're presently found) by imploding the relevant markets - in a controlled fashion.

Allowing the markets to perform the required price discovery seems likely to be far more brutal to me, in the end.

Are you suggesting, for example, a controlled demolition of the property market (*)? How?

* Not a controlled demolition of property, which would have the opposite effect. I think Bill Gross suggested this at one point.

[Coffee On Credit ~ Bloomberg]

“Customers are now asking how much things cost and bringing sandwiches from home,” she says. “People aren’t leaving their offices. Every day looks like a Sunday.”

This is the coastal town

That they forgot to close down

Armageddon - come armageddon!

Come, armageddon! come!

[Bond Markets]

Again we need to be quite specific if we are to have a sensible conversation.

The market does discover risk premia - I think we should trivially be able to agree this without proceeding.

Reserves set the risk-free rate (the market cannot guarantee par value - only the taxpayer can do this).

The difference between market and reserve opinion on growth outlook (opinion as to whether or not the Reserve's liquidity goals will be met) is expressed both in exchange rate futures as well as treasuries yield.

In short - the market can only guess at over- or under-shoot and critically it is and does.

The market cannot set the taxpayer's economic growth target (and even the reserves can only forecast this) - this seems a nonsensical concept to me, but I'm open to further input.

I suppose we are mostly thinking about three kinds of interest rates: mortgages, savings, and business loans. The rates on mortgages and savings are low because the base rate is low, because of the way mortgages terms have thus far been agreed (e.g. track base rate + 0.5%), and because the new significant shareholder in the banks (government) wants it to be so.

I think (maybe completely wrong) that interest on business loans is higher. But its also subject to the same government manipulation.

I guess rates can be thus manipulated to some degree, but the undesired side-effect is that banks will be more reluctant to grant loans.

[Bond Markets]

Negative stimulus (charging savers for holding cash) might break this recycling of reserve liquidity into risk-free (and short-term) instruments (this is EDM's NIRP concept).

The way you wrote this "charging savers for holding cash" sounds like Kaletsky's ridiculous column in this weeks Times. He suggests taxing people's savings to make them spend. This seems absurd to me because i) savers would move their money elsewhere (peraps out of the country) bankrupting the banks and ii) the whole idea of banks is that they invest your savings ... if they're not invested its the bank's fault, not the savers.

EDM's NIRP was about the central bank effectively charging banks for keeping their reserves. This would encourage the banks to invest more and keep less in reserve. Makes some sense to me.

So I'm a bit confused .. can you clarify what you mean by negative stimulus? Thanks.

[Bond Markets]

I read that worldwide nobody wants gubmint bonds, does that mean rates will have to go up by year end?

The opposite of this is currently the case. Everyone want government bonds (particularly US treasuries) and so their prices are high and yileds are at historic lows.

Interest rates will remain low while that is the case. If the sentiment reverses and noone wants government bonds then interest rates will rise.

The Fed (and maybe soon the BoE) have declared their intent and started buying government bonds in order to maintain low interest rates indefinitely.

[1906 All Over Again]

This is not a depression. Yet. This crash is more like 1906. What do you mean you've never heard of the great crash of 1906? Look it up, you numpties.

Rubbish. Its more like the crash of 1873:

http://en.wikipedia.org/wiki/Long_Depression

Numpty.

[Old People In Poverty]

In mitigation, the young are at a demographic disadvantage due to the boomer bulge.

[Printing Money]

I think also they might try it, but the difference with the BoJ and our position is that the money seemed to disappear out of their home economy and into the foreign Carry Trade.

Im not sure if the World could stand the Dollar, £ and Euro banks all offering money for the carry trade.

In addition, none of the measures Japan took caused their consumers to start borrowing again in any numbers.

Wondering about this a bit more ...

Maybe Japan was at a double disadvantage because other economies were doing ok while theirs was crashing. The BoJ printed and gave money to banks, but most of the worthy borrowers were foreign institutions investing outside Japan. So it propped up the Japanese banks, but didn't stimulate their wider economy much.

In contrast, now everone's economy is fecked. So if the Fed or BoE prints and gives it to the banks, they might not find worthy borrowers outside their national economies. May as well invest at home (or just hoard it).

[Barack Obama Reveals Massive Economic Rescue Package]

He actually mentioned installing energy efficient lightbulbs in every federal building the other day, reminded me exactly of gordo.

How many Americans does it take to change the light bulbs? About 12% of them.

I'll get me coat.

[Printing Money]

Sure the Fed have, but they are in a real pickle.

The problem as their people see it is a shortage of money. Printing will ease it. This is EXACTLY how the Weimar hyperinflation started. They filled a perceived shortage with printed money. It helped but ended up in the banks, so they printed more next time, it helped but ended up in the banks, rinsed and repeated to destruction.

These things ALWAYS start off as small, but the stupid frackers just keep doing it.

I wonder what the effect of the US going Hyper would have on our economy?

I suspect the boffins at the Fed have heard of hyperinflation and are aware of the dangers. They'll proceed ultra-cautiously. I think phase 1 is just talking about it to see how the market reacts.

Also, Japan's QE was a very specific and transparent policy with precise limits on how much money would be created when and for how long. That was all to make the markets comfortable and confident about what was going on.

[Printing Money]

I think also they might try it, but the difference with the BoJ and our position is that the money seemed to disappear out of their home economy and into the foreign Carry Trade.

Im not sure if the World could stand the Dollar, £ and Euro banks all offering money for the carry trade.

In addition, none of the measures Japan took caused their consumers to start borrowing again in any numbers.

Agreed.

Not everyone can do QE. If smaller, weaker economies try it they're toast. And it could also be very risky if one economy tries it alone. I read somewhere that the US would probably try to persuade others (e.g. UK) to go along with them.

Also agree, QE didn't cause Japan's economy to bouce right back. But maybe their outcome was substantially better than it would have been without QE? Someone else started a good thread here a while back suggesting the Japanese experience was the best possible outcome we can hope for.

[Printing Money]

I havent read the Buy bit anywhere.

The Fed have said this. They are further down the printing route, and have maybe actually started. The BoE have only just started talking about QE (not even sure they've said QE yet)

[Printing Money]

I think we're all in danger of being hood winked here, they've (the govt/BOE) stuffed the banks full of money with which they've (the banks) simply *repaired* and rewarded themselves. The banks have now told the govt to fukc off and die in relation to lending out any more money, or the money they have already been given; which will become socialised debt for decades to come. Darling didn't expect this, he's been mugged off, he genuinely expected they'd lend, instead they've laughed their tits off at him and Brown. Their only alternative to get them to lend is to double up the bail outs, but they know if they do that the banks will simply horde the next tranch, therefore they have to find a different mechanism, hence QE...

The banks are lending. Just not enough. That's because there aren't enough willing, creditworthy borrowers. Pretty much all investments look very risky now. The government might force banks to lend more, but they'll lose the money and the government will have to get more fom the taxpayer, only to throw it down the drain again. Until the deflation/crash stops.

As you say, one big problem is that the government is saddled with a huge debt for the money even if it was wasted.

Maybe one of the motivations for QE is that it (in these deflationary circumstances, if the market permits) enables to government to cram money into banks and force them to lend it (even waste it) without being saddled with the accompanying debt. To have its cake and eat it (or throw it down the drain).

[Printing Money]

You cant really buy financial assets. You partake in the asset by trading it and loaning against it for interest and pass off of risk.

Hence, all these MBS and CDOs the bank has taken recently for cash, it hasnt bought them, its taken them as collateral.

No. To date, central banks have lent existing narrow money against those assets as collateral.

They are now planning to buy the assets with newly created money.

The change from lending to buying is critical.

[Printing Money]

In this world of money backed by no material thing, the taxpayer and his ability to pay interest on his borrowings is all that stands betwen a currency with worth and one without.

Printing Definately falls in the latter category as no taxpayer liability is incurred.

Agree. Usually, in normal circumstances.

But it seems the Fed and BoE (and treasuries) are testing the waters by talking about maybe possibly printing a bit, if the market wouldn't mind.

They'd keep issuing debt backed money as usual. But would also start buying otherwise worthless crap with more new narrow money.

The objective would be to prevent economic collapse. The market might accept this plan under the circumstances, thinking some temporary monetary dilution (and assuming that funny money is destroyed once the economy is back to positove inflation) is prefereble to an economic collapse that could render the bonds already held as worthless.

The BoJ did it.

[Printing Money]

Yes, thats where you find the balance.

So is the BoE legally entitled to buy any asset using newly created narrow money?

Can it buy at any price it sees fit?

Can the BoE legally start QE by buying basically worthless toxic paper from banks at high prices using newly created narrow money?

[Printing Money]

The bank of England is Independant by Statute and they must produce balanced accounts..

Printing would unbalance the account and go directly against the Charter under which the Bank is Governed, one of the rules is to protect the Currency and its stability.

The Fed is a different kettle of fish, indeed, there are several Feds in the US.

It can easily balance its accounts. It has the power to create new narrow money, which it can use to buy assets. Indeed, whenever the BoE buys assets it does so with newly created narrow money.

I think we are just disputing what assets it is allowed to buy and what legislation governs this. You claim it can only legally buy government bonds. I don't know if that is true, but would certainly like to find out for sure.

[Printing Money]

Its not legal.

You said this yesterday. How do you know? Where is the legislation that says what is ad isn't legal for the BoE to do in controlling the narrow money supply? Genuine question .. I'd like to read the legislation.

The actions of the Fed are governed by the Federal Reserve Act: http://www.federalreserve.gov/aboutthefed/fract.htm

I'm looking through that for the relevent sections.

[Sterling Set To Enter Terminal Phase]

Alternatively, they will print just enough to offset the contraction in credit availability and keep CPI around 2%, which is the defined job of the Bank of England. When the economy begins to recover, they will destroy the money to prevent inflation getting out of control.

Sorry to be controversial, but printing money does not mean hyperinflation unless any second round effects are ignored by the central bank.

Nice to see some thoughtful disussion of QE. More of this please!

[London Lawyers Face The Axe]

Doesn't say 1000 jobs? Says 80.

Oops, sorry .. wishful thinking. Fixed.

[London Lawyers Face The Axe]

It's not all bad news:

Clifford Chance, the world’s largest law firm by revenue, has announced redundancy consultations which could see almost 10 per cent of its London lawyers lose their jobs.

The London-based law firm, established in 1802, has said up to 80 of its 1,000 London lawyers face the axe. The firm employs 3,800 legal staff worldwide.

http://business.timesonline.co.uk/tol/busi...icle5473283.ece

[Increase Tax On Savings]

It doesn't make any sense. If you tax savings held in banks then people will move their savings out and the banks will be bankrupted. And he's suggesting the tax to encourage savers to invest their money, but that is exactly what the bank does with their money already.

[Brown Plans To Print More Money Amid Fears Rate Cuts Won't Work]

Tax rebates don't work as shown by President Bush mailing money to people. Heading into a recession

you want money and job security, not a new sofa. Tax cuts take a long time until people will trust them

to be a real long term support, and the governments cannot afford to overlad themselves with debt and

cut taxes.

Right.

They want to get banks lending and people borrowing again. You can't force people to borrow, and very few want to because their economic expectations are now so negative. And so many are already borrowed to the eyeballs.

Even if it works and 1/3rd or so of the money filters back out, that is a tiny amount of the economy, maybe

one quarter will be up, then it's back down again. It's much more about public relations and changing the mood

of the people then it is about finance.

I think it could make the collapse less severe. Many people will say it was money wasted and didn't work, but perhaps without it, the collapse would be much worse.