Printing Money

[Ash4781]

Not for us lot - but the gov't can do it.

i'm not sure they can as prob breaks european laws/entry requirements

Presumbably gov would borrow direct from bank of england who would just print the cash?

[Flatdog]

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.

Yet another post which subtly unravels nonsense..hats off to you Bloo Loo, may you continue to post here ad infinitum

[The XYY Man]

The definition of the state's power is that they can do things you can't - but they at least go to the effort of making up a new work for it when they do it

protection money =tax

counterfeiting = quantitive easing/monetary inflation

murder = execution/war

kidnapping = arrest

locking people up = imprisonment

rape = what rape?

and so on

Mincing screaming turd-burgling nancy-boy poof = Lord Mandelson

[winkie]

At the end of the day...what is available to spend in the pay/benefit package after debt expenses will determine how well the economy does...borrowing to take on extra debt to spend on non-essentials will not solve the problem.

Printing money is a short term solution and should only be undertaken with extreme caution, it can create more damage, if spent recklessly and without control.

[why me]

Indeed, whenever the BoE buys assets it does so with newly created narrow money.

Yes, thats where you find the balance.

[Bloo Loo]

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.

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.

Edited January 8, 2009 by Bloo Loo

[Minderbinder]

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?

[InternationalRockSuperstar]

Mincing screaming turd-burgling nancy-boy poof = Lord Mandelson

[why me]

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

Not sure if they are allowed. Generally they only buy securities, foreign currency, gold I think.

They could buy bad assets but not a lot a point as theyve recapitalised the banks and the money will just sit on balance sheets - much like the capital injection.

Edited January 8, 2009 by Hancial

[Bloo Loo]

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?

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.

[Minderbinder]

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.

[Converted Lurker]

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...

Edited January 8, 2009 by Converted Lurker

[Minderbinder]

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.

[Bloo Loo]

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.

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.

[eightiesgirly]

From the Boe MOU

The Bank's responsibilities

2. The Bank contributes to the maintenance of the stability of the financial

system as a whole – one of its two core purposes. This involves:

i. ensuring the stability of the monetary system as part of its monetary policy

functions. It acts in the markets to deal with fluctuations in liquidity;

ii. overseeing financial system infrastructure systemically significant to the

UK, in particular payments systems whether based in the UK or abroad. As

the bankers' bank, the Bank stands at the heart of the payments system. It

falls to the Bank to advise the Chancellor, and answer for its advice, on any

major problem arising in these systems. The Bank is also closely involved in

developing and improving the infrastructure and strengthening the system to

help reduce systemic risk;

http://www.bankofengland.co.uk/about/legislation/mou.pdf

'This law is upsetting me and stopping me helping hard working families. I think I will change it wiv my amazing emergency powers coz it's an emergency what came form America. Ta Gordon'.

[Converted Lurker]

From the Boe MOU

The Bank's responsibilities

2. The Bank contributes to the maintenance of the stability of the financial

system as a whole – one of its two core purposes. This involves:

i. ensuring the stability of the monetary system as part of its monetary policy

functions. It acts in the markets to deal with fluctuations in liquidity;

ii. overseeing financial system infrastructure systemically significant to the

UK, in particular payments systems whether based in the UK or abroad. As

the bankers' bank, the Bank stands at the heart of the payments system. It

falls to the Bank to advise the Chancellor, and answer for its advice, on any

major problem arising in these systems. The Bank is also closely involved in

developing and improving the infrastructure and strengthening the system to

help reduce systemic risk;

http://www.bankofengland.co.uk/about/legislation/mou.pdf

After all that's 'gone down' you still have faith in the integrity of the system and those who govern?

[InternationalRockSuperstar]

If they [HMG/BoE] want to print money and it's current illegal, then they'll just introduce "emergency powers" for our "own good" to "save us" from the big bad credit crunch.

Half the sh1t the Fed gets up to now is illegal anyway.

[Bloo Loo]

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.

I havent read the Buy bit anywhere.

[Bloo Loo]

After all that's 'gone down' you still have faith in the integrity of the system and those who govern?

No.

And they can change the law tommorrow.

Shame really, as the laws were there to stop this sort of folly in the first place. Nothing has changed to suggest its not a folly. It is.

Indeed, it is flouting and bypassing the Capital requirements, designed to prevent overlending, thats caused the problem.

OUr ancestors knew a thing or two, money hasnt changed in nature and neither has bankers greed.

To delegislate to fix a problem caused by flouting legislation is the madness of King George.

Edited January 8, 2009 by Bloo Loo

[Minderbinder]

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).

[Minderbinder]

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)

[Bloo Loo]

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)

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?

[Minderbinder]

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.

[mfp123]

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)

it make no difference if banks fail to make new loans though. the only way the money supply expands is if banks create new loans.

if the money just sits in a banks balance sheet nothing really happens. thats why japan had deflation when they had zero interest rates.

printing money only increases the Capacity to create new money which must be done through new loans.

[why me]

it make no difference if banks fail to make new loans though. the only way the money supply expands is if banks create new loans.

Or buys assets from the general public.