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munimula

Bank Of England Governor Paves Way For 'quantitative Easing'

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http://www.guardian.co.uk/business/2009/ja...titative-easing

Mervyn King, governor of the Bank of England, has tonight cleared the way for "quantitative easing" – radical measures to combat deflation and unblock frozen credit markets – by promising to start buying billions of dollars of corporate bonds and other assets within "weeks, not months". The move is intended to pump cash into the banking system and restart the flow of lending to families and businesses.

After sterling took a fresh battering on the foreign exchange markets from investors anxious about the escalating cost of the government's bank bailouts, King used a speech to a CBI dinner in Nottingham to promise that the Bank's monetary policy committee is ready to take "unconventional measures" to kick-start the economy once its standard weapon of interest rate cuts is exhausted.

King said the bankruptcy of Wall Street bank Lehman Brothers in September had plunged the world into "an unprecedented and synchronised downturn in business and consumer confidence," and the UK was now in the grip of "a pronounced contraction in spending and output."

With interest rates already slashed to 1.5%, he conceded for the first time that a more radical approach might now be necessary. "It is sensible for the MPC to prepare for the possibility – and I stress that we are not there yet – that it may need to move beyond the conventional instrument of Bank rate and consider a range of unconventional measures," he said.

These would "take the form of purchases by the Bank of England of a range of financial assets in order to expand the amount of reserves held by commercial banks and to increase the availability of credit to companies," he said.

Echoing US Federal Reserve chairman Ben Bernanke – who used a speech in London last week to introduce the term "credit easing" as a description of his own approach – King said that, as well as buying government bonds to recharge banks' balance sheets with cash, the Bank was also urgently drawing up plans to buy particular types of assets whose markets were malfunctioning. "It will be a matter of weeks, not days, before a programme of purchases can begin, but it will be weeks, not months," he said.

The Fed has already plunged into several markets in an effort to keep credit flowing – buying mortgage-backed assets issued by government-backed mortgage guarantors Fannie Mae and Freddie Mac, as well as "commercial paper", the debt issued by many companies to fund day-to-day operations.

As well as setting out the Bank's possible next moves, the governor threw his weight behind Chancellor Alistair Darling's latest rescue package for the financial sector, announced on Monday, describing the measures as being "designed to protect the economy from the banks".

Eventually, the governor said, the costly taxpayer bailouts for the financial system would start to take effect, and help the economy to recover. "The banking system is receiving massive support to cope with the need to restructure its balance sheet. That will take time, but time is a great healer, even of banks."

Part of Darling's package was a £50bn fund for the Bank of England to buy corporate bonds, widely seen by the markets as the first step towards quantitative easing – but King's more detailed proposals suggest the Bank is ready to go much further.

The governor also defended this handling of the economy before and since the onset of the credit crunch, stressing that the Bank had repeatedly warned of the risks of an increasingly complex financial system in the years before the crash, and pointing out that last summer, before the Lehman collapse, inflation was still rising.

After Lehman's bankruptcy, however, he said, "our business contacts at home and abroad, and my international counterparts, started to report that orders and confidence had, in the same telling phrase, 'fallen off a cliff'."

Some critics, including independent MPC member Professor David Blanchflower, argue that interest rates should have been cut earlier and faster last summer as the deteriorating state of the labour market began to send worrying signals about the wider economy.

This is it folks. From the horses mouth. Question is once the presses have been fired up will they be able to turn them off again.

Didn't Darling say just a couple of days ago that QE was not being considered???

Edited by munimula

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Notice how it didn't make sky or bbc?

I'm sure peston mentioned it last night on bbc news 24

maybe it didn't make the 'normal' news though

http://www.bbc.co.uk/blogs/thereporters/ro..._not_banks.html

That's why the Bank of England will swap corporate loans and other forms of credit for Treasury bills, which can easily be turned into cash (by the way, this new facility is a part of the preparations for quantitative easing, for printing money when Bank Rate is nearer to zero).

but really there should be a whole fVcking screaming from the rooftops about this

:angry:

edit: I guess peston only skimmed this as the full details hadn't been revealed

lets see if they get off their holes in the morning

Edited by mr slump

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I'm sure peston mentioned it last night on bbc news 24

maybe it didn't make the 'normal' news though

This is different. That is about the swap of £50bn government debt. This is King actually saying they are ready to print....in weeks. That is print as in create money from absolutely nowhere. And to begin devaluing the pound. It doesn't say but I think he has said this at a dinner tonight as I haven't seen this from him yet and it was published at 8:30pm

Part of Darling's package was a £50bn fund for the Bank of England to buy corporate bonds, widely seen by the markets as the first step towards quantitative easing – but King's more detailed proposals suggest the Bank is ready to go much further.
Edited by munimula

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Guest mattsta1964

BYE BYE STERLING! :ph34r:

So it's the nuclear option then

Time to dump sterling en masse folks

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Reading again it does say 'tonight'. Looks like QE is now an official policy and who knows what assets it will be used to hoover up. This is it...going into the unknown within 'weeks'.

Mervyn King, governor of the Bank of England, has tonight cleared the way for "quantitative easing"

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King said that, as well as buying government bonds to recharge banks' balance sheets with cash, the Bank was also urgently drawing up plans to buy particular types of assets whose markets were malfunctioning.

That will be mortgages then

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Mervyn King, governor of the Bank of England, has tonight cleared the way for "quantitative easing" – radical measures to combat deflation and unblock frozen credit markets – by promising to start buying billions of dollars of corporate bonds and other assets within "weeks, not months". The move is intended to pump cash into the banking system and restart the flow of lending to families and businesses.

That's lovely. I'm sure families are just chomping at the bit for more debt from the banksters.

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That will be mortgages then

They are going to buy anything and everything that is going down in value - but we will never know, or at least not immediatley. So much for sitting on the side lines waiting for fair values.

Now the question is do they try to have an orderly decline or do they stop at proping up prices or doyou trust them to stop at proping up prices and not to over egg it? Me - NO, NO, NO!

This is pretty bad news - sterling is gona get whacked tomorrow.

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Well, here goes stirling, here goes the UK economy and whatever last bastion, glimmer of economic hope existed will be gone in a matter of 'weeks'. When, and i ask this with the upmost sincerity WHEN will Gordon Brown be REMOVED, don't let his hands touch anything because unlike Midas everything he touches turns to the brown stuff, what a catastrophe he is, chancellor and an unelected PM - remove this man - forthwith.

Please people i truly believe this is a time to take 'positive' action, we are staring into a black hole and this bunch will take us and generations to come right to the very bottom, this shit-storm and snowball has grown out of their control and we need to stop it!

Fin

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They are going to buy anything and everything that is going down in value - but we will never know, or at least not immediatley. So much for sitting on the side lines waiting for fair values.

Now the question is do they try to have an orderly decline or do they stop at proping up prices or doyou trust them to stop at proping up prices and not to over egg it? Me - NO, NO, NO!

This is pretty bad news - sterling is gona get whacked tomorrow.

Sterling is going to get whacked but it might be good for the bank share prices as this will save them from nationalisation

Perhaps that's why it is the only option now? Government knows it can't stand behind all the big banks without UK going broke. For them it's not a difficult decision.

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Bye Bye UK PLC....

Welcome hyper-inflation (well not yet but give them time !)

Pounds already getting hammered - imports increasing in price, then all those lovely tax increases to look forward to - not long until we'll be talking about increasing interest rates, keeping downward pressure on house prices as mortgages becore more expensive ...... oh dear .....

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Doomed to fail they are printing money to lend to us.

FOOK OFF I DONT WANT TO BORROW

If you want to print just give me the money and fook the middle man.

Somebody should take court action to stop this.

The collapse of the UK. Zimbabwe here we come.

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This is different. That is about the swap of £50bn government debt. This is King actually saying they are ready to print....in weeks. That is print as in create money from absolutely nowhere. And to begin devaluing the pound.

My guess is they are planning to do exactly what the US Treasury and Fed did in December : Treasury gives BOE £50bn to cover potential losses on securities purchases; this clears way for BOE to buy £500bn worth of securities with this 'margin' to cover losses.

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They must be already doing it then.

Indeed. How many weeks ago was the law changed to allow this to be done without disclosure? Give them a day or two to summon up the courage and you're off.

P.S. You may be interested to hear an example of how open young minds are. I explained to my 10 year old kid yesterday how when, he was little, Mummy & Daddy swapped some numbers that Northern Rock wrote down for us for the house we live in, and how we worked to make them wipe the numbers off two years ago.

He understood why we didn't say "money" and wondered why they were allowed to just make it up. I then asked him to read a £20 note and tell me what he saw; he picked up on the "promise" immediately and asked me how they kept the promise.

Then I told him that they were going to print more promises so the banks could write even bigger numbers down.

Now he wants me to turn all my numbers into real things we can live in or trade.

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  • 284 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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