bootfair Posted March 9, 2009 Share Posted March 9, 2009 (edited) The cunning plan, outlined in more detail in the paper version of the mail states the Bank will "easily" avoid inflation by reselling the "financial assets" that the Bank will buy via Quantitative Easing, "BACK TO THE PRIVATE SECTOR". Now can someone tell me why, having dumped these "financial assets" on the tax payer, for much more than they were worth, and now breathing a huge sigh of relief, the PRIVATE sector would want to buy them back, ever, even in the glimmer of hope of a recovery. Im sure, as a financial illiterate I am missing something..can someone please reassure me there is no fatal flaw in Mr Beans Cunning Plan to avoid inflation. QUOTE: (ONLINE VERSION) Writing in the Daily Mail, Deputy Governor Charlie Bean says the Bank will 'easily' be able to prevent a new bout of runaway price rises by reselling the assets it plans to buy with the fresh cash. 'As the economy recovers, so we will probably need to remove some of the extra money in order to ensure that inflation does not pick up too much,' he says. http://www.dailymail.co.uk/news/article-11...Bank-chief.html Edited March 9, 2009 by bootfair Quote Link to comment Share on other sites More sharing options...
Cogs Posted March 9, 2009 Share Posted March 9, 2009 (edited) Buy high, sell low? Surely they have to perform at a level greater than 0? Clever old bankers. Rip you off on a car and then buy it back from you for less than the scrap value. Edited March 9, 2009 by Cogs Quote Link to comment Share on other sites More sharing options...
crispindry Posted March 9, 2009 Share Posted March 9, 2009 Buy high, sell low?Surely they have to perform at a level greater than 0? We can't have a precedent set.. Quote Link to comment Share on other sites More sharing options...
tinker Posted March 9, 2009 Share Posted March 9, 2009 crispindry Morse code in your signature? Quote Link to comment Share on other sites More sharing options...
bootfair Posted March 9, 2009 Author Share Posted March 9, 2009 (edited) Well this is what I'm thinking, if they sell back the assets at a low price, then the plan to suck back the QE money won't work... there will still be the cash in the system... the difference between what they bought it for and what they can sell it for will still be sloshing around in the system won't it... It doesn't sound so cunning to me.... Buy high, sell low?Surely they have to perform at a level greater than 0? Clever old bankers. Rip you off on a car and then buy it back from you for less than the scrap value. Edited March 9, 2009 by bootfair Quote Link to comment Share on other sites More sharing options...
Reck B Posted March 9, 2009 Share Posted March 9, 2009 crispindryMorse code in your signature? INTEGRITYISSHOWNWHENNOONEISLOOKING --. --- .-. -.. --- -. -... .-. --- .-- -. .. ... .- - --- - .- .-.. -.-. ..- -. - Quote Link to comment Share on other sites More sharing options...
bobthe~ Posted March 9, 2009 Share Posted March 9, 2009 The cunning plan, outlined in more detail in the paper version of the mail states the Bank will "easily" avoid inflation by reselling the "financial assets" that the Bank will buy via Quantitative Easing, "BACK TO THE PRIVATE SECTOR". Now can someone tell me why, having dumped these "financial assets" on the tax payer, for much more than they were worth, and now breathing a huge sigh of relief, the PRIVATE sector would want to buy them back, ever, even in the glimmer of hope of a recovery. Im sure, as a financial illiterate I am missing something..can someone please reassure me there is no fatal flaw in Mr Beans Cunning Plan to avoid inflation. QUOTE: (ONLINE VERSION) Writing in the Daily Mail, Deputy Governor Charlie Bean says the Bank will 'easily' be able to prevent a new bout of runaway price rises by reselling the assets it plans to buy with the fresh cash. 'As the economy recovers, so we will probably need to remove some of the extra money in order to ensure that inflation does not pick up too much,' he says. http://www.dailymail.co.uk/news/article-11...Bank-chief.html Aren't the financial assets Treasury Gilts that the BoE purchase off the gubmint and then give the gubmint the money? T Bonds are normally easy to sell into the Private sector. I don't think he is talking about toxic assets here. Quote Link to comment Share on other sites More sharing options...
Moo Posted March 9, 2009 Share Posted March 9, 2009 Well this is what I'm thinking, if they sell back the assets at a low price, then the plan to suck back the QE money won't work... there will still be the cash in the system... the difference between what they bought it for and what they can sell it for will still be sloshing around in the system won't it...It doesn't sound so cunning to me.... Depends if that cash in certain institutions that you just so happen to own... Quote Link to comment Share on other sites More sharing options...
Cogs Posted March 9, 2009 Share Posted March 9, 2009 Well this is what I'm thinking, if they sell back the assets at a low price, then the plan to suck back the QE money won't work... there will still be the cash in the system... the difference between what they bought it for and what they can sell it for will still be sloshing around in the system won't it...It doesn't sound so cunning to me.... Erm. This is one of those things like fractional reserve where I tie myself up in knots Anyhow, perhaps I have this wrong but its replacing the theoretical value the first time out (mark-to-model blah blah blah) that was never actually realised but existed as a balance sheet thing with a smaller profit in actuality at a later point. The "hit" taken in the middle is to printed money. Does that work or is my grey matter playing up? Quote Link to comment Share on other sites More sharing options...
Guest UK Debt Slave Posted March 9, 2009 Share Posted March 9, 2009 The cunning plan, outlined in more detail in the paper version of the mail states the Bank will "easily" avoid inflation by reselling the "financial assets" that the Bank will buy via Quantitative Easing, "BACK TO THE PRIVATE SECTOR". Now can someone tell me why, having dumped these "financial assets" on the tax payer, for much more than they were worth, and now breathing a huge sigh of relief, the PRIVATE sector would want to buy them back, ever, even in the glimmer of hope of a recovery. Im sure, as a financial illiterate I am missing something..can someone please reassure me there is no fatal flaw in Mr Beans Cunning Plan to avoid inflation. QUOTE: (ONLINE VERSION) Writing in the Daily Mail, Deputy Governor Charlie Bean says the Bank will 'easily' be able to prevent a new bout of runaway price rises by reselling the assets it plans to buy with the fresh cash. 'As the economy recovers, so we will probably need to remove some of the extra money in order to ensure that inflation does not pick up too much,' he says. http://www.dailymail.co.uk/news/article-11...Bank-chief.html The 'Cunning Plan' you speak of, or BALDRICK, will be to steal the wealth from the people at some point in the future, either via inflation, or taxation, or they'll just dip into you pension (if there's anything left) and steal it from there. What they haven't factored in, is the possibility that the sheeple might wake up to what they are doing. They haven't got any money to bail themselves out..........So they'll STEAL it from us Simple really Quote Link to comment Share on other sites More sharing options...
A.steve Posted March 9, 2009 Share Posted March 9, 2009 The cunning plan, outlined in more detail in the paper version of the mail states the Bank will "easily" avoid inflation by reselling the "financial assets" that the Bank will buy via Quantitative Easing, "BACK TO THE PRIVATE SECTOR". Hmmm - it isn't impossible, it would require one of two things: There's an onset of spiralling deflation - making any safe form of debt desirable - even if buying it is loss making. Current debt matures - allowing the central bank from yield curve arbitrage alone - and new debt is issued by the DMO that is attractive to investors. Quote Link to comment Share on other sites More sharing options...
bootfair Posted March 9, 2009 Author Share Posted March 9, 2009 (edited) thanks for the replies.. COGS - so, basically, we agree that something is worth more than i would get if I sold it to someone else...so then you buy it, giving me more money than its worth, and then I sell it back to you later for less, and we can just forget the difference.... we wil call the difference pretend money that never existed. AHA!!! we will say the difference is not MONEY but NUMBERs.... That is indeed a very clever scheme. I will definitely buy one of those off you, when you have one spare :-) oops, but what if I spend all the lovely money in the meantime, or give it to people who don't want to pay it back and then when you want me to I have not the money to buy the assets back... Now UKDebtSlave's explanation I totally get Edited March 9, 2009 by bootfair Quote Link to comment Share on other sites More sharing options...
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