The Gilts Thread

[bill still]

Thank you so much for that, Yerrel. I wish I would have had that a year ago of 15 years ago. heheheh.

Questions asked in the House, 6 May 1941: Hansard LINK:

[bill still]

Thank you so much. Boy, I'm finally hitting on the mother lode.

*wry smile*

From the same Hansard page:

Sir Kingsley Wood is the largely forgotten inventor of the PAYE system. I have no idea why he died early. Kingsley Wood is most notorious for a response made to Leo Amery MP in late 1939, during the so called phoney war, when asked why the RAF, rather than just scattering leaflets could not incendiary bomb sizeable arms dumps known to be hidden in the Black Forest, which was very dry after a hot summer. A shocked Wood responded:

Some sentences have been copied.

[Timm]

What do you mean out on a limb in the UK?

I was talking about the Fed. It is totally debt based.

Simply that I thought the US was doing the same as us. I meant no value judgement.

About the nationalization, I was talking to my wife about at dinner tonight. I just can't see how it could be completely nationalized. That would mean -- to me -- BoE would no longer be in control of monetary targets, the Parliament would be.

Indeed.

http://www.bankofengland.co.uk/monetarypolicy/framework.htm

The Bank’s monetary policy objective is to deliver price stability – low inflation – and, subject to that, to support the Government’s economic objectives including those for growth and employment. Price stability is defined by the Government’s inflation target of 2%. The remit recognises the role of price stability in achieving economic stability more generally, and in providing the right conditions for sustainable growth in output and employment. The Government's inflation target is announced each year by the Chancellor of the Exchequer in the annual Budget statement.

The 1998 Bank of England Act made the Bank independent to set interest rates. The Bank is accountable to parliament and the wider public. The legislation provides that if, in extreme circumstances, the national interest demands it, the Government has the power to give instructions to the Bank on interest rates for a limited period.

Perhaps we should start another thread on this, as we are highjacking an excellent gilts thread.

Bill?...

[Guest_chris c-t_*]

I watched the BoE press conference today and perhaps for the first time felt I was looking at the emperor without his clothes, particularly when Mervyn King dodged the question of monetisation of government debt (and he looked extremely cagey when he did so). Many others on this site have been seeing this for quite some time, so I'm arguably very naïve and I'm definitely late to the party. Nevertheless it disturbs me that I have finally lost both my respect for, and my trust in, the officials of the Bank of England.

...

[As an addendum I'm sure most of you saw today the issue re JP Morgan and the 'inadvertent' mixing of client funds with proprietary funds ,which is now under investigation by the FSA. I could tell you a very interesting story about this, not relating to JPM but to a well-known UK institution. Unfortunately I'm bound under legal settlement to not disclose the nature of the incident. All I would say is that you should not assume that securities or monies held in UK custodial accounts actually exist. Of course, they normally exist when you demand them. But what happens if for some reason the institution concerned can't get its hands on the security concerned, even though it is legally meant to be holding it under FSA rules? And does the FSA actually care if that firm is in breach of those rules unless you threaten to take the issue public? Hmm, now therein lies a very educational tale...]

Very interesting, FT. Have you been aware of Jim Sinclair's efforts over the past year or so to encourage shareholders to get their own CREST accounts, and also to ensure any other items they own are registered to them?? - Talked to him maybe?

There are commercial short positions in certain metals (e.g. Silver) which exceed a year's mining production. I am aware JPM is one of the major bullion banks, so nothing would surprise me there.

Edited August 13, 2009 by chris c-t

[The Spaniard]

Perhaps we should start another thread on this, as we are highjacking an excellent gilts thread.

Bill?...

An excellent idea, Timm.

Apologies to FreeTrader etc. for the intrusion.

I've just started a Fed vs BoE thread.

Edited August 13, 2009 by The Spaniard

[Democorruptcy]

Thanks for the reply Freetrader.

[InternationalRockSuperstar]

I watched the BoE press conference today and perhaps for the first time felt I was looking at the emperor without his clothes, particularly when Mervyn King dodged the question of monetisation of government debt (and he looked extremely cagey when he did so). Many others on this site have been seeing this for quite some time, so I'm arguably very naïve and I'm definitely late to the party. Nevertheless it disturbs me that I have finally lost both my respect for, and my trust in, the officials of the Bank of England.

why did you have any trust in the most evil people on the planet in the first place?

[getdoon_weebobby]

Mpc Voted 6 to 3 For Extra £50bn Qe,

King wanted £75bn

Edited August 19, 2009 by getdoon_weebobby

[OnlyMe]

Mpc Voted 6 to 3 For Extra £50bn Qe,

King wanted £75bn

Mervyn King - money printing moron.

I was right about the Bankrupt of England. This country will be run down into the ground with debt repayments.

[Kilham]

Oops meant to post this here but ended up in another thread :

The [bOE] continues to shock mkts with news that it was really a choice between a GBP50 bln or GBP75 bln QE add at its Aug meeting clearly signalling that there is a decent risk of more to come when the current buyback prog runs its course in Nov. The fact that King sided with the GBP 75 bln camp adds more weight to this view and will once again leave markets scratching their heads as to whether the CB knows something that isn't in the public arena that is prompting them to follow such an aggressively expansionary path. Indeed the bulk of recent UK econ news has been positive and with infl overshooting mkt estimates this latest surprise could prove tricky for mkts to stomach.

[FreeTrader]

The fact that King sided with the GBP 75 bln camp adds more weight to this view and will once again leave markets scratching their heads as to whether the CB knows something that isn't in the public arena that is prompting them to follow such an aggressively expansionary path.

I suspect what the BoE knows is that the government commitments made to the UK banking sector are so great (and are likely to result in such enormous losses to the taxpayer) that there will be no choice but to monetise the liability.

Rather than do it later when the true cost becomes apparent, it's probably best to print as much you can right now.

The increase in QE was a done deal before the MPC even met.

[Godley]

Give me inflation, we need inflation. Anybody who thinks we are not going to experience high inflation in the near future is now on my donkey list.

The printy printy continues.............

[Traktion]

Thanks bill, I'd missed that exchange. Perhaps I can return the favour by pointing out Traktion's next post (my bold):

I've been groping my way to a similar ideal for some weeks. (Hence my Basel II thread etc). I'm not sure if it is galling or encouraging to find others on the forum had already thought of it, and that you did 15 years ago!!! Anyway, I might as well share why I was thinking along these lines: I was trying to work out why Gordon Brown is behaving like a man with a crusade, when to everyone else he looks like a sad, failed loser. Is it just possible that this was his great socialist plan, to wrest at least some power from the banks and end boom and bust?

I know, it's a crazy idea, but I like crazy ideas.

I missed this last week, as I was away, but the thought had crossed my mind too. I just find it hard to believe that the man would try to do something so empowering for the people (could he really be our saviour? ). With Mandelson meeting up with Nate Rothschild (of banking dynasty fame) a couple of weeks ago and talk of a power struggle, nothing is in the realms of the unbelievable.

I wouldn't be surprised if there is a power struggle behind the scenes at both the BoE and within the government.

As for monetising the debt, if they do and the markets don't respond in a strongly negative way, then what? If the cat gets out of the bag that States need not borrow money from others to fund their spending (they just need to control inflation), then why would anyone buy/sell government bonds? I'm sure no one enjoys paying interest to private bankers...

I have still heard no word on any tightening of reserve ratios though... I think if we here word about this, it will be rather telling over the direction the BoE/Government is taking.

P.S. I thought the Fed was using Quantitative Easing too? Surely, this is essentially the same as is happening here?

[grumpy-old-man-returns]

Give me inflation, we need inflation. Anybody who thinks we are not going to experience high inflation in the near future is now on my donkey list.

The printy printy continues.............

h'mmm, you've changed your tune....

For me weighing all this up cash is king.

We are not going to wake up one morning and face hyperinflation it doesn't work like that. Most of us will see the signs well in advance and be able to move our funds. Cash is the easiest thing to change into something else, I would rather hold cash right now than any other asset.

I guess at the end of the day you pays your money you takes your chances.

If the hyperinflation scenario looks likely fund will go straight to NSI rpi linked bond. Any opinions?

[Traktion]

Give me inflation, we need inflation. Anybody who thinks we are not going to experience high inflation in the near future is now on my donkey list.

The printy printy continues.............

If the banks don't lend it out, how will we get inflation? I seem to recall that the Japanese took a disliking to credit after their crisis in the 90s.

What the banks do or allowed to do is all important. Inflation certainly isn't a forgone conclusion still.

[Injin]

If the banks don't lend it out, how will we get inflation? I seem to recall that the Japanese took a disliking to credit after their crisis in the 90s.

What the banks do or allowed to do is all important. Inflation certainly isn't a forgone conclusion still.

Yes, it is.

Let say (for example) that house prices went up and up andd up, but you had a low, low credit score.

Gues what?

You are homeless. A handful of oligarchs buying stuff at sky high prices while serfs look on without two bob to rub together is certainly possible.

Edited August 19, 2009 by Injin

[grumpy-old-man-returns]

If the banks don't lend it out, how will we get inflation? I seem to recall that the Japanese took a disliking to credit after their crisis in the 90s.

What the banks do or allowed to do is all important. Inflation certainly isn't a forgone conclusion still.

I would say high inflation is already a forgone conclusion, hyper isn't, but very likely if the QE continues......which it will.

biflation, leading to hyper-biflation imo.

[getdoon_weebobby]

I would say high inflation is already a forgone conclusion, hyper isn't, but very likely if the QE continues......which it will.

biflation, leading to hyper-biflation imo.

id say the BoE are getting hold of as much £ as they can while they can before gilt markets turn the screw.

im still in the deflation camp and still dont buy the high inflation scenario at this present time.

the debt and future debt is mammoth, the money printing is a drop in the ocean

[Alan B'Stard MP]

I would say high inflation is already a forgone conclusion, hyper isn't, but very likely if the QE continues......which it will.

biflation, leading to hyper-biflation imo.

There's a fooking great hole for any new money to fall into. Deflation it is for the foreseeable.

[kagiso]

Give me inflation, we need inflation. Anybody who thinks we are not going to experience high inflation in the near future is now on my donkey list.

The printy printy continues.............

Proud to say 'eee aaaww'.

Latest inflation rates from the back of the Economist:

USA -1.4%

Japan -1.8%

China -1.8%

Canada -0.3%

Euro Area -0.6%

Austria nil

Belgium -1.7%

France -0.7%

Germany -0.5%

Italy nil

Netherlands +0.2%

Spain -1.4%

Denmark +1.0%

Norway +2.2%

Sweden -0.9%

Switzerland -1.2%

Australia +1.5%

HK -0.9%

Malaysia -1.4%

Singapore -0.5%

Taiwan -2.3%

Thailand -7.8%

UK +1.8%

Every significant advanced economy is now in deflation except for the following:

Austria, Italy & Netherlands; all very close and will certainly be dragged down by the other Euro area countries and the idiots at the ECB fighting the last war with their anti-inflation Maginot Line.

Denmark; may survive if they take the radical option of breaking the twenty year policy of shadowing the DM-Euro through the EMU.

Norway; should survive nicely with sensible inflation rate and lots of oil.

Australia; the lucky country will struggle to survive the coming commodity crash.

And the coming commodity crash will set the seal for all those countries just moving into deflation. As input prices collapse; deflation will be locked into their systems.

And the UK? Happy and healthy with historically low inflation bang on target.

Once again I say God bless Badger and Merv for saving us from lost decades of deflation and zero growth.

It will of course take time for the UK to recover from the current recession, growth will be weak for a few years.

But we will have growth.

The EU, the US and Japan will not have growth, deflation does not allow growth.

[mattyboy1973]

deflation does not allow growth.

Nonsense. Much of the 19th century consisted of deflation and growth. If productivity rises faster than the money supply, growth actually causes price deflation.

[desertorchid]

Nonsense. Much of the 19th century consisted of deflation and growth. If productivity rises faster than the money supply, growth actually causes price deflation.

Absolutely! This is basic A level economics but is completely overlooked by policy makers. Deflationary forces in 2000-2001 were supply-side ie ICT/globalisation/outsourcing were all bringing down costs of production, improving efficiency and potentially improving standards of living across western economies. HOWEVER, the numpties in power saw it as a threat and slashed rates and loosened monetary policy, fuelling a credit boom/crisis. Now, of course, its too late, deflationary pressures are demand orientated and central banks just dont know where to turn.

[getdoon_weebobby]

Absolutely! This is basic A level economics but is completely overlooked by policy makers. Deflationary forces in 2000-2001 were supply-side ie ICT/globalisation/outsourcing were all bringing down costs of production, improving efficiency and potentially improving standards of living across western economies. HOWEVER, the numpties in power saw it as a threat and slashed rates and loosened monetary policy, fuelling a credit boom/crisis. Now, of course, its too late, deflationary pressures are demand orientated and central banks just dont know where to turn.

yup and now we get hyper deflation. well done greenspan and friends

folks can we try and keep this on track tho . this is a great gilts thread , and needs to keep its emphasis on the gilts market

Edited August 19, 2009 by getdoon_weebobby

[Godley]

h'mmm, you've changed your tune....

No I haven't, that thread was regards 'hyper inflation', not 'high' inflation

I have always been in the inflation camp, just not your doomsday scenario's. My cash has now been duly converted into tangibles including a house and land

My opinion has been proved correct to date where as yours? Anyway I thought we were on an amensty, shall I drag up some of your old posts?

We are now entering a new phase of all this where the QE is going beyond it's intial scope, interesting times.

[grumpy-old-man-returns]

yeah,bet the japs were saying that in 90

yes I used to also think that in my HPC Militant Loyalist days