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gruffydd

New Boe Figures Show Uk Qe Failing To Increase Lending

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Uk Qe Failing

50% correct. The psychological side of it has worked pretty well as far as I can see.

(Edit)

Oooh, yer bugger, yer changed the title.

Edited by Moo

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The findings show that non-financial corporation holdings of M4 fell by £2bn in May, while M4 lending to private non-financial corporations fell by £0.3bn in the same month.

Recovereh?

If anything this tends to support the view that the MPC will sanction more QE in the not too distant future.

Saved by the printing press!

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Guest sillybear2

Of course it isn't, the net effect on private credit is next to nothing because the DMO and govt is consuming the 'credit' instead.

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http://www.bankofengland.co.uk/statistics/...009/may/FM4.pdf

The household sector’s holdings of M4 rose by £2.4 billion in May. The annual growth rate continued to fall, to 3.0%.

M4 lending (excluding the effects of securitisations etc) to the household sector rose by £1.2 billion. The annual growth

rate fell further, to 3.0%. Private non-financial corporations’ (PNFCs’) holdings of M4 fell by £2.0bn; the annual

growth rate became more negative, at -2.1%. M4 lending (excluding the effects of securitisations etc) to PNFCs fell by £0.3 billion in May and annual growth continued to fall, to 0.3%. Holdings of M4 by other financial corporations

(OFCs) rose by £2.8 billion and M4 lending (excluding the effects of securitisations etc) to OFCs rose by £22.4 billion in

May.

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Can someone just explain what the downside of QE is, in reality? I assume this money needs to be 'paid back' at some stage doesn't it, or taken out of the system?

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Can someone just explain what the downside of QE is, in reality? I assume this money needs to be 'paid back' at some stage doesn't it, or taken out of the system?

Every pound created devalues all the others.

They steal from you to bail out idiots who took on bad bets.

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Can someone just explain what the downside of QE is, in reality? I assume this money needs to be 'paid back' at some stage doesn't it, or taken out of the system?

You have a Ferrari GTO. It's th only one of it's kind and worth a cool $5m

Then the government makes another from thin air.

Bye bye $2.5m

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Can someone just explain what the downside of QE is, in reality? I assume this money needs to be 'paid back' at some stage doesn't it, or taken out of the system?

What is the downside of Inflation? QE and borrowing ensures that inflation continues

it never gets paid back as more money created in the future to pay it. The amount of money in circulation rises, the purchasing power of each pound falls and wages rise for ever

Edited by moosetea

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Guest sillybear2
Can someone just explain what the downside of QE is, in reality? I assume this money needs to be 'paid back' at some stage doesn't it, or taken out of the system?

If it's left in the system it permanently expands the monetary base which is inflationary/hyper-inflation, if the BoE conducts open market operations to reverse the QE then they risk sending us into a double-dip recession, that aside even if they successfully withdraw the liquidity it will leave a black hole on the accounts of the BoE because they will be selling the gilts for less than they paid for them. Once ZIRP ends and interest rates rise they will be left with a load of QE gilts with a low market value.

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If it's left in the system it permanently expands the monetary base which is inflationary/hyper-inflation, if the BoE conducts open market operations to reverse the QE then they risk sending us into a double-dip recession, that aside even if they successfully withdraw the liquidity it will leave a black hole on the accounts of the BoE because they will be selling the gilts for less than they paid for them. Once ZIRP ends and interest rates rise they will be left with a load of QE gilts with a low market value.

Oh yeah, inflation according to the BoE currently stands at almost 50%

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In medieval times, when a patient was taken ill with the ague, leeches were often prescribed. When the leeches didn't work, the common explanation was that not enough leeches had been applied.

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You have a Ferrari GTO. It's th only one of it's kind and worth a cool $5m

Then the government makes another from thin air.

Bye bye $2.5m

I appreciate simple models or analogies are helpful in explaining complex issues, but...

If there were only 2 Ferraris, the fall in value of each is not likely to be that great (or even happen). What I'm getting at, is that if the government created only a few Ferraris, the effect wouldn't be so great. The real problems arise when the Ferraris are churned out on a scale that does affect value.

So the question is whether QE is of a scale that affects the value of money. At the moment it (QE) isn't even filling the gap from the collapse in private credit creation. The real problems might start when normal monetary growth resumes and nothing is done to stop or reverse QE.

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Oh yeah, inflation according to the BoE currently stands at almost 50%

Yeah, but it's down from 52% in Apr so we must be in a deflationary period ;):):)

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Can someone just explain what the downside of QE is, in reality? I assume this money needs to be 'paid back' at some stage doesn't it, or taken out of the system?

You end up using notes like this for a cup of coffee.

Chigaramum190108AP_468x325.jpg

post-21382-1246279037_thumb.jpg

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Guest sillybear2
You end up using notes like this for a cup of coffee.

You actually need notes like this for a cup of coffee :-

zimbabwe_100_trillion_dollar_bill.jpg

Your version is just the petty change :lol:

post-13375-1246279517_thumb.jpg

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Something doesn't work, do you keep trying it until it does? Or do you try something new?

But "this" has worked for 30 years.

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Guest sillybear2
Something doesn't work, do you keep trying it until it does? Or do you try something new?

“The definition of insanity is doing the same thing over and over again and expecting different results†-- Albert Einstein

At least that explains why Brown won't stop spending.

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Ta everyone. It does seem like they have got away with it though. I know it can't be that easy, or else everyone would have done it in the past. Is it because up to know the amounts have been relatively small, or else because every other economy is doing just as mad? We don't seem to have massive inflation yet.

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50% correct. The psychological side of it has worked pretty well as far as I can see.

(Edit)

Oooh, yer bugger, yer changed the title.

QUOTE

Uk Qe Failing

The original title was more apt.

Lending vast amounts of money to the banks/other institutions otherwise known as QE has failed.

What has it achieved,if anything?

Has it temporarily prevented banks going bust?

Has it temporarily allowed high government borrowing?

Note the word temporarily

It has not just failed it has put the UK finances in a very bad position.

Everyone knows it now has to stop. It is propably already too late as the current position may not be sustainable with just the maintenance costs alone (treading water) not being able to be met.

Can the money be clawed back and quickly? How?

Everyone knows the situation except.........yes you guessed it. He actually thinks its a good idea to spend even more.

If it wasn't so serious it would be funny.

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Ta everyone. It does seem like they have got away with it though. I know it can't be that easy, or else everyone would have done it in the past. Is it because up to know the amounts have been relatively small, or else because every other economy is doing just as mad? We don't seem to have massive inflation yet.

It takes time to flow outwards from the banks.

They get to buy stuff at the old price, we get to pay for it through higher prices later on.

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Can someone just explain what the downside of QE is, in reality? I assume this money needs to be 'paid back' at some stage doesn't it, or taken out of the system?

Tis a great question. No one really knows the answer. The best I can do is say 'depends'.

If an economy is at full production, if you increase the supply of money, the likely outcome is more money, same number of goods and services, so you get inflation. A gain for those who are able to 'obtain' this extra printed money, at the expense of everyone else.

If an economy is in a deflationary spiral, then if that extra money is used by the government to buy goods and services, giving people jobs etc, then it is possible that the output of the economy can be stimulated as a result. Indeed, it is possible, believe it or not, for output to be stimulated, including extra business investment, that leads to greater output, and lower prices as businessmen invest in more productive capacity.

What will happen this time is anyones guess. FWIW I think that now is about the only time that QE is a sensible policy, and I am a big supporter of it. It will be time to stop when we have the return of 'inflationary expectations'. We know when that happens because interest rates will rise, in particular the price of gilts will start falling.

And things are so bad, that I think that we need to print more than most would think sensible to get our way out of this mess. The trouble is of course, that its like putting petrol on a fire trying to get it going again. Nothing happens when you do it, then you put some more on, still nothing, then some more, then a bit more, still nothing, then whoosh.

I hope I am not around advising more printing when the whoosh happens. I am sure that I will be more cautious by then.

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