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ralphmalph

Where Has All The Qe Money Gone

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Interesting article in the Telegraph

Britains banks are flush with cash and they are depositing it at the BoE not with each other. Skipton usually has 150mill at the bank as of a few weeks ago it had 1.1billion. Obviously means they are not lending on housing but when they want too start the HPI band wagon again it seems they have the firepower to do it.

reserves.jpg

Article below.

http://blogs.telegraph.co.uk/finance/edmun...-credit-crunch/

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Interesting article in the Telegraph

Britains banks are flush with cash and they are depositing it at the BoE not with each other. Skipton usually has 150mill at the bank as of a few weeks ago it had 1.1billion. Obviously means they are not lending on housing but when they want too start the HPI band wagon again it seems they have the firepower to do it.

reserves.jpg

Article below.

http://blogs.telegraph.co.uk/finance/edmun...-credit-crunch/

Is that a lot of pent-up inflation I see there in that chart?

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Is that a lot of pent-up inflation I see there in that chart?

Possible but only if it gets into circulation. The Japanese did the same and they have huge pent up potential inflation but for 20 years they have avoided it.

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Possible but only if it gets into circulation. The Japanese did the same and they have huge pent up potential inflation but for 20 years they have avoided it.

It's a run to cash.

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Is that a lot of pent-up inflation I see there in that chart?

It could be seen as a lot of pent up deflation.

If banks are holding assets at the BoE rather than lending out cash, there is less support for inflated asset prices. This could be happening because of either risk aversion at the banks or a lack of demand for credit from the economy.

To the Japanese case, they proved quite clearly that in cases where there is a large supply of credit and only a small demand for credit that you can still have deflation even in the face of huge fiscal stimulus and QE programs.

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Sigh.

OK I'll explain with little words because it's late.

BoE prints money and uses it to buy back existing ye-olde long-dated low return government bonds from "the banks".

"The Banks" then use that money to buy brand new, higher paying, shorter dated government bonds.

And thus behold, the UK government has managed to sell the bonds it needs to borrow £700 billion this year.

Tada.

OK, we can all go and buy wheel-barrows now.

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It could be seen as a lot of pent up deflation.

If banks are holding assets at the BoE rather than lending out cash, there is less support for inflated asset prices. This could be happening because of either risk aversion at the banks or a lack of demand for credit from the economy.

To the Japanese case, they proved quite clearly that in cases where there is a large supply of credit and only a small demand for credit that you can still have deflation even in the face of huge fiscal stimulus and QE programs.

Carry trade says no.

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