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ralphmalph

Where Has The Qe Money Gone Part Ii

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http://blogs.telegraph.co.uk/finance/edmun...interest-rates/

Another interesting article in the telegraph.

Bank prints 150 billion of money buys gilts from banks, banks deposit 150 billion of cash with the BoE.

So QE money not being lent to the economy but hoarded by the banks.

So some bright spark has a new cunning plan lets charge the banks to leave money on deposit at the BoE i.e negative interest rates. This would force the banks to lend the QE money or buy gilts, Corp bonds, etc.

I bet Gordon is positivley salivating in wonderland tonight and busy shouting at Darling "Tell those xxxx's at the banks to start that great together mortgage up again. It worked last time, it will work this time."

Still time for Nu Labour to really nuke the economy with another cunning plan.

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As a second thought this begs the question of who is buying all the new issuance of gilts from the Govt. I had thought that it was a fix up. Gordo needs to borrow 150 billion up tothe next election, merv prints it, banks buy UK govt debt Gordo safe till election, torys got big problem.

But this graph means that that is not the case. Somebody is buying the gilts with thier own money not printed money.

So which country thinks the UK is safe in Gordo's control?

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Somebody is buying the gilts with thier own money not printed money.

ok ok, i 'fess up, its me. i just drive the old nissan as a cover, i'm minted - even more minted than daddy bear and sibley put together.

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As a second thought this begs the question of who is buying all the new issuance of gilts from the Govt. I had thought that it was a fix up. Gordo needs to borrow 150 billion up tothe next election, merv prints it, banks buy UK govt debt Gordo safe till election, torys got big problem.

But this graph means that that is not the case. Somebody is buying the gilts with thier own money not printed money.

So which country thinks the UK is safe in Gordo's control?

The money doesn't need to come from abroad, why can't it be being bought by banks here that don't want to lend to the high street? It would be stupid not to buy Gilts if you are a bank because you can get a guaranteed return at zero cost and zero risk. It costs the banks nothing to issue loans. Issuing Gilts allows more bank credit to enter the system which causes a rise in prices and loss of value in the pound. A Gilt is cash with a time delay, but most people (according to the market) expect that it will be redeemable when it expires. It is temporary cash and affects prices for that reason.

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The money doesn't need to come from abroad, why can't it be being bought by banks here that don't want to lend to the high street? It would be stupid not to buy Gilts if you are a bank because you can get a guaranteed return at zero cost and zero risk. It costs the banks nothing to issue loans. Issuing Gilts allows more bank credit to enter the system which causes a rise in prices and loss of value in the pound. A Gilt is cash with a time delay, but most people (according to the market) expect that it will be redeemable when it expires. It is temporary cash and affects prices for that reason.

The assumption was when QE was announced and Merv said he was going to buy gilts, that the institution he bought gilts from would then buy the newly issued gilts needed to fund Gordo's spending binge.

If what you say is true then the banks had the spare cash available to buy the gilts without QE. So what was the point of QE?

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The assumption was when QE was announced and Merv said he was going to buy gilts, that the institution he bought gilts from would then buy the newly issued gilts needed to fund Gordo's spending binge.

If what you say is true then the banks had the spare cash available to buy the gilts without QE. So what was the point of QE?

The banks don't need to have spare cash to buy Gilts because they can lend themselves the money out of thin air. I'm not sure why buying Government debt with QE money is expected to affect prices... perhaps someone else can explain?

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The assumption was when QE was announced and Merv said he was going to buy gilts, that the institution he bought gilts from would then buy the newly issued gilts needed to fund Gordo's spending binge.

If what you say is true then the banks had the spare cash available to buy the gilts without QE. So what was the point of QE?

None of what's happening makes any sense. personally I feel like I've woken up in the middle of a cold war with the real action just about to kick off any minute. But it never does.

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Whether we like it or not .. QE and the govt have engineered a bounce.. Here is a simple comment I picked up from a reader on a news website ..

QE has put 125 Billion of new money into the UK .. This means the value total of all assets are now 125 Billion more than they would have been without QE. This could be shares, houses, commodities ... !!

Simples.

We could argue that the money would flow into shares .. but at the end of it when the buyer of shares cashes their chips in .. the money flows to ??

Does any one have any figures around the colective asset value destroyed before QE began .. including housing & real estate .. I bet QE covers only a fraction of the wealth destruction we have seen so far.

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Whether we like it or not .. QE and the govt have engineered a bounce.. Here is a simple comment I picked up from a reader on a news website ..

QE has put 125 Billion of new money into the UK .. This means the value total of all assets are now 125 Billion more than they would have been without QE. This could be shares, houses, commodities ... !!

Simples.

We could argue that the money would flow into shares .. but at the end of it when the buyer of shares cashes their chips in .. the money flows to ??

Does any one have any figures around the colective asset value destroyed before QE began .. including housing & real estate .. I bet QE covers only a fraction of the wealth destruction we have seen so far.

If the money supply is something like between 5 and 7 Trillion then a 20% fall would be £1,200bn. But this hasn't really been destroyed yet, at least officially it's just that people are beginning to suspect that the banks might not be good for their promises (eg Northern Rock) and are thinking about a bank run.

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As a second thought this begs the question of who is buying all the new issuance of gilts from the Govt. I had thought that it was a fix up. Gordo needs to borrow 150 billion up tothe next election, merv prints it, banks buy UK govt debt Gordo safe till election, torys got big problem.

But this graph means that that is not the case. Somebody is buying the gilts with thier own money not printed money.

So which country thinks the UK is safe in Gordo's control?

I expect most of that'll be insurance companies, primarily providers of annuities. They're much more restricted than the rest of us in what assets they're allowed to hold to underwrite their liabilities.

Government debt is a primary means of paying "funded" pensions. Watch it grow!

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They should just QE away, tighten up the bank reserve requirements so they can't go on a lending spree, then watch the banks squirm. We have the power to create our own money, control the flow of it and leave the banks out to dry.

In 1950 about 50% of the money in circulation was state issued, legal tender. Now about 3% is, with the rest lent out as debt and controlled by the private banks.

The existing system is completely nuts. The banks are expendable and easily replaceable.

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