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Rakno

I Don't Understand Qe, Can One Of You Experts Help?

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Reading about the effects of QE, I confess, I am flummoxed. This is what I currently think QE is,

BOE creates money out of thin air and then buys government bonds. This way, the government keeps running a deficit and doesn't have to go to the market, where it would have to pay higher interest/premium.

But this excludes the normal banks (RBS, Barclay etc), which means they are not lending to Joe public.

I am confused.

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As far as I'm aware the government issues gilts to the commercial banks, other financials and private investors which pay interest to maturity. So far no new money but for the interest which comes from the future. Qe is the BoE with permission of HMG buying up the guilts from the market with freshly 'minted' digital money. Hey presto the pound in your pocket isn't worth a pund anymore when the Qe money gets through to the real economy.

Edit :but I am not financially literate

Edited by zebbedee

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QE is the devil. That's all you need to know.

(stay out of this one aa3!)

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Guest DissipatedYouthIsValuable

This is how it looks to me.

Quantitative Easing

Me and the missus like to get togged up nicely of a weekend and take a wander around the city. We like to look at empty buildings, so this morning we took a little stroll down to the Bank of England to see who could get the best echo out of the vaults.

As we got closer, a bloke, all done up nice, asked me if I was a banker, as I had me pinstripes on.

We like a good laugh, so we said, "Yes!"

He asked us if we had any bits of paper we were making losses on, I said, "Loads mate...." and looked a bit forlorn like.

So he said, "Give us the bits of paper and I'll give you a few quid."

Not being one to pass up a chance on getting a few free quid out of the mentally ill, I gave him my mortgage agreement.

"That'll do nicely, son", he said, and gave me a load of quantitatively eased fresh new money.

"What do I owe you for this then?", I asked.

"A shade over ******all", he said.

"Seems pretty good..."

"But you can only spend it if you sell it on to someone who isn't in banking, just keep the interest."

"I can't give it away to one of them poor bastards wiv nuffink?", I asked, a bit incredulous like.

There were a couple of starving little scamps who looked like they could do with a good meal, hanging about.

"No, no, that's why you get to keep your bonus, salary and pension from the previous robbing, a little something for keeping schtum.", he winked.

"Thanks, me old mate, ******ing blindin', good little number. Cheers. What happens if I give it to some **** who can't afford to pay it back?"

"Don't worry about that, we'll give you another bundle and nick all their shit."

And we went on our merry way.

Funny old World.

We got some bloody big echoes from that Bank of England building, must be the sound waves bouncing off of all that gold.

Edited by DissipatedYouthIsValuable

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I Don't Understand Qe, Can One Of You Experts Help?

You don`t need an expert to reply.

Print loadsa money inject into the system and eventually you end up with very high inflation as seen in the 70s, inject now and pay dearly in the future, are you listening you amateurs at the MPC. :rolleyes:

They have lost control of the situation, will fail, and like all failures will leave with a very nice lump sum as is the norm today. :angry:

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You don`t need an expert to reply.

Print loadsa money inject into the system and eventually you end up with very high inflation as seen in the 70s, inject now and pay dearly in the future, are you listening you amateurs at the MPC. :rolleyes:

They have lost control of the situation, will fail, and like all failures will leave with a very nice lump sum as is the norm today. :angry:

;)

get some gold Charlie. B)

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Reading about the effects of QE, I confess, I am flummoxed. This is what I currently think QE is,

BOE creates money out of thin air and then buys government bonds. This way, the government keeps running a deficit and doesn't have to go to the market, where it would have to pay higher interest/premium.

But this excludes the normal banks (RBS, Barclay etc), which means they are not lending to Joe public.

I am confused.

Last time this was tried, it was an openly hostile power doing it. Germany in the 1940s remembered the devastation QE had brought to the Weimar republic, and tried something like it on the UK. See here for more detail.

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