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I Have Had A Thought ....

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Yup -I'm with you.

100% flowing into the banks - its hitting my line of work now (services to banks) - They aint gonna be giving it to the man on the street though - nosir!

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Is QE being used to increase the share price of the state owned banks? Certainly would expliain why the cash isn't flowing into our pockets....

Absolutely.

they can have numbers on the balance sheet that aretn going to go down with their financial "assets", which are being marked to model.

without QE, the numbers would just look a bit insolvent.....

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Could be - but I thought the bulk was going into govt debt to keep the welfare state going.

Election coming up so the benefit train needs to keep chuggin.

not at all, government is still paying interest on the bonds it issues, even if the BoE buys them from a bank later with QE.

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not at all, government is still paying interest on the bonds it issues, even if the BoE buys them from a bank later with QE.

Presumably the interest is then paid to the BoE which is wholly owned by the government?

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Presumably the interest is then paid to the BoE which is wholly owned by the government?

yes, it adds to the banks balance sheet...they are going to need it....to pay the interest on the QE they have issued...to stop the banks spending it into the real world as the banking crisis recedes...this is the plan...pay MORE interest than they would get in the real world for QE deposits at the BoE.

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yes, it adds to the banks balance sheet...they are going to need it....to pay the interest on the QE they have issued...to stop the banks spending it into the real world as the banking crisis recedes...this is the plan...pay MORE interest than they would get in the real world for QE deposits at the BoE.

Reason I point this out, imagine the election coup if credit crunch was declared over then labour sell off the banks at a profit

- the proles will think Brown is a genius.

Other thing to point out,volumes are rediculously thin at the moment, meaning it only takes a small inflow of cash to generate big price moves - I wonder if they are bumping the price with a view to sell off, effectively directly generating cash for the government via QE.

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Reason I point this out, imagine the election coup if credit crunch was declared over then labour sell off the banks at a profit

- the proles will think Brown is a genius.

Other thing to point out,volumes are rediculously thin at the moment, meaning it only takes a small inflow of cash to generate big price moves - I wonder if they are bumping the price with a view to sell off, effectively directly generating cash for the government via QE.

im imagining...sadly thats all that one can do for the credit crunch.

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As has been said before if QE is the answer why haven't poor countries been allowed to print themselves out of poverty.

QE has certainly achieved masking the blackhole for a time and share prices have increased hugely.

If the rate of increase continues we could see the FTSE at 6500 by the end of Sept. By Christmas we might even have it at 8000, all base on future earnings due to the global recovery.

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http://www.telegraph.co.uk/finance/newsbys...into-banks.html

Investors have been using large swathes of the £125bn so far poured into the economy by the Bank of England to buy shares and debt in Britain's biggest banks.

The Bank believes this is why the closely watched money supply data have so far showed little sign of improving since the quantitative easing (QE) programme began in March, and undermines suggestions that it has been a failure.

Last week the Bank's latest provisional estimates of broad money supply showed it rose 1pc in July, the biggest monthly increase since February, but still a very low level increase.

"It could be consistent with QE having a little more impact on broad money than in previous months – although, compared with the £125bn of purchases that were completed by August, that would still represent a pretty small return on the Monetary Policy Committee's investment," said Colin Ellis, economist at Daiwa Securities.

However, the Bank suspects that rather than using the money received from the sale of gilts for the purchase of other assets, the investors have been lured into spending it on bank shares.

Because under this scenario the money would effectively remain within the banking sector, this could explain why measures of broad money have not increased as a result.

In the minutes of its August meeting, the MPC conceded that broad money growth had been "surprisingly weak", but it added: "To some extent, however, that might have reflected the impact of institutional investors' acquisition of banking sector assets, which should, in time, encourage greater bank lending."

The Bank has maintained that it is still too early to assess the full effects of its asset purchase so far. The MPC's decision at its August meeting to extend QE by £50bn to £175bn shocked economists, who had widely predicted that the MPC would not pump any more money into the economy after a wave of positive economic data over recent weeks.

They were surprised even more when the minutes revealed that three of the nine members of the committee, including Mervyn King, the Governor, had preferred to expand the programme by a bigger £75bn but were outvoted by their colleagues.

As a result of the split, and because of the Governor's influence, economists now believe a further extension to QE is likely.

"We doubt that the MPC will be satisfied that it has done enough QE until broad money growth has strengthened significantly from its current rates," said Vicky Redwood, economist at Capital Economics.

Ross Walker, economist at Royal Bank of Scotland, said the "odds are tilted" to another £50bn of QE in November, to coincide with the Bank's next quarterly Inflation Report.

The Bank has already made it clear that once economic recovery is underway, it could opt to raise interest rates above the current historically low level of 0.5pc, before starting to unwind its QE programme.

However, it indicated in its August inflation report that traders were wide of the mark by assuming that it would raise interest rates significantly in the coming years. The report suggested that if it followed the market's expected path for interest rates and lifted them above 4pc over the next two-and-a-half years it would send inflation below its 2pc target.

In terms of QE, it is not yet clear how the Bank will go about unwinding the policy in an orderly manner, but focus is increasingly shifting to possible exit strategies once the recession is over.

This seems to backup the OP thought.

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They've only printed £175bn so far which is a drop in the ocean compared to broad money supply.

But if QE were used to increase the broad money supply, it could (in theory) do so to the tune of over £1.75 Trillion.

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But if QE were used to increase the broad money supply, it could (in theory) do so to the tune of over £1.75 Trillion.

But it's not a lack of narrow money that constrains M4, we're on a voluntary system remember.

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Is QE being used to increase the share price of the state owned banks? Certainly would expliain why the cash isn't flowing into our pockets....

I Agree but the fact is no one has a clue where all this money is going

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I Agree but the fact is no one has a clue where all this money is going

This is the problem with electronic money, once its out of the BOEs account, it becomes very difficult to trace....

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But it's not a lack of narrow money that constrains M4, we're on a voluntary system remember.

I'm not sure that is true.

The EU Capital Requirements Directives are complicated, "sophisticated" and full of possible exclusions.

But I don't think they are voluntary.

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I'm not sure that is true.

The EU Capital Requirements Directives are complicated, "sophisticated" and full of possible exclusions.

But I don't think they are voluntary.

The Capital Adequacy regulations are an ex post, after the fact measure.

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The Capital Adequacy regulations are an ex post, after the fact measure.

What does this mean?

Does it mean that EU lenders do not have to comply?

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It means they comply after they have done what they want. It's impossible not to comply.

Why is impossible not to comply?

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I guess they don't want to constrain the banks.

Ahh, you appear more interested in semantics than answering the question.

I'll try again.

What mechanism is it that makes it impossible not to comply?

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This is the problem with electronic money, once its out of the BOEs account, it becomes very difficult to trace....

money doesnt need tracing...its like a pool...you have to watch where it flows to.

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Ahh, you appear more interested in semantics than answering the question.

I'll try again.

What mechanism is it that makes it impossible not to comply?

I answered what I thought was your question. Perhaps be more clear. The mechanism is that the people making the rules make them so that it is impossible not to comply.

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