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bogbrush

Are We Inching Toward A Write-off Of Qe Debt?

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I was wondering why exactly the BoE couldn't just write off the debt, or at least waive ever selling it back. In a World made on tick, and with people hungry to do the same on their personal front, wouldn't there be popular assent for such a move?

In which case why not do some more - say a few hundred billion - to keep "vital services" going. And some more scrappage schemes, say on fridges and so on. Plus a 2010 car scheme too, of course. Vital for the environment too.

I believe this would be the course of a new Labour government if they held on after this election. If not could anyone tell me why this wouldn't float? It was only a few months ago that Ministers wouldn't discuss QE except as an "out there" idea, and the IMF is no good any more as it doesn't have the money so I guess we just have to print it all away and declare "Growth" in our consumption-based economy. The nature of this lot is to introduce us to unthinkable concepts, let them lie there a while and then once everyone has got used to it, do it.

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I was wondering why exactly the BoE couldn't just write off the debt, or at least waive ever selling it back. In a World made on tick, and with people hungry to do the same on their personal front, wouldn't there be popular assent for such a move?

In which case why not do some more - say a few hundred billion - to keep "vital services" going. And some more scrappage schemes, say on fridges and so on. Plus a 2010 car scheme too, of course. Vital for the environment too.

I believe this would be the course of a new Labour government if they held on after this election. If not could anyone tell me why this wouldn't float? It was only a few months ago that Ministers wouldn't discuss QE except as an "out there" idea, and the IMF is no good any more as it doesn't have the money so I guess we just have to print it all away and declare "Growth" in our consumption-based economy. The nature of this lot is to introduce us to unthinkable concepts, let them lie there a while and then once everyone has got used to it, do it.

I'm not sure what you are proposing. The BoE write off the bankers debts? The bankers wouldn't necessarily right off debts owed to them. Therefore this could be extremely unpopular!

It would also set a precedent, making any future debt harder to enforce even if the country could afford it (which it can't).

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They only have 3 options.

Debt jubilee

Bankruptcy

Or print money into existence, if people believe paper money still has value they can get away with it. Maybe in the short term which is all they care about.

Edited by interestrateripoff

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I was wondering why exactly the BoE couldn't just write off the debt, or at least waive ever selling it back. In a World made on tick, and with people hungry to do the same on their personal front, wouldn't there be popular assent for such a move?

What are you on about?

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Guest KingCharles1st
The only have 3 options.

Debt jubilee

Bankruptcy

Or print money into existence, if people believe paper money still has value they can get away with it. Maybe in the short term which is all they care about.

I suppose the big put off with trading in things like sheep and pigs is that you have to kill and pluck them yourself :(

Edited by KingCharles1st

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I agree. I think they will write-off at least some of it.

Only the gilt part and monetize the govt debt (ala Zimbabwe).

The only real cost is inflation. Once they start these things it's very hard to stop.

If they don't, they'll put of the reversal for a long, long time.

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What are you on about?

You know how the BoE just wrote some money into existence and bought Government debt?

You know how there was no obvious consequence of writing that money into existence, no interest to be paid?

You know how if they ever try selling that debt to the market it'll (i) fail and (ii) give the government no money?

Doesn't it sound to you like simply forgetting it will be tempting? Do you seriously think if they boost it up to £400/500bn (as Brown would in the next few years) that will ever be settled?

No, they'll simply say that the money supply looks ok and there's no pint destroying that money so we'll call it quits. This will appeal to a population hooked on debt and aspiring to write-offs anyway, not that they'd really need public approval as they can distract them easily enough.

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Guest UK Debt Slave
I was wondering why exactly the BoE couldn't just write off the debt, or at least waive ever selling it back. In a World made on tick, and with people hungry to do the same on their personal front, wouldn't there be popular assent for such a move?

In which case why not do some more - say a few hundred billion - to keep "vital services" going. And some more scrappage schemes, say on fridges and so on. Plus a 2010 car scheme too, of course. Vital for the environment too.

I believe this would be the course of a new Labour government if they held on after this election. If not could anyone tell me why this wouldn't float? It was only a few months ago that Ministers wouldn't discuss QE except as an "out there" idea, and the IMF is no good any more as it doesn't have the money so I guess we just have to print it all away and declare "Growth" in our consumption-based economy. The nature of this lot is to introduce us to unthinkable concepts, let them lie there a while and then once everyone has got used to it, do it.

The whole idea of the ntional debt is to stop people being 'too well off'

It's a communist system, central economic planning

The central bank manipulates the interest rate and the monetary system deliberately to keep most people POOR

So don't expect a debt jubilee

It ain't gonna happen

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I suppose the big put off with trading in things like sheep and pigs is that you have to kill and pluck them yourself :(

I'd love to see you plucking a pig Charlie

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The whole idea of the ntional debt is to stop people being 'too well off'

It's a communist system, central economic planning

The central bank manipulates the interest rate and the monetary system deliberately to keep most people POOR

So don't expect a debt jubilee

It ain't gonna happen

Oh I don't mean peoples debts, nor even the banks debts; just that they will forget the Central Banks balance sheet when Merv writes off his government debt.

Edited by bogbrush

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I was wondering why exactly the BoE couldn't just write off the debt, or at least waive ever selling it back. In a World made on tick, and with people hungry to do the same on their personal front, wouldn't there be popular assent for such a move?

In which case why not do some more - say a few hundred billion - to keep "vital services" going. And some more scrappage schemes, say on fridges and so on. Plus a 2010 car scheme too, of course. Vital for the environment too.

I believe this would be the course of a new Labour government if they held on after this election. If not could anyone tell me why this wouldn't float? It was only a few months ago that Ministers wouldn't discuss QE except as an "out there" idea, and the IMF is no good any more as it doesn't have the money so I guess we just have to print it all away and declare "Growth" in our consumption-based economy. The nature of this lot is to introduce us to unthinkable concepts, let them lie there a while and then once everyone has got used to it, do it.

If they were dealing rationally with the crisis and actually cared this would be one approach.

They aren't though - they are stealing their whole careers worth of pay, whilst trying to make it 2007 again.

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Here's how a possible write-off of QE could be made work.

Estimated/rough figures (bn)

2007

Narrow money: 200

Broad money: 6000 (30:1 ratio in the banking system)

Govt debt: 400

QE: 0

Now

Narrow money: 400

Broad money: 6000 (15:1 ratio in the banking system)

Govt debt: -800

QE: -200

Write off the QE (leaving it as narrow money) and the govt debt part of it, but put in place banking rules that

ensure no more than 20:1 leverage.

Future

Narrow money: 400

Broad money: 8000 (20:1 ratio in the banking system)

Govt debt: -600 (+ whatever else the muppets borrow, but make them get it from the system and pay proper IRs)

Would mean 30% inflation over a few years.

Those with cash will lose out. For those in debt it will not seem so bad.

Houses will fall slightly (my prediction).

At the end, you'll have a less leveraged banking system, less debt in the system and correctly prices housing.

If this was combined with proper regulation, it could be the best way out of this mess.

..... but, would not suit me.

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I was wondering why exactly the BoE couldn't just write off the debt

...

I believe this would be the course of a new Labour government if they held on after this election.

Except that there is ABSOLUTELY NO CHANCE of Labour winning the 2010 election, and they know it. Their only plan appears to be to use QE and borrowing to defer the rest of the recession until after the election, when they can blame the Tories for the layoffs and tax rises, hoping to win back power in 2014.

Everyone keeps saying how the Labour party are just acting short termist - i think they are acting with 2014/2015 in mind.

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Well I actually started this as a dig at the cynical policy development of this lot, but since we're talking about solutions isn't the simple fact that the heart of the problem is banks ability to create money by people going into debt?

Fix that (by simply making it illegal to lend what you don't already possess) and the states position in organising provision of currency fundamentally changes, making totally alien policies quite normal (and desirable).

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Here's how a possible write-off of QE could be made work.

Would mean 30% inflation over a few years.

Can you get wage inflation with that? Cos it won't be inflationary without that. It will be highly deflationary

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Except that there is ABSOLUTELY NO CHANCE of Labour winning the 2010 election, and they know it. Their only plan appears to be to use QE and borrowing to defer the rest of the recession until after the election, when they can blame the Tories for the layoffs and tax rises, hoping to win back power in 2014.

Everyone keeps saying how the Labour party are just acting short termist - i think they are acting with 2014/2015 in mind.

The tories might also write-off some of the QE. They'd need to keep the pensioners happy, but it

could help their finances.

Can you get wage inflation with that? Cos it won't be inflationary without that. It will be highly deflationary

No, but the inflation itself would be linked to a recovery. If there's no recovery, you could QE even more

and it'd cause no inflation.

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Guest UK Debt Slave
Except that there is ABSOLUTELY NO CHANCE of Labour winning the 2010 election, and they know it. Their only plan appears to be to use QE and borrowing to defer the rest of the recession until after the election, when they can blame the Tories for the layoffs and tax rises, hoping to win back power in 2014.

Everyone keeps saying how the Labour party are just acting short termist - i think they are acting with 2014/2015 in mind.

If only things were so certain

The election will be decided in a very small number of marginal seats. Just another example of our sham democratic system.

How will Cameron win those marginal seats with a blank manifesto?

I wouldn't be surprised if Labour win myself.

I'm just hoping I wont be around to witness it.

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Here's how a possible write-off of QE could be made work.

Estimated/rough figures (bn)

2007

Narrow money: 200

Broad money: 6000 (30:1 ratio in the banking system)

Govt debt: 400

QE: 0

...

To OP, yes! The current system is a farce and we don't need to pay private banks for interest on something we essentially print anyway. The inflation occurs when it is borrowed - it makes little difference whether the new money is backed by debt or not. If they pay it back, it will be deflationary, which is why they won't. *

According to Wikipedia (not the best, but hey) broad money (M4) is only 1500bn - http://en.wikipedia.org/wiki/Money_supply

Assuming the above is correct, we could allow 50% credit deflation and pump QE up to 700bn (£50bn was already present) and we are debt free. The banks then need their reserve ratios changing to 100%, full reserve, and we can take the power to issue money back.

As narrow money pre 2007 was about £50bn (not sure where you got £200bn from?), 30:1 lending to fits well at £1500bn.

People need to wake up about what the national debt is - a private tax on every UK citizen.

EDIT: * To note, the bank credit causes the lion's share of the inflation by racking up borrowing from the newly created money (30:1 etc).

Edited by Traktion

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If only things were so certain

The election will be decided in a very small number of marginal seats. Just another example of our sham democratic system.

How will Cameron win those marginal seats with a blank manifesto?

I wouldn't be surprised if Labour win myself.

I'm just hoping I wont be around to witness it.

They're hardly much different anyway - what radical changes will the Tories make? IMO, it is better voting for real change, with one of the smaller parties.

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A possible (schematic) scenario (?):

According to the DMO, almost all Gilts are owned by non-banks, so let's deal only with that case.

If £800bn of existing Gilts are bought by the BoE with new QE M0, then the commercial banks acquire £800bn of new M0 assets on their books, balanced with £800bn of new deposits (bank liabilities) in the accounts of those who sold the Gilts.

A big question then is: What do the Gilt sellers do with their £800bn?

Presumably they will be looking to buy assets with similar characteristics to Gilts. Top quality corporate bonds would do the job best, and indeed it is now reported that this is happening to a good slug of the QE money already issued.

Now suppose that UK PLc issued £800bn of new corporate bonds, sold them to the former holders of Gilts, then used the £800bn to pay down their own bank debt.

Then both the Government and UK Plc would be more or less out of debt to the commercial banking system.

Only poor old Joe Public remains indebted to the banking system, his domestic mortgage and credit card debts unaffected.

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...

Then both the Government and UK Plc would be more or less out of debt to the commercial banking system.

Only poor old Joe Public remains indebted to the banking system, his domestic mortgage and credit card debts unaffected.

Great post - I like the way you have thought of the next step with the corporate bonds, which would lead to good business investment, ultimately benefiting all of us.

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A possible (schematic) scenario (?):

According to the DMO, almost all Gilts are owned by non-banks, so let's deal only with that case.

If £800bn of existing Gilts are bought by the BoE with new QE M0, then the commercial banks acquire £800bn of new M0 assets on their books, balanced with £800bn of new deposits (bank liabilities) in the accounts of those who sold the Gilts.

A big question then is: What do the Gilt sellers do with their £800bn?

Presumably they will be looking to buy assets with similar characteristics to Gilts. Top quality corporate bonds would do the job best, and indeed it is now reported that this is happening to a good slug of the QE money already issued.

Now suppose that UK PLc issued £800bn of new corporate bonds, sold them to the former holders of Gilts, then used the £800bn to pay down their own bank debt.

Then both the Government and UK Plc would be more or less out of debt to the commercial banking system.

Only poor old Joe Public remains indebted to the banking system, his domestic mortgage and credit card debts unaffected.

Just to clarify when you use the term UK PLC I take it you mean the private busineses of the UK and not the Govt?

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BTW, to reply to the OP about why people don't want to see this happen, it's because they think it will be inflationary. What most people don't realise is that banks create vastly more money out of "thin air" every day. Essentially, the general public don't see or understand the full picture.

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Guest UK Debt Slave
They're hardly much different anyway - what radical changes will the Tories make? IMO, it is better voting for real change, with one of the smaller parties.

Totally agree

It's a sham democracy.

Cuddly Ken Clarke, Bilderberg shill and purveyor of cigarettes to third world children. George Osborne, Bilderberg shill with connections to Rothschilds and a (once upon a time) friends with Darth Mandelson.

Forget choice. There ain't none ;)

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