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"special Liquidity Scheme Will Not Be Extended"


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Merv just said the Special Liquidity Scheme should not and will not be extended. As this is the mechanism for supporting the mortgage industry, I should say we now have a realistic schedule for a proper house price crash. The banks simply do not have the money to maintain the mortgage market at current levels on their own.

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Merv just said the Special Liquidity Scheme should not and will not be extended. As this is the mechanism for supporting the mortgage industry, I should say we now have a realistic schedule for a proper house price crash. The banks simply do not have the money to maintain the mortgage market at current levels on their own.

What about the "NEW special Liquidity Scheme?"

Voters were suckered in via New Labour rebranding you know...

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Merv just said the Special Liquidity Scheme should not and will not be extended. As this is the mechanism for supporting the mortgage industry, I should say we now have a realistic schedule for a proper house price crash. The banks simply do not have the money to maintain the mortgage market at current levels on their own.

Has he just signalled the inevitability of QE hitting Mugabe/aa3 levels?

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Has he just signalled the inevitability of QE hitting Mugabe/aa3 levels?

He has said that he expects inflation to be well below the 2% target in the medium term .... and (separately) QE will be used to help meet the 2% target.

I think that's probably a "yes" to your question.

Edited by Matt Bear
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Merv just said the Special Liquidity Scheme should not and will not be extended. As this is the mechanism for supporting the mortgage industry, I should say we now have a realistic schedule for a proper house price crash. The banks simply do not have the money to maintain the mortgage market at current levels on their own.

Not only but also;

Breaking news:

* Bank of England says January's inflation likely to exceed 3%.

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So, does the money printed for Quantitative Easing have to be 'paid back'? Or taken out of the system somehow?

Could one of you that understands these matters explain please?

It won't be paid back. When they entered into QE, they maintained that the gilts would be sold when the market recovers. I think that's extremely unlikely. They will probably even be rolled over, but since that's a gradual process in the future, I'm sure nobody will notice :huh:

The banks are going to need to buy all the new government debt to stay within the new rules, so the government won't have any trouble finding buyers.

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He has said that he expects inflation to be well below the 2% target in the medium term .... and (separately) QE will be used to help meet the 2% target.

I think that's probably a "yes" to your question.

The man's talking nonsense. The fan charts always show 2% in the medium term. They're never right but that is always the medium term prediction.

p-o-p

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So, does the money printed for Quantitative Easing have to be 'paid back'? Or taken out of the system somehow?

Could one of you that understands these matters explain please?

They printed it and then they spent it via govt borrowing and spending and of course the ever present interest payments into the wider circulation. IF the economy wasnt so fecked it would have been highly inflationary. As it was it just knackered our currency by 30% at peak.

To get it out of circulation they would have to take it out in taxes and then destroy it. (Sorry l just have to stop here for a moment lm in danger of guffawing up my pelvis....)

Or more likely to mop it up will have to SELL yet MORE treasuries which of course they will have to pay interest on and eventually will have to either roll over or retire (pay back nominal capital) in however many years the treasury term is. This doesnt really remove it permanently but will ensure that inflation gently massages it into the economies skin like a cheap moisturiser over the coming decades.

By the way, l am not pretending to know whats going on either, but l'd like someone to say..no this is how they'll do it and tell me in words that dont hurt my brain.

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What's the new scheme going to be called then?

VMR.

Assett Purchase Facility?

http://www.bankofengland.co.uk/publications/news/2010/008.htm

Information on the Asset Purchase Facility can be found on the Bank of England website at http://www.bankofengland.co.uk/monetarypolicy/assetpurchases.htm.

The Bank will continue to purchase high-quality private sector assets on behalf of the Treasury and financed by the issue of Treasury bills, in line with the arrangements announced on 29 January 2009. The letter from the Chancellor of the Exchequer to the Governor on 29 January 2009 and the Governor’s reply to the Chancellor can be found at the following addresses:

pdf_icon.gifhttp://www.hm-treasury.gov.uk/d/ck_letter_boe290109.pdf

pdf_icon.gifhttp://www.bankofengland.co.uk/markets/apfgovletter090129.pdf

A letter from the Chancellor of the Exchequer to the Chairman of the Treasury Committee on 4 February 2010 regarding the use of the Asset Purchase Facility for these purposes can be found at the following address:

pdf_icon.gifhttp://www.hm-treasury.gov.uk/d/chx_letter_040210.pdf

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Told ya - big announcement but actually more printing.

http://www.three-peaks.net/annette/Addiction-Stages.htm

Third and Final Stage of Addiction

Physical and Mental Breakdown

· The pain from loneliness, shame, and anger are almost continual.

· Performance of the act doesn't cover the pain, any more, it only adds more pain.

· When the act no longer eases the pain, the addictive logic breaks down.

· The pressure of stored feelings mounts up. It causes emotional and/or physical breakdown.

· The normal self dreads each new day.

· Stopping the addictive cycle causes physical withdrawal and a grieving process for the lost relationship with the act.

· There are only two ways out of this stage of the addiction - intervention or suicide.

· Most addicts are stopped though intervention of help from friends or loved ones or by the legal system.

· The chances of recovery are good if there is a total commitment by the addict and a complete lifestyle change.

· Without intervention, the tormented normal self decides to put a stop to it all and commits suicide.

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So, does the money printed for Quantitative Easing have to be 'paid back'? Or taken out of the system somehow?

Could one of you that understands these matters explain please?

In theory no.

We are about 10% off full output......... providing they stick to the £200bn printed so far......... thats about 10% of the money supply.

The ultimate effect of this should be 0% pressure on inflation. As the "new pounds" hit the street and start buying goods, this doesn't push the price of goods up, it just ramps up the production of those goods. As the last "new pound" is spent, the last shred of additional output is provided.

No increase in inflation.

The assumption that printing money increases inflation rests on an underlying assumption of inelasticity in the supply of goods. An economy, basically, at full stretch.

So........ at full production...... adding £200bn cash would just plug through straight into inflation, as another £200bn of goods can't be produced.......so more money chases the same amount of goods........ so inflation in prices. If you CAN produce another £200bn of goods, then thats what the economy does, no price inflation.

So..... in theory...... they don't have to take it back out.

This, however, ignores second order effects. (what if output is 10% off possible because 10% of the money supply has been hidden under mattresses, and it later returns as people take it out from under the mattress and spend it while we are at full output ?) ....... so in practice they may, later, have to suck at least some money back out by re-sale of the gilts they bought.......... on the other hand, in a deflationary environment, they may welcome the additional inflation this casues (pushing it from -1%, say, to 2%) so it's hard to say.

All I can say is that with a first order approximation of the current situation........ they don't have to take it back out.

Yours,

TGP

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They printed it and then they spent it via govt borrowing and spending and of course the ever present interest payments into the wider circulation. IF the economy wasnt so fecked it would have been highly inflationary. As it was it just knackered our currency by 30% at peak.

To get it out of circulation they would have to take it out in taxes and then destroy it. (Sorry l just have to stop here for a moment lm in danger of guffawing up my pelvis....)

Or more likely to mop it up will have to SELL yet MORE treasuries which of course they will have to pay interest on and eventually will have to either roll over or retire (pay back nominal capital) in however many years the treasury term is. This doesnt really remove it permanently but will ensure that inflation gently massages it into the economies skin like a cheap moisturiser over the coming decades.

By the way, l am not pretending to know whats going on either, but l'd like someone to say..no this is how they'll do it and tell me in words that dont hurt my brain.

Not quite. To reverse the QE, the BoE just need to sell the gilts (200bn odd) back to the market and destroy the cash

raised. This should increase the yields on the gilts, so cost the govt more in future interest, but otherwise have no

impact on the current debt level.

If they were to ignore the QE and fully, officially switch to printing money, they'd destroy the gilts and reduce the govt

debt 200bn.

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In theory no.

We are about 10% off full output......... providing they stick to the £200bn printed so far......... thats about 10% of the money supply.

The ultimate effect of this should be 0% pressure on inflation. As the "new pounds" hit the street and start buying goods, this doesn't push the price of goods up, it just ramps up the production of those goods. As the last "new pound" is spent, the last shred of additional output is provided.

No increase in inflation.

The assumption that printing money increases inflation rests on an underlying assumption of inelasticity in the supply of goods. An economy, basically, at full stretch.

So........ at full production...... adding £200bn cash would just plug through straight into inflation, as another £200bn of goods can't be produced.......so more money chases the same amount of goods........ so inflation in prices. If you CAN produce another £200bn of goods, then thats what the economy does, no price inflation.

So..... in theory...... they don't have to take it back out.

This, however, ignores second order effects. (what if output is 10% off possible because 10% of the money supply has been hidden under mattresses, and it later returns as people take it out from under the mattress and spend it while we are at full output ?) ....... so in practice they may, later, have to suck at least some money back out by re-sale of the gilts they bought.......... on the other hand, in a deflationary environment, they may welcome the additional inflation this casues (pushing it from -1%, say, to 2%) so it's hard to say.

All I can say is that with a first order approximation of the current situation........ they don't have to take it back out.

Yours,

TGP

But the QE is narrow money, not broad. At the moment there's little demand for new debt, so the inflationary factor is low.

Once any sign of real recovery, I'd expect this money to be leveraged out very quickly. It's more than doubled the narrow

money supply, so if things went mad again, it'll double the broad money supply, which has to be very inflationary.

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  • 433 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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