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Qe2 Justifications

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The justifications for QE2 have been bugging me lately (well apart from RealistsBears dubious knowledge on Champagne).

For sure, the £ is surging on the thought that QE2 is cancelled (and interest rates will rise earlier than expect), but reckon the red flashing lights are going off at ThreadNeedle and so I expect Merv and co. to be talking down the £ (and mentioning QE2) again in the next few days.

With the economy expanding 0.8% during Q3, I think the next justification for QE2 will be money supply. As soon as the YoY measure goes negative, the printing presses will be cranked up.

Purely speculation on my part, but what do you think?

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Whats the difference to QE and banks increasing money supply, year after year, above wages.

To me it seems we've been QEing since 2001, only we called it borrowing.

But borrowing with no plan to pay it off, and no possibility of default, seems no different to printing.

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Whats the difference to QE and banks increasing money supply, year after year, above wages.

To me it seems we've been QEing since 2001, only we called it borrowing.

But borrowing with no plan to pay it off, and no possibility of default, seems no different to printing.

Spot on. In the sense QE / QE2 is trying to replace the banks money supply creative activities. But with the banks not wishing to lend / people not wanting to borrow. How can QE2 make a difference? (It could be used to buy Mortgage back securities, then we're back to cheap money... would this be the final step on the route to Japan style stagnation?)

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The coalition's plan is scratch around and wait for something to turn up, when this fails they'll fire up the printing press, it's just a matter of time. I don't see any other big ideas coming from Cameron and Co.

Using the language of the day it would be unfair to not take this action, the Tories must prevent a double dip recession at all costs.

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The coalition's plan is scratch around and wait for something to turn up, when this fails they'll fire up the printing press, it's just a matter of time. I don't see any other big ideas coming from Cameron and Co.

Isn't that a little unfair after just a few months? Let's wait and see, we've had the spending round - let's see what the plan is for growth.

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Apart from anything else, they'll think they'll need to do a competitive qe because of the Yanks.

But they are looking only short term.

QE CEMENTS PENSIONS AND HOUSES UNAFFORDABLE LEVELS.

When they realise their mistake there will be a devastating destruction of productive capital. They must let price do its work.

+1

A logical train of thought. Deflation in the money supply cannot be avoided can it?

Edited by DungBeetle

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.... the Tories must prevent a double dip recession at all costs.

I'd agree that politically this seems to be the case, but it seems to be the tories who are talking themselves into this political blind alley. Why? We have had an unprecedented economic crisis on the other lots watch. Was it beyond the best minds of political spin to cast the double dip as a Labour legacy?

We are all being told we must accept austerity. Why can't we accept that recovery will likely be sporadic, even to the extent that a double dip may occur?

Instead the coalition is allowing the opposition to stake their political reputation on the non-occurence of a negative GDP number. The chances of the government over-reacting to avoid this are going up each and every time a minister seeks to take credit for a revival in the country's economic fortunes. Cameron and Clegg must crack down on any kind of triumphalism right now before it's too late.

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The coalition's plan is scratch around and wait for something to turn up, when this fails they'll fire up the printing press, it's just a matter of time. I don't see any other big ideas coming from Cameron and Co.

(...)

I think the plan is to use QE to increase bank equity and use Basel III to ringfence this as regulatory capital.

Problem is, they said it was to avoid deflation.

And we don't have deflation.

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+1

A logical train of thought. Deflation in the money supply cannot be avoided can it?

Yes.

Mervyn presses "print."

As for the US, they already hyperinflated.

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Yes.

Mervyn presses "print."

As for the US, they already hyperinflated.

Hi Injin; I keep reading this in your posts and I have yet to understand. Could you explain? Do you mean they have already hyperinflated because of the amount of base money expansion?

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Hi Injin; I keep reading this in your posts and I have yet to understand. Could you explain? Do you mean they have already hyperinflated because of the amount of base money expansion?

He does.

It's pure semantics - wheelbarrow is not included.

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If they are going to QE at least give the money to the public rather than buying bad assets off banks and hoping they will eventually lend out the money

£40b of QE gives each over 16 year old £1000 to spend and boost demand within the economy.

£40b to banks gives bonuses to 10k traders.

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Hi Injin; I keep reading this in your posts and I have yet to understand. Could you explain? Do you mean they have already hyperinflated because of the amount of base money expansion?

Yep.

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If they are going to QE at least give the money to the public rather than buying bad assets off banks and hoping they will eventually lend out the money

£40b of QE gives each over 16 year old £1000 to spend and boost demand within the economy.

£40b to banks gives bonuses to 10k traders.

it wouldnt BE QE then.

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Quote. flashman said...

QE & QE2 is paper shuffling from one side of the ledger, to the other. Anyone who claims that the UK version of QE directly causes inflation does not fully understand its’ mechanics. The determinedly ignorant claim that the British version of QE is simple ‘money printing’. It is not. The UK version of QE was designed to curtail the banks' ability to make money without bothering to lend to businesses and individuals. It didn't even achieve that because they still didn't lend. QE might have been put on hold for now but I imagine they will reach for it again at the first sign of stress, no matter what history tries to tell us. When they do, it still wont cause inflation and it still wont be 'money printing'.

Brilliant Post.......

http://www.housepricecrash.co.uk/newsblog/2010/10/blog-and-qe-does-not-cause-inflation-30920.php

Edited by Panda

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The justifications for QE2 have been bugging me lately (well apart from RealistsBears dubious knowledge on Champagne).

For sure, the £ is surging on the thought that QE2 is cancelled

In don't see what makes you caim that the pound is surging.

Agains the dollar it is the same rate as a monh ago and against the Euro 4 months ago (having spent most of the past month falling)

tim

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The justifications for QE2 have been bugging me lately (well apart from RealistsBears dubious knowledge on Champagne).

For sure, the £ is surging on the thought that QE2 is cancelled (and interest rates will rise earlier than expect), but reckon the red flashing lights are going off at ThreadNeedle and so I expect Merv and co. to be talking down the £ (and mentioning QE2) again in the next few days.

With the economy expanding 0.8% during Q3, I think the next justification for QE2 will be money supply. As soon as the YoY measure goes negative, the printing presses will be cranked up.

Purely speculation on my part, but what do you think?

The pound is not surging.

Just because it has volatile bounces from stupidly oversold lows does not mean it is surging.

The pound is currently severely devalued against all world currencies. It would have to rise at least another 10 - 15% before I thought it was fairly valued.

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The pound is not surging.

Just because it has volatile bounces from stupidly oversold lows does not mean it is surging.

The pound is currently severely devalued against all world currencies. It would have to rise at least another 10 - 15% before I thought it was fairly valued.

Thanks for some sanity - I quite agree.

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  • 140 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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