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Effects Of Qe

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I was under the impression that QE would help the economy, and produce a higher value of GDP, even though this would be a technical improvement rather than genuine growth.

Someone suggested to me that it was money printing that is causing the recession Real resources such as material goods, food and energy are being diverted to those with access to the printed money, and away from the productive economy. Any opinions?

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I don't know of any definitive research on where the QE (resultant broad) money went but my guess is that the pension funds, insurance companies etc.who sold their gilts used most of the money received to buy new gilts.

The increase in base money revived inter-bank liquidity, the increase in broad money enabled HMG to sell more gilts.

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Ludwig von Mises describes the endgame brought on by reckless expansion of credit: "There is no means of avoiding the final collapse of a boom brought about by credit (debt) expansion. The alternative is only whether the crisis should come sooner as the result of a voluntary abandonment of further credit (debt) expansion, or later as a final and total catastrophe of the currency system involved."

Von Mises is adamant it won't generate a recovery.

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Ben Bernanke claimed under oath that QE1 and now QE2 had created 3 million jobs.

if this were true, then another 12 million officially unemployed could be saved by doing QE1+QE2 x 4.

Of course, its 8ollox.

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It merely perpetuates the malinvestment, the market needs to correct in order for the malinvestments to be shaken from the system and capital to be reallocated, the crash isn't the problem its the cure and the longer the medicine is applied that delays the cure the worse the ravages on the economy.

If you were ill and the doctor told you, "I can give you this medicine and you'll be half as ill for the next 10 years or I can give you nothing but you'll be better in 6 months" what would you do?

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Virtually no mainline commentators / media even mentioned QE yesterday as a cause for our inflation, yet whenever King started up the presses last year there was warnings galore on it.

Whats changed

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I was under the impression that QE would help the economy, and produce a higher value of GDP, even though this would be a technical improvement rather than genuine growth.

If you have a sore knee and I break your leg for you, is that a technical improvement?

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QE has hurt the real economy because it's ended up fuelling the commodities price boom thus generating imported inflation.

There's no such thing as a free lunch - except for bankers of course.

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  • 312 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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