Analysis - Bank Policymakers Push Door To Qe Wide Open

[interestrateripoff]

http://uk.reuters.com/article/2011/09/16/uk-britain-boe-idUKTRE78F56020110916

Bank of England policymakers have pushed the door wide open to more quantitative easing to support the faltering economy, and some say they could take their next step in October or November.

While Adam Posen's zealous call for more asset purchases this week came as no surprise, two of his more sceptical colleagues on the Bank's Monetary Policy Committee also gave downbeat assessments of the economy, suggesting it may not take too much more bad news to push the Bank into action.

"I think the MPC is moving towards quantitative easing. And they are probably not far away," said Capital Economics analyst Jonathan Loynes.

Even Bank watchers who harbour doubts about whether a majority of MPC members would brush aside high inflation say recent policymaker comments show a growing readiness to vote for more action.

"As all central bankers, Martin Weale and Charlie Bean have avoided precommitting to anything in October or November," said Nomura analyst Philip Rush. "However, they have certainly left the door open to take action if they thought it to be necessary."

Looks like the stage is set for what will happen when the next banking crisis hits, they are going to start up the magic printing presses again which solved all of the problems last time...

[plummet expert]

http://uk.reuters.com/article/2011/09/16/uk-britain-boe-idUKTRE78F56020110916

Looks like the stage is set for what will happen when the next banking crisis hits, they are going to start up the magic printing presses again which solved all of the problems last time...

Currency debasement and inflation will be the result. It does not work and you just get a replacement problem instead. If all that QE has not worked yet, why will it not work next time? Easy - the deflationary pressure of debt is too great now and the withdrawal of money from the economy/money supply shrinkage is so great ( and hidden) that QE - just buying off debts with a printing press will not work. If they go a whole step further and buy large quantities of assets to keep them from falling in value, then they really are more stupid than any govts seen at almost anytime in history.

If I or you printed money to pay our debts it would be called a fraud and we'd go to prison. If a govt does it, then the label is QE.

[nohpc]

http://uk.reuters.com/article/2011/09/16/uk-britain-boe-idUKTRE78F56020110916

Looks like the stage is set for what will happen when the next banking crisis hits, they are going to start up the magic printing presses again which solved all of the problems last time...

They won't QE whilst RPI is at 5% and the pound is hugely devalued already.

The only way to hedge against QE is to buy high dividend shares and also commodity shares (hard, soft and gold)

The first sniff of CPI dropping towards target and they will probably jump on the opportunity to QE but the idea of doing it now is ridiculous.

Edited September 16, 2011 by nohpc

[wonderpup]

Currency debasement and inflation will be the result. It does not work and you just get a replacement problem instead. If all that QE has not worked yet, why will it not work next time? Easy - the deflationary pressure of debt is too great now and the withdrawal of money from the economy/money supply shrinkage is so great ( and hidden) that QE - just buying off debts with a printing press will not work. If they go a whole step further and buy large quantities of assets to keep them from falling in value, then they really are more stupid than any govts seen at almost anytime in history.

If I or you printed money to pay our debts it would be called a fraud and we'd go to prison. If a govt does it, then the label is QE.

Yes- printing might work if done on a scale large enough to destroy any remaining vestige of credibility the bank may have. At which point it would all be academic.

[okaycuckoo]

In the long run I agree with plummet expert, but nohpc has it right in the short run.

My guess is we'll see formal recession confirmed over the next six months, commodity prices hit a higher low, then the experiment begins again.

[Panda]

Currency debasement and inflation will be the result. It does not work and you just get a replacement problem instead. If all that QE has not worked yet, why will it not work next time? Easy - the deflationary pressure of debt is too great now and the withdrawal of money from the economy/money supply shrinkage is so great ( and hidden) that QE - just buying off debts with a printing press will not work. If they go a whole step further and buy large quantities of assets to keep them from falling in value, then they really are more stupid than any govts seen at almost anytime in history.

If I or you printed money to pay our debts it would be called a fraud and we'd go to prison. If a govt does it, then the label is QE.

With this next crisis looming, which seems to be much bigger than any previous, they can either print or its good bye savings, good bye pensions, good bye banks, and also how can anything be valued when peak debt has created peak ponzi, which could create total collapse of the system?

They are left with no choice but to print currency, the debt is too big. I do not like it but what other options? The debt supports the current asset values, let the asset values be revalued, take the hair cut, that is very painfull for the investor, which could be anyone of us?

[interestrateripoff]

They won't QE whilst RPI is at 5% and the pound is hugely devalued already.

The only way to hedge against QE is to buy high dividend shares and also commodity shares (hard, soft and gold)

The first sniff of CPI dropping towards target and they will probably jump on the opportunity to QE but the idea of doing it now is ridiculous.

The BoE pension pot has bet on inflation, they won't have any problems in pushing inflation higher.

[R K]

Currency debasement and inflation will be the result. It does not work and you just get a replacement problem instead. If all that QE has not worked yet, why will it not work next time? Easy - the deflationary pressure of debt is too great now and the withdrawal of money from the economy/money supply shrinkage is so great ( and hidden) that QE - just buying off debts with a printing press will not work. If they go a whole step further and buy large quantities of assets to keep them from falling in value, then they really are more stupid than any govts seen at almost anytime in history.

If I or you printed money to pay our debts it would be called a fraud and we'd go to prison. If a govt does it, then the label is QE.

* GDP rose from - 6% p.a. to something rather less catastrophic

* Equity prices doubled

* Nominal house prices bounced from £148k to £162k

* Osborne was able to tighten fiscally with tax rises

* Banks didn't close their doors, there weren't further runs and savers got 100% return of capital

Could you clarify 'didn't work' please?

[Injin]

* GDP rose from - 6% p.a. to something rather less catastrophic

* Equity prices doubled

* Nominal house prices bounced from £148k to £162k

* Osborne was able to tighten fiscally with tax rises

* Banks didn't close their doors, there weren't further runs and savers got 100% return of capital

Could you clarify 'didn't work' please?

If it worked, how come we are here again?

[nohpc]

If it worked, how come we are here again?

I think "they" would say because they didn't do enough of it last time.

[Chuffy Chuffnell]

They won't QE whilst RPI is at 5% and the pound is hugely devalued already.

You want a bet?

[Chuffy Chuffnell]

If it worked, how come we are here again?

Quite.

Not that they can or will see this simple truth.

They'll continue to do exactly the same until it all goes utterly tits up. Give it 2-3 more years (of this!)

Edited September 16, 2011 by Chuffy Chuffnell

[Chuffy Chuffnell]

I think "they" would say because they didn't do enough of it last time.

Absolutely. Eventually the Fed will just QE $10000000000000000000000000000000000000000 or whatever and then I'll just go on a 72 hour drinking rampage as the world around me collapses.

(Hopefully by the time my hangover is over new currencies, etc, will have been established and we can start over again..)

Edited September 16, 2011 by Chuffy Chuffnell

[FIGGY]

If they are going to do it stop fu*king about and just print up a man sized £500bn.

Its not the act that is piss*ng me off its the slow pace, some one needs to step up and either say we will print to oblivion or let this sucker die, we are still in Zombie mode which means I'm not getting massive inflation to make my index linked bonds pay out, nor am I getting a HPC/system reset.

Its all very boring

[Fairies Wear Boots]

I think "they" would say because they didn't do enough of it last time.

If they had done more of it, the pound would have dropped more and 'imported inflation' would be even higher. Which is what will happen if they do another round.

[Fairies Wear Boots]

* GDP rose from - 6% p.a. to something rather less catastrophic

* Equity prices doubled

* Nominal house prices bounced from £148k to £162k

* Osborne was able to tighten fiscally with tax rises

* Banks didn't close their doors, there weren't further runs and savers got 100% return of capital

Could you clarify 'didn't work' please?

And now we have over target inflation and low GDP growth. Sticking their fingers in the cracks in the dyke has been reasonably successful up until now. Over target inflation and no wage rises means less spending in shops.

[Executive Sadman]

Currency debasement and inflation will be the result. It does not work and you just get a replacement problem instead. If all that QE has not worked yet, why will it not work next time? Easy - the deflationary pressure of debt is too great now and the withdrawal of money from the economy/money supply shrinkage is so great ( and hidden) that QE - just buying off debts with a printing press will not work. If they go a whole step further and buy large quantities of assets to keep them from falling in value, then they really are more stupid than any govts seen at almost anytime in history.

If I or you printed money to pay our debts it would be called a fraud and we'd go to prison. If a govt does it, then the label is QE.

Cant they write the debt off?

Thats what used to happen before gubmint decided its the one to solve the problems it creates.

[NEO72]

* Nominal house prices bounced from £148k to £162k

That works out around £20 billion per % - there's value for you.

And now we have over target inflation and low GDP growth. Sticking their fingers in the cracks in the dyke has been reasonably successful up until now. Over target inflation and no wage rises means less spending in shops.

And brings increasingly more homeowners closer to repossession.

[Panda]

Over target inflation and no wage rises means less spending in shops.

Agree, but we have a debt backed money system, for goverment to keep up spending where we left off, they must borrow, who wants to lend to them, so they print, and will keep printing to fund the annual deficit but not increasing the debt due to the new money....................We have less and less to spend until Corporates completely take the p!ss. All SME's die, we are issued with tokens to spend at the local corporate, no where else to shop...............

Or do we get a cost wage inflation upward spiral, will it make stuff cheaper, urrr? It will clear the debt serviceability costs, but will they the Corp's beneifit from an increase in wage costs, nope, less money in the pot for their divy's, less money in the pot for the bonus.............

This ain't going anywhere, we are as rich in cash terms as we will ever be, its print, funnel it to where it is intended to be, while the "us" pay more tax, more costs... Then war....many die, will debts get wiped clean?

[LJAR]

* GDP rose from - 6% p.a. to something rather less catastrophic

* Equity prices doubled

* Nominal house prices bounced from £148k to £162k

* Osborne was able to tighten fiscally with tax rises

* Banks didn't close their doors, there weren't further runs and savers got 100% return of capital

Could you clarify 'didn't work' please?

didn't work if by "work" you mean fix the economy.

because we probably need to have a 10%+ contraction to liquidate all the malinvestments built up in the boom.

equity prices are at a hisorically high valuation already - pushing them higher is not a good thing

high house prices are bad right?

he has tightened fiscally - we shall see what happens

negative interest rates and high inflation is pretty bad for savers not exactly 100% return of capital when it depreciates fast.

The banks need to fail, until they do we can look forward to stagflation.

We then need to save up and pay off the combined 300% of GDP we have built up in debt. Until that happens we will get no real growth, because there is no real savings and investment going on.

Edited September 16, 2011 by LJAR

[MongerOfDoom]

* GDP rose from - 6% p.a. to something rather less catastrophic

Still negative though, and it might have happened anyway. It's not like you can measure it all that reliably with inflation running rampant.

* Equity prices doubled

No they haven't. FTSE is about 5000, and it was not anywhere near 2500 just before QE. In any case, the unit of the index is the nominal pound sterling, and that has been devalued, so it would less of a success than it might seem at first even if true.

* Nominal house prices bounced from £148k to £162k

That does not sound right either, but I am willing to accept there is an index or an area that shows that sort of a rise. I think most people are not seeing those sorts of nominal rises.

* Osborne was able to tighten fiscally with tax rises

Errm? Peoples' incomes have been devalued, so they can pay more tax? It's not even as if he is not running a Greek-style deficit either. I really don't want to see anything that in your opinion would resemble a loose monetary policy. BTW, this site is called HPC, so few would consider tightening by means of tax rises in any way preferable to doing it by setting a non-negative real interest rate. Anybody else want more "successful" policy like that?

* Banks didn't close their doors, there weren't further runs and savers got 100% return of capital

Am I missing sarcasm? Future generations will need to pay off the shrewd investment in RBS. Perhaps the people whose pensions invested in LLoyds shares might explain what a success that was to you much better than I ever could. Besides, just why was it preferable to nationalise NR and BB when we could have just given the depositors their £35k odd, and be done with it. It's not like they were going to bring on a systemic collapse. Either way, this list of successes predates QE.

Could you clarify 'didn't work' please?

Well, CPI is not yet quite at Zimbabwian levels, and there is still food to eat. Perhaps we need more QE to fix that?

[OnlyMe]

That works out around £20 billion per % - there's value for you.

And brings increasingly more homeowners closer to repossession.

Not just the overindebted gamblers - right across the board - there wil be a lot of pensoners who will have to throw in the towel or switch off the heat with 10-20% inflation in the basics.

[caparn]

QE is a good method to pass the wealth of savers into hands of the borrowers. It's also a good way to perform contraction of an economy. With wage rises less than inflation the economy and personal income is being contracted without anyone making a fuss about wage cuts. And of course it allowes the governement to default on their debt without not paying it back. Just through devaluation of the currency.

Edited September 16, 2011 by caparn

[Krackersdave]

£2 a litre coming then eh?

[Timm]

They won't QE whilst RPI is at 5% and the pound is hugely devalued already.

The only way to hedge against QE is to buy high dividend shares and also commodity shares (hard, soft and gold)

The first sniff of CPI dropping towards target and they will probably jump on the opportunity to QE but the idea of doing it now is ridiculous.

When does the 20% VAT anniversary come around?