Qe Will Never Be Unwound

[Guest TheBlueCat]

I've made very few predictions on this site but I've consistently said that QE will never be unwound. The BoE will just silently write off the debt at maturity. Seems Carney is now more or less admitting it:

http://blogs.telegraph.co.uk/finance/ambroseevans-pritchard/100026798/the-bank-of-england-will-never-unwind-qe-nor-should-it/

I don't agree with AEP that this is a victimless crime, that's my savings in effect he's talking about.

[Errol]

Paper money collapse can't be far off now. Buy gold, silver, land, etc. Steer well clear of paper money.

[Driver]

Paper money collapse can't be far off now. Buy gold, silver, land, etc. Steer well clear of paper money.

Hmm, don't think so.

[gf3]

I've made very few predictions on this site but I've consistently said that QE will never be unwound. The BoE will just silently write off the debt at maturity. Seems Carney is now more or less admitting it:

http://blogs.telegraph.co.uk/finance/ambroseevans-pritchard/100026798/the-bank-of-england-will-never-unwind-qe-nor-should-it/

I don't agree with AEP that this is a victimless crime, that's my savings in effect he's talking about.

I had written in blue witting at the bottom of my page interest rates will not go over 2½% in my life time. They are now saying interest rate staying between 2% and 3% in the future. So I think my prediction 3 years ago was pretty good.

[spyguy]

I had written in blue witting at the bottom of my page interest rates will not go over 2½% in my life time. They are now saying interest rate staying between 2% and 3% in the future. So I think my prediction 3 years ago was pretty good.

Don't consufe BoE base rates with what banks cost of capital.

The UK has a lot of debt and very savers. It'll have to compete for global savings.Meaning it'll have to shore up its exchange rate.

Nothing stays still.

[interestrateripoff]

The magic printing press will never be turned off.

The Chinese had huge success with it from 1200-1700.

[erat_forte]

Can there really be such a thing as a free lunch in economics? We will never be able to prove it either way, but on balance it looks like the answer is yes.

There's a real incentive to trust that article's analysis!

[Nationalist]

Y'all need to stop thinking of money as a commodity. Money is a rationing system invented by the government. The government controls both how much money is in the system, and how much money things cost. All money that exists has been created from nothing by the government.

Money is another of those games that the only way to win is not to play.

[zugzwang]

Paper money collapse can't be far off now. Buy gold, silver, land, etc. Steer well clear of paper money.

Agreed, in light of the cataract of lies we've been told about QE and the double bubble anyone who isn't holding physical right now is a fool and a dupe. A default precedent has been established but QE won't accomplish what the thief apologist Evans-Pritchard wants as it's serving only to re-leverage the economy not deleverage it. Wholesale monetisation is the only way out now. The Weimar Wheelbarrow Club is about to get very busy indeed.

[zugzwang]

dupe.

Edited March 12, 2014 by zugzwang

[TheCountOfNowhere]

im starting to think about currency collapse....what else is left?

there eeems to be nothibg anyone can do or say or minor event that has stopped their printing...liquidity schemes...low intetest rates.

they have essential got away scot free with the biggest fraud in history. banker robbery, as it were.

[interestrateripoff]

Y'all need to stop thinking of money as a commodity. Money is a rationing system invented by the government. The government controls both how much money is in the system, and how much money things cost. All money that exists has been created from nothing by the government.

Money is another of those games that the only way to win is not to play.

The Chinese thought that and failed, the people preferred using counterfeit coin currency as they believed it had more value.

[R K]

I've made very few predictions on this site but I've consistently said that QE will never be unwound. The BoE will just silently write off the debt at maturity. Seems Carney is now more or less admitting it:

http://blogs.telegra...-nor-should-it/

I don't agree with AEP that this is a victimless crime, that's my savings in effect he's talking about.

Not sure what you mean by 'write off the debt'. The BoE bought govt. bonds for cash. The sellers had an asset (bond) for which they now have cash. So they've effectively swapped one asset for another (bond for cash).

BoE now has bonds. Nearly all bonds mature. So all the BoE would be doing is holding them until they mature. At which point they're effectively like 'cash' or as AEP suggests they might be swapped for a zero-coupon perpetual or something similar. All that changes really is the duration and the coupon. It means the govt. no longer have to pay interest on that amount of QE'd bonds of course, but then the BoE recycle that back to the Treasury anyway so not sure how that's very different.

[Sancho Panza]

http://www.theguardian.com/business/2014/mar/02/interest-rates-five-years-rock-bottom

'But it is a peculiarity of the financial crisis that the lower interest rates have fallen, the more we have saved. In the dying days of the boom in early 2008, UK households were saving just 0.2% of their total income every month. But as the banks toppled and worries about job losses mounted, the savings ratio leapt to 8% within a year. It's a sign of renewed confidence that the figure is now falling again.Throughout the crisis, British savers have sought safety first, preferring instant access accounts even at the cost of near-invisible rates of interest. The Bank of England reckons that rates have been so poor that savers have decided to keep their money in easy reach rather than locked away into accounts that pay little extra. Over the past two years alone, the amount kept in instant-access accounts has risen from £435bn to £525bn, while the amount in savings bonds has dropped from £281bn to £238bn. Money has also poured into cash Isas – up from £162bn five years ago to £227bn now.

In the early days of the crisis, banks desperate for cash kept interest rates relatively high despite base rate falling to 0.5%. The real pain for savers came when the government introduced Funding for Lending in July 2012, which gave banks access to cash and made them much less keen to offer competitive rates, said Anna Bowes of savingschampion.co.uk. Since then, rates on "best buy" instant access savings accounts have more than halved – and there's little sign of any respite for savers soon. Patrick Collinson'

[terryturbojr]

The interesting bit will be what they do with the principal. Whether they even take it from the government. If they take it then pass it back like they did interest or if they take it then extinguish it.

[Guest TheBlueCat]

Not sure what you mean by 'write off the debt'.

One way or another they won't ever ask the government to repay the principal. As you say, that could be by converting them to perpetual zeroes rather than by explicitly cancelling them, but the effect is the same.

[Quicken]

So monetizing government debt is a victimless crime now, eh? If it's such a good plan, why not finance all government spending that way and cancel all taxes?

[wonderpup]

Not sure what you mean by 'write off the debt'. The BoE bought govt. bonds for cash. The sellers had an asset (bond) for which they now have cash. So they've effectively swapped one asset for another (bond for cash).

BoE now has bonds. Nearly all bonds mature. So all the BoE would be doing is holding them until they mature. At which point they're effectively like 'cash' or as AEP suggests they might be swapped for a zero-coupon perpetual or something similar. All that changes really is the duration and the coupon. It means the govt. no longer have to pay interest on that amount of QE'd bonds of course, but then the BoE recycle that back to the Treasury anyway so not sure how that's very different.

I'n not sure I get this;

Where did the BoE get the money to buy the Bonds?- I guess it just created it out of thin air. So it uses this made up money to buy bonds from the Government which now has cash- cash that was created from nothing.

The BoE now has the bonds which eventually mature, but that's not a problem because they-the BoE are not going to ask for payment on maturity,they are just going to sit on the matured bonds for ever or something similar to that.

So the whole thing is kind of ritual dance in which one part of the Government, the BoE pretends to buy bonds from another part, using 'cash' that it has simply pretended into existence via a government sanctioned mandate.

So where does 'austerity' come in? Since the BoE can just create as much cash as the government needs, and the Government can issue as many bonds as it needs- why does anyone need to suffer?

Is it perhaps that like many rituals a blood sacrifice is needed- to create at least the illusion that something 'real' has taken place? So the role of 'austerity' is to provide that evidence of pain and suffering?

Are we allowed then to question who it was that was chosen to be that sacrifice- and to notice that the people feeling the pain are not the people who created the need for the pain?

Those who claim that to attack the bankers is an empty ritual of blame fail to grasp the reality that the entire 'austerity' meme is itself an empty ritual- with one difference- the pain in this case is real.

[iamnumerate]

So where does 'austerity' come in? Since the BoE can just create as much cash as the government needs, and the Government can issue as many bonds as it needs- why does anyone need to suffer?

Because if we did it too much then the value of the pound would collapse as happened in Zimbabwe, Venezuela etc.

For example it is possible in theory to steal a very small amount of money from every bank account in the UK and get away with it - because the amount is too small to notice (making you very rich).

However you could steal more than a fraction of a penny (so try to get as rich as Bill Gates doing it).

[wonderpup]

Because if we did it too much then the value of the pound would collapse as happened in Zimbabwe, Venezuela etc.

For example it is possible in theory to steal a very small amount of money from every bank account in the UK and get away with it - because the amount is too small to notice (making you very rich).

However you could steal more than a fraction of a penny (so try to get as rich as Bill Gates doing it).

That was my suspicion- that 'austerity' was the required chicken blood that lent substance to the magic.

So the way it works is this- to save the bankers money was conjured into existence by the Government via the BoE- but to lend credibility to the money other people (who are not bankers) must bleed- because all serious magic requires blood sacrifice.

Meanwhile city bonus's are up 29%.

Isn't free market capitalism great?

[iamnumerate]

That was my suspicion- that 'austerity' was the required chicken blood that lent substance to the magic.

So the way it works is this- to save the bankers money was conjured into existence by the Government via the BoE- but to lend credibility to the money other people (who are not bankers) must bleed- because all serious magic requires blood sacrifice.

Meanwhile city bonus's are up 29%.

Isn't free market capitalism great?

Actually I think without QE the autesrity would have been worse.

[wonderpup]

Actually I think without QE the autesrity would have been worse.

Why did we need the austerity in the first place? Because a collection of spivs in the City turned our economy into a casino, bet the house and lost the lot- leaving us a bankrupt nation.

I'm not against blood sacrifice by the way- if that's what it takes to sell the idea that we are not just printing money without cost- I would just prefer the people doing the bleeding to be the people who are responsible for the mess in the first place.

But it's all nonsense anyway- everyone knows that QE is not magic- just a shabby slight of hand. No amount of 'austerity' will make good the billions that have been created from nothing.

Edited March 13, 2014 by wonderpup

[zugzwang]

Why did we need the austerity in the first place? Because a collection of spivs in the City turned our economy into a casino, bet the house and lost the lot- leaving us a bankrupt nation.

I'm not against blood sacrifice by the way- if that's what it takes to sell the idea that we are not just printing money without cost- I would just prefer the people doing the bleeding to be the people who are responsible for the mess in the first place.

But it's all nonsense anyway- everyone knows that QE is not magic- just a shabby slight of hand. No amount of 'austerity' will make good the billions that have been created from nothing.

Austerity!! It's hard to imagine how Osborne (or anyone else) could have borrowed more?

How he chose to spend it, however... there's the rub.

[iamnumerate]

Why did we need the austerity in the first place? Because a collection of spivs in the City turned our economy into a casino, bet the house and lost the lot- leaving us a bankrupt nation.

Are you talking about Gordon Brown?

[wonderpup]

Are you talking about Gordon Brown?

I'm talking about the global banking cartel that crashed the worlds economy and continue to pay themselves billions based on their 'talents'.