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Bank of England just announced it will finance the gvt directly.


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https://www.telegraph.co.uk/business/2020/04/09/bank-england-temporarily-finance-government-spending/

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.."As a temporary measure, this will provide a short-term source of additional liquidity to the government if needed to smooth its cashflows and support the orderly functioning of markets, through the period of disruption from Covid-19," the BoE said in a joint statement with the finance ministry.

The Government and BoE said any borrowing from the Ways and Means facility – effectively the government's overdraft with the BoE – would be repaid by the end of the year....hmmm

and yet...

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At the weekend Andrew Bailey, the Governor of the Bank of England, said that the Bank would not engage in direct monetary funding (DMF) of government spending. He was adamant that this was the route to monetary hell. 

https://www.taxresearch.org.uk/Blog/2020/04/09/on-sunday-the-bank-of-england/

Edited by Saving For a Space Ship
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"Never believe anything until it's been officially denied" - Yes Minister

This is interesting - and not entirely unexpected.

This is why I was sceptical of those who said they will take haircuts of people's pensions and money in the bank.  Why do that, and cause uproar, when Mr Bailey can click his mouse a couple of times and create £1 billion.

If things get bad, they'll print money to try and deal with today's problem, and deal with the inflation problem tomorrow.

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16 minutes ago, scottbeard said:

"Never believe anything until it's been officially denied" - Yes Minister

This is interesting - and not entirely unexpected.

This is why I was sceptical of those who said they will take haircuts of people's pensions and money in the bank.  Why do that, and cause uproar, when Mr Bailey can click his mouse a couple of times and create £1 billion.

If things get bad, they'll print money to try and deal with today's problem, and deal with the inflation problem tomorrow.

Exactly they are not going to mess with pensions, that's why the conservatives are in power...

Secondly, taking peoples savings would cause a huge uproar, you can't just take peoples money which they've worked hard for...

It's more likely we will see hyperinflation over the next two years, pensioners will be safe as state pension is tied to inflation.

Young people with mortgages would go crazy if they allowed deflation, many will loose their mortgages as they are out of work, that would only compound the problem.

Soon the goverment will not be able to or want to continue the 80% wage scheme along with paying the self-employed.

Hyperinflation is actually the only way out of this and the amount of money counties are throwing around, is will be almost impossible to stop.

After this, is expect house prices to dip temporarily for 3-12 months, then as the economy picks up expect them to be even crazier than before with all that extra cash flowing about.

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55 minutes ago, scottbeard said:

"Never believe anything until it's been officially denied" - Yes Minister

This is interesting - and not entirely unexpected.

This is why I was sceptical of those who said they will take haircuts of people's pensions and money in the bank.  Why do that, and cause uproar, when Mr Bailey can click his mouse a couple of times and create £1 billion.

If things get bad, they'll print money to try and deal with today's problem, and deal with the inflation problem tomorrow.

QE is a tax on anyone that holds money.

There is no difference between QE and the savings tax ultimately.

I prefer QE to a savings tax because it is potentially easier to avoid.

I have no doubt that there will be endless moaning on this site about QE, but the bottom line is that you're an idiot if you don't take steps to avoid it.

 

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44 minutes ago, Speed1987 said:

Exactly they are not going to mess with pensions, that's why the conservatives are in power...

Secondly, taking peoples savings would cause a huge uproar, you can't just take peoples money which they've worked hard for...

It's more likely we will see hyperinflation over the next two years, pensioners will be safe as state pension is tied to inflation.

Young people with mortgages would go crazy if they allowed deflation, many will loose their mortgages as they are out of work, that would only compound the problem.

Soon the goverment will not be able to or want to continue the 80% wage scheme along with paying the self-employed.

Hyperinflation is actually the only way out of this and the amount of money counties are throwing around, is will be almost impossible to stop.

After this, is expect house prices to dip temporarily for 3-12 months, then as the economy picks up expect them to be even crazier than before with all that extra cash flowing about.

Are countries "throwing around" more money than in the GFC, where I think 300 billion was printed ?

How come that didn't lead to hyperinflation ?

The furlough scheme is estimated at 30 billion in comparison.

 

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53 minutes ago, Speed1987 said:

Exactly they are not going to mess with pensions, that's why the conservatives are in power...

Secondly, taking peoples savings would cause a huge uproar, you can't just take peoples money which they've worked hard for...

It's more likely we will see hyperinflation over the next two years, pensioners will be safe as state pension is tied to inflation.

Young people with mortgages would go crazy if they allowed deflation, many will loose their mortgages as they are out of work, that would only compound the problem.

Soon the goverment will not be able to or want to continue the 80% wage scheme along with paying the self-employed.

Hyperinflation is actually the only way out of this and the amount of money counties are throwing around, is will be almost impossible to stop.

After this, is expect house prices to dip temporarily for 3-12 months, then as the economy picks up expect them to be even crazier than before with all that extra cash flowing about.

Exactly. Thanks that I got 5 year fix on my mortgages.

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23 minutes ago, Gigantic Purple Slug said:

Are countries "throwing around" more money than in the GFC, where I think 300 billion was printed ?

How come that didn't lead to hyperinflation ?

The furlough scheme is estimated at 30 billion in comparison.

 

Don't presume what happened in the past will happen tomorrow. Money works until it breaks, Venezuela, Zimbabwe.

And remember that QE effectively devalue people's work. The big reset will happen, one way or the other, the losers have been the young people not gaining from the "wealth effect" but increased rent and inability to purchase assets since the "goods inflation" never showed up, whereas the "asset inflation" was a real thing but put under the rug.

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6 minutes ago, Freki said:

Don't presume what happened in the past will happen tomorrow. Money works until it breaks, Venezuela, Zimbabwe.

And remember that QE effectively devalue people's work. The big reset will happen, one way or the other, the losers have been the young people not gaining from the "wealth effect" but increased rent and inability to purchase assets since the "goods inflation" never showed up, whereas the "asset inflation" was a real thing but put under the rug.

Well you can turn that around and say don't assume what happened in weimar germany will happen tomorrow either.

People laugh at the phrase "it's different this time".

But it is. It's always different. The circumstances are different. The outcome will be different.

If your stratgey relies on money "breaking" in the future, that's probably at least as risky as relying on it not "breaking". The best place is to be somewhere inbetween.

Edited by Gigantic Purple Slug
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1 hour ago, Speed1987 said:

Exactly they are not going to mess with pensions, that's why the conservatives are in power...

Secondly, taking peoples savings would cause a huge uproar, you can't just take peoples money which they've worked hard for...

It's more likely we will see hyperinflation over the next two years, pensioners will be safe as state pension is tied to inflation.

Young people with mortgages would go crazy if they allowed deflation, many will loose their mortgages as they are out of work, that would only compound the problem.

Soon the goverment will not be able to or want to continue the 80% wage scheme along with paying the self-employed.

Hyperinflation is actually the only way out of this and the amount of money counties are throwing around, is will be almost impossible to stop.

After this, is expect house prices to dip temporarily for 3-12 months, then as the economy picks up expect them to be even crazier than before with all that extra cash flowing about.

Is all the extra money not going to those who have stopped work? I.e. it will not be flowing around or extra, it's replacing consumption and production that has been lost whilst we are all on lockdown and doing neither.

If the QE causes WAGE inflation and interest rates were to go up in a year or so after the crisis has been declared not as catastrophic as first thought in health/mortality terms, that may be the reset of HPs back to normal levels in relation to wages that HPC have been expecting since pre-2004.

In terms of avoiding the money grab, what is the suggested strategy? I assume partly shiny metals but what else? FTSE100? NIKEII?

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3 minutes ago, Gigantic Purple Slug said:

Well you can turn that around and say don't assume what happened in weimar germany will happen tomorrow either.

People laugh at the phrase "it's different this time".

But it is. It's always different. The circumstances are different. The outcome will be different.

Great, so apply that healthy dose of scepticism to your "How come that didn't lead to hyperinflation ?" 

What is being done is dangerous, very dangerous. We keep on kicking the can down the road and compounding the effect of economic crisis. 

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21 minutes ago, Freki said:

Great, so apply that healthy dose of scepticism to your "How come that didn't lead to hyperinflation ?" 

What is being done is dangerous, very dangerous. We keep on kicking the can down the road and compounding the effect of economic crisis. 

I agree and I see no end in sight currently.

Wuhan has opened up again, how do the Chinese propose they can make a virus disappear.... none of this makes sense. They are claiming they've gotten a grip of this, but any understanding of viruses would lead you to be skeptical of their claims...

 

 

 

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34 minutes ago, ebull said:

Is all the extra money not going to those who have stopped work? I.e. it will not be flowing around or extra, it's replacing consumption and production that has been lost whilst we are all on lockdown and doing neither.

If the QE causes WAGE inflation and interest rates were to go up in a year or so after the crisis has been declared not as catastrophic as first thought in health/mortality terms, that may be the reset of HPs back to normal levels in relation to wages that HPC have been expecting since pre-2004.

In terms of avoiding the money grab, what is the suggested strategy? I assume partly shiny metals but what else? FTSE100? NIKEII?

But it is not replacing production is it as those people have stopped working. More money chasing less goods = ?

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2 minutes ago, doomed said:

But it is not replacing production is it as those people have stopped working. More money chasing less goods = ?

Yep. It's bad enough when people are producing value, but to pay them to sit at home is nutso.

1 hour ago, Gigantic Purple Slug said:

Are countries "throwing around" more money than in the GFC, where I think 300 billion was printed ?

 

Yes. $10 trillion in the States alone.

Quote

How come that didn't lead to hyperinflation ?

Good question. It did. In assets such as housing and the stock market. Don't worry, that bill will come due at some point.

2 hours ago, Speed1987 said:

Secondly, taking peoples savings would cause a huge uproar, you can't just take peoples money which they've worked hard for...

It has worked in the past and it worked in Greece. This time they can remotely change your bank balance.

2 hours ago, Speed1987 said:

It's more likely we will see hyperinflation over the next two years, pensioners will be safe as state pension is tied to inflation.

Can you tie this statement to this one please?

2 hours ago, Speed1987 said:

Soon the goverment will not be able to or want to continue the 80% wage scheme along with paying the self-employed.

 

2 hours ago, Speed1987 said:

Hyperinflation is actually the only way out of this and the amount of money counties are throwing around, is will be almost impossible to stop.

Are you saying that the only outcome of this is hyperinflation, or that the only solution the government had was hyperinflation? An actual solution would have been to slash regulation and taxation.

 

2 hours ago, Speed1987 said:

After this, is expect house prices to dip temporarily for 3-12 months, then as the economy picks up expect them to be even crazier than before with all that extra cash flowing about.

Or a currency collapse. Krugman will have you believe that it can't happen, because it only matters in the context of other Fiat currencies.

Well, how much is a Livre worth in Reichsmarks?

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10 minutes ago, doomed said:

But it is not replacing production is it as those people have stopped working. More money chasing less goods = ?

It's more nuanced than that though.

Those stopped working are only getting 80% so which 20% will they stop spending?

They will pay the rent/mortgage/bills and buy food and all of those things continue to be produced. Only the froth is removed.

Don't know the answers: How much are BofE are printing vs how much production of froth is removed?

Example from this board: recruitment consultant no longer paid 3k to find an employee, HR do it [will be paid the same salary]. That 3k has disappeared forever.

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3 minutes ago, ebull said:

Those stopped working are only getting 80% so which 20% will they stop spending?

This is a best case scenario, right? A lot of people have lost their job altogether, for them it is UC. 

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5 minutes ago, Freki said:

This is a best case scenario, right? A lot of people have lost their job altogether, for them it is UC. 

Yes, even now. In the example I gave, recruitment consultant will only get 80% of his basic. A chunk of the 3k was divvis if self employed or bonus if an employee so no where near 80% of normal.

The example is good though, the 3k [part of] which widgit-froth company didn't pay to recruitment consultant will not be used by that r.c. to buy frothy widgits.

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3 hours ago, scottbeard said:

"Never believe anything until it's been officially denied" - Yes Minister

This is interesting - and not entirely unexpected.

This is why I was sceptical of those who said they will take haircuts of people's pensions and money in the bank.  Why do that, and cause uproar, when Mr Bailey can click his mouse a couple of times and create £1 billion.

If things get bad, they'll print money to try and deal with today's problem, and deal with the inflation problem tomorrow.

? I knew this post was coming because everybody's waiting for the QE announcement everywhere and they think it will solve all their problems but everybody I know [ with money ] is sh1tting themselves anyway. How do you explain that?

Edited by adamLancs
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Can someone explain what this is?  (unfortunately I have to work at least part time!  So can't research it right now)

 

Does it mean the Bank of England prints/QE's money, then gives it directly to the government for day to day spending, instead of the government issuing bonds?

 

If so, is this a dangerous president?

Edited by reddog
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1 minute ago, reddog said:

Can someone explain what this is?  (unfortunately I have to work at least part time!)

 

Does it mean the Bank of England prints/QE's money, then gives it directly to the government for day to day spending, instead of the government issuing bonds?

 

If so, is this a dangerous president?

It's only "dangerous" if you have absolute faith that money will maintain its value.

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2 hours ago, Freki said:

Great, so apply that healthy dose of scepticism to your "How come that didn't lead to hyperinflation ?" 

What is being done is dangerous, very dangerous. We keep on kicking the can down the road and compounding the effect of economic crisis. 

Tech stocks fall = need to save world more debt

Housing prices fall = need to save world more debt

too much debt and banks fall = need to save world more debt

new virus = need more debt

Every problem is now a massive crisis and need more debt on top of debt.

Inflation or Japanisation I thought the end was near already but again we find another debt bonanza scenario.

Would the Weimar republic have avoided issues if they had real time computer systems allowing them more control?  Or managed to funnel all the money into houses?

Maybe it was all demographics at the end of the day and that is where the pig is passing through the python.

Edited by Fromage Frais
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14 minutes ago, Fromage Frais said:

Tech stocks fall = need to save world more debt

Housing prices fall = need to save world more debt

too much debt and banks fall = need to save world more debt

new virus = need more debt

Every problem is now a massive crisis and need more debt on top of debt.

Good points, though I wonder to what extent - if at all ???? - this is about TPTB realising that they are on a debt rollercoaster and the only way forward is to increase the speed of the rollercoaster?

Although, for the first time I think this time (the virus is real, the extent to which the lockdowns are an appropriately proportioinal response is a matter of some debate I think) ... this time the "excuse" is a real externality to their feifdoms.

I wonder how many of the "financial gurus" really just love pressing the "print more money" button and just love this excuse.

Edited by Aidan Ap Word
Clarification
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