Thursday, February 11, 2010

Printy printy

Bank hint on quantitative easing drives down pound

Sterling fell sharply against the dollar and the euro as the Bank of England hinted that it could pump billions more into the economy via quantitative easing. The Bank’s Monetary Policy Committee (MPC) voted to halt quantitative easing this month, but Mervyn King, the Bank Governor, said that it was “too soon” to say that no more asset purchases would be needed.

Posted by devo @ 06:50 AM (1403 views)
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12 thoughts on “Printy printy

  • I really don’t understand why mervyn King does this. Surely price-led inflation instead of demand-led inflation is a nightmare for King – it sends the UK further towards sovereign bankruptcy as investors take flight, the currency moves further downwards and inflation even further.

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  • We are in a bad enough situation as it is – house prices still way too high, an eye watering debt pile, the two electable parties claiming no big cuts this year, good possibility of a hung parliament, rating agencies threatening a downgrade, non-viable base rate that cannot be moved up without dooming us all. Then out pops good old Merv each and every month with another downbeat message.

    The downside risks of holding Sterling right now far outweigh the upside gains. The fact our currency hasn’t made any gains against the Euro during this Greece episode says it all.

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  • I really don’t understand why mervyn King does this. Surely price-led inflation instead of demand-led inflation is a nightmare for King – it sends the UK further towards sovereign bankruptcy as investors take flight, the currency moves further downwards and inflation even further.

    The problem with QE is that once started, in a failing economy, it’s almost impossible to stop. In the longer term it will contribute to the rising cost of imports and, of course, raw materials.
    I don’t believe that a week pound will help exports, as it only increases the cost of the raw materials – unless of course, the materials are sourced from inside the UK.

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  • Printy printy….. Don’t believe a word of what some academic posters say about QE. Humbug! Printy printy, oh the camouflage.

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  • Why do they want to go down that route? Educate yourselves about Liberty.

    “Deflation and Liberty” This monograph addresses a critically important issue: the prevailing view that deflation is a catastrophe that must be stopped. Read by Dr. Floy – The monograph also explains why the establishment are harmed by deflation.

    Follow this link and choose “Deflation is Liberty”:

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  • mark wadsworth says:

    For the zillionth time, QE is not “pumping money into the economy – it is merely replacing one kind of government borrowing (gilts) with another kind (electronic balances at BoE).

    Admittedly, the amount of QE over the last year has been roughly equal to the amount of government borrowing, so once you net it all off, the entire government deficit of the last year (£178 billion or thereabouts) has been financed by the BoE taking deposits from commercial banks (i.e. taking money out of the economy) which the government then puts back in, so the net effect either way is minimal.

    The clever bit was disguising “reckless government borrowing” as “pumping money into the economy”, heck only knows how they pulled that off.

    It is a separate debate which types of government expenditure help the economy (road, rail and power infrastructure) and which is pure waste (windmills and quangoes).

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  • FMP
    – Gold Standard -> Deflation -> Liberty
    … almost, but not quite. I prefer:
    Free Banking* -> Market Implies in/de-flation -> Freedom
    * Note that in Free Banking some issuers could well choose a Gold Standard (or any other base they see fit), if your causal chain is right then it would happen that way auto-magically 🙂

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  • Surely King is managing expectations…..
    Say things are going to be bad and if they are bad, you are seen as being right. If things get better then you are merely seen as being a pessamist.

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  • 666, I never called for a gold standard. I want to end government monopoly on money creation, and the end of the central bank propping up fractional reserve banking. Then, the free market would drive us to the most sound and convenient money. Gold would certainly form a part of that free market solution, but I don’t want a government monopoly gold standard. Simply end legal tender laws, enforce against fraud, and the rest will sort itself out.

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  • talking of (well seeing) Tom101… has anyone seen uncle tom lately??

    MW i feel your frustration… although isnt it replacing something that they (the banks) cant do much with … with something they can. So yes from your point of view – the governments you are right, but from the banks point of view… because they can lend that money (over and over), its not the same.

    The issue at the moment is how and when they distribute that money, – specifically what they spend it on and will it be enough to combat the “credit deflation” [assuming thats what they think there is, or else why bother?] now or in the future. In other words will the see saw be balanced or tip over into inflation or even hyperinflation.

    As usual paddy helps!! : http://www.youtube.com/watch?v=ohKQP_wSO9k

    or http://www.youtube.com/user/marketplacevideos#p/u/4/cxfMxpB9-Ds

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  • Wadsworth, “replacing one kind… with another kind.. ” — so they issue fewer gilts/bonds, does this affect yield? Is there a “gilts issued” chart somewhere, as opposed to “gov borrowing” which presumably would include QE if they’re trying to disguise it, and the gilts issued would plummet?

    “BoE taking deposits from commercial banks” — commercial banks have spare cash during credit crunch?

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  • Techie, “has anyone seen uncle tom lately?? ” — he popped in briefly not too long ago, but seems to have disappeared again.

    Ah, paddy helped, thanks.

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