Friday, October 29, 2010

To print, or not to print: that is the question

Mervyn King must turn off the printing press

All in all, policy-makers are becoming worryingly dependent on further QE for salvation. The argument goes that with mountainous public debt excluding the possibility of further stimulus packages or tax cuts to boost the economy, why shouldn’t we just print more money instead?

Posted by devo @ 11:06 AM (2025 views)
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30 thoughts on “To print, or not to print: that is the question

  • sibley's b'stard child says:

    Well, that’s a refreshing change; Posen and chums, please take note. Particularly liked this quote:

    “No one will believe the Bank if it cites a deflationary bogeyman that doesn’t yet exist as justification for turning on the printing presses again”.

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  • “No one will believe the Bank if it cites a deflationary bogeyman that doesn’t yet exist as justification for turning on the printing presses again”.

    But the BOE will keep printing, and deep down we all know why, don’t we?

    Go on, admit it, the financial system is collapsing. The temporary life support of the last three years hasn’t worked.

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  • How quickly will this play out i wonder?

    Years, months… weeks….

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  • 3. tom101 said… How quickly will this play out i wonder?

    Until the first Too Big To Fail, fails. But don’t underestimate the power elite’s ability to keep the plates spinning.
    Fascinating to watch the collapse unfold though. In many ways I feel privileged to be living in such interesting times.

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  • Not sure i feel the same. Interesting could become turbulent real quick!

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  • @ devo – for a very long time I read this site daily before eventually picking up a password and deciding to participate – now I know much of what S2R1 wrote was deemed by many to be absolute garbage however one of his main and regularly trotted out predictions was the total collapse of the finance system as we know it. His views at the time were seen as extreme (even bordering on lunacy) but that isnt the case anymore even to the extent that his “staring into the abyss” expression has appeared in the mainstream press recently. He also advocated buying Au long before the current fad took off.

    As you say interesting times ahead.

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  • now I know much of what S2R1 wrote was deemed by many to be absolute garbage

    I always thought him an interesting poster; much of what he wrote reflected what I was seeing – I work in a retail related business – so can see how people are behaving with regards to spending. Though perhaps some of what he wrote was a little dark, but I too take a similar view.

    As you say interesting times ahead.

    Actually I’m teriffied, not for myself, but for those who I know are fully extended – none of whom I would want to see lose their homes.

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  • jack: I was always a voluble supporter of str1. I liked him. However I feel obliged to point out that he was as mad as a box of badgers (albeit in a loveable way). He made many, many strident and crazy predictions that didn’t pan out. I also have to point out that the financial system hasn’t yet collapsed and that AU has not gone up more than many other commodities. The world would be a poorer place without people like str1, but let’s not get carried away

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  • hpw – I wouldnt personally stretch to being “terrified” but I am concerned that a large number of people face severe financial difficulties in the forthcoming months/years – a good indicator is the rise of the pay day loan companies and the fact that many would be hit hard by a modest rise in interest rates (this when rates are being held down artificially at a 300 year low).

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  • “How quickly will this play out i wonder?

    Years, months… weeks….”

    My bet is never. Anyone else care to take a stab at putting a date on it?

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  • 26th March 2012 at 3.15pm

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  • flash – agreed, however I’m not getting carried away – I’ve been selective in picking out the bits he got right (or is perhaps getting closer to being right). The point I was really trying to make is that some of his mad cap predictions eg the potential collapse of the current finance system is not perceived (IMO) to be as wacky now as it was back in 2006-7.

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  • i think the pending collapse will be rapid if it is going to happen

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  • jack: I know what you are saying but if you asked 10,000 members of the public about the chances of a total economic/financial collapse, you could probably count the ‘doomsters’ on one hand.

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  • “How quickly will this play out i wonder? Years, months… weeks….” My bet is never. Anyone else care to take a stab at putting a date on it?”

    I agree with never but for a different reason.

    Maybe this sounds naive but I believe that at the end of the day, financial common sense will prevail albeit causing hardship for many people.

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  • general congreve says:

    @15 – That is no doubt very true Flashman. However, it you’d also asked 10,000 supposedly well-informed bankers and politicians (as opposed to the x-factor loving public) about the chances of a house price collapse and credit crisis just before it occurred, I imagine you could also have counted the number who predicted such an event on one hand.

    I mean, look at the EU funding debacle. Cameron levying for a reduction of the yearly contributions increase from 6% to 2.9%, yet every member state that contributes is BORROWING the money to fund their contributions. Debt is the problem. It’s what finished off the Roman Empire, the British Empire, the Soviet Union and it’ll be what finishes the EU, US hegemony and the current status quo that goes with it. IMO.

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  • notyethomeless says:

    After having read “When Money Dies” by Adam Fergusson on holiday, I can say I’m in the marginally terrified camp. This book charts the downfall of the German economy and the Mark in the period after World War 1, and there are many parallels with today.

    The shocking bit is that people didn’t really notice inflation running at about 5% to 8% a year from 1914 (as Germany printed treasury bills to pay for a short, sharp victorious war that didn’t work out that way), and were still oblivious in 1920 when the value of the mark had fallen by half. It took months for it to fall by another half, then days to fall to successive fractions of that value.

    If a currency collapse comes, it will take most of us by surprise, and will happen faster than we will be able to cope with. In this day and age, it will trip collapses in many countries, so there won’t be an obvious way of escaping either (German neighbours in Austria and Hungary were also toppled at this time, although their collapses happened faster and they were bailed out by rich, stable neighbours, like the UK. By the time Germany collapsed, there was no-one available to bail them out)…

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  • general congreve says:

    @18 – Well said that man, well said.

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  • tyrellcorporation says:

    @ Flash

    ‘jack: I know what you are saying but if you asked 10,000 members of the public about the chances of a total economic/financial collapse, you could probably count the ‘doomsters’ on one hand.’

    Ask the same 10,000 Brits who is the President of France and I’m sure those answering correctly would only be just into the 100’s. My point is that the views of the general public are no guage for the probabilities of unforseen events actually happening. Northern Rock springs to mind. One day life was normal, the next, abject panic. It’s easy to see how in this age of digital communication, a global panic could occur very quickly and with no warning.

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  • @18: They were in that position because they had just lost the worst war in history (WW1) and because the victors were constantly tapping them for reparations. Our situation is not remotely as bad as their post war destruction. Despite this, they recovered in a very short space of time and were strong enough to take on the might of the UK, Russia and the America for 6 long years. At the end of the Second World War, they were again on their knees and again paying reparations. Despite this they quickly recovered to be the richest nation in Europe.

    The parallels you draw are not particularly valid because we cannot possibly be compared to a Germany ripped to shreds by losing the two biggest wars in history. We also have to consider how quickly they recovered each time. If they recovered from such catastrophic blows then it isn’t credible to think that we can’t quickly recover from much lesser blows.

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  • tyrell: I wasn’t saying that mass opinion (or lack of it) is a good gauge. I was responding to Jacks point about there recently being much more awareness of impending doom. I was saying that there isn’t really any significant amount of awareness (hence my handful in a 1000 comment). I’d be the last person to put any store in the public perception of anything

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  • The idea of more QE has been hinted for a while now, but most intelligent commentary (such as this piece) has shown that it won’t be welcomed by the fourth estate unless there is a pressing justification.

    On balance, I think it’s unlikely to happen in the UK anytime soon, if at all.

    The Americans will, and we will watch to see what happens. The Yanks might well spark a crisis of confidence in their currency, and send everyone running in the opposite direction; – this is, at the end of the day, a very dangerous strategy.

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  • On balance, I think it’s unlikely to happen in the UK anytime soon, if at all.

    I think it will probably depend upon exactly what house prices are doing.

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  • Is it possible to learn by exactly how much, the pound in my pocket has devalued since the beginning of QE?

    So that I can work out how much to fiddle my tax return by?

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  • general congreve says:

    @21 – I agree entirely that it will be possible to rebuild from any looming disaster pretty quickly, just as Germany did. After all, the sun will still be shining, they’ll still be oil in the ground and hands to work in the factories. In the case of Germany and now, the problem is debt-based. Germany post WW1 debt was crippling, hence the problems they had and the realignment to a new economy based around stable money introduced by Hitler. After WW2 the had debt, but nothing like post WW1 debt, so the situation was recoverable.

    What I’m saying is that this whole crisis could be resolved very quickly, however, in order to do so there will be winners and losers. The impending losers (banks, politicians etc.) are desperate to stop themselves going down, so will drag the rest of us through the mire with them, until something gives. At that point they will lose and those that positioned themselves correctly will come out on top. As for the average man, he’ll probably find himself more or less where he started when this settles down.

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  • By the time Germany collapsed, there was no-one available to bail them

    Actually, the US isn’t that different from Germany in the 20’s…..both countries are massively in debt to other countries. In that respect, they are similar. And the US may well choose the same way out.

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  • @26 I hope you are not suggesting a 3rd World War, a likely even more expensive waste of resources than the Gulf War!

    If you are, the US doesn’t have rich enough dubious US and European bankers and industrialists to assist them (e.g the Bush Family and IBM), like Nazi Germany had, plus most of the world is in the mire, so where would the money come from to pay for a 3rd World War and the high cost to repair countries, if anyone even survives it?

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  • general congreve says:

    @27 – Interestingly the US owes the majority of its debt to it’s own people. It’s the pension funds and the savers who are going to take the biggest hit from this.

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  • general congreve says:

    @27 – I meant @26. Drunk.

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