Tuesday, August 9, 2011

Think of QE as a laxative

European Central Bank must go nuclear to save Europe

"It needs to launch quantitative easing on a massive scale to head off a eurozone debacle, if necessary purchasing half the entire stock of Italian and Spanish debt, they argue. Stephen King, HSBC's chief economist, said the ECB should drop its ideological opposition to QE and embrace easy money in "exactly the same" way as the US Federal Reserve. (Nouriel agrees, but Frankfurt says NO). Ideas?

Posted by alan @ 03:50 PM (1858 views)
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14 thoughts on “Think of QE as a laxative

  • cynicalsoothsayer says:

    From the comments:

    “It is clear that somebody is going to have to pay for all these bail-outs, and it is going to be the German taxpayer,” said David Bloom, currency chief at HSBC.”

    I was tempted to read that cynically as follows:
    ‘It is clear that somebody is going to have to pay for all these bail-outs, (and it is not going to be HSBC)” said David Bloom, of HSBC

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  • QE is the only way that the markets aren’t going to collapse.

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  • of course there will be a hell of a lot of inflation – but we don’t care about that.

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  • I care about inflation because I am still saving for a house. So QE is not a good idea. I don’t want house prices being inflated faster than I can save.

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  • miken i hear croyden is a good place to buy, libya too

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  • miken, nearly everyone assumes that that house prices will go up along with inflation but that will only be the case if wages do.

    Unfortunately for the bulk of the UK this will not be the case as stagflation will rule for years to come.

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  • enuii, I am seeing new builds priced at stupidly high prices. I’m seeing small (9sqm for master bedroom!) 3 bed semi’s priced at 240K and it seems there are people who have the money because the developer says 60% of this new estate is already sold. Only a couple of years a go the same sort of property would have been sold for 200K. So I see clear inflation in new house prices. But having said that the prices of properties built in 2005 are selling at the same price today.

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  • general congreve says:

    Enuii is of course correct. We are likely to witness bilflation, as inflation in staples like food and fuel continues, but wages stay stagnant, thereby leaving consumers with less money to put towards mortgages and rents.

    On balance QE is not really your enemy if you have money in the bank saved solely for a house. However, if you change your mind and need the money for something else, it won’t go as far. On balance there are better places for your savings, I’ll leave it at that.

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  • miken, why buy new when better pre-owned properties area available in areas whose character is already known. New properties generally need considerable fettling to get just right once you realise what corners were cut during their construction and older properties, even terraced houses often have more space than modern 4-bed houses.

    A little patience and some imagination can go a long way.

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  • 2 speed Europe seems more likely (I think).

    Either way, north can’t co-exist with the south much longer. Portugal is stuck with a system which gradually will drive them into the ground.

    2 trillion Euros in the Fund is just too much.

    …too many countries think they can live beyond their means. And we solve that….Mmnn how?

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  • Europe is in crisis for two reasons. Wealth and real estate is not taxed, and it does not have a central bank. The first problem created the ‘financial innovation’ (fraud) and the real estate ponzi scheme that followed. The absence of a central bank that can create debt free money (quantitative easing) prevents any kind of orderly de-leveraging from occurring and condemns Europe to austerity, social crisis and economic decline. The hostility of European bankers to labour and meaningful democracy means the ECB will never be allowed to do what central banks were created to do – free economies from predatory debt. Our financial masters would rather sacrifice the real economy than see the perogatives of the capital markets, and their own free lunch, challenged.

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  • Again, “Once you start, you can’t stop.”

    Simples!

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  • My German friends tell me that patience is running thin in Germany, and that public attitudes are hardening..

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  • Can anyone clarify the following detail? Is the ECB buying bonds with newly created credit (aka QE), or using reserves? It’s unclear from what the commentators, including Evans Pritchard, are saying.
    Thanks,
    Nick

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