Wednesday, October 31, 2012

The farce that is QE

Ank of England's Charlie Bean signals no more QE

The B of E has bought £32bn of the last £34bn debt issued. Hardly anybody else wants it so the government must print money to buy it or the yields would soar to reflect the risk. The B of E's Funding for Lending is a last desperate attempt to persuade people to borrow cheap money to buy ridiculously overpriced houses to try generate the only "growth" they know, i.e. house price inflation. If people refuse to take the debt slavery thrust down their throats with years of sub standard living due to servicing all that debt, them the game us up for them. There is only so much QE they can get away with before they have to stop printing and our interest rates will soar.

Posted by hpwatcher @ 08:34 PM (2168 views)
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14 thoughts on “The farce that is QE

  • Great quote:


    The_UK_is_a_corporatocracy
    21 minutes ago
    Why do they keep pretending that QE has anything to do with helping the economy?

    We still have a £100bn a year deficit so the government must continue with QE, it’s the only way they can maintain spending. What they cannot do is sell the gilts to the open market at rates that do not represent the risk, i.e. lending to a debt ridden banana/house price debt republic. The B of E has bought £32bn of the last £34bn debt issued. Hardly anybody else wants it so the government must print money to buy it or the yields would soar to reflect the risk.

    The B of E’s Funding for Lending is a last desperate attempt to persuade people to borrow cheap money to buy ridiculously overpriced houses to try generate the only “growth” they know, i.e. house price inflation. If people refuse to take the debt slavery thrust down their throats with years of sub standard living due to servicing all that debt, them the game us up for them. There is only so much QE they can get away with before they have to stop printing and our interest rates will soar. The B Of E are running the ultimate bluff, sat there playing 3 card brag holding 5-3-2, holding houses worth a fraction of what they are for sale at, hoping some mugs let them buy the pot instead of calling their bluff.

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  • You have to wonder at the “intelligence” of those “in control”. Have a look at the forcasts and actual results for Greece by the EU-IMF troika (next article). Time to wake up and smell the coffee, methinks!

    Its enough to make you ask for a reduction in the EU budget contribution, Mr Cameron 🙂

    Before anyone calls me a doom-monger, who would have forecast the widespread destruction in the US two months back? The BoE will undertake lots more QE because they have to. IMHO, it will end in tears.

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  • yes. Literally, Gold is the only game in town.

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  • No, there are literally thousands of other games in town – games of football, games of ping pong, games of cards …

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  • He explained that QE is useful if it “can encourage households and businesses to bring forward expenditure”

    T*sser, how many middle and lower income households have benefited through QE?

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  • So we are four years down the line from the credit crunch (is that like apple crunch?). Cutting interest rates didn’t work — well it did, my mortgage is well and truly under control. But it didn’t work for the wider economy, unless we have to wait another four or five years while others like me abuse it to overpay our mortgages and reduce the debt, but given Sib’s Interest Only Mortgage article from the Wailly Fail (brilliant name) there’s lots of stupid people who can’t see the sense in paying off their loan the debt burden may be around for much longer.

    So interest rate cuts are not resolving the problem quickly enough. And QE is just letting the bankers improve their balance sheets, not the man in the street (see Cantillon effect — ie those at the end of the QE effect are screwed the most).

    Sorry guys but the only thing left is to increase those damned interest rates. Bummer. But you’ve got to do it? What else can you do?

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  • The end of the global savings glut must be concentrating a few minds. What happens when people aren’t willing to save at zero or negative rates in Asia? They will start to offload their Western assets pushing the price down and the yield up. Interest rates will be in competition with rapidly increasing nominal yields. Real interest rates are going to go up anyway, and stay up.
    QE was the suppression of the ten year market rate, the BoE will probably still keep the overnight rate low and Osbourne does read the papers, he knows his delay time just ran out. Maybe the cuts are finally going to start or maybe enough people will stay in auto-enrollment that they affect demand without the need for rate rises. One way or another, less real stuff to enjoy for Mr. and Mrs.UK.

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  • mark wadsworth says:

    If somebody gets his facts straight, then I’ll listen to his opinion. His somebody can’t be bothered to look up the facts and dives straight into his own opinion, making up facts as he goes along to support his case, then I find it a bit tedious.

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  • No, there are literally thousands of other games in town – games of football, games of ping pong, games of cards …

    Draughts.

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  • B of E has bought £32bn of the last £34bn debt issued

    Is that not straight? That’s what’s happening in the US.

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  • mark wadsworth says:

    HPW, you say that this is because “Hardly anybody else wants it so the government must print money to buy it or the yields would soar to reflect the risk.”

    This is quite simply not true, the UK government could quite happily issue 3 or 5 or 10 years bonds, and people would happily buy them.

    The current yields on existing 10 year UK gilts are below two per cent. It is just that the UK government prefers to borrow very short term (by taking ‘overnight’ deposits from commercial banks) at about 0.5%, and the yield curve being what it is, commercial banks are jsut as happy with 0.5% overnight as they would be with just under two per cent for ten years fixed. There is a lot of behind the scenes pressure on them to do so, and the bankers are happy to take a modest cut by buying new gilts on Tuesday and selling them back on Thursday.

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  • This is quite simply not true, the UK government could quite happily issue 3 or 5 or 10 years bonds, and people would happily buy them.

    I think this will always be a mystery to be. Who would be mad enough to tie up a massive amount of money, with a government engaged in money creation on such a massive scale, for an absolute pittance of an interest rate……who indeed……

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  • mark wadsworth says:

    HPW, I have no idea either. Probably pension funds, who like long term stuff at a fixed yield because it makes their life easier, and also because the government leans on them to buy gilts.

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  • MW @13….is the right answer; pension funds plus investment funds at the more cautious end of the spectrum will put a fair chunk in that direction. HPW – it is a mystery to you because you are an individual, private investor so there are many more profitable and lower risk ways to make money for the individual.

    As screwed up as we all think the UK is, the UK government has still always paid back its debtors, and is clinging onto its AAA investment rating. It’s a no-brainer safe haven for large funds.

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