Green across the Board as printing takes off

JohnRo wrote: »

We were told it would be used to lend to SME and get the economy moving, that's not happened.

Well it might have done if the Government had not made buy to let more profitable than productive industry...
Restricting the supply of housing through planning constraints, whilst guaranteeing sub prime mortgages with taxpayers money to force up house prices has been a double whammy for the National Debt - sucking investment away from productive industry, and ratcheting up the Housing Benefit bill to bridge the gap between wages and rents.
Presumably thats why we have 'Growth' from debt fuelled consumption, and a doubling of the National debt in just one term of office.

gadgetmind wrote: »

QE is something that the government controlled central banks do and is nothing to do with the commercial banking industry.

Thats the Official line, Of Course.
Back in the real world the first £180 billion of QE1 was used exclusively as a covert bank bailout despite the BoE deceiving parliament and the people and claiming they were not buying gilts from banks. A fairly convincing deception in that a year before QE the banks held zero gilts for the central banks to buy. In the run up to QE the BoE smuggled £180 billion in gilts to the banks via the Special Liquidity Scheme and then promptly bought them all straight back again. The DMO then lent the gilts back to the banks again so they could sit as collateral on their books and allow them to go speculating in the casino markets. What happened after is unclear as the DMO muddies the historical records from that point and ceases to report banks as a separate entity within its QE purchases reports.
The whole point of QE was supposedly to get banks lending again to business and households. But because they made buy to let more profitable than productive industry it was a complete failure on that score.

One can only assume that kick starting lending could not have been the main objective of QE as if the government or central banks really wanted to achieve that they could have simply ordered the nationalized banks the public owned to have started lending and the BoE could have overseen that directly.

Economists would like to think of their discipline as a science, but it is clear that instead of taking direct control and managing the public banks lending, they implemented a policy that gave them no control whatsoever as to what the banks would do with their newly printed money. As a form of lending, this in effect has globally been a completely irresponsible and reckless approach to the financial crisis and has created far more problems than it has solved.

At the heart of economics is the theory of diminishing marginal utility and QE was always going to be subject to that. How many yachts do the 0.01% really need to buy? The trickle down theory has been completely discredited and now all new money is destined to be reinvested in whatever the latest hot markets are. The net result is that asset classes have been miss-priced and markets totally disconnected from market fundamentals. Markets are now purely driven by anticipation of central bank interventions regardless of their economic efficacy. From any moral, ethical or practical viewpoints the markets simply do not care what happens in the long run. They hold no notions of social or economic responsibility, they think simply in terms of short term gains as a corrupted tail that wags the media and central banking dogs now.

This has all led to global malinvestment on a scale never seen before. In China we have seen ghost cities built that will never be inhabited, high oil prices which in in the US has led investors desperate for yield into funding a non-profitable shale revolution that has led to global over supply of oil and consequent price war and oil crash.

Together with reckless and irresponsible economic policy we have seen reckless and irresponsible foreign policy as the US, UK and EU try to ratchet up global geo-political tensions in the Arab world and with Russia. The net result is to drive foreign investors into safe havens such as the dollar and the London property markets. These inflows of foreign money running scared are largely the story of the economic 'recovery' in the UK - the rest is just more debt as borrowing from rosy futures is the only economic game in town.

There are now no end of bubbles waiting to burst. There is the US sub prime auto bubble, student debt bubbles, corporate junk bond bubbles, government bond bubbles, equity bubbles, property bubbles, currency bubbles..... The justification for all of this from central banks? Stagflation or paltry economic 'growth' which is largely explained by creative accounting and statistical manipulation of all the key metrics which are gathered by survey anyway. Hardly scientific. The real cost of this? The impoverishment of the middle and working classes as the value of savings and wages are continually eroded. How was it ever possible to encourage or get people spending again by making them poorer year in and year out? How is more of the same from the ECB going to change anything now? EZ citizens are net savers not debtors like in the US. Will they really spend savings on consumer goods or just take them out of banks and invest them elsewhere? In which case negative interest rates will lead to the loss of bank capital and pump up investment bubbles everywhere else.