Newsnight: Quantitative Easing

WTF?_2

dopester wrote: »

You're going OTT with this in my opinion.

Printing money - this quantitative easing.. may not be as sure fire high inflation as you believe. Quantitative easing was used by Japan in the early 2000s as well, to give banks money to lend (which also requires the demand to borrow from fair/good credit risks to actually get in to the system proper), but hasn't fully pushed back the deflationary forces there.

Do you understand how powerful the deflationary forces are in the UK and USA and elsewhere ?

At this stage, to me it is like an attempt to deflect the oncoming hurricane with a hair-dryer. I'll worry more about it when the market stresses about it.

Japan exported their inflation via the carry trade, which was why their inflationary measures had little effect.

When you have the will to print up endless amounts of credit and put it into the system, you simply cannot fail to 'defeat deflation'.

You have to do some pretty stupid things but you will beat it.

The problem is that you risk massive inflation from all the liquidity you injected once deflation stops. And it's not predictable when the tipping point will come so by the time you see the inflation, it's too late to stop it.


And underlying it all is the deficit in production that we have vs the rest of the world. No amount of printing money can address that. All inflation can do is redistribute the existing wealth in the Western economies from the wealthy to helping bail out some of the debt.

mewbie_2

setmefree2 wrote: »

Hoorah - got this one back:j:D

Actually this is one I was glad to see the back of. Just the title makes my head hurt. For some reason I have connected it with digestive problems, and, well that's it really.

SingleSue

I kept thinking about quantum leap!

Very interesting discussion (if you leave out the WUM gate thing....er what IS a wum?) but I think I will have to read some more to get a good understanding of it all before I join in properly.

amcluesent

>And it's not predictable when the tipping point will come<

That's true, all of the 'plans' from Clown amount to pulling harder and harder on a bungee-cord attached to brick. Nothing happens for ages then... smack!

Cannon_Fodder

At the risk of hurting my and other peoples brains some more, by resurrecting this thread...!!


Tonights BBC 10 O'clock News, 16/12, ran images of printing presses and likened the country to a pawnbroker, getting prepared to purchase (possibly undesirable) assets in order to inject money into the system, with the 'quantitative easing' expression thrown in right at the end, probably to stop viewers changing the channel !!

Linked to the US rate drop, which one commentator thought was so large as to signal some significant extra moves in monetary policy, soon to come...

Ex-BoE employee was part of the piece, and the way it was portrayed implied "official" release rather than BBC "scoop", getting the wider public "informed" of what is about to happen...?

tomstickland

Quantative easing - sounds like a solution to constipation to me.

hethmar

Yes, something involving bifidus regularis

chriz1000

Quantitative easing leading to hyperinflation is the equivalent to saying ok we messed up, let’s reset all Debt and savings.
Until recently the rich poor divide has been increasing. At least 40% of the wealth in our country is held by 1% of the population. If you have fixed rate debt you will benefit, as your mortgages/loans/credit cards will be eased/paid off thanks to hyperinflation. However if you have any pensions or savings they will be next to worthless unless invested in gold or another currency that isn’t affected. Yes there are many other negative consequences to hyperinflation, however with the state of our economy and the large amount of personal debt a large majority of the population would actually benefit from a controlled level of hyperinflation. I.e 25-50% per annum sustained over 5 years. Obviously if hyperinflation was to get out of control it could totally ruin our economy. The most ideal situation would be if all currencies inflated money at the same rate. If this was to happen you would eliminate any import/export problems.

WTF?_2

chriz1000 wrote: »

Quantitative easing leading to hyperinflation is the equivalent to saying ok we messed up, let’s reset all Debt and savings.
Until recently the rich poor divide has been increasing. At least 40% of the wealth in our country is held by 1% of the population. If you have fixed rate debt you will benefit, as your mortgages/loans/credit cards will be eased/paid off thanks to hyperinflation. However if you have any pensions or savings they will be next to worthless unless invested in gold or another currency that isn’t affected. Yes there are many other negative consequences to hyperinflation, however with the state of our economy and the large amount of personal debt a large majority of the population would actually benefit from a controlled level of hyperinflation. I.e 25-50% per annum sustained over 5 years. Obviously if hyperinflation was to get out of control it could totally ruin our economy. The most ideal situation would be if all currencies inflated money at the same rate. If this was to happen you would eliminate any import/export problems.

The bottom line is that there is too much debt. Either you pay it off or you default. The thing is that there may be simply too much to pay off without depressing the economy for years to come. If you are having to spend a significant proportion of what you produce to pay off old debt then you're not spending it in the wider economy. Likewise, the government has to tax like crazy to pay off their debt.

Inflation is a partial default - it devalues the debt. Unfortunately it also destroys savings so savers need to be on their toes.

If we get very strong inflation it's really bad news. Hyperinflation would be simply disastrous. If they could magically produce something like 5-6% 'controlled' inflation then that might be a price worth paying. However, I don't think that you can simply short-circuit things like this. There is a huge imbalance in the amount we produce and the amount we consume. It has to be addressed and it doesn't look like the government are willing to do what it takes, preferring to try to inflate their way out of trouble.

sabretoothtigger

depressing the economy for years to come

Theres the answer what will happen I think or we could do what america did (does) and just keep doubling the bets




http://www.brillig.com/debt_clock/