Printing Money

Generali

NB QE or Quantative Easing is how countries print extra money these days. It is done by the Central Bank issuing more money to the Government but not taking the same amount of cash out of circulation by selling bonds.

From FT Alphaville:

http://ftalphaville.ft.com/blog/2008/12/22/50676/thats-not-quantitative-easing/

In quantity terms, a comparison of the US QE with that in Japan shows that, during just the first four months (16 weeks), the US monetary base has soared by 97.2% compared to a modest 6.7% at this point in the Japan QE cycle. Indeed, even after the first year the Japanese monetary base had risen only 32.5%.

tradetime

Whilst that quote, may seem alarming, may even be alarming, it would be far more alarming to find that the US was exactly mirroring the Japanese, step for step quantity for quantity. Remember the Japanese failed to achieve what they set out to do.
Much of the criticism leveled at their efforts to control their crisis centered around the fact that they seriously underestimated the severity of the situation and thus were much too slow to react, and when they did react, they were nowhere near aggressive enough. I think we can safely say whatever criticisms are leveled at the US in the PM, those won't be amongst them.

Generali

tradetime wrote: »

Whilst that quote, may seem alarming, may even be alarming, it would be far more alarming to find that the US was exactly mirroring the Japanese, step for step quantity for quantity. Remember the Japanese failed to achieve what they set out to do.
Much of the criticism leveled at their efforts to control their crisis centered around the fact that they seriously underestimated the severity of the situation and thus were much too slow to react, and when they did react, they were nowhere near aggressive enough. I think we can safely say whatever criticisms are leveled at the US in the PM, those won't be amongst them.

True. That the US-ians have all but doubled the amount of money in circulation bothers me a lot though.

tradetime

Generali wrote: »

True. That the US-ians have all but doubled the amount of money in circulation bothers me a lot though.

Oh I do agree, the figures are mind boggling, sometimes when discussing this sort of thing I have to stop just remind myself what sort of sums of money we are talking about here, millions, billions, and trillions just seem to have merged and lost all impact of value when spoken about nowadays.

purch

the figures are mind boggling

It's a very high tightrope they are walking.....when they finally have to bring these Bonds to the market, getting the timing right to get this huge amount of money out of the system appears at first sight to be an impossible feat to accomplish.

Generali

purch wrote: »

It's a very high tightrope they are walking.....when they finally have to bring these Bonds to the market, getting the timing right to get this huge amount of money out of the system appears at first sight to be an impossible feat to accomplish.

That's my fear. Ok, maybe the US-ians can get this sort of cash out of the money supply. After all if you're an investor in some basket place hell hole like Argentina, most of Africa or Barnsley* then there is a clear attraction to holding US$ Government debt.

The UK Government won't be able to sell Gilts anything like as quickly as the US Govt though.



*The Barnsley bit was a joke. Sorry to any Africans reading that thought I was comparing the DRC with Barnsley.

handful

QE aka storing inflation. The more they print the higher the cost in inflation. Having said that, there are some that could do with a bit of inflation to lower the value of some of their debts, if only cosmetically.

(I'm not one of them btw. I remember how damaging inflation can be!)

free4440273

People look at the Bond market now and cry 'horror :eek:, look at those yields' (as do i). Yes, the Bond market is telling us something, but it's important to remember it is yet another bubble - and it's the Hedgies who are front-running this, just as they did with commodities (gold, copper et. al.) a yr ago.

Generali

free4440273 wrote: »

People look at the Bond market now and cry 'horror :eek:, look at those yields' (as do i). Yes, the Bond market is telling us something, but it's important to remember it is yet another bubble - and it's the Hedgies who are front-running this, just as they did with commodities (gold, copper et. al.) a yr ago.

Probably you're right. Probably not the hedgies inflating it though as so many are bust.

Interesting young lady you have as your avatar. What's her name please?

free4440273

Generali wrote: »

Probably you're right. Probably not the hedgies inflating it though as so many are bust.

Interesting young lady you have as your avatar. What's her name please?

:rotfl:That would be telling ; but thanks for asking
:rotfl:

Generali

free4440273 wrote: »

:rotfl:That would be telling ; but thanks for asking
:rotfl:

No point in asking for her phone number in that case I suppose.

Oh well.