Printing Money

free4440273

Generali wrote: »

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

Oh well.

Nope; anyhow it's premium-rate:rotfl:Now Gen, be good for the Mrs and behave

:rotfl:

Generali

free4440273 wrote: »

Nope; anyhow it's premium-rate:rotfl:Now Gen, be good for the Mrs and behave

:rotfl:

Hey there free4440273. Let's be serious for a sec. I always behave. I don't always behave well, that I'll grant you, but I do always behave.

ad9898_3

Mugabe has done a bit of 'Quantative Easing', Zimbabwe has just released a $10 billion note.

free4440273

ad9898 wrote: »

Mugabe has done a bit of 'Quantative Easing', Zimbabwe has just released a £10 billion note.

just one problem: people in Zimbabwe cannot afford shredders

lethal0r

purch wrote: »

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.

I am attempting to understand bonds, QE, inflation etc... If I ask about 20 noob questions I may get there.

Can someone tell me why they need to get the money out of the system?

Generali

lethal0r wrote: »

Can someone tell me why they need to get the money out of the system?

Take a simple economy. 3 people, 3 cans of cold beer, 3 pound coins, one each. It's clear that the beers will sell for a pound each.

Now set up a second example, 3 people, 3 cans of cold beer, 6 pound coins, two each. It's now clear that the beers will sell for 2 pounds each.

Putting more money into the system doesn't make more beer but it does make the money worth less. People may feel richer ("Hey, I've got 2 quid now!") but it'll do them no good as they can't buy more stuff.

Now to get back to the topic, governments can create money using a piece of paper, a printing press and some ink. If they do that then there's more money but no more stuff so we have inflation as per my example.

However, if the Government prints a load of money and then says, we'll sell Gilts for the same value what they do in effect is take a load of cash out of private hands and puts it into the Government's hands. The idea is that in harsh economic times, private people/companies wont spend but the Govt will so the Govt can spend our way out of trouble.

IMO this is cr ap. Debt is the problem not the solution.

We'll see.

lethal0r

thanks, that has helped me with inflation. let me see if I understand the gilts process.

so the government prints out money, then issues gilts for the same value. so they now have the printed money to spend as well as however much they sold the gilts for?

is money always printed first? couldn't they just issue gilts and then spend the money they get for those? then just print the money out when the gilts need to be repaid?

Generali

lethal0r wrote: »

thanks, that has helped me with inflation. let me see if I understand the gilts process.

so the government prints out money, then issues gilts for the same value. so they now have the printed money to spend as well as however much they sold the gilts for?

is money always printed first? couldn't they just issue gilts and then spend the money they get for those? then just print the money out when the gilts need to be repaid?

Nope!

The way it should happen is:

1. Govt prints money.
2. Govt sells bonds to the same value of the money that was printed. To give an example, Govt prints a GBP10 note so the stock of money has increased by GBP10.
3. The Central bank sells a GBP10 Gilt so the Govt takes in GBP10.
4. The money supply is flat, everyone's happy.

ad9898_3

Some great posts in this thread Gen.

lethal0r

I THINK I understand now.

So the principle is to create more money now, but ensure it is paid back at a future date to stop inflation?

And the bond is the mechanism for stopping inflation - if the money was printed without a bond it would not go out of circulation & thus there would be inflation?