Quantative Easing

1echidna

repoamuse wrote: »

Japan had nowhere near the level of national / personal debt we have. In fact they had SAVINGS and INDUSTRY

The Japanese's problems were totally different to ours.

Our problem is a [strike]credit[/strike] debt problem.

OK with our creditors demanding their money what do we do? Declare bankruptcy?

purch

Ok I'll tell you it's not about inventing money at all. It's about printing money.

The money is real but unfortunately it has the effect of making any money you had before slightly less real.

The Germans tried it in the 1930's and probably others before them so it isn't new. Mr. Mugabe of Zimbabwe is the current champion of this means of fiscal policy.

At the end of the game the Germans didn't do too badly and Mr Mugabe is still in control of Zimbabwe so I guess it can't be ruled completely bonkers.

Neither the Weimar Republic in the 1920's nor Zimbabwe have ever used a policy of Quantative Easing.

It is ludicrous to use those two examples to try and explain the process. Nothing could be further from the truth.

The first time Quantative Easing as a policy was used, was by Japan in the 1990's.

It does not involve Printing Money

tomstickland

Governments can create and destroy money when it suits them. The effect is to change the buying power of money, since the total number of units of currency still has to equate with the same amount of value.

Fractional reserve banking means that banks can lend more money then they actually hold in their reserves. This has an effect of multiplying up the amount of money in circulation. The government creates a pound, this is deposited and a further 80p is lent on, this is deposited and 64p is lent on etc until a single pound has created a few pounds of money in circulation.

Due to the credit crunch then money supply has dried up somewhat, so it is believed that printing money will stave off depreciation. However, it is risky, the risk being steep inflation in the future.

SGE1

kwikbreaks wrote: »

Ok I'll tell you it's not about inventing money at all. It's about printing money.

The money is real but unfortunately it has the effect of making any money you had before slightly less real.

The Germans tried it in the 1930's and probably others before them so it isn't new. Mr. Mugabe of Zimbabwe is the current champion of this means of fiscal policy.

At the end of the game the Germans didn't do too badly and Mr Mugabe is still in control of Zimbabwe so I guess it can't be ruled completely bonkers.
http://en.wikipedia.org/wiki/Quantitative_easing

Er...

On Wednesday, he [the Chancellor] told the Financial Times newspaper he was considering a policy of "quantitative easing" to increase money supply to the economy.

He has now said he is looking at "a range of measures," but "nobody is talking about printing money".

and

According to the BBC's economics editor Hugh Pym, the Treasury could resort to the use of quantitative easing as falling interest rates become less effective at stimulating the economy.

Instead of literally printing money, the Bank of England would write out cheques to banks in exchange for assets such as corporate investments.
The hope would be that the banks would then lend this extra money to consumers who would in turn go out and spend it.

http://news.bbc.co.uk/1/hi/uk_politics/7817623.stm

neverdespairgirl

zarazara wrote: »

so, if theres no bread, will there be cake?

nice one! :j

Cannon_Fodder

SGE1 wrote: »

Er...
On Wednesday, he [the Chancellor] told the Financial Times newspaper he was considering a policy of "quantitative easing" to increase money supply to the economy.

He has now said he is looking at "a range of measures," but "nobody is talking about printing money".

And of course the Chancellor's word is his bond...

Cannon_Fodder wrote: »

Alistair "no recession" Darling, nine months ago in his first budget speech, told us that “my forecast shows the UK economy will continue to grow throughout this period of global uncertainty”.

http://www.timesonline.co.uk/tol/comment/leading_article/article5014731.ece

SGE1

Cannon_Fodder wrote: »

And of course the Chancellor's word is his bond...

That's not the same thing. In this instance, he's telling people what his policy WON'T entail. In your example, he just didn't accurately foresee the future (and in his defence, he wasn't the only one).

kennyboy66_2

repoamuse wrote: »

Japan had nowhere near the level of national / personal debt we have. In fact they had SAVINGS and INDUSTRY

The Japanese's problems were totally different to ours.

Our problem is a [strike]credit[/strike] debt problem.

Japan problems are/were broadly similar.
Debt, deflation, deregulation and demographics, but of a greater magnitude.

The asset bubble in stocks and land in 80's Japan was much greater than what has happened in the US & the UK. Check out what stock market prices and land prices did in Japan between 1983 & 1989.

Their approach to sorting out their problems then was too little too late.

[Deleted User]

kwikbreaks wrote: »

Ok I'll tell you it's not about inventing money at all. It's about printing money.

The money is real but unfortunately it has the effect of making any money you had before slightly less real.

The Germans tried it in the 1930's and probably others before them so it isn't new. Mr. Mugabe of Zimbabwe is the current champion of this means of fiscal policy.

At the end of the game the Germans didn't do too badly and Mr Mugabe is still in control of Zimbabwe so I guess it can't be ruled completely bonkers.
http://en.wikipedia.org/wiki/Quantitative_easing[/quote]

Ted Heaths chancellor Tony Barber tried it as well in 1973 in his "dash for growth" they increased money supply by an astounding 30% in just one year,and look at the problems that caused for the rest of the decade

puddy

this all sounds quite upsetting,, what are we going to do?? whats going to happen? not sure i understand any of this, i cant be the only one