Printing money

[Deleted User]

[Deleted User]

Did you know the US Government actually printed 100,000 dollar bills back in the thirties? they were issued for interbank use only and were not meant for the general population. A very small amount has reached some collectors.

http://myinvestingblog.com/wp-content/uploads/2008/06/100000.jpg

http://en.wikipedia.org/wiki/Large_denominations_of_United_States_currency

Generali

travellingbum wrote: »

Did you know the US Government actually printed 100,000 dollar bills back in the thirties? they were issued for interbank use only and were not meant for the general population. A very small amount has reached some collectors.

http://myinvestingblog.com/wp-content/uploads/2008/06/100000.jpg

http://en.wikipedia.org/wiki/Large_denominations_of_United_States_currency

Many years ago, I cancelled bearer bonds as a very small part of my job. It was a very odd feeling taking what was in effect $50,000,000 in $1,000,000 notes and making it worthless using a sort of giant hole punch to punch the date into the notes.

Printing money is a very bad idea BTW.

Paul_M_5

travellingbum wrote: »

Did you know the US Government actually printed 100,000 dollar bills back in the thirties? they were issued for interbank use only and were not meant for the general population. A very small amount has reached some collectors.

http://myinvestingblog.com/wp-content/uploads/2008/06/100000.jpg

http://en.wikipedia.org/wiki/Large_denominations_of_United_States_currency

£1 million and £100 million (!) notes do actually exist in the UK. They're held by the Scottish banks (if there are any left) as they have to hold Bank of England notes of the same value of any Scottish notes they print, so that any notes printed by Scottish banks do not increase the money supply and the BoE retains control of the value of notes printed.

So there are symbolic (but legal) £100M BoE notes held by the Scottish banks.

http://www.bankofengland.co.uk/banknotes/about/other_notes.htm

Maybe if quantitative easing starts to flow, we can all get our hands on some £100M notes :eek:

IveSeenTheLight

I'm interested to know, what is the negative points of quantative easing?

In simple terms it would seem that those with cash suffer while those in debt (mortgages included) would benefit as the debt is worth less

But what other consequences is there?

Generali

IveSeenTheLight wrote: »

I'm interested to know, what is the negative points of quantative easing?

In simple terms it would seem that those with cash suffer while those in debt (mortgages included) would benefit as the debt is worth less

But what other consequences is there?

The biggest (and very real) risk is that the bond market will view this as inflationary and demand a higher rate of interest to compensate them for their being repaid using devalued currency. This will be a significant drain on the taxpayer as they will have to pay out more in interest charges. About GBP130,000,000,000 in Gilts will be issued this year according to the Treasury. I suspect that will be more like GBP140-150,000,000,000. An extra 1% in interest costs would mean an extra GBP1,500,000,000 per year in taxes until that debt is repaid.

That means an extra GBP60/year on the average household's taxes.

The trouble is, that isn't the end of it as all the UK's debt will need to pay a higher rate of interest as it comes up to be rolled over. It was a significant problem in the 1980s. Interest rates would need to be raised at inappropriate times to maintain the pound and bond issuance as markets feared a return to the inflation of the 1970s. Correctly as it turned out.

omelette451

Wicked_witch wrote: »

Actually physically printing money? As in our paper cash outweighing the actual gold reserve? How would that help???

I can't admit to knowing much about this, but isn't it true that we've long since abandoned the gold standard anyway? Something to do with Churchill or Chamberlain if I remember correctly.

Generali

omelette451 wrote: »

I can't admit to knowing much about this, but isn't it true that we've long since abandoned the gold standard anyway? Something to do with Churchill or Chamberlain if I remember correctly.

The Gold Standard was re-introduced by Churchill in 1925 and it was abandoned in 1931.

dopester

IveSeenTheLight wrote: »

I'm interested to know, what is the negative points of quantative easing?

In simple terms it would seem that those with cash suffer while those in debt (mortgages included) would benefit as the debt is worth less

But what other consequences is there?

House prices crash even harder.

amcluesent

>House prices crash even harder.<

Depends. Once inflation takes hold, there could be increased demand of tangible assets as the purchasing power of savings falls.