Quantative easing - can someone explain it please?

bootalishus

Hi

can someone explain to me, in laymens terms, what quantative easing means and how it will effect me if i am renting and have my STR fund in the bank. Also what can I do to protect my STR fund.
I am finding this all very worrying at the moment and panicing that I will end up with zilch, no STR fund and therefore no house.
Also dread to think what sort of quality of life my poor kids will have. I did want another child but I am not so sure now - what will their future be, mega taxes and loads of pensioners with no money.
Feeling very depressed about the whole thing.

iolanthe07

As I understand it quantative easing means simply printing money. AFAIK economists always taught that this led to rampant inflation (eg Weimar Republic, Zimbabwe), but maybe Clown has found some magic to stop this happening. It will mean that your savings will just become worth less (unless interest rates go up to compensate), but so will you debts. So good for borrowers, bur not for savers - just what the country needs at the moment, but long term? God help our children and grand children.

handful

iolanthe07 wrote: »

but maybe Clown has found some magic to stop this happening.

I doubt it, he's still trying to find someone to draw him a map.

97trophy

http://marketplace.publicradio.org/videos/whiteboard/quantitative_easing.shtml

Watch Paddy explain how it works in the USA. This is a great video and easy to follow.

ad9898_3

It means printing money, if Brown goes down this route we are doomed. The US can do it to a certain extent as they are world's reserve currency (for instance China holds 2 trillion in $) and of course there is the petro dollar.

Put simply, we are not in any kind of position to print money, we would end up like Zimbabwe.

Radiantsoul

Basically the government increases the supply of money in the economy. So printing money is a good layman's term.

But it is nothing like what happened in Weimar Republic or Zimbabwe. The threat of inflation is much lower as you are talking about limited amounts of money. Also the chance of a wages/prices spiral is pretty limited. It seems that if inflation is heading below zero then increasing the money supply is unlikely to make much difference.

What will happen is the government will buy assets where the market has collapsed(mortgage backed securities) these will then raise in price and increase banks ability to lend.

QE may raise inflation in the longer term, but it didn't in Japan and increases are imo likely to be modest(if the BoE even udnertakes QE).

Masomnia

iolanthe07 wrote: »

As I understand it quantative easing means simply printing money. AFAIK economists always taught that this led to rampant inflation (eg Weimar Republic, Zimbabwe), but maybe Clown has found some magic to stop this happening. It will mean that your savings will just become worth less (unless interest rates go up to compensate), but so will you debts. So good for borrowers, bur not for savers - just what the country needs at the moment, but long term? God help our children and grand children.

You spelt it wrong for a start, so that's hardly inspiring confidence.

It's not 'printing money', like they did in Weimar Germany or Zimbabwe, money is created but it is used to buy treasury assets, not put directly into the system. And in any case the BoE 'prints' billions every year, I haven't seen any rampant inflation round here.

If you could highlight any similarities between the circumstances in Weimar Germany and Zimbabwe and our situation I'd be very interested to hear them.

Or alternatively, keep using these overly simplistic worst case scenarios to scare people into going along with your political agenda, turning anything into another boring 'Clown' rant.

To the OP, try something more objective:

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

iltisman

Perhaps we could adopt the leaf as currency.

iolanthe07

You spelt it wrong for a start,

Thanks for correcting me - I hate spelling things wrong, but I took the word from the OP's post. Incidentally, I don't really have a political agenda, it's just that I have lived through four Labour governments and they have all ended in economic woe.

abaxas

It's basically the movement of money from old people to Aston Martin. Using bankers as a proxy.

:P

purch

Quantative easing - can someone explain it please?

There are a lot of people who can explain it for you incorrectly !!!! (see above )

The rules are simple.

You must mention:
A) Zimbabwe
Weimar Republic
C) Printing Money
D) Wheelbarrows
E) Hyper Inflation

(not necessarily in that order)

Then you are well on your way to receiving an incorrect explanation.