Quantative easing - can someone explain it please?

Californication

Interestingly enough, when the ECB increased the euro money supply last year (by accepting a wider range of collateral from banks to borrow euros), the banks just left the cash on deposit with the ECB, so the net effect was negligible.

Ultimately, the central bank can increase the money supply, but banks have to accept credit risk to lend the money into the economy, which they (rationally) don't want to do right now.

--C

wigglebeena

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.

The same magic he used to stop the boom and bust cycle?

zedyy

bootalishus wrote: »

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.

Watch this video below - Quantative easing explained!

http://www.youtube.com/watch?v=XBT052jHnmE&feature=channel_page

Robert_Sterling_3

iolanthe07 wrote: »

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.

Perhaps you would like me to correct your grammar;)

It is wrong to use the word wrong when you did use the word wrong . You should have written the word wrongly instead. When writing wrongly you need to write it correctly. I think I will stop while I am ahead here.;)

Cannon_Fodder

iltisman wrote: »

Perhaps we could adopt the leaf as currency.

Those clever Australians are choosing to do the opposite of QE, setting light to all those trees.

chucky

Cannon_Fodder wrote: »

Those clever Australians are choosing to do the opposite of QE, setting light to all those trees.

err it's a different leaf that he's talking about CF...

Masomnia

Robert_Sterling wrote: »

Perhaps you would like me to correct your grammar;)

It is wrong to use the word wrong when you did use the word wrong . You should have written the word wrongly instead. When writing wrongly you need to write it correctly. I think I will stop while I am ahead here.;)

Point taken

scousethife

Small spelling and grammer mistakes are negligable, and are infantile point scoring. Please leave them in the 90's where they belong thanks.

Who gets the money? thats what I want to know. If clown wants us spending again why doesnt he write us all a cheque for say ten grand, well actually 15 I want a new kitchen.

bubblesmoney

Radiantsoul wrote: »

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).

are we talking of limited amounts of money increasing the monetary base????
in what world is increasing the monetary base from 800 billion a year ago to 2 trillion (and still printing) limited and all that while decreasing fractional reserve ratios to zilch and buying trash for cash (TARP = CRAP, same goes for bad bank)

in the chart below

• M0: The total of all physical currency, plus accounts at the central bank that can be exchanged for physical currency.
• M1: The total of all physical currency part of bank reserves + the amount in demand accounts ("checking" or "current" accounts).
• M2: M1 + most savings accounts, money market accounts and small denomination time deposits ( certificates of deposit of under $100,000).
• M3: M2 + all other CDs (large time deposits, institutional money market mutual fund balances), deposits of eurodollars and repurchase agreements.

have a look at the grey line shooting upwards. food for thought. :beer:

Masomnia

scousethife wrote: »

Who gets the money? thats what I want to know. If clown wants us spending again why doesnt he write us all a cheque for say ten grand, well actually 15 I want a new kitchen.

The money goes to the banks, who then in theory lend it out.

Because everyone would try to buy a new kitchen, and the price would rise because of the sudden demand. So you'd be no better off, and the same goes for everything else.