Bank warns of 'deep recession'

Really2

mbga9pgf wrote: »

! You cant have inflation without the will to spend cash, which, of course there is none at the moment!

Spot on fella and no one can add that to any equation.

a lot of the "hyper inflation" theorists just think trillions of £'s are some how going to be dumped in to the economy (How I have no clue)

Surely buying the bad debt is as an exact a way of printing the money as possible?

mbga9pgf

This, in my opinion, will not be inflationary.

Paying for toxic assets will make the difference between a mad max type scenario and a major recession; even with significant cash holdings, I would prefer QE with the latter thanks.

really, its actually catered for in the monetaryist view:

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

V sub t is the transactions' velocity of money, that is the average frequency across all transactions with which a unit of money is spent. This reflects availability of financial institutions, economic variables, and choices made as to how fast people turn over their money.

seeing as the above isnt happening, no chance of inflation, at least zimbabwe scale. Once the economy picks up, the BOE will HAVE to take the cash out of circulation mind. This could form quite a good tool to control inflation for the future!

Really2

Wookster wrote: »

The BoE buys worthless assets (can you see the problem already?) from banks who then will have surplus cash sitting on their balance sheets. Banks then lend money to consumers and corporates thus increasing monetary supply without a corresponding increase in production which causes inflation.

The BOE would surely buy the assets at near to market value so the balence sheet money will have been swallowed up.
Also based on asstes still devaluing in the short term I hardly think they will start 100% mortgages etc again?

Really2

mbga9pgf wrote: »

This, in my opinion, will not be inflationary.

Paying for toxic assets will make the difference between a mad max type scenario and a major recession; even with significant cash holdings, I would prefer QE with the latter thanks.

Exactly, your life, your childrens life etc. is worth a lot more than going back in the dark ages so some can get a cheap house.

purch

The BoE buys worthless assets (can you see the problem already?) from banks who then will have surplus cash sitting on their balance sheets. Banks then lend money to consumers and corporates thus increasing monetary supply without a corresponding increase in production which causes inflation

The Banks have had their Balance Sheets decimated. They will 'suck up' the surplus cash and still have a balance sheet in such a poor state that they will be unable to take on anything other than the highest quality assets.




P.S. Anyway....!!!!!!? would be proud of you, reiterating his fears almost word for word, without the aid of a script !!!

mbga9pgf

Wookster wrote: »

The BoE buys worthless assets (can you see the problem already?) from banks who then will have surplus cash sitting on their balance sheets. Banks then lend money to consumers and corporates thus increasing monetary supply without a corresponding increase in production which causes inflation.

But are they going to make the same mistakes and lend to those that cant repay, above 3.5X earnings and without a significant deposit?

No, in my opinion. As many have said, the paragrim has shifted. They cant lend extra money as the toxic assets were balanced by banks liabilities, namely foreign investors cash. This is why the write downs are an issue. they dont have the cash to pay their depositors without QE!!!!

As for supply, check out global reserve stocks of commodities! Even Oil! Loads to go around!

I am a trained thermodynamacist as one of my sub specialities. Enthalpy is an important concept. Just like you cant recreate a tree from ashes and lots of energy, we cant go back to the old financial system as the process is irreversible.

High inflation at a time we, globally are have lots of spare capacity (people, equipment, factories) but no demand (due to lack of cash) is IMO impossible. We have lived through the inflationary phase already. For the past 10 years, we had to deal with rocketing asset prices (houses, increasing expectations for individual wealth) without the cash to pay for it. We borrowed our way to pay for this lavish lifestyle. Now its payback time, unless they start sending cheques to every man woman and child in the UK Inflation will not rise signficantly. Now time for the deflation.

mbga9pgf

Really2 wrote: »

Exactly, your life, your childrens life etc. is worth a lot more than going back in the dark ages so some can get a cheap house.

Oh, I will still get my cheap house, just without the barbed wire and machine gun!!

Really2

mbga9pgf wrote: »

But are they going to make the same mistakes and lend to those that cat repay, above 3.5X earnings and without a significant deposit?

No, in my opinion. As many have said, the paragrim has shifted. They cant lend extra money as the toxic assets were balanced by banks liabilities, namely foreign investors cash. This is why the write downs are an issue. they dont have the cash to pay their depositors without QE!!!!

As for supply, check out global reserve stocks of commodities! Even Oil! Loads to go around!

You are one of the few "bears" on here that is actually is a "realist"

You won't be very popular.;)

Wookster

Really2 wrote: »

The BOE would surely buy the assets at near to market value so the balence sheet money will have been swallowed up.
Also based on asstes still devaluing in the short term I hardly think they will start 100% mortgages etc again?

There are problems with that: no one knows what the assets are really worth. A propeller head would say the present value of future cashflows however one cannot predict defaults with any degree of certainty.
Furthermore the market value of such assets is so depressed at the moment as to under value them.

So, if you pay too much, the tax payer gets screwed and if you pay too little the banks get screwed (worsening the situation).

However, none of this really matters because the ultimate aim of this "asset" buying is to provide the banks with cash to lend to the economy (which they are obliged to do to get a return if the base rate is nil). That is what causes inflation - more cash chasing the same number of goods.

Reckless lending got us into this mess. Is more lending likely to get us out of the mess?

Furthermore, do you think banks are going to correctly price risk this time around?

hmmmmmm...

Really2

mbga9pgf wrote: »

Oh, I will still get my cheap house, just without the barbed wire and machine gun!!

I agree their is more than enough downward momentum at the moment.

But for some reason some want more and more, but I quiet like civilization.