Quntitative Easing

Wookster

Sir_Humphrey wrote: »

I have posted exhaustively on this over the last few years, and also over on GHPC before access to that forum was blocked for me. I don't want to reiterate them now.

In short, we are too much like the USA, and not enough like Sweden.

Go on, why not humour me?

Edale

I know an economist called Graham Turner who wrote a book around 2003 (which is massive and very hard work) called 'solutions to a liquidity trap'. It looks at where Japan went wrong. He also wrote a book called 'credit crunch' which he finished at the end of 2007 and is remarkably accurate as to how events have unfolded.

I have asked him similar questions, he believes QE is essential but will only work if done early enough and whole heartedly, this is where Japan went wrong and he thinks America are already too late and if we don't do something soon we will go the same way.

He reckons that Brown, Darling and most of the treasury do not truly understand how to implement QE effectively and will wait until it is too late. He wrote this piece in the Guardian back in September when the bank of england were dithering with interest rates. It looked slightly mad at the time suggesting that unemployment could reach 4 million but it does not seem so daft now.

Radiantsoul

The unique nature of the recession seems to make it hard to draw comparisions with other events. Banking is such a huge sector of the economy.
It seems that the velocity of circulation of money needs to be increased and the debt burden needs to be decreased. The UK is already deleveraging, but I suspect that government would like to spread it across several business cycles.

Masomnia

Wasn't the American administration criticized for not increasing the money supply in the 30s?

Just checked and Friedman argued it, but I'm no going to claim to fully understand the arguments.

Californication

My understanding is that depending on sterilization of the printed money and on what assets are purchased, the govt/central bank can do one or more of three things:
1) increase base money supply;
2) flatten the medium and long end of the gilt yield curve;
3) reduce the credit spread between gilts and risky bonds along the curve.

(1) just requires printing money and using it to buy govt bills; here there is no interest rate or credit risk.
(2) has no credit risk, but there is interest rate risk since the central bank now holds longer term gilts.
(3) has credit risk since the CB now holds bonds that may default.

Also, there may come a point where the yield on longer dated gilts rises if the govt issues too many; this restricts their ability to buy risk assets and fund it with sales of gilts, since the spread moves down, but the yield on gilts moves up as much.

This all ignores currency moves, which add another layer of problems...

--C

tomstickland

"Quntative easing". Sounds rude.

MrFonzerelli

The money supply is drying up. Do we
a) go cold turkey
b) try to ween ourselves off (print some to bide time whilst restructuring economy)
c) print lots and spend it all (the sticky plaster approach)

Unfortunately Mr Brown seems to like (c)

bubblesmoney

generali - was the pun intended when you typed this as the header for this thread

Quntitative Easing

Generali

bubblesmoney wrote: »

generali - was the pun intended when you typed this as the header for this thread

Nope. I didn't have my glasses on!