BoE to start printing money

Edale

I think an important part of QE is the driving down of borrowing costs. This then helps put a floor under the likes of property prices which is important in restoring confidence. It also helps indebted businesses and households.

There is a risk that sterling may lose value but if properly implemented, QE could calm the markets. For all those who say it has never worked anywhere else, that is usually because it is never done in time and done when deflation and falling asset prices have set in - this was why it was not wholly successful in Japan (although did stem the problem somewhat) and why it will possibly be too late in the US which has had falling house prices for over 2 years now.

mewbie_2

StevieJ wrote: »

Mewbie, ask him why there is more money around if credit has been reduced

Yeah Wookie. Why is there more money around if credit has been reduced?

btw I'm no one's puppet. I was going to ask that clever stuff myself. Before Stevie said.

StevieJ

Graham_Devon wrote: »

It hasn't dissapeared. It is owed. The asses on which it has been spent, now they are falling, are not worth the money the loans were worth. People therefore can't repay it.

But it certainly hasn't dissapeared.

We don't know how much the assets will realise, we only know their market value (which is based on a mistrust of them). Anyway once the banks are back on their feet we can sell them back:T BTW if the market were to bottom soon this would increase the market value of these assets.

chucky

Edale wrote: »

I think an important part of QE is the driving down of borrowing costs. This then helps put a floor under the likes of property prices which is important in restoring confidence. It also helps indebted businesses and households.

There is a risk that sterling may lose value but if properly implemented, QE could calm the markets. For all those who say it has never worked anywhere else, that is usually because it is never done in time and done when deflation and falling asset prices have set in - this was why it was not wholly successful in Japan (although did stem the problem somewhat) and why it will possibly be too late in the US which has had falling house prices for over 2 years now.

this is a very good point, i had never realised and should have pretty obvious to me - i'm borrowing now on a commercial loan and i get a worse interest rate than i would 12 months ago on another transaction that i did, for example;

Feb 2008 5.39%,
Feb 2009 6.21%.

i was expecting the rate to be much lower due to the rate cuts in the last 5 months.
but due to lack of funds i will be paying a premium for it.

QE will improve exactly this situation.

lostinrates

mewbie wrote: »

Yeah Wookie. Why is there more money around if credit has been reduced?

btw I'm no one's puppet. I was going to ask that clever stuff myself. Before Stevie said.

Hang on a second.....

if ''stuff'' - like houses and new cars and everything on sale in shops -is worth less, and there is still the pretend money in debt in existance...is that ALREADY quantative easing by accident rather than design???? (more head spinning )

Wookster

mewbie wrote: »

But Wookie, here's the rub. With the extra money available you can buy more goods. So they don't need to go up like you said about ergo and that.

Increasing the supply of money doesn't necessarily mean increasing the goods available to buy.

Wookster

Edale wrote: »

I think an important part of QE is the driving down of borrowing costs. This then helps put a floor under the likes of property prices which is important in restoring confidence. It also helps indebted businesses and households.

I think a process (asset revaluation) has started now which will have to run its course. QE may slow the asset price revaluation but if it is applied to the extent that it will make a significant difference the side effects (run away inflation & corresponding unemployment; run on the pound) will erode disposable incomes which reduce the capacity to support asset values.
Banks will not start to lend until the revaluation has run its course, therefore any measure that slows it down will prolong the pain.

Edale wrote: »

There is a risk that sterling may lose value but if properly implemented, QE could calm the markets. For all those who say it has never worked anywhere else, that is usually because it is never done in time and done when deflation and falling asset prices have set in - this was why it was not wholly successful in Japan (although did stem the problem somewhat) and why it will possibly be too late in the US which has had falling house prices for over 2 years now.

It is very difficult to say what QE achieved in Japan as no one will know what would have happened has it not been undertaken. However, surplus supply of money was exported to other countries in order to attract higher returns (as interest rates were close to or equal to zero). Guess where that cash went? The UK & USA amongst others where together with other cash (from China, the Middle East etc) it became cheap credit that financed the asset price boom, so QE did cause inflation, just not in Japan!

chucky

Wookster wrote: »

It is very difficult to say what QE achieved in Japan as no one will know what would have happened has it not been undertaken. However, surplus supply of money was exported to other countries in order to attract higher returns (as interest rates were close to or equal to zero). Guess where that cash went? The UK & USA amongst others where together with other cash (from China, the Middle East etc) it became cheap credit that financed the asset price boom, so QE did cause inflation, just not in Japan!

The difference in Japan was that it was undertaken much later in crisis and maybe too late...

lostinrates

Edale wrote: »

For all those who say it has never worked anywhere else, that is usually because it is never done in time .

If that's the usual reason are there others?

If its never worker because its always too late how do people know it'll work if done early?

Rolandtheroadie

there was a guy down the street started printing money a few years ago. Didnt go too well for him.