BoE to start printing money

lostinrates

My head is spinning and I need to go back a few steps.

Money is representational of 'stuff' not stuff....money is pretend.

Printing money would increase the pretend money but be worth less.

Pretend printing of pretend money has the same result but we can't even burn the stuff in frustration?

In all seriousness, I thought I had this straight but I need to go back to the lady bird book version

If the government are using it to spend/lend while the value of that same money is decreasing by virtue of there being more money but the same amount of 'stuff' then is that inflationary as the 'stuff' is under demand (from governments pretend pretend money) while we have no more money?

That sounds right.....sort of, but the room IS spinning

(wage rises ad? I'm still stuck at the point where my miserly living is rewarded with being able to afford a kettle/taoster combi deal rather than a Smallbone kitchen:rolleyes: )

chucky

Graham_Devon wrote: »

QE is increasing the money supply.

it's increasing the money supply but not the physical - technically it's the M4 (or M3 I think it is) money supply that they're increasing not the M0 (physical cash and bank deposits i think) which is what printing money would directly do.

Graham_Devon wrote: »

The whole point is to take the bad debts, make them dissapear so more money can be lent.

it's to put up the bank cash bases as well as fund the banks debts not take them away

Graham_Devon wrote: »

I just personally think that, just like the bailouts, the banks will not lend, as they have shown after the bailouts.

you may be right - but apart from letting the banks go bust which would be carnage i don't think they have any other realistic option. it's pain but probably less pain in the over all scheme of things.

StevieJ

passau91 wrote: »

There's a thought, what would happen if all currencies went into a short freefall - I doubt they would all decline at the same rate. BTW, are any currencies still on a gold-standard?

How can they all go into freefall currency is a relative measure i.e. they are all measured against each other, so if they were all equally weak they would all stay the same (ignoring exceptional factors such as carry trade and petro currency ).

Graham_Devon

The banks have already been saved from going bust. QE does not save them, and wouldnt. Bailouts save them.

The QE measures simply take their bad debts and make them vanish, from what I have read that will be going on, i.e. what this stage of QE is aimed at.

It's like everyone in the UK all of a sudden having their housing / rental payments paid on their behalf, but keeping their wages. Suddenly the nation has a whole load of extra money in their pockets each month (well those paying mortgages / rent).

Apart from in this scenario, it means that, say for instance I went to have a loan for 5k. The bank turns me down, they cant afford it. After QE, they say, here have 5k. That 5k was not avalable before, it is after QE. That, in itself is increased money supply, money that was not there before, suddenly out there in the economy, becuase I will be spending it (thats the idea of loans obviously).

So that money I couldnt spend, but wanted to, all of a sudden I can spend and put out into the economy.

That, in essence is increasing money supply. Increasing money supply = printing money.

If anyone can say it's any different, I really would like to discuss it, I don't want constant insults, but I don't know how there is any other way this could be described. If you read what they are trying to do, it's increasing lending.

Basically what they are doing is giving a load of extra cash to the banks (by relieving them of their bad assets), to lend to us, for us to spend. Extra money supply into the economy.

My biggest problem, as I have said, is I don't personally think that the money will actually get to us. My other problem is increasing the debt, again, which seems a little silly, but I suppose in this soceity as it stands, people need credit to live. (As well as business's...which a lot of this will be aimed at).

But seriously, I cant think of it as anything other than increasing money supply. Making money that will never be seen again (bad debt) dissapear and allowing "new" money to be spread around via loans is, IMO, nothing more than increasing money supply....by creating money from nothing, to make bad stuff dissapear into nothing.

chucky

I think you've taken it to an extreme - it's not (and i hope it's not) going to be a constant supply of money. it would be temporary measure to improve liquidity not to clear debts. if it's anything else it's when issues start.

and i don't know if the money will get to us - we just have to expect that we will.
otherwise nothing has been solved and you expect the people in power to want to solve this economic climate.

StevieJ

QE is a response to deflationary pressures that itself a response to a reduction in the money supply (because of a reduction in credit). The QE will create money to buy illiquid financial instruments off the banks and enable then to increase lending and thus increase the money supply back to something like it was before the CC. In theory
May be completely wrong but that is my understanding :cool: When the credit crunc eases the BOE hopefully will reverse this process, I think

Graham_Devon

It doesnt really matter if it's constant or not. It's still new money available (or thats the theory and how they are selling it).
Either way, its the same as printing money.

chucky

Graham_Devon wrote: »

It doesnt really matter if it's constant or not. It's still new money available (or thats the theory and how they are selling it).

and the money supply can be reduced in the future - just like Baroness Thatcher did...

Graham_Devon

chucky wrote: »

and the money supply can be reduced in the future - just like Baroness Thatcher did...

Yep, it can. But that's not what we were talking / arguing about

mewbie_2

You doomies can't take anything as good news. How can MORE money be bad? I've read a lot about this in the Sun, two paragraphs all about money and stuff. Basically, if we print more money, we have more money. It's so simple. More money to spend, more money on wages, more money on everything. Therefore, ipso bleedin' facto, we have extra money in our pockets. If I had a fiver yesterday, then today I might have a tenner.

And how can that be bad? Lighten up dudes.