Darling May Grant BOE Money-Printing Powers in March 5 Letter

Cannon_Fodder

(Apologies if already posted, I must have missed it)

http://www.bloomberg.com/apps/news?pid=20601102&sid=aRH1z3cOp4EE&refer=uk

" March 3 (Bloomberg) -- Chancellor of the Exchequer Alistair Darling is likely to give the Bank of England powers to print money to revive the economy this week in an exchange of letters with Governor Mervyn King.
The correspondence will be published on March 5, the same day as the bank’s next interest-rate decision, according to a Treasury official. Darling said in an interview in the Daily Telegraph published today that the central bank has the “levers” to print money and policy makers may decide this month that they need to use them. "

also;
http://news.bbc.co.uk/1/hi/business/7924234.stm


"Most analysts believe the Bank will cut rates to 0.5% from 1%. An announcement is expected at 1200 GMT on Thursday.
As rates get closer to zero, the Bank runs out of room to cut the cost of borrowing to stimulate the economy. As a result, economists suggest that it will opt to expand the money supply by up to £150bn ($212bn). "


Have they left it too long?
Will it make a difference?
How will we tell either way?

The economy not disappearing down a black-hole wiil be lauded as proof of wonderful management of the situation, I guess.

Wookster

Cannon_Fodder wrote: »

How will we tell either way?

This is the major question.

What I find so worrisome about this new leap in the dark is that there is no policy document at all!
No document to state how much will be pumped into the banking system
- no clarification of what assets will be purchased
- no clarification of how success will be measured
- no clarification of how excess liquidity will be mopped up if the policy is deemed to succeed
- there does not seem to be a forum for communicating the discussions around QE.

Not only is this a major departure from normal economic policy, it is being conducted in the most opaque and unaccountable manner possible.

stevetodd

Wookster wrote: »

This is the major question.

What I find so worrisome about this new leap in the dark is that there is no policy document at all!
No document to state how much will be pumped into the banking system
- no clarification of what assets will be purchased
- no clarification of how success will be measured
- no clarification of how excess liquidity will be mopped up if the policy is deemed to succeed
- there does not seem to be a forum for communicating the discussions around QE.

Not only is this a major departure from normal economic policy, it is being conducted in the most opaque and unaccountable manner possible.

I think this is because we are going into unknown territory and maximum flexibilty must be available in case things start to go wrong. Also they will I suspect want to ease gently into this and may wish to have the flexibility to increase intensity, but only after seeing how it is going after it is has started, rather than making restrictive decisions before we even start.

lostinrates

You know what? I'm glad. I think this has been handled poorly from the start, and I know I am in the minority, and ill educated at that. But seeing they came down this route and we all knew it was coming and the dread of seeing our savings eroded has been so real and frankly for me frightening I just feel glad they are going to start. The reality might be less frightening than the anticipation had been and if not it can't be worse than my worst fears. At least our Euro savings might go further.

BlondeHeadOn

stevetodd wrote: »

I think this is because we are going into unknown territory and maximum flexibilty must be available in case things start to go wrong. Also they will I suspect want to ease gently into this and may wish to have the flexibility to increase intensity, but only after seeing how it is going after it is has started, rather than making restrictive decisions before we even start.

Shock, horror! You mean...... the government has absoulutely no idea what it is doing???

:eek:

I am not reassured......

stevetodd

BlondeHeadOn wrote: »

Shock, horror! You mean...... the government has absoulutely no idea what it is doing???

:eek:

I am not reassured......

But does anyone when they head into unknown territory? It's better go in quietly like a ninja rather than a bull in a china shop.

At first I was horrified by the prospect of QE but now I actually think it's the right thing to do.

Cannon_Fodder

stevetodd wrote: »

I think this is because we are going into unknown territory and maximum flexibilty must be available in case things start to go wrong. Also they will I suspect want to ease gently into this and may wish to have the flexibility to increase intensity, but only after seeing how it is going after it is has started, rather than making restrictive decisions before we even start.

But even that outlook on how to do it IS some sort of plan...

Who/when/where have they sat down and reached this (possibly) sensible approach.

I say possibly, because it takes months to see the effects of small changes on an economy our size, so QE could go on for years and years with the drip-feed approach.

If we are going to bother, throw £100Bn at it and be done with it.


Oh, on the unknown territory comment - I know we didn't have much idea about how to get OUT of Iraq, but did they decide to go IN while not knowing how...?

They should have contingency plans for all flavours of eventualities - where to land in Iceland was probably considered at some point...

stevetodd

Cannon_Fodder wrote: »

But even that outlook on how to do it IS some sort of plan...

Who/when/where have they sat down and reached this (possibly) sensible approach.

I say possibly, because it takes months to see the effects of small changes on an economy our size, so QE could go on for years and years with the drip-feed approach.

If we are going to bother, throw £100Bn at it and be done with it.


Oh, on the unknown territory comment - I know we didn't have much idea about how to get OUT of Iraq, but did they decide to go IN while not knowing how...?

They should have contingency plans for all flavours of eventualities - where to land in Iceland was probably considered at some point...

They will but it will be fluid just like a plan in a chess game

Wookster

stevetodd wrote: »

They will but it will be fluid just like a plan in a chess game

Not exactly confidence inspiring for one of the world's "premier economies" is it?

stevetodd

Wookster wrote: »

Not exactly confidence inspiring for one of the world's "premier economies" is it?

I would prefer them to be doing something rather than running around in very small circles doing nothing. Let's face it, these are desperate times.

ps no I am not desperate I mean the economy as a whole

StevieJ

stevetodd wrote: »

I would prefer them to be doing something rather than running around in very small circles doing nothing. Let's face it, these are desperate times.

ps no I am not desperate I mean the economy as a whole

They have actually done something, interest rates 5.75% down to 1% (or0.5%), I am not sure that we have seen the full effects of this yet.