Quantatitive easing and savings - what effects?

tradetime

FATHEROFTWO wrote: »

A few questions for anyone that has a clue what is going on?

If they are performing QE and purchasing back debt that they owed and it has no effect then the 150 Billion they have wiped off the national debt is a good thing for the economy as its free money ?

Don't really understand the question.

FATHEROFTWO wrote: »

If inflation goes up it will be because the price of imported merchandise cost more.....is this because the value of the pound has dropped ?

Inflation is a monetary phenomenon namely an increase in supply and velocity of money, rising prices are not inflation, but rather a symptom of inflation, so no not really, decrease in demand and lowered input costs will help to keep prices low.

FATHEROFTWO wrote: »

What is the opinion of the short term Pound /Dollar exchange rate ?If it goes down what downside are we talking about here ?

Anybodies guess really, but my imho Sterling is likely in a range of about $1.30 on the downside to $1.50 on the upside.

FATHEROFTWO wrote: »

I am going to the States in the summer and bought my dollars today at 1.33 dollar to the pound.Fortunately I bought some dolars a few months back when the rate was a lot higher

If America dont participate in QE then our currency has effectively devalued similar to what a rights issue does to to a share price or am I wrong ?

Moot point, US have already begun QE

tradetime

Steve_xx wrote: »

I think that the markets had already priced-in a reduction in UK base rates, as well as the likelihood of QE, and this is the reason that sterling seems stable. In addition. I feel it likely that the ECB will not be able to hold off from dropping their rates this month and this too will assist sterling.

Hard as it may be to believe, the EU could potentially be in more trouble than the UK, apart from the fact that countries such as Ireland, Greece, and Italy are in very bad shape, it seems their banking system is much more exposed to a rapidly destabalizing Eastern Europe than ours is, Eastern Europe will be the next shoe to drop for the Eurozone.

Steve_xx

tradetime wrote: »

Hard as it may be to believe, the EU could potentially be in more trouble than the UK, apart from the fact that countries such as Ireland, Greece, and Italy are in very bad shape, it seems their banking system is much more exposed to a rapidly destabalizing Eastern Europe than ours is, Eastern Europe will be the next shoe to drop for the Eurozone.

Yes I agree with you. This crisis could almost cause the european unity dream to unravel unceremoniously if the respective component countries feel that their fiscal policy is so enshrined in centralisation that their inability to act unilaterally in their national interest is so severley hampered that it is unacceptable. Time will tell. But I think that stormy weather lies ahead in the eurozone and I expect to see much disagreement on fiscal policy over the coming months and this will no doubt takes its toll in the form of hurt pride.

sabretoothtigger

I'd say euro and usa are worse off then we are but arent those two our major trading partners and so it will only drag us down too

tradetime

Spanglear wrote: »

After todays announcement of the BoEs intention to push ahead with "quantatitive easing" (or the virtual printing of money in lay terms), I am a little unclear on how this will affect savings in the long term. Is it yet more bad news for savers?

Already reeling after the harsh interest rate cuts of the past few months, do you think we now about to see savings eroded further by this new measure?


Your thoughts, Cheers.

to be honest, it's really hard, if not impossible to say. i know some people will be adamant that the end result is massive inflation, even hyperinflation. FWIW, my own view is that since it is more art than science, the likelihood is, assuming it works of course, they'll get the balance wrong and there will be a significant temporary spike in inflation as we come out of this recession, how temporary, I have no idea Beyond that who knows, nothing has been attempted on this scale before, there is no model to compare, what people forget, is that while they are pumping billions of dollars into the system as of last October it was estimated that approximately $29 trillion in welth had disappeared from the worlds stockmarkets, that's a pretty big hole to fill. So I don't think all is as cut and dried as some make out.

FATHEROFTWO_2

Sorry I will re phrase it.
In starting QE and effectively buying back government debt owed then the government have reduced the national debt.

Is this not a good thing provided that no other negative factors impact the economy and it is effectively created free money for the government ?

blizeH

Some good advice and information in here, thank you guys.

Still a little unsure as to what to do though; I'm thinking I should probably speed up the house purchase, just in case inflation goes massively above interest rates? Or is that a bad idea still..?

tradetime

But I think that stormy weather lies ahead in the eurozone and I expect to see much disagreement on fiscal policy over the coming months and this will no doubt takes its toll in the form of hurt pride.

For me the connotations of that are a bigger worry than anything else, as a species we have not progressed very far in how we like to settle our disagreement when pride is hurt. It may just be that we haven't seen the real storm yet.

tradetime

sabretoothtigger wrote: »

I'd say euro and usa are worse off then we are but arent those two our major trading partners and so it will only drag us down too

Agreed, that's where it gets difficult to work out who's worse off than who, for example, as I understand it the Euro banks are much more at risk to Eastern Europe, we have little exposure there, but how much exposure do we have to the Euro banks Everything is so interwoven in a global economy, and nobody it seems is sheltered.

Steve_xx

blizeH wrote: »

Some good advice and information in here, thank you guys.

Still a little unsure as to what to do though; I'm thinking I should probably speed up the house purchase, just in case inflation goes massively above interest rates? Or is that a bad idea still..?

On balance, I would say, that house prices have some way to fall yet. And so on that basis, if I were you, I would probably hold off buying for the moment and review again in six months.