US begins Quantative Easing

Reaper

I'm a bit surpised that nobody has mentioned the US has started to do QE too. I think it's significant news with so many countries holding dollar reserves, so I'll say it...

the US Federal Reserve announced a plan to buy $1.2tn (£843bn) of debt to boost its economy.

http://news.bbc.co.uk/1/hi/business/7952319.stm

Graham_Devon

Might see the pound recovering a little, hopefully.

mr_fishbulb

Graham_Devon wrote: »

Might see the pound recovering a little, hopefully.

It has against the dollar a little already

http://newsvote.bbc.co.uk/1/shared/fds/hi/business/market_data/currency/11/12/intraday.stm

mewbie_2

I don't want to read a load of boring (to me) economics so this is a rhetorical question. How can you buy your own debt? It feels to me like the government saying time will go backwards for a short period every Thursday.

btw I know I have been a bad MSEer because there have been so many threads on this and I haven't been paying attention.

Oh and can we stop the picking on typos? It's taking me longer to post because I have to be sooo careful.

SGE1

I don't think I'm quite ready to write a dissertation on the implications of QE, but all in all, I'd say it's a logical move, here and over there. Good luck to them.

tuggy12

mewbie wrote: »

attention.

Oh and can we stop the picking on typos?

I would like to but sometimes it's hard to ignore, especially when the OP uses a word in the title that's not even in the dictionary: Quantative

Do you think he meant to say: Quantitative

mewbie_2

tuggy12 wrote: »

I would like to but sometimes it's hard to ignore, especially when the OP uses a word in the title that's not even in the dictionary: Quantative

Do you think he meant to say: Quantitative

Well I knew what he meant, and I knew I didn't understand it. Just as well I didn't bother Wikiing it.

simple2rent

mewbie wrote: »

I don't want to read a load of boring (to me) economics so this is a rhetorical question. How can you buy your own debt? It feels to me like the government saying time will go backwards for a short period every Thursday.

how you buy your debt...

Basically the Government has already borrowed money, they did this through what they call issuing bonds. The Government then pay a fixed interest per year to those who purchased the bonds.

Now the Government are creating money (effectively printing money) and using this to buy back the bonds. This is the quantitative easing just announced in UK where they created £75bn to buy back bonds and other types of debt.

For example, if you or I printed some money and gave it to our lender to pay off the mortgage we will have effectively done the same thing ... except that it is illegal for us to print money, only the government can do that!

Fred1_2

For example, if you or I printed some money and gave it to our lender to pay off the mortgage we will have effectively done the same thing ... except that it is illegal for us to print money, only the government can do that!

It's not illegal to print your own money, it;s only illegal to print counterfeit money. Anybody can write a promissory not promising to pay the bearer the sum of £x sterling and sign it and date it. Of course, no one is compelled to accept such a promissory note as payment.

Reaper

tuggy12 wrote: »

I would like to but sometimes it's hard to ignore, especially when the OP uses a word in the title that's not even in the dictionary: Quantative

Do you think he meant to say: Quantitative

Shucks I always get that wrong. I reckon my version is easier to say though.

RetroBob

Haha, I love the principle of borrowing, and then to pay it off you just print cash, turn around and give it back! Seems like cheating to me but what do I know, I'm a taxpayer.

So, what are the risks?