What will happen when QE stops.

Wookster

QE is really the Central Banks (BoE & Fed) taking the place of international money markets.

When QE is withdrawn money will still be owed to banks and other creditors. QE isn't going to change that.

lemonjelly

inspector_monkfish wrote: »

Absolutely true.
Books are balanced right up until as late as possible, then any excess liquidity is off loaded back to the Central Banks.

The Bank I work for is a relativley small player in the InterBank Markets, but we have just offloaded almost £2billion to BOE, about USD1billion to the FED, and about EUR500million to ECB. They are keeping it nice and warm for us, until we need it all or some of it back!

So goodness knows what the larger players are doing....

This is all cash we have picked up from lenders that don't have the ability to lend to Central Banks, so have to give it to the likes of us.


I wouldn't know so much about the mortgage market.

Forgive me - is this normal/usual?

If not, when did it change?

Slightly OT, how do you feel about the shifting of such volumes of £?

inspector_monkfish

lemonjelly wrote: »

Forgive me - is this normal/usual?

If not, when did it change?

Slightly OT, how do you feel about the shifting of such volumes of £?

No, its far from normal !!

Usually that money would be passed around amongst many other Banks active in the money markets, making the markets alot more liquid.

It started about 12mths ago, and the amounts lodged with Central banks has got bigger and bigger as the months have gone by.

The volumes mean nothing. When you have done it for long enough, it becomes second nature. Believe me, that is only tiny compared to other Banks. (sorry if that sounds flippant :cool:)

purch

Forgive me - is this normal/usual?

No it's highly unusual.

Before the 'credit cruch', and before late 2008 it would never have happened.

In fact the most usual time for the Central Banks to be involved in the Overnight money market would be to provide funds for a Bank that had miscalculated was short, rather than to soak up all the excess funds.

Currently the whole money market is way out of Balance.

lemonjelly

inspector_monkfish wrote: »

No, its far from normal !!

Usually that money would be passed around amongst many other Banks active in the money markets, making the markets alot more liquid.

It started about 12mths ago, and the amounts lodged with Central banks has got bigger and bigger as the months have gone by.

The volumes mean nothing. When you have done it for long enough, it becomes second nature. Believe me, that is only tiny compared to other Banks. (sorry if that sounds flippant :cool:)

I appreciate your answer Inspector.

No it doesn't sound flippant. Personally, I break into a sweat if I crack out a tenner, but that's cos I'm not fantabulously wealthy!

However, working in debt advice (amongst other subjects), when I started, £500 was classed as "high". This started to change v quickly, to the extent that now, it ain't juicy unless the individual has debts approaching more than £100k.

Suppose you become accustomed to it - just numbers on a page.

I have to remind myself that it's peoples lives sometimes (though that said, they usually seem less bothered than me!)

FWIW personal debts above £50k (not including mortgage) aren't uncommon for people in my line...

Thanks again for the answer...

inspector_monkfish

lemonjelly wrote: »

I appreciate your answer Inspector.

No it doesn't sound flippant. Personally, I break into a sweat if I crack out a tenner, but that's cos I'm not fantabulously wealthy!

However, working in debt advice (amongst other subjects), when I started, £500 was classed as "high". This started to change v quickly, to the extent that now, it ain't juicy unless the individual has debts approaching more than £100k.

Suppose you become accustomed to it - just numbers on a page.

I have to remind myself that it's peoples lives sometimes (though that said, they usually seem less bothered than me!)

FWIW personal debts above £50k (not including mortgage) aren't uncommon for people in my line...

Thanks again for the answer...

exactly, just numbers on a screen/page...

interesting comments you make about the personal debt business - quite scarey infact!!

lemonjelly

I started in 1998. Effectively working through the boom - watching the debt get bigger & bigger.

Freinds & I have been saying for years how unsustainable the level of consumer borrowing became. Not suprised it hit the skids, just suprised at how long it took.

It has become a regular thing to see people daily with debts of £40-50k.

D'you know what's wierd, that the lower end (ie debts of £6k) tend to be more bothered about it.

Scary that people can have accessed 4-5-6 x salary (or even more) through unsecured creditors. Max one source of credit, move to another.

Worse, is the debt level not included in this (rent/mortgage/council tax/utilities etc etc)

Numbers on a screen....Like you say

That said, dunno how I'd cope shifting £9 million or something like that!:D

inspector_monkfish

lemonjelly wrote: »

I started in 1998. Effectively working through the boom - watching the debt get bigger & bigger.

Freinds & I have been saying for years how unsustainable the level of consumer borrowing became. Not suprised it hit the skids, just suprised at how long it took.

It has become a regular thing to see people daily with debts of £40-50k.

D'you know what's wierd, that the lower end (ie debts of £6k) tend to be more bothered about it.

Scary that people can have accessed 4-5-6 x salary (or even more) through unsecured creditors. Max one source of credit, move to another.

Worse, is the debt level not included in this (rent/mortgage/council tax/utilities etc etc)

Numbers on a screen....Like you say

That said, dunno how I'd cope shifting £9 million or something like that!:D

i don't get out of bed for £9million !! ;)

its not my money. so i'm not worried



scarey stuff indeed about those debts :eek:

tomterm8

ad9898 wrote: »

I'm just intrigued by what the board thinks will happen to the economy/housing market when this stops. The BoE bought £3.5 billion worth of gilts yesterday and is planning on another £3 billion tomorrow, this must have effect when it stops.

My feeling is the small amount of optimism that has being going through the media is riding on the back of QE, net debt currently stands at £774.8bn, 54.7% of GDP. At some point the borrowing and QE has to stop, but what will be likely scenarios when it does ?

Well, personally I think that if badly executed it will set of another recession. It depends on how quickly you stop QE (essentially, I think this is the period of time the banks need to work through their writedowns and get well capitalised and profitable again) . We're talking at least five years to reverse the QE, maybe as much as a decade to repay the borrowing. Basically, every time you need to slow the economy, the government will withdraw some more money from circulation via tax instead of raising interest rates. IMHO.

97trophy

Alternatively, we could be sucked into the euro.

Scenario is still the same - a decade long depression.