What will happen when QE stops.

purch

For those that are interested, I have had this reply;

Thats a shock. :eek:












Would never have guessed you were called Ken.............

Snooze

purch wrote: »

Thats a shock. :eek:












Would never have guessed you were called Ken.............

Me neither. With a name like kennyboy I expected him to be called Dave.

:rolleyes:

Rob

Generali

kennyboy66 wrote: »

For those that are interested, I have had this reply;

[FONT=&quot]"Hello Ken[/FONT]

[FONT=&quot]To answer your first question, the Gilts concerned are held in a separate organisation called the Asset Purchase Facility Fund. This was established as a subsidiary of the Bank on 30 January 2009. Please see:[/FONT]

[FONT=&quot]www.bankofengland.co.uk/markets/apf/apfquarterlyreport0904.pdf[/FONT]

[FONT=&quot]Please also see the announcement by the Bank on 29/1/09, at:[/FONT]

[FONT=&quot]http://www.bankofengland.co.uk/publications/news/2009/005.htm[/FONT]

[FONT=&quot]As to your second question - yes, we get paid the coupons (ie the interest) from the Government.[/FONT]

[FONT=&quot]For general information on the Asset Purchase Facility, please see:[/FONT]

[FONT=&quot]http://www.bankofengland.co.uk/markets/apf/[/FONT]

[FONT=&quot]Kind regards[/FONT]


[FONT=&quot]

---

Original Message

---

[/FONT]
[FONT=&quot]From: ken[/FONT]
[FONT=&quot]Sent: Wednesday, June 24, 2009 1:16 PM[/FONT]
[FONT=&quot]To: Enquiries[/FONT]
[FONT=&quot]Subject: Enquiry about Quantitative easing[/FONT]
Hi,

What happens to the Gilts that the BoE purchases under the Quantitative Easing scheme.

Are they “retired” or do they still exist on the BoE balance sheet ?

Does the government still have to pay the coupon on these purchases ?

Thanks Kennyboy66 - that's pretty much the email I sent. I guess mine got lost in the system.

I wonder what happens to the coupons after that. Does the BoE pay a dividend to the UK Government as it's sole shareholder for example?

openside

I heard a rumour that QE is being used to purchase NEW GILTS because our gilt auctions were about to fail (had failed in fact) and that when the markets realise this is what is hapening (ie us printing money to finance the budget deficit) the nasty stuff and the rotating cooling device will intersect at a very high velocity

This must be a vicous rumour though as im sure one can find out easily exactly where the billions of QE money has already gone :-)

(though I couldnt it was as if its a secret!)

purch

I guess mine got lost in the system.

Thet probably noticed that it originated from the Colonies and thought..........."Damn republicans can mind their own business !!!!!"

JonnyBravo

Snooze wrote: »

Me neither. With a name like kennyboy I expected him to be called Dave.

:rolleyes:

Rob

Blimey Mike, you do say some daft things

:rolleyes:

kennyboy66_2

Generali wrote: »

Thanks Kennyboy66 - that's pretty much the email I sent. I guess mine got lost in the system.

I wonder what happens to the coupons after that. Does the BoE pay a dividend to the UK Government as it's sole shareholder for example?

I think from reading the BoE site, the Government has had to guarantee that they will cover any losses that the whole operation makes.

I think that when the process reverses then the loss on selling Gilts and other bonds will be mitigated by the interest income that will have built up.

Whatever the rights and wrongs of QE, at least it seems to be accounted for correctly, and gives no short term revenue benefit to Government (obviously bar the fact that it has reduced yields on newly issued debt).

Generali

kennyboy66 wrote: »

I think from reading the BoE site, the Government has had to guarantee that they will cover any losses that the whole operation makes.

I think that when the process reverses then the loss on selling Gilts and other bonds will be mitigated by the interest income that will have built up.

Whatever the rights and wrongs of QE, at least it seems to be accounted for correctly, and gives no short term revenue benefit to Government (obviously bar the fact that it has reduced yields on newly issued debt).

Accounting for it correctly is a good start TBH.

We live in interesting times.

tomterm8

Generali wrote: »

Thanks Kennyboy66 - that's pretty much the email I sent. I guess mine got lost in the system.

I wonder what happens to the coupons after that. Does the BoE pay a dividend to the UK Government as it's sole shareholder for example?

The BOE pays a dividend to the treasury on its operating profits. That is in the legislation. What interests me is the legal implications of the above post - it implies that the various schemes are actually run as seperate legal entities to the BoE. In which case, are the schemes granted some form of limited liability?

Austin_Allegro

Generali wrote: »

To be fair to the BoE you can be sure they've spoken about this and have at least some idea about where they want to go under various scenarios.

The trouble is, what is going on fiscally across most of the industrialised world has never been tried before in such a systematic and calculated way AIUI. This is a huge monetary experiment and nobody can know what the outcome will be as it's never been done before. They're not going to put on their website (as a hostage to fortune) what they're going to do if they don't know what is going to happen! They're sure as hell not going to spell out all the grisly possibilities like the UK going 'bankrupt', hyperinflation etc. Imagine the headlines:

"Hyperinflation 'possible' say bank bosses"
"'UK may be Bankrupt' - Tories call for Public Enquiry" (Reader offer - Free Tin Hat for Every Reader (Coupon on page 83)).

As Han Solo once said, "I've got a bad feeling about this".

Yes can you imagine how Paxo would cope with it:

'Mervyn King, is the UK going bankrupt?'
'Well Jeremy, it's a question of....'
'Is the UK going bankrupt?
'There's no definite answer but if I may...'
'Is the UK going bankrupt?'
'It's really a matter of fiscal sti...'
'Is the UK going bankrupt?'
etc