End of QE

damanpunk

Cleaver wrote: »

We have lots of friends with kids. They have debt, as we all do to some extent, although I don't think many are 'choking' on it. And like your friends they will be worried about paying their mortgage and keeping their job to a certain extent. Aren't we all in a recession? It's only natural. The truth of the matter is that the vast majority of them will keep their jobs and be able to pay their mortgage.

And haven't kids always been expensive? And haven't people always worried about losing their jobs and paying their mortgage in a downturn or recession? I guess the counter argument to that is that it's different this time and that people are funding their lifestyle through debt, which I take on board.

Thank god you use this board Cleaver, you always say similar to what I am thinking (and what I believe the vast majority of the public would think).

P.s. think you need to update your recession bingo, loads of the phrases have been coined already this year.

damanpunk

StevieJ wrote: »

Don't be ridiculous, it is all about the Piigs especially Greece, the Ftse is one of the best performers today

BTW youngsters are not very happy with you :eek:

"baby boomers reveal themselves to be simply the most spoilt generation in the history of the entire planet", "a parasitic generation", "thanks for looking the other way", "it's a generational mugging".

http://www.guardian.co.uk/money/2010/jan/31/unemployed-graduates-credit-crunch-andrew-hankinson

Housing !!!!!philes.

Remember, debt is not wealth.

fc123

StevieJ wrote: »

Don't be ridiculous, it is all about the Piigs especially Greece, the Ftse is one of the best performers today

BTW youngsters are not very happy with you :eek:

"baby boomers reveal themselves to be simply the most spoilt generation in the history of the entire planet", "a parasitic generation", "thanks for looking the other way", "it's a generational mugging".

http://www.guardian.co.uk/money/2010/jan/31/unemployed-graduates-credit-crunch-andrew-hankinson

Fantastic article..thanks for linking. It could almost have it's own thread spin off from it.

I am now going to be a really annoying older person and e-mail it my 22 yr old son to read.:o

HAMISH_MCTAVISH

Thrugelmir wrote: »

QE has allowed the Government to continue to borrow money without tapping the money markets or raising taxes. So people have more money in their pockets than they otherwise would, so are able to buy assets if they so wish , with the added advantage that interest rates are low if they can borrow the money.

So this tax year around £180 billion has been added to the UK's credit card. All of which will be paid back in the future.

I'm not sure which is sadder, the fact that a seemingly well educated person can post such an obvious lie, or the fact that so many other seemingly well educated people believe it.

QE is nothing more or less than an adjustment of the supply of liquidity in the economy, achieved by creating money out of thin air, and using it to buy assets already in existence.

It is not a loan, it does not have to be paid back.

At a future date when there is a surplus of liquidity in the economy, the liquidity will be withdrawn by selling the assets and the proceeds of sale "destroyed".

Or they could just as easily choose to leave it there until such time as inflation renders the value of the assets held trivial, and then withdraw it.

Thrugelmir

Hamish your posts so are normally so well reasoned. Yet to resort saying something is a lie.

I'm not sure which is sadder, the fact that a seemingly well educated person can post such an obvious lie, or the fact that so many other seemingly well educated people believe it.

Basic maths lesson. Forecast Gilts Issusance

22nd April 2009

The government plans to issue £220 billion worth of gilts in 2009-2010 to fund the £175 billion of public borrowing the chancellor announced in today’s budget.

http://www.fundstrategy.co.uk/news/budget-huge-gilt-issuance-to-fund-public-borrowing/184975.article


We all know that £200 billion of gilts have been bought under QE.

So £220 billion sold less £200 bought = £20 billion net issusance.

= £200 billion pumped into the economy.

The taxpayer has has a free lunch during the 2009/10 tax year.

On your other points.

It is not a loan, it does not have to be paid back. - the Chancellor addressing the International Money Markets " we are inflating the UK out of its financial mess". Soros will be rubbing his hands with glee. Destroying confidence isn't going to sell £800 billion of Gilts over the next 5 years.

At a future date when there is a surplus of liquidity in the economy, the liquidity will be withdrawn by selling the assets and the proceeds of sale "destroyed". - The BOE holds around 90% of the market in Gilts with a maturity of under 2 years. So the debt will have to be refinanced to roll it over. Where is this liquidity going to appear from?
Or they could just as easily choose to leave it there until such time as inflation renders the value of the assets held trivial, and then withdraw it.
- Read above.

As one of MSE's great economic guru's. How is the UK plc going to repair its balance sheet? Build up wealth in houses then remortgage them to foreign investors?

ManAtHome

Hamish does seem to have a blind-spot about the DMO->Banksters->BoE cycle (which is just on the edge of EU-legal as long as Merv doesn't link to WeBuyAnyGilt.com in his sig).

HAMISH_MCTAVISH

Thrugelmir wrote: »

Forecast Gilts Issusance

All you are doing is looking at the net position, and conflating activity between the primary and secondary markets, which is horribly oversimplistic and makes the erroneous assumption that activity was conducted on a replacement basis, rather than an additional basis.

If you think for one second that the UK, or any other country with a AAA rating, would have had any trouble issuing those gilts into the face of the deepest global recession since the 30's, when investors the world over were piling into anything offering a modicum of security, you are sadly mistaken.

If we had not done QE at all, we would still have been able to offload the newly issued primary market gilts. (although granted, perhaps on slightly less favourable terms)

But all QE has really done, is replace already existing and issued old gilts, being held by financial institutions, with newly created cash which they can lend out instead.

When liquidity returns, the gilts will be sold, reducing liquidity in the markets, and the returned funds destroyed.

It is simply a liquidity solution, for a market that was starved of liquidity.

It is not monetisation of debt via the back door.

Nor is it "a loan, which has to be paid back".

carolt

ManAtHome wrote: »

Hamish does seem to have a blind-spot about the DMO->Banksters->BoE cycle (which is just on the edge of EU-legal as long as Merv doesn't link to WeBuyAnyGilt.com in his sig).

I'm thanking you because it's a Friday night, although I haven't the faintest idea what your post meant.

ManAtHome

HAMISH_MCTAVISH wrote: »

If we had not done QE at all, we would still have been able to offload the newly issued primary market gilts. (although granted, perhaps on slightly less favourable terms)

But all QE has really done, is replace already existing and issued old gilts, being held by financial institutions, with newly created cash which they can lend out instead.

Really - so why cough up £200 billion to buy the gilts instead of (say) £10 billion to cover the 'slightly less favourable terms'. We could have used the extra £190 billion to employ several million people making Harry Hill Knitted Charaters to flog to the Chinese... But - oops, govt has spent the extra £190 billion instead to ...errrm 'lock in growth for a decade of prosperity for hard-working families' or something.

Newly-created cash lent out? Where, to whom - M4 seems to be going down rather than up - pesky foreigners cashing out..?

HAMISH_MCTAVISH

ManAtHome wrote: »

Really - so why cough up £200 billion to buy the gilts instead of (say) £10 billion to cover the 'slightly less favourable terms'. ..?

Because that would not increase liquidity.

They didn't buy freshly issued gilts. The merely removed older gilts from the market, replacing them with cash, which financial institutions can use to do whatever they want with. Whether that is directly lent, or used to shore up balance sheets, which then allows for future lending, is irrelevant.

If anything, you may have a case to make for large issuances of gilts crowding out other lending, and sucking up liquidity from the markets, which QE has averted last year.

But that is not the same thing at all as assuming debt has been monetised, which is the usual tack of the QE sceptics.