Officially in recession

kabayiri

I'd contend that as a nation we spend too much on non-productive elements in the economy (like welfare) relative to those which generate growth (support for exporters, infrastructure, training, r&d).

I suspect I am not alone on this view. The issue is how to rebalance the economy though? It's undoubtedly a painful process, and will effect large sections of the populace. Politicially, it could be akin to slitting your own throat.

michaels

So what about using QE to invest directly in infrastructure, could use projects that are effectively self financing like toll roads etc to avoid scaring the credit markets and building white elephants like High speed rail lines. Could obviously leverage this with private capital as well but avioding PPI type arrangements of course when looking at investment 'earnings'. QEII bridge might be an excellent example.

Other areas might be upgrading buildings to reduce energy usage (also might earn some carbon credits), could be paid for via utility bills and providing boradband access paid for by users.

Edit: Trick is obviouslyt to seperate ownership (public) and operation (private) in much the same way as sovereign wealth funds do.

HAMISH_MCTAVISH

Graham_Devon wrote: »

Ok, so a trillion squids all go into a new bank, which I assume offers low rate lending, and has lending targets.

Pretty much.

A bank that functions as a bank and allows monetary policy to actually work, instead of being sabotaged by the current lot.

I can see why this would sort a lot of issues in the housing market

And the wider economy.

I'd actually suggest that lending should be evenly split between consumers, small businesses and the housing market.

(for a VERy short period of time until what I will discuss in a minute takes over).

You fail to understand. Again.

A kick start is all that is required. Once you have enough growth, it becomes self sustaining.

But I'm wondering how sustainable such a bank would be, considering the knock on effects it would have to other markets.

The knock on effects you suggest are just wrong. And you haven't mentioned the positive ones.

As you say, it would be completely against competition laws. You've just moaned about cartels, and now suggest we railroad over all banks and start a new one with a trillion squids.

It may well be against competition laws.

But the solution to fighting cartels is more competition, not less.

It would also completely undermine investors in banks, such as pension funds etc and probably cripple them.

Why?

Can you explain the mechanism through which that would occur?

Are you saying that more competition in the lending markets would cripple existing lenders?

Amongst a whole heap of other problems

.

Like?

So I believe that could be ruled out as a none starter...as obviously it simply wouldn't work, and would actually cause a massive problem with investors.

Actually, it would work very well.

The bit you fail to understand it this.....

- Lenders and their investors will be crippled more if the economy keeps tanking, than by any short term competition in the lending markets to get the economy moving again.

The helicopter theory may work to some extent, and is a much better option if a QE option HAS to be used. Doubt it will happen without severe desperation though.

Amazing how much resistance there is to simple ideas that would work.

Personally, I'd rather see no further QE at all. Why? Put bluntly, it didn't work did it. It only held things off for a while. I'd rather get this whole thing done and dusted instead of being sqeezed further every year in the name of "making things better".

Either stimulus works or it doesn't.

If it can work, and it hasn't, then clearly the problem is just that you haven't done enough of it.

If it can never work, and only ever "kicks the can down the road", then America is screwed and my point about no sustainable recovery without a housing market recovery still stands.

So which is it?

Graham_Devon

I see were back to your leading questions where you have already provided the answers but have failed to take into account any other answers.

As for the investors, I really cannot believe you fail to see how this would destroy investments.

If you create a "bank" who lends out cheap money, that's also easier to get than money from the "normal" banks, then why would people use normal banks?

Why would we not all switch our mortgages to the new bank that will offer us lower rates and more favourable terms? Therefore, what happens to the current banks and their investors?

shortchanged_2

Graham_Devon wrote: »

Why would we not all switch our mortgages to the new bank that will offer us lower rates and more favourable terms? Therefore, what happens to the current banks and their investors?

Perhaps Hamish would prefer to see a monopoly instead of a cartel.

Emy1501

Would the bank have any uw criteria? Would it have to convince the markets that it likely the money would be paid back or is this just printed money? Who would be allowed to borrow this cheap money? I suspect we would all want some of it would n't we?

HAMISH_MCTAVISH

Emy1501 wrote: »

Would the bank have any uw criteria? Who would be allowed to borrow this cheap money? I suspect we would all want some of it would n't we?

I don't think anyone is suggesting that such a bank would have to be abnormally cheap, or abnormally loose with lending standards..

Just that it would lend at normal rates and terms without the funding constraints currently preventing lending.

Would it have to convince the markets that it likely the money would be paid back or is this just printed money?

Printed money, but it would have to be paid back eventually.

What I'm suggesting is reasonably normal lending, that fills in the gaps where the banks are not currently doing their job.

So for example in the case of mortgages a 5% to 15% deposit, less than 5.0 LTI, rates of between 4% and 5.5%, and at least the UK average credit score required. No self cert, No I/O, etc.

If you have a better deposit you can already get better rates elsewhere, and that would continue.

So no business would be taken from existing lenders, as they're pretty much not lending to these people now.

In the case of small business and consumer lending, similar common sense, historically normal, lending standards would apply.

Graham_Devon

HAMISH_MCTAVISH wrote: »

What I'm suggesting is reasonably normal lending, that fills in the gaps where the banks are not currently doing their job.

Dress it up how you like Hamish.

Theres nothing normal about it however. Your definition of "normal" appears to be getting wider and wider from anyone elses definition. You appear to assume banks have a "job to do" and they are currently not doing it.

I was interested at the start, hence asking how you would do better. But seriously, these are your plans? Railroading over the free market, inventing £1tn, and then handing it out at better rates to everyone, and it "may" need to be paid back, though you haven't quite decided.

You are having a giraffe mate, and looking very silly while doing it.

Every solution you appear to come up with simply revolves around one thing. Lending more, and screw any consequences.

HAMISH_MCTAVISH

Graham_Devon wrote: »

Your definition of "normal" appears to be getting wider and wider from anyone elses definition.

My definition is what is normal.

We all accept the crazy 125% self cert liar loans at peak were abnormal. So they should not return.

But normal lending must inevitably return.

You appear to assume banks have a "job to do" and they are currently not doing it.

Of course they do.

That's why they exist.

I was interested at the start, hence asking how you would do better. But seriously, these are your plans? Railroading over the free market, inventing £1tn, and then handing it out at better rates to everyone,

I've said no such thing.

You just like to characterize it that way because you're scared sh1less such a plan would work.

and it "may" need to be paid back, though you haven't quite decided.

Definitely going to have to call you out on that one.

Outright lie.

You are having a giraffe mate, and looking very silly while doing it.

I take it "silly" is the new "desperate".

You really must try debating without throwing in all the childish insults. One day perhaps.....

Every solution you appear to come up with simply revolves around one thing. Lending more, and screw any consequences.

And every "solution" you come up with involves flushing the economy down the toilet and making millions more people unemployed just so we can start from a much lower base.

shortchanged_2

Ahhhhhh.

You can just smell the desperation.:coffee: