MSE News: Pensions and savers hit as Bank prints more money

Thrugelmir

bigadaj wrote: »

Banks had sales targets like clothes shops, and took about as much notice of people's financial standing as them as well.

Some banks did. Not all. There's a danger of painting the whole industry black. When those that caused the real issues are now demised or restructured.

oldvicar

IMO the main effect of QE is that by buying its own Gilts with money manufactured by the BoE, the government can pretend that it is managing to finance the public deficit, and patting itself on the back that it is doing so at historically low rates. The poor Eurozone countries don't have this luxury.

Is it just coincidence that the amount of QE is so similar to the amount of the public deficit?

There may be technical arguments as to whether or not the money is being 'printed' - when really it's just that 'reserves are created' - but it all seems the same to me as a layperson. As far as I know whenever governments have created/printed money to pay for their large structural deficts the results have always been ugly and inflationary.

MrMalkin

oldvicar wrote: »

As far as I know whenever governments have created/printed money to pay for their large structural deficts the results have always been ugly and inflationary.

This isn't true, the Allies ran up very large deficits during WW2 but in the immediate aftermath there was no high inflation or recession (which you'd expect as all the large military contracts ended and troops were demobbed). Instead there was a lengthy period of relative economic stability even as deficits came down.

A little mild inflation and some economic growth is enough to bring down deficits and nullify a lot of national debt. The UK still has some Napoleonic War debt on the books that has never been paid off, but 200 years of inflation has rendered it largely irrelevent.

MoneySaverLog

In the 1940's the average house price was around £500

Now it is around £160,000

That's inflation for you.

MrMalkin

Right, but wages have inflated at a roughly equivalent rate so that's a largely meaningless statement.

oldvicar

MrMalkin wrote: »

Right, but wages have inflated at a roughly equivalent rate so that's a largely meaningless statement.

In a thread about inflation damaging Pensioners and Savers, the fact that wages also inflate is a largely meaningless statement.

Thrugelmir

MrMalkin wrote: »

Right, but wages have inflated at a roughly equivalent rate so that's a largely meaningless statement.

Wages disconnected with house prices some years back. We are only partly through the process of them dropping back into line.

Pincher

In Greece, they stayed in power by bribing the electorate with borrowed money, until no more idiots will lend them money any more.

In other countries, where they can't simply lie about their public accounts, the idiots will catch on much quicker. Hence QE, where the government prints money to bribe the people, so they can stay in power.

In a democracy, the people with vision and drive don't get to run the economy, because they get booed when they demand proper auditing and enforcement, and nobody with money will sponsor their political campaign.

MrMalkin

Pincher wrote: »

Hence QE, where the government prints money to bribe the people, so they can stay in power.

It's not the government that's printing money, it's the Bank of England, which is not part of the government. George Osborne and Co have no control over what the bank does with interest rates or QE or reserve requirements.

bigadaj

MrMalkin wrote: »

It's not the government that's printing money, it's the Bank of England, which is not part of the government. George Osborne and Co have no control over what the bank does with interest rates or QE or reserve requirements.

...and the bank of England is guaranteed by...hm treasury.