MSE News: Base rate held and no further QE

Treadstone2.0

Base money is expanding everytime they add another £50Bil to the supply. Outstanding revolving credit is collapsing as people default or pay off debts faster than they borrow new debts. Very worrying when you consider 300 year low base rates.

RenovationMan

Treadstone2.0 wrote: »

Base money is expanding everytime they add another £50Bil to the supply. Outstanding revolving credit is collapsing as people default or pay off debts faster than they borrow new debts. Very worrying when you consider 300 year low base rates.

Do you advise buying precious metals?

Pincher

QE is operating, in the sense that money is pumped into the banks, but just sits there to bolster their balance sheets. The government has to prod them to lend.

QE is not working, in the sense that it has not prevented a double dip recession.

Keep adding QE means we end up like Michael Jackson, overdosing on pain killers, because it has less and less effect, so you take more and more of it. Nobody dares to say let's go cold turkey and kick the QE habit, because it's the same as telling the Greeks to kick the debt habit. Somebody has to put a stop to it, though.

ILW

RenovationMan wrote: »

Well we've not got deflation so I'd say QE was working ok.

Deflation is not the disaster is is made out to be.
Short term it probably does more good than harm.
Are say lower energy costs really a bad thing?

Graham_Devon

RenovationMan wrote: »

Well we've not got deflation so I'd say QE was working ok.

We appear to have moved from "QE hasn't caused inflation, it's all external" to "well, QE avoided deflation (thereby meaning it causes inflation)".

All in the space of a year, by the very same people.

RenovationMan

ILW wrote: »

Deflation is not the disaster is is made out to be.
Short term it probably does more good than harm.
Are say lower energy costs really a bad thing?

Except that the deflation would be on an individual country basis, not on a global basis and so oil and gas would be just as expensive.

I'm amazed that you think deflation is a good think, even short term (how you could control it so that it's short term is beyond me), I can only think that it's because you don't understand what deflation is. Here is a handy guide from the BBC:

http://news.bbc.co.uk/1/hi/business/7754487.stm


"Falling prices might sound great for consumers, but in fact this is bad news for everyone.

Economist and author of 'Credit Crunch', Graham Turner, says it can lead to a vicious circle of decreased spending and increased unemployment.

People wait as prices fall for goods to get cheaper before buying and in fact they become the buyers' strike. Then that creates more deflation, more job losses and so on.

The reason why economists also worry about deflation is because it's much harder to combat than inflation.

If inflation rises there's no limit to how far you can raise interest rates, with deflation there is a limit to how far you can cut interest rates," he added.

The most memorable deflation was during the Great Depression of 1929."

RenovationMan

Graham_Devon wrote: »

We appear to have moved from "QE hasn't caused inflation, it's all external" to "well, QE avoided deflation (thereby meaning it causes inflation)".

All in the space of a year, by the very same people.

LOL, You really, really don't understand the mantra of: "[STRIKE]Speak[/STRIKE] post less, [STRIKE]listen[/STRIKE] read more" that I keep saying to you.

You're so quick to try and score points that you comment on things you have no idea and just make a clown of yourself.

Graham_Devon

RenovationMan wrote: »

LOL, You really, really don't understand the mantra of: "[STRIKE]Speak[/STRIKE] post less, [STRIKE]listen[/STRIKE] read more" that I keep saying to you.

You're so quick to try and score points that you comment on things you have no idea and just make a clown of yourself.

So you don't deny any of what I stated then?

I just find it mildly amusing that around the time there was talk, and a sligth fear of interest rates rising, ALL the inflation was VAT and external which we had no control over. QE did not add to it. (there are numerous threads....as you well know, with this on).

However, now that interest rates are going no where, QE is working!! Just like that, it's keeping us out of deflation! By definition, you are now reverting to state QE is inflationary.

I don't need an argument about it, nor do I need to re-vist a playground, I'm just stating what I see, and stating it's fairly amusing how a policy and it's effects can change dependant on how you feel it may benefit you at the time.

shortchanged_2

So a question for renoman, it's just a shame he can't see it.

What is one of the main causes of the lack of consumer spending currently happening?

OK let me answer that for you. It is inflation without wage growth keeping up.

Result, a squeeze on household budgets and people don't spend = recession.

A period of deflation in this country now would be beneficial as people are more likely to increase their discretionary spending.

Masomnia

shortchanged wrote: »

A period of deflation in this country now would be beneficial as people are more likely to increase their discretionary spending.

Even if company profits and thus wages start falling?