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QE a "monumental" mistake
Graham_Devon
Posts: 58,560 Forumite
Suggested it will go down in history as per the title, as it's squeezed everyone, especially pensioners and workers.
May be Ros Altman, which many who like QE detest, however, she makes some good points. How can we possibly get growth when were supposed to keep cutting out spending to keep up with the rising costs of essentials?
You can't do both.
May be Ros Altman, which many who like QE detest, however, she makes some good points. How can we possibly get growth when were supposed to keep cutting out spending to keep up with the rising costs of essentials?
You can't do both.
http://www.guardian.co.uk/business/2013/jan/29/qe-monumental-mistake-pensions-expertsThe Bank of England's policy of pumping money into the economy has been a "monumental mistake", pensions experts have warned .
A committee of MPs heard that measures taken by the Bank to drive the economy had backfired by squeezing individuals' incomes – both pensioners and those in work – and forcing companies to divert cash into pension funds rather than investing.
Ros Altmann, pensions expert and director general of Saga, said current policies devalued pensioners' incomes, making them less willing to spend: "Quantitative easing and ultra-low interest rates have hampered the spending power of those in the economy who were not over-indebted and who would otherwise have spent money."
By pumping money into the system, QE also drives up prices, which hits consumer demand. Simon Rose of the campaign group Save our Savers, said: "QE is an inflationary policy, as [the bank admits]. With inflation running higher than the increase in wages, it's not just pensioners, everybody is feeling the pinch."
Altmann said ending the QE programme was much more likely to herald a period of growth than its introduction had done. "History will judge this as a monumental mistake," she said. "If we do not have any more quantitative easing, the economy will be freer to grow than if we do."
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Merves pension is index linked, what does he care?0
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Graham_Devon wrote: »Suggested it will go down in history as per the title, as it's squeezed everyone, especially pensioners and workers.
May be Ros Altman, which many who like QE detest, however, she makes some good points. How can we possibly get growth when were supposed to keep cutting out spending to keep up with the rising costs of essentials?
You can't do both.
No mention of saving the banking system though.
Without banks. Where would savers deposit their money.0 -
http://citywire.co.uk/money/bank-of-england-tells-pensioners-qe-hasnt-hurt-you/a613394The Bank of England has denied pensioners have lost out as a result of its quantitative easing (QE) programme despite annuity rates being pushed ever lower.
In a paper published today the Bank defended its decision to set interest rates at a historical low of 0.5% and create money totalling £375 billion to date – which is used mainly to buy UK government bonds, or gilts – saying it was the right decision and Britons would be worse off if this course of action hadn’t been taken.
Although QE has caused the price of gilts to rise, and yields to fall, which in turn has led annuity rates to fall, the Bank said QE has also led other assets to rise – including corporate bonds and equities – which cancels out the negative effects of gilt yield falls.
‘QE has caused the price of gilts to rise and yields to fall, in turn leading to an increase in demand for, and the price of, a wide range of other assets. That has lowered borrowing costs for companies and households and increased the net wealth of asset holders, both of which acted to stimulate spending,’ said the Bank.
The report looks at the way the Bank’s policies have affected those in defined contribution (DC) schemes approaching retirement. It admits annuity rates have been reduced, but said conversely the value of pension fund assets has increased.
On that basis the Bank said QE has had a ‘broadly neutral impact on the value of the annuity income’ if the pension pot is invested in bonds and equities. The Bank also states the impact on defined benefit (DB) pensions has been ‘neutral’.“The great enemy of the truth is very often not the lie – deliberate, contrived, and dishonest – but the myth, persistent, persuasive, and unrealistic.
Belief in myths allows the comfort of opinion without the discomfort of thought.”
-- President John F. Kennedy”0 -
Graham_Devon wrote: »Suggested it will go down in history as per the title, as it's squeezed everyone, especially pensioners and workers.
May be Ros Altman, which many who like QE detest, however, she makes some good points. How can we possibly get growth when were supposed to keep cutting out spending to keep up with the rising costs of essentials?
You can't do both.
http://www.guardian.co.uk/business/2013/jan/29/qe-monumental-mistake-pensions-experts
Whilst we will never know whether we could have survived with less QE at the micro level this is spot on. The spending power of the elderly has been reduced. They are spending more on necessary items diverting discretionary spend away from than "luxuries".
As people move towards pension age they tend to switch from more risky investments into cash. With interest rates so low this is reducing tax take and VAT from consumption as well as impacting the quality of life.
Annuity rates are on the floor and will impact new pensions taken now for the duration. Inflation for pensioners is higher for most as key basics are increasing over and above inflation, energy, fuel, food, water.
It is all very well for pension funds assets to be bolstered but this is reducing incomes now.
At the macro level the balancing theories may sound plausible but at the micro level much damage is being done both financially and also in health I would expect, physical and mental.
Merv needn't worry though he is all right.
Low interest rates may have helped borrowers but most pensioner don't fall in that camp to any large degree. Whether those rates have stimulated spending by those benefiting, in the populace as a whole, is doubtful, IMO, it has just been soaked up in higher prices for necessary expenditure energy, fuel, food etc."If you act like an illiterate man, your learning will never stop... Being uneducated, you have no fear of the future.".....
"big business is parasitic, like a mosquito, whereas I prefer the lighter touch, like that of a butterfly. "A butterfly can suck honey from the flower without damaging it," "Arunachalam Muruganantham0 -
Low IR have been fantastic for home owners. Homeowners are the engine of the uk so makes perfect scenes to look after this group.0
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moneyinmypocket wrote: »Homeowners are the engine of the uk so makes perfect scenes to look after this group.
I beg to differ they are the product of the engines of the UK.
Without the engines there would be no house."If you act like an illiterate man, your learning will never stop... Being uneducated, you have no fear of the future.".....
"big business is parasitic, like a mosquito, whereas I prefer the lighter touch, like that of a butterfly. "A butterfly can suck honey from the flower without damaging it," "Arunachalam Muruganantham0 -
moneyinmypocket wrote: »Low IR have been fantastic for home owners. Homeowners are the engine of the uk so makes perfect scenes to look after this group.
Surely high house prices have tied up huge amounts of capital in fixed illiquid assets, thus stalling the engine of the UK economy."When the people fear the government there is tyranny, when the government fears the people there is liberty." - Thomas Jefferson0 -
They first started QE because they were terrified of deflation. Such is the remoteness of the parallel universe that they habit, our so called economic experts and political class thought that deflation was a realistic possibility in this country where powerful cartels set prices of key commodities such as utilities and motor fuel, and key services like rail. Having started QE and got away with it they got rather hooked on it. A lot of it stems from being seen to be doing something, without really having a clue what they should be doing.No-one would remember the Good Samaritan if he'd only had good intentions. He had money as well.
The problem with socialism is that eventually you run out of other people's money.
Margaret Thatcher0 -
QE is barmy - a loony idea that failed in the Japanese recession of the 90s and that has now failed again, predictably. Interest rates should be low, but now they are much too low. I think 2% is the right level, not 0.5% - as for the housing market, this can't be allowed to hijack the entire economy.0
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