The End of the Beginning for QE in the US...?

DiggerUK

QE will not stop. Tapering will not happen.

QE is another form of government stimulus, governments have only 'tapered' previous borrowings, with inflation, over time. Way too much funny money to deal with now.

2% price inflation gets rid of government borrowings within 36 years, 10% within 8 years. Current price inflation does it in about 20 years. 7% is the tipping point to 'no overall control' when bond markets won't lend anymore.

Difference twixt pre 2007 and now, is that there is no manufacturing base producing output that equates to wealth production that justifies the stimulus.
All QE stimulus does now, is produce a profit in equities with the sugar rush effect of QE, but nothing of substance such as real wealth creation.
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Generali

DiggerUK wrote: »

2% price inflation gets rid of government borrowings within 36 years, 10% within 8 years. Current price inflation does it in about 20 years. 7% is the tipping point to 'no overall control' when bond markets won't lend anymore._

Eh? How does that work then.

If I owe £100 and inflation is 10% a year, I still owe £100 in 8 years time.

The value of the debt has fallen to the equivalent of about £47 today but I still have a debt.

I think we have forum-nomics at work here.

DiggerUK

The government prints it's own means of repayment, you don't.
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Generali

DiggerUK wrote: »

The government prints it's own means of repayment, you don't.
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But that's different from inflation repaying you debt for you.

DiggerUK

For you it's a problem, for the government it isn't. Their ability to repay the debt, gilts, is simple....issue more gilts and inflate.
Only other means governments have to raise money are taxes, selling the family silver, or war booty.

The reason the government wants to have inflation at 2%, is so that there is creative destruction that's controlled. QE throws all control out of the window. They have never 'tapered', they don't know how to either.
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Thrugelmir

DiggerUK wrote: »

For you it's a problem, for the government it isn't. Their ability to repay the debt, gilts, is simple....issue more gilts and inflate.

Someone has to buy the Gilts though. QE is having a deflationary not inflationary effect.

DiggerUK

.......are two sides of the same debased coin.

QE debases the currency, debasement always leads to inflation. It hasn't got out of hand for now, that's all.

Overcapacity and cheap labour is what's keeping prices down, not QE.
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sabretoothtigger

Effects of inflation on debt might be compared by looking at 1970's housing market.
I think it was for this period that UK became the largest (in proportion) seller of index linked bonds.

They probably wont simply benefit because their tax revenue will be damaged and also government costs rise. Overall gov will be worse off, less able to finance and might be in trouble refinancing debt ie forced into running a surplus, a handbrake turn from the deficit now

michaels

Wow - I had not realised until now - I will sell my house, liquidate all my assets and buy physical silver....thanks digger.

Thrugelmir

DiggerUK wrote: »

QE debases the currency,

In the current circumstances how?