Why hasn't QE caused inflation?

Thrugelmir

In_For_A_Penny wrote: »

Agree - as a relative novice looking to understand all this better - the UK economy in particular seems dysfunctional. It seems a missed opportunity to achieve some real and sustainable growth in industry and other sectors.

House price inflation despite low building levels would appear to be counter productive - a bit more money to solicitors, EA's and a select few landlords but probably bad for the overall economy in the absence of real growth and wage inflation.

Takes time to create sustainable growth. Listening to the media you would think that industry and commerce operates like a tap that you can on or off.

House building declined so construction companies laid off their workers. As a result skilled trades get lost as people earn a living elsewhere. Roofing and brick plants either closed production lines or shut completely due to a lack of demand. No one is going to invest millions of pounds in new facilities, training staff etc unless there's a long term certainty.

As for wages. We live in an increasingly global labour market. Where many unskilled, semi skilled jobs can be performed anywhere. For 20 years China has been acquiring the technological expertise to manufacture, produce what the West does. The scale of production has to be seen to be believed.

System

Perhaps it's all gone into inflating a house price bubble?

If they wanted it to stimulate general spending they should have tipped banknotes over housing estates by helicopter.

CLAPTON

In_For_A_Penny wrote: »

Agree - as a relative novice looking to understand all this better - the UK economy in particular seems dysfunctional. It seems a missed opportunity to achieve some real and sustainable growth in industry and other sectors.

House price inflation despite low building levels would appear to be counter productive - a bit more money to solicitors, EA's and a select few landlords but probably bad for the overall economy in the absence of real growth and wage inflation.

why do you say the the UK economy is dysfunctional?

It is one of the most successful economies in the western world and has growth rate the envy of EU, an employment rate the envy of most of europe, even our youth employment rate is vastly better than most of europe.

in what way did we miss an opportunity for 'real ' growth in industry etc: how do you suggest we could have done that when demand was very low ?

you seem to miss the link between house price and low levels of building : the link isn't counter intuitive it's entirely predictable and frequently predicted

one is (one of ) the causes of the other

the problem of low growth rate and high prices is to do with people lacking decent homes rather than a problem with the economy

the_flying_pig

yeah, the bank of england did some work a couple of years ago where it reckoned that inflation would have been about a percentage point lower or something without QE.

In_For_A_Penny_2

More than happy to be corrected on all this btw - As I say, I'm in no way pretending to be an economist - merely trying to understand the complexities of it all. . .

CLAPTON wrote: »

why do you say the the UK economy is dysfunctional?

It seems to being overly dependent on a broken banking sector and an even more broken housing market. QE has saved the former from collapse and coupled with historically low interest rates, has it sent the latter into a bubble?

CLAPTON wrote: »

An employment rate the envy of most of europe, even our youth employment rate is vastly better than most of europe.

I've seen the falling unemployment figures and yet wage growth appears stagnant. What sort of jobs are we creating? Are these sustainable and will they contribute to a growing economy?

Thrugelmir

CLAPTON wrote: »

why do you say the the UK economy is dysfunctional?

It is one of the most successful economies in the western world and has growth rate the envy of EU, an employment rate the envy of most of europe, even our youth employment rate is vastly better than most of europe.

I see nothing successful in having an ever growing Government debt nor a huge balance of trade deficit as well. Given that the export targets set for the UK by 2020 are simply unachievable. Taken as a whole Europe is a net exporter. A better position to be in. Despite the situation now. There's nothing magical about consumer spending underpinning the UK's current recovery.

Thrugelmir

the_flying_pig wrote: »

yeah, the bank of england did some work a couple of years ago where it reckoned that inflation would have been about a percentage point lower or something without QE.

Is the impact of QE wearing off? As the true extent of the financial crash is still being felt even today.

Graham_Devon

CLAPTON wrote: »

why do you say the the UK economy is dysfunctional?

It is one of the most successful economies in the western world and has growth rate the envy of EU, an employment rate the envy of most of europe, even our youth employment rate is vastly better than most of europe.

in what way did we miss an opportunity for 'real ' growth in industry etc: how do you suggest we could have done that when demand was very low ?

you seem to miss the link between house price and low levels of building : the link isn't counter intuitive it's entirely predictable and frequently predicted

one is (one of ) the causes of the other

the problem of low growth rate and high prices is to do with people lacking decent homes rather than a problem with the economy

And it would be great if all of that were built on solid foundations. But the rapid rise in massive government debt and rapid rise in benefit payments suggest it's not.

Thrugelmir

IronWolf wrote: »

Because the money supply added has not all come through into the economy. At the same time as QE you have increased regulation on the banks requiring them to have much higher reserves. So any cash they raise through QE stays with them and boosts their capital ratios.

Barclays is currently in the process of shrinking it's balance sheet by £95 billion.

RBS has lost £45 billion since 2008.

£375 billion is an extremely large mind boggling number but small in the context of the game that's being engineered. In reality no one has a clue. Other than to react as events unfold.

theEnd

Clifford_Pope wrote: »

If they wanted it to stimulate general spending they should have tipped banknotes over housing estates by helicopter.

PPI compensation?

I know a few people who ended up with £10k+. One with £25k+. All now spent.