Green across the Board as printing takes off

Glen_Clark

gadgetmind wrote: »

Well, I'm a layman, and I understand the concept of increasing the monetary base by buying financial assets in the open market, but then not "monetising" this by leaving the assets intact with all coupons and maturity payments still due.

Of course, what's interesting is how to "unwind" this situation, and I can see three different approaches, but let's maybe leave that until later.

I think you do yourself an injustice, because the overwhelming majority of the population would not understand what all that means. Wheras they would understand what 'money printing' means, and its effectively (admittedly not literally) what is being done.
But I can understand those who benefit from QE want to put a positive spin on it, and the phrase 'money printing' does not sit well with that

guymo

Glen_Clark wrote: »

Wheras they would understand what 'money printing' means, and its effectively (admittedly not literally) what is being done.

Are you sure people understand what that means? So the central bank somehow creates money. So far so good
Now: how does it get out of the door of the bank, and if it doesn't, who cares?

I don't think the phrase "money printing" is any more intelligible than a more detailed and accurate explanation.

gadgetmind

guymo wrote: »

Now: how does it get out of the door of the bank, and if it doesn't, who cares?

By buying assets (mainly gilts but also some corporate bonds) on the open market. This forces down yields, which means everyone including the government benefit from cheaper borrowing, and also allows those who previously held the assets to lend out the money.

The problem is that last stage.

Note that the central bank can also get fancy and target assets of certain durations, which does funky stuff (technical term!) to the yield curve. You can also match buying with selling, so the yield curve flattens but no new money is created.

https://en.wikipedia.org/wiki/Operation_Twist#Operation_Twist_.281961.29

gadgetmind

Glen_Clark wrote: »

But I can understand those who benefit from QE want to put a positive spin on it, and the phrase 'money printing' does not sit well with that

To be honest, I won't know what kind of a spin to put on it until the experiment has run to conclusion.

guymo

gadgetmind wrote: »

By buying assets (mainly gilts but also some corporate bonds) on the open market. This forces down yields, which means everyone including the government benefit from cheaper borrowing, and also allows those who previously held the assets to lend out the money.

Exactly. My point is precisely that none of that activity or its consequences are implied by the phrase "money printing" -- so (as you said earlier) that phrase should be resisted. It's not easier to understand; it's simply incomplete and inadequate.

JohnRo

The essence of QE is fraudulent, which should be no surprise given the "industry" involved.

Marine_life

Its a relatively blunt tool but effective.


Simply speaking, make cheap money available which weakens the currency and makes exports cheaper and imports more expensive. Thats leads to:


a. Inflation as imports are more expensive.
b. Growth as exports are cheaper and internally produced goods and services become more attractive.


Thats the theory.


I'm glad some of my funds are denominated in US$

gadgetmind

JohnRo wrote: »

The essence of QE is fraudulent, which should be no surprise given the "industry" involved.

QE is something that the government controlled central banks do and is nothing to do with the commercial banking industry.

IronWolf

JohnRo

QE is something that the government controlled central banks do and is nothing to do with the commercial banking industry.

What? Do you honestly believe that?

QE was and is all about the commercial banking industry, it is a continuation of TARP, an unaudited fraudulent stealth bailout organised and engineered by the banks themselves. Politicians haven't got a clue what is going on. If you think they tell central banks what to do...

All QE has done is create financial bubbles, shore up banks unaudited balance sheets and allow them to profit from a rate differential on offer, by parking much of that free money back with the central banks at a marginally better rate and profit accordingly. It's done nothing for the real economy.

We were told it would be used to lend to SME and get the economy moving, that's not happened.

The people running banks, in any other walk of life would be fraudsters.