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    • MSE Guy
    • By MSE Guy 6th Oct 11, 11:17 AM
    • 1,628Posts
    • 1,255Thanks
    MSE Guy
    MSE News: Bank of England holds base rate and pumps £75bn more into economy
    • #1
    • 6th Oct 11, 11:17 AM
    MSE News: Bank of England holds base rate and pumps £75bn more into economy 6th Oct 11 at 11:17 AM
    This is the discussion thread for the following MSE News Story:

    "The Bank of England today announced it is holding the base rate at its 0.5% historic low for the 31st consecutive month and is printing more money ..."

    Read the full story:
    Bank of England holds base rate and pumps £75bn more into economy



    This thread is not in the 'discuss house prices and economy board' as that is only open to those logged into the forum so anyone coming from the news story may not be able to see it.

Page 1
    • oldvicar
    • By oldvicar 6th Oct 11, 11:32 AM
    • 1,068 Posts
    • 944 Thanks
    oldvicar
    • #2
    • 6th Oct 11, 11:32 AM
    • #2
    • 6th Oct 11, 11:32 AM
    Seems to me that QE is in danger of being a bubble.

    May the gods help us when it bursts.
    • Cardozo
    • By Cardozo 6th Oct 11, 12:51 PM
    • 63 Posts
    • 23 Thanks
    Cardozo
    • #3
    • 6th Oct 11, 12:51 PM
    • #3
    • 6th Oct 11, 12:51 PM
    Will/Has this cause/caused any change to the Euro to Pound Exchange rate? If so, how much of a change?
    • oldvicar
    • By oldvicar 6th Oct 11, 2:23 PM
    • 1,068 Posts
    • 944 Thanks
    oldvicar
    • #4
    • 6th Oct 11, 2:23 PM
    • #4
    • 6th Oct 11, 2:23 PM
    Will/Has this cause/caused any change to the Euro to Pound Exchange rate? If so, how much of a change?
    Originally posted by Cardozo
    With acknowledgement to Sceptic001, who posted this on another thread:
    The British Pound has declined heavily against all of the 16 most actively traded currencies this lunchtime, falling over 1% against the Euro and the Dollar in under a minute, as the Bank of England announced that it would resume quantitative easing and purchase government bonds to the value of £75 billion," says exchange rate analyst Adam Solomon at foreign exchange specialists TorFx.
    http://www.economy-news.co.uk/britis...ears-343545345
    • oldvicar
    • By oldvicar 6th Oct 11, 2:42 PM
    • 1,068 Posts
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    oldvicar
    • #5
    • 6th Oct 11, 2:42 PM
    • #5
    • 6th Oct 11, 2:42 PM
    With the latest round bringing the QE total to £275,000,000,000.00 then the Bank of Enland has printed money totalling:
    • Over half the overspend of the Labour administrations between 1997 - 2009 (if you accept David Cameron's conference speech figure that they spent £400-500 billion we didn't have)
    • 20% of the national debt. I think the last I heard it was £1.3trillion, but its probably gone up again
    The Old Lady seems to be printing enough to almost cover the government's annual deficit themselves. Which is very handy.
    • oldvicar
    • By oldvicar 6th Oct 11, 2:49 PM
    • 1,068 Posts
    • 944 Thanks
    oldvicar
    • #6
    • 6th Oct 11, 2:49 PM
    • #6
    • 6th Oct 11, 2:49 PM
    Sorry to hog the thread but just to stir things some more isn't the title of the thread wrong?

    The BoE hasn't 'pumped' a single penny into the economy. It's bought itself some government debt, but then so do I when I buy a premium bond.
  • pqrdef
    • #7
    • 6th Oct 11, 3:02 PM
    • #7
    • 6th Oct 11, 3:02 PM
    The BoE hasn't 'pumped' a single penny into the economy. It's bought itself some government debt, but then so do I when I buy a premium bond.
    Originally posted by oldvicar
    Tried that, but they seemed to think I should have some money I could give them in exchange for the premium bonds.

    I told them money is only a concept, so I create it by thinking about it, but they hung up.
    "It will take, five, 10, 15 years to get back to where we need to be. But it's no longer the individual banks that are in the wrong, it's the banking industry as a whole." - Steven Cooper, head of personal and business banking at Barclays, talking to Martin Lewis
    • oldvicar
    • By oldvicar 6th Oct 11, 3:23 PM
    • 1,068 Posts
    • 944 Thanks
    oldvicar
    • #8
    • 6th Oct 11, 3:23 PM
    • #8
    • 6th Oct 11, 3:23 PM
    Tried that, but they seemed to think I should have some money I could give them in exchange for the premium bonds.

    I told them money is only a concept, so I create it by thinking about it, but they hung up.
    Originally posted by pqrdef
    Ha Ha! I get that, but is the economy more 'pumped' by the BoE buying up gilts with funny money than by say the Chinese buying them with some they printed?

    Not that I advocate it, but to 'pump' the economy doesn't the BoE either need to offer its funny money to enterprise, or the government needs to spend even more?

    I will equally argue that more QE = higher inflation (or a 'pumped' economy?) so I guess I really have no idea at all ! Maybe some other experts (in addition to pqrdef) will come along in a minute and make it all clearer
    • Ifts
    • By Ifts 6th Oct 11, 3:31 PM
    • 1,827 Posts
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    Ifts
    • #9
    • 6th Oct 11, 3:31 PM
    • #9
    • 6th Oct 11, 3:31 PM
    Saw this article on the ThisisMONEY.co.uk website:

    QE Q&A: What is quantitative easing and does it work?

    Read more: http://www.thisismoney.co.uk/money/news/article-2045943/QE-Q-A-What-quantitative-easing-does-work.html#ixzz1a13cQEBh
    Never let the perfume of the premium overpower the odour of the risk
    • oldvicar
    • By oldvicar 6th Oct 11, 4:24 PM
    • 1,068 Posts
    • 944 Thanks
    oldvicar
    Saw this article on the ThisisMONEY.co.uk website:

    QE Q&A: What is quantitative easing and does it work?

    Read more: http://www.thisismoney.co.uk/money/news/article-2045943/QE-Q-A-What-quantitative-easing-does-work.html#ixzz1a13cQEBh
    Originally posted by Ifts
    I enjoyed reading the article and found it informative.

    I ESPECIALLY enjoyed reading the comments the article has generated so far
    • sabretoothtigger
    • By sabretoothtigger 6th Oct 11, 4:29 PM
    • 10,025 Posts
    • 6,604 Thanks
    sabretoothtigger
    I think the point is the 75bn doesnt exist anywhere. They just devalued the sterling pound and gave the money to government. If you own or earn sterling then you just got poorer though it wont register exactly until government gives money to its employees. The other way it will show up more rapidly is if people sell government bonds, nobody is really selling yet but when they do that new money will create higher prices
    Tokyo residential prices have gone from 4x London in 1990 to ľ London in 2014
    Maybe this is one of those cases where you canít go home again,
    by Ben S. Bernanke, former Fed chairman
    • talexuser
    • By talexuser 6th Oct 11, 7:41 PM
    • 2,806 Posts
    • 2,190 Thanks
    talexuser
    Only on a slightly different slant, the Government is talking about some mechanism of getting loans to small/medium firms who can't get credit.

    I seem to remember that project merlin (bailing out the banks) had some clause that they had targets to loan to small/medium firms in exchange for the bailouts? The last time I saw this reported the banks were under target.

    Why is no-one talking about project merlin anymore if credit is not available for growth? Another example of one way bets for the banks with our money?
    • oldvicar
    • By oldvicar 6th Oct 11, 8:27 PM
    • 1,068 Posts
    • 944 Thanks
    oldvicar
    Only on a slightly different slant, the Government is talking about some mechanism of getting loans to small/medium firms who can't get credit.

    I seem to remember that project merlin (bailing out the banks) had some clause that they had targets to loan to small/medium firms in exchange for the bailouts? The last time I saw this reported the banks were under target.

    Why is no-one talking about project merlin anymore if credit is not available for growth? Another example of one way bets for the banks with our money?
    Originally posted by talexuser

    I believe it is the case that there is plenty of credit available and that the banks will lend to companies with a decent proposition. Althought the banks are careful, the issue is that enterprises are even more cautious and don't want to borrow anything - thank you v much. British businesses overall have a cash pile they are not investing.
    • nrsql
    • By nrsql 6th Oct 11, 8:30 PM
    • 1,879 Posts
    • 656 Thanks
    nrsql
    The idea is to devalue sterling.
    Once wages catch up it means that personal debt will be reduced i.e. all those hefty mortgages and credit card debts will be less of a burden.

    The downside is that imports i.e. most of the things we buy will be more expensive.

    Means inflation - so good for those that bought index linked certificates when they were available.
    • oldvicar
    • By oldvicar 6th Oct 11, 8:34 PM
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    • 944 Thanks
    oldvicar
    Means inflation - so good for those that bought index linked certificates when they were available.
    Originally posted by nrsql
    Not good, but we'll try to keep our heads above water
    • lvader
    • By lvader 6th Oct 11, 8:50 PM
    • 2,105 Posts
    • 1,786 Thanks
    lvader
    I think the point is the 75bn doesnt exist anywhere. They just devalued the sterling pound and gave the money to government. If you own or earn sterling then you just got poorer though it wont register exactly until government gives money to its employees. The other way it will show up more rapidly is if people sell government bonds, nobody is really selling yet but when they do that new money will create higher prices
    Originally posted by sabretoothtigger
    75bn only covers about 7 months of government debt which means that even with QE there will be a net purchase of goverment bonds of around £50bn. There will be no extra money going into the economy, they are simply making sure less gets taken out.
    • nhaslum
    • By nhaslum 6th Oct 11, 9:15 PM
    • 16 Posts
    • 15 Thanks
    nhaslum
    QE is "the last resort of desperate governments when all other policies have failed".

    Well according to Boy George in 2009 anyway.
    • MiserlyMartin
    • By MiserlyMartin 6th Oct 11, 10:00 PM
    • 1,918 Posts
    • 1,372 Thanks
    MiserlyMartin
    The British Pound has declined heavily against all of the 16 most actively traded currencies this lunchtime, falling over 1% against the Euro and the Dollar in under a minute, as the Bank of England announced that it would resume quantitative easing and purchase government bonds to the value of £75 billion," says exchange rate analyst Adam Solomon at foreign exchange specialists TorFx.:
    Originally posted by oldvicar
    Hyperinflation here we come!
    • Pincher
    • By Pincher 6th Oct 11, 11:11 PM
    • 6,516 Posts
    • 2,491 Thanks
    Pincher
    Hyper-inflation can happen to tin-pot little countries like Israel, Argentina, but never in proper countries like the U.K. I always thought that was a rather precarious assumption.

    Water the gin once, customers start grumbling.
    Water it more, they start leaving.
    The next time you water it, nobody is there to drink it.
    • Pincher
    • By Pincher 6th Oct 11, 11:46 PM
    • 6,516 Posts
    • 2,491 Thanks
    Pincher
    What I need is for a bank to lend me a million of that £75 billion,
    at 3.99% fixed for 5 years.

    I'll buy two houses at £400k each, using the remainder to pay for stamp duty, fees, refurbishment, etc. and then rent it out at 6% gross yield.

    Inflation will cause

    1. The BOE rate to rise to 15%, but my BTL mortgage will be fixed at 3.99%.

    2. Rent to rise sharply, even though the mortgage payment is fixed.

    3. House prices will rise with wage rises. I sell the house in 2016 for £650k each. Repay principal of £1 million.

    The first couple of years I might lose money, but inflation will soon make this deal profit generating. In fact, the higher the inflation, the greater the profit.
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