Quantitative Easing explained

Discussion in 'Economics' started by Alsacien, Dec 29, 2011.

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  1. Alsacien

    Alsacien LE Moderator

  2. Alsacien

    Alsacien LE Moderator

  3. And who will explain the BOE that QE is really not a good solution?
  4. Anything but a biased outlook regarding the history of the Fed demonstrates a distinct lack of perspective. Only the French Army has a worse record of realising its founding ambitions :-b
    • Like Like x 1
  5. As are all perspectives! A liberal perspective is biased towards liberalist views, a Conservative perspective is biased towards a Conservative view.Etc Etc Etc!
    Each person will view things differently dependant on their perspective!
  6. Alsacien

    Alsacien LE Moderator

    I tend to judge them on whether they are able to offer a viable alternative, (one that would work in reality as well as theory, and would be applicable at the time). Hindsight and criticism are the easiest perspectives to hold.....

    QE impact in UK is very hard to gauge, not having QE in the UK is somewhat easier and does not make for pleasant reading.
    The only different approach being tried is the ECB's LTRO for 3 years, it will be interesting to see how this safer option works in comparison to QE
  7. Like the fella says why don't they just call it printing money? Basically because too many idiots think that is always a bad thing even when faced with high debt levels in both public and private sectors.

    Propping up a series of asset bubbles is perhaps closer to the reality of US and UK policies and that is a damned sight worse in the long term.
  8. Didn't post it to criticise, just as an alternative viewpoint as this is a sticky!
    My view is that no matter what the ECB or Governments do it is going to be a hard time for the average Joe!
    If we are all honest these are deep and new waters for us all. Some have an understanding, some don't understand and seek advice, the majority don't care until it hits them like a wet kipper in the face!

  9. Idiots eh? How very inflammatory. I don't think that QE is always a bad thing but it is a tool that should be used sparingly since it invariably has the effect of devaluing currency with obvious concomitant effects. The fact that one is wary of using QE doesn't automatically mean that one endorses asset value protection.

    Two obvious areas for action are social welfare and foreign aid. These outputs are better addressed by hard pruning than currency devaluation as a result of QE.
  10. I can see how a monetarist policy works when all is normal with the economy, but the thing which strikes me as daft about QE is that there is already a huge surfeit of money supply through loans, mortgages, etc. To my mind QE isn't working in the short term but could lead to a very nasty moment in the future when everyone is maxed out on credit (monetary supply in tits own right), their debt has been indexed linked to a weakening pound, and everyone elsewhere realises the pound is worth SFA.
  11. I'm not shure I have my head round this QE thing. I'd like it to go through my bank account though.
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  12. Depends what it's being used for. The last government sold it to us as means of heading off deflation which is generally reckoned to be a bad thing, despite what the two beasties in the YouTube video were saying. Deflation was never a problem under the last government, or the current one and recent tranches of QE have been carried out purely to enable the government to pay its bills.

    At the end of Gordon Brown's tenancy in Downing Street, one third of government expenditure was coming straight off the printing presses. That's the entire welfare budget, funded by slapping some ink onto mashed up trees. The saviour of the world never stopped to think that this might be a bad idea.

    It's worth noting that the Bank of England Act makes it illegal for the Bank to print money and simply hand it to the government. That is, as the video stated, the last resort of banana republics. Hence, as in America, our government laundered the cash through merchant banks.

    Not so much foreign aid. IIRC it's only about 1% of government spending and it keeps the hippies happy while all those carbon footprint managers in the public sector are being culled.

    The welfare budget represents one third of government spending. It got out of control under the Major government and it turned into a money sucking black hole under Gordon Brown. We simply can't afford it any more and the current government has barely scratched the surface. No more child benefit for folks on £40k? Is that it? Try ensuring that nobody on benefits gets more than minimum wage. How about making illiterate job seekers learn to read?
    • Like Like x 1
  13. You would actually want those on benefits to get a lot less than minimum wage as an incentive to get a job.
  14. I can't see many career welfare claimants voting Tory. I think it was Bill Clinton's Democrat administration that introduced very severe cuts to welfare in the USA. Five years of claiming in your lifetime and that's your lot. Yet the welfare classes in America still vote Democrat. That's the power of political tribalism for you.

    The "representation without taxation" problem was something Maggie tried, and failed, to address with the poll tax. In some of the bigger cities, only a minority paid rates. This led to a situation where a non taxpaying majority were able to fund increasingly lavish spending by imposing crippling charges on the taxpaying minority. Remember Ken Livingstone's lesbian housing estates and gay parachute clubs? Guess how they were funded?