Now those of you on here who read political threads may realise I am no fan of Gordon Brown's or the way he is handling the crisis but latest indications are that the next policy to address the recessionCredit crunch will be Quantitive Easing .
I attempt to explain it below for those who may not be aware of how it would work. Whilst I am biased I have tried to be as factual as I can(with a dash of sarcasm to taste)
Quantitive Easing
Ok The government, sorry, I mean The Bank of England(because it's independent of the government )
makes an entry in its books and creates a balance sheet asset and with this new found wealth it buys government bonds back, or maybe, some of those suspect loan packages our rather naieve financial institutions are still sitting on waiting for them to go pop.
This is a master stroke. That way the government puts cash back(well it may not actually be cash it may just be sons of an accounting entry) into the financial sector without resorting to printing financial sector being the public spirited organisations they are will now free up lending as their liquidity ratios will be significantly improved(eased).
Not only will the banks free lending up but at the same time they will have shed sceptic debt and not taken on new shareholders(the taxpayers), therefore dividends and shareprices are not diluted in fact shareprices of beneficiary organisations may well rise(spot a problem here) .... Brilliant for the affected banks …a little like somebody given you a pair of solid gold ladders to climb out of a hole you've dug for yourself and then said ....ahhhh go on then keep the ladders.
Just one small little point …this cash that will suddenly flood the banking system …where has it come from?
Ahhh well you see it starts with…… The Bank of England making an entry
I Suggest they call it the Emperors new Clothes account .
So…its not technically printing money …..and Gordon's not had to borrow it(yet)
In a genetically modified nutshell that’s it so what I would like to know is are we in favour of such a brilliant strategy.
I of course am not ..why …well it’s the government using money it hasn't got to buy assets that potentially have no intrinsic value …now what organisations have been found wanting doing that !
Incidentally if you or I tried doing that it would be called fraud
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Quantitive Easing
Should we be quantitively Eased?
Sex God
So It's like printing money without the printing press and the paper but you still lose thevalue of the pound in yer pocket. What's more you save on the ink as well.
Never been in a 100% majority before. :smug:
.
Never been in a 100% majority before. :smug:
.
Quote by niceguysdoexist
Now those of you on here who read political threads may realise I am no fan of Gordon Brown's or the way he is handling the crisis but latest indications are that the next policy to address the recessionCredit crunch will be Quantitive Easing .
I attempt to explain it below for those who may not be aware of how it would work. Whilst I am biased I have tried to be as factual as I can(with a dash of sarcasm to taste)
Quantitive Easing
Ok The government, sorry, I mean The Bank of England(because it's independent of the government )
makes an entry in its books and creates a balance sheet asset and with this new found wealth it buys government bonds back, or maybe, some of those suspect loan packages our rather naieve financial institutions are still sitting on waiting for them to go pop.
This is a master stroke. That way the government puts cash back(well it may not actually be cash it may just be sons of an accounting entry) into the financial sector without resorting to printing financial sector being the public spirited organisations they are will now free up lending as their liquidity ratios will be significantly improved(eased).
Not only will the banks free lending up but at the same time they will have shed sceptic debt and not taken on new shareholders(the taxpayers), therefore dividends and shareprices are not diluted in fact shareprices of beneficiary organisations may well rise(spot a problem here) .... Brilliant for the affected banks …a little like somebody given you a pair of solid gold ladders to climb out of a hole you've dug for yourself and then said ....ahhhh go on then keep the ladders.
Just one small little point …this cash that will suddenly flood the banking system …where has it come from?
Ahhh well you see it starts with…… The Bank of England making an entry
I Suggest they call it the Emperors new Clothes account .
So…its not technically printing money …..and Gordon's not had to borrow it(yet)
In a genetically modified nutshell that’s it so what I would like to know is are we in favour of such a brilliant strategy.
I of course am not ..why …well it’s the government using money it hasn't got to buy assets that potentially have no intrinsic value …now what organisations have been found wanting doing that !
Incidentally if you or I tried doing that it would be called fraud
Errrrmmm... pardon?
Cherrytree pardon is a good question as with everything Gordon does it is not always obvious what he has really done or is about to do .
However if I paraphrased it as ...............he is going to give money he doesn't really have to the banks to get them to lend more whilst keeping the city happy that he hasn't reduced the shareprice of the banks.
In exchange he will have to pay less interest on the bonds he buys back or he will buy loans the banks have to dodgy mortgage holders(the stuff that caused the credit crisis in the first place)
Hope that helps
I know I know ...why didn't I say that before
However if I paraphrased it as ...............he is going to give money he doesn't really have to the banks to get them to lend more whilst keeping the city happy that he hasn't reduced the shareprice of the banks.
In exchange he will have to pay less interest on the bonds he buys back or he will buy loans the banks have to dodgy mortgage holders(the stuff that caused the credit crisis in the first place)
Hope that helps
I know I know ...why didn't I say that before
Sex God
In effect this money is fictitious. What isn't ficticious is the way in which the banks get rid of their crap debt to, or have guarantees from the Gov't which is payed for by Joe Public. Maybe just maybe there is enough reason here somewhere to nationalise a few banks OR set up a new national bank, albeit that most of any monies has gone into the maws of the pvt sector banks anyway.
Maybe by having a national bank the govt could initiate lending at low rates to customers with somesort of mortgage swap scheme thus lending money that the banks ain't, and giving the low interest preferentials direct to the mortgaged. Maybe this could stimulate some sort of growth in the finance area? It is time the banks had a good slapping down to size methinks.
Oh it also looks like i might have ro wait a little longer for my bank charges rebate by the looks of it. Not that I waited 4 years for it already.
I don't get where Gordon is coming from I really dont. What the f*ckinhell has he dne with god knows how much his government has had over the last decade and more.
Maybe by having a national bank the govt could initiate lending at low rates to customers with somesort of mortgage swap scheme thus lending money that the banks ain't, and giving the low interest preferentials direct to the mortgaged. Maybe this could stimulate some sort of growth in the finance area? It is time the banks had a good slapping down to size methinks.
Oh it also looks like i might have ro wait a little longer for my bank charges rebate by the looks of it. Not that I waited 4 years for it already.
I don't get where Gordon is coming from I really dont. What the f*ckinhell has he dne with god knows how much his government has had over the last decade and more.
Sex God
It will be a bit of a bummer if everyone wanted to cash in their new found wealth at the same time seeing as how the money isn't really there :lol2:
History is, of course, repeating itself.
Remember Harold Wilson 41 years ago with "The Pound in Your Pocket" speech? well, some of us do
In the 1930's Germans were paid twice a day and took it home in wheel barrows it was so worthless.
Currently, a loaf of bread in Zimbabwe is equivalent to about a thousand pounds (soon to be "revalued" to about 50p)
And the pound will be just as worthless as Gordon Borrown continues to fiddle whilst Rome burns.
I asked that question so many times; "where has all that money gone?"
Remember Harold Wilson 41 years ago with "The Pound in Your Pocket" speech? well, some of us do
In the 1930's Germans were paid twice a day and took it home in wheel barrows it was so worthless.
Currently, a loaf of bread in Zimbabwe is equivalent to about a thousand pounds (soon to be "revalued" to about 50p)
And the pound will be just as worthless as Gordon Borrown continues to fiddle whilst Rome burns.
I asked that question so many times; "where has all that money gone?"
I heard this phrase used the other night and I Thank you for the concise explanation niceguys, but what you don't explain is how the friggin hell do we get out of this goddam mess that the oh so greedy financial sector - with the tacit help of the government - got us into. We really are treading dangerous water and the future looks bleak!
I was puzzled by the actions being taken by government to halt the recession. Then I had a think about it.
Its pretty clear that the plan is to control as much of the the economic base as possible. The plan takes two forms, a period of ridiculously low interest rates to enable the government to prop up and buy into the banks and other organisations followed by a period of high ones during which I fully expect the government to bail out those with mortgage problems by buying their homes and allowing them to rent them back. Welcome back nationalised industries and social housing.
This financial easement plan is wholly consistent with such a strategy.
The end result will be a deeply socialist economy despite the abolition of clause 4. If Im wrong Ill buy everybody a pint in 2020.
Its pretty clear that the plan is to control as much of the the economic base as possible. The plan takes two forms, a period of ridiculously low interest rates to enable the government to prop up and buy into the banks and other organisations followed by a period of high ones during which I fully expect the government to bail out those with mortgage problems by buying their homes and allowing them to rent them back. Welcome back nationalised industries and social housing.
This financial easement plan is wholly consistent with such a strategy.
The end result will be a deeply socialist economy despite the abolition of clause 4. If Im wrong Ill buy everybody a pint in 2020.
Quote by GnV
History is, of course, repeating itself.
Remember Harold Wilson 41 years ago with "The Pound in Your Pocket" speech? well, some of us do
In the 1930's Germans were paid twice a day and took it home in wheel barrows it was so worthless.
Currently, a loaf of bread in Zimbabwe is equivalent to about a thousand pounds (soon to be "revalued" to about 50p)
And the pound will be just as worthless as Gordon Borrown continues to fiddle whilst Rome burns.
I asked that question so many times; "where has all that money gone?"
To bail out the banks. Or to pay for the civil servents pensions, while the rest of us lose theirs. Or paying for MP'S second homes and their new kitchens. Or......... well that's £100 billion gone straight away.
This Government and past ones, have a great nack of maipulating things, in any fashion they see fit to hoodwink the public.
Gordon me old cocker is finished, and if we are not careful the pound won't buy you half a Euro. How the Bottler has turned his attitude around in the last 11 years. From being prudent to well..........getting rid of everything worth anything, to bail out the greedy banks.
I bet the 30000 staff at Woolies, would have loved the Governmaent to bail them out, so they still had jobs. But alas they will be signing on for their benefit cheques, whilst the bankers or is that wankers, continue to waste our money.
Oh England in 2009....deep joy.
fact is..we need the banks to start lending money again. The economy will not start with-out a kick. At the moment the banks will not borrow business money, basically with-out a directors 100% guantee on the money. This is a way of lossening up the purse strings.
Mr cameroon is very quiet meanwhile....the only suggestion he had so far was to give savers more interest. FFS we don't people saving right now...we want them spending.
Mr cameroon is very quiet meanwhile....the only suggestion he had so far was to give savers more interest. FFS we don't people saving right now...we want them spending.
Sex God
I'm no expert, not by any stretch of the imagination. However, the way I understand it is, the economy will start to grow again when people start buying again. EG the housing market will start to pick up again when prices go down to what's seen as an affordable level. If interest rates are still attractive, then buyers will be more likely to take out mortgages and things should start moving again.
If the government/Bank of England start making up balances that don't exist, or printing money with no assets behind them, the value of the pound will drop even further and surely we'd end up in a worse state of affairs than we're currently in!
As I say, I don't profess to have knowledge on this subject, but from my own basic understanding, this quantitative easing wotsit is a highway to despair, and I find it very worrying
This is my first political type thread I think, I'm actually a bit scared of clicking submit :shock: :scared:
If the government/Bank of England start making up balances that don't exist, or printing money with no assets behind them, the value of the pound will drop even further and surely we'd end up in a worse state of affairs than we're currently in!
As I say, I don't profess to have knowledge on this subject, but from my own basic understanding, this quantitative easing wotsit is a highway to despair, and I find it very worrying
This is my first political type thread I think, I'm actually a bit scared of clicking submit :shock: :scared:
Sex God
Quote by Angel Chat
I'm no expert, not by any stretch of the imagination. However, the way I understand it is, the economy will start to grow again when people start buying again. EG the housing market will start to pick up again when prices go down to what's seen as an affordable level. If interest rates are still attractive, then buyers will be more likely to take out mortgages and things should start moving again.
If the government/Bank of England start making up balances that don't exist, or printing money with no assets behind them, the value of the pound will drop even further and surely we'd end up in a worse state of affairs than we're currently in!
As I say, I don't profess to have knowledge on this subject, but from my own basic understanding, this quantitative easing wotsit is a highway to despair, and I find it very worrying
This is my first political type thread I think, I'm actually a bit scared of clicking submit :shock: :scared:
Don't be!
Your postmakes sense and holds water. I agree with your opening paragraph in that at somepoint people will start to buy houses againOK the destruction of peoples lives prior to this may be massive but it will happen, people will buy again.
As for the quantative easing thing
wish I did. like you I find it all a bit scary too. For the majority of people i sincerely hope. It is, I think, a case of a little pain and then things will turn for the better once more. However for those people, and i realise it isn't a few, who suffer badly in all this we can only empathise. Just got to hold on i think. 
Sex God
Quote by Lost
This is my first political type thread I think, I'm actually a bit scared of clicking submit :shock: :scared:
Don't be!
Your postmakes sense and holds water.
:shock: Blimey. I made sense in a political/financial thread? I'm gonna print this out and stick it in my scrap book :lol2: I must be growing up at last :shock:
I think what worries me the most is that the company I work for has to buy all of it's materials from Germany. The lower the value of Sterling in comparison to the Euro, the harder it is for us to make a profit. It's not a huge company anyway, there are only 6 of us there - and I was the last one in
At the moment we're keeping our heads above water, but the bosses have said that the next 6 months are crucial. If we get through them, we should be ok. It's getting through them that will be the hard part.If the value of the pound goes down much further, I'll start to be very seriously worried (I'm already worried anyway, but ... well you know what I mean)
Thank you though Lost, at least the first reply was positive , even if any further ones just point and laugh at me
:lol: Heres an idea, the government could loan people the deposit to buy a house and delay the repayments. The banks wont give a mortgage without a big deposit, but if the gov't gives them money we all lose out. However if they loan the deposit to new buyers they will get it back in the long term and end the current crisis.
Simple ! Or am i missing something again?
Simple ! Or am i missing something again?
Quote by deancannock
fact is..we need the banks to start lending money again. The economy will not start with-out a kick. At the moment the banks will not borrow business money, basically with-out a directors 100% guantee on the money. This is a way of lossening up the purse strings.
Mr cameroon is very quiet meanwhile....the only suggestion he had so far was to give savers more interest. FFS we don't people saving right now...we want them spending.
The problem I have with this post Dean is the credit crunch was brought about fundamentally by people spending money they hadn't got. Now the Government sees that as a solution
Incidentally Mr cameroon has spotted that it is pensioners that are going to be hit hardest by the collapse of interest rates hence his attempt to address the fact that a large number of them have to rely on interest off their savings to keep their heads above water. After all Gordon dipped his sticky little fingers into their private pension funds.
Angelchat a good post for your first foray into the murky world of UK PLC. Your not alone in being very worried ... so am I
niceguy, i like your simplification of what you say gordon brown/allister darling are proposing to do (quantative easing)increasing the money supply. you have things upside down. that is their prosed response to the reduction in the money supply caused by banks refusing to lend. gordon brown and no elected representative tells the banks what to do. its the other way round and regardless of what supposed political cessation of continuing credit (increase in the money supply)had to stop because the total of capital required to service the interest of derivitives alone had become greater than the gross product of human activity on the planet and the ponzi scheme was up ! under the normal circumstance of regulated fractional reserve lending, the money supply must continue to increase, otherwise, where would the interest come from ? but since deregulation, where fractional reserves were in the regions of 35 - 50 to 1, not just in the cases of commercial banks and hedge funds but chartered banks as well, the size fictiteous value sloshing around in derivitives, siv's, cdo's etc puts 1929 and the 30's in the shade. the correction will be far more greater. any time very soon, a big event. dave
Quote by gulsonroad30664
niceguy, i like your simplification of what you say gordon brown/allister darling are proposing to do (quantative easing)increasing the money supply. you have things upside down. that is their prosed response to the reduction in the money supply caused by banks refusing to lend. gordon brown and no elected representative tells the banks what to do. its the other way round and regardless of what supposed political cessation of continuing credit (increase in the money supply)had to stop because the total of capital required to service the interest of derivitives alone had become greater than the gross product of human activity on the planet and the ponzi scheme was up ! under the normal circumstance of regulated fractional reserve lending, the money supply must continue to increase, otherwise, where would the interest come from ? but since deregulation, where fractional reserves were in the regions of 35 - 50 to 1, not just in the cases of commercial banks and hedge funds but chartered banks as well, the size fictiteous value sloshing around in derivitives, siv's, cdo's etc puts 1929 and the 30's in the shade. the correction will be far more greater. any time very soon, a big event. dave
Yay gulson, you found it and replied, i'm proud of you xxxx
Hi, me again, been trying to teach gulsonroad how to use the forum but he just sent me this pm :
gulsonroad30664 whispers: what does exponential curve mean and how does it relate to interest on fractional reserve lendind ? can you post that...please
Not a clue what it means so look forward to the reply xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
gulsonroad30664 whispers: what does exponential curve mean and how does it relate to interest on fractional reserve lendind ? can you post that...please
Not a clue what it means so look forward to the reply xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
Quote by gulsonroad30664
niceguy, i like your simplification of what you say gordon brown/allister darling are proposing to do (quantative easing)increasing the money supply. you have things upside down. that is their prosed response to the reduction in the money supply caused by banks refusing to lend. gordon brown and no elected representative tells the banks what to do. its the other way round and regardless of what supposed political cessation of continuing credit (increase in the money supply)had to stop because the total of capital required to service the interest of derivitives alone had become greater than the gross product of human activity on the planet and the ponzi scheme was up ! under the normal circumstance of regulated fractional reserve lending, the money supply must continue to increase, otherwise, where would the interest come from ? but since deregulation, where fractional reserves were in the regions of 35 - 50 to 1, not just in the cases of commercial banks and hedge funds but chartered banks as well, the size fictiteous value sloshing around in derivitives, siv's, cdo's etc puts 1929 and the 30's in the shade. the correction will be far more greater. any time very soon, a big event. dave
Wow an impressive post Gulson.
I agree that the banks have not and are not functioning at the behest of the government. We have only to see how the re-capitalisation of the banks has singularly failed to have the desired effect in freeing up the flow of investment capital. The reductions in global base rates have reduced interbank lending rates but they are either irrelevant because lending has not started to flow again or new deals to end users are at significantly higher rates as the banks look to increase their margins from both ends of the equation.
Whilst I accept that in a world where the population grows the money supply must increase there has to be an underlying asset base which supports that creation can never be based on unserviceable debt that is what has got us in this mess in the first place.
Quantitive easing in my mind is writing cheques for the future we won't be able to cash and the resulting adjustment needed to correct that will exacerbate the crap we will already have to bear.
If I understand your post correctly you are saying things will get worse before they get better. That , I am afraid is what I believe also.
Thanks for your input.
Quote by Angel Chat
This is my first political type thread I think, I'm actually a bit scared of clicking submit :shock: :scared:
Don't be!
Your postmakes sense and holds water.
:shock: Blimey. I made sense in a political/financial thread?
Thank you though Lost, at least the first reply was positive , even if any further ones just point and laugh at me
:laughabove: :laughabove: :giggle: :laughabove: :laughabove:
I am laughing with you!! honest! :smoke:
Sam xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
Quote by niceguysdoexist
fact is..we need the banks to start lending money again. The economy will not start with-out a kick. At the moment the banks will not borrow business money, basically with-out a directors 100% guantee on the money. This is a way of lossening up the purse strings.
Mr cameroon is very quiet meanwhile....the only suggestion he had so far was to give savers more interest. FFS we don't people saving right now...we want them spending.
The problem I have with this post Dean is the credit crunch was brought about fundamentally by people spending money they hadn't got. Now the Government sees that as a solution
Incidentally Mr cameroon has spotted that it is pensioners that are going to be hit hardest by the collapse of interest rates hence his attempt to address the fact that a large number of them have to rely on interest off their savings to keep their heads above water. After all Gordon dipped his sticky little fingers into their private pension funds.
credit crunch is brought about by the banks borrowing to much money, and the increase in land prices, slowly meaning, land was becoming unaffordable. The land prices therefore drops, and the loans secured against that are potentially dangerous. Business can only thrive if people purchase items or services !!!! There is no way we can encourage saving at this point in time. How the hell can people saving money, and not spending possibly be of any use to the economy. Mr Cameron has just beeen total silent... fact is the americam government is doing the same as us..the german Government I see has now taken our lead and doing the same...guess all must be wrong and have no idea what they talking about eh !!