More QE.

[anonymous-user]

eldar said:

Instead of lending cheap money to banks to allow them to lend expensive, why isn't the freshly virtualised £50bn spent on improving the infrastructure - road,rail, nuclear, etc?

nice fresh QE money isn't "lent to banks" its is used to BUY or BORROW government debt off them. the purpose of qe IS to lend money to the government cheaply, by buying government debt! the real question is why the government is using the money on st and not doing as you suggest.

[eldar]

fbrs said:

nice fresh QE money isn't "lent to banks" its is used to BUY or BORROW government debt off them. the purpose of qe IS to lend money to the government cheaply, by buying government debt! the real question is why the government is using the money on st and not doing as you suggest.

Thus I'm a big bank, and I own £1bn of Government deby, like war loan or whatever. BoE redeem that at market value (probably more?) as I could just sell it?

I then have cash to lend.

Am I missing something?

[anonymous-user]

eldar said:

fbrs said:

nice fresh QE money isn't "lent to banks" its is used to BUY or BORROW government debt off them. the purpose of qe IS to lend money to the government cheaply, by buying government debt! the real question is why the government is using the money on st and not doing as you suggest.

Thus I'm a big bank, and I own £1bn of Government deby, like war loan or whatever. BoE redeem that at market value (probably more?) as I could just sell it?

I then have cash to lend.

Am I missing something?

yes. the bank (incidentally not just banks but pension funds etc..) doesn't just have government debt (gilts) from nowhere, they bought it in the first place; they lent the money to the government. the bank is effectively stepping out of the trade and getting its original money back. after qe the government still has the money and the boe holds the debt. buying bonds moves the price up, ie the yeild falls, this allows the government to issue MORE debt at cheaper rates. this is why the PIGS are all desperate for the ecb to get printing. im not saying i agree with qe, its a disaster for savers and allows the government to increase its debt painlessly, but it isn't 'giving money to banks', its really giving money to governments by devaluing the debt. you could argue the government is so in debt because of the banks in the first place but thats a whole other thread.

edited to add, in addition a lot of the gilts banks own will be part of their regulatory capital, they can't just sell them to loan the money out to the wider economy

Edited by fbrs on Thursday 5th July 21:09

[Ozzie Osmond]

eldar said:

Instead of lending cheap money to banks to allow them to lend expensive, why isn't the freshly virtualised £50bn spent on improving the infrastructure - road,rail, nuclear, etc?

a) "freshly virtualised". Wonderful expression! Collect first prize!

b) I absolutely agree with your overall sentiment. Spending on useful infrastructure is IMO definitely worthy of the expression "investment" and workers get paid along the way. Much better than paying the idle to do nothing.

[markcoznottz]

fbrs said:

eldar said:

fbrs said:

nice fresh QE money isn't "lent to banks" its is used to BUY or BORROW government debt off them. the purpose of qe IS to lend money to the government cheaply, by buying government debt! the real question is why the government is using the money on st and not doing as you suggest.

Thus I'm a big bank, and I own £1bn of Government deby, like war loan or whatever. BoE redeem that at market value (probably more?) as I could just sell it?

I then have cash to lend.

Am I missing something?

yes. the bank (incidentally not just banks but pension funds etc..) doesn't just have government debt (gilts) from nowhere, they bought it in the first place; they lent the money to the government. the bank is effectively stepping out of the trade and getting its original money back. after qe the government still has the money and the boe holds the debt. buying bonds moves the price up, ie the yeild falls, this allows the government to issue MORE debt at cheaper rates. this is why the PIGS are all desperate for the ecb to get printing. im not saying i agree with qe, its a disaster for savers and allows the government to increase its debt painlessly, but it isn't 'giving money to banks', its really giving money to governments by devaluing the debt. you could argue the government is so in debt because of the banks in the first place but thats a whole other thread.

Or to put it another way the political elite look after thier own by engineering re election, hence QE funny money to pay its bills and kick the can bla bla you know the rest. The banks meanwhile don't care, they make record profits from the great unwashed anyway, and if they don't the state stands behind thier liabilities.

[anonymous-user]

markcoznottz said:

Or to put it another way the political elite look after thier own by engineering re election, hence QE funny money to pay its bills and kick the can bla bla you know the rest. The banks meanwhile don't care, they make record profits from the great unwashed anyway, and if they don't the state stands behind thier liabilities.

Agreed but doesn't every buisness ultimately make record profits from the great unwashed, from supermarkets to oil companies. Tis the way of the world. As for the state standing behind banks liabilites, this is true. The implicit "insurance" of systemically important banks is provided free of charge (ignoring the few billion rbs and lloyds pay(id) for the asset protection scheme). In a capitalist system the banks should be paying for that 'insurance' and their roe would be even more pitiful

[Mr Snap]

johnfm said:

eldar said:

Instead of lending cheap money to banks to allow them to lend expensive, why isn't the freshly virtualised £50bn spent on improving the infrastructure - road,rail, nuclear, etc?

According to recent our resident PFI hospital builder (whose PH names escapes me), existing hospitals need £100b+ spending on them in maintenance.

If that wouldn't rejuvenate the building trade, what will.

Wouldn't suit the government at all. Rebuild all those hospitals and nasty chavvy people would only want to use them (patients expand to fit the hospital beds allotted). Then you'd have to pay more to the NHS...

Roadbuilding upsets the county set and don't even think about nuclear. I mean, it's ok somewhere remote in Scotland (as long as it's not on a mate's grouse moor) but you can't build them anywhere important, like the south of England, where they're needed. Can you imagine the fuss?

Basically, we're reduced to improving the building quality in the nicer parts of London. As long as the cheap polish labour can fit enough architrave, we'll be fine...

[markcoznottz]

fbrs said:

markcoznottz said:

Or to put it another way the political elite look after thier own by engineering re election, hence QE funny money to pay its bills and kick the can bla bla you know the rest. The banks meanwhile don't care, they make record profits from the great unwashed anyway, and if they don't the state stands behind thier liabilities.

Agreed but doesn't every buisness ultimately make record profits from the great unwashed, from supermarkets to oil companies. Tis the way of the world. As for the state standing behind banks liabilites, this is true. The implicit "insurance" of systemically important banks is provided free of charge (ignoring the few billion rbs and lloyds pay(id) for the asset protection scheme). In a capitalist system the banks should be paying for that 'insurance' and their roe would be even more pitiful

My biggest gripe is that the government HASN'T cut it's cloth accordingly. Government spending is UP, the shameful 5.2% rise in benefit payments tell you everything you need to know about how serious they are about cutting spending. So we are in this together, only well we aren't, at least not the government anyway. They are however such a bunch of clowns that the current strategy isn't working (tax increases and inflation),, and I suspect most of the sme's who do read the paper beyond the last x factor story, realise this and are punishing the government by spending as little as possible. Good on em I say. Osbourne is going to have to borrow more than expected, well fancy that, why don't you make some proper cuts then tt. If you won't enter into a proper debate on how to rebuild tAhe economy, then we won't help you. How about you have an hour long tv programme with the whole cabinet present. And set out immediate 40% government cut in expenditure, and corresponding tax cuts. Cut business rates, abolish parking charges, etc. On the lib dems, either they help us rebuild the country, or call a general election simple as, we don't need a student pressure group stopping progress in the biggest recession in living memory.

[anonymous-user]

mark, you've got my vote