QE to the max question
Discussion
Given we have our own currency and BOE can create more money - why can the BOE now create £1 trillion and buy Govt Debt.
Then write it off....
Clearly our £ would devalue against other currencies but we would not have defaulted and due to lower £ value would be more competative for our services and exports.
We would benefit from being able to set a balanced budget from day one and therefore on year one have zero debt interest charge. It is likely to enhance growth too.
What am I missing?
OR - we have a structual debt of £1 trillion the debt interest on that and then generations to pay that debt off....
Then write it off....
Clearly our £ would devalue against other currencies but we would not have defaulted and due to lower £ value would be more competative for our services and exports.
We would benefit from being able to set a balanced budget from day one and therefore on year one have zero debt interest charge. It is likely to enhance growth too.
What am I missing?
OR - we have a structual debt of £1 trillion the debt interest on that and then generations to pay that debt off....
Good lord.
Simply put, if we started printing money like that, we'd not be able to print it fast enough to keep up with the devaluation of our currency.
We'd never hit the one trillion necessary as once we start printing it'll become 2 trillion, then ten, then one hundred, then Zimbabwe Bingo!
Simply put, if we started printing money like that, we'd not be able to print it fast enough to keep up with the devaluation of our currency.
We'd never hit the one trillion necessary as once we start printing it'll become 2 trillion, then ten, then one hundred, then Zimbabwe Bingo!
freecar said:
Good lord.
Simply put, if we started printing money like that, we'd not be able to print it fast enough to keep up with the devaluation of our currency.
We'd never hit the one trillion necessary as once we start printing it'll become 2 trillion, then ten, then one hundred, then Zimbabwe Bingo!
So economic sucide thenSimply put, if we started printing money like that, we'd not be able to print it fast enough to keep up with the devaluation of our currency.
We'd never hit the one trillion necessary as once we start printing it'll become 2 trillion, then ten, then one hundred, then Zimbabwe Bingo!
So Labour policy
freecar said:
Good lord.
Simply put, if we started printing money like that, we'd not be able to print it fast enough to keep up with the devaluation of our currency.
We'd never hit the one trillion necessary as once we start printing it'll become 2 trillion, then ten, then one hundred, then Zimbabwe Bingo!
Not sure what you mean by taking time to "print" they physically dont print anything. So they could simply decide that on 15 March 2012 for example that they will pay off all current Govt debt even with extra costs of early redemption costs. Ifyou do that then the debt will always be the same plus fees.Simply put, if we started printing money like that, we'd not be able to print it fast enough to keep up with the devaluation of our currency.
We'd never hit the one trillion necessary as once we start printing it'll become 2 trillion, then ten, then one hundred, then Zimbabwe Bingo!
£ would devalue by £1 trillion - it has currently devalued by £350 billion and that has just hurt our pension funds through QE. This way would hurt everyone equally and instantly start a fresh with the assocaiated competative advantage.
The £350 devaluation (plus other factors) has caused the £ to weaken from lo 60p for a Euro to low 80p (Id say the much lower interest rate v Euro is the biggest killer here) then it could in theory become say £1.50 for a Euro. The UK would prosper
thinfourth2 said:
So economic sucide then
So Labour policy
Lets say this caused the £ to drop below parity vs the Euro. So Labour policy
Impacts - Fuel costs go up, Gas - oil
So it means things we buy from outside of the UK costs more.... it would then also men that things we make in the UK are btter value so you would choose o buy those - infact people outside of the UK would start to buy more from the UK as the products are cheaper.
V88Dicky said:
Our debt is owed to other countries. Until we repay them (by spending less than we earn), we will always have debt, no matter how you fudge it.
But my point is we pay all creditors off in full on one day - debt cleared. Makes no difference if that is to a bank a fund or a country all cleared. They are happy as debt cleared and can then use that cas to invest elsewhere.Welshbeef said:
The £350 devaluation (plus other factors) has caused the £ to weaken from lo 60p for a Euro to low 80p (Id say the much lower interest rate v Euro is the biggest killer here) then it could in theory become say £1.50 for a Euro. The UK would prosper
The £350bn has nothing to do with the devaluation against the Euro. The Euro was undervalued at 60p and then the German economy got over the re-unification costs and became one of the strongest economies on the planet. It then dragged all of Europe along with it. QE had no effect on this.If we printed £1tn and the pound moved to £1.50 for a Euro (more like £5) then how would that help us? The minimum wage would have to be £25 and hour and importing all the raw materials to make (e.g) cars in the car plants still cost the same in $ terms. They would just cost much more in pounds. If a beer cost £3 which at eh moment is 3.60 Euros then at £1.50 to the Euro a beer would just cost £5.40. In reality though it would be more like £20 as no one would trust the currency and inflation would be in 1000's of percent.
Welshbeef said:
V88Dicky said:
Our debt is owed to other countries. Until we repay them (by spending less than we earn), we will always have debt, no matter how you fudge it.
But my point is we pay all creditors off in full on one day - debt cleared. Makes no difference if that is to a bank a fund or a country all cleared. They are happy as debt cleared and can then use that cas to invest elsewhere.Servicing the debt is the problem, that and the fact we consistently spend more than we earn as a nation. You have seen the problems we have had implementing modest cuts. This country is set up to run at 2007 tax receipt levels, until the country cuts it's cloth accordingly we are in a bad place.
coyft said:
Strange that servicing the debt (interest payments) is the problem. The BofE issues 50 billion to commercial banks through QE and charge the banks 0.5%, they then give the money back to the Government in exhange for bonds paying 2.5%. Nice business if you can get it...... Oh to be a banker.
Haha, you think that's bad now imagine unlimited loans of 3 year money at ~1% to pump into Italian or Spanish bonds at 7% and then park them straight back at the bank that lent you the money! Oh to be a Euro-Banker.MrCheese said:
but what happens when you then go back to the international markets to raise more money in the future....if they know you are likely to pull the same gag again they will be less likely to lend. Also AAA ratings and all that go down the pan.
What do you mean? All creditors had been paid back in full. WHy would creditworthyness be decreased by being debt free and clearing your debts?R11ysf said:
The £350bn has nothing to do with the devaluation against the Euro. The Euro was undervalued at 60p and then the German economy got over the re-unification costs and became one of the strongest economies on the planet. It then dragged all of Europe along with it. QE had no effect on this.
If we printed £1tn and the pound moved to £1.50 for a Euro (more like £5) then how would that help us? The minimum wage would have to be £25 and hour and importing all the raw materials to make (e.g) cars in the car plants still cost the same in $ terms. They would just cost much more in pounds. If a beer cost £3 which at eh moment is 3.60 Euros then at £1.50 to the Euro a beer would just cost £5.40. In reality though it would be more like £20 as no one would trust the currency and inflation would be in 1000's of percent.
So by inputting £350billion into the currency does nothing to deflate it yet 3times that amount suddenly makes a beer cost £20?If we printed £1tn and the pound moved to £1.50 for a Euro (more like £5) then how would that help us? The minimum wage would have to be £25 and hour and importing all the raw materials to make (e.g) cars in the car plants still cost the same in $ terms. They would just cost much more in pounds. If a beer cost £3 which at eh moment is 3.60 Euros then at £1.50 to the Euro a beer would just cost £5.40. In reality though it would be more like £20 as no one would trust the currency and inflation would be in 1000's of percent.
As for the beer case you do know we make all Ale and cider within the UK using UK produce. So that wouldn't change - of course those who want forign bevvies would notice the cost rising which would inturn be good for our home grown prducers.
Please answer why 350billion causes more or less zero inflation yet £1 trillion causes 1000's of % inflation.... if you seriously believe that then there must be a happy medium between 350 billion & 1 trillion which would be acceptable trade off of inflation to debt free.
coyft said:
Strange that servicing the debt (interest payments) is the problem. The BofE issues 50 billion to commercial banks through QE and charge the banks 0.5%, they then give the money back to the Government in exhange for bonds paying 2.5%. Nice business if you can get it...... Oh to be a banker.
Me thinks you are not understanding how QE works....
coyft said:
In reality the financiers have taken away the right for Governments to issue their own currencies.
"Money is Power", or shall we say, "The Monopoly to Create Credit Money and charge interest is Absolute Power". (Alex James)
Amsel (Amschel) Bauer Mayer Rothschild, 1838:
"Let me issue and control a Nation's money and I care not who makes its laws".
Doesnt mean it cannot happen and I think it would be a very interesting theory. "Money is Power", or shall we say, "The Monopoly to Create Credit Money and charge interest is Absolute Power". (Alex James)
Amsel (Amschel) Bauer Mayer Rothschild, 1838:
"Let me issue and control a Nation's money and I care not who makes its laws".
As a creditor if you are paid back in full and there have been no missed payments plus any early repayment charges are met then you are happy as the terms and conditions of the contract are satisfied. Now assume that on a Macro level for UK govt debt all paid in full all T&C's fully met noone underpaid.
The only thing that would happen is a devaluation which is bad but the points I raised & am sure there are many more would be the upsides for doing it to the point that at worst net neutral at best strongly growing and a highly competative country plus by the very nature of expensive forign madeproducts it would encourage companies to be set up or to transfer production of produts from other countries to ours.
k off back to your own thread.
sidicks said:
coyft said:
Strange that servicing the debt (interest payments) is the problem. The BofE issues 50 billion to commercial banks through QE and charge the banks 0.5%, they then give the money back to the Government in exhange for bonds paying 2.5%. Nice business if you can get it...... Oh to be a banker.
Me thinks you are not understanding how QE works....Gassing Station | News, Politics & Economics | Top of Page | What's New | My Stuff