Printing money storing up huge problems for Economy.

[Anna B]

World's leading financial watchdog says that printing money (QE) could be contributing to chaos in Europe, which could lead to a Global meltdown.

 

£325 billion so far, and Sir (how could they knight the man who has presided over such a monumental **** up?) Mervyn King is pressing for another £50 billion. You simply can't add this sort of money to an economy without it having a detrimental effect. So far savings and pensions are in free fall.

 

What I want to know, in plain English please so that I can understand, is how we can be in debt, virtually bankrupt, yet be able to print money to this extent, and also give billions to the EU baleout? (and Afford billions for the Olympic Games.)

 

According to today's news, Hospitals are now going bankrupt!

 

What's going on? I've asked before and have still not had a stisfactory answer.

[anywebsite]

OK... you need to read some economics.

 

Money is usually created by private banks, when they lend people money it's just like they're printing money, there is more money around, it multiplies it. The saver still thinks the money is in their account, while the borrower is out spending it. Then when they spend it, it goes into another bank account & it's lent out again. This accounts for around 97% of the money in the economy, it's all just sat in bank accounts most of the time. Only a small proportion of the money in the economy is paper & coins.

 

When the banks stop lending so much money & demand repayment with interest there is less money available to the whole economy, the process goes in reverse. The money supply shrinks.

 

If the money supply rises too quickly then you get out of control inflation. If it falls, you get deflation, which is much worse.

 

To counteract the effect of the private banks stopping lending on the overall money supply, the national bank needs to print lots more money. Problem is, they weren't actually printing money & giving it to normal people, they were just making up numbers on a computer screen & giving it straight to banks, so it's had little effect. If the amount of money that you're printing is less than the amount sucked out by the private banks, it has little effect on domestic inflation, just helps to prevent deflation. If all the other countries are doing similar, then exchange rates stay similar, otherwise it devalues the currency against other currencies. Devaluing the currency makes our exports cheaper abroad & imports more expensive - it's not necessarily a bad thing, it's often what's needed to get the economy of a particular country going again, savings & pensions do badly, but it encourages spending & generates more income, which is more important.

 

You're posting a non-story from somebody that has the wrong end of the stick.

[Anna B]

OK... you need to read some economics.

 

Money is usually created by private banks, when they lend people money it's just like they're printing money, there is more money around, it multiplies it. The saver still thinks the money is in their account, while the borrower is out spending it. Then when they spend it, it goes into another bank account & it's lent out again. This accounts for around 97% of the money in the economy, it's all just sat in bank accounts most of the time. Only a small proportion of the money in the economy is paper & coins.

 

When the banks stop lending so much money & demand repayment with interest there is less money available to the whole economy, the process goes in reverse. The money supply shrinks.

 

If the money supply rises too quickly then you get out of control inflation. If it falls, you get deflation, which is much worse.

 

To counteract the effect of the private banks stopping lending on the overall money supply, the national bank needs to print lots more money. Problem is, they weren't actually printing money & giving it to normal people, they were just making up numbers on a computer screen & giving it straight to banks, so it's had little effect. If the amount of money that you're printing is less than the amount sucked out by the private banks, it has little effect on domestic inflation, just helps to prevent deflation. If all the other countries are doing similar, then exchange rates stay similar, otherwise it devalues the currency against other currencies. Devaluing the currency makes our exports cheaper abroad & imports more expensive - it's not necessarily a bad thing, it's often what's needed to get the economy of a particular country going again, savings & pensions do badly, but it encourages spending & generates more income, which is more important.

 

You're posting a non-story from somebody that has the wrong end of the stick.

 

Well thanks for trying.

 

As for getting the wrong end of the stick, how would anybody know with this explanation in the paper?

 

'Near zero policy rates, with abundant and nearly unconditional liquidity support, weaken incentives for the private sector to repair balance sheets and for fiscal authorities to limit their borrowing requirements.'

 

...Erm.. OK, just about got that....

 

'At its root the European crisis is a potential harbinger, a virulent and advanced convergence of the problems to be expected elsewhere if policy fails to break the vicious cycle of sectoral imbalances, excess leverage, public over-indebtedness and overburdened central banks.'

 

....Yes, well.... I'm an ex English teacher, and I can't really understand it, so what chance have other people?

 

How can you get angry when you can't understand what's going on? And I do believe we're not meant to understand it. That it's a deliberate ploy to keep us in the dark. What do you think?

[MrSmith]

[/b]

 

Well thanks for trying.

 

As for getting the wrong end of the stick, how would anybody know with this explanation in the paper?

 

'Near zero policy rates, with abundant and nearly unconditional liquidity support, weaken incentives for the private sector to repair balance sheets and for fiscal authorities to limit their borrowing requirements.'

...Erm.. OK, just about got that....

 

'At its root the European crisis is a potential harbinger, a virulent and advanced convergence of the problems to be expected elsewhere if policy fails to break the vicious cycle of sectoral imbalances, excess leverage, public over-indebtedness and overburdened central banks.'

 

....Yes, well.... I'm an ex English teacher, and I can't really understand it, so what chance have other people?

 

How can you get angry when you can't understand what's going on? And I do believe we're not meant to understand it. That it's a deliberate ploy to keep us in the dark. What do you think?

 

Come on Anna a two year old would understand that.

[Jason Bourne]

...Sir (how could they knight the man who has presided over such a monumental **** up?) Mervyn King...

 

I'm sure he paid a nice, fat bribe contribution to the government's coffers... and I don't mean tax

[Cavegirl]

I thought that this documentary was a great introduction to UK-specific economic issues Anna. This is the blurb about it and the link:

 

97% owned present serious research and verifiable evidence on our economic and financial system. This is the first documentary to tackle this issue from a UK-perspective and explains the inner workings of Central Banks and the Money creation process.

 

When money drives almost all activity on the planet, it’s essential that we understand it. Yet simple questions often get overlooked, questions like; where does money come from? Who creates it? Who decides how it gets used? And what does this mean for the millions of ordinary people who suffer when the monetary, and financial system, breaks down?

 

Political philosopher John Gray, commented, “We’re not moving to a world in which crises will never happen or will happen less and less. We are in a world in which they happen several times during a given human lifetime and I think that will continue to be the case.”

 

If you have decided that crisis as a result of the monetary system is not an event you want to keep revisiting in your life-time then this documentary will equip you with the knowledge you need, what you do with it is up to you.

 

http://topdocumentaryfilms.com/97-owned/

[Anna B]

I thought that this documentary was a great introduction to UK-specific economic issues Anna. This is the blurb about it and the link:

 

Thankyou Cavegirl, I'll make a point of watching it.

 

It's a pity many of the posters on here won't.

 

A lot of questions asked, are often answered in links, but most people don't bother to read / watch them. (Me included sometimes, it can take up a lot of time.) However, when I have listened to some of these documentaries I've had my eyes opened, and occasionally my views changed completely. They are that powerful. And lets face it, they are able to explain things much better than we can.

[grafikhaus74]

Sir (how could they knight the man who has presided over such a monumental **** up?) Mervyn King

 

For 'Services to keeping a straight face as he destroyed savings and pensioners' nest eggs'.

 

That's how our 'Honours' system works.

 

Last week, ahem, 'Dame' Tessa Jowell for 'Services to telling barefaced lies about the true cost of the Olympics.'

[Vague_Boy]

....how we can be in debt, virtually bankrupt, yet be able to print money to this extent, and also give billions to the EU baleout?[/b] (and Afford billions for the Olympic Games.)

Ultimately we can't. See my current sig.

 

 

savings & pensions do badly, but it encourages spending & generates more income

Doesn't seem to be working though.

[I1L2T3]

One sector really struggling is pensions. Funds have historically bought gilts as a core part of their investments. They pay lower interest rates than many investments on the market but they can be bought with long dates and are ultra-safe, the lowest risk part of a pension portfolio. With these ultra-low gilt yields pension performance is reduced, anybody buying annuities suffers. For some the trouble is already here, now.