QE for the people?

[unbeliever]

There is no other "rest" that is the total of QE. It increases the M4 supply held by the banks - not "real" M0 in your wallet currency.

 

Are you sure about this? Surely much of it has found its way to M0 by now.

[woodmally]

Quantitative easing for people, Jeremy Corbyn style. I dont believe that we should be doing QE for the banks, so I cannot agree that it should be done for the people.

 

We started QE in 2009, we havnt done that well, deflation and lower living standards, what would a good economy look like?

 

http://www.independent.co.uk/news/uk/politics/plough-quantitative-easing-cash-into-building-homes-and-infrastructure-says-jeremy-corbyn-10378393.html

 

https://en.wikipedia.org/wiki/Quantitative_easing#United_Kingdom

 

Quantitive easing doesnt work for banks or people. The reason we are in this pickle in the first place is due to people borrowing too much. So if we can help people to clear their debt faster maybe that will help. How I dont know?

[Obelix]

How? The only way to increase M0 is to print money and the BoE isn't doing that.

 

It might trickle down to being in your bank account, but that's still M1/2 supply the actual amount of circulating BoE notes is the same.

 

BoE buys a bond, and banks get money for that bond. That's money in the banks accounts for lending.

 

When QE has done it's job, the BoE simply doesn't roll over the bond, calls it due, and requires the bank to redeem it, takes the money off the banks and the excess money disappears.

 

If you actually printed money to give to people, then you will have the devils own job removing it afterwards. That is very inflationary which is why the BoE didnt of course do it.

[unbeliever]

How? The only way to increase M0 is to print money and the BoE isn't doing that.

 

It might trickle down to being in your bank account, but that's still M1/2 supply the actual amount of circulating BoE notes is the same.

 

BoE buys a bond, and banks get money for that bond. That's money in the banks accounts for lending.

 

When QE has done it's job, the BoE simply doesn't roll over the bond, calls it due, and requires the bank to redeem it, takes the money off the banks and the excess money disappears.

 

If you actually printed money to give to people, then you will have the devils own job removing it afterwards. That is very inflationary which is why the BoE didnt of course do it.

 

Everyday people use M1 all the time. What's the real difference in this modern world of bank transfers, debit cards and so on between M0 and M1?

I never physically lay my hands on most of my money.

 

If they paid me 10% bit more, the chances are I won't use any more paper money than I did before, but I'll use 10% more electronic money. Surely that's still inflationary.

[El Cid]

It might trickle down to being in your bank account, but that's still M1/2 supply the actual amount of circulating BoE notes is the same.

 

BoE buys a bond, and banks get money for that bond. That's money in the banks accounts for lending.

 

 

"The goal of this policy is to facilitate an expansion of private bank lending; if private banks increase lending, it would increase the money supply, though QE does directly increase the broad money supply even without further bank lending."

 

QE is said to cause high inflation, just as printing money does.

[Obelix]

Everyday people use M1 all the time. What's the real difference in this modern world of bank transfers, debit cards and so on between M0 and M1?

I never physically lay my hands on most of my money.

 

If they paid me 10% bit more, the chances are I won't use any more paper money than I did before, but I'll use 10% more electronic money. Surely that's still inflationary.

 

I'm not sure the point you are making.

 

No-one is saying the QE isn't inflationary. It's designed to be so.

 

It's also designed so that you can deflate it once it's done it's job.

 

Consider that we've had over 300 billlion created - many times the M0 supply - and inflation has done, what? Nothing really. QE stopped deflation.

 

When the economy picks up as it is doing, then we will see the effects of increase and massive inflation is on the horizon - except that the BoE is about to pull the levers and deflate the economy. Essentially providing a soft landing for the fall, and a damped down start for the recovery.

[El Cid]

Except that you cannot undo that sort of QE and increasing the M0 supply is just printing money to spend. The Weimar republic tried that one....

 

The BoE can decrease or increase the amount of money in the system.

 

All the JC is suggesting is that instead of pumping large amounts of money into the bankers coffers, pump smaller amounts into house building.

Both are inflationary, both can be wound back, both might make sense to the average Labour voter

[Obelix]

You cannot wind back the M0/M1 supply without people noticing and getting VERY upset, to the point of it being impossible unless you want full scale civil disorder.

 

JC is suggesting stuff based on the "ideas" of Richard Murphy whose economic credentials are slightly less impressive than those possessed by a dead badger. He's not the sort of person you'd get accountancy advice from (he's NOT an economist) let alone try and run the entire economy successfully..

 

But he does have daft ideas that the Left occasionally like - mainly because he does know which buttons to press to get a reaction. Sadly he's good at forgetting which ones hes advocated and has ended up proselytizing for both sides of the argument before now, and looking as foolish as anything into the bargain...

[unbeliever]

I'm not sure the point you are making.

 

No-one is saying the QE isn't inflationary. It's designed to be so.

 

It's also designed so that you can deflate it once it's done it's job.

 

Consider that we've had over 300 billlion created - many times the M0 supply - and inflation has done, what? Nothing really. QE stopped deflation.

 

When the economy picks up as it is doing, then we will see the effects of increase and massive inflation is on the horizon - except that the BoE is about to pull the levers and deflate the economy. Essentially providing a soft landing for the fall, and a damped down start for the recovery.

 

This I agree with.

I knew a lot of it was still tied up in M4, but I didn't realise it was so much.

[Obelix]

It can work it's way down to M1 really - it doesnt matter. Let's say the BoE generates a pile of cash, buys a gilt from a bank, lets be in character and call it Plunder and Flee.

 

The BoE eventually wants to destroy that money. It really doesnt care how. Now if Plunder and Flee (PaF) are going to be responsible it gets lent to a company taht uses it to grow it's operations, takes on mre staff, sells more etc... all that good stuff .

 

So the economy ticks along nicely, and then the BoE goes to PaF and redeems it's gilt. PaF knowing the gilt is coming due, will have the cash, it pays the BoE all gone. Money has vanished after doing it's job.

 

Say PaF lends it to Dodgy Doors Ltd who instead of buying Better Doors like they said, pay the directors a fat bonus. That's in M1 supply. But we can destroy it. Easy. Dodgy Doors gets it's loan called in by PaF - and they have no money. Ooops. They go bust. PaF don't have the money. So if the BoE want to get the money back - they just force PaF into bankruptcy.

 

Now you understand why Lehmann Bros was shot dead. Why Northern Rock died a death..... Pour encourager les autres..... You will lend responsibly Or Else..... Make no bones about it - when QE is running any bank that plunders it and flees with the proceeds will be cast to wolves. The BoE wants it's QE money destroying and it doesn't care how it's done....

 

None of this money gets as far as M0. Also none if it is "given" as a freebie into M1. That would be disastrous - hows the BoE going to get that back? 300 billion that four times the total circulating phsyical currency.... and JC wants to drop that into the economy?

 

Massive inflation - because you cannot get it back. I mean you could get it back once youve given it out - but people haven't budgeted for that. I mean no one would expect them to demand it back. you could demand it back - you could impose a flat rate one off tax to claw the money back.

 

We could call it a Poll Tax.

 

I'm sure there would be no problems and people would just pay up.

 

What QE is is a way to let banks continue to lend, without violating the fractional reserve requirements. Basically instead of the ordinary lenders underwriting the banks reserves with deposits, the BoE does it with it's broad shoulders. But those shoulders have to be withdrawn, and that time is coming.

 

JC doesn't understand this (there is a good reason why politicians study economics....) and for sure his financial advisers don't appear to understand it either. To dump cash into the economy without regard for getting it back is sheer lunacy.