The Mystery of Quantitive Easing

by craig on February 10, 2012 9:21 am in Uncategorized

The headlines all say that the Bank of England has pumped another £50 billion into the economy in the third round of quantitive easing. In fact, the money will not get far into the economy. It is given to the banks and other financial sector companies, and evidence from the previous £250 billion worth of quantitive easing is that almost all of it will stay there, being very handy stuff with which to fund massive salaries and bonuses.

This whole notion of what is and isn’t useful in the economy is strange anyway. This cold weather is making us all use a lot more gas for heating. Those higher bills will count as increased economic activity and higher GDP, but actually we are all less comfortable. This morning I have put on an electric heater to boost the central heating. That is increasing economic activity and increasing GDP. But for the last week I have been burning logs from my own garden on an open fire – that doesn’t increae GDP as I didn’t pay for them. But they were warmer and more pleasurable. A homely example that the automatic equation of GDP with a better life is nonsense.

There is a mystery about the way Q.E. works. The Bank of England does not just give the cash away to financial institutions, but exchanges it for assets. We are told that this is not the Bank of England saving the bankers from their mistakes by buying up toxic assets, but rather that the assets are gilts.

I do not understand this at all. Why would banks want to cash in gilts? Gilts are already perhaps the most liquid asset you can hold, other than cash, in the classic definition of liquidity that they can be easily sold without much affecting their value. On top of which, these same financial institutions are actually still buying bonds from the Bank of England on a regular basis, which would make the process pointlessly circular. And the current Bank of England bonds the banks are buying pay historically low rates, almost certainly lower than any gilts they are exchanging under Q.E.. Why would they do that?

The only sense I can see is that the Bank of England is giving cash in return for junk, and the gilts line is a cover. Any genuine official statistics on exactly what the Bank of England has bought up under Q.E.anywhere?

It is beyond doubt true that the effect of creation of new money is to reduce the value of currency already in circulation. The effects will show through in inflation and the exchange rate. Of course, those will continue to be affected by other factors as well, which is why there are better and worse times to do it. But in effect Q.E. is still a transfer of wealth from those who hold any of the currency to those given the new stuff. In other words, more cash from you to the bankers.

Actually if QE had been used genuinely to stimulate the economy it would have been a marvellous thing. With £350 billion we could have built an enormous amount of social housing on brownfield sites, converted derelict high streets into housing, built the Severn barrage and a high speed rail link from London to Aberdeen and still have had change. We could have reopened the steel industry to do it. a thousand manufacturing firms could have been re-tooled. Millions could have been employed. The entire logic of economic depression could have been turned around.

Instead we gave more cash to the bankers.

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234 Comments

1 2 3

  1. Never expect anything but corruption and crime from the scum in power. If they’re doing anything with the word billion in it they’re trying to enrich their mates at the expense of others. Be grateful we’re only handing over treasure to them. The brownskin people have to pay in blood as well.

    Vive la revolution.

  2. When QE first started it also seems to have been significant in fuelling the massive increases in commodity prices a couple of years back. What’s for sure is that precious little of it is filtering into support for small businesses, which constitute the vast majority of employers in the UK.

    It’s curious isn’t it, how economists – or it it just the media? – seem to go through such angst about the fashionable ‘index’. I remember decades ago the news was full of worry about the ‘balance of trade’; then it was all those money indicators – M0, M1, M5 and the rest. Then the exchange rate. Now we all get the heebie-jeebies about ‘growth’, which as you point out above, Craig, is full of daftness. You know what? I don’t think they have a systematic theory at all. I don’t think they have a clue.

  3. Thank you for pointing these things out to people. Not many have the time these days to think about what’s really going on, but people need to know. Our future and especially our children’s future is being majorly undermined in England and all over the world.

    The 99% need to get out there and say: Stop it right here and now.

  4. Anyway we can console ourselves with knowledge that there is a diamond boom:

    http://www.guardian.co.uk/business/2012/feb/10/de-beers-profits-diamond-boom

  5. Buy Gold and/or silver, protect yourselves from the crash that is pre planned,

  6. If you want up-to-date info look at the ZeroHedge website, and check out Max Keiser on Sky(RT), past episodes are available from his website.

  7. Using the money to rebuild in this way is exactly what I’ve been advocating for years now, mainly to deaf ears, albeit to people that have absolutlry no control over anything much really. Amongst other thins, I envisaged a massive solar / renewable building programme, generating thouseands of skilled jobs, new technology, with the added benifit of removing the dependancy on the energy firms and subsequently, no gas / elec bills leaving more moiney in peoples pockets to spend, if they so wish wish.

  8. Craig, it’s worth buying this week’s Spectator for the articles on QE by Fraser Nelson (“QE is the transfer of wealth from the poor to the rich. It floods banks with money, which they use to pay bonuses” and Bill Jamieson.

    .
    As a bonus you will also get an excellent review (pp34-5) by Rory Stewart (Con MP for Penrith and Border) of Andrew Alexander’s ” America and the Imperialism of Ignorance: US Foreign Policy since 1945″. “The world is a much more dangerous place as a result of America’s determination to save it.”
    .
    Stewart notes that Alexander “builds his case through quotes from primary sources, from National Security Council documents, speeches, telegrams, presidential letters and Soviet archives. Here is a general, commenting on the Japanese: “When we knew we didn’t need to do it and they knew we didn’t need to do it, we used them as an experiment for two atomic bombs.” ” Comment is superfluous.

  9. O/T Stuart Littlewood has taken up the matter of the Israeli MATIMOP/British water collaboration.
    .
    Britain helps Israeli water thieves
    10 February 2012

    http://www.redress.cc/palestine/slittlewood20120210

  10. Also O/T No irony. Poacher turned gamekeeper comes to mind.
    .
    Prescott seeks commissioner role
    The former deputy prime minister Lord Prescott says he wants to stand as Police and Crime Commissioner for Humberside Police
    .
    http://www.bbc.co.uk/news/uk-england-humber-16978613
    .
    He got a nice payout from Murdoch too.

  11. I’ve an economics degree, which included econometrics, and looking at my ISLM model, still cant for the life off me figure out how QE or TAFT work, Japan came up with it, having worked on FSA projects (dodged Basel 1 and 2) it appears to me that the only alternative is smoke and mirror approach as Craig concludes, namely a figleaf for trading banks toxic debt,and would explain why UK banks tier 1 capital is looking so healthy but absolutely no mechanism for Keynesian trickle down

  12. There was an announcement this morning that the major banks have failed the coalition targets on lending to small and medium aized enterprises. If you google banks fail lending targets, you see links going back through every month of last year saying the same thing. And then they announce their annual profits in £billions such as Barclays who announced £5.6 billion profits for 2011.
    .
    Project Merlin!
    .
    Project Merlin proves less than magic
    Net lending to small businesses is down 6%

    .
    Lord Oakeshott, the Liberal Democrat peer, resigned a year ago over the Project Merlin deal.
    .

    Even with targets for the major banks, net lending – the amount repaid and the amount of loans granted – to small businesses in the year to November was down 6%.
    .
    The official verdict on the Project Merlin agreement, signed a year ago on Thursday, will be published on Monday and, given the data published so far, will again show that net lending will be negative.
    .
    /…
    http://www.guardian.co.uk/business/blog/2012/feb/08/net-lending-to-small-businesses-down-six-per-cent?newsfeed=true

  13. You think the bailout form Germany to Greece could be made a little less onerous on the Greeks as part of the deal, if they weren’t (apparently) required to buy numerous planes, tanks and submarines as required in bailout no1?

    You think your average German knows they are paying for these via the backdoor?

    Love to see the detailed elements of the Aid package.

  14. The same logic is again without doubt true with the third IMF loan to Greece. Germany has ordered Greece to buy military arms such as German tanks and German artillery. Thus the tools of death idle ready in austere compounds while thousands of Greek children bawl “Είμαι πεινούν mummy.”

  15. And meanwhile, having done the approved, virtuous thing, putting a significant portion of my income aside into a pension pot, I find as I reach retirement, that a large part of its value has been stolen by bankers, and the value of the annuity I can expect is negligible because of artificially low interest rates, and the erosion of the value of money through QE. If I had ,my time again, I would have spent it all on travel, alcohol and wild women, and borrowed to the point of bankruptcy, like the bankers did.

    There is still a massive private debt mountain out there, that hasn’t been called in yet, but has the makings of crash that will dwarf the banking crash. That is why the government is favouring borrowers over savers with their interest policies. I think it is immoral.

  16. eveningperson

    10 Feb, 2012 - 1:21 pm

    I can recommend Paul Krugman as a person who explains the issues clearly, including why stimulus does not cause inflation in the current situation of a depression caused by lack of liquidity.

  17. More like quantitative schmoozing then. If the government would have wanted value for money they should have set up a community banking system that is guaranteed by its investment in local sustainable developments the banks would not fund. This story makes a point about such coyness.
    http://www.edp24.co.uk/business/wind_farms_provide_new_opportunity_for_caister_fishermen_1_1204555

    Further, monies are siphonmed off straight into low tax off shore accounts, as each and every bank has them, a bit like a mascot.

  18. Joe Templeton

    10 Feb, 2012 - 2:22 pm

    Obviously, the ‘cash’ is in exchange for relatively illiquid assets, or the exchange would indeed be pointless. But I’m not sure illiquidity necessarily means ‘junk’, and in any event the exchange is presumably at post-crash prices.

  19. As AdBusters keep saying, “economists must learn how to subtract.”

  20. Sion,
    .
    ” If I had ,my time again, I would have spent it all on travel, alcohol and wild women,”
    .
    And waste the rest right?

  21. ”If I had ,my time again, I would have spent it all on travel, alcohol and wild women”
    .
    It seems to have worked for Craig.

  22. Craig,
    .
    Your understanding of what is going on, is not wrong. And Henry Ford warns of the consequences …. “It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning.”
    .
    And this explains the folly of austerity measures quite well too ……. http://www.assoeconomiepolitique.org/IMG/pdf/Manifesto_of_the_appalled_economists.pdf
    .
    The banks never have a problem foreclosing on those who are negligent and reckless and unable to repay credit created to generate debt and arbitrary profit called interest. Time for the people to foreclose on the system and demand their billions/trillions back? And time for a Par;liament which acts in the interest of the people too, methinks, or they can kiss their Ponzi scam goodbye too.
    .
    There appears to be a bit of bother in Greece at the moment …. because the banking system is holding it to ransom for money which the people allow them to invent and provide for their labour and pleasure.
    .
    And this tale ….. http://nieuws.nl.msn.com/buitenlands-nieuws/griekse-politie-wil-arrestatie-leden-trojka ….. [Yes, I know it is in Dutch but I couldn’t find it English :-)] tells you that Greek police union has told its members to arrest any ECB or IMF or EU inspector who would be in Greece, presuming to tell the Greeks what to do/how they are to live.
    .
    Are you men or mice? Squeak up. I can’t hear you.

  23. “Instead we gave more cash to the bankers”
    .
    Problem is it never seems to be enough, they always want more and more.

  24. O/T but as someone mentioned Jimmy Savile OBE! the other day, I saw this.
    You have to go to the link as you cannot copy from G Fawkes.
    .
    http://order-order.com/2012/02/08/bbc-jimmy-savile-cover-up-scandal-coming/

  25. Great to see your interest and bafflement at QE. Even the delightful Steph. Flanders on the Beeb is pretty clueless at explaining Money. Yes, the BoE (Bank of England) can, and with QR, DO ‘print’ money. But this, plus the actual printing of banknotes is only 3% of all the money in circulation (M3/M4 in economists’ jargon.)

    So where did the other 97% of all our money come from? Why the likes of RBS Lloyds BoS etc can also, in effect, ‘print’ money. Shock Horror when BoE ‘prints’, just doing normal business when profit-making Banks do so. What a scam! How do they get away with it?

    To learn more about money (the stuff even commentators seem to have missed) have a look at the Positive-Money website:

    http://www.positivemoney.org.uk/

    There are some excellent short videos explaining this. You may feel inspired to join the Campaign by Positive Money to wrest back control of OUR money from these (often Scottish) spivs!

  26. This is all rubbish, except the bit about burning your own firewood.

    QE is QE. Bailouts are bailouts. The Bank of England could do a bailout with QE, but there is no necessary connection between the two. If the BOE is buying gilts it is by definition not doing a bailout, since gilts are as good as cash.

    QE is money printing, a very simple operation: the BOE writes a cheque to someone’s account with money it does not have — sometimes called ink money — thus creating money out of thin air.

    If the recipient of the cheque is the government, the bank receives a government bond in exchange: an exchange of one worthless piece of paper for another, but with the significant consequence that the government spends the money on another little war, bailing out Greeks, hiring more bureaucrats, funding HS rail or some other boondoggle supposed to be beneficial to the economy.

    If the recipient is not the government, then the an asset must be exchanged for the money. If the asset is a government bond, this is an exchange of one worthless piece of paper for another worthless piece for which someone has nevertheless paid real money. In that case the BOE is giving back the money it previously acquired by selling the bond.

    The result is an increase in the money in circulation, which means a stimulus to the economy. The transaction also tends to lower interest rates, which stimulates borrowing from the commercial banks, which adds further to the money supply and hence demand.

    So, no need for paranoia. The government is doing the right thing. Encouraging private spending, not government waste.

  27. Altogether now – in unison and harmony…
    .
    “it’s the rich what gets the pleasuuuure… and the poor what gets the blaaaaame!”

  28. CanSpeccy

    You are normally pretty astute, but seem not to have read what I wrote. You write:
    “If the BOE is buying gilts it is by definition not doing a bailout, since gilts are as good as cash.” Which is quite true. But you are ignoring my question – is that really what the BoE is doing, because what possible incentive would the banks have to sell their gilts – which are, as you say, as good as cash – to the BoE for cash? Especially when they are also, with cash, buying new bonds which have a lower rate of interest than the gilts they are supposedly selling?

  29. I’ve always wondered about the utility of GNP as a measure of wealth. I think it is one of these measurements that can be made .A good crime spree would increase economic activity and thus GNP. Someone once coined the term “ilth” as opposed to wealth .

  30. thank you for informing us about your little black market projects
    we will submit legislation to tie down the burning of logs so that burning logs will add to GDP
    second we have not ever used one dollar pound euro to buy anything
    we have only provided loans
    its our money, was, is, will be
    we do what we want with it
    and less you understand about what we do better for us
    have a nice day

  31. “normally pretty astute.” That’s very polite of you, Craig, since I was so rude.
    .
    As to your question, “what possible incentive would the banks have to sell their gilts – which are, as you say, as good as cash – to the BoE for cash?” my assumption is that the BOE is buying bonds in the market, i.e., from anyone, which might include you or I, Lloyds Bank or the Bank of China. In that case, the cash exchanged for the gilts may indeed be invested in new bonds, but as you ask, why would it be?
    .
    If I sell a bond I may use the cash for consumption spending, business investment, buying a house, etc., all of which are stimulative. At the same time the number of bonds in circulation has been cut, thus there is a negative impact on interest rates, which is also stimulative. And even if I did buy another bond, that merely passes the cash to someone else who is more or less likely to actually spend it.
    .
    But it is not altogether clear to me what is happening from the single news report I have read, probably because the central bank prefers to obscure from public view exactly what it is doing. However, in this case, unless you are aware of evidence to the contrary, I am inclined to believe that the BOE is engaging in a straight forward effort to stimulate the private sector by increasing the money supply.

  32. DownWithThisSortOfThing

    10 Feb, 2012 - 6:54 pm

    At the Leveson inquiry it has been revealed that a photo of Hauge in a gay bar was brought by NOTW for £20k and never published, no doubt Rupert (great friend of Netanyahu) was just happy to have the picture and never once considered using it to ‘influence’ Mr Hague.
    _
    Andy Coulson was Cameron’s press adviser at the time whilst still being paid by the NOTW. That’s what Cameron means by transparent government – transparently corrupt to the core.
    _
    http://www.guardian.co.uk/media/2012/feb/09/news-of-the-world-guido-fawkes-hague?newsfeed=true

  33. “… the major banks have failed the coalition targets on lending to small and medium sized enterprises.”

    The problem is that no small or medium sized businesses can come up with business plans to justify loans. The economy is depressed, demand is falling and will continue to do so.

    What is remarkable is the hypnotic power the ideologists hold over people whose living standards are falling steadily, whose prospects of every kind constantly grow dimmer but who retain a compulsion to believe that all is well and that prosperity is just around the corner. Because the ruling class loves them all.

    Maybe the tipping point will be around 60% Youth Unemployment and mass homelessness and it will then sink in that, actually, it is not the fault of the single mother down the road, the desperate bastard looking for work, now that we’ve bombed him out of Iraq and killed his family for fun or other Malthusian villains.

    It is that, if we want a decent society we need to make one, because Santa Capitalism isn’t going to give it to us.

  34. @downwiththis

    You can’t read or you can’t type. The photo was of a special adviser to Hague, not Hague himself.

    Interesting story, nevertheless.

  35. DownWithThisSortOfThing

    10 Feb, 2012 - 7:08 pm

    The vast majority of the QE money is spent on buying shares and property. There is only one purpose to it and that is to keep these bubble markets going because they have no other strategy. It is of course just making things a whole lot worse down the line.

  36. DownWithThisSortOfThing

    10 Feb, 2012 - 7:13 pm

    Guilty as charged. I was speed reading. He is gay though. :)

  37. You would not recognize him as the warmonger sitting next to La Clinton recently would you?
    .
    http://www.dailymail.co.uk/news/article-1305082/Another-Hague-special-adviser-And-baseball-cap-moments.html
    .
    There is previous too. A Barnaby Towns was also a SpAd who has gone off to the US to work. He was openly gay.

    .
    If Hague is gay, then why the pretence? Many other MPs have come out. Perhaps he protects Ffion whom he married in December 1997 when he was the Conservative leader. Talk about Teflon Tony.

  38. “There is only one purpose to it and that is to keep these bubble markets going because they have no other strategy. It is of course just making things a whole lot worse down the line.”
    .
    Hey, DWoTSOT, what’s the alternative? A good old fashioned depression, everyone to go bankrupt and the gold bugs to pick up the pieces for next to nothing? That’s what made Joseph Patrick Kennedy rich during the Great Depression. He shorted the market on the way down, invested his profits in gold then picked up the Chicago Trade Center for pennies on the dollar. With the profits he was able to buy the US Presidency plus the Senate seat for Massachusetts, not that it brought him any joy in old age.
    .
    But I don’t think that will work well now. It will convert mass unemployment into near universal unemployment. During the Great Depression, the Western countries still had some demand for manufactured goods. Now most of that stuff’s imported from low-wage economies, so without the bubble economy, there ain’t nuthin’.
    .
    The solution that seems obvious to me is to get on with the convergence of wages between East and West, without resort to mass immigration to replace the British workforce with third-worlders, Poles, Bulgarians, Slovaks and others who easily outcompete the less competent members of the UK (potential) workforce.
    .
    To do that, only two things are required. First, abolition of the minimum wage, which forces the least competent members of the workforce into idleness. Second, provide a wage subsidy to insure that those taking the lowest market wages, i.e., comparable to wages paid to the industrial workforce in China and Vietnam, etc. do not starve.
    .
    I worked out the cost here. It turns out to be rather trivial, since it is offset by cuts to welfare and related services, e.g., prison incarceration, mental hospitals, etc. which cater particularly to the unemployed. In addition, it creates a whole new range of business ops. for British capitalists, which can help restore the balance of payments and, through increased corporate tax payments, eliminate the government deficit.

  39. Anonymous have taken the CIA website down! I have just tried it. https://www.cia.gov/

  40. Mike Whitney, as always has an interesting piece at Counterpunch

    http://www.counterpunch.org/2012/02/10/the-troika-blackmails-greece/

    CanSpeccy you are proposing the salvation of Capitalism by the re-institution of slavery.

  41. “CanSpeccy you are proposing the salvation of Capitalism by the re-institution of slavery.”
    .
    So what are you proposing Chris2? Outright starvation, hyperinflation?
    .
    And what’s slavery got to do with wage subsidies, anyhow? You think unemployment is more dignified? You think being replaced by an African, an Asian or an East European is better than working for a subsidized wage and getting on-the-job experience that will increase the market value of your labor?
    .
    Come on, get your brain in gear and forget the pathetic leftist “share-the-wealth but don’t expect us to do a job” bollocks.
    .
    Incidentally, if you allow the labor market to work, i.e., get rid of minimum wage laws, you not only drive down wages but you drive down costs too. How else do you suppose that Chinese industrial workers survive on a couple of hundred quid a month? It’s because labor being cheap, everything is cheap.

  42. New lamps for old? Is this what QE amounts to?

    But what, I wonder, would the economy have looked like without QE? Proabably a full-on Great Depression 2, with horrendously high unemployment, collapsing demand, diving tax revenues, massive cuts across the board, the £ taking a nosedive…

    So, one can aruge that without QE things would have been far, far, worse. We’ve effectively been running on the spot rather than moving forward.

    QE isn’t working well enough though, if, it can be said to ‘work.’

    QE is designed to give the impression that ‘capitalism’, especially the financial sector, hasn’t actuallly imploded, and the entire system is insolvent, that is the banks, our financial institutions.

    Even in the US, a couple of years ago, when the banks were failing and falling, questions began to be raised about the future of capitalism. In Congress representatives from both factions of the ruling party began to publically question whether transfering colossal sums from the taxpayer to the financial sector, the famous bailouts, was ‘capitalism’ or, in fact, ‘socialism.’ For, if private capitalism cannot survive without the protection provided by the State, the State acting as a bank, where did ‘free markets’ go to?

    Obviously it was of the utmost importance that this questioning of the central tenets of liberal, capitalist, economic dogma and faith, be stopped. No more discussion. There is no alternative to ultra-liberalism. And poor old Keynes is smeared with the ‘socialist’ label, how that would have amused and appalled him.

    QE is creating, not so much, of ‘money’, but rather ‘debt.’ Debt created out of thin air, and money does grow on trees, contrary to what most people think. Which is both ironic, and frightening when one thinks about it.

    One can also see QE as a delaying tactic, a frantic and desparate attempt to avert the inevitable, the collapse that’s coming when the markets understand that the debt bubble is bursting and cannot be pumped up again, a bit like Humpty Dumpty.

    Finally, QE is almost a strategy for ‘class warfare.’ The ruling, financial elite, essentially loses everything they have on the great, revolving roulette wheel of ‘the markets’, the finantial institutions are insolvent, yet because the ‘elite’ control both the economy and the politicians, they have the power to demand that the State covers their losses and saves them, by ’emptying’ the treasury. Otherwise known as by far the biggest welfare, or social security check payment in recorded history.

  43. My comment vanished into thin air, is that normal?

  44. My exact thoughts,Craig. Having spent a couple of days trying to work it out I also reached the conclusion that the gilts story is a cover and that the reality is the purchase of junk securities to keep the banks afloat. The purchase of gilts would only make sense if the market for gilts had dried up- it would be a bailout of the state. We’re not yet at the point although it is to come. This is a bailout of the banks- something they can’t own up to , for obvious reasons. We must try to expose this deception as the consequences will be catastrophic for all of us. I’m trying to raise issue with Occupy Movement

  45. QE is an attempt to sustain a system, financial capitalism, that, arguably, has collapsed. That is the leading banks are all insolvent, if one examined their books properly. Obviously, this conclusion and realization is totally unacceptable for a variety of reasons, both economic and political.

    Whilst Greece, being a very small economy, cannot magically create a new finacial bubble that gives the impression that the system hasn’t collapsed and imploded, the leading economies, like the US and the UK, can, by creating vast amounts of new ‘money’ or really, new ‘debt’, get away with this ‘magic trick’ or Ponzi scheme… at least for a while, until something turns up, before the realization that we are all Greeks, dawns on the public, arguably the banks know already.

    Capitalism is on welfare, and the 1% have lost everything playing ‘roulette’, but because they ‘own’ society, and the political class, they are able to demand that the State covers their loses, in what is probably, no certainly, the biggest social security check in recorded history. How ironic, whilst the Welfare State is being gutted, that same State steps in with a massive hand-out to the 1%!

    A true indication of how bad things really are is to imagine what the economy would have looked like without the massive injection of ‘debt’ to save the financial system and the rest of the economy. But how long can this Hindenburg-size bubble keep airborne? One keeps pumping it up, but at the other end it’s full of holes.

    Without QE we’d probably be back to the 1930’s with economic collapse, mass-unemployment, and revolution in the air. QE is an attempt to avoid the consequences of an economic experiment, neo-liberalism, that has gone drastically wrong, as I was convinced it would and have been arguing the case for a quarter of a century.

  46. P.S. Of course the implication of rejecting these bailouts is that the banks must be put through bankruptcy- they need to be taken off life-support, they need euthanasia. This is what we should be pushing for. Until this is done we can’t start to rebuild the country.

  47. QE is, new lamps for old. But only in the homes of the wealthy.

  48. Nice post craig.
    `Oh` If you were at the helm Craig. But maybe Scotland would be more deserving of your talents.

    When banks create a loan, they increase the Money Supply. If the government takes out a loan by selling a bond, it can print Federal Reserve Notes. If you take out a loan, the banker adds credit to your bank account. At the end of the year, you owe the banker an interest payment. But, since he only created the principal and not the interest, someone somewhere must take out another loan so we can all make our principal and interest payments. Over time rolling over those interest payments creates a Mountain of Unpayable Debts. This crushes economic activity. It also does do what it was designed to do which is to transfer all real wealth from those who created it to those who gave themselves the right to print our money.

    As the Bilderbergers understand the situation of the world economy, there are just two solutions. One is Austerity and the other is Hyperinflation. And we are doing both right now. Austerity transfers wealth from us to the Uber Rich by selling off public assets we paid for and canceling programs we paid for so we can make payments on a fictional debt. When Argentina was forced by the bankers to sell of its state owned oil company, the bankers paid 4 cents on the dollar a national resource. Austerity merely accelerates the transfer of all assets to the Bilderbergers.

    I said public debt is fictional because the alternative was that government had created money without debt and interest payments so there never would have been a public debt. If you count the Fannie Mae and other guaranteed debts, the total US government debt is 21 trillion dollars.

    Hyperinflation does not cancel public debts by deflating its actual value. Double prices and cut your debt in half does not work in the real world. That is an illusion. The Federal Reserve is creating tens of trillions of dollars and loaning it out at rates ranging from 0.01% to 0.25% interest. John Williams at Shadow Stats tells us the real inflation rate is 11.6%. We can calculate the real cost of borrowing by subtracting 0.25% from 11.6%. The Uber Rich pay minus 11% interest which is sort of like giving trillions of dollars to multi-billionaires. Blythe Masters is the English girl who is Vice-President for Global Commodities at JP Morgan. She is heavily invested in food futures with borrowed money. This along with ethanol subsidies has driven up the cost of eating worldwide so millions more die of starvation every year.. If she makes a mistake betting on the future price of food, copper, oil gold or silver, all Blythe has to do is to sell her losses to Ben Bernanke at the Federal Reserve for 100 cents on the dollar. Then Blythe and her friends at Goldman Sachs can borrow even more money and drive prices even higher. This will soon raise the price of food beyond the reach of WalMart shoppers and is by design. They want the poor to rebel so the middle class and the poor will shoot each other. In America this will be interpreted as a race war which is what it will be. If we are busy killing each other, we will not have time and energy to chase down bankers.

    That is how hyperinflation works. I recently said America will go into hyperinflation within 16 months cutting wages in half. I define hyperinflation as beginning at 25% for a reserve currency like the dollar. This intentional inflation is designed to reduce you to Debt Slavery so the Bilderbergers own everything of value in the world including you, your spouse and your children.

    Quote from Stormfront.org

    Spoken like a true nationalist.

    With £350 billion we could have built an enormous amount of social housing on brownfield sites, converted derelict high streets into housing, built the Severn barrage and a high speed rail link from London to Aberdeen and still have had change. We could have reopened the steel industry to do it. a thousand manufacturing firms could have been re-tooled.

  49. Craig,
    “is that really what the BoE is doing, because what possible incentive would the banks have to sell their gilts”
    ,
    ,
    By definition ; “A gilt is a UK Government liability in sterling, issued by HM Treasury and listed on the London Stock Exchange.”
    ,
    Hence the gilts bought are by issue of further gilts, this trade of the kind with kind can only make sense, if the gilts that getting bought are fixed rate gilts, with a lower than inflationary coupon (rate of return) rates. This weird trade is the latest symptom of the crash that has so far destroyed the wealth of the middle class, and the poor, whilst enriching the rich even further.
    ,
    The rates calculated for the original transactions were excluding the crash factor, and now the owners of these gilts can in effect dump these in a wholesale fashion and de-stabilise the already shaky Stirling. Therefore the hush money getting paid by borrowing even more money, sort of paying the protection racketeers with promises of more money next week.
    ,
    Meanwhile the trend is to make people poorer and as the rabid right wing scum would wish to stop minimum wage, and take away the barriers to competitiveness, which basically means making everyone across the globe as poor as the next Indian untouchable, or Chinese farmhand. This is then prescribed as a nostrum to “stop emigration” and “start industrial rejuvenation”.
    ,
    Slight problem with this model is; money that is getting extorted from the various governments through various tricks, is then invested in the commodities that is pushing the prices of commodities even higher, promoting hunger, homelessness, further depressing the internal markets, while the money made from the ripping off the poor finds its way as loans of high interest rates in the foreign capital markets.
    ,
    The spiral of degradation then becomes to be a race to the bottom by all those engaged in the merry go around of the “Conventional capitalism”. This then will result in one outcome; poor eating the rich.
    ,
    However those crooks selling snake oil and creating the phoney bubbles, ie the great amounts of debt that is to be paid by majority to the crooked minority, have so far got away with their ill gotten gains, without so much as getting fined the value of a parking ticket, such is the wonders of the deregulated markets.

  50. With £350 billion we could have …
    .
    Probably not. The HS rail from London to Aberdeen would have taken the lot and why should the English taxpayer subsidize railways in Scotland when the Scotch are planning to leave the Union the year after next?
    .
    But in any case, what is the use of a subsidized steel industry? Who’s going to buy the output? Are you proposing tariffs? But if you impose tariffs and exit the WTO, then you don’t need to subsidize steel, entrepreneurs will build the plants to profit from the high prices available in a protected market.
    .
    QE makes good sense in a depression when money supply collapses due to debt deleverage as is occurring now.
    .
    Problem is, for the West, that when the government prints money little of it remains within the community to stimulate production and employment, since you can buy cheaper stuff and services offshore. The only industries that benefit are the distributive trades and the factories that snap together cheap Chinese components.
    .
    There appear to be only two possible solutions to this problem. One is an end to free trade with the low-wage economies, i.e., through the imposition of tariffs, quotas, capital controls, etc., the other is to achieve wage convergence promptly. Since Chinese manufacturing wages are not going to match those in Britain for many years, that means lowering British wages. This will happen automatically if you abolish the minimum wage law. But because at internationally competitive wages some people would starve, you need to introduce a wage subsidy scheme too. In time, low wages will drive down the cost of living and make survival for the working poor possible. And as they gain skills, the lowest paid workers will increase in value and hence in the wages they command.
    .
    But everyone seems convinced that we’re the victims of some monstrous capitalist scam and nothing can be done except hand money out to the deserving poor, without expecting them to do anything for a living.
    .
    Actually, the problem is probably that David Cameron is a pleasant young man with very little practical experience and really hasn’t a clue about what he is doing. Oh, he has civil servants to advise, but who in the right mind would leave the management of the country to a bunch of civil servants who never met a payroll in their lives.

  51. “Hence the gilts bought are by issue of further gilts.”
    .
    Not so, if what is happening has been correctly reported as quantitative easing.

    If there is QE, then the gilts bought are bought with money the BoE does not have, i.e., ink money, money out of thin air, money that did not previously exist.
    .
    That’s the point of QE, to get money into circulation, which in this case is done by buying bonds from the public.
    .
    If the bonds were paid for through the issuance of new bonds, there would be no QE.
    .
    Here’s my primer on money printing.

  52. Not so, if what is happening has been correctly reported as quantitative easing.
    ,
    Where does this money come from? Ink money?
    ,
    So the real IOU/gilt is replaced with imaginary I Paid the bearer/ink money!
    ,
    You are deliberately obfuscating.

  53. @writerman – comments may not show up straight away if they are caught by our creaky spam system. It is best to assume it will show up when a mod approves it, rather than posting again – I have done this just now for you.

  54. The idea of QE, which is simply creating money out of thin air, is to increase the money supply.
    .
    .
    Private Banks normally increase the money supply by the amount of debt they create ( loans ). When you get a bank loan the bank doesn’t lend you meny it already has it creates the money out of thin air. however to prevent private banks creating an infinite amount of money out of thin air they are bound by the central bank regulations called the reserve requirement ( or reserve ratio ). This is called Fractional Reserve Banking and the money is created out of thin air through deposit multiplication ( also known as Money multiplier )
    .
    The federal reserve release a booklet sometime ago explaining the process of FRB and deposit multiplication …
    .
    http://www.smeggys.co.uk/smeggy_info/Modern_Money_Mechanics.pdf
    .
    .
    … but simply put, on a reserve requirement of 10% for every £1million deposited into the banking system, the banks can create upto £10million

    QE works by creating an initial seed of money to increase bank reserves by buying financial instruments like bonds and depositing the money into the bank accounts of those selling the bonds. The banks then have an increased reserve and thus can then create up to 10 times that amount through deposit multiplication.
    .
    .
    of course the banks have to create the new money through debt and not use it to pay bankers bonuses, and of course on of the complaints about previous rounds of QE was that the banks were being too slow in creating new debt to increase the money supply even after they had the QE injection to increase reserves.
    .
    .
    Always remember that prviate banks control the economy because they create and destroy the money and thus control the supply
    .
    I say ‘destroy’ becuase as well as creating new money out of thin air as new debt, the banks also destroy it again when the loan is paid back. This is why a Credit crunch ( debt crunch ) is bad. All money is debt. As existing debts are paid off new debt is required to top up the money supply, other wise the amount of money in existence decreases, people start hoarding what’s left for longer, thus the velocity of money decreases, and there’s less commerce and jobs are lost, etc,etc,etc, This can spiral down. interest rates are normally adjusted to regulate the money supply, but when that fails QE is employed.
    .
    .
    QE is really just Open Market Operations on a grander scale.
    .
    .
    All money is debt ( an IOU note – I promise to pay the bearer ). Even if you personally have no debts, somebody somewhere is paying back that tenner in your pocket
    .
    .
    The big problem is the Usury, i,e the addition of interest on the issuance of the new money. Remember all existing money is all promised debt. so when new debt is created the money to pay off the usury on it doesn’t yet exist. There’s only one solution for that…. mroe debt.
    .
    .
    .
    and that’s Debt Enslavement 101 folks. it’s a clever system in which the Money lenders have got us all by the balls in an infinite run of debt enslavement and cream off a royalty for themselves for basically nothing but typing a number into an electronic account. They don’t even have to pay to print most of it up as physical notes anymore
    .
    .
    have fun :)

  55. “Where does this money come from? Ink money?
    ,
    So the real IOU/gilt is replaced with imaginary I Paid the bearer/ink money!
    ,
    You are deliberately obfuscating.”
    .
    I told you, I comes out of thin air!
    .
    The BoE writes a cheque, which the recipient deposits to his bank account and is then able to spend.
    .
    That’s all there is to it.
    .
    The only difference between you doing this and the BoE doing it is that the BoE does not need to have the money, just a book-keeping entry. That’s one of the joys of being a central banker. The mechanics are probably a little more complex than indicated, but not much. And the interest paid by the Treasury on the gilts that the BoE bought is presumably returned to the Treasury, as would be the case with the US Central Bank.

  56. Canspeccy at 10.06 – it must be very comforting to have such a clear view from (I suspect) a lofty vantage point.
    I do not pretend to know very much about economics; however your post chills me. It smacks of a viewpoint which regards “workers” who have a “value” as pawns to be moved around at the will and whimsy of others who by chance of birth, good fortune, intelligence, ambition, etc etc can order others to jump to their command in the interests of what? Growth?
    Nah – there’s more to life than that Cantsee.

  57. Someone tell me please, I am curious: exactly how does one become a fat cat banker of the sort that Craig and others here love to hate? No doubt we should avoid so great a sin, of course, but how exactly does one become such a bounder? Just in case I should need to know. :)

  58. PS. On second thoughts I take it back, Indeed one must avoid and flee from such filthy lucre! Filth! Filth! Let the fat cats roll in their gold sovereigns, and let us value more getting to heaven (and them too if they repent of course, why not?)

  59. PPS. Time to return to balance. If we have a comfortable life, maybe we should be thankful enough for that.

  60. Canspeccy
    I’ve been working in London this week at a shopping centre. After taking £12 p.h. 8 hours in the freezing cold, I paid £22 parking, congestion charge, and 230 miles@ 25p per mile travel costs. Nett gain: 0
    Before Gordon Brown my actual expenses were knocked off my taxable income – happy happy – financial survival.
    After Gordon Brown, I now get a Working tax credit, which I live on while my earnings are cancelled by the expenses.
    This change by the Chancellor of the Exchequer was pure racism by the office dwelling community against the people who make things work after the offices are closed with the net result that I, who do useful things, earn nothing but have to be subsidised, while they who do nothing and cost millions to heat and air-conditionise, pocket multiple tens of thousands salaries.
    QE is more of the same. It is ridiculous for you to suggest that non-productivity being incentivised and productivity being de-incentivised is the only sensible course of action. They told ne at school 50 years ago that we were entering an era of leisure. Maybe this illusion is maintained because so many people are getting rich from work being done out of sight out of mind in the Far East. Doesn’t that ring little alarm bells about the invisibility of the African slave trades?

  61. “The BoE writes a cheque, which the recipient deposits to his bank account and is then able to spend”
    ,
    You really have no idea, and are making it up as you go along.
    ,
    Is BOE a private company? Who owns it?
    ,
    This to and fro debate here seems to conclude on one hand money as debt, on the other money out of thin air ie not a debt but product of the BOE, which in turn is given freely to the banks.
    ,
    In this nice world BOE gives money to the banks, and banks then own the lot of us along with the whole of the place, including the government, and the BOE, nice circle jerk.
    ,
    However, this remains a mystery; we have the resources, the workers, the markets, and nothing is getting produced, consumed or explored, because of the scarcity of the money an artificial construct that evidently no one around here seems to understand. That is capitalism for you; Oligarchs make you work so they can get you to buy their money so that you can work even more never ever reaching a level of independent from the web of the debt that has been accrued because all the time your work has been worth less and less and even less in terms of the money’s value. Hamsters are inherently stupid, to get into the hamster cage and run for their lives, what does that say about us all to subscribe to the current bankrupt ideology, shoved down our throats as the only way to be?

  62. Q.E. is not such a mystery.
    The banks have purchased domestic and foreign sovereign debt (Greek, Portuguese, Irish, U.S., etc.) and other (private) debt (because it looked like a good investment at the time of purchase and offered ‘higher’ interest rates at the time of purchase and because they have had lots of cash sloshing around because the U.S.A. has been flooding the banks and the world with virtually ‘free’ money since 2008).
    The banks are allowed to call these debt instruments ‘assets’.
    In addition the banks have been ‘trading’ these assets amongst themselves because the banks generate a commission on each sale.
    In addition the banks have sold ‘insurance’ policies to each other against the risk that these sovereign bond (and other) assets may lose value (in the case of default by the original issuer (e.g. Greek, Irish, Portuguese, Italian, Spanish, British Central Banks)).
    In addition, they have sold and re-sold these insurance policies to each other, each time earning commissions.
    In addition they have been both purchasing and issuing insurance policies against such defaults without even having to actually own the underlying debt in the first place and without having the necessary reserve funds with which to pay out the insured in the event of a default.
    In addition, the generally accepted previous accounting rules have been changed such that in the event that these assets do in fact fall in value (they have in fact so fallen) then the banks do not have to report such loss on their balance sheets (for if they did, they would be forced to reveal that they probably were insolvent).
    In addition, they have been trading U.S.A. mortgage debt (and earning commissions) amongst themselves (and insuring such debt), much of which mortgage debt is close to worthless – again off balance sheet.
    These above so called ‘derivative instruments’ are now collectively equivalent to many, many, many times the total world’s annual gross domestic product (some estimate up to ten times i.e. US$70 trillion, others estimate up to US$700 trillion).
    If Greece (for example) does default then the holders of its sovereign bebt have at least two problems:
    1. How to account for the loss of their Greek sovereign debt assets, and
    2. How to pay out to those same insured parties against default.
    The bonds’ default clauses are complicated and have been issued under various different countries’ jurisdictions but there’s no need to worry because an organisation has been set up to adjudicate exactly: “what actually is or is not a default at the time of such default”.
    You may further rest easy because this organisation has been set up by the major banks themselves and further is staffed by upright, decent and no doubt highly paid members of those same banks.
    So what is the Bank of England almost certainly spending Pounds 50 billion on?:
    transferring the dodgy banks’ assets (per the above) onto its own balance sheet and thereby making (at least partially) the banks balance sheets whole again and in the meantime ensuring that the British taxpayers are now so liable for another 50 billion.
    It has all become the world’s largest Ponzi pyramid scheme, the size of which entirely dwarfs anything since the beginning of recorded history.
    The on-going transfer of wealth from the 99% to the 1% is unprecedented.
    Only time will tell if it is to continue along this path in which event the banks will likely own ‘everything’.
    One may hopefully look to such ‘connected’ persons as yourself to advise the peons as to whether this state of affairs has come about by accident or design.

  63. Rose,
    .
    Insofar as anyone believes me to be possessed of a loft vantage point, that can be attributed solely to the fact that I have over the years made some effort to understand how money is created and what role its management and manipulation has is in the evolution of the economy.
    .
    You suggest that I regard ““workers” who have a “value” as pawns to be moved around at the will and whimsy of others …”
    .
    That is a misconception. In a market economy, there are always to parties to a transaction, and in the case of employment contracts, one of those parties is the worker, who therefore has considerable control over the work he or she does and under what conditions.
    .
    The remarks I’ve made here, reflect my view that the existence of mass unemployment, up to 50% or more among young people in some European countries, as the scandal of the age.
    .

    And in considering what should be done to solve the problem, one must chose among the feasible alternatives, none of which is utopian.
    .
    There are some who would like to go back to the hard left solutions of Old Labour, nationalize everything, have the government own everything, provide the Western equivalent of the iron rice bowl. But this has never worked well. In Russia and China it evolved into a murderous tyranny. And in Britain it was driven by socialists who were enthusiastic supporters of tyranny: Bernard Shaw, who wished to euthenthize those unable to support themselves, the Webbs and H.G. Wells, enthusiastic supporters of the mass murderer Stalin and many other crypto Communists in the ranks of the Labour Party and academia.
    .
    So what is the alternative? A market system, either on a national or a global basis.
    .
    I have long argued for a return to a regulated national market economy in which capital is not free to exit without cost to the lowest wage jurisdiction, where home industries are protected by a tariff wall, and competition is maintained by strict application of anti-monopolies legislation (An idea well explored in the 1990’s by Southern Baptist University economist Ravi Batra).
    .
    But that solution has been thoroughly rejected, neither left, right nor middle want it. What everyone wants is cheap cell phones, ipads, car parts and services from China, Vietnam, India, Turkey, etc. What that means is jobs are going to be wiped out if you try to maintain the existing ten- to thirty-fold wage differential between the West and the Rest. The solution I offer is, thus, the only one that seems feasible given the constraints.
    .
    However, there is much to be said for a properly functioning and regulated market economy. People may not like competition very much, but it is a spur to self-improvement and productivity that can make us all better off and better disciplined. And under a truly democratic government in an age of unparalleled technological advancement, there is no doubt that under a properly regulated market economy the mass of people would be much better off that they are today.
    .

  64. I did answer your comment, Rose, but the system seems to have wiped it out.
    .
    Perhaps it will reappear in the morning. Suffice it for now to say, that I prefer a market economy to a communist or fascist system such as most people here seem to prefer.
    .
    Moreover, you should remember that in a market system all transactions depend of the agreement both parties to the transaction. That is true in the job market as in any other. Therefore, workers are never exactly pawns in a market economy, contrary to the case in a socialist system, although it is true that sometimes the options are lousy.

  65. Craig, why don’t you use sensible functionally effective blog software instead of this crap that deletes half of what’s posted here?

  66. Oh, now my complaint shows but not my comments. Must be that cretinous moderator “other mod” on the job. Time to quit, evidently.

  67. For mine, any discussion of usury within its priest (which is to say, banker) supplied Gordian knot definition is a waste of time. The Gordian knot was a con in its entirety and usury is no different.
    .
    Money is nothing more than a means of exchange. To treat the means of exchange as a commodity in and of itself has no future beyond that of a pyramid scam. In both of them the bust is inevitable with the only difference being that usury’s bust takes decades to occur and can thus be misrepresented and blamed on everyone except the makers of it.
    .
    The ancients understood this and that’s why every major religion declared usury a sin. (Judaism is only a soft exception insofar as it bans usury to Jews but permits it to Goyim).
    .
    The idea that a nation should borrow its money from people who never had it to begin with (but merely clicked their fingers and declared it so) and that the people of that nation should then be required to pay it back with interest, and all in real world blood and treasure, deserves a single response: the sharp end of a sword.
    .
    Everything else is bullshit of the impossible riddle variety and will be precisely as successful as all those other experienced knot-tying boy scouts who preceded Alexander.
    .
    But don’t mind me. Best everyone just carry on picking at that knot. The priests said it can be undone and they wouldn’t lie to us would they? Nah.

  68. CanSpeccy,
    .
    The added value of your theory-led chundering is the net loss of human dignity,as far as i can see.

  69. @canspeccy

    Monetary policy doesn’t work in a liquidity trap – you miss that point and much of your argument falls down.

    @craigmurray

    One of the main points of QE is to fund the budget deficit – compare the BoE balance sheet to the government’s funding requirement. Without QE the government would have found it difficult to fund the deficit. The banks role is to take a really big slice off the top – with the bonus that they get to sell their existing gilts at a fantastic mark up. All of this has to be reversed at some point in the future before it turns inflationary and that is when the pain really hits (and the banks get to make another hugely profitable trade then also).

    The funny thing is when the BoE started QE a few years ago it was considered extremely unorthodox and untested but now it is completely the norm. It will probably all end in tears but most of the people involved will have moved on by then.

  70. Synchronicity to me is an indication that things don’t happen by chance, they happen because of design and purpose. Atheistic demons don’t like that notion since it would mean that ultimately there is a master plan they are not in charge of.
    .
    There is synchronicity in the way that privately owned central banks together with corrupt governments are creating a world of slaves and slave owners (themselves) through the fractional monetary system and an invented war on terror.
    .
    There is synchronicity in the way the ESM treaty is created in the EU youtube.com/watch?v=vPCKHvCgLnA
    .
    And there is synchronicity in what Tony Farrell, a former Principal Intelligence Analyst at South Yorkshire Police , says here: youtube.com/watch?gl=US&v=azEQRmcfRJk
    .
    Things never happen by chance, there is always a purpose, life is a quest of understanding purposes.
    .
    Why there are so many zionists trolling the commentaries in this blog in not too hard to understand though.

  71. “Monetary policy doesn’t work in a liquidity trap”
    ,
    But the Great Depression was the mother of all liquidity traps and the Keynsians assure us that recovery would have been achieved had the money supply not been allowed to contract. But in any case I was not advocating money printing, I was merely explaining what was involved.

  72. “The added value of your theory-led chundering is the net loss of human dignity,as far as i can see.”
    .
    In what way does a policy that would allow the unemployed to find work at a living wage detract from their dignity?
    .
    The added value of your comment, to adopt your rather bizarre style, is outright lunacy, so far as I can see.

  73. ‘“The BoE writes a cheque, which the recipient deposits to his bank account and is then able to spend”

    You really have no idea, and are making it up as you go along.
    ,
    Is BOE a private company? Who owns it?’
    /
    To take those points in reverse order, not the BoE is not a private company. It was nationalized in 1946.
    /
    No, I am not making anything up. I am just explaining how QE works.
    /
    How did you think it worked?
    /
    The Government prints money as and when it sees fit. The process is very simple. Why should it be otherwise?
    /
    But people find it hard to understand for some reason. presumably that’s why Ben Bernanke once remarked “we have a technology, it’s call the printing press.”
    /
    In fact, that’s not the technology that central banks use to “print” money, but its an analogy that people can grasp: the printing of banknotes.

  74. Guano, you made 96 quid for an eight hour day, which is about 94 pounds more than I made in my first job. But you spent 57.50 on travel and 22.00 on parking, which left you with a net of only 14.50, or just under two pounds an hour, which is not a living wage.
    /
    My first thought is that you should look for a job closer to home. But I don’t wish to be flippant. And I am prepared to believe that you would have taken a job closer to home if you could have found one, which means that you are the victim of a lack of jobs, the result of globalization, outsourcing, off-shoring and mass immigration, all of which put you in competition with billions of people in the third world where average wages are only a dollar or two a day.
    /
    And remember, among the four billion in the developing world, there is pretty certainly someone at least as bright as you or anyone else here who would like to take your job or any job you might have a chance at in exchange for the pittance they earn now driving a pedicab, working in a sweatshop or trying to scrape an existence from a tiny patch of soil.
    /
    But if the minimum wage were abolished and job subsidies instituted, you’d have both greatly expanded job opportunities and a living wage, which is better than the condition you are in now.
    /
    What’s more, since you are literate and enterprising enough to travel 230 miles for a day’s work, you’d pretty certainly have a choice of a wide range of jobs and the prospect of rapid promotion.

  75. Is Quantitive an alternate spelling for Quantitative, or is the Craig Monster struggling with words of more than three syllables?

  76. “OK Fine”: Either seems fine with the BBC, both have been used, nobody appears to be getting all bent out of shape about it, but perhaps you should send a letter of complaint without delay. Let us know how you get on with that, promise?
    .
    Aside from that incredibly feeble whinge, your stamp of approval must be given by default! Given that was your only criticism, and you found the time to read, and respond.

  77. Here the BoE confirms that my explanation of the supposed mystery of QE is precisely correct:
    .
    “Between March 2009 and January 2010, the MPC authorised the purchase of £200 billion worth of assets, mostly gilts – UK Government debt. The MPC voted to begin further purchases of £75 billion in October 2011 and, subsequently, at its meeting in February 2012 the Committee decided to purchase £50 bn to bring total asset purchases to £325 bn.
    .
    The purpose of the purchases was and is to inject money directly into the economy in order to boost nominal demand. Despite this different means of implementing monetary policy, the objective remained unchanged – to meet the inflation target of 2 per cent on the CPI measure of consumer prices. Without that extra spending in the economy, the MPC thought that inflation would be more likely in the medium term to undershoot the target.”
    .

    But while there is no mystery, it remains open to question whether QE is the right policy. As I’ve indicated, I think it is largely irrelevant as a means of ending high unemployment since we have a globalized economy and more spending in the UK just sucks in more stuff from abroad and increases the debt load without producing much employment outside of the distribution trades. The only solution that I can see is to achieve wage convergence with the Asian masses immediately by freeing the labor market, rather than waiting for convergence over the course of years of demoralizing economic decline, social disruption and loss of industrial capability.

  78. Glenn
    .
    Why are you asking me to write to the BBC about something you saw on their site? Am I your secretary?

  79. Canspeccy
    Of course Employment contracts are the responsibility of both parties in most countries, but in the UK the conditions are so completely warped by state benefits and incentives that it nearly amounts to slavery. If I sign up to zero income on the condition of subsidy, and on April 1 the subsidy is removed, I will be on zilch zero nothing.
    I agree with Writerman above that the system is wholly fraudulent and I can see in my own case that I will have to self-exile very soon in order to survive. If you export jobs, you will have to export people to follow those jobs. The idea that the removal of jobs will create a vacuum which will be filled by others is wrong. When those others arrive at the same level of fiscal subservience that I am on, and realise that we are in a single-eyed computer system which charges us noise and methane pollution tax for farting, they will also not be able to survive.
    The only viable way forward for this country is to have a revolution in which the lying, scumbag politicians who do the will of the Zionist bankers are removed and replaced by moral human beings. I do not think that immigrants who have been accustomed to a fairer fiscal deal in their own countries will be more likely to act against UK fiscal injustice than the indigenous species, because if anything they are more likely to join, rather than resist the system of deception because it is not their country and they have less to lose.

  80. My younger brother, who is a banker, and works in the City, has told me on serveal occasions, that the dirty little secret is, that most, if not all, the ‘banks’ are insolvent, or ‘bust.’ But, clearly, admitting this in public would crash the world’s economy, so… one creates even more ‘insolvency’ or ‘debt’, also known as QE, to paper over this inconvenient truth. How long this ‘Potempkin’ financial system can survive, is debatable.

    Furthermore it’s extraodinary that the state/tax-payer is effectively paying banks to borrow from the state, yet with interest rates so incredibly low, or really non-existant, if one factors in inflation; it’s an indication of how bad the economy is really doing, that investment and transactions between banks have almost ground to a halt.

    My brother’s bank, for example, swaps ‘worthless’ bonds, or ‘debt’ for gilts supplied by the BoE. They then invest this money in South America and Asia, not in the UK. As he said when we met over Christmas, it’s surprising that the peasansts haven’t strarted to hang people like me from lampposts.

    A big problem for the economy is that it’s doubtful that traditional Keynesian remedies will work this time around, if they ever really did. There’s a lot to be said for the radical argument that what lifted the world out of the last Depression in the 30’s, wasn’t Keynes, but the second world war. If that’s true, are we going to employ the methods this time around?

  81. http://2.bp.blogspot.com/-A9xvHiI_3fQ/TsgQm7E1v8I/AAAAAAAAAfE/BeKSzRh_O-Q/s1600/jump-you-fers.jpg
    .
    Q Are bankers still getting high on cocaine as they were before the bubble burst?

  82. No such word as quantitive. Sorry.
    .
    quan·ti·ta·tive   
    1. that is or may be estimated by quantity.
    2. of or pertaining to the describing or measuring of quantity.
    3. of or pertaining to a metrical system, as that of classical verse, based on the alternation of long and short, rather than accented and unaccented, syllables.
    4. of or pertaining to the length of a spoken vowel or consonant.

    ——————————————————————————–

    Origin:
    1575–85; < Medieval Latin quantitātīvus, equivalent to Latin quantitāt- (stem of quantitās ) quantity + -īvus -ive

    .
    Two corrections for CanSpeccy.
    Scotch is whisky. Scots or Scottish are people.
    David William Donald Cameron! is neither pleasant nor young. He will be 46 this year.

  83. Writerman’s points on QE are even more pointed than the sceptical comments by Larry Elliott in the Guardian on 10 Feb ( see http://tinyurl.com/83uc6tk )

    .
    See also the latter part of my post on this thread at 10.49 am yesterday. If we are looking to reap the benefits of a major war do we see the UK as benefiting on the model of the USA or of Japan after WW2 (or even of rationed Britain, with spivs and unwittingly sowing the dragon seeds that have sprouted as imitative neo-connery a couple of generation later?

  84. O/T A message to Matthew Gould pleading for his intervention to have a stop put to the cruel treatment of this Palestinian by the Israelis has been met with an Out of Office messaage.
    .

    http://www.haaretz.com/print-edition/features/otherwise-occupied-for-the-sake-of-his-dignity-1.411281
    .
    Or HERE
    .
    Otherwise Occupied / For the sake of his dignity – Haaretz Daily Newspaper | Israel News
    .
    Amira Hass discusses the case of Khader Adnan, who has already broken a Palestinian record for the longest solo hunger strike in protest against humiliating practices by Shin Bet security service interrogators.
    .
    Adnan has testified that his hands were tied behind his back, he was thrown on the floor of an army jeep and during the journey soldiers kicked and slapped him. The jeep reached the Mevo Dotan settlement, where he described being held for several hours outside in the cold, with his cuffed hands swelling and his lower lip cut and bleeding.
    .
    The day after this, he was tied to a chair and positioned in an excruciatingly painful way. Throughout the interrogation, he remained tied, his hands behind his back. Adnan says that Shin Bet questioners cursed him and threatened harm to his family.
    .
    According to Hass, Adnan was recently moved from the Israel Prison Service medical facility to a private hospital in Bnei Brak. His legs and arms are cuffed to his bed.
    .

  85. I shall invent words as I see fit. Quantitive is more economiocal than quantitative, and its meaning is obvious, And its easier to say.

  86. I agree, Craig. I made up “commenters” to describe people who place comments on blogs etc, to replace “commentators”, which suggests a media professional. If people never invented words we wouldn’t have any.
    .
    Now I want a word like “his” and “hers”, to describe possession by a person in the singular whose sex is not specified or maybe unknown, without resorting to the plural. I find this omission in English most annoying.

  87. Perhaps we should rename you Craig “Humpty Dumpty” Murray, or maybe precise wording is not important in diplomacy. Or maybe even today, words used in diplomacy really do mean whatever Hillary Clinton means them to say. Or, maybe have another dram. Cheers.

  88. Yeah, right, “Sarah Palin invents word refudiate, compares self to Shakespeare”.
    .
    Craig’s misspelling is just that, not an invented word, and betrays a misunderstanding which is shown more clearly by his text.
    .
    Clark’s commenter is not an invented word.

  89. Clark (at 10.44 am), I have long shared your frustration. It adds to the difficulty that we really need the new pronoun to have nominative, accusative and genitive forms and not to seem biased to either of the sexually explicit singular pronouns. The messy compromises of orally and aurally indistinguishable s/he and grammatically incoherent “them” are both unacceptable. Your question has made me grapple seriously with this conundrum for the first time.

    .
    The best I can tentatively come up with – bringing in a false etymological relationship with French rather than Anglo-Saxon – is: tu, tob, tas. The difficulty with this or any other possible solution will be that we have (thankfully) no Academy Anglais to impose a new rule.

    .
    Altogether, one could make a case for saying that the situation is as messy as that of our unwritten constitution. A further complication: what would Alex Salmond think? Should there be a Scots variant? And wouldn’t a USA variant need to have a false etymological link to Spanish?
    .

    More radically, since the 21st century is Chinese, why not use the English language’s genius for encouraging inward migration and take over lock stock and barrel Mandarin’s “ta” for all these forms. That will mean, of course, getting rid of our present linguistic sexual discrimination. That may come not to matter much in an age of decreasing sperm viability and increasing use of cloning and GM people.

  90. But it is not altogether clear to me what is happening from the single news report I have read, probably because the central bank prefers to obscure from public view exactly what it is doing. However, in this case, unless you are aware of evidence to the contrary, I am inclined to believe that the BOE is engaging in a straight forward effort to stimulate the private sector by increasing the money supply. ….. CanSpeccy 10 Feb, 2012 – 6:40 pm

    .
    The problem appears to be that the right sort of individuals* in the private sector are not receiving money supply to spend and generate relief and energise economies, CanSpeccy. Thus are the banks destined to collapse and their executives fated to be considered and treated as ignorant and arrogant pariah/negligent, artificial control freaks?
    .
    * And I particularly choose the word individuals because money/QE spontaneously created wealth is always held in the control of individuals even whenever disguised and gifted as a loan/bail out to a multinational conglomerate.
    .
    Whenever one considers the supposed parlous state of Westernised capitalist/mercantilist economies, with their mountains of ever increasing debt and pretty clear inability to repay, [and one then should be asking …. Repay to whom and for what whenever money is so easily instantly invented in sums as are merely arbitrarily decided/subjectively considered appropriate for systems survival needs/feeds/seeds] is one forced to conclude that the Game being played is systemically sub-prime and failed, and failed a long time ago, with no one smart enough to start a completely different and fundamentally new Great Game.
    .
    And that is a catastrophic failing in human intelligence which delivers every conceivable vulnerability to be ruthlessly exploited by that which delivers ……. well, would that be the Future with SMARTer Immaculate Sources or those who would be ITs Agents of Change?
    .

    I shall invent words as I see fit. Quantitive is more economiocal than quantitative, and its meaning is obvious, And its easier to say. ….
    Craig 11 Feb, 2012 – 10:24 am

    .
    And why not, Craig, for it covers up for so much and provides such remarkable stealth too, in some cases.

  91. Sorry I spoke 😉

  92. Knocks on the door in the chilly dawn this morning.
    .
    Eight people held over payments inquiry
    Five employees of the Sun were among those arrested as part of the Operation Elveden inquiry
    .
    Five Sun employees are among eight arrested over alleged corrupt payments to police and public officials.
    .
    A Surrey Police officer, member of the armed forces and Ministry of Defence employee were also arrested.
    .
    Picture editor John Edwards, chief reporter John Kay, chief foreign correspondent Nick Parker, reporter John Sturgis and associate editor Geoff Webster were held, the BBC understands.
    .
    The arrests are part of the Operation Elveden probe into payments to police.
    .
    News Corporation confirmed that five employees of the Sun were arrested.
    .
    http://www.bbc.co.uk/news/uk-16996275
    .
    Shame that there isn’t an Operation FoxGouldWerritty ongoing.

  93. Absolutely love it. A heated debate trying to understand the intrecacies of an unsustainable and falsifying financial system, turns to semantics over words.
    Clark I’m all the way with you, what point has pedantry got, what has it ever achieved and why are we all so hung up about words when languages evolve all the time.

    Unless 70% of all Bretton woods orientated fiancial system fail, we will not see anything different. Off course if we help this failure along to happen faster, rather than drag it out for some more decades of value adding wars and crumbling social system, we will be called just about every word under the sun, including the word eco/terrorists.

  94. Craig, I don’t think you underdstand how QE works. There is no reason why the Bank of England should buy gilts, it is just that they are more liquid than any other UK asset. What matters is how the Bank pays for them, which is with an IOU.

    This IOU counts as money and so the money supply is increased. It also counts as part of the reserves that banks have to hold and allows them to lend more money (more than 10 time the amount of QE).

    Unfortunately, the banks are unwillin to use this increased lending capacity and so the effect of QE is rather limited.

  95. The right wingers here are so desperately trying to portray the fraud of the gargantuan magnitude perpetrated on the ordinary masses by the ruling oligarchs as a natural/normal economic activity.

  96. james c,
    Gilts are the “IOU” given by the BOE to some entity in the past with a set coupon value ie rate of return, that in turn has given the BOE to print/issue/hand out money.
    ,
    Evidently as per the sophistry so prevalent on this thread the BOE without raising any money ie not issuing any gilts, or bonds goes ahead and prints money to buy back its IOU that it has given in the past, with a view to the banks lending money to people who have no jobs and not a chance of a snow ball in hell to pay back the money they have borrowed from the said banks and then blame is put on the banks for not lending out to people who cannot pay back the amounts they intend to borrow.

  97. The very fact that there can be so much argument with so little agreement, so much misunderstanding, so much disagreement over what the various terms even mean, let alone their implications, seems indicative that economics has got completely out of hand, that it now has more in common with, say, astrology, fashion and connoisseurism than it has with any kind of science.
    .
    Now what sort of organisations routinely submerge important discussions under a deluge of confusion and trivia, and why?
    .
    It’s perfectly simple. People get together to make democratic governments partly as a tool that is powerful enough to keep other, less regulated power structures in check. One governmental function is to gather wealth from where excesses of it accumulate, and move it to where it will actually do some good. Seeing as the distribution of wealth has been steadily polarising for decades, governments are clearly failing in that function. The obvious reasons for this are corruption and the undue influence of Big Money over government.

  98. The 0% stamp duty ‘holiday’ for houses sold for under £250,000 is being withdrawn by Osborne. From 24 March it returns to 1%.
    .
    New deals for buyers as stamp duty holiday ends
    http://www.bbc.co.uk/news/business-16989215
    .
    This insurance scheme is being introduced.
    .
    ‘Next month another initiative is being launched.
    .
    Under the NewBuy Guarantee scheme, lenders will be able to offer 95% mortgages on new homes without taking on all of the risk if the borrower defaults.
    .
    This insurance scheme will mean that lenders will be guaranteed to lose less money than before if the borrower eventually fails to repay all their loan.
    .
    A spokesman from the Department of Communities and Local Government explained how it would work.’
    /..

    I hope the ‘first time buyers’ understand all of this jargon.

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