Effects of Quantitive Easing on......

This is a discussion on Effects of Quantitive Easing on...... within the Economic & Fundamental Analysis forums, part of the Methods category; Originally Posted by Xeno I think people still underestimate the scale, and inflation is a long way off. Do you ...

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Old Mar 12, 2009, 4:00pm   #16
 
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I think people still underestimate the scale, and inflation is a long way off.
Do you think it is possible that inflation will pick up faster if others follow. Demand in commodities, excluding oil, will reach the levels we saw last summer and then we will be no better off.
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Old Mar 12, 2009, 4:16pm   #17
 
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maybe in the long term
the time to react is now to avoid massive correction
but BofE has to spend money on new businesses or businesses with prospects, not just buying up everything blindly. I am not sure if they do this right, but who knows.

They should have separated the rotten firms to avoid contagion in the first place, yet there is no agreement amongs diffrent political views as usual, so in practice all looks f***d up a the moment. I guess conservative liberalism hasnt done much good to the people at the bottom of the ladder, invisible hand? Could be cruel fist of destruction.
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Old Mar 12, 2009, 4:24pm   #18
 
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If that is the case then why does the Governement not undertake infrastructural projects to rejuvenate some out dated technology in the country. Railways, underground, broadband etc... I know some of these are already underway but a lot more could be done. Take the facists of Italy and Germany; they recovered after WWI and the Great Depression with massive projects. Italy built motorways, drained large areas etc...

Just an idea... taking the train from London to Edinburgh makes you think in a strange way!
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Old Mar 12, 2009, 4:29pm   #19
 
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If that is the case then why does the Governement not undertake infrastructural projects to rejuvenate some out dated technology in the country. Railways, underground, broadband etc... I know some of these are already underway but a lot more could be done. Take the facists of Italy and Germany; they recovered after WWI and the Great Depression with massive projects. Italy built motorways, drained large areas etc...

Just an idea... taking the train from London to Edinburgh makes you think in a strange way!
------------------------------------------

Seems that you gov is pretty rubbish though. The prime minister - 14 years investment banker cant figure out cyclical movement of capitalistic economies.
And why they dont pump money in the rejuvanation of the projects - cos they dont have them, there is nowhere to borrow, thats why they print them. Even worst they have stopped subsidising green energy projects, going back to fussils and nuclear power.
Looks bad, check the UK macro figure - looking much worst than the US and EU.
Sorry
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Old Mar 12, 2009, 4:39pm   #20
 
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If that is the case then why does the Governement not undertake infrastructural projects to rejuvenate some out dated technology in the country. Railways, underground, broadband etc... I know some of these are already underway but a lot more could be done. Take the facists of Italy and Germany; they recovered after WWI and the Great Depression with massive projects. Italy built motorways, drained large areas etc...

Just an idea... taking the train from London to Edinburgh makes you think in a strange way!
They used to do all sorts of things like that, using off-balance sheet vehicles (PFI). Unfortunately, the banking shock caused the whole PFI system to get completely disrupted in a whole variety of ways. So public infrastructure projects languish 'cause the normal methods of financing them are broken. Until they can fix the banks, nothing can proceed, in my view.
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Old Mar 12, 2009, 5:03pm   #21
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Do you think it is possible that inflation will pick up faster if others follow. Demand in commodities, excluding oil, will reach the levels we saw last summer and then we will be no better off.
Do you mean if other countries follow? If so, yes it would have an effect. While our currency would be less devalued, demand would increase, but if the QE elsewhere does what ours does, which is just shore up balance sheets at the moment, it would just fill in a hole.

Regarding oil, when it was at 150, many experts were saying that about 40-60 dollars of that was speculative. Now, we're getting by quite happily at 45 dollars. The speculative part of a bubble usually comes towards the end, so I see oil drifting up gradually over 12-24 months.

The bottom line IMO is, gold and oil should be very good long term investments, and the signs of any returning inflation will be slow and obvious and easy to hedge against
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Old Mar 12, 2009, 5:33pm   #22
 
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Its a sad but hopefully truth!
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Old Mar 20, 2009, 11:42pm   #23
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What I dont understand about this money creation, is that this money is created out of thin air to buy these corporate bonds. These bonds have to be paid back, with interest!

Where does the money and interest that is paid back go?
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Old Mar 21, 2009, 12:31pm   #24
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What I dont understand about this money creation, is that this money is created out of thin air to buy these corporate bonds. These bonds have to be paid back, with interest!

Where does the money and interest that is paid back go?
The redemption money and interest on the bonds is paid to the bondholder - in this case the Bank Of England. That's not really the point here though. The point is that whoever previously held the bonds now has cash instead of the bonds. This cash is now available to them to lend, invest etc. If they'd got cash for them by selling them to someone who hadn't created the cash, then the money would have come from somewhere else in the economy, and the net amount of money in the economy would not have increased.

If you're worried about the money being paid back coming out of the economy, don't be - in most cases it won't be paid back for many years, in some cases, never, by which time we'll knowthe effects of the QE.
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Old Mar 21, 2009, 2:10pm   #25
 
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according to Schumpeter we are facing the process of "creative destruction"
according to Keynes monetary policy action is not enough
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Old Mar 23, 2009, 12:06am   #26
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The redemption money and interest on the bonds is paid to the bondholder - in this case the Bank Of England. That's not really the point here though. The point is that whoever previously held the bonds now has cash instead of the bonds. This cash is now available to them to lend, invest etc. If they'd got cash for them by selling them to someone who hadn't created the cash, then the money would have come from somewhere else in the economy, and the net amount of money in the economy would not have increased.

If you're worried about the money being paid back coming out of the economy, don't be - in most cases it won't be paid back for many years, in some cases, never, by which time we'll knowthe effects of the QE.
Right, so theyre not buying newly issued bonds?
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Old Mar 23, 2009, 9:14am   #27
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Right, so theyre not buying newly issued bonds?
They could be - it makes little difference. Either way the money ends up with a private company and is available to them to spend. If the government decided that an otherwise sound business had cashflow problems and had put expansion plans on hold then buying newly issued bonds from them would be an ideal way of solving the problem.
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Old Mar 26, 2009, 9:33pm   #28
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On the Fed’s quantitative easing: “Forget economic theory and modeling – I can’t see how the U.S. can simply ‘inflate itself’ out of its debt obligations where so much of those debt obligations are held by trading partners.”

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