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.
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?
“The BoE writes a cheque, which the recipient deposits to his bank account and is then able to spend”
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You really have no idea, and are making it up as you go along.
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Is BOE a private company? Who owns it?
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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.
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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.
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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?
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.
Rose,
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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.
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You suggest that I regard ““workers” who have a “value” as pawns to be moved around at the will and whimsy of others …”
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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.
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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.
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And in considering what should be done to solve the problem, one must chose among the feasible alternatives, none of which is utopian.
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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.
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So what is the alternative? A market system, either on a national or a global basis.
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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).
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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.
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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.
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I did answer your comment, Rose, but the system seems to have wiped it out.
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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.
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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.
Craig, why don’t you use sensible functionally effective blog software instead of this crap that deletes half of what’s posted here?
Oh, now my complaint shows but not my comments. Must be that cretinous moderator “other mod” on the job. Time to quit, evidently.
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.
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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.
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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).
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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.
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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.
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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.
CanSpeccy,
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The added value of your theory-led chundering is the net loss of human dignity,as far as i can see.
@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.
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.
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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.
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There is synchronicity in the way the ESM treaty is created in the EU youtube.com/watch?v=vPCKHvCgLnA
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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
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Things never happen by chance, there is always a purpose, life is a quest of understanding purposes.
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Why there are so many zionists trolling the commentaries in this blog in not too hard to understand though.
“Monetary policy doesn’t work in a liquidity trap”
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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.
“The added value of your theory-led chundering is the net loss of human dignity,as far as i can see.”
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In what way does a policy that would allow the unemployed to find work at a living wage detract from their dignity?
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The added value of your comment, to adopt your rather bizarre style, is outright lunacy, so far as I can see.
‘“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.
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Is BOE a private company? Who owns it?’
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To take those points in reverse order, not the BoE is not a private company. It was nationalized in 1946.
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No, I am not making anything up. I am just explaining how QE works.
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How did you think it worked?
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The Government prints money as and when it sees fit. The process is very simple. Why should it be otherwise?
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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.”
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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.
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.
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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.
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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.
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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.
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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.
Is Quantitive an alternate spelling for Quantitative, or is the Craig Monster struggling with words of more than three syllables?
“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?
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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.
Here the BoE confirms that my explanation of the supposed mystery of QE is precisely correct:
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“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.
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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.”
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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.
Glenn
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Why are you asking me to write to the BBC about something you saw on their site? Am I your secretary?
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.
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?
http://2.bp.blogspot.com/-A9xvHiI_3fQ/TsgQm7E1v8I/AAAAAAAAAfE/BeKSzRh_O-Q/s1600/jump-you-fers.jpg
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Q Are bankers still getting high on cocaine as they were before the bubble burst?
No such word as quantitive. Sorry.
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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.
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Origin:
1575–85; < Medieval Latin quantitātīvus, equivalent to Latin quantitāt- (stem of quantitās ) quantity + -īvus -ive
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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.
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 )
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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?
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.
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http://www.haaretz.com/print-edition/features/otherwise-occupied-for-the-sake-of-his-dignity-1.411281
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Or HERE
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Otherwise Occupied / For the sake of his dignity – Haaretz Daily Newspaper | Israel News
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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.
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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.
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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.
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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.
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I shall invent words as I see fit. Quantitive is more economiocal than quantitative, and its meaning is obvious, And its easier to say.
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.
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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.
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.
Yeah, right, “Sarah Palin invents word refudiate, compares self to Shakespeare”.
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Craig’s misspelling is just that, not an invented word, and betrays a misunderstanding which is shown more clearly by his text.
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Clark’s commenter is not an invented word.
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.
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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.
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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?
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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.