How crime could pave the way for quantitative easing

Tim Carpenter LPUK

I see little difference - both are a crime. Both result in devaluation and theft.

I use a brewery analogy to explain QE:

It is as if you are a beer-maker and the Government pitches up at your warehouse in the dead of night with a truck of water and a truck-load of barrels. It breaks in without permission, waters down your beer and takes away barrels of beer for its own use. Because it gets first dibs on the barrels, those least diluted will be taken away. You wake up and count your barrels and all seems ok. When you come to sell your beer you find there is more in the marketplace and what you have is weaker, so the price you get is lower. Your beer is now less valuable yet the State has beer - money - it never had.

It is theft, pure and simple.

Publius

I wish someone would take the time to explain how QE is supposed to work in an open economy.

Austin Barry

Tim Carpenter@12.53

I take your point, but this Government is incapable of organising any event in a brewery.

Frederick Shickerbotham-Botham

Valiant effort, Tim, but you overcomplicate things with talk of all this booze. I prefer a simpler sweet shop analogy:

It is as if you are a liquorice-maker based in York, and the Government pitches up at your highly profitable Reading outlet in the dead of night with a truck of red (i.e. the best) Jelly Babies and a truck-load of Happy Shopper paper bags. It breaks in without permission, nicks all the fags, waters down your wife and takes away a box of Snickers and a packet of McCoys for tea. Because it gets all the salt 'n' vinegar, those least left will be replaced by Cola Cubes. You wake up and count your fags, call the police and all seems ok. When you come to sell your Jelly Babies, you find there is more beer in the lavatories, and what you have is weaker, the value of your remaining Snickers skyrockets. Your beer is now less valuable yet the State has beer - Sherbet Lemons - your wife never had.

It is theft, pure and simple.

fulcanelli

We're all doomed, doomed I tell you!

This will not end well.

Forlornehope

If you know anything about making coins, this was obvious from the introduction of the £1. Three dimensional modelling and machining make the creation of accurate dies pretty straightforward. The edge milling and script is an attempt to make it a bit more secure but if you have the right machine it is actually quite a simple operation. The 1 and £2 which are made in two pieces are much more difficult to make. It requires both components to be made to tight tolerances and then accurately pressed together. The medium to long term answer has to be going more and more electronic. That has its own problems but technology has made forging physical money far too easy.

KB

Tim,

I believe the point is that the Bank (the MPC) say the beer is currently too strong and likely to get stronger. Many disagree - Liam Halligan being one of the most articulate.

Watney Red-Barrel

@Tim: Why would the government have trucks? Does this mean the MoD is in on this beer-stealing racket?

Tim Carpenter LPUK

KB, even if my beer is deemed too strong, I should be able to keep the extra volume created - I brewed it, after all.

To suggest otherwise is collectivist thievery.

bmc3186

Tim your 'beer' is too strong because no one is willing to use it to buy anything - you had absolutely nothing to do with its value.

Deflation can be devastating to an economy. Staving it off is a pretty sensible idea.

Susan Hill

Forlornhope.
I don`t know anything at all about making coins but clearly you do. Where do I get this equipment ?

John

Read this: http://www.strike-the-root.com/91/allport/allport3.html

Tim Carpenter LPUK

bmc3186, your assertions are absurd.

Nothing to do with the value? Who are you trying to mislead?

We can change it to being a beer wholesaler, ok? I bought the beer at one strength and the Govt comes in and waters it down, taking the excess for its own squalid purposes. Now do you understand?

Did the Government "earn" the beer? No. It is the LAST entity to lay claim to creating value, for the State creates no value and earns no money. All it can do is take it and work to stabilise value.

And what is all this about the beer being "too strong"? Ask any importer.

You, sir, are a shill.

Forlornehope

Susan, Machinery Mart is a good source for second hand machine tools. The skills to use them are another thing!

bmc3186

Tim, the point is that inflation is falling. So when you 'earned' the money it could do one thing, now it can do another. The reason for that is because people are hording their money instead of spending it. This sucks money out of the economy, leads to a decline in economic activity and will make most of what you own and earn worth less in the future.

So I think its in your best interest for the government to 'water down' your beer. The only reason you wouldn't is if your only stake in the economy is banknotes under your mattress...