Printing money is not the solution

Irene

Is Brown trying to stretch this out until the election?

kein

i could of told you this 6 months ago and if i know it gordon brown knows it to.he is printing money to get him to the election after that win or lose he doesn't care.i signed the petition against him and received his reply yesterday.the man should be in hospital or jail or both-broadmoor for the criminally insane.

TrevorsDen

You wonder why King is propping Brown up - but the Bank of England came into existence to fund govt spending, so I suppose King must think its his duty. but its a scam. what happens next year? How will the deficit be funded then? I guess Brown does not give a stuff - someone elses problem and another that his incompetence has made worse.

Anyone who thinks this is good for us is brain dead. We are funding the deficit by debasing the £ in our pocket and by future inflation. We are all being impoverished.

Herbert Thornton

What I want to know is - when the pound really does become worthless after the fashion of Weimar and Zimbabwe, will it (as has happened in Zimbabwe which now uses the U.S. dollar) simply be replaced by another currency - in Britain's case by the Euro - thus subordinating and tying Britain so strongly to Europe that escaping Europe's clutches will be even harder than it is now?

Is this, in fact a secret and deliberate policy - just like the encouragement of the huge tide of undesirable immigration?

Are they both part of a greater and even more evil conspiracy?

mac

And the BBC report this as though it's merely a clever technical wheeze. Listening to both head girls Montague on Today and Flanders on BBC TV News at One, anyone unaware of the plight Brown has landed us in would assume that there were no long-term consequences.

The BBC, convenient voice of the 'political arm of the British People'/

Ivy Eileen

Brown and Darling don't understand that banking is founded on confidence. Without that, there are no lenders and no depositors. The banking system is shot through with uncertainty and is only too painfully aware that there is no political leadership in this country.

All this Q.E. is doing is swapping one I.O.U. for another, albeit in a slightly more liquid form .... but it's all circular as the Gilt is replaced by the pound note. It's tantamount to pulling yourself up by your bootstraps - try it sometime !

@ kein, yes I received my reply too yesterday. Insulting isn't a fair description .... more of the "I'm going to see the job through. It's the right thing to do" garbage.

Moraymint

Here's what I think is going to happen.

You know when you watch one of those tipper trucks unloading a pile of sand from the back? The tipper starts to rise, the flap opens at the back and the sand slides out steadily. All seems well; this should be straightforward; nicely under control.

The pneumatic arm keeps pushing up (the Bank of England keeps printing money) and the tipper rises still further. Looks good; not much happening that we can't predict.

The next thing you know; WHAM! The load of sand that was in the back of the tipper suddenly appears as a f*****g great mound of sand on the floor behind the truck.

The maths of this is called chaos theory. It's also all about the law of unintended consequences. At the start, everything is nice and linear and predictable. Then, suddenly and without warning, things change unpredictably and problems start appearing here, there and everywhere.

My money is that as 2009 comes to a close and we move into 2010, things will start changing unpredictably. The degree of fragility that is now baked into our economy and, therefore, into our society is like nothing we've ever seen before.

Gordon Brown is gambling that he can keep that linear and predictable flow of sand running until the General Election.

After which, just watch whilst Dave and his pretty clueless colleagues face unpredictable event after unpredictable event as the monstrous, unprecedented house of cards erected by the Marxist nutters currently clinging to office collapses around our ears and our society enters a whole new era.

Time's running out chaps. The angle of the tipper truck is nearing that WHAM! angle. This is going to hurt, believe me.

PS All that printed money is, by and large, now being gambled by our banking financial "elite" on the stock market. Our banking and financial "elite" is churning money and making a fortune for itself. Down here in serfdom, life gets harder by the day (it certainly is for me; my business is suffocating through lack of working capital). If we don't organise a Peasants' Revolt soon, then this country is going to rewind about 500 years in next to no time. I, for one, am not prepared to tolerate this for much longer.

Battle 2807

But, Moraymint, what on earth are we to do? You say that you are not prepared to tolerate this much longer, but what can any of us DO?
I am beside myself with fury at what this government has done to my country (deliberately, it now seems) and we now understand that Great Britain no longer exists - we are a satellite of the EU. Who gave permission for that to happen? Who asked US if that is what we wanted? And what can we do now? We have been betrayed. And yet, we allowed this to happen. How?
For evil to triumph, it just needs good men to do nothing. RIP Great Britain.

Billericay Dave

This needs pushing in the MSM the spat over the EU is nothing compared to the disaster that Bliar and Brown have engineered in the name of socialism and thier quest to hold power at any cost to the british taxpayer.

mouse1

mac: "And the BBC report this as though it's merely a clever technical wheeze. Listening to both head girls Montague on Today and Flanders on BBC TV News at One, anyone unaware of the plight Brown has landed us in would assume that there were no long-term consequences."

Look on the bright side: that means you've still time to open a foreign bank account and move your savings overseas, should you be lucky enough to have any. I really wouldn't wait more than a few more months though.

Noa Zrk

To quote Goldfinger:
"Once is Happenstance. Twice is Coincidence. The third time it's Enemy action".
Brown has indeed ended boom and bust. For the foreseeable future we're bust. Its impossible not to see an utterly malign delight in the poisoned chalice this despicable treacherous T&G apparatchik is leaving for future generations.

TrevorsDen

Not sure I agree with the analysis Moraymint - or the mathematics.

For sure Brown does not care how big a mess he leaves the country in if it gives him some chance of not necessarily winning an election, but keeping disaster at bay until its all over.

But I do not think the printed money is going on the stock market - as pointed out its going in gilts, with the brokers taking a nice jobbers turn.
The stock market hardly looks buoyant so there is no real signs of the printed money ending up there.

All thats happening is the banks are building up their balances - certainly not lending to business..

Herbert Thornton

So please to remember,
This 5th of November,
George Brown and treason and plot.....

Beer Moth

Agree with Moraymint, there is one massive pile about to land. If only it were sand.

Also with mac's observation on the incredible complacency of the coverage on BBC of the state of play.

One of these investment types was wheeled out on the evening news to have a bit of a whinge at the fact that only another £25bn had been injected into the system today, when in his opinion, it really could have done with double that.

I'm sure I heard the lovely but worrying Ms Flanders, saying that all this money - now £200bn - had been put into the system in order to support existing and generate new, business. And yet the same report featured an entrpeneur whose experience suggested that this money never reaches her level. So where the hell is it going? And why? (Genuine questions please someone anyone.)

TrevorsDen

The Telegraph point ou the statistics are not good
" ...revisions to previous months’ figures which showed that production fell by 0.8pc in the third quarter overall – worse than the 0.7pc fall assumed by the ONS in its first estimate of third-quarter GDP. It dashes hopes that the ONS will revise up that surprise fall in GDP, and cements suspicions that the UK is still mired in recession.
In a further blow, the National Institute of Economic and Social Research (NIESR) suggested that the fourth quarter got off to a bad start, with the economy contracting 0.6pc in October. "

IF the 3Q figures are not revised up and 4Q still shows recession then Brown's credibility will be in even more shreds than it is now.

Snowman

The most puzzling aspect of the quantitative easing lies in its observed seeming ineffectiveness. So far anyway, unless one credits the policy with the stabilization of the banking system. Almost £200bn of new money got pumped into the economy, i.e. more than the total Government annual tax take, but where has it gone? Neither the corporates, nor individuals have been acquiring new credit, if anything balances on credit cards have been cut, and businesses keep complaining about credit starvation. The coming results of the banks may throw some light on it. If not, the Bank should look into this, or may have been looking into it already without telling us.

What also puzzles is the yield trend, and in particular yield trend on index gilts. Look at the price/yield correlation of the 1&1/4 index gilt 2017. If it says anything it is that the markets are still pricing in very low inflation, perhaps even deflation. In the past few days there has been a slight uptick in the bond’s yield, but its clean and dirty price responded in tandem. Puzzling indeed.

James Newbound

I have a brother that works as a senior position in asset management in the City. This means he knows (supposedly!) the best and most stable places for clients to invest.

His verdict on the situation? "You ain't seen nothing yet". Scary times.

If you think matters are bad here, take a little look at Ireland (where its very visible) and Spain (where its soon going to be even worse).

Herbert Thornton

Beer Moth –

You ask where the money is going. I think an effective way to look at it is to think of the nation’s currency as an enormous sheet of foil with the thickness of the foil determining its actual value per square inch.

Think of the foil being beaten with a hammer (as is the case with, for example, when people produce gold foil) so that it its area gets bigger and bigger while at the same time the foil becomes thinner and thinner.

That represents what Brown is doing. He’s hammering the foil more and more – stretching it - so that each square inch represents less and less value. One word for it is inflation. Brown’s euphemism for it is Quantitative Easing.

Your savings represent so many square inches of the nation’s sheet of foil – and their value is decreasing as the foil gets ever thinner.

Chris Cook

I think you are under a misapprehension as to what is going on here.

Public credit is being used to replace private credit draining out of the system as deleveraging continues.

This is anti-deflationary, for sure, and while it is inflationary of financial asset prices it is not inflationary of retail prices, because financial institutions don't go shopping to Tesco, although they do buy their shares.

In order for there to be Zimbabwe/Weimar style inflation there has to be lending or more likely spending into the economy.

Neither is happening, the former because there are few creditworthy individuals, enterprises or projects, and the latter for ideological reasons.

As I understand it, and please correct me if you see a flaw in my analysis, the Bank of England is receiving maybe 3.5% pa on its £175bn in gilts from the Treasury, and paying 0.5% pa on its reserve balances.

ie the BoE is making a profit on QE of maybe £5bn pa. Or another way of looking at QE is that the Treasury has a £175bn overdraft at 0.5%.

The wonders of seigniorage.

john miller

You won't find this sort of article in many other places. Plenty of pundits are pontificating on the state of the economy, but few, if any, point out the obvious link to Brown using this as a blanket sized Band Aid to cover the haemorrhageing economy. As many commenters to this piece have already stated, Brown is sacrificing my children's future welfare to prop up his failed economic policies and retain a slim chance of not going down in history as the world's worst financier.

As always with Brown, it is his hubris that matters most. We poor sods come bottom of the list. Witness his orgasmic pleasure at being the first Labour chancellor to announce a cut in basic rate income tax. He really didn't care that this was funded by the poorest taxpayers.

I can't tell you what I'd like to do with his moral compass, but I can tell you he'd walk like John Wayne for some time afterward.

Roger Davies

I fail to understand why we must print money to pay for Public Sector jobs that we intend to axe in the very near future. If these jobs are not required why are we increasing the mountain of debts? Obviously, Brown wishes to create a mirage of fiscal wizardry until the GE, after that the Tories will have to man the shovels.
I would like to see Madame la Guillotine's sharp tongue in action in Westminster.

Tim Carpenter LPUK

A win win for Brown. His debt is being sponged up and the Pound undermined as a way to soften us up for Euro entry.

michael

QE's good for the soul
The more you spend-
the deeper your hole
The deeper your hole-
the bigger your pile
A Wistful deposit-
bequeathed with a smile.

The Puppet Master

You'd think the Tories would be pointing this out more energetically than they are, curious that they aren't making much of it.
I'm not sure how the newly printed money will transfer it's way into the economy, presumably we will have a sudden loss of faith, leading to a rapid currency collapse, which will force up food and fuel prices whilst collapsing government revenue. Then notes would be printed to pay pensions and salaries, etc.
I'm surprised this has gone as long as it has. We still await the trigger for the collapse, perhaps it will be the dollar.

Joan

Week in, week out Liam Halligan in the Sunday Telegraph has been doing his nut about this.

Brown knows exactly what he’s doing, spending his way to the next election to make life harder for the next Government. As Richard Littlejohn says, the man has a vindictive streak the width of the Firth of Forth.

I’m astonished we’ve not seen more commentary on this.

kein

in previous times parliament would have voted there displeasure by witholding ministers salaries.perhaps if cameron gets in we can deprive brown of his pension,cars and bodyguards/flunkeys after all he deprived us of a country and way of life.if he had to get a bus the man on top might give him a piece of his mind.

Naomi Muse

The private sector is the engine of the economy. Without it the public sector would not exist as it would have no funds at all and no means of getting funds.

Therefore the private sector needs to be the focus for recovery.

"The key problem the UK private sector faces is a lack of credit due to a bust banking system."

Absolutely right.

Making sure that the money printed is earmarked for the private sector so that more jobs can be created, more work and productivity achieved, is the only possible path to recovery.

If Gordon Brown believed in doing the best for the UK he would have organised this.

DavidL

People ask where the £200bn has gone but the answer is there in the Gilt buyers chart. The £200bn has been used not only to buy the massive issues of new gilts but to artificially sustain the market by buying existing gilts from other holders. On the plus side we have had no risk of a buyers strike for Government debt because dealers have a guaranteed purchaser and are allowed to make a turn. On the minus side this has allowed this Government to keep borrowing at the same maniacal rate. This chart is the most frightening thing I have seen in a long time. There is no demand for gilts other than by the Government itself. When QE ends the auctions will be a bloodbath.

Upstanding Citizen

If the £200 Billion of money printed by the Treasury, was stacked in a pile of £20notes, it would stretch further than the entire length of the UK.

Enough is enough. Having been made recently unemployed, I will be hiding my money under the mattress, and not declaring any taxes.

As a hardworking professional, unable to afford a bedsit for a decade Its not MY toxic housing debt.

So I am not paying for it.

If they find out and take me to court, I will pay them back 10pence per week.

Bryan Davies

Sorry to be so thick but if the DMO sell gilts to the market then HMG receives cash, whereupon the BoE creates its QE money which it uses to buy gilts from the market which leaves the latter with cash to buy more gilts from the DMO. And so it goes on.
Surely if QE is to have any effect it has to be of a larger scale than recent issues of HMG debt.

Beer Moth

Herbert Thornton.

Many thanks. A bit more of this taught in schools would be a good idea methinks.

I'm still puzzled as to how this gilt trip is going to help the nation's fight to regain stability. Prosperity obviously too strong a word for the moment.

James

"As I understand it, and please correct me if you see a flaw in my analysis, the Bank of England is receiving maybe 3.5% pa on its £175bn in gilts from the Treasury, and paying 0.5% pa on its reserve balances.

ie the BoE is making a profit on QE of maybe £5bn pa."

In which case, why doesn't the BofE use QE all the time? Why not continually print money in order to buy assets so that the Bank can make a "profit"? Life's so easy when you've got a printing press.

Frank Leader

We have had this Village Idiot as Chancellor and Prime Minister. What else can we expect from the man who Pillaged the Pension Schemes. Sold our Gold reserves at the lowest price.
When things were benign he boasted that he had cured Boom and Bust. When things went wrong of course it wasn't his fault. It was World Conditions and those nasty Bankers.