tag:blogger.com,1999:blog-7820485130017459619.post407148048217537704..comments2023-10-24T01:46:47.151-07:00Comments on CynicusEconomicus: The Bank of England - The Printing Presses Start TurningUnknownnoreply@blogger.comBlogger26125tag:blogger.com,1999:blog-7820485130017459619.post-74297502264795563182012-05-22T13:28:34.952-07:002012-05-22T13:28:34.952-07:00The solution is to cut imports and exports to zero...The solution is to cut imports and exports to zero. Anything else may be dynamic and exciting is not really sustainable.A Real Black Personnoreply@blogger.comtag:blogger.com,1999:blog-7820485130017459619.post-3169584565545575172009-03-09T15:01:00.000-07:002009-03-09T15:01:00.000-07:00After the binge cometh the hangover.When money bec...After the binge cometh the hangover.<BR/><BR/>When money becomes as scarce as water in the desert there are two options.<BR/><BR/>One option is the famous liquidation theory of Andrew Mellon, Secretary of Treasury under Herbert Hoover: “Liquidate labor, liquidate stocks, liquidate the farmers, liquidate real estate... It will purge the rottenness out of the system. High costs of living and high living will come down. People will work harder, live a more moral life. Values will be adjusted, and enterprising people will pick up the wrecks from less competent people.” <BR/><BR/>Cynics might remark that Mellon was prepared to liquidate everything and anything apart from his own wealth: he was considered the third richest American with an estimated worth of $300-$400 million and prosecuted, but not convicted I might add, for tax-evasion. He is also known as philantrope: he donated alsmost 3% of his wealth to worthy causes.<BR/><BR/>Since both Friedman and Keynes thought that, from an economic point of view, Mellon was an imbecile, no politician today, apart from Russ Limbaugh and a few others, would be prepared to follow Mellon's advice.<BR/><BR/>So this leave us with the inflation scenario: rather than assets, deflate money. But I don't think the BoE, the Fed or the ECB aim to do a "Zimbabwe." <BR/><BR/>But what can't be borrowed must be printed. What does this mean? Step on the gas, then step on the brakes: step on the gas and then aim to do a "Paul Volckert".<BR/><BR/>MartinAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-7820485130017459619.post-75224094726923444572009-03-09T14:51:00.000-07:002009-03-09T14:51:00.000-07:00btw, now that I think of it. 300M of US citizens *...btw, now that I think of it. 300M of US citizens * 1000$, is 300B per month. Considering what you did the last 6 months, it was cheaper. And it would kick start the economy.<BR/><BR/>But everyone would see right through your ponzi scheme.<BR/><BR/>Zed again. CE. if you can merge my posts please do it.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-7820485130017459619.post-69740751412293664102009-03-09T14:33:00.000-07:002009-03-09T14:33:00.000-07:00http://www.nytimes.com/2009/03/09/opinion/09krugma...http://www.nytimes.com/2009/03/09/opinion/09krugman.html?_r=1<BR/><BR/>My rant on that. Yes, I should comment there, but my posts never get published. I'm a troll, I admit it.<BR/><BR/>Yes, Mr Krugman, the stimulus is going to be sort. Your Keynes math says so. So, what is your answer? Spent even more money you don't have, just to kick start your nice little ponzi system?<BR/><BR/>Here is an idea for you. Every US citizen, will receive (for the rest of his life) a monthly paycheck of 1000$ of newly created money, just for the task of being an US citizen. The only obligation, is that he will spend them within the month. <BR/><BR/>Will that save the Keynes model?<BR/><BR/>ZedAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-7820485130017459619.post-26576275612425589452009-03-09T14:01:00.000-07:002009-03-09T14:01:00.000-07:00Things are moving fast huh? The US goes public wit...Things are moving fast huh? <BR/><BR/>The US goes public with <A HREF="http://news.bbc.co.uk/2/hi/asia-pacific/7933171.stm" REL="nofollow">news</A> of Chinese vessels harrassing their ships in the South China Sea...<BR/><BR/>A <A HREF="http://www.telegraph.co.uk/finance/financetopics/financialcrisis/4958831/Overvalued-euro-set-to-plunge-within-months.html" REL="nofollow">doubling</A> in the amount of people shorting the Euro...<BR/><BR/><A HREF="http://www.telegraph.co.uk/finance/financetopics/g20-summit/4963944/G20-ministers-set-for-clash-over-economic-crisis-solutions.html" REL="nofollow">G20 problems</A>...<BR/><BR/>Hmmmm...Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-7820485130017459619.post-18937434901110462012009-03-09T14:00:00.000-07:002009-03-09T14:00:00.000-07:00Things are moving fast huh? The US goes public wit...Things are moving fast huh? <BR/><BR/>The US goes public with <A HREF="http://news.bbc.co.uk/2/hi/asia-pacific/7933171.stm" REL="nofollow">news</A> of Chinese vessels harrassing their ships in the South China Sea...<BR/><BR/>A <A HREF="http://www.telegraph.co.uk/finance/financetopics/financialcrisis/4958831/Overvalued-euro-set-to-plunge-within-months.html" REL="nofollow">doubling</A> in the amount of people shorting the Euro...<BR/><BR/><A HREF="http://www.telegraph.co.uk/finance/financetopics/g20-summit/4963944/G20-ministers-set-for-clash-over-economic-crisis-solutions.html" REL="nofollow">G20 problems</A>...<BR/><BR/>Hmmmm...Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-7820485130017459619.post-34843423703680416072009-03-09T13:59:00.000-07:002009-03-09T13:59:00.000-07:00Things are moving fast huh? The US goes public wit...Things are moving fast huh? <BR/><BR/>The US goes public with <A HREF="http://news.bbc.co.uk/2/hi/asia-pacific/7933171.stm" REL="nofollow">news</A> of Chinese vessels harrassing their ships in the South China Sea...<BR/><BR/>A <A HREF="http://www.telegraph.co.uk/finance/financetopics/financialcrisis/4958831/Overvalued-euro-set-to-plunge-within-months.html" REL="nofollow">doubling</A> in the amount of people shorting the Euro...<BR/><BR/><A HREF="http://www.telegraph.co.uk/finance/financetopics/g20-summit/4963944/G20-ministers-set-for-clash-over-economic-crisis-solutions.html" REL="nofollow">G20 problems</A>...<BR/><BR/>Hmmmm...Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-7820485130017459619.post-52037385223913166552009-03-09T12:05:00.000-07:002009-03-09T12:05:00.000-07:00The problem with the milk analogy is that you left...The problem with the milk analogy is that you left out the velocity of money. The same money can be used to purchase milk over and over and this has the effect of multiplying the supply. What we have right now is a situation in which people are only buying essential milk and not splashing out on discretionary milk so the money is not being re-used as many times in the year. This reduces the multiplier. The BoE are increasing the supply to compensate for this reduction. The question is - what happens when everybody decides they want to buy lots of spare milk again? The bank needs to then pull money out of the system, which it proposes to do by asset sales but if nobody wants the assets because that asset class is still out of fashion then surely the only option is to raise interest rates and get everybody to put their money in the bank where it can't be used to buy milk!Jeremy Ormehttps://www.blogger.com/profile/02562312858264349902noreply@blogger.comtag:blogger.com,1999:blog-7820485130017459619.post-47569502339461190992009-03-09T01:25:00.000-07:002009-03-09T01:25:00.000-07:00cynicusThere are emerging signs that China may be ...cynicus<BR/><BR/>There are emerging signs that China may be " decoupleing " as its stimulus packages are kicking in.<BR/><BR/>If this process translates to recovery in the general region and results in less reliance on the west for demand, the co dependency on which the US depends could be shattered.<BR/><BR/>Could this be the direction from which the western economies are destroyed.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-7820485130017459619.post-32239383614251306022009-03-08T20:28:00.000-07:002009-03-08T20:28:00.000-07:00"Ketley said... Tiberius - that factfile on QE ..."Ketley said...<BR/><BR/> Tiberius - that factfile on QE has the hallmarks of a press release."<BR/><BR/>Good catch Ketley!<BR/><BR/>So does the Treasurey issue them and the media just genuflects?<BR/><BR/>TAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-7820485130017459619.post-39864483975863167182009-03-08T14:06:00.000-07:002009-03-08T14:06:00.000-07:00Just reading Peston's blog on Chinalco's stake in ...Just reading Peston's blog on Chinalco's stake in Rio... Peston is saying that China are on a 'Go Global spending spree'... If I had a load of currency that I had good reason to believe was going to devalue drastically at some point in the not too distant future I'd probably be buying all the <I>real</I> stuff I could with it... Is this why China is on the spending spree do you think?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-7820485130017459619.post-38173538032057801942009-03-07T18:16:00.000-08:002009-03-07T18:16:00.000-08:00Rely to LemmingThe suggestion seems to be that if ...<B>Rely to Lemming</B><BR/><BR/><I>The suggestion seems to be that if businesses and individuals take on loans with a penalty of interest to pay, the resultant growth is likely to be that of wealth - it has come from a carefully calculated risk and therefore the invisible hand is guiding them; whereas if we just print money and inject it into the economy (apparently pledging to remove it at the right time in the future..?) the resultant growth is just useless economic activity ... Similarly, is it equally possible that a 'make work' scheme, or a money printing operation *could* produce genuine wealth? </I><BR/><BR/>Of course, printing money can be put to productive purposes. If the money was lent directly to the government and they spent it on building new factories producing manufactured goods (e.g., in a high value added industry like high tech) and these goods were bought by domestic and foreign consumers, then of course printing money can generate real growth.<BR/><BR/>Another example would be mining or oil drilling. If the state printed money and built a new oil company extracting and exporting oil, then that would be new wealth.<BR/><BR/>Furthermore, many people argue that fractional reserve banking under a central bank creates money from nothing any way (see http://www.lewrockwell.com/rothbard/frb.html).<BR/><BR/>If the private sector can create money from nothing and lend it to people to create new wealth, there is no reason whatsoever why the government cannot do the same thing.Lord Keyneshttps://www.blogger.com/profile/06556863604205200159noreply@blogger.comtag:blogger.com,1999:blog-7820485130017459619.post-42034232603217229422009-03-07T12:10:00.000-08:002009-03-07T12:10:00.000-08:00MarkIn an earlier post you mentioned the multiplie...Mark<BR/><BR/>In an earlier post you mentioned the multiplier effect, suggesting that money injected into the economy results in an increase in economic activity but, crucially, not an increase in wealth (I think that's what you said). To me, this seems to be at the heart of this matter: what is it about normal economic growth that results in genuine wealth creation, as opposed to useless economic activity? The suggestion seems to be that if businesses and individuals take on loans with a penalty of interest to pay, the resultant growth is likely to be that of wealth - it has come from a carefully calculated risk and therefore the invisible hand is guiding them; whereas if we just print money and inject it into the economy (apparently pledging to remove it at the right time in the future..?) the resultant growth is just useless economic activity. <BR/><BR/>However, as has been seen throughout history, it is entirely possible for people in capitalist economies to make mistakes such as those which lead to bubbles (and it is no good pointing out that governments have distorted the markets as this will *always* be the case.) <BR/><BR/>Similarly, is it equally possible that a 'make work' scheme, or a money printing operation *could* produce genuine wealth? <BR/><BR/>If so, I believe that this is a crucial point, as many people are baffled as to why printing money doesn't work, when 'normal' economic growth also implies the printing of money somewhere in the system.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-7820485130017459619.post-33051891909680809342009-03-07T07:40:00.000-08:002009-03-07T07:40:00.000-08:00Anon - Re The Independent article you link to. It'...Anon - Re <A HREF="http://www.independent.co.uk/news/business/news/run-on-uk-sees-foreign-investors-pull-1-trillion-out-of-the-city-1639413.html" REL="nofollow">The Independent article</A> you link to. It's a good thing then that the BoE is putting at least £750 (after fractional multiplication) into the economy. The UK doesn't need foreign money when it can print all it wants.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-7820485130017459619.post-63211664374949860152009-03-07T01:53:00.000-08:002009-03-07T01:53:00.000-08:00Britain tops bank bail-outs with nearly 20% of GDP...Britain tops bank bail-outs with nearly 20% of GDP, report finds<BR/><BR/>http://www.guardian.co.uk/politics/2009/mar/07/uk-bank-bailoutsAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-7820485130017459619.post-9866506845081800112009-03-07T01:27:00.000-08:002009-03-07T01:27:00.000-08:00A bit of a spelling error in the post. "Obfuscate"...A bit of a spelling error in the post. "Obfuscate", not "obfusticate". Thanks to Paul for pointing this out.Markhttps://www.blogger.com/profile/14983165364072918091noreply@blogger.comtag:blogger.com,1999:blog-7820485130017459619.post-30883920130986760802009-03-06T23:16:00.000-08:002009-03-06T23:16:00.000-08:00An important article hidden away in today's Indepe...An important article hidden away in today's Independent:<BR/> <BR/>http://www.independent.co.uk/news/business/news/run-on-uk-sees-foreign-investors-pull-1-trillion-out-of-the-city-1639413.html<BR/><BR/>However, nothing in there will surprise readers of this blog...Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-7820485130017459619.post-77611061384643570602009-03-06T20:44:00.000-08:002009-03-06T20:44:00.000-08:00Tiberius - that factfile on QE has the hallmarks o...Tiberius - that factfile on QE has the hallmarks of a press release. <BR/><BR/>Google "As the name implies, QE aims to increase the amount of money in the economy through the creation of central bank money to buy up assets such as Government gilts"<BR/><BR/>and you come up with <A HREF="http://www.google.ca/search?hl=en&client=firefox-a&rls=org.mozilla%3Aen-GB%3Aofficial&hs=lXo&q=As+the+name+implies%2C+QE+aims+to+increase+the+amount+of+money+in+the+economy+through+the+creation+of+central+bank+money+to+buy+up+assets+such+as+Government+gilts&btnG=Search&meta=" REL="nofollow">this many hits</A>Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-7820485130017459619.post-83742863224674359982009-03-06T16:59:00.000-08:002009-03-06T16:59:00.000-08:00In this illustration, we will say that the UK has ...<I>In this illustration, we will say that the UK has a total output of milk of 100 litres, and that there is a total amount of £100 in the UK economy. In this example, therefore, the price of milk will be £1 per litre. If we then imagine that the government prints another £10, so that there is a total of £110 in the economy, we have a problem. The amount of milk has not increased at all, but the amount of money available to buy milk has increased. Instead of having £100 chasing the 100 litres of milk, we now have £110. In this simplification, remember, there is only the 100 litres of milk to buy with the money.<BR/>The only thing that can then happen is that the milk will increase in price from £1 per litre to £1.10 per litre. In other words, if you increase the money supply without increasing output, then you have a situation of inflation.</I><BR/><BR/><BR/>But this analogy doesn’t really work: it’s not even a simplified sketch of what is happening.<BR/><BR/>A better one would be this:<BR/><BR/>The UK has a total output of milk of 100 litres, and … there is a total amount of £100 in the UK economy. In this example, therefore, the price of milk will be £1 per litre. <BR/>However, demand has collapsed. Many people have lost their jobs. They are worried about the future, and prefer not to buy milk, as they must save money and wait for a time when they can get a new job. Moreover, £30 has been wiped out from the economy and is no longer in circulation because mortgage holders in the economy have seen their interest rates sky-rock. The banks are hoarding the £30 that they have been receiving as interest. Also, the banks refuse to lend any new money to people, so the economy just can’t get that extra £30 to get the economy on track. The central bank decides to start buying assets to inject £30 into the economy, and soon things start moving again and the £30 the banks were hoarding reenters the economy. The central bank removes the extra £30 it injected. We are back to the original situation of £100 in the economy.Lord Keyneshttps://www.blogger.com/profile/06556863604205200159noreply@blogger.comtag:blogger.com,1999:blog-7820485130017459619.post-9292343595565296702009-03-06T02:44:00.000-08:002009-03-06T02:44:00.000-08:00The lack of transparency is very worrying, particu...The lack of transparency is very worrying, particularly in light of the absence of any critical assessment of the impact of QE as you point out. <BR/><BR/>Many years ago, when I was working in Japan (of all places) I was very critical of the freedom of the Japanese press. The target of my opprobrium was the Japan National Press Club. Essentially this 'club' amounted to little more than a way of allowing the government to corral the press into taking their line, and threatening the whip hand to any dissenters. This corruption of the freedom of speech appalled me. <BR/><BR/>Then I met a journalist - a member of the same press club. When I told him I was from the UK he told me (in excellent English) that we have a very similar system here only its even worse, because the club isn't even called a club and its existence is not even known to the public.<BR/><BR/>This UK version of the 'club' appears to have been exerting its influence in a number of areas, particularly in economic policy lately. For example, David Blanchflower's role in alleviating the effects of the credit bust-led recession by voting for rate cuts is far more prominently reported than his less recent track record of voting for rate cuts <I>that brought about the credit boom in the first place!</I> <BR/><BR/>Everyone can see the MPC members' track records, but for some reason, the press prefer not to look nowadays. Talking of which, I wonder what the CPI inflation figure was that the MPC was given early access to yesterday, which was absent in their meeting summaries ... ?<BR/><BR/>There could of course, be an element of personal interest in this of course. For example, it is well known among local estate agents that many of the one bedroom flats around the White City and Shepherds Bush area are owned and let by BBC employees. I suppose in their defence, the BBC is a large employer and goodness knows they do have an awful lot of money, but what does this mean for their journalistic integrity and programming choices on property issues?<BR/><BR/>On the subject of house prices, I'm quite sure that the media's complicit attitude towards QE is also fuelled partly by a private desire not to rescue the economy, not to regain exchange rate stability or even to achieve long term price stability but alas, to <I>stop their houses falling in value</I>.<BR/><BR/>I'm quite sure too, that the mealy-mouthed wording in the Chancellor's and Governor's letters that you point out is for the purposes of plausible deniability if it all goes catastrophically wrong (and the probability of that scenario has just been raised by way of this policy). <BR/><BR/>If hairsplitting is the meat of politics, plausible deniability is the two veg!<BR/><BR/>P.S. Lots to write about now it's <B>really</B> getting interesting!Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-7820485130017459619.post-11299817388165525462009-03-06T01:37:00.000-08:002009-03-06T01:37:00.000-08:00Do you know the recent figures for the diff. money...Do you know the recent figures for the diff. money supply totals (m0 and m4) in the UK? Or could you point me to where they might be (fairly easily) as fact or good estimate?<BR/><BR/>ThanksAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-7820485130017459619.post-90646266862471268022009-03-06T01:00:00.000-08:002009-03-06T01:00:00.000-08:00A compelling blog. Thank you for explaining QE in ...A compelling blog. Thank you for explaining QE in a way that I can understand. My cynicism, particular about government, has increased with age and I heartily concur with your obfuscation belief. I am worried about what is happening with our economy and look forward to seeing the response to your request.Paul Coombeshttps://www.blogger.com/profile/09143484729379464693noreply@blogger.comtag:blogger.com,1999:blog-7820485130017459619.post-59842903839751633762009-03-06T00:20:00.000-08:002009-03-06T00:20:00.000-08:00http://www.timesonline.co.uk/tol/money/savings/art...http://www.timesonline.co.uk/tol/money/savings/article5854995.ece<BR/><BR/>Now savers are in even more trouble, their savings account is useless as is provides them with no interest on their capital (and the risk of a bank holiday) whilst at the same time they feel the need to preserve it by investing in riskier asset classes.<BR/>Wonderful.<BR/>Any ideas on how much inflation the added money could stoke?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-7820485130017459619.post-55393921649918827302009-03-05T23:55:00.000-08:002009-03-05T23:55:00.000-08:00Thank you Cynicus, for clarifying areas the press ...Thank you Cynicus, for clarifying areas the press seem to shy away from.<BR/> <BR/>I'm concerned this nebulous process of QE masks an even murkier ultimate objective - to encourage consumers resume the levels of debt and overspending that presaged this whole crisis in the first place...<BR/><BR/>It's like we're collectively trying to refuel a car with four flat tyres.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-7820485130017459619.post-83355758386869128012009-03-05T21:51:00.000-08:002009-03-05T21:51:00.000-08:00Well being a Brit in Vancouver I get first post ag...Well being a Brit in Vancouver I get first post again thanks to my pal GMT-8.<BR/><BR/>Cynicus - Unless I am mistaken, the fractional reserve system will multiply the reported £150bn figure in circulation closer to £1500bn. <BR/><BR/>Regarding your examples of the obfustication in the BoE letter - bear in mind the letters between the Chancellor and the Governor are not written by the Chancellor and the Governor. They are only signed by the Chancellor and the Governor. The actual authors are civil servants who are experts in law, spin and obsfuscation.<BR/><BR/>Lastly, I've emphasised key words from an except from Feb's inflation report that you link to.<BR/><BR/><I>5.4 The balance of risks<BR/><BR/>To gauge the evolution of the balance of risks, the MPC will focus particularly on measures of money, credit and nominal demand. In assessing the risks to money and credit, and thus to nominal demand, the Committee will monitor the structure of banks’ balance sheets, conditions in capital markets, and the cost and availability of funding to companies and households. In addition, <B>the Committee will monitor</B> surveys of household and business confidence, developments in the global economy, nominal earnings, the level and composition of unemployment, company creation and destruction rates, and <B>inflation expectations</B></I>.<BR/><BR/>These six bold words summarise what it's all about. A confidence game.<BR/><BR/>Over the next few weeks I expect an onslaught of propaganda, general misdirection and <A HREF="http://www.youtube.com/watch?v=l8lsSPshxJ4" REL="nofollow">obsfuscation of the numbers</A>.Anonymousnoreply@blogger.com