75 Billion Quid Pumped Into The Economy By The Bank Of England. What If...

[brunswick]

so in reality the private bank (bank of england) has printed (created) 75Bn to give to banks to drive up the stock market, it is really a backdoor bailout. this helps the ppl in no way.....why not wipe everyones debt instead?

at least in the usa ppl are starting to march on wall street, in the uk ppl are too asleep.

 

[Tom Hark Preston Park]

Saw something in the news last might which reminded me that the Aussie government did actually give away money to its citizens in a bid to stimulate the economy at the start of 2009. Here's what you could have had...

Cash payments

One-off $950 cash payment to low and middle-income families, single workers, students, drought-effected farmers and others, in five groups of bonuses:

1. Tax bonus for working Australians: (paid automatically by ATO)

- $950 tax bonus for taxable income up to $80,000

- $650 tax bonus for taxable income $80,000 - $90,000

- $300 tax bonus for taxable income $90,000 - $100,000

2. $950 single income family bonus for 1.5 million families

3. $950 Farmer's hardship bonus for 21,500 drought-effected farmers

4. $950 per child Back to School bonus for 2.8 million children from low to middle-income families

5. $950 Training and Learning Bonus to students and people outside the workforce returning to study



Apparently sales of video games went through the roof

 

[beorhthelm]

so in reality the private bank (bank of england) has printed (created) 75Bn to give to banks to drive up the stock market, it is really a backdoor bailout. this helps the ppl in no way.....why not wipe everyones debt instead?

well, many analysts and economist dont think its so clever and they should be more creative, such as setting up a bank to loan the money directly to the businesses that need investment.

 

[sten_super]

Monetary policy in this country is a complete joke at the moment, and for me the credibility of the BoE's MPC is completely shot to pieces. I can't believe that in yesterday's press release they yet again harped on about temporary inflation pressures, when the CPI has been above 3% for 21 months and the RPI above 4½% for 17 months. Why on earth don't they simply say that they've temporarily abandoned their inflation mandate to attempt to promote growth?

 

[withdeanwombat]

My mattress would be five feet higher.

 

[Biscuit]

Isn't this how hyperinflation started? :S

 

[sten_super]

My mattress would be five feet higher.

This is why the BoE don't want to do what THHP suggests in the OP and simply give the money direct to households - because too much of it would be either used to pay off existing debts or be saved. Having said that, I don't think that QE will work either; the best bet would have been to lend direct to SMEs, but no-one's keen on that because the costs (in terms of correctly assessing the risk of individual customers, and then writing off any money lent to firms that go under) would be quite high. It's rather funny though that they trust the banks to correctly ascertain the risk involved, when that was one of the major issues that started the crisis in the first place.

Isn't this how hyperinflation started? :S

A rampantly out-of-control money supply would cause hyperinflation, yes, but £75bn is not that much in the grand scheme of things.

 

[beorhthelm]

... I can't believe that in yesterday's press release they yet again harped on about temporary inflation pressures, when the CPI has been above 3% for 21 months and the RPI above 4½% for 17 months.

to be fair, all the puff has gone out of rising commodity prices and fallen back, oil is down and the effects of VAT wont be present after Jan, so there wont be alot of inflationary pressure.

 

[sten_super]

to be fair, all the puff has gone out of rising commodity prices and fallen back, oil is down and the effects of VAT wont be present after Jan, so there wont be alot of inflationary pressure.

But the energy price rises haven't been fully factored in yet (with some tariffs rising very recently). The most recent forecasts I've seen put CPI at around 2¾% in 2012 (against a target of 2%) and RPI at 3¼% (target 2½%).

The deterioration in the outlook has made it more likely that inflation will undershoot the 2% target in the medium term. In the light of that shift in the balance of risks, and in order to keep inflation on track to meet the target over the medium term, the Committee judged that it was necessary to inject further monetary stimulus into the economy.

This is from the BoE press release, and is patently nonsense. They are not targeting inflation (if they are, they've been doing a sodding crap job of it), so why not just come out and say it?

 

[Chicken Runner61]

wow. i really hope these youtube educations are not too widespread. go and look at some real balance sheets, they are all online.

and again pay attention to the news of what the whole credit crisis is about. bank A wont lend to bank B, because they are worried they dont have the cash to cover. so bank B wont/cant lend to company X because they dont have the free cash flow to do so. now why would that be a problem if the bank could just simply magic a billion £ from creating a loan to company X?

Balance Sheets Real

The reason that Bank A won't lend to Bank B is because the banks are playing pass the parcel bomb. They don't know which one of their banking cartel is holding the fantasy paper assets they all created.

They have no option but to print more money but they also know that it was printing money in the first place that created the problem they are now in.

Why do you think that now anyone getting a loan has to provide real assets as security?

Answer : Its because its very likely that if/when the lot crashes down the people that provided real assets as security will lose them to cover the loans that default.

The questions you need to ask is :

What will happen to my loan debts if the bank system or paper currency collapses?

What will happen to all my savings or pensions funds if the banking system or paper currency collapses?

Basically

The banks lent out promissory notes for assets they didn't actually have.

If you mate asked you to look after his car and you sold it. Took the money and said "look how clever I am" then spent the money on tarts and a party and then borrowed a car to cover the one you sold and kept doing it you would be done for fraud, but when banks do it its called a banking system.

 

[brunswick]

 

[Biscuit]

This is why the BoE don't want to do what THHP suggests in the OP and simply give the money direct to households - because too much of it would be either used to pay off existing debts or be saved. Having said that, I don't think that QE will work either; the best bet would have been to lend direct to SMEs, but no-one's keen on that because the costs (in terms of correctly assessing the risk of individual customers, and then writing off any money lent to firms that go under) would be quite high. It's rather funny though that they trust the banks to correctly ascertain the risk involved, when that was one of the major issues that started the crisis in the first place.



A rampantly out-of-control money supply would cause hyperinflation, yes, but £75bn is not that much in the grand scheme of things.

 

[brunswick]

in recent months i said it is wise to get off grid, and get gold as the economy is going to crash......from this i got ridiculed as a CT, a nutter, crazy world view etc....

...but now cracks in the MSM and "experts" are starting to come round too.

heheh....best thing to happen to this planet is a massive economy crash

 

[beorhthelm]

The reason that Bank A won't lend to Bank B is because the banks are playing pass the parcel bomb. They don't know which one of their banking cartel is holding the fantasy paper assets they all created.

They have no option but to print more money but they also know that it was printing money in the first place that created the problem they are now in.

i agree with that to a point, but the underlying assets where/are there. the "high powered money" that dingobat and the video claim the banks have that magics money in to existance is a fairy tale. the point about the balance sheet is that the deposit and the loans are on different sides of the books, which are supposed to balance, he is adding them together on the same side.

ofcourse, the central banks can literally print money as they are here, but thats a different beast, and specifically not creating new debt but paying old debt off. the problem wasnt created by printing money, its from having a huge influx of money from China/OPEC that wants somewhere to live, so leaving lots of cheap credit on the table for bonds, mortgages etc.

 

[34064 Fighter Command]

I said it at the time Northern Rock were bailed out and I'll say it again now.

Any bank that gets itself into this sort of mess should be allowed to go bust. It's incompetent management on the banks boards of directors that has caused this and they should take the hit and the consequences for this.

It is entirely wrong that taxpayers once again have to bail out failed companies.

It's also high time the banks were given a sharp dose of reality. If they decide to lend money to bad risks it's their responsibilty, not ours.

Bank shareholders are more than happy to pocket the profits in the boom years, well now it's time they took their responsibilty for the policies that they've encouraged the banks to follow, and accept the losses.

Once it has been shown that a bank has no more right to a bailout than any other company, then the stockmarkets will take a much greater interest in the way banks are run and their business plans.

If you continue to bail them out, then they'll just carry on as before, and nothing will change.

If we're ' All in this together ', then the bank have to take their share of the blame.

 

[Chicken Runner61]

i agree with that to a point, but the underlying assets where/are there. the "high powered money" that dingobat and the video claim the banks have that magics money in to existance is a fairy tale. the point about the balance sheet is that the deposit and the loans are on different sides of the books, which are supposed to balance, he is adding them together on the same side.

ofcourse, the central banks can literally print money as they are here, but thats a different beast, and specifically not creating new debt but paying old debt off. the problem wasnt created by printing money, its from having a huge influx of money from China/OPEC that wants somewhere to live, so leaving lots of cheap credit on the table for bonds, mortgages etc.

You are mixing up economic theory, with accountancy and global politics/economics and trying/hoping to rationalise an excuse for what has gone on and what may happen - I did the same at first but when I looked back at what actually happened I realised how naive we all are. We don't WANT to feel that we are being conned or robbed so we try to blame others or refuse to accept it especially as in this case the end game is quite horrific.

A year ago Ghaddafi was going to be our new friend - I didn't hear Cameron then - Then the oil price spiked and there are doubts about the reality of Saudi reserves on the balance sheets / problems with nuclear (japan) and suddenly we are involved with the french to oust him. Funny how we haven't gone in to Syria or Egypt though.

Take Greece -- They wont default - they wont default - they wont default...... lend them money they WILL default! - They wont default - they wont default - they wont default......lend them money they WILL default!!


Gold - Just why are many nations buying gold and sticking it in their OWN vaults rather than USA's?

 

[34064 Fighter Command]

Northern Rock failed because it relied on wholesale markets rather than retail deposits to fund its operations. Its had very little to do with self cert mortgages and in fact it was making loads of money by packaging up those self cert mortgages and selling them to institutions abroad. It failed when the global market began to implode and Northern Rock found itself having to borrow money at higher interest rates than it had already promised to lend out at.

Global funds dried up interest rates went up as the Libor rate went up and that caused NR to issue a profits warning.This along with a drop in NR's share price led to further worries about the bank and THEN as you say the FSA sat on their hands. As interest rates went up those self cert mortgages together with everyone drawing their money out put the final nails in NR's coffin but it was GLOBAL factors that led to it.

It was Thatcherism that created your banking systems that created your relaxed credit restrictions and Thatcherism that lost control of the money supply and became obsessed with a global banking system. The fact that Major, Brown and now Osborne and Cameron continues with these policies is what beggars belief.

This is absolutely true, as all the Building Societies demutualised and became Banks under Thatcher, and everyone was happy to pocket the free shares they issued - especially the stock markets where vast amounts of shares were snapped up at rock bottom prices.

Well now that they're all banks and PLC's, and no-longer owned by the people who have deposits invested in them, it is down to the Shareholder to hold the boards of directors to account for the bad debts they've taken on.

If there is anything to learn from this, it's that a mutual society, be it a building society, life asurance company or whatever, is a far safer place to invest your money than a bank. Stock markets are, and always have been, high risk places to invest money, and banks should have it no different to any other PLC.

 

[Chicken Runner61]

I said it at the time Northern Rock were bailed out and I'll say it again now.

Any bank that gets itself into this sort of mess should be allowed to go bust. It's incompetent management on the banks boards of directors that has caused this and they should take the hit and the consequences for this.

It is entirely wrong that taxpayers once again have to bail out failed companies.

It's also high time the banks were given a sharp dose of reality. If they decide to lend money to bad risks it's their responsibilty, not ours.

Bank shareholders are more than happy to pocket the profits in the boom years, well now it's time they took their responsibilty for the policies that they've encouraged the banks to follow, and accept the losses.

Once it has been shown that a bank has no more right to a bailout than any other company, then the stockmarkets will take a much greater interest in the way banks are run and their business plans.

If you continue to bail them out, then they'll just carry on as before, and nothing will change.

If we're ' All in this together ', then the bank have to take their share of the blame.

Yes fully agree but


The questions you need to ask is :

What will happen to my loan debts if the bank system or paper currency collapses?

What will happen to all my savings or pensions funds if the banking system or paper currency collapses?


Solve that and you can let the banks go to the wall.

 

[beorhthelm]

You are mixing up economic theory, with accountancy and global politics/economics and trying/hoping to rationalise an excuse for what has gone on and what may happen

probably true. however...

What will happen to my loan debts if the bank system or paper currency collapses?

What will happen to all my savings or pensions funds if the banking system or paper currency collapses?

the debts still persist because someone will buy the loan book discount, while the savings (over the guarantee, supposedly) and the pensions will get lost in the collapse. then we really will feel robbed. so while we dont like bailing out the banks, the alternative is worse.

 

[34064 Fighter Command]

What will happen is that the loan debt will pass on to whichever person decides it is sensible to purchase that part of the business. Plenty of examples of banks being taken over ( by other banks although this need not necessarily be the case, it could be a mutual like a Nationwide or Britannia, or a pension company ). You will then have to continue to repay your loan to the new company. It's how Lloyds TSB took over HBOS, how RBS took over Natwest etc.

However, the savings will be reimbursed under the governments Financial Services Compensation scheme ( but not the full amount ).

Any shares that the pension funds own will be worthless, as they would be to any other investor. But they were quite happy to take the profit from the bank during the boom years, so it's unlikely that this amounts to their sole investment. As I said, the stock market is a high risk place to invest, and if a pension fund is run properly it will have a spread of investments in different sectors of business, government bonds etc that guarentee a rate of return as it knows exactly what it's future liabilities are likely to be.

I'm not suggesting that the whole system should be allowed to collapse, I'm suggesting that we chop off the diseased parts and let them die so the healthy parts continue to survive.