House Prices stable - yeah right

[Freamon]

Apart from the £75 billion printed yesterday?

...which will go straight into bank reserves and no further (as the previous £200bn has done).

[TimberWolf]

...which will go straight into bank reserves and no further (as the previous £200bn has done).

Few people support that view. AFAIK most economic experts consider QE equivalent to printing money.

[TimberWolf]

Few people support that view. AFAIK most economic experts consider QE equivalent to printing money.

Including a surprising candid Bank of England:

In March 2009, the Monetary Policy Committee announced that, in addition to setting Bank Rate at 0.5%, it would start to inject money directly into the economy in order to meet the inflation target [comment: i.e. increase it]. The instrument of monetary policy shifted towards the quantity of money provided rather than its price (Bank Rate). But the objective of policy is unchanged - to meet the inflation target of 2 per cent on the CPI measure of consumer prices. Influencing the quantity of money directly is essentially a different means of reaching the same end.

Significant reductions in Bank Rate have provided a large stimulus to the economy but as Bank Rate approaches zero, further reductions are likely to be less effective in terms of the impact on market interest rates, demand and inflation. And interest rates cannot be less than zero. The MPC therefore needs to provide further stimulus to support demand in the wider economy. If spending on goods and services is too low, inflation will fall below its target [comment: can't have that can we!].

The MPC boosts the supply of money by purchasing assets like Government and corporate bonds – a policy often known as 'Quantitative Easing'. Instead of lowering Bank Rate to increase the amount of money in the economy, the Bank supplies extra money directly. This does not involve printing more banknotes. Instead the Bank pays for these assets by creating money electronically and crediting the accounts of the companies it bought the assets from. This extra money supports more spending in the economy to bring future inflation back to the target.

Bank of England | Monetary Policy | Quantitative Easing Explained

Also honest is the way they admit trying to reach an inflation target. Of course Merv gets a knighthood if he exceeds it.

[AtW]

...which will go straight into bank reserves and no further (as the previous £200bn has done).

Depends who sells paper tulip for real cash to cretins at BoE.

If it's Govt that sells bonds then this money go into Govt spending and keep interest rate on bonds low by making up for lack of demand from real investors.

If it's banks of all sorts that sell tulip "AAA" assets in exchange for real cash then this money will end up on commodities markets to make said banks big $$$ that they will repay as bonuses to employees where as everyone else will keep paying the price in higher inflation.

[Freamon]

Few people support that view. AFAIK most economic experts consider QE equivalent to printing money.

Most "economic experts" said that the problems with sub-prime mortgages were "contained".

[Freamon]

Depends who sells paper tulip for real cash to cretins at BoE.

If it's Govt that sells bonds then this money go into Govt spending and keep interest rate on bonds low by making up for lack of demand from real investors.

If it's banks of all sorts that sell tulip "AAA" assets in exchange for real cash then this money will end up on commodities markets to make said banks big $$$ that they will repay as bonuses to employees where as everyone else will keep paying the price in higher inflation.

Neither of those options are correct though. The BoE has only used QE to buy govt bonds from banks.

[centurian]

Early 90's interest rates 15%

Nope - they were never at 15% - it was pre-announced that they were going to be raised to 15%, but that never happened. Instead we pullled out of the ERM.

Base rates were at 12% for a few hours. The highest they were for any substantial period of time was 10%.

[Lockhouse]

Nope - they were never at 15% - it was pre-announced that they were going to be raised to 15%, but that never happened. Instead we pullled out of the ERM.

Base rates were at 12% for a few hours. The highest they were for any substantial period of time was 10%.

Mortgages touched 15%. At the time I fixed at 13% for two years and they were 11% for one year and 15% for the next so I came out of it even.