Reply to: Bankers save the world.

[Zero Liability]

That's not how money creation works. Central banks can only create currency, but banks can create money directly through the accounting they use when they make loans.

One needs to understand the difference between money and currency. QE has only marginally increased the monetary base. If used properly, QE could have been a good tool, for example printing money and giving it directly to the people.

Fractional reserve banking - Wikipedia, the free encyclopedia

http://www.bankofengland.co.uk/publi...ion.pdf#page=1

Right and as I said, they don't directly create money, because it'd be too open to abuse and far too obvious.
It's still open to abuse now but obvious it is not. Nothing I mentioned requires direct money creation barring asset purchases, and even those are done via the intermediation of private banks.

[jamesbrown]

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Drat, I've hit my Telegraph 20 article monthly limit

Bastards!

Open it in a private tab...

[SpontaneousOrder]

They also provide lending to banks at low rates

Plus they announce that they are going to buy a tulip tonne of bonds, the banks then sell theirs at a higher than normal price (because everyone knows there's a definite market now it's been announced) - meanwhile the government issues more bonds which the banks then buy again. I.e. free money.

[SpontaneousOrder]

That's not how money creation works. Central banks can only create currency, but banks can create money directly through the accounting they use when they make loans.

One needs to understand the difference between money and currency. QE has only marginally increased the monetary base. If used properly, QE could have been a good tool, for example printing money and giving it directly to the people.

Fractional reserve banking - Wikipedia, the free encyclopedia

http://www.bankofengland.co.uk/publi...ion.pdf#page=1

If lending creates credit (which in aggregate over time amounts to money), and QE is instituted to (among other things) facilitate lending, then what's your point?

Plus - from the BoE website:

Quantitative easing (QE) is an unconventional form of monetary policy where a Central Bank creates new money electronically to buy financial assets, like government bonds.

[petergriffin]

Rofl

They weren't instituted to directly create money as that may even be against the constitutions of some governments, but to provide the stability required for FRB to take off.

That's not how money creation works. Central banks can only create currency, but banks can create money directly through the accounting they use when they make loans.

One needs to understand the difference between money and currency. QE has only marginally increased the monetary base. If used properly, QE could have been a good tool, for example printing money and giving it directly to the people.

Fractional reserve banking - Wikipedia, the free encyclopedia

Because bank deposits are usually considered money in their own right, fractional-reserve banking permits the money supply to grow beyond the amount of the underlying reserves of base money originally created by the central bank.

http://www.bankofengland.co.uk/publi...ion.pdf#page=1

Commercial [i.e. high-street] banks create money, in the form of bank deposits, by making new loans. When a bank makes a loan, for example to someone taking out a mortgage to buy a house, it does not typically do so by giving them thousands of pounds worth of banknotes. Instead, it credits their bank account with a bank deposit of the size of the mortgage. At that moment, new money is created.

[Zero Liability]

The uneducated plebs put the blame on central banks and QE, while the real culprit is fractional reserve banking. Only 3% of new money is created by the Bank of England, the rest is created by banks out of nothing when they give loans.

Rofl

They weren't instituted to directly create money as that may even be against the constitutions of some governments, but to provide the stability required for FRB to take off. Furthermore, they actively - indirectly - purchase government debt and other 'assets'. They also provide lending to banks at low rates and act as a lender of last resort. So how do they escape blame exactly when they are required for FRB to be stable?

[original PM]

I don't suppose anyone here could do a better job.

Better maybe/maybe not

In a more open and honest fashion without stealing money - more than likely yes!

[OwlHoot]

QE central bankers deserve a medal for saving society - Telegraph ...

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Drat, I've hit my Telegraph 20 article monthly limit

Bastards!

[Doggy Styles]

I could.

I bet.

[SpontaneousOrder]

I don't suppose anyone here could do a better job.

I could.

[Doggy Styles]

I don't suppose anyone here could do a better job.

[SpontaneousOrder]

The money trickles down. Fine.
The only problem is that the further it trickles down, the less it's worth.

[petergriffin]

The uneducated plebs put the blame on central banks and QE, while the real culprit is fractional reserve banking. Only 3% of new money is created by the Bank of England, the rest is created by banks out of nothing when they give loans.

[Zero Liability]

Forbes seems to take a rather dimmer view than an effusive Ambrose.

The End of QE, Fed Policy Normalization and the Equity Market - Forbes


Meanwhile, Cameron seems to be in favour of indefinite price controls when it suits him ...

http://www.telegraph.co.uk/finance/p...-for-ever.html

I'm sure he genuinely does find central bank 'independence' annoying, most politicians probably do, which is why it's more myth than fact. Curiously, his views aren't too off from Keynes's.

They prop the economy up on cheap credit, make it reliant on it then argue any deviation from this course is 'painful'. Well duh. It doesn't mean the economy should continue to be run on fiction. Of course, I think this is just a pre-election Cameron talking. This is why I like Godfrey Bloom, Steve Baker and Daniel Hannan - they're some of the only politicians who exhibit an understanding of monetary economics, at least openly.


Not to be outdone, the BOJ joins in the fun...

http://www.telegraph.co.uk/finance/e...ve-easing.html

There really is nowhere to hide from QE. Should mean Japanese stocks will do well though.

[BrilloPad]