Reply to: No need to panic after all.

[Sysman]

I guess the people running the massive simulations on super-computers are being told otherwise... of course the worrying thing is people on these boards might have been involved writing the simulation software....

Did anyone see Channel 4's Ascent of Money in November/December?

In the last episode, the presenter described the LTCM (Long Term Capital Management) disaster - basically a couple of Maths whizzes had come up with a fancy formula which couldn't lose, but their model was based on data going back only a piddling 5 years. If they had just gone back 11 years they would have included the 1987 crash, and if they'd gone back 80 years they would have captured the Russian default of 1917.

It's 30 minutes into the programme.

Garbage In, Garbage Out.

[Purple Dalek]

Has quantitive easing already started?

http://www.johnredwoodsdiary.com/200...c-and-the-bbc/

You do know it is now against the law to say it, if indeed they are, as mentioned here a few weeks ago now.

[BrilloPad]

Has quantitive easing already started?

http://www.johnredwoodsdiary.com/200...c-and-the-bbc/

[Doggy Styles]

Hmmm. My plan B to open a wheelbarrow emporium doesn't seem so silly now.

[Cheshire Cat]

I'm going to build my own printing press and buy shares in FTSE companies until I'm the major shareholder in all of the countries top companies and banks.
The companies have money that they can invest. The banks have money that they can lend to businesses and mortgagees, and I become the countries largest shareholder.
That's the same as the govt are proposing, isn't it?

[b0redom]

On the plus side, hyperinflation means we could all get contracts in the Euro zone and pay off our mortgages in about a week.

*BOOMED*

[ThomasSoerensen]

2. If everyone's printing money and global demand destruction is rampant, what do prices inflate against?

commodities and goods

So prices of all your purchases will skyrocket - I hope you get to change your daily rate so you are not stuck on an old rate for long. You will work for peanuts or less.

[Doggy Styles]

QE will be used to make the government look good, not to fix our economy. If anyone believes we can have a huge BOOM without even a small bust are living in lala land, QE just moves the timeline out a bit, but the pain will be felt eventually.

Much rather just leave interest rates around 1% for 6 months, force the banks to open up their books and air their bad debts/assets so we can get this tulip over with. Then whack up interest rates back to 6% to ward off inflation, promote saving, thereby recapitalizing the banks, govt coffers (via gilts) and we ca have some semblence of normal monetary operation.

I would rather have 9-12 months of doom than 12 months of quiet before 3-5 years of the worst storm since the great depression.

That all makes sense to me but what do I know - I also like Gonzo's comment that nobody really knows what they are doing.

The only fly in the ointment seems to be that if the government does it, they'll be even more f***ed at the next general election. So they won't do it.

[Solidec]

QE will be used to make the government look good, not to fix our economy. If anyone believes we can have a huge BOOM without even a small bust are living in lala land, QE just moves the timeline out a bit, but the pain will be felt eventually.

Much rather just leave interest rates around 1% for 6 months, force the banks to open up their books and air their bad debts/assets so we can get this tulip over with. Then whack up interest rates back to 6% to ward off inflation, promote saving, thereby recapitalizing the banks, govt coffers (via gilts) and we ca have some semblence of normal monetary operation.

I would rather have 9-12 months of doom than 12 months of quiet before 3-5 years of the worst storm since the great depression.

[Gonzo]

I guess the people running the massive simulations on super-computers are being told otherwise... of course the worrying thing is people on these boards might have been involved writing the simulation software....

When we are babies we slowly try to make sense of this world around us into which we have been born. The most natural thing is for us to think that the world works in the way that we experience it and has always done so.

But that is not the case. When I think about the way that I have gone about my daily life today, someone living 100 years ago would hardly recognise it.

So what I am getting at, is that it is not a safe assumption that people know what they are doing, that includes the modellers and the economists. The confidence that you have in someone's competence is inversely proportional to the number of times that they have conducted the activity. At the moment, I don't think that there is any experience that can be drawn upon, which is why we are in deep do-do.

[ace00]

Who do you mean by everyone? As far as I see it, only people likely to print shedloads of cash are the US (reserve currency status, commodities like oil priced in $) and the UK.

If common consensus is true and the US are already printing money (they already have legislation that allows them to withold the fact that they are) then their currency has NOT taken a beating like sterling.

The EU wont do it, as too many countries in surplus or well within normal operating status would be negatively impacted, Japan and China both devalue their currency to keep their exports flowing. Iceland is too small to matter, and we all know about Zimbabwe.

I am positive Britain will be in isolation with regards to huge currency devaluation if they kick the printing presses into overdrive, no other country that counts in the global economy has so many negative indicators as us.

Good points and largely agree actually, but how would "Japan and China both devalue their currency to keep their exports flowing" ? By printing money in Japans case, and state control in China which would mean that sterling would not inflate relatively. Euro area I'm not sure, but I think they will continue interest rate cuts. Euro is too strong really.

I do think that after a year or 2 then we see inflation in US, UK, especially in relation to Asian currencies.

[BlasterBates]

Quantative easing will inevitably lead to a devaluation. Think of it as the UK Government taking money out of peoples accounts and spending it for them. If QE is done in a limited fashion it will lead to a devaluation step, so causing inflation at some point in the future, but not out of control.

[Gonzo]

2. If everyone's printing money and global demand destruction is rampant, what do prices inflate against?

Not every country has had quite the same appetite for debt over the past five years that the UK has.

[d000hg]

I can't. I really can't see any other outcome.

I guess the people running the massive simulations on super-computers are being told otherwise... of course the worrying thing is people on these boards might have been involved writing the simulation software....

[Solidec]

Well 2 things:
1. Currency already devalued (25% against the Euro - that's more than "Black Wednesday").
2. If everyone's printing money and global demand destruction is rampant, what do prices inflate against?

Who do you mean by everyone? As far as I see it, only people likely to print shedloads of cash are the US (reserve currency status, commodities like oil priced in $) and the UK.

If common consensus is true and the US are already printing money (they already have legislation that allows them to withold the fact that they are) then their currency has NOT taken a beating like sterling.

The EU wont do it, as too many countries in surplus or well within normal operating status would be negatively impacted, Japan and China both devalue their currency to keep their exports flowing. Iceland is too small to matter, and we all know about Zimbabwe.

I am positive Britain will be in isolation with regards to huge currency devaluation if they kick the printing presses into overdrive, no other country that counts in the global economy has so many negative indicators as us.