Printing money

[Drd]

OK,so who can explain how printing money is going to help the crisis.Are the government going to give us all £1000 or what?I don't understand this idea.

[Buckster]

yup they print more money

we all get £20k in crisp 50s to reduce or mortgage and/or loans

which then spurs us on to spend at shops therefore helping the economy

win win situation

[Drd]

Sounds good to me,that's half an Aston V8

[Buckster]

if you're psending that sort of money the goverment will love you

[Iccz]

20k is safe in the banks right?
they need it more than anyone else
Or maybe 20k of porn, gota help the porn industry out remember...
Or maybe a wise investment of £20k of lightbulbs...


I dont see printing money helping anyone, we'll end up with hyper inflation...

[smelly]

Originally Posted by Iccz

20k is safe in the banks right?
they need it more than anyone else
Or maybe 20k of porn, gota help the porn industry out remember...
Or maybe a wise investment of £20k of lightbulbs...


I dont see printing money helping anyone, we'll end up with hyper inflation...

Or £20k in import duty and payments to parcel force for av kit from estonia......

[krish]

apparently this only works if it's done secretly

... and isn't this now called quantitative easing?

http://en.wikipedia.org/wiki/Quantitative_easing

Quantitative easing is a tool of monetary policy. It effectively means that the central bank prints new money, in order to increase the supply of money. 'Quantitative' refers to the money supply; 'easing' essentially means increasing.

Quantitative easing was used notably by the Bank of Japan (BOJ) to fight domestic deflation in the early 2000s. More recently during the global financial crisis of 2008, policies announced by the US Federal Reserve under Ben Bernanke to counter the effects of the crisis have been likened to quantitative easing coupled with the issuance of new debt on the US federal balance sheet.

In Japan's case, the BOJ had been maintaining short-term interest rates at close to their minimum attainable zero values since 1999. With quantitative easing, it flooded commercial banks with excess liquidity to promote private lending, leaving them with large stocks of excess reserves, and therefore little risk of a liquidity shortage. The BOJ accomplished this by buying more government bonds than would be required to set the interest rate to zero. It also bought asset-backed securities, equities, and extended the terms of its commercial paper purchasing operation. Despite Japan's sustained near zero interest rates, the quantitative easing strategy did not succeed in stopping price deflation.

Quantitative easing can also be called a misleading term. For to equal 'ease' with 'increase' is inaccurate on linguistic and mathematical levels. What is furthermore misleading, is the assumption that the money supply is only provided by central banks - as credit to national governments.

In reality, the money supply of a sovereign country has two sources: notes and coins also called Cash, printed and minted free of interest by the State, and Credit, issued out of thin air at interest, by banks.

To 'ease' the 'quantities' of money in circulation by increasing Credit means practicing usury.

[RMCF]

All this huge scale economics is, as far as I am led to believe, is quite simple.

In times like this the central banks can really only lower interest rates/Gov can only cut taxes to try to refire the economy.

If these 2 things don't work, then apparently its the end !!

And these 2 things don't seem to be working at present.

[shodan]

Its something to do with the amount of money owned and owed being far greater than the money which physically exists. eg You have a million pound in the Abbey National and you wander into your nearest branch and want to close your account and take the money in cash. Well the branch won't physically have that much cash they can give you there and then. Now for some business transactions, times that by ten or a hundred and the company that have to give the money won't have the physical cash.

Putting more money out there can free up more money.

[Steve.J.Davies]

its inflationary for sure. but some inflation should bring interest rates up and maybe the banks will start lending again. A fine line to walk though.
But what percentage of the money in 'UK ltd' is fiat money ? (compared to how much they are printing). arguably fiat money has more value that the stuff the banks have willfully created by using debt to create money out of thin air.
Forget anything about money being backed by resources - those days are long gone.

[loz]

Basically,

say the government has £100 in tax income this year.
And a £100 pilled up in the bank of england.
And plans to spend £250.

Someone points out they only have £200, so asks "where is the other £50 coming from. Are you going to borrow it?"

The government says "no need, we have £150 pilled up now".

"But where did that extra £50 come from?"

The government says "We printed it."

Sounds easy, but the consequence is inflation, because the government still only really has £100 in 'real terms', and the £50 just came from thin air. So now each pound note is only worth 66p of what it was before.

A big problem would be imports, because other governments would know you don't really have £150's worth of assets (like gold) to back that £150 of paper money, just £100's worth.

So whilst your £100 might have bought you 100 euros before, now £150 still only buys you 100 euros.

If you only printed £1 more you would probably be OK - and governments do that all the time. In fact they also do the reverse, and destroy £1.

But as soon as you start printing far too much, inflation sets in, confidence falls, and before you know it you have to print even more, and so it goes on. Before you know it, you need £1m to buy something that once cost £1. All because the government tried to print its way out of a shortfall.

[Import racer]

If it sounds like a bad idea it probably is.

Has no one in the Government any real good ideas or long term strategies ?

Obama seems to have a good idea, as many have been saying on here for a while and that's to put the builders back to work and invest in the country and do some work that actually needs doing.
They are rebuilding infrastructure in the US and investing in future industries.

We need more social housing for a start.

Printing more money will make us look like a joke around the world further devaluing the pound and will then lead to inflation again when import prices go back up.

We need good ideas, and banks should be made to lend by lowering the interest the rate that the Government lent all our money, from the 12% down to 4% or 5% so the banks can actually afford to lend this money back out.

And let some of the interest rate cuts play out rather than scaring everyone into stop spending big by further interest cuts and silly ideas.

Some of this was mentioned on Newsnight last night.

Some of these other ideas like printing money just smack in the face of desperation.

Do these people really know what they are doing ? or is it all just a political smoke screen.

They look like they are ******* in the wind
Just throwing good money after bad.

[LFC_SL]

Originally Posted by Import racer

Obama seems to have a good idea, as many have been saying on here for a while and that's to put the builders back to work and invest in the country and do some work that actually needs doing.
They are rebuilding infrastructure in the US and investing in future industries.

Well the President-elect still needs to sell to Congress his $775 billion plan

Read something amusing (yesterday). "Governments can suck all of the sand out of a desert". Huh.

[Drd]

I think I'm beginning to understand this.But it still seems that the government are the only people who have this extra money,and are therefore the only people who can spend this extra money.How does that help me buy an Aston,or is it just V8's for MP's?

[eric pisch]

Originally Posted by Drd

I think I'm beginning to understand this.But it still seems that the government are the only people who have this extra money,and are therefore the only people who can spend this extra money.How does that help me buy an Aston,or is it just V8's for MP's?

banks have to lend money to make a profit, the money printed i believe goes into the banking system, then hopefully they will get large cash reserves and start lending cheaply again

down sides are terrible thou, more money means it has less worth = inflation, if it goes out of control then you get hyper inflation and a loaf of bread will cost you a million. Also causes your currency to devalue against all others so all your imports will cost a lot more.

printing money is a last desperate attempt to sort out the problems.