Explain?
Global financial system implosion begins
- Thread starter Falcon
- Start date
Idaho
blah blah blah
QE allowed the wealthiest to acquire hard assets on very cheap credit, while doing nothing for the poorest. Wealth inequality has spiked massively since 2008.
gosub
~#
And the inflationary pressures already showing on the poor end. So printing money now doesn't help
Not quite my understanding.
QE involved the Bank of England buying hard assets (in the form, mainly, of government bonds) in return for new central bank money which was deposited into the sterling reserves system.
The sellers of those bonds swapped illiquid assets for cash. The fact that the Bank of England was buying bonds at scale pushed up the price of those assets and reduced medium/long term yields, which had the effect of reducing medium/long term interest rates. Is that what you're referring to? I would have thought lower interest rates were of benefit to a wider range of people than simply the wealthiest.
The bit you’re missing out there is what the previous owners of the bonds did next with their newly minted cash.
But the Bank of England isn't "printing money" now.
Since the beginning of this year they have been unwinding the QE programme. At peak, total QE was at £895 billion; since February the Bank has not been replacing QE government bonds in its portfolio which has reduced the overall level of gilts-related QE from from £875.0bn at the end of 2021 to £837.9bn. In addition, a total of £1.1bn of corporate bonds matured, reducing the stock from £20.0bn to £18.9bn. This is planned to accelerate as the BoE starts to actively sell bonds this month.
Exchange of letters between the Governor and the Chancellor on the Asset Purchase Facility - September 2022
Exchange of letters between the Governor and the Chancellor
www.bankofengland.co.uk
During the period 2009-2020, when QE was increasing, inflation flatlined. Now, as QE is being unwound, inflation has been increasing. It seems odd to suggest there is some sort of inverse relationship between QE and inflation, or am I misunderstanding you?
We are talking about pension funds, investment funds and overseas investors. According to the Bank of England, the expectation was:
Exactly. That liquidity flooded into the equity markets, which has had numerous impacts, including making the rich richer.
It also benefited pension funds and investment funds, and their customers in turn. Not just the wealthiest.
Do you have a view on the current policy of unwinding QE, which seems likely to have the reverse effect?
Pension funds and investment funds are owned by people. Primarily, they are owned by wealthy people. This, after all, is the nature of wealth. A 20% increase in value is worth a lot more to somebody with a million pound pension pot than somebody with a £10k one.
Yes, it’s no coincidence that the Nasdaq and FTSE Techmark indices have dropped like a stone. When the cheap money dries up, people are less inclined to gamble on long-term bets.
gosub
~#
Itll be sorely tempted to restart printing but would be a mistakeBut the Bank of England isn't "printing money" now.
Since the beginning of this year they have been unwinding the QE programme. At peak, total QE was at £895 billion; since February the Bank has not been replacing QE government bonds in its portfolio which has reduced the overall level of gilts-related QE from from £875.0bn at the end of 2021 to £837.9bn. In addition, a total of £1.1bn of corporate bonds matured, reducing the stock from £20.0bn to £18.9bn. This is planned to accelerate as the BoE starts to actively sell bonds this month.
Exchange of letters between the Governor and the Chancellor on the Asset Purchase Facility - September 2022
Exchange of letters between the Governor and the Chancellor
During the period 2009-2020, when QE was increasing, inflation flatlined. Now, as QE is being unwound, inflation has been increasing. It seems odd to suggest there is some sort of inverse relationship between QE and inflation, or am I misunderstanding you?
QT means bleeding the system and should continue til most people's ears pop..but the correction means houses stocks etc end up worth a smaller amount of money food fuel etc will still be going up a d there will be a fucktonne of unemployment...will be a temptation to go shipbuilding with Elvis Costello but infastructure Keynesiam my preferred choice
CH1
"Red Guard"(NLYL)
In my opinion it is precisely this that has destroyed the housing sector as we knew it in the 1950s-1990s.
Near zero interest rates have caused fixed assets like houses to rocket in price, just like gilts and the sort of bonds that get issued in dodgy company mergers and acquisitions.
So whilst the average Telegraph reader takes delight in their house price rising, people no on the "ladder" find it has been kicked out of reach.
Meanwhile parasitically inclined property owners find ready bank loans from banks and building societies to indefinitely increase their buy to let empires.
None of this worked with interest rates at 5-10% as they historically have been. How on earth did Gordon Brown come up with it?
elbows
Well-Known Member
Funny how the hole in our finances vanishes or grows depending on what arbitrary rules and forecasts are used:
Economists question 'black hole' in UK finances
The government's justification for upcoming UK tax rises and spending cuts is shaky, economists say.
www.bbc.co.uk
Thinking about things in crude zero sum ways, or via magic money trees or stupid attempts to conflate national debt with household credit card debt like the austerity justifiers did during the last period of austerity is not sensible. The amounts of money spent propping things up during the pandemic were large. But they have to be contrasted with the sums of money lost if large chunks of the economy and peoples jobs and incomes had been allowed to collapse during the pandemic lockdowns. Or the effects of not bothering to respond to the pandemic virus much at all, the effects that not bothering with mass testing would have had on peoples confidence, etc.
platinumsage
HaveMyPassword123
Funny how the hole in our finances vanishes or grows depending on what arbitrary rules and forecasts are used:
Economists question 'black hole' in UK finances
The government's justification for upcoming UK tax rises and spending cuts is shaky, economists say.www.bbc.co.uk
Thinking about things in crude zero sum ways, or via magic money trees or stupid attempts to conflate national debt with household credit card debt like the austerity justifiers did during the last period of austerity is not sensible. The amounts of money spent propping things up during the pandemic were large. But they have to be contrasted with the sums of money lost if large chunks of the economy and peoples jobs and incomes had been allowed to collapse during the pandemic lockdowns. Or the effects of not bothering to respond to the pandemic virus much at all, the effects that not bothering with mass testing would have had on peoples confidence, etc.
Of course there’s a money tree, but “magic” implies there are no inflationary consequences to harvesting its fruits. It's more a pact with the devil - despite the rising cost of living, US consumption in Q2 was up 7% on 2019.
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gosub
~#
Ten year Treasury yield drops, driving popular bond-market recession gauge to most-negative level in more than 40 years
The benchmark 10-year Treasury yield drops to another one-month low on Wednesday, driving a popular bond-market gauge that is an indicator of a potential...
www.marketwatch.com
gosub
~#
A lot of that 'consumption' was spending more to buy the same stuff.....Or buying on credit card, average US consumer has burnt through what savings they have
platinumsage
HaveMyPassword123
It's adjusted for inflation:
SEMCOG High-Frequency Economic Dashboard and Socio-Economic Indicators
Our region's economic recovery is dependent on the containment of COVID-19. In order for economic activity to rebound, infection rates need to remain low. SEMCOG queried the latest COVID-19 tracking data from the MI Safe Start Map for the seven-county, Southeast Michigan region. Measures...
gosub
~#
Cheers. Off that, looks like its services thats not flat, and they are including eating out.....which fits with data last month for hospitality still expandingIt's adjusted for inflation:
SEMCOG High-Frequency Economic Dashboard and Socio-Economic Indicators
Our region's economic recovery is dependent on the containment of COVID-19. In order for economic activity to rebound, infection rates need to remain low. SEMCOG queried the latest COVID-19 tracking data from the MI Safe Start Map for the seven-county, Southeast Michigan region. Measures...maps.semcog.org
Equally true is cc debt rising and savings falling.
Was in the pub last night (UK) people were talking about having what was a normal Xmas as opposed to the last couple of Covid ones. I suppose its that, can't entirely blame them, has been pretty torrid
Fuck next year is going to be brutal
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Anecdotally we usually have a crazy November flogging stuff (wholesale) for Christmas presents and struggling to keep up. So far that hasn't happened. This week has been busy but more due to delayed shipments coming in rather than stuff going out. Maybe the priority f8ir a lot of people is on seeing family and having a good time (good news for hospitality) rather than buying all the usual tat forgotten by new year.
gosub
~#
Shipments delayed from where (if you don't mind me asking)?
gosub
~#
Thought it might be. Zero covid policy plus a dried up Yangtse (a major internal shipping lane) was bound to impact on the Xmas elves
That ignores balancing impacts from changes in the discount rate impacting the liabilities. Much of those assets are being held to meet future liabilities and although the asset values have fallen, the income-generation of the assets has risen. Since the banks don’t intend to sell the assets anyway, the long-run effect may well be positive.
Long story short: try not to see breathless articles by journalists as indicating the sky falling in. Banks are doing pretty well right now.
gosub
~#
Nah they are being squeezed
Did want to find another article on new US mortgage credit systems which make it easier for the poor to buy*...Is not a bad idea as long as those now can have the wherewithal wait for the knife to hit the floor before they pick it up
*Didn't coz one I'd has a reasonable time down the pub and 2 looking like a few other countries doing similar
Well, the market doesn’t seem unduly worried about Wells Fargo (the bank in the article)
gosub
~#
Yield curves are still inverted indicating more rate rises to come. (+ big downturn as it works it way through) Fed basically had its eye off the ball summer 21, should have started rate rises then.
City types are shovelling clients money in 4th quarter in the hope of meeting bonuses...bear market persists though
City types are shovelling clients money in 4th quarter in the hope of meeting bonuses...bear market persists though
gosub
~#
Well looking at the edge of your cropped image they are 2/3 of their highest this year...recorded prior to interest rates starting to rise...
October Market was all about soft pivot...ie SLOWING rate of interest rate hikes (not lowering) . Banks majority of profit and growth stems from issuing new loans, you tell me if higher interest rates make issuing of responsible debt more or less likely?
If city types are throwing money at market to earn bonuses regardless of outlook (as I assert) why would they care particularly about which sectors they throw it at at?
October Market was all about soft pivot...ie SLOWING rate of interest rate hikes (not lowering) . Banks majority of profit and growth stems from issuing new loans, you tell me if higher interest rates make issuing of responsible debt more or less likely?
If city types are throwing money at market to earn bonuses regardless of outlook (as I assert) why would they care particularly about which sectors they throw it at at?
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