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Cannoness
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Posted - 2009.03.05 07:04:00 -
[1]
Could someone explain to me how this will help the economic situation?
Where does the extra money go?
Wouldnt this further damage the currency involved?
I just saw on the news that the bank of england may be considering it, whether they are or not, it does leave me rather puzzled as to how this will help
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Jago Kain
Amarr
Pan Galactic Traders
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Posted - 2009.03.05 07:18:00 -
[2]
I'm sorry; that information is not available at your security clearance.
Please report to your nearest Intsec office for termination.
___________________________________________________
The game will never be over, because we're keeping the meme alive. |
HazeInADaze
Minmatar
Native Freshfood
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Posted - 2009.03.05 07:59:00 -
[3]
basically the money goes into the banks, which in turn is supposed to free up money for lending to companys etc.
ofc whether the banks do that is another problem.
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Phantom Slave
JUDGE DREAD Inc.
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Posted - 2009.03.05 08:46:00 -
[4]
Printing money out of thin air generally has the effect of causing inflation. This is caused because your money is worth less because there's now more of the money floating around, without a solid backing of gold.
Just my general observation of it.
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Florio
Federal Defence Union
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Posted - 2009.03.05 11:02:00 -
[5]
Printing money may help with liquidity and may lead to inflation. Inflation will decrease the real value of our debt and in that regard, taken in isolation, may be beneficial. But inflation is a monster that can't be tamed, and if it runs away then the real purchasing power of your cash reserves will get decimated. So we're all pretty screwed but you knew that already.
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Ratchman
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Posted - 2009.03.05 11:22:00 -
[6]
Printing money is a desperate attempt to get the money flowing again. It does have the side effect of causing massive inflation once the money does start flowing around the system, as the value of the pound reduces.
Personally, I think they would be better off forcing the banks to lend money. After so much money has already been invested in bailing them out, the taxpayer should have them over a barrel.
But of course, all the senior bankers are good friends with the politicians, and donate regularly, so guess which way government will choose?
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ceaon
Gallente
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Posted - 2009.03.05 11:22:00 -
[7]
printing money is "good" the value of that money decrease and then some of us can use the to fire up cigars or use them on bathroom
Somos universales,
Pero andamos como el resto de los mortales,
Ocultando nuestros miedos,
Parece que no pero las guapas tambien se tiran pedos,
Tambien los listos sumamos con los dedos.
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Super Whopper
I can Has Cheeseburger
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Posted - 2009.03.05 12:18:00 -
[8]
Turkey a few years ago had a 1000% inflation and before the Euro you had to be a millionaire in Italy to buy an Ice cream.
Now Zimbabwe is printing money like crazy and there're notes with a Gazillion Zimbabwe Dollars on them, you really have to be richer than god to buy a loaf of bread there and guess how rare bread is there?
Is this possible with our own 'Western' world? Sure it is. The way our idiotic governments are wasting money and pumping them into useless and wasteful companies is ridiculous. They are only doing it because the money will be syphoned off and end up in their pockets, like what happened last year with the trillion that companies in the US were given. It all disappeared in lavish parties and bonusses which they awarded themselves and their politician friends.
Then we have the Pound, as mentioned above. The pound is devaluing so hard it's going to have a huge long term impact on the UK. What you have to realise is that many Western economies are nothing more than paper economies with nothing than debt backing them up. While it's easy to blame this on China, India, Vietnam and other countries that are, intentionally, keeping wages low but the actual blame can be laid at the feet of corporations who are outsourcing their personel to these countries.
Greed is good - Gekko, Wall Street.
Now that same greed is coming to bite us hard and we have no response to it, other than beg the same Middle Eastern countries we accuse of terrorism for money. Without their so called terrorist money we will become non-existent, ironic isn't it? I find it really funny because once Saudi Arabia or China decide they no longer will fund the US the US will crumble like a house of cards. It took Europe a thousand years to get back on its feet, after the collapse of the Roman Empire, while the Eastern world progressed and advanced. Now the roles have been reversed, and looking at Iran and the Middle East as well as China, it's only a matter of time before Asia and the Middle East overtake the 'Enlightened International Community'.
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Florio
Federal Defence Union
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Posted - 2009.03.05 12:22:00 -
[9]
It's wonderfully ironic.
The banks lend too much money.
The banks get told they're not lending enough.
The banks have less money to lend as the government has told them they have to set aside more capital.
Fact is, good companies can still get credit while bad companies get pruned by recalled facilities. Unfortunately there seems to be a lot of mediocre companies getting wiped out too. It's like trying to increase the health of a bonzai tree by pruning with a chainsaw.
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jason hill
Caldari
Clan Shadow Wolf
Sylph Alliance
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Posted - 2009.03.05 13:15:00 -
[10]
and interest rates have dropped to 0.5% today ... damn my missus for getting a fixed rate at 5%
destroy everything you touch |
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Carniflex
Caldari
Schmoo Manufacturing Inc.
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Posted - 2009.03.05 13:54:00 -
[11]
 Originally by: jason hill
and interest rates have dropped to 0.5% today ...damn my missus for getting a fixed rate at 5%
You will be happy about it in few years when all that printed money is going home to roost. Or not ... depends on stuff boils down.
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ReaperOfSly
Gallente
Zetsubou Corp
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Posted - 2009.03.05 16:51:00 -
[12]
Originally by: Carniflex
Originally by: jason hill
and interest rates have dropped to 0.5% today ...damn my missus for getting a fixed rate at 5%
You will be happy about it in few years when all that printed money is going home to roost. Or not ... depends on stuff boils down.
This. Low interest rates are a temporary situation. The calm before the storm, you might say. Give it a few years and we'll be suffering massive hyperinflation.
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jason hill
Caldari
Clan Shadow Wolf
Sylph Alliance
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Posted - 2009.03.05 17:35:00 -
[13]
in before jago turns it into a bloody boxxy thread !
destroy everything you touch |
Revonanist
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Posted - 2009.03.05 18:39:00 -
[14]
Credit crisis visualized
Quite explanatory.
Don't forget to stock up on water and non-perishables, the zobmie apocalypse is coming.
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Cmdr Sy
Appetite 4 Destruction
The Firm.
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Posted - 2009.03.05 18:55:00 -
[15]
Edited by: Cmdr Sy on 05/03/2009 19:06:00
To understand QE, you have to understand bond yields, and how they move inversely to price.
Let's say you are a company, and sell a bond with face (par) value 100 ISK, a coupon yield of 5% and 1 year maturity.
This means you owe the buyer (the investor) his 100 ISK and 5 ISK coupon payment in 1 years' time. In the meantime, you have use of his 100 ISK cash.
However, the buyer can normally sell the bond on the secondary market. If he immediately sells it at face value, nothing really changes. If he sells it for 101 ISK, the new buyer is still entitled to his 100 ISK + 5 ISK from you on the date of maturity, but since he paid 101 ISK for it (above par), his profit will only be 4 ISK, or just under 4% (this is the current yield, and will be the yield to maturity if he holds the bond to redemption). Similarly, if the original buyer sells the bond for 90 ISK, you still have to repay 105 ISK, but the second buyer will see a yield of 16.7%, while the original buyer will take a 10% loss on his investment.
Why would he take a loss? If he believes you will not repay him. He cuts his losses and plays it safe, while the second buyer has a much higher return to look forward to, for his risk, which he may consider to be adequately covered.
Now consider what happens if the bond is trading at a discount for 90 ISK, and you have to issue a second 100 ISK 1-year bond. The next group of potential investors will see the existing bond trading at a discount with a sky-high current yield, and will ask for the same return for the perceived credit risk. They may demand a 16.7% coupon. Welcome to your new borrowing cost.
Now consider what happens if you are a borrower whose cost of borrowing is indexed off the example above, at a spread of 300 basis points. At first it was 8%, now it is 19.7%. In fact, depending what common factors may be in play, the spread may widen.
Now you are ready for QE.
What if the government were to buy that bond, trading at a discounted price of 90 ISK, at par, paying with newly created currency?
The market price goes up, the current yield goes down, and future borrowing costs, including those indexed off that particular asset should (in theory) come down too.
In practice, the underlying credit risk has not changed! If the true price of the current risk is 16.7%, it is what it is! Not only might there be no other buyers at the higher price, but those already holding such assets might take the opportunity to sell at the windfall price while it lasts. Which, faced with a torrent of liquidation, it will not. The government then ends up owning all those debt instruments, with the risk mis-priced, and the yield reset to its true value. And when the risk crystallises, the government will bear the loss.
And so QE is really just a way of postponing the inevitable blasting apart of asset owners, with the government / central banks assuming ownership.
It is a government-sponsored means of concealing credit risk and preventing market valuation of that risk, ie officially endorsing and continuing by decree, what has hitherto been achieved in the marketplace by negligence, incompetence and fraud.
This is how a government's finances can implode, the currency can devalue, and interest rates can go to 15-20%, all in the space of a week or two. Inflation? In fact, it would be low on the list of things you would have to worry about. 
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Dantes Revenge
Caldari
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Posted - 2009.03.05 19:03:00 -
[16]
They've provided a way to totally destroy the Bank of England. Bank notes are technically not our currency, the real currency of any country is gold.
On each bank note in the UK and some other countries, there is a statement: "I promise to pay the bearer on demand the sum of..." This varies from one country to another but the meaning is the same. A bank note is essentially a negotiable cheque backed by gold. The Bank of England is obliged by that promise to pay you the value of that note in gold if you request it. If everyone hit the bank and requested the gold as promised, the bank would find itself unable to pay everyone.
Personally, I'd say stuff the Euro, I want to see a single world currency.
--
Originally by: CCP Whisper
No it is not an official statement. Not everything surrounded by blue bars is an official statement which can be quoted as fact until the end of time. Deal with it.
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Nebulous
Minmatar
Thukker Zoku
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Posted - 2009.03.05 19:24:00 -
[17]
As much as I hate them I must admire the super rich elite and their success in enforcing "Monetarism" upon the whole world, they have truly brainwashed the people of this world into believing this is the only way, I look at this thread now and see people discussing it as though it is normal and what the solution to financial problems should be, it's laughable.
The real and only solution to this monetary enslavement is alternative economics, monetary systems can only work for the few and enslaves the majority, as I have said on many occasions before "you are only as free as the amount of money you have" and you can only have lots of money at the expense of many others.
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Abrazzar
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Posted - 2009.03.05 19:27:00 -
[18]
The real currency of any bank or country are empty promises. Money has no value.
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Ideas for: Mining
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Florio
Federal Defence Union
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Posted - 2009.03.05 21:58:00 -
[19]
Edited by: Florio on 05/03/2009 21:58:39
There is quite a bit of crap in this thread.
@cmdr sy (above comment not aimed at you): dude if you learnt to speak a variant of english laypersons could understand you'd be awesome. that's a compliment btw. (although when i recently suggested inflation back in january you poo-poo'd the idea.)
Am i correct in seeing baltic dry go up a bit and successful US mortgage applications going up? Green shoots in a zombie-apocalypse wasteland? i'm seriously thinking of buying up a shed load of US stocks, i'm heavily into china already.
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Jago Kain
Amarr
Pan Galactic Traders
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Posted - 2009.03.05 22:01:00 -
[20]
Originally by: jason hill
in before jago turns it into a bloody boxxy thread !
Goddammit.... rumbled.  Oh well, back to spiteful sniping.
___________________________________________________
The game will never be over, because we're keeping the meme alive. |
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Cmdr Sy
Appetite 4 Destruction
The Firm.
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Posted - 2009.03.05 22:02:00 -
[21]
Edited by: Cmdr Sy on 05/03/2009 22:07:46
Meh. The economy works on the principles on which it works, and for as long as it does so, denying them will not enable you to draw any meaningful conclusions.
Continuing with the above...
Let's say you have one million ISK to invest in the form of a loan to one of a thousand available companies. What interest would you charge on the money?
Depending on your requirements, you will want to shortlist some companies and learn a lot about them and their markets. To help you decide, you will consult the market to see what other people who have loaned them money are currently charging. This is because all investors make their own assessment of risk and price it accordingly, and the aggregate of such choices, in a relatively free market, should be in a position to give a reasonably reliable price signal about the risk. It will not be perfect of course, which is why you must do your own due diligence, but it will be very useful information.
This is the same thing every one of you does when you perform a "price check" in EVE, except the item is credit!
Let's say the market price is 8%.
IS IT REALLY?
You could say 'yes' before, but can you say it now, with QE out there? What if that 8% yield is the result of a politically expedient prop job? What if the underlying credit risk is more accurately priced at 12%, and your research fails to reveal this? Which in all fairness it may not, with regulators that are asleep. Then if you lend at 8%, you have underpriced the risk and over a long enough time period, you are screwed and you will lose money to defaults for which you have not allowed in your pricing.
The government will have achieved its goal, it will have lowered the cost of borrowing for some company from 12% to 8% and even sucked in private capital, but you will have been defrauded. To make political capital and win votes for someone else.
So what does an intelligent or merely shell-shocked and weary investor do? Charge each one of those 1000 companies the same usurious rate "to be on the safe side" or keep the money as cash on deposit earning 0%?
The answer is people will do both, depending on their individual risk appetite. And whichever any individual investor chooses, the economy, the real economy that produces and sells things and employs people, will be pulverised. The simple reason is when the government begins to manipulate prices in the market in the interests of "economic stability" (vote-winning), you no longer know the true price of anything and must assume that everything has been tampered with. This fundamental lack of confidence and trust damages the economy to a far greater extent than natural losses would damage it.
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Cmdr Sy
Appetite 4 Destruction
The Firm.
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Posted - 2009.03.05 22:22:00 -
[22]
Originally by: Florio
Am i correct in seeing baltic dry go up a bit and successful US mortgage applications going up? Green shoots in a zombie-apocalypse wasteland? i'm seriously thinking of buying up a shed load of US stocks, i'm heavily into china already.
Personally, I think the DJIA and S&P500 indices are heading for around 4000 and 400 respectively, (and FTSE100 and 250 the 3000 mark) and I do not think that is far off, after any countertrend rally is taken care of. Then, maybe worse yet. Buying an index is not in my immediate future, neither this year nor the next. As described above, government policy looks set to make things worse, on top of already poor fundamentals, which point to a depression with tens of percent coming off the GDP of pretty much every country in the world. At this point, it is difficult to assess the credit-worthiness and future prospects of even the blue chip companies, and some of the "fog of war" is being enshrined in policy on the flawed basis that what you don't know can't hurt you.
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Cmdr Sy
Appetite 4 Destruction
The Firm.
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Posted - 2009.03.06 00:02:00 -
[23]
Great, now the government is going to convert its preferred equity in LTSB to common. Last year's taxpayer loan at 12% becomes a gift. I wonder if they got a single interest payment back. Probably not. The taxpayer got cheated, as usual. I think this was the plan all along. Get a borderline politically acceptable foot through the door, then toss in the cash when no-one is looking. Heh, if you are a shareholder, lube up for tomorrow's dilution.
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Super Whopper
I can Has Cheeseburger
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Posted - 2009.03.06 04:25:00 -
[24]
Originally by: Dantes Revenge
They've provided a way to totally destroy the Bank of England. Bank notes are technically not our currency, the real currency of any country is gold.
On each bank note in the UK and some other countries, there is a statement: "I promise to pay the bearer on demand the sum of..." This varies from one country to another but the meaning is the same. A bank note is essentially a negotiable cheque backed by gold. The Bank of England is obliged by that promise to pay you the value of that note in gold if you request it. If everyone hit the bank and requested the gold as promised, the bank would find itself unable to pay everyone.
Personally, I'd say stuff the Euro, I want to see a single world currency.
You know one reason why the bank won't be able to pay everyone? Guess what Brown did when gold was at its lowest price?
High treason, punishible by death.
Single currency? The Brits have been whining how they will never 'surrender' to 'Europe'. Look where the crying and whining of little children has got them to? But then, to be honest, nobody wants the UK in the Euro anyway, only a fool would want to pay for that debt.
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Thorliaron
Brutor tribe
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Posted - 2009.03.06 04:38:00 -
[25]
germany tried this, look what happened. Japan tried this in 2001 and they have been in a reccession since.
wont work!
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Captain Hudson
Caldari
Royal Hiigaran Navy
SCUM.
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Posted - 2009.03.06 04:39:00 -
[26]
Edited by: Captain Hudson on 06/03/2009 04:47:54
Originally by: Super Whopper
Originally by: Dantes Revenge
They've provided a way to totally destroy the Bank of England. Bank notes are technically not our currency, the real currency of any country is gold.
On each bank note in the UK and some other countries, there is a statement: "I promise to pay the bearer on demand the sum of..." This varies from one country to another but the meaning is the same. A bank note is essentially a negotiable cheque backed by gold. The Bank of England is obliged by that promise to pay you the value of that note in gold if you request it. If everyone hit the bank and requested the gold as promised, the bank would find itself unable to pay everyone.
Personally, I'd say stuff the Euro, I want to see a single world currency.
You know one reason why the bank won't be able to pay everyone? Guess what Brown did when gold was at its lowest price?
High treason, punishible by death.
Single currency? The Brits have been whining how they will never 'surrender' to 'Europe'. Look where the crying and whining of little children has got them to? But then, to be honest, nobody wants the UK in the Euro anyway, only a fool would want to pay for that debt.
why would we want to join the euro, the european bank has done nothing, hence why all the european leaders are at eachothers throats over what to do.
The eurozone is tipping into a deeper downturn than America itself despite the tremors in the US mortgage industry, and may already be in full recession for the first time since the launch of the single currency.
Spain, Italy and Greece are all much worse off than Britain, but thats ok, you just keep you anti-british glasses on pal, we dont like you much either
Iv found him |
Nebulous
Minmatar
Thukker Zoku
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Posted - 2009.03.06 05:43:00 -
[27]
Originally by: Cmdr Sy
This fundamental lack of confidence and trust damages the economy to a far greater extent than natural losses would damage it.
Wrong! It is the "Monetary system" as a whole that damages the economy and the planet as a whole, even if you could find a sweet spot for preventing financial crisis every decade or so, you still can't ignore the other downsides to a monetary system like crime, war, greed, competitiveness, corruption and social degradation.
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Super Whopper
I can Has Cheeseburger
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Posted - 2009.03.06 06:50:00 -
[28]
Originally by: Captain Hudson
why would we want to join the euro, the european bank has done nothing, hence why all the european leaders are at eachothers throats over what to do.
The eurozone is tipping into a deeper downturn than America itself despite the tremors in the US mortgage industry, and may already be in full recession for the first time since the launch of the single currency.
Spain, Italy and Greece are all much worse off than Britain, but thats ok, you just keep your anti-british glasses on pal, we dont like you much either
What you mean to say is that it was clear in 1963 what kind of a disaster the UK was.
Quote:
Only then, they said, could a "humiliating" inquiry into the UK's economic affairs be avoided when Common Market foreign ministers meet to consider Britain's application formally next month.
Why would I have an anti-UK glasses on when the Brits are more than capable of ruining the country themselves? I will tell you that it was obvious ten years ago, when I set foot in that nightmare, what kind of a mess the UK was. It didn't come as a suprise when I learned that 66% of the Brits want to flee.
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Graalum
Di-Tron Heavy Industries
Atlas Alliance
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Posted - 2009.03.06 06:57:00 -
[29]
Originally by: Phantom Slave
Printing money out of thin air generally has the effect of causing inflation. This is caused because your money is worth less because there's now more of the money floating around, without a solid backing of gold.
Just my general observation of it.
gold has no real value, you can't eat it, build with it, it can't til a field.
People think it has real value, even though its value fluctuates considerably.
Anyways, right now inflation is a good thing, because a deflationary trap is far worse than any amount of inflation.
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Graalum
Di-Tron Heavy Industries
Atlas Alliance
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Posted - 2009.03.06 06:58:00 -
[30]
Originally by: Ratchman
Printing money is a desperate attempt to get the money flowing again. It does have the side effect of causing massive inflation once the money does start flowing around the system, as the value of the pound reduces.
Personally, I think they would be better off forcing the banks to lend money. After so much money has already been invested in bailing them out, the taxpayer should have them over a barrel.
But of course, all the senior bankers are good friends with the politicians, and donate regularly, so guess which way government will choose?
how exactly does someone force a bank to lend money? Better yet, why would you?
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