Carry on printing

 

                The US Fed’s decision to print some more was clearly designed to show Mr Obama they are doing something, at a time when he needs to show his determination to get unemployment down.

                There was no great need to print more dollars. The US banks are better placed than European ones. The US money supply has been expanding modestly anyway. The US economy has been performing better than most EU economies.

               The immediate joy in world markets at the thought of yet more money in circulation was to be expected. Maybe Mr Bernanke is right and this latest round of money printing will not be too inflationary in itself. However, the promise to keep interest rates on the floor until 2015 at the earliest is another blow to savers. It is also surprising. There could come a time before then when the Fed needs to brake the inflation it is currently trying hard to provoke.

               On the other side of the Atlantic Mr Draghi has been hinting that he wants to print, but  his stated policy still does not allow that. He has to watch his back, as Germany is no fan of money printing after their bitter experience of it in the 1920s when it led to hyperinflation. Markets also seem to ignore the fact that Spain and Italy will have to enter IMF programmes before the ECB will buy their bonds.

           The UK is pressing on with its latest programme. With RBS and HBOS still troubled banks, and with the stiff regulatory controls on new credit, the QE’s inflation consequences are for the moment restrained. In recent weeks the thought of more US QE has knocked the dollar generally, including against the pound. The pound, of course, devalued so much more early in the Credit Crunch when all this monetary experimentation first began.

            There is no substitute for creating stronger and more competitive banks, and for both the private and public sectors getting on top of their excess debt problems. Money printing may delay some of the adjustment, but it does not replace the laws of arithmetic. Mr Micawber still was right to say keeping income slightly higher than  expenditure made for greater happiness.

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105 Comments

  1. Acorn
    Posted September 16, 2012 at 5:25 am | Permalink

    “Funding for Lending”. The BoE and the Treasury (monetary plus fiscal policy) may have got a winner. http://symmetrycapital.net/index.php/blog/2012/09/did-michael-woodford-endorse-ngdp-targeting-hell-no/ .

  2. colliemum
    Posted September 16, 2012 at 6:05 am | Permalink

    Well, the joy in world markets was to be expected, as you write above.
    Also, as expected, the USA has been downgraded by one agency already, and Moody’s will certainly follow as they’ve already warned the Obama government that this is likely to happen.
    So if ‘the markets’ are aiming for another ‘October surprise’ as in 2008, then my feeling is that this may well backfire spectaculary.

    • Single Acts
      Posted September 16, 2012 at 10:45 am | Permalink

      I recall the old saying to the effect that when you can get nothing out of a bank* you should put nothing into a bank.

      * i.e. a positive real rate of return

      • zorro
        Posted September 16, 2012 at 4:37 pm | Permalink

        People should go on strike and save with other alternatives like credit unions/friendly societies. These can often have more flexible repayment arrangements.

        zorro

  3. Mike Stallard
    Posted September 16, 2012 at 6:12 am | Permalink

    Reform of the Civil Service and of the Welfare State is becoming urgent.
    Irrelevant?
    No. The State is sucking up the money from the banks and the banks are now either nationalised or actually stuffed with bonds – which means more interest payments to the banks. It is a vicious circle.
    IDS really wanted to introduce some reforms, but, apparently, that is being blocked. The Unions are standing in the way of real Civil Service Reform. So are the millions and millions of voters who depend (as I do and so do all other OAPs) on the State for hand-outs.
    This is going to take a genius to sort out and, frankly, I don’t see one on the horizon.
    Do you?

    • Disaffected
      Posted September 16, 2012 at 11:07 am | Permalink

      You are correct. But I seem to recollect that JR said last week the government wanted people to save- I don’t see it, as my remarks made clear. I do not think Osborne is sufficiently interested in the economy, he and Cameron are more about being in post for the kudos than making any real difference. The alternatives pointed out by many commentators, including JR, demonstrate quite clearly there are feasible ways to cut spending and promote growth; reward hard working people, cut expenditure for welfare lifers (5.2% pay rise that Cameron allowed) while cutting pay, pensions and savings for those who have worked all their lives.

      These are circular debates where the cabinet is not listening because in truth it acts like a conduit for the EU. UKIP is the only true alternative.

      JR, Lord Tebbit and others are naive to think they are helping the Tory party by staying loyal or stubborn for thinking they will not be ousted from a party by Europhiles and they will change the course Cameron is taking. No change to date.

      Major, Clarke and Co might use language of fear to scare Tory MPs to keep quiet by saying what happens when disunity happens (a bit like socialist name call to prevent freedom of speech and suppress opponents of their view). The fact is the Tory party are now unelectable in 2015 because of a staunch Europhile, indecision and poor judgement exercised by Cameron (Laws being his latest folly of judgement). This is the making of the Tories by ignoring their supporters and acting in stark opposition against their wishes ie borrow and waste, heavily tax, big state, heavy regulation, blindly follow civil service, mass immigration, soft on crime, slash military while committing them to more wars, gay marriage, Lords reform etc.

      Tory sleaze continues: providing dinners at Downing Street (how long does it take to ascertain whether the state paid for the gas, electric, food and staff costs to raise Tory party funds?). Kelly report collecting dust on the shelf, after bold language from Cameron what he was going to do- more like another example, in a long line of examples, of hot air an bluster.

    • Cliff. Wokingham.
      Posted September 16, 2012 at 3:21 pm | Permalink

      I feel IDS has made a good start. He will reduce the amount of money paid to some and will force others into looking for work. Will universal credit work? I don’t know, it depends on the state sector’s willingness to implement the policies and on the quality of the software. Personally I expect it to be a bit of a mess, but I hope to be proven wrong.

      I honestly believe that anything IDS does will have little real effect, until and unless we address the problem of young, single women thinking it is their right to (have babies-ed) with no means of supporting their off-spring. We need a strong Conservative government to give notice that, in just over nine months time, the state will cease to reward single women and girls that choose to (have a child-ed) with no means of funding it.
      The media and the left will go mad, they will scream: “Won’t you think of the children” but this area of the population are dragging us all down. I am not talking about women whose marriage has broken down or widows, just the professional (single mums) that our welfare system rewards.

      Harsh some might say but, it is the elephant in the room that no party will ever discuss. If this problem was sorted out, we could fund our OAPs and our disabled and, we could all have real tax cuts.

      • Disaffected
        Posted September 17, 2012 at 5:18 pm | Permalink

        Made a good start? What has been implemented? It might not be the fault of IDS, but that of indecisive Cameron, or perhaps not approved by a focus group? There is a £2.2 billion black hole for benefit payments, so perhaps not quite a good start or even out of the blocks after two and half years!!! Mass immigration continues to soar, spending continues to soar, tax increases soar, EU contribution continues to soar, no change at Westminster following MP expense scandal- the report is on the shelf. Actually, when is the Tory led coalition going to make a start?? Time is passing them by. A lot of hot air but very short on delivery.

    • Sean O'Hare
      Posted September 16, 2012 at 4:04 pm | Permalink

      So are the millions and millions of voters who depend (as I do and so do all other OAPs) on the State for hand-outs

      If by that you mean the State Pension then please do not refer to it as a handout. It is our money that is being returned to us – or at least some of it. Money they took from under thread of force and calling it National Insurance. The fact that there was no pension fund being built up makes it a giant ponzi scheme, but that is hardly we pensioner’s fault.

      • Steven_L
        Posted September 16, 2012 at 4:14 pm | Permalink

        Of course it is a handout. You lot voted decade after decade for governments who spent all the tax take and more, and you all benefitted from it. The legacy of debt is your legacy.

        • zorro
          Posted September 16, 2012 at 4:54 pm | Permalink

          ‘you all benefitted from it…’….Steven, that is a very moot point. Who would you have people vote for in a democracy? The least that people can expect under the rule of law is honest money and honour in upholding implied contracts.

          zorro

        • Terry
          Posted September 16, 2012 at 6:29 pm | Permalink

          Do you really think that we “lot” voted to be ripped off? Com’on get with the programme.
          We voted for a party we reckoned would well manage the economy. That worked during the decade 1979-1989. After that well.. you can see for yourself.

          Which is why my household is abandoning the mainstream parties and moving to one of the newer ones that hopefully, will put the well being and wishes of the electorate, the British citizen and OUR country, above ALL other considerations.

          We are sick of higher taxes and reduced disposable incomes only to see our tax deducted money thrown at anything that does not move inside and outside of the UK. We cannot feed the world, we cannot medically treat the world and we certainly cannot house the world, so why do we try to do it all? And at the expense of us, the tax payers, who tragically unwittingly, put these liberal minded people into a position of power.

          I say “Think not of what your country can pay you in expenses and salaries, whilst you continue to hand out benefits on a global scale BUT what YOU can do for for your country”!

          If you are an MP, in it for the money and the power, we do not want you. We can no longer afford you. You have become the burden upon the future of the UK and we want rid of you. So, either work for us or consider yourselves fired. And that includes the cabinet, of course. The Member for Wokingham is excused, as he is very fit for purpose..

          • Robert Christopher
            Posted September 16, 2012 at 10:04 pm | Permalink

            “We voted for a party we reckoned would well manage the economy. That worked during the decade 1979-1989.”

            How did that happen?

            We had a leader with some b*lls, that’s what!

            Not a cabinet with two Balls or one with none at all!

    • uanime5
      Posted September 17, 2012 at 12:48 am | Permalink

      IDS’s plans involve forcing 2 million people onto the 2 year long Work Programme at a cost of £5 billion to the taxpayer to massage the unemployment figures. How is this going to benefit the UK?

      Other equally stupid ideas are forcing people to work for no money, at the taxpayers expense. Why would a company create jobs when they have an endless supply of young people who can be forced to work for 3 months at no cost to the employer?

      The only way the Welfare State is going to be reduced is by creating more jobs, not by bullying the unemployed.

      • Lindsay McDougall
        Posted September 17, 2012 at 10:05 am | Permalink

        There is the hope that after two years, the people involved will be (more) ready for work. If you are arguing for the abolition of ALL work support programmes, ALL state sponsored apprenticeships, ALL enterprise zones and ALL other symbols of Tory Wettery, then I might be with you. However, if you do that, you have to run the country so that it pays to work and doesn’t pay not to work. Somehow, I don’t think that is the arguement you are making. So what are your proposals for employment?

      • Cliff. Wokingham.
        Posted September 17, 2012 at 11:12 am | Permalink

        Uanime5,

        I do actually agree with most of your thoughts about forcing unemployed people to do un-paid work. I have already mooted on here that, in effect, they are almost being treated as criminals for being unemployed, in so far as they are forced to do un-paid work just as a judge sentences a convicted criminal to un-paid work. I also mooted that they are NOT working for their benefits because many of those convicts on un-paid work punishments are too on benefits and do not have part of those benefits stopped whilst not available for work whilst carrying out their punishment.
        I have also stated on here before that, if jobs are there, they should be filled with people that are paid a wage, not slaves.
        I have also mooted that so called apprentiships are not real apprentiships compared to what we all understood them to be in the past. I feel they are glorified YTS schemes but also for adults and we all know how little use the YTS scheme was.

        The main thrust of my comment was regarding single women that choose the lifestyle choice of motherhood, with no means of supporting their children. Our host edited my post and somewhat altered the tone of it. I can understand this, because about twenty years ago, Mr Redwood received a lot of flack locally when he was critical of our “single parent problem.” He merely aired commonsense Conservative views and was crucified by the left wing local press and single issue groups. The fact he felt the need to edit my post using PC language illustrates the point I was making above, in relation to the reluctance of parties and politicians to address the problem.

        Uanime5, just for clarity, I feel that Universal Credit could be a good thing if it is allowed to work. I do fear that HMRC and others, who are already stretched, will struggle to oversee the scheme and we all know about government’s record regarding IT systems.
        Universal credit will allow unemployed people to take part time work and tempoary full time work without, in theory, worrying about the safety net of the benefit system taking ages to catch up when their job comes to an end, thus leaving them with no money coming in: This must be a good thing, yes?

        Even you must agree that the current way our society almost encourages young women and girls to have children with no means of supporting them is unsustainable and we do need to bring a sense of morality back into our society: left wing liberalism, where anything goes, has clearly not worked. If we stop encouraging people to have kids with no means of supporting them by no longer rewarding them with housing and large handout which, unlike most OAPs, they have not contributed to, then I suspect the welfare bill will come down, housing will be freed up and the number of people with no real future will decrease. We are now seeing single girls that have grown up in single parent, workless households repeating the cycle and having kids themselves and we are seeing grannies in their early thirties: this surely cannot be good for our society can it?

  4. Kevin R. Lohse
    Posted September 16, 2012 at 6:28 am | Permalink

    Let us say that the total wealth of a Nation or currency area is W. The exact value of W cannot be known, but is approximately expressed by proxy in a number of ways. One of those ways is by totalling up all the financial instruments, of which cash is one. Let us say that the monetary unit is the Splondour. If W increases, either the value of the Splondour increases against other currencies, Interest rates are reduced, or the central Bank may print more Splondours to maintain parity. If W decreases, eg in a depression or a slump, surely printing more money may pprovide a quick fix, but will increase inflation and indebtedness and exacerbate the situation over the longer term Or is that too simplistic?

  5. lifelogic
    Posted September 16, 2012 at 6:51 am | Permalink

    Certainly many of the banks in the UK are still not lending to business sensibly. They are looking for margins of 4%+ plus large fees and lending very low percentages of loan to security value and with other absurd restrictions.

    They are mainly interested in pulling loans in and selling you various duff products and getting cash deposits – on which they pay you virtually nothing. Recovery with not be very quick until they get some competitive banking going – what is stopping them – they seems to have money to burn in the state sector.

    • Mark
      Posted September 16, 2012 at 9:12 pm | Permalink

      They’re using profits on business lending to subsidise their mortgage lending.

    • outsider
      Posted September 17, 2012 at 12:19 am | Permalink

      Dear Lifelogic,
      Four years down the line, I am coming round to thinking that there really isn’t a credit problem, let alone a bank problem (beyond the debris of 2008-09) or a domestic demand problem. The reality is that there has been a sharp increase in business risk, which has been building up ever since the balance of global economic power started shifting in the early years of this century but was “kicked down the road” for a few years by the ludicrous credit boom that was started to get America out of the dot-com crash.
      The global flow of funds needed to keep this going is drying up, which necessarily removes the implicit asset price “guarantee” that removed most of the risk from, for instance, the property development that you suggest is your business.
      There is plenty of cheap credit for big, safe businesses. If banks are turning down 30 per cent of loan applications from small firms that is probably well justified, maybe a bit low.
      Small and new firms need risk capital not loans and they may have to do it the old way, by saving for seed-corn, ploughing back the profits and not taking comfortable salaries from the firm. Or big dividends.
      No doubt I shall be shot down for this heresy. For all I know, you personally drive round in a 10 year old Golf and take home-made sandwiches on your travels but it seems to me that many of the new “entrepreneurs” assume (perhaps as a result of said dot-com boom) they can live a swish lifestyle from the start and rely on banks to supply the funds.
      That is not the way it used to be and, I suspect, not the way it will be in future. There are now more reliable and profitable homes for international banking funds than the slow-growth, high-debt economies of Western Europe and the US.

      • lifelogic
        Posted September 17, 2012 at 7:31 pm | Permalink

        I have substantial assets and a good track record and good property and other security available but still I cannot borrow all I want to at sensible rates to fund growth. What chance the rest?

  6. Pete the Bike
    Posted September 16, 2012 at 7:52 am | Permalink

    If the Fed stop printing money the markets will plunge, interest rates soar and the game is over for Helicopter Ben and his pals. That’s the trouble with stimulation, stop it and things deflate to their real size. That would be, at least in the case of stock and bond markets, much less than half their stimulated size.

    • zorro
      Posted September 16, 2012 at 5:16 pm | Permalink

      As expected, once they start QE, there is never the right time for them to stop it in their eyes.

      zorro

    • Gary
      Posted September 16, 2012 at 7:01 pm | Permalink

      That is correct , Pete. They have embarked down the road that eventually leads to hyperinflation, and there is no way that they can return before then without a great unwinding that will make the last unwinding look like a picnic. All they have done is piled up more debt and kicked the can. There really should be a law against this cavalier, wanton destruction of the country.

  7. The PrangWizard
    Posted September 16, 2012 at 8:22 am | Permalink

    It all sounds like funny money and it’s all out of my league, but I still think I understand how economics works and printing money seems wrong to me. So, should I make additional capital repayments to my mortgage now, in case rates go up in a year or two, or should I just let it run and allow inflation erode the debt? Or buy gold?

  8. Brian Tomkinson
    Posted September 16, 2012 at 8:29 am | Permalink

    John,
    For some time I have thought that you would be an excellent successor to Mervyn King as Governor of the BoE. I dismissed that thought as I also thought you would be considered as too much of a political appointment. I have changed my mind reading today’s Sunday Times, where they state that a certain Gordon Brown is considered a long shot for the post, albeit at bookmakers’ odds of 200-1. Get your application in!

    • Bob
      Posted September 16, 2012 at 10:26 am | Permalink

      If Brown is on the short list, it’s proof positive that destruction of the UK is the object and that Fabians are running the show.

    • forthurst
      Posted September 16, 2012 at 10:36 am | Permalink

      I don’t know about Gordon Brown, but Lord Lucan would be worth considering as a rank outsider.

    • peter davies
      Posted September 16, 2012 at 11:11 am | Permalink

      G Broon as Gov of BOE….. nothing would surprise me, (wrong job for the man given his history-ed)

    • lifelogic
      Posted September 16, 2012 at 3:50 pm | Permalink

      On the grounds that, in the state sector, it is usually proven disasters that are promoted above all others, then perhaps he has a chance. After all selling all that gold and nationalising the banks in such an absurd loss making way was brilliant! Perhaps worth a punt on “save the world and some bigoted woman” Gordon Brown.

      • zorro
        Posted September 16, 2012 at 5:22 pm | Permalink

        Jmaes Brown, the ‘godfather of Soul’, and James Gordon Brown, the ‘Godfather of Post Neo-Classical Endogemous Growth Theory’…No,no it’s just so wrong on so many levels…..

        zorro

  9. Electro-Kevin
    Posted September 16, 2012 at 8:40 am | Permalink

    Off topic if I may, Mr Redwood.

    Is it wise to have Prince Harry in a forward position (manning the guns on an Apache) in Afghanistan ? The equivalent of a Victorian cavalry officer on a charger with sabre in hand.

    It’s not an issue of safety. I respect the man for wanting to do his bit and am proud of him for putting his neck on the line.

    The concern I have is that he is grandson of the head of the Church of England. This – along with the religious fundamentalism of Blair and Bush Jnr – is making it look like a crusade. It is extremely provocative.

    In fact I think that – subliminally at least – Christian impulses are the impetus behind our interventions in the Middle East. We have been offered no logical explanation as far as I can see.

    • Electro-Kevin
      Posted September 16, 2012 at 8:48 am | Permalink

      Returning to the subject of QE and linking it with Al Qaeda…

      I can’t help thinking that 9/11 brought this.

      We had the Dot.Com crash and were due a correction. I was expecting interest rates to rise and so fixed my mortgage. Then 9/11 took place and interest rates were kept low to stabilise the global economy.

      Property boomed to a new – and even less sustainable level – and then crashed.

      When I viewed those towers falling the very last thing I was thinking was “You know what ? We’re going to have an economic boom over the next few years.”

      But we did. One that’s devastated us.

      • zorro
        Posted September 16, 2012 at 5:24 pm | Permalink

        We really could spend hours discussing issues around that one!

        zorro

        • Electro-Kevin
          Posted September 17, 2012 at 9:16 am | Permalink

          That you won’t do it in seconds is both kindly and patient of you, Zorro. Thank you.

          The cheap money (already there) just kept on coming. I could not believe what I was seeing and was very concerned about what it meant for our future.

          Couple this with what I know of the American psyche – many have a love of credit, waste and consumption and wear indebtedness as a badge of success.

          Radio 4 are quick to call the Thatcher era the ‘…era of greed’. This was but nothing on the Brown/Blair years in that regard – particularly after 9/11.

          2003 was a bumper year for new car sales.

          Just how do they get away with it ?

  10. Barry Oblivion
    Posted September 16, 2012 at 9:11 am | Permalink

    forgive me; from the title I thought that Sid James and Hattie Jaques may have been placed in charge of running the FED?

    • lifelogic
      Posted September 16, 2012 at 2:48 pm | Permalink

      I suspect they would have done it rather better.

      • zorro
        Posted September 16, 2012 at 5:46 pm | Permalink

        Soon Ben Bernanke will be saying ‘infamy, infamy, they’ll all got it in for me…’

        zorro

  11. Mark
    Posted September 16, 2012 at 9:21 am | Permalink

    As Steve Baker, MP for High Wycombe pointed out in the recent debate on fuel prices, QE results in inflated commodity prices.

    Steve Baker (Wycombe) (Con): Many Members have talked about the volatility of oil prices and the functioning of the markets. There is a correlation between the volatility of oil prices and US Federal Reserve monetary policy. Before the end of Bretton Woods, there was hardly any volatility in the oil price; it has been introduced only subsequently. If there is a secular trend in oil prices at all—priced in, say, gold, which happens to be a scarce commodity—it is downwards. I do not think we are

    13 Sep 2012 : Column 491

    paying enough attention to the US exporting both inflation and volatility through US Federal Reserve monetary policy.

    • forthurst
      Posted September 16, 2012 at 10:31 am | Permalink

      The volatility in the oil price as with other commodities is almost entirely the consequence of the interference of banksters in markets in which they have no legitimate interest. There is clear documented evidence that, far from achieving ‘price discovery’ as is the usual alibi for bankster meddling in markets for short term profit, the consequences are price distortion and higher prices paid for future deliveries. When markets are working properly, they respond specifically to supply and demand. The Fed’s money printing, agreed, has eroded the purchasing power of the dollar: to about 2 cents since being instituted in 1913.

      • Mark
        Posted September 16, 2012 at 9:24 pm | Permalink

        Banks entered the oil market in a big way in the mid 1980s, just as prices were crashing. With the exception of the Kuwait invasion, prices basically remained low until after the turn of the century (indeed 10 $/bbl was touched in 1999). I think you’ll find that it is the activities of central banks, not commercial ones, that inflate nominal oil pries. Bank traders don’t care which way a market moves, so long as they gain a margin from being a trade intermediary.

    • Bob
      Posted September 16, 2012 at 10:32 am | Permalink

      @Mark
      “QE results in inflated commodity prices”

      Since you can’t print gold or oil, it seems pretty obvious.
      As far as soft commodities are concerned, adjusting out other factors such as weather etc. the effect will be the same.

  12. Denis Cooper
    Posted September 16, 2012 at 9:25 am | Permalink

    I don’t quite understand what QE3 is really intended to achieve, because of the rather peculiar purpose to which the new money will be put.

    http://www.nationalreview.com/corner/316801/qe3-here-stay-patrick-brennan#

    “… the purchase of “agency mortgage-backed securities,” those already issued by federal entities such as Fannie and Freddie, at a rate of $40 billion a month … ”

    NB, not any mortgage-backed securities which might be available, but those issued by Fannie and Freddie; and that important word “agency” appears five times in the original statement by the Fed even though it doesn’t appear at all in many of the UK reports.

    I can understand very clearly why Darling and Osborne arranged for the Bank of England to rig the market in bonds issued by the UK government, gilts, because that helps to ensure that the government won’t run out of money to pay its bills; but I can only hazard a couple of guesses why the Fed has chosen to rig the market in bonds issued by Fannie and Freddie.

  13. Lindsay McDougall
    Posted September 16, 2012 at 9:31 am | Permalink

    This programme of the American Fed is completely without merit and has the sole (and dubious) objective of keeping President Obama in power. Mr Obama has a 5% post Convention opinion poll lead. Will it last? Why should it last?

    Low base rates and QE in the UK are directly against the interests of me and my family. As a pensioner, I want zero inflation (you can cancel all the hand outs and concessions) and I want low house prices so that my children can get into the housing market. Why should we suffer because institutions and other households made stupid decisions in the run up to 2007?

  14. Richard Ede
    Posted September 16, 2012 at 9:47 am | Permalink

    Should the Offices of English Rule in the Islands of the British be abolished and if they were what would the Savings to the British Exchequer be?
    Don’t the Offices of English Rule duplicate much of the work and responsibilities of the Devolved Administrations and aren’t they incompatible with the kind of State that appears to be emerging in the Islands?

  15. forthurst
    Posted September 16, 2012 at 9:58 am | Permalink

    “With RBS and HBOS still troubled banks”

    Being a zombie really isn’t any fun, therefore, surely, high time for dismemberment. Perhaps ‘gay marriage’ will solve the problem, perhaps not, but if there is a leadership of highly ambitious, whilst extremely vain, ignorant and ineffectual individuals, sadly it’s all that there is any hope to expect. Solve the world’s problems? Solve our problems? Fat chance. Act specifically against the interests of the English people by selling them out to foreigners, whilst acting as a surrogate for those who prefer to hide behind the curtain bankrolling their miserable ambitions. Will do.

  16. Rodney Willett
    Posted September 16, 2012 at 10:31 am | Permalink

    Can someone please tell me what money is? I mean, really is. OK, I can sell my pound coin for an hour in a car park or a packet of runner beans – but only if the local authority and the supermarket believe that the pound coin is fair exchange. What if they stop believing that because there is so much of the stuff sloshing around that it seems all rather valueless? Isn’t that what happened in Germany about a hundred years ago? And in Argentina rather more recently? Could it happen here?

    • Steven_L
      Posted September 16, 2012 at 4:23 pm | Permalink

      It has happened here. During the so called ‘boom years’ the amount of pounds was often increasing at 15% per annum. And now no one can afford to buy or rent anything bigger than a shoe box on their miserable wages that increased perhaps 3% per annum.

      Most of the inflation went into housing costs but the idiots that run the show pretend housing costs increasing is not ‘inflation’, despite it being most people’s biggest expense.

  17. Denis Cooper
    Posted September 16, 2012 at 10:36 am | Permalink

    “On the other side of the Atlantic Mr Draghi has been hinting that he wants to print, but his stated policy still does not allow that.”

    What Mr Draghi says and what he does may be different things, and Mr Draghi has no problem with covering his tracks by carrying out complex transactions through chains of intermediaries.

    For some years I’ve repeatedly warned that the eurocrats will do everything they possibly can, legal or illegal, ethical or unethical, to preserve the existing eurozone intact.

    If they fail in that it will not be for want of trying, but because they make some gross miscalculation from which there is no recovery and which leaves them with no option other than to eject one or more countries from the eurozone, and in my view the chance of that happening is now low, maybe 10%.

    Now I am repeatedly warning that if they succeed then later the eurozone will fulfil its destiny by expanding to encompass all of the EU member states, including the UK, but apparently that is not a prospect which causes any alarm in the senior ranks of the UK government.

    In his Telegraph article yesterday:

    http://www.telegraph.co.uk/finance/currency/9543645/Britain-should-seize-this-chance-to-strike-a-new-deal-with-Europe.html

    Major wrote that:

    “the prudent would not close the door for all time”

    but then somebody who was both prudent and patriotic would want to do everything possible now to make sure that at no time in the future would we be left with no “sensible” choice other than to fall in line and join the euro.

  18. oldtimer
    Posted September 16, 2012 at 10:50 am | Permalink

    It seems to me that there are two reasons for more US QE. The first is to help Obama`s election campaign. The second is to devalue the US currency, especially vs China`s renminbi. There is a third possible reason – the Fed throwing its hands up in horror at the failure of the US political establishment to agree the tax and spending policies needed to cure the ballooning US deficit.

  19. peter davies
    Posted September 16, 2012 at 11:16 am | Permalink

    Your calls for bank breakups of the likes of HBOS and RBS ring as true as ever. The govt needs to split out the good parts of both into smaller entities and sell of ASAP.

    The bad bits need to be looked at like you would any failing business and deal with them appropriately otherwise this is going to continue for years to come

  20. sm
    Posted September 16, 2012 at 11:46 am | Permalink

    Bernanke Secretly Gives away Sixteen Trillion Dollars

    Its not so much the creation of money to spend but who that money is given to or spent on and for what real purpose?

    At the moment can financial institutions under the circumstances we have, crony capitalism etc capable of making productive use of the funds rather than skimming and speculating.

    I note son the neta bmreports.com page, as wind energy production, extra capacity added, the max/min price spreads have closed?

    I suspect if the QE was used for productive use and to deleverage, increase competion and shrink the finance sector things will improve. But sadly it seems it financing the powerful/influential who should lose their shirt.

    What is the logic in retaining a model of banking which depends on exponential debt growth. Where losses are socialized, profits are offshored for tax efficiency, and huge pay to individuals who have been paid fortunes for risking what?

    Creating money out of thin air for private gain is a con perpertrated on the people.
    QE given to the failed institutions without moving to a new system like full reserve banking , is a betrayal and a fraud by government on the people.

    Printing money to pay food stamps is a consequence not the issue.

    • sm
      Posted September 16, 2012 at 11:49 am | Permalink

      Bernanke Secretly Gives away Sixteen Trillion Dollars
      Please google the strapline for the article.

      • zorro
        Posted September 16, 2012 at 4:20 pm | Permalink

        Yes, that’s what the latest FED audit has unveiled. Well done to Ron Paul for getting that through Congress!

        zorro

  21. Conrad Jones (Cheam)
    Posted September 16, 2012 at 12:38 pm | Permalink

    Federal Reserve statements (Release Date: September 13, 2012 fed website), paint a picture like this:

    “Things are going ok but not as good as we would like, therefore; to improve the employment figures – even more; we want to accelerate the recovery by putting more money directly into the economy”.

    Small denomination tiime deposits at commercial Banks have been declining since April 2011 (from federal Reserve Statistical Release).

    Savings deposits at Commercial Banks are struggling after rising from April 2011, sharp dips, followed by a recovery indicate that these types of deposits are also begining to decline.

    Money Stock Measures (from Federal Reserve Data)
    This is baffling as the 13 week moving average shows a steady incline – starting at 9.8 Trillion Dollars in June 2012, ending with 10.0 Trillion Dollars (10,000 Billion Dollars) in September 2012.

    So the money stock is increasing but Ben Benranke still thinks that more QE is needed?

    There seems to be the paradox of an increaasing money supply and a large amount of Americans on Food Stamps. Buying “Assets” off Private Banks may increaase their Reserves but it does not Gaurantee that the Banks will direct their lending at the right people.

    All I can say is it’s good for Stock Prices, Gold and other Commodities (like Food) but it’s not – in my opinion; going to improve peoples lives, it may just slow the decline in living standards but will help store up energy for an even bigger Financial Shock a year or two from now, expecially if the Chinese and Russians decide that U.S Dollars are worth the paper they are written on – which is already happening.

  22. Neil Craig
    Posted September 16, 2012 at 12:49 pm | Permalink

    Printing money is just kiting cheques and no alternative to really getting out of recession. If we want to do that why not just cut out the middleman and replace government ministers with those who have already been convicted of such fraud?

    All serious politicians know we could be out of recession in days if they wanted it.

  23. Terry
    Posted September 16, 2012 at 12:49 pm | Permalink

    After some three years of QE intervention, the GDP of those Countries participating remains in the doldrums. So, I conclude that Trillions of Dollars and Billions of Pounds of printed money has done nothing for our respective economies. But why do the Central Banks persist with this ominous policy? Technical Charts available on line,tell me the US T Bond is falling in value. Holders are clearly getting very nervous about having vast quantities of this once AAA security. We all know once the Bond Prices fall, the Yields will rise and Government will have no choice but hike Interest Rates. When that happens, financial Armageddon commences and we shall see the real effects of this dire money printing and debt inflation. Not forgetting the paper money devaluation that has been falling continually over the past decades.

    Rather than Inflation, I feel that we are going to experience a period of Deflation which has been brought about by many factors. Ultra Low Interest rates give poor return on deposits and pensions, falling disposable incomes for families across the country, falling commodity prices driving down costs and profits, et al.
    Deflation, of course, is the drying up of credit and the lack of money circulating within the economy. Both are happening, right now. The effects are lower prices, which is bad for the Government but good for the consumer. Firms are paying down debt rather than increasing it and their purchases are falling each month along with their revenues. The BoE wants the new cash to be lent to Small Businesses so that they can expand. Open your eyes Merv and George, just who will they sell to? Who are their customers? SBs want more customers not more debt. And YOU cannot create more customers with YOUR current policies. If you want to do that you must change your policies.

    The QE debacle has become as a façade to cover the fact that these people do not know what to do. Stop ‘Green’ taxes, stop 60% of overseas aid, severely cut down on Public Sector expenditure, say ‘Non’ to any more handouts to the EU. Then give the savings by way of tax reductions to the lowest paid and small businesses in the country. Do the right thing, for once, because it is right.

    • uanime5
      Posted September 17, 2012 at 1:02 am | Permalink

      Alternatively the Government could raise minimum wage to 60% of the average wage. This would very quickly give a significant proportion of the UK a lot more money to spend in the economy.

      • Mark
        Posted September 17, 2012 at 2:18 pm | Permalink

        It would very quickly lead to a large increase in unemployment.

      • David Price
        Posted September 17, 2012 at 5:34 pm | Permalink

        Why do you want to raise the cost of living by at least 20%?

      • Richard
        Posted September 17, 2012 at 7:06 pm | Permalink

        uanime5
        By your logic all we need to do to eliminate poverty and make everyone rich is to pass a law making the minimum wage £25 per hour
        Or you could really go to town and make it £250 per hour
        Happy days!

      • Lindsay McDougall
        Posted September 19, 2012 at 1:21 am | Permalink

        I’ll repeat the question that I asked earlier: what makes you think that you know better than the labour market what wages ought to be?

  24. Conrad Jones (Cheam)
    Posted September 16, 2012 at 1:06 pm | Permalink

    There’s an interesting answer on the Federal Reserves Bank of New York website: “Frequently Asked Questions” page.

    Question: “What are U.S. notes, and how do they differ from Federal Reserve notes?”

    Fed Answer: “U.S. notes, the first national currency, began circulating during the civil war; they were authorized by the Legal Tender Act of 1862. The Department of the Treasury issued these notes directly.”

    “U.S. notes serve no function that is not already served by Federal Reserve notes. As a result, the Treasury Department stopped issuing U.S. notes, and none have been placed into circulation since January 21, 1971. Those that remain in circulation are obligations of the U.S. government.”

    “Both U.S. notes and Federal Reserve notes are part of our national currency and are legal tender. They circulate as money in the same way.”

    This is partly true since, if you went into a Coffee Shop in Downtown Manhattan and ordered a coffee – payment would be accepted in Federal Reserve Notes or United States.

    What the Federal Reserve does NOT say is that U.S Notes incur no debt to the Tax Payer, as they are issued directly by the U.S. Treasury.

    Everytime a U.S Note was issued – the National Debt of the United States increased by ZERO dollars.

    Everytime a Federal Reserve Note is issued, the National Debt of the United States increases by ONE Dollar.

    A currency that benefits a few individuals while extracting interest payments from everyone else, is NOT a National Currency. It’s a National Scam.

  25. Bert Young
    Posted September 16, 2012 at 1:19 pm | Permalink

    I would not take up the advice to become a candidate for the Bank of England job however much you are suited to it ; I prefer you to remain in the HofC and be available for the Chancellor of Exchequer role . There is bound to be change at the top of the Conservative party and , if a deal is done with UKIP , the arrangement would be a vote winner and you would be in the frame to be Chancellor . Too much sullied water has gone under the bridge for either Cameron or Osborne to continue in any position of influence .

  26. Conrad Jones (Cheam)
    Posted September 16, 2012 at 1:31 pm | Permalink

    The New York FED Website has got a wealth of educational information for School Teachers to teach their classes about money:

    “It’s All About Your $
    Federal Reserve Bank of New York
    A Teachers Guide”

    Section 3 of this guide is very apt for the times we are now experiencing.

    It’s title is : “Counterfeit Money”

    “Teacher says: In order to protect the value of our money why is it necessary that we stop counterfeiters from making and using fake money? ”

    This purely relates to making physical Federal Reserve Notes – which is obviously really bad for the Federal Reserve as it means that not all paper notes in circulation would be paying interest to Private Banking Institutions.

    What this Guide fails to say is that the US Banking System counterfeits currency everytime it creates a loan. It’s fair to say that everytime a loan is repayed, money is also destroyed. The difference between old loans being repayed and new loans being created decides the rate of growth or decline of the money stock.

    If Banks want to see particular Asset Classes (like Housing or Food) go up in price, all they need do is extend loans to investors who are going to invest in that particular market.

    If they cannot see a quick profit from a Business which wants to setup a Manufacturing Plant that won’t see a profit for five years, then the loans will be directed at consumers who wish to take out Car Loans, Home Extensions, and other loans which increase consumption and reduce production, so long as the borrower can repay with interest.

  27. Conrad Jones (Cheam)
    Posted September 16, 2012 at 1:44 pm | Permalink

    “There is no substitute for creating stronger and more competitive banks, and for both the private and public sectors getting on top of their excess debt problems.”

    Please can you describe what you mean by a “Competitive Bank” ?

    I don’t understand this concept of a Competitive Bank in the context of our current Government Funded Banking system.

    Does a Competitive Bank still receive Subsidies from Tax Payers?
    Does a Competitive Bank still receive Deposit Insurance from Tax Payers?
    Does a Competitive Bank still receive no VAT charges?
    Does a Competitive Bank still receive a Bail Out when it fails? – Bit like a toddler riding a Tricycle with stabilizers and wearing body armour, wrapped in cotton wool.

    We have a NHS – fair enough, we know that some of our taxes go into the NHS.
    After 2007, once the Banking Curtain Fell to the floor, we also discovered that we have a NBS – A National Banking System, also funded by our Taxes.

    We would like to see more Banks too. We would also like to see “Competitive Banks” – I think that the phrase “more Competitive Banks” is confusing, more Competitive than other Government Funded Public services perhaps?

    • sm
      Posted September 17, 2012 at 10:19 am | Permalink

      Conditions of subsidy should be no distributions, no salary increases, no expense increases!

      Further more, the subsidy should be conditional on the raising of external capital equivalent to the subsidy, otherwise the shareholders get wiped out and the bondholders do a debt for equity swap. The priority of creditors should put director interests statutorily at the bottom of the list.

      You would think the regulator for competition might look at the scam of fractional reserve banking (in effect creating their own deposits) and how that is a barrier to entry of sound money banks. Those fully reserved or with higher reserves.

      Banks without subsidy and not dodging taxes now that would be welcome.

      Subsidy to the current banking setup is almost like watching the original Alien movie.Most of the victims beg to be shot just rather than let it live and devour others.

  28. Robbie
    Posted September 16, 2012 at 2:08 pm | Permalink

    It would be helpful if politicians, together with journalists, could replace the term “money printing” with the more accurate label of “counterfeiting”.

    It’s theft, John, and in a sane world those responsible for it would be jailed.

    It might help politicians get re-elected but it does no favours for ordinary folk.

    • Denis Cooper
      Posted September 17, 2012 at 12:59 pm | Permalink

      There is an unaswered question about the precise legal basis on which Chancellors have been authorising the Bank to create vast sums of new money, but if there is any illegality then it doesn’t come under laws on either counterfeiting or theft.

      It’s certainly misrepresentation when the law says that on average a pound will lose 2% pa of its purchasing power, as measured by CPI, and then it loses much more than that.

  29. Derek Emery
    Posted September 16, 2012 at 2:09 pm | Permalink

    “Mr Micawber still was right to say keeping income slightly higher than expenditure made for greater happiness.”

    The public debt/GDP ratio was about 60% when the coalition came to power in 2010. The CEBR forecast in that it will reach 90% of GDP by 2019-2020.

    There are no Mr Micawbers in UK politics -only spendthrifts. Labour would be a bigger spendthrift than the coalition so the choice is between the ugly and the uglier.

  30. Antisthenes
    Posted September 16, 2012 at 2:12 pm | Permalink

    In the days of Mr Micawber those who could not pay their debts were put into debtors prison. We now have debt, which continues to increase, that we cannot pay although debtors prison with bars no longer exists we are never the less all prisoners of that debt and the sins of this generation will be visited on many generations yet to come.

  31. fox in sox
    Posted September 16, 2012 at 2:23 pm | Permalink

    This round of QE3 is the buying of dubious bank assets. In our QE the B of E buys UK Gilts.

    So far as I see QE involves buying substandard assets that no one wants. It is not a sign of a healthy economy or one willing to tackle the real issues.

    • Denis Cooper
      Posted September 17, 2012 at 1:06 pm | Permalink

      But are they “dubious” assets?

      As I pointed out in an earlier comment, the QE3 money will be used to buy bonds previously issued by Fannie and Freddie

      Is that because some of those bonds which were issued in the past are now seen as being “dubious”, and the Fed is taking them out of circulation?

      Or is it that Fannie and Freddie are themselves now seen as being “dubious”, and so the bonds they are issuing now are also seen as being “dubious”?

  32. john miller
    Posted September 16, 2012 at 2:55 pm | Permalink

    Not inflationary?

    Can someone tell me how printing money is not inflationary?

    Is it merely because the person who printed it really, really hopes it isn’t going to be so?

    • zorro
      Posted September 16, 2012 at 4:22 pm | Permalink

      It isn’t inflationary at the moment because of the way it is being deployed in Western economies (particularly the UK). It is effectively supporting commodity and house price values and government deficit spending.

      zorro

      • zorro
        Posted September 16, 2012 at 4:25 pm | Permalink

        It’s not filtering through into the private banking system (they are not really lending anyway – capital and balance sheet requirements) and is keeping interest rates on long term bonds low.

        zorro

      • Robbie
        Posted September 16, 2012 at 6:48 pm | Permalink

        Zorro, when you say “it isn’t inflationary at the moment” you contradict yourself by mentioning that QE is supporting commodity and house prices.

        Er, this is inflation. Ask anyone who fills a car with petrol or eats food.

        It would be refreshing to see a prominent politician, like Mr Redwood, admit that our central bank is COUNTERFEITING. I don’t wish to cross swords with him as he’s one of our more clued-up MPs; but the lack of honesty about this so-called QE is appalling.

        • zorro
          Posted September 16, 2012 at 9:59 pm | Permalink

          Robbie,
          Yes, there are commodity price increases (oil etc) as a result of QE as I indicated, but it could be a lot worse if the banks actually (incompetently) started spreading the stuff around. At the moment, they can’t, and it is in that context that my commments about comparative inflationary trends should be seen……Please do not assume that I agree that QE is a sensible long term option.

          zorro

        • Conrad Jones (Cheam)
          Posted September 16, 2012 at 10:17 pm | Permalink

          I believe you are correct that there is counterfeiting of our currency.

          I also think zorro is right – it isn’t inflationary at the moment because the money that the Central Bank passes to Banks in exchange for Assets goes into Private Bank Reserve Accounts held at the Bank of England, and not into the Economy directly.

          Banks are able to make loans without additional Reserves by simply adding an “Asset” (how much the borrower owes them) simultaneously with a “Liability” (the amount on deposit with the person they’ve just lent the money to). The money did not exist and so they don;t have to find it anywhere because it’s just a Bank sanctioned I.O.U., a promise by the borrower to pay money back in the future (‘PositiveMoney’ explains this process in detail).

          When the BoE performs QE – it is not counterfeiting becasue the BoE is a Government owned institution and has the full authority of Government to create money. The problem is that – instead of injecting it directly into the Economy (this lie is peddled by the BBC), it actually just goes into the Central Bank Reserve Accounts of Private Banks. The BoE could issue a Trillion Pounds this way and it wouldn’t make a penny difference to the Money Supply that we have access to becasue it’s “Central Bank Money” and not Broad Money. The money that Joe Public is allowed to use can only be issued as Debt, through a Private Bank when they lend.

          The BoE is NOT permitted to issue currency directly into the Economy because of the Maastricht Treaty. The BBC forget this little detail and always report QE as “… quantitative easing–the injection of money directly into the economy “.

          The money – in the form of Notes and Coins; has been very stable and always lags behind the excessive money creation (Commercial Bank Money – or Credit) which is carried out by Private Banks. The amount of debt free money issued by the Government now only makes up 2.6% of the Money supply. Historically – it has averaged about 20%. The reason for inflation is the excessive amounts of credit issued for mainly speculative purposes (i.e. Housing), and the reduction of lending Restrictions.

          Inflation is eroding peoples savings and wages but the CPI method of calculating it makes it appear that it is far less than it actually is. Why on Earth would we come up with a method of calculating Inflation and not include House Prices, the most costly of the items we are likely to buy. Why would it enable substitutions of one product with another becasue the product they use to use is so expensive that everyones switched to the cheaper product?

          Looking at how the Banking System actually works (when taking account of all the things the BBC neglect to say) seems unbelievable at first. Why can a Private Bank issue so much money and charge interest for it? The results of such a system are clear to see.

          If we ever get out of this crisis (a big IF), then Inflation could go exponential as Banks are loading up with ammunition.

          • sm
            Posted September 17, 2012 at 10:29 am | Permalink

            If we removed the right of so called private banks to create money and we gradually forced banks to move to full reserve banking surely this would counter the threat of runaway inflation.

          • Conrad Jones (Cheam)
            Posted September 17, 2012 at 9:22 pm | Permalink

            sm,

            We’re on the same wavelength.

            The IMF recently produced a Report which was a review of a collection of memorandum produced in 1933 collectively known as the “Chicago Plan”. It was shown to FDR, but he was reluctant to propose it to congress. He chose other measures such as conviscation of Gold in 1933, then WWII came along and the plan got shelved.

            http://www.imf.org/external/pubs/ft/wp/2012/wp12202.pdf

            There are four advantages of your suggestion as detailed in the IMF Report:
            1. Permits much better control of the business cycle.
            2. The second advantage is that having fully reserve-backed bank deposits would completely eliminate bank runs.
            3. The third advantage of the Chicago Plan is a dramatic reduction of (net) government debt.
            4. The fourth advantage of the Chicago Plan is the potential for a dramatic reduction of private debts.

          • Conrad Jones (Cheam)
            Posted September 17, 2012 at 9:26 pm | Permalink

            Mr Redwood said in a reply to one of my comments that going back to a Gold Standard would not work as it could cause a money supply shortage. I researched this as discovered that he was right.

            Mr Redwood has rarely commented on monetary reform which would suggest that he either agrees that monetary reform is the answer or that he does not have strong enough arguments against Full Reserve Banking.

            Reply I will tackle this issue one day when I have time. The truth is the government and monetary establishments are not yet ready to consider funademntal reform of their banking systems, despite the obvious and continuing problems.

          • Robbie
            Posted September 18, 2012 at 12:20 pm | Permalink

            “I also think zorro is right – it isn’t inflationary at the moment …”

            Before I chuck a brick at my computer screen, can I ask if any of you guys actually buy stuff? I do, and can report that since 2009 UK prices for petrol are up by more than 30%, vegetable oil 100%, bread 70%, postage 40%, pasta 60%, rice 60%, printer paper 30%, and don’t get me started on housing rents.

            But never mind, the Government reports today that inflation is just 2.5%. Of course, flat screen TVs have more than halved, but they aren’t essential for living.

            Wake up, guys. You are simply swallowing Government and Bank of England propaganda.

          • Conrad Jones (Cheam)
            Posted September 18, 2012 at 6:07 pm | Permalink

            In reply to Robbie,

            Yes – sorry Robbie, what I meant was Hyperinflationary, as a direct result of QE. I also – and many people I speak to; acknowledge what you are saying. Food, Electricity, VAT, Petrol, Oil, Taxes in general are all going up – way beyond the “Alice in Wonderland” CPI figures that the Newspapers struggle to keep a straight face when they report the new figures. QE itself, is decoupled from the real Economy because it only goes into Central Bank Reserve Accounts of Private Banks.

            So where on Earth is all this inflation coming from ?

            I’m no Economist or Financial Expert, but my opinion is that it could be as a result of Commodity Trading and Speculation. Food Spikes in the Financial Markets could be the cause of the Arab Spring. Let’s hope that Water does not end up being traded on the Stock Market, because then – we are all in trouble.

      • Denis Cooper
        Posted September 17, 2012 at 1:09 pm | Permalink

        In the UK virtually all of the QE money has indirectly helped to fund the government’s budget deficit, as was always intended right back to March 2009 when Labour first got the Bank to start rigging the gilts market.

  33. zorro
    Posted September 16, 2012 at 3:56 pm | Permalink

    The official explanation is that they are undertaking this QE along with some certainty over ZIRP for the next three years to stimulate activity. But will it? People might think well if they have that little confidence in the economy, maybe I should wait a bit because things might be cheaper in a couple of years…..Make no mistake, this is meant to be open-ended QE ‘until the economic situation improves’ starting off with buying around US$40 billion per month on supporting mortgages.

    However, as with QE and the manner in which it is currently being deployed to support private bankers, the banking industry, fake stock market boost, commodity values, along with over-valued housing assets is doing nothing for the real economy. It is merely making the very rich richer and the middle classes and poorer classes poorer….

    zorro

    • zorro
      Posted September 16, 2012 at 4:03 pm | Permalink

      All this is doing is misdirecting investment, discouraging saving, and slowly crushing the entrepreneurial spirit….What people must do is understand this, and protect their assets in the best way possible.

      zorro

  34. Andrew Smith
    Posted September 16, 2012 at 4:02 pm | Permalink

    Manufacturing more money is a waste of time for the real private sector as banks will not lend. They are trying to change their balance sheet ratios, in accordance with government and regulator instructions, in the only way open to them – namely by reducing loans.

    They cannot increase capital so the ration can only be changed by reduced lending.

    Banks will not even lend to each other because they do not trust the accounts of others.

    • zorro
      Posted September 16, 2012 at 4:18 pm | Permalink

      Yes, with the capital and balance sheet requirements (Basle III) limiting their ability to borrow, and the public sector engaging in QE to supposedly stop deflation, it all seems rather counterintuitive. Why not relax the capital and balance sheet requirements, stop QE, and allow the banks to lend to reasonable risks and let the market operate. What we are seeing is a co-ordinated worldwide corporate style central control of the banking system, and nothing to do with the actions of a free market.

      zorro

      • uanime5
        Posted September 17, 2012 at 1:08 am | Permalink

        Given that the 2008 financial crash happened because banks were lending so much money relative to the capital they had relating the capital requirements will just create more problems in the long run.

        • Lindsay McDougall
          Posted September 19, 2012 at 1:39 am | Permalink

          This was because they overvalued some of the capital assets that they held. This category was mainly property related assets. So whose monetary policy was too easy for 7 years (2001 to 2007) because property prices were not included in the measure of inflation used in the inflation index. The Governor of the Bank of England and his Monetary Policy Committee, both appointed by Gordon Brown, that’s who.

  35. Manof Kent
    Posted September 16, 2012 at 4:50 pm | Permalink

    I thought the IMF could only help nations with their own national currency.

    The govt says that our IMF money will not go to prop up the euro.

    Yet here we are with the ECB apparently making it a condition that IMF help be obtained first before the ECB will become involved .

    Is this really the situation ,John ??

    reply Yes. The IMF do not agree with my view that they shoulod not help members of a single currency area that do not control their own currency.

    • Denis Cooper
      Posted September 17, 2012 at 1:15 pm | Permalink

      It’s worse than that, because for no good reason the IMF made future support for Ireland conditional upon Irish ratification of Merkel’s “fiscal pact”.

    • Conrad Jones (Cheam)
      Posted September 17, 2012 at 9:48 pm | Permalink

      Virtually no Country on Earth controls it’s own currency. Money is issued as Debt by Private Banking Institutions. You should know that by now Mr Redwood.

  36. zorro
    Posted September 16, 2012 at 5:14 pm | Permalink

    John,
    Good news I see on the issue of foreign lorry drivers now having to pay a contribution to their use of UK roads albeit by introducing acharge to all lorry drivers but allowing UK drivers to recoup the difference through a reduction in road tax. I wonder how they propose to police this arrangement and ensure that it is not avoided?

    zorro

  37. Christopher Ekstrom
    Posted September 16, 2012 at 7:48 pm | Permalink

    It is hardly cynical to note Mr. Bernake will be sans job should Romney prevail. The current regime is also encountering difficulty with that inconvenient truth. Is Romney to be the USA’s Cameron? Perhaps. He is not a noted man of principle. His religiosity means as little as GW Bush’s much cited faith. Perhaps losing allows the next generation of Conservatives to rise. The danger is in the Supreme Court. Will the current White House occupant appoint five justices; that’s the end for any discernible Constitution, if so.

  38. Michael Read
    Posted September 16, 2012 at 8:43 pm | Permalink

    I will translate your thoughts into a register we can all understand:

    Printing money is bloody madness.

    It’s being done to get Obama into a second term. A noble goal perhaps but at the expense of taking them and us to hell in a handcart and worse.

    Osborne’s economic policy appears to be “I-hope-something-helpful-turns-up-ASAP”.

  39. James Reade
    Posted September 17, 2012 at 7:57 am | Permalink

    There “was no great need” for expansionary monetary policy in the US? Heck, even one of your right wing cheerleaders over there is willingly admitting the economy is anything but in good shape: http://www.thedailybeast.com/newsweek/2012/09/09/niall-ferguson-why-is-obama-winning.html

    Oh, wait, did I forget that those on either side of the political spectrum distort all the facts to support their party’s candidate, regardless of how much it contradicts what they have said in the past?

    • Lindsay McDougall
      Posted September 18, 2012 at 8:26 am | Permalink

      Neither the US nor the UK economy is in good shape and neither has been helped by ultra low interest rates and QE. In case you haven’t noticed, during the application of these easy money measures, GDP growth has been stagnant or less than the long term trend rate. No doubt you will tell me that they have kept the elephants away.

      If you check your post WW2 economic history, you will find that the sort of major expansion in money supply that later produces inflation only gives about a year of above average GDP growth. After the inflation has built up, zero or low GDP growth applies.

  40. Lindsay McDougall
    Posted September 17, 2012 at 10:19 am | Permalink

    There is no substitute for creating stronger and more competitive banks. So, when and under what conditions, are the State’s shares in RBS and LLoyds to be sold back to the public?

    I see that RBS are in the run up to selling off Direct Line insurance (I’m all in favour except that it is in response to an EU diktat). RBS contains a number of separately branded businesses and moe sell offs should be possible.

  41. David Langley
    Posted September 17, 2012 at 12:15 pm | Permalink

    This might be a plebian point amongst all the high finance going on here. I now realise that I know a lot of people who depend on social security for their weekly cash. They all seem to exist on fast foods, smoke and drink and have mobile phones. Their is not a lot of evidence of home cooking and frugality in their homes and they seem relatively well dressed and watch a lot of reality and games etc TV. I also know that they have credit cards which are invariably maxed out. are in arrears with council tax and rents. Any sudden funds are normally spent on more fast foods and alcohol not repaying debt. There is evidence of cars without road fund licenses and I suspect adequate insurance. Some family members are often “in trouble” with the law and have a dearth of books and articulate children in the home. What I wonder is going to change their lifestyles and habits because I see little evidence of change so far. Perhaps high finance is similarily incapable of effecting real change too to the country in general. Perhaps the refunding of banks and treasuries only operate on some higher level to their satisfaction and our taxes fund the bizarre situations of our massive and growing underclass.

    • Bazman
      Posted September 17, 2012 at 6:13 pm | Permalink

      The feral rich of which there are many apologists on this site for. If there is an undeserving poor then by default there must be an undeserving rich?

      • Lindsay McDougall
        Posted September 19, 2012 at 1:30 am | Permalink

        You could call ex-shareholders in banks the undeserving rich because they received bail outs much greater than the real value of those shares (evidence – the total moneys payed for RBS and LLoyds shares was £65.5 billion; the total value of their shares now is £33 billion). Awkwardly for you, it was a Labour government that made those purchases WITHOUT DOING DUE DILIGENCE.

        • Bazman
          Posted September 19, 2012 at 5:46 pm | Permalink

          Not awkwardly for me in any way. The Labour government believed in the lies and fantasy of the bankers. Worked for a while and did improve the lives of many in the short term, including myself in the long term, as I survey my vast paid for estate.. Very awkward for anyone who still believes in these fraudsters or maybe they are just like many financial right wingers, fantasists of the sparrow and horses type. Ram it.

  • About John Redwood


    John Redwood won a free place at Kent College, Canterbury, and graduated from Magdalen College Oxford. He is a Distinguished fellow of All Souls, Oxford. A businessman by background, he has set up an investment management business, was both executive and non executive chairman of a quoted industrial PLC, and chaired a manufacturing company with factories in Birmingham, Chicago, India and China. He is the MP for Wokingham, first elected in 1987.

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