Uk inventing money to gain momentum

yoshytoshy

Just heard that the uk government is to increase there actual reserve amount ,in an attempt to kick start the economy.

If it works ,would we be able to borrow for it ?

http://news.bbc.co.uk/2/hi/business/7924234.stm

TGPS

It's called "quantitative easing" - which makes it sound like a remedy for a bloated stomach.

Whether you think it will work depends on what you think of the theory of money supply. If they do it right, feeding in money slowly they could kick start some lending and free up the inter-bank market - if it doesn't work it could lead to hyper-inflation!!

It may also lead to a weakening of sterling, which is obviously good news for Newry, but not so good for Dundalk!!!

TGPS

http://thisgruntledpublicservant.blogspot.com/

Fratton Fred

The UK economy is facing deflation at the moment so it should be fairly risk free, shouldn't it?

TGPS

Fratton Fred wrote: »

The UK economy is facing deflation at the moment so it should be fairly risk free, shouldn't it?

It should be!! In theory!!

Actually if it's properly managed it could work very well, but the operation of it requires them to monitor the money supply very closely and very carefully. However, in this electronic age that shouldn't be a problem - the main problem will be sorting out when genuine changes are occuring as opposed to "noise" in the markets.

The main problem is probably that not enough is known about what other toxic traps are out there in the economy that might scupper the tactic!!!


TGPS
http://thisgruntledpublicservant.blogspot.com/

yoshytoshy

TGPS wrote: »

It's called "quantitative easing" - which makes it sound like a remedy for a bloated stomach.

Whether you think it will work depends on what you think of the theory of money supply. If they do it right, feeding in money slowly they could kick start some lending and free up the inter-bank market - if it doesn't work it could lead to hyper-inflation!!

It may also lead to a weakening of sterling, which is obviously good news for Newry, but not so good for Dundalk!!!

TGPS

http://thisgruntledpublicservant.blogspot.com/

Lets say it works and it's seen to work ,can we attempt it ourselves or are there rules with europe that prevent us?

Fratton Fred wrote: »

The UK economy is facing deflation at the moment so it should be fairly risk free, shouldn't it?

Surely the reason the rate is low ,is to keep the economy from total carnage. If it goes up ,there'd be no movement at all:(

Fratton Fred

Fratton Fred wrote: »

The UK economy is facing deflation at the moment so it should be fairly risk free, shouldn't it?

Yup.
It should be safe enough for the time being.
They are not actually printing money but buy government and corporate bonds which can be sold again when necessary to reduce the effect.
Basically it increases bank liquidity so they can loan more and increases government liquidity so they have to borrow less.

Both in theory if the banks and government play ball should kick start demand in the economy by giving people more money to spend by more loan approval to businesses and the like meaning more jobs etc.

The UK govt will want to play ball obviously and the banks have to due to the government share in most of them.

So it should work.

But then nothing surprises me anymore such is the nature of the insanity thats taken over the world economy at the moment.

Ironbars

The USA does it all the time,

yoshytoshy

Surely threres a risk of half the money being spent on loans and no return/consumer take up

yoshytoshy

yoshytoshy wrote: »

Lets say it works and it's seen to work ,can we attempt it ourselves or are there rules with europe that prevent us?

It would have to be the ECB that do it with a majority decision to approve it.
They could buy Irish government bonds for instance.
It's very unlikely as by it's very nature the EU is a collection of differing states with differing needs [hence our recent tiger boom due to the low interest rates designed to help an ailing german economy].

It's easy to decide to do it when you have an economy the size of the UK with your own central bank and currency.
If Ireland still had an independent one and the punt...to be honest we'd be too small and the punt would go into freefall.
Mind you if we were on our own now we wouldnt even have got to that option we'd have had the IMF in Iceland style by now.

Mind you also if we dont do a very serious budget next month,they'll be in anyway I think.
Slowly reality is creeping in thankfully.

yoshytoshy

Thinking about what england has done ,surely we could invest money in the country ourselves in a different way.
Maybe the government should give special loans to people who want to start companies. Special tax rates for the first couple of years to ease things.
Better than paying out the dole to everyone.

Sadly it's probably too late for innovation like that now.
We should have matched the UK 15% Vat rate for instance to stop the flow across the border and we should have that rate policed.

Right now-we're so foobarred govt coffers wise,we can't even check the nuts on helicopters..

Taking 4 billion out of the economy next month and 16 billion over the next 4 or 5 years is not a recipe for growing an economy.

It's the economic equivalent of being greeted by people from Aldi taking your orders as you enter the local tesco [that wouldnt do much for tesco's bottom line would it?].

yoshytoshy

Hopefully the english thing works out for them ,might rub off on us in some way.

Ironbars

Deleted User wrote: »

We should have matched the UK 15% Vat rate for instance to stop the flow across the border and we should have that rate policed.

Ive heard this mentioned a lot lately but I cant for the life of me think how it will help.
What were the receipts from vat last year?
Will reducing VAT reciepts by 30% really stimulate public spending to offset the losses?

TGPS

yoshytoshy wrote: »

Hopefully the english this works out for them ,might rub off on us in some way.

It'll rub off on us, but probably not in a good way - sterling will fall, and more euros will "leak" out of Ireland to the north in particular.

We can't follow the same QE route because we can't create the balances (money!) without the approval of the ECB, who would probably resist it because the money would just leak from here to ther Euro jurisdictions.

The Yanks are passmasters at QE because so much of their currency circulates beyond their borders - as they've famously said - it's their currency, but it's ours (i.e. the rest of the world's) problem.

We could probably only follow a QE strategy if the ECB went that route as a Europe-wide response. As it is a lot of Irish debt is held by non-Irish entities, buying it up wouldn't necessarily lead to extra money being injected into the economy.

We may benefit if the sterling credit markets unblock and capital starts to circulate again

TGPS
http://thisgruntledpublicservant.blogspot.com/

Fratton Fred

I thought sterling would drop today but it doesn't appear to be. I am convinced it is being manipulated at the moment to keep money within the uk.

yoshytoshy

Fratton Fred wrote: »

I thought sterling would drop today but it doesn't appear to be. I am convinced it is being manipulated at the moment to keep money within the uk.

Almost certain heard a report earlier that it did drop ,must have gone back up

LordSutch

What strikes me is just how shallow the effects of the Celtic Tiger were!

After ten/twelve years of unprecedented economic growth & prowess, building growth, massive job creation & wealth creation 'par-excellence', and what has Ireland PLC got to show for it . . . .

It is also interesting to note the emphasis & attitudes towards the economic downturn in Britain compared to those here in Ireland. In Britain they have lowered VAT, they have cut interest rates, they are actively talking about printing New Money, they talk about the temporary 'Credit Crunch' which will lead to highish unemployment & a tightening of the purse strings, manufacturing will take a biggish hit, but all will survive & things will be an awful lot better by 2010/11, (with an admission that the economic furure is uncertain > but not critical).

Here in Ireland "The Recession" seems to be drastically worse and already 'critical', with VAT gone Up^ instead of down, with talk of Angela Merkel bailing us out, with a Government that seems to be in crisis, with doom & gloom appearing from everywhere, with massive unemployment on the cards, & the 'threat' of every multi national pulling the plug from one week to the next! > a very unsure future for nearly everybody in work, and very few answers forthcoming from the powers that be ......

Talk about snakes & ladders, by this time next year we may well be back down the ladder to where the country was 'economically' back in the 1980s. (amazing how all that wealth just evaporated so quickly)!

Hopefully 'something' will just happen and things will take an upturn, or even just level out . . . . . .

yoshytoshy

Camelot wrote: »

After ten/twelve years of unprecedented economic growth & prowess, building growth, job creation & wealth creation 'par-excellence', and what has Ireland PLC got to show for it . . . .

It's a shock to the system today for me ,when I think of the benefits england might have from a kickstart.

We don't have anything to even kick ,on the other hand there are a few people that deserve a good kick over here.

Fratton Fred

yoshytoshy wrote: »

It's a shock to the system today for me ,when I think of the benefits england might have from a kickstart.

We don't have anything to even kick ,on the other hand there are a few people that deserve a good kick over here.

You do know that not everything over the Irish sea is England right?

yoshytoshy

Fratton Fred wrote: »

You do know that not everything over the Irish sea is England right?

Do you mean that common wealth countries would be part of the bail out ?

Mr.Micro

There is no quarantee that quantitative easing( printing money in laymans terms IMO) will work for the UK economy. Lest we forget the people managing the economy in the UK for the last 10 years made a hash of it and none of them saw this coming. How can they be so right now? Its desperation time with interest rates at rock bottom and cannot go much lower at 0.5%. Remember what happened in Japan ie deflation. As far as Ireland is concerned we are just adrift waiting or hoping for rescue if the big economies pick up we might get a crumb.

LordSutch

Yoshytoshy, I think Fratton Fred is pointing out that you are confusing 'England' with the 'UK' ......

Talking about 'England' does not include Wales, NI or Scotland.

yoshytoshy

Camelot wrote: »

Yoshytoshy, I think Fratton Fred is pointing out that you are confusing 'England' with the 'UK' ......

Talking about 'England' does not include Wales, NI or Scotland.

All the headlines are quoting UK ,so I presumed it meant any companies working through the english/uk banking system.

I'm not familiar with the english banking system ,so thanks for clearing it up. I know about the scottish and welsh pound ,but I thought they shared the same central bank:o

yoshytoshy

To clear things up here ,once and for all. I'm neither mad nor completely stoopid (I hope)

When I say England in one of my posts ,I'm thinking of the car manufacturers and industries within england. The thread title quite clearly says UK.

I was comparing a country with our own ,so I don't see why someone one need to ask such a question really.

This whole dilemna we are in has my head wrecked ,not a good day on the western front:(

Bottle_of_Smoke

Deleted User wrote: »

Sadly it's probably too late for innovation like that now.
We should have matched the UK 15% Vat rate for instance to stop the flow across the border and we should have that rate policed.

Right now-we're so foobarred govt coffers wise,we can't even check the nuts on helicopters..

Taking 4 billion out of the economy next month and 16 billion over the next 4 or 5 years is not a recipe for growing an economy.

It's the economic equivalent of being greeted by people from Aldi taking your orders as you enter the local tesco [that wouldnt do much for tesco's bottom line would it?].

To be honest I don't think that would have made a difference. What sent people across the border was the Euro being 93-98P in the weeks runnign up to christmas. Adding that to the cost of living difference the VAT wouldn't have mad much of a dent

A Dub in Glasgo

yoshytoshy wrote: »

To clear things up here ,once and for all. I'm neither mad nor completely stoopid (I hope)

When I say England in one of my posts ,I'm thinking of the car manufacturers and industries within england. The thread title quite clearly says UK.

I was comparing a country with our own ,so I don't see why someone one need to ask such a question really.

This whole dilemna we are in has my head wrecked ,not a good day on the western front:(

Don't be too hard on yourself, most Irish people seem to equate everything over 'here' as England and sterling money as English money.

TGPS

Camelot wrote: »

Talk about snakes & ladders, by this time next year we may well be back down the ladder to where the country was 'economically' back in the 1980s. (amazing how all that wealth just evaporated so quickly)!

Hopefully 'something' will just happen and things will take an upturn, or even just level out . . . . . .

The wealth we invested in is still there. We spent frivolously so we don't have as much as we should.

TGPS
http://thisgruntledpublicservant.blogspot.com/