Quantitative Easing. Who pays?

[Roland]

These are bonds that the general public and institutions purchase as well as the Bank Of England so they would have to be interest bearing other wise no one would buy them. I think it would be right to assume that the rate of interest must be low as the Government has no problem in getting rid of them thanks to the BoE. I understand it is having a knock on effect on pension funds and the like as most pension funds hold "safe" Government investments. From everything I have found out about Quantative easing we will be picking up the bill.

If the BoE is printing the money to buy the bonds I think it reasonable to assume there is no need to sell them on the open market so your assessment may not be correct.

I think we've probably both tried to do are home work on how all this works but it seems to be a subject lacking in good clear information that we can all understand so my personal guess is the physical money is not going to ever be repaid.

One thing we can both agree on is one way or another we will be picking up the bill.

[longjohn]

Well, in short, we need to be given the information if the BoE is ever going to cash in the Bonds and at what rate of interest they are receiving when the Bonds become due. I am going to send an e-mail to them asking them just that and will bring the thread back to life when I have heard from them. The lack of posts by others suggests to me that their are very few people who understand it.

[Roland]

Well, in short, we need to be given the information if the BoE is ever going to cash in the Bonds and at what rate of interest they are receiving when the Bonds become due.

I totally agree because it is just not there. A good part of the reason I don't think the debt gets paid and it is palmed off as being a type of loan is to keep the public with the illusion that this money gets paid back.

I am going to send an e-mail to them asking them just that and will bring the thread back to life when I have heard from them.

I'll look forward to the reply but my guess is you'll just get the same rubbish that says a lot wile explaining nothing that you'd find on the BBC website.

The lack of posts by others suggests to me that their are very few people who understand it.

Your not wrong here at all. I was hopping some one might step in and explain, in a coherent manor that we can all understand, how the whole thing works and give links for us to cross examine in the hope we might get to the truth on this matter. It would appear no one knows.

[longjohn]

I totally agree because it is just not there. A good part of the reason I don't think the debt gets paid and it is palmed off as being a type of loan is to keep the public with the illusion that this money gets paid back.



I'll look forward to the reply but my guess is you'll just get the same rubbish that says a lot wile explaining nothing that you'd find on the BBC website.



Your not wrong here at all. I was hopping some one might step in and explain, in a coherent manor that we can all understand, how the whole thing works and give links for us to cross examine in the hope we might get to the truth on this matter. It would appear no one knows.

I tied to get Papa to respond as he seems to know everything but he too has nothing to say about it but I will get to the bottom of it. I wonder if any of the MPs even know how it works. I will give mine a chanice to explain it to me. Should be interesting.

[Roland]

I tied to get Papa to respond as he seems to know everything but he too has nothing to say about it but I will get to the bottom of it. I wonder if any of the MPs even know how it works. I will give mine a chanice to explain it to me. Should be interesting.

MP's don't have a clue all they know how to do is repeat sound bites that sound good to a ignorant (not as in stupid just having any idea of the way things work) voter.

The first reply you get I'd guess will just be the party line we'll flob the voter off with this answer. If your interested keep me posted and we'll just keep dissecting the reply and asking for a though explanation of how exactly this debt is repaid.

[longbow64]

The problem lies with how the money is doled out, and the fraction reserve banking system that's broken.

The money isn't just doled out, unfortunately it is borrowd by financial institutions like the RBS, who are basically broke due to apparently bad investment decisions.

What I can't get my head round is where the Trillions have gone that they lost before the Government had to start printing and guaranteeing money to bail them out. Most of this money is now in China, Brazil and India but how did it get there?, they tell us it was a toxic property debt, but the amounts we are talking would buy up half of America, no-one seems to know where this money is...or how it got snorted up a bankers nose to pop up in China.

So basically the Government is using it's ecconomy to sell bonds by printing money, bonds that are bought by China, India, Brazil to prop up banks that have failed due to fractional reserve lending, so that these banks can carry on as normal and are genetically incapable of changing.

Now before the banks crashed and were profiting, declared profits of what 6BN, they had paid a billion or hundreds of millions in bonuses to their r.soles who work there, and this is tier two corruption because profits are supposed to be dividened out to share holders, had they done that minus bonuses, then banking shares would have outperformed every other share on the planet....now would that have caused a boom bust, so was it deliberate, if not why did they not dilute the share base and price by raising more money by issuing new shares????

[internetcynic]

why did they not dilute the share base and price by raising more money by issuing new shares????

because who in the right mind wants to buy shares in a bank with vast and potentially fatal amounts of toxic debt?

[longbow64]

because who in the right mind wants to buy shares in a bank with vast and potentially fatal amounts of toxic debt?

INC, I know what you mean, I'm not talking about the rights issue but way before that when they hatched a shareholder ripoff plan.

Before this came to light, they were milking the share holders by stealing their profit.

Had they not done this raises lots of very difficult questions because these would have ranked as some of the best performing shares , a lot of the profit that should have gone to share holders was paid to bankers as bonuses, it raises questions and lots of them, No.1 other firms would soon follow suit in this new con, No.2 would bank shares have become artificially inflated, could they have been trying to reduce the profit, I don't think so , pure greed, they orchastrated a ripoff that blew up.

[longjohn]

I recall that up to 10 years ago banks were sending out cheque books inviting people to write out cheques if they opened an account with them. Every secured debt that the bank generates becomes an asset on the balance sheet which the banks in turn can lend out many times over. In short it is money the bank does not really own but lends it out at interest. Over heating of the property markets was the start of break down of the banks and the recession but all of this is nothing to do with the thread.

[Geoffrey Collier]

Anything, be it government or management must preside over a governable entity. When we are confronted with twenty-four hour banking, across time zones, with transactions coming under different national laws at different geographical stages of the process, it comes impossible to regulate or scrutinise. Ninety-eight of the top 100 UK companies in the footsie, are registered in tax havens. The Inland Revenue tries to negotiate with them in order to reach some tax agreement. Vodafone has been given a complete exemption from corporation tax for this year. TNCs' know perfectly well that they are beyond reach. Every western country has similar problems; their legal frameworks do not allow the powers available to make much difference. Bank reforms can only affect the general taxable population, or small corner shops, to the TNCs' they are largely irrelevant.

The Germans were angered yesterday when PIMCO (large investment house.) has said that it will not make any more sovereign loans to the EU until Germany acknowledges its obligations to the indebted eurozone. That is hitting below the belt; that may be an effective method to force Germany into becoming the lender of last resort. Isolating the EU from the global financial markets, as China has already decided; plus threats to EU exports, may be kind of discipline Britain, the USA and China will assert until they have persuaded Germany to comply with their wishes. Germany may become totally intransigent, but a price for that obduracy will be extracted.


The financial system has a long history of crises; the existence of a crisis is nothing unique. What we can say is unique is the existence a unified global market which is now able to circumvent national laws and any central supervisory authority. In the late 19th.C, for example, Britain had a serious problem resulting from poor investments and loans to Latin America. That resulted in a massive outward flow of gold down the proverbial 'black hole'. The Bank of England had to stop that with some urgency.


Despite protestation from some concerning QE, that will be with us for many more years. Sir Mervyn King intimated only last night that more can be anticipated in the U.K. The Federal Reserve Board in the USA has said that they could be doing likewise. If banks need recapitalising they either borrow the money from institutions which have often borrowed the same from other institutions, or produce their own, which does have the advantage of keeping interest-rates low. That is unfortunate for investors, and pension funds, but it is still better than a global default on private and corporate debt. If war broke out, for example, the national debt would rise, and purchasing fluidity would be produced from QE. It may be that Germany will see QE as a means by which the ECB can be the collective lender of last resort, thereby removing much of liability from themselves.

Much of what is discussed in the BDF's economics section may often be of interest to students of moral philosophy, or those who try to segregate subjects into political left/right divisions, but the immediate need is for an economic/financial system relevant to the circumstances of our time. That is the constant in this debate. Much inflation is a statistical abstraction; don't see if it is hiding under the sofa, it won't be there. Such speculation is in the same league as asking, 'What law makes the law, law?' or 'If everything has a first cause, what cause caused the first cause? Expel them to the literature department to read metaphysical poetry. Don't let them become decision-makers in the real world.