Trout

iTrader: (1)

Nice little video - US oriented but you get the idea...

QE Explained

PaulC72

In other words buy shares in GS.

ChefDude

simplistic an not entirely true. but funny

Trout

iTrader: (1)

Basics are true though.

The Fed has usually taken the wrong action - although easy to say with hindsight.

The same characters that were in charge in 2008 are still in charge.

QE has worked in the US and here by purchasing fixed assets from banks.

hodgy0_2

as i have said an earlier thread, the last 4 years have seen one of the biggest wealth transfers from the poor to the rich the world has ever seen

Leslie

I always thought it was a swep' up political name for effectively printing more money which the nation can't actually back up!. NL using the term hoping that us "thick" members of the public would not see through it.

Les

Adrian F

it is printing money, wait until the economy picks up and we will then get inflation with all this extra money sloshing round the system.

They will have to get it back out the system like they did in the 80's

GlesgaKiss

QE IS inflation. The rising prices is a natural result that comes later. All these officials, especially in the US keep banging on about deflationary pressures, but it remains to be seen just how much QE will be used. In the fed's bid to 'prevent deflation', they will probably overshoot the mark by a mile. Inflation figures aren't even that high in the U.S. right now, but it would be interesting to see what parts of the inflation data are falling and possibly offsetting other parts which are rising. Food prices and the basics will have to rise soon, if they aren't already. It's always in the government's interest to report moderate inflation, so they probably regularly come up with ways to scew the figures to show lower inflation by changing weightings and the way aspects of it are recorded.

Good wee video - just switched the laptop on to watch it as it wouldn't work on the phone.

dpb

Dont tell that to Gideon Gono

Luminous

iTrader: (3)

I liked that video, if just half of that is true, we really are in for a bumpy ride

Trout

iTrader: (1)

The main omission is that the QE is used to buy T-bills from other sources, not just Goldman Sachs

fast bloke

Many of the people commenting have no idea what it means or how it works. They just found out it was a bad idea by reading the Sunday Sport (or the Daily Mail, which is the same with a harder crossword)

ChefDude

I think the QE is quite a good idea. Although the attempt to devalue the dollar to promote increase in trade isn't working so well due to the dollar being the nearest we have to a worldwide currency; it's actually strengthened in recent days.

All eyes are on Germany/Europe, china and japan really.

GlesgaKiss

ChefDude - It would be interesting to know why you think it's a good idea though?

ChefDude

Well, we all know the primary objective of the US's QE was to raise inflation... Which is not happening quickly at all.

I think the real agenda was to devalue the dollar to encourage global trade with the US. This then would put pressure on china, who have been keeping the renminbi undervalued to keep trade levels high, to revalue their currency. Remember China's wholly dependent on global trade, because the domestic population is too poor to buy anything.

Basically, the US is sick of Asia enjoying cheap trade from the strong dollar and wants to redress the balance.

Currently, asia is suffering high inflation and Germany is selfishly preventing the eu from saving their economic ar$es, resulting in poor times for ireland, Greece and Italy et al.

And don't forget we printed loads of money a while ago, so we're in a good position to not have to resort to more QE

GlesgaKiss

The fact that the domestic population is too poor to buy anything is directly linked to the peg of their currency to the dollar. They don't need the trade at all, they just think they do. It's obviously benefiting a certain group in China to keep things as they are.

Why would the U.S. not want cheap trade with Asia? They are going to be pretty stuffed if China does let their currency appreciate, as at the moment they are running huge trade deficits with them. America relies on these imported goods to maintain its living standards. If it suddenly can't buy them (which it is doing at the moment by borrowing remember) then it's in trouble.

Leslie

Surely it means that the government gets its hands on more pounds cash which immediately become lower in value because the country cannot back it up at the previous valuation.

Hence we move into ever greater inflation!

Seems pretty simple to me without all the clever words they chuck out in regard to such an action.

Les

ChefDude

I guess it's not certain what's going to happen, but china absolutely requires foreign trade. And it will have to do something with inflation running 10%.

GlesgaKiss

That's all inflation over the long-term is! In the short-term other factors can affect individual items or assets, but the steady rise in prices is down to inflation of the money supply.

Why though? Again, their inflation rate may have something to do with the dollar peg. I guess we agree, but see the outcome as being different.

ChefDude

Decentralized economy? lack of investment in the domestic workforce and the required resources to support industry?

I have to admit to being more worried at the moment about the irish/greek/italian bailouts. Spain, a big big economy to be in trouble, and Portugal are next ones to potentially require bailouts.

GlesgaKiss

China will still get what they need with a stronger currency, and the population in general will benefit. The U.S. would have to suffer at least a temporary, sharp drop in living standards. It will be roughly proportionate to the rise in the standard of living of the average Chinese person.

ChefDude

we'll see what effect the rise in chinese interest rates will have on inflation. they're still thinking about price capping.

GlesgaKiss

They need to let their currency appreciate in the market, rather than having it fixed to the dollar. And yes, I've heard about the price capping. Terrible, but it is still a 'communist' country, so I suppose this is all par for the course.