Queen's Speech

[Alan Medic]

Can't both May and Corbyn not be sent to the Tower? Surely it's time for Her Maj to exercise a bit of Royal power. I voted Labour but 'ol JC seems to think everyone who did, did so because of him. In my case nothing could be further from the truth.

[JohnL]

Loz Wrote:

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> rahrahrah Wrote:

> --------------------------------------------------

> -----

> > Loz Wrote:

> >

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>

> >

> > > there is no magic money tree.

> >

> > ...quantitative easing.... anyway:

>

> If you think QE is a magic money tree, then you

> don't understand QE.

QE doesn't have to be done the way it's done though (which I don't think is the right way personally).

The bank could just dump money into the economy - of course that risks inflation.

[Loz]

Lordship 516 Wrote:

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> > If you think QE is a magic money tree, then you

> > don't understand QE.

>

> It has been a magic money tree for the banks & the

> richest 5% of the UK population who creamed 40% of

> the benefits.

>

> Trickledown did not happen ... & does not

> happen...QE has been a failure for most of the

> population & has been a massive

> transfer/maintenance of wealth for the already

> wealthy...

>

> For the rest of the population it merely resulted

> in a devaluation of their megre assets & the

> erosion of their incomes...

>

> Sorry Loz...it is you who needs to understand the

> consequences of QE...

>

> On top of all that you have the devaluation of the

> ?...coming up a little for now but destined to

> further fall over the next few months...

We can debate til the cows come home about the *consequences* of QE, but my point is that few people (including, it seems, yourself) understand the *mechanics* of QE. Then you would realise that it ain't no magic money tree.

[Loz]

JohnL Wrote:

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> Loz Wrote:

> --------------------------------------------------

> > If you think QE is a magic money tree, then you

> > don't understand QE.

>

> QE doesn't have to be done the way it's done though (which I don't think is the right way

> personally).

>

> The bank could just dump money into the economy - of course that risks inflation.

No, they can't. That's wouldn't be QE then - that would just be printing money.

[rendelharris]

The Bank of England does effectively print money, albeit electronically, and uses it to buy assets. From the BofE's own website: "This policy is designed to inject money directly into the economy."

[JohnL]

Loz Wrote:

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> JohnL Wrote:

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> -----

> > Loz Wrote:

> >

> --------------------------------------------------

>

>

> > > If you think QE is a magic money tree, then

> you

> > > don't understand QE.

> >

> > QE doesn't have to be done the way it's done

> though (which I don't think is the right way

> > personally).

> >

> > The bank could just dump money into the economy

> - of course that risks inflation.

>

> No, they can't. That's wouldn't be QE then - that

> would just be printing money.

I know - it's helicopter money : ) I always smile when I say that.

http://www.investopedia.com/articles/personal-finance/082216/what-difference-between-helicopter-money-and-qe.asp

[Loz]

rendelharris Wrote:

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> The Bank of England does effectively print money,

> albeit electronically, and uses it to buy assets.

> From the BofE's own website: "This policy is

> designed to inject money directly into the

> economy."

Sort of, but not quite. There is a little more to it than that. However, it is very similar to the way banks 'create' money.

[Lordship 516]

Loz Wrote:

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> rendelharris Wrote:

> --------------------------------------------------

> -----

> > The Bank of England does effectively print

> money,

> > albeit electronically, and uses it to buy

> assets.

> > From the BofE's own website: "This policy is

> > designed to inject money directly into the

> > economy."

>

> Sort of, but not quite. There is a little more to

> it than that. However, it is very similar to the

> way banks 'create' money.

So, Loz - if it is "Sort of, but not quite. There is more to it than that"

Please let us have the advantage of your unstated knowledge - I am always very happy to learn. I look forward to receiving your perceived wisdom in the matter.

[Loz]

Lordship 516 Wrote:

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> Loz Wrote:

> --------------------------------------------------

> > rendelharris Wrote:

> --------------------------------------------------

>

> > > The Bank of England does effectively print money,

> > > albeit electronically, and uses it to buy assets.

> > > From the BofE's own website: "This policy is

> > > designed to inject money directly into the

> > > economy."

> >

> > Sort of, but not quite. There is a little more to

> > it than that. However, it is very similar to the

> > way banks 'create' money.

>

> So, Loz - if it is "Sort of, but not quite. There

> is more to it than that"

>

> Please let us have the advantage of your unstated

> knowledge - I am always very happy to learn. I

> look forward to receiving your perceived wisdom in

> the matter.

I really rather doubt your sincerity, but here goes...

Banks 'create' money by raising a debit and a credit on the books. The credit goes to you in the form of money. The debit is usually held in the form of a lien on the purchased assets. As you pay off the loan the debit is paid off, until the created money is 'unmade'.

QE is very much the same. The BoE 'creates' the money (as Rendell said), but they also create a debit. The newly created money buys assets which balance the credit and will be later sold to 'fill in' the debit.

That's why turning QE into helicopter money won't work (or, as I think McDonnell's idea was, to use on infrastructure), as there is no mechanism to balance the debit with a suitable asset and to later refill the 'debit' hole by selling it.

You could possibly do 'helicopter money' by just printing money, but it's a extremely dangerous path, as you are essentially just devaluing your currency.

[rendelharris]

That's a clear explanation, thank you - I was aware the "printed" money was used to buy assets but didn't realise they are held for use as later payback. But what if, in the case for example of infrastructure spending, the credit were assessed not by assets but by a lack of debits, e.g. every person employed would be one less for whom benefits were provided, every person employed would be paying tax & NI, they would all be spending more in the economy and so on. Not to mention the general effect on the nation's wellbeing - more regular employment easing crime problems, mental health problems etc? Not everything can be quantified on a balance sheet.

[Loz]

I suppose the question there, Rendell, would be how to quantify such 'assets' (especially given that they don't actually exist at the time of the money creation - they are more of an end goal) and, more importantly, how they would be realised to ensure the debit hole would eventually be filled.

Anyway, I've always been a bit dubious as to the quantification of such 'benefits' - you hear people say that ?1 spent on, say, smoking campaigns sees a (pulling a number out the air) ?10 return, but does that flow to the government and, if indeed it does, do they know it has and that it is to pay off the QE? That balance sheet hole has to be filled sometime.

> Not everything can be quantified on a balance sheet.

I fully agree, but since QE is basically fiddling with balance sheets, in this case probably has to be!

[rendelharris]

Yes the unquantifiables are by nature, well, unquantifiable. But if you give an unemployed person a job paying, say, ?20,000 a year then you save around ?10,000 maybe in benefits, they'll pay around ?3,000 in tax and NI, 20% of whatever the spend their wage on comes back as VAT etc etc. So that's all tangible return, before starting to count the savings in healthcare, reduced crime rates etc.

[Lordship 516]

Loz Wrote:

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> Lordship 516 Wrote:

> --------------------------------------------------

> -----

> > Loz Wrote:

> >

> > So, Loz - if it is "Sort of, but not quite.

> There

> > is more to it than that"

> >

> > Please let us have the advantage of your

> unstated

> > knowledge - I am always very happy to learn. I

> > look forward to receiving your perceived wisdom

> in

> > the matter.

>

> I really rather doubt your sincerity, but here

> goes...

> Banks 'create' money by raising a debit and a credit on the books. The credit goes to you in the form of money. The > debit is usually held in the form of a lien on the purchased assets. As you pay off the loan the debit is paid off, > until the created money is 'unmade'.?

Banks don?t ?create? money per se. They have a set of regulations to abide by & the amounts that they can ?lend? are dictated by reserve requirements?and?capital adequacy?ratios, both for the amount they can lend overall & the sizes of individual loans. The ?creation? of money supply through ?deposit multiplication? is rare - a very complex & controlled scenario.

Central banking have a different modus operandi. The BoE reviews the economy as a whole & when the money supply is restricted in some particular manner they opt to issue further capacity which recently took the form of what has come to be known as Quantative Easing. They do this by creating a book entry [as you have explained] which from the time of Luca Pacioli [15th C monk] involves a double entry in the accounts - a debit & a credit.

The BoE buys Treasuries & other blue chip financial securities from BANKS & this results in four main effects. 1] The banks make a profit on the instruments that they held due to the assets in question increasing in value due to the actions of the BoE. 2] The banks who sell these securities end up with more liquid funds. The idea is that the banks will then lend this money onwards to businesses that need funds for development that in turn will produce an increase in GDP. 3] The stock market prices increase in sympathy with the buoyancy that has been created. 4] The minute the BoE creates the QE amount it causes the ? to be devalued; this in turn increases the value of stocks in money terms, especially for those firms that are receiving an appreciable amount of their income in foreign currency.

The BoE now has assets that it can either hold or sell in the future if it wants to cool down an overheated economy. It is likely that the BoE will suffer a loss on the subsequent sale of these assets under those circumstances. The city boy will see to that.

At a time of it?s choosing the BoE can simply reverse the process [hopefully not making a loss in the process.

The problem with our QE is that holders of financial securities made a substantial profit which they held on to thus increasing their wealth holdings as did the holders of stocks that increased in value. Nothing went towards the real economy - this actually sucked up about 40% of the new money supply.

The next problem was that instead of making new funds available to businesses, the banks held onto the new money supply to enhance their balance sheets with relatively little flowing into the real economy.

QE failed..! But not for the wealthy family offices, hedge funds & banks - they all made lots of cash but not for you or me.

> That's why turning QE into helicopter money won't work (or, as I think McDonnell's idea was, to use on >

> infrastructure), as there is no mechanism to balance the debit with a suitable asset and to later refill the >'debit' hole by selling it.?

Loz, your comment is nonsense & actually contradicts what was proposed. McDonnel?s idea of creating a National Infrastructure Bank would actually work quite nicely. It would [ostensibly] create much needed assets [housing, schools, hospitals, prisons etc] all owned by ?we, the people? so everyone would benefit. The BoE could issue new money against 50 year bonds ; the money thus created would be used productively to build necessary assets, providing much needed jobs & economic activity; the various asset owning entities would then have to pay off these bonds within their annual budgets, thus balancing the issuance of the moneys over time.

There is nothing wrong with a technical devaluation of currency if it will result in a rebalancing effect in the economy elsewhere, particularly if this rebalancing results in necessary productive assets being created. The already wealthy will squeal about this as it will devalue their vast asset holdings that are usually sheltered against taxes & other fiscal burdens; The banks would squeal as they would lose some of their grip o the market as they would no longer profit from PPP & similar ?opportunities?.

The UK Treasury issues various financial instruments that are not backed by anything other than the ?good faith & integrity? of the government/state. The market decides to support these issues but the interest rates tend to be higher than the BoE could accommodate & having the BoE issue the funds gives the transactions an ?arms length? dimension to the transaction outside the political sphere of the government of the day.

> You could possibly do 'helicopter money' by just printing money, but it's a extremely dangerous path, as you are essentially just devaluing your currency.

Your assertion is subjective & notional - you are contriving to produce a negative view of the idea. There is a lot to be said for distributing ?helicopter money' to all citizens who would largely spend this in the economy. Friedman approves of this mechanism as it would result in a direct injection of money into the real economy increasing AD. However, the people with most influence would not like this to happen as they would lose control & commissions that they have come to regard as their right. Another method is for the BoE to give a tax rebate to every permanent resident taxpayer as Australia did in 2009. It actually worked quite well for the Australian economy as most of this money was directly injected into the economy at a critical time for their economy & Australia has not looked back since that.

The banks & city people want to skim a piece of every financial movement in the economy - QE for the people would limit some of this & at the same time reduce the costs of funding for essential projects, making them less of a burden to repay & bringing forward essential facilities for the whole population.

[Loz]

Lordship 516 Wrote:

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> Banks don?t ?create? money per se. They have a set of regulations to abide by & the amounts that

> they can ?lend? are dictated by reserve requirements?and?capital adequacy?ratios, both for

> the amount they can lend overall & the sizes of individual loans. The ?creation? of money supply

> through ?deposit multiplication? is rare - a very complex & controlled scenario.

You need to look up 'fractional reserve banking'. It is one of cornerstones of our money supply. Granted it is a different process than the central bank, but I was trying to keep it simple.

[snipped a very convoluted explanation of QE that pretty much said what I did, but using 27x more words. Explaining things to the layman is not your forte, is it?]

> The BoE could issue new money against 50 year bonds ; the money thus created would be used

> productively to build necessary assets, providing much needed jobs & economic activity; the various

> asset owning entities would then have to pay off these bonds within their annual budgets, thus

> balancing the issuance of the moneys over time.

Why would they QE to issue new money against a new bond? That makes no sense. You can issue bonds to get money, or you can QE to get money - why would you do one to do the other? I think you are confusing it with the fact you can create money to redeem the bonds, which is why govt bonds are considered rock solid investments, but the dangers in that are similar.

> There is nothing wrong with a technical devaluation of currency if it will result in a

> rebalancing effect in the economy elsewhere, particularly if this rebalancing results in

> necessary productive assets being created. The already wealthy will squeal about this as it will

> devalue their vast asset holdings that are usually sheltered against taxes & other fiscal burdens;

> The banks would squeal as they would lose some of their grip o the market as they would no longer

> profit from PPP & similar ?opportunities?.

OK, we've moved from Economics 401 to Junior Politics 101.

> Loz, your comment is nonsense & actually contradicts what was proposed. McDonnel?s idea of creating

> a National Infrastructure Bank would actually work quite nicely. It would [ostensibly] create much

> needed assets [housing, schools, hospitals, prisons etc] all owned by ?we, the people? so everyone

> would benefit.

As far as I saw, he was proposing to use a form of QE to finance the NIB, which given the liquidity of the 'assets' (and, indeed, their liquidable value) would be impossible.

> Another method is for the BoE to give a tax rebate to every

> permanent resident taxpayer as Australia did in 2009. It actually worked quite well for the

> Australian economy as most of this money was directly injected into the economy at a critical

> time for their economy & Australia has not looked back since that.

You are confusing issues - that's was not QE.

Also Australia's economy was rather buoyant anyway because of China and the mining boom. Australia was one of about two or three economies that didn't go into recession poost-2008. In fact, my home city boomed during most of that period, all thanks to China. Certain states were suffering, though, so the stimulus package was enacted.

And the rebate was quite small - about AUD$1000 if I remember correctly. It did cause a boom in flat screen TV's and white-goods, though - my brother in law did very well out of it.

> The banks & city people want to skim a piece of every financial movement in the economy - QE for

> the people would limit some of this & at the same time reduce the costs of funding for essential

> projects, making them less of a burden to repay & bringing forward essential facilities for the

> whole population.

Calling it 'QE for the people' is misinformation - it cannot be QE. It is, and always will be, just printing money.

[Loz]

Lordship 516 Wrote:

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> Loz Wrote:

> --------------------------------------------------

> > I really rather doubt your sincerity, but here goes...

[cue: long convoluted answer from LL516]

I can't imagine why I doubted your sincerity.

[Lordship 516]

Loz Wrote:

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> Lordship 516 Wrote:

> --------------------------------------------------

> -----

> > Loz Wrote:

> >

> --------------------------------------------------

>

> > > I really rather doubt your sincerity, but here

> goes...

>

>

>

> I can't imagine why I doubted your sincerity.

With regard to your comment that I am not so adept at explaining to laypeople - possibly true but I always assume that I am addressing objective adults.

QE will be whatever you declare it to be - it doesn't follow that your view is a realistic proposition. I prefer to address technical matters objectively without being clouded out by political considerations or other subjective ideological notions.

Just a note on 'helicopter money' & Australian tax rebates [AUD10.4 billion] was funded by the central bank & distributed by the government to mainly middle & low income earners - that was 'helicopter money' disguised as a discretionary fiscal stimulus & resulted in increasing AD. In 2009 - 2010 the Australian economy experienced a significant dip in GDP but this had been forecast - suitable fiscal & other stimulus was put into effect; this resulted in the Australian economy [along with the Canadian economy] being one of the few well managed economies during that time. Per capita economic output declined for four consecutive quarters, but because the population grew, the economy still expanded. The first quarter of 2009 saw a net growth of 97,000 immigrants, the highest since the figures were first compiled in 1981. They had luck on their side also as a small satellite economy to a much larger Chinese economy - the huge infrastructure stimulus in China fueled exports from Australia & the Aussie banks kept their cool - defaults were low. Australians also benefited from having confidence - Keynes called it "animal spirits" - having faith that things will get better is a prerequisite to things getting better for real.

The helicopter money certainly helped it get past the relatively recessionary period. Good strategy but not available to larger economies.

[Loz]

An article just popped up on my Facebook feed that looks at why Corbyn is a Brexiter.

But in the context of calling things QE that aren't, it is also interesting as it suggests that crashing the economy would not necessarily be seen as a bad thing to the current Labour leadership.

It is, at least, an interesting theory.

https://musealoudblog.wordpress.com/2017/06/27/why-is-corbyn-pro-brexit/

[Lordship 516]

Everyone & anyone will try to pull down all politicians of every hue. People form ideas opinions & hypotheses & then these develop as events happen & people shape these into better ideas for the times we live in.

I have read almost everything that all the various politicians have put forward as their economic ideas & nowhere can I see that Corbyn & McDonnell have any notion to welcome a crashed economy. Nowhere can I see that they want to have a Marxist economy. What they do postulate is a fair distribution of the national cake & this does not go down well in many quarters.

The current neoliberal model that is extant in the UK [and much of the world] is mainly suited to the wealthy maintaining & extending their wealth & indentures most workers to work in a manner that keeps the wealthy rich & co-opts most workers to enter into credit & service arrangements that keep them on a payment thread-mill that feeds the large corporations cashflow machines. Just look at all the direct debits that you have entered into. After working 4 days for everyone else you probably are lucky if you have one days income for yourself for food etc.

The government legislated to keep keep public sector pay below 1% but they didn't extend that legislation to politicians' income. Taking the pi$$. I wish I could do the same with my bills.

We need to modify the current brutishnesss that has pervaded our society whereby the few rich don't care about the rest; the rest struggle on as best they can & are given little choice in life. We ought all be willing to share the national cake & society will be a better & happier place to live in.

This is not left wing or any wing - it is just common decency & civilized humanity. We do need an adjustment to our economy & distribution/sharing of the national wealth.

[JohnL]

Loz Wrote:

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> An article just popped up on my Facebook feed that

> looks at why Corbyn is a Brexiter.

>

> But in the context of calling things QE that

> aren't, it is also interesting as it suggests that

> crashing the economy would not necessarily be seen

> as a bad thing to the current Labour leadership.

>

> It is, at least, an interesting theory.

>

> https://musealoudblog.wordpress.com/2017/06/27/why

> -is-corbyn-pro-brexit/

How can he set-up the great socialist "republic" within the limitations of the EU ;) (only half joking)

[JohnL]

Is this Government getting rather leaky - reminds me of John Major.

http://www.standard.co.uk/news/politics/shameless-theresa-may-pleaded-with-david-cameron-to-support-her-dup-deal-a3578116.html

"A source close to the former PM was quoted" - oh it's George isn't it :)

[Lordship 516]

Loz Wrote:

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>

> But in the context of calling things QE that

> aren't,

>

"We have tried a form of helicopter money before, to good effect, albeit in the form of fiscal, rather than monetary policy. As recently as the global financial crisis in 2008-09, the government distributed cash benefits directly to households to encourage spending. This helped keep the economy from dipping into recession, alongside the RBA?s aggressive rate cuts, the precipitous fall in the Australian dollar (AUD) and massive stimulus in China, which lifted demand for our commodity exports."

Stephen Walters

Chief Economist, Australian Institute of Company Directors

[rendelharris]

I notice - returning to my original point on this thread - that today May has intimated there will be no vote on foxhunting either. Good, say I and many others, I've no doubt, but again, how many votes in rural areas were swayed (or more likely how many who don't usually vote were persuaded to turn out) by a promise which has proved completely false?

[Loz]

Lordship 516 Wrote:

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> Loz Wrote:

> --------------------------------------------------

> -----

>

> >

> > But in the context of calling things QE that

> > aren't,

> >

>

> "We have tried a form of helicopter money before,

> to good effect, albeit in the form of fiscal,

> rather than monetary policy. As recently as the

> global financial crisis in 2008-09, the government

> distributed cash benefits directly to households

> to encourage spending. This helped keep the

> economy from dipping into recession, alongside the

> RBA?s aggressive rate cuts, the precipitous fall

> in the Australian dollar (AUD) and massive

> stimulus in China, which lifted demand for our

> commodity exports."

>

> Stephen Walters

> Chief Economist, Australian Institute of Company

> Directors

Eh?? Which part of 'but that isn't QE' are you having difficulty with?

[Lordship 516]

U-turn Tessie rides again..!

[JohnL]

Outside experts coming in to take over parts of Kensington Council.

http://www.independent.co.uk/news/uk/home-news/grenfell-tower-fire-kensington-council-government-taskforce-theresa-may-tory-rehousing-safety-a7824256.html

It's because of the way things have been handled since the Grenfell tradgedy it seems.