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Listed below are comments made by super_bean_counter between Wednesday, 11th March 2009 and Wednesday, 18th March 2009.

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FSA say 'more capital, less risk' 12:57pm on 18 Mar 2009 "The financial crisis has challenged the intellectual assumptions on which previous regulatory approaches were largely built, and in particular the theory of rational and self-correcting markets. Much financial innovation has proved of little value, and market discipline of individual bank strategies has often proved ineffective."

Had the banks been allowed to go bust, I can guarantee you that the theory of rational and self-correcting market would have dampened the enthiusams of speculators/investors for a VERY long time.

Duncan
Should the Bank of England buy shares? 5:59pm on 12 Mar 2009 Robert,

It is not the job of a capitalist goverment to allocate capital.

If they did, it can be argued that the BoE could incur huge losses should the economy not recover and the value of the shares boughts crashes.

That would create a big problems as it would permanently increase the supply of money.

At least by buying guilts and bonds they can be sure to get a substantial amount of their cash back.

Duncan
Will QE work? 11:18am on 12 Mar 2009 Armagedion.

Look at my username....(sigh)

The answer is sometime closer than you think.

Duncan
Will QE work? 4:48pm on 11 Mar 2009 #115 armagedion

The loss on repurchase will be minimal, the figure RP quoted of 30b seems high.

This might sounds strange to a lot of people but their is little correlation between the value of the currency and QE.

FX is driven by the demand for sterling which in terms is driven by investment opportunities (mostly) by foreign capital.

No I don't work in PR.

Duncan
Will QE work? 12:30pm on 11 Mar 2009 #49

Consumer debt = mortgages/credit cards.

That would generate huges losses for the treasury.

Duncan
Will QE work? 12:28pm on 11 Mar 2009 #53

Money is not being lent, the treasury is buying assets.

The sellers have no obligations to buy back those assets.

All they are doing is exchanging an illiquid form of asset for a highly liquid one.

The aim of such policy is not clear as it does not affect the root of the problem.

The banks have access to liquidity, further increasing their liquidity will not intice them to lend since they know that any money they lend will likely not generate a profit.

Duncan
Will QE work? 12:24pm on 11 Mar 2009 #57

They are NOT debasing the currency, that would imply printing monet and exchanging it for something that is not resalable (food+ services).

The only debasing that will occur will be if the treasury makes a loss on those securities, as RP explained in his article.

Duncan
Will QE work? 12:22pm on 11 Mar 2009 #36

Why doesn't the gov just give money to taxpayers instead of buying gilts and bonds to stimulate the economy.

It is because they are getting something in return which they would not if they simply gave the money.

If the money was given, that would result in the money supply being expanded and the currency would be debased.

What they are doing DOES NOT affect the money suppley, UNLESS we see serious losses on the value of the securities which they receive in exchange, smt which Robert pointed out in his article.

Duncan
Will QE work? 11:44am on 11 Mar 2009 #32.

I should have made it clearer:

Ultimately the loss will be to those who receive a Sterling fixed-income, including pensionners and those without assets.

The reason for the above is that the loss which the treasury will incur will cause inflation and generally wages & pensions lag behind the inflation rate meaning that those 'far away' from the 'hot' money or do not receive income which can quickly adjust will lose out.

Duncan
Will QE work? 09:58am on 11 Mar 2009 Hi Robert,

The eye-watering £30bn loss which you are writing about is not in fact what the public understands a loss to be.

Since the money was created out of thin air, there is no loss per say. In actual fact the consequence of this loss will be for the supply of M1 money (money held within the reserve system) to be permanently expanded by the loss incurred.

Through the multiplier effect and once the banks regain the appetite to lend again, you can expect the real consequence of that loss to be the expansion of the money supply by a factor which is inversely proportional to the reserve requirements of banks (something tells me that it will be higher in the future).

To recap, it is not a loss to the taxpayer, the consequence will be a permanent increase in the money supply.

Duncan

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