Coronavirus

[Oracle]

The BBC long since ceased to be an objective news organisation.

I notice the BBC are taking every opportunity to make mischief over the shortage of PPE and at the same time wasting that same precious equipment by getting reporters/journalist kitted out in it and wandering around in hospitals, no doubt getting in the way.

Are these essential journeys, driving to and hanging around other peoples places of work?

Arseholes, the lot of them.

[Mike T]

So banks and building societies just print the money to loan out do they? One wonders then why there was a Financial crisis at all in 2007/2008. All Northern Rock etc. had to do was turn on the printing presses. Job done.

Similarly with the Government. No need for taxes at all, we can just print the money and spend whatever we like. Well that might work in the fantasy world of the Guardian. Meanwhile on planet earth, that will just produce hyperinflation.

Under some circumstances you do not get significant inflation. Quantitive easing was just printing money. The money you got as a mortgage to buy your house did not exist until the bank/building society wrote a cheque. Of course at times it goes very badly wrong - hence 2008.
I found Yanis Varoufakis' book "Talking to my daughter about the economy" interesting - he thinks about printing money this way as borrowing from the future, rather than borrowing from another source. Thinking about that mortgage - we create the money by working/being paid/paying it back - in the future in other words.

[Muddy Retriever]

Under some circumstances you do not get significant inflation. Quantitive easing was just printing money. The money you got as a mortgage to buy your house did not exist until the bank/building society wrote a cheque. Of course at times it goes very badly wrong - hence 2008.
I found Yanis Varoufakis' book "Talking to my daughter about the economy" interesting - he thinks about printing money this way as borrowing from the future, rather than borrowing from another source. Thinking about that mortgage - we create the money by working/being paid/paying it back - in the future in other words.

QE is not the same as just printing money. It's purpose is to increase the money supply and get banks lending through having more liquidity. The debt purchased by central banks remains on Governments' Balance Sheets. Whether QE is effective is debatable.

If simply printing money to pay for Government expenditure was the panacea, why doesn't everybody do it? Why doesn't your beloved European Union for instance do it? Why does it force swinging austerity on some of it's more unfortunate members?

There are a number of examples from history of Governments doing as you suggest and hyper-inflation being the outcome, the Weimar Republic in Germany, along with Zimbabwe are two famous ones.

[Mike T]

QE is not the same as just printing money. It's purpose is to increase the money supply and get banks lending through having more liquidity. The debt purchased by central banks remains on Governments' Balance Sheets. Whether QE is effective is debatable.

If simply printing money to pay for Government expenditure was the panacea, why doesn't everybody do it? Why doesn't your beloved European Union for instance do it? Why does it force swinging austerity on some of it's more unfortunate members?

There are a number of examples from history of Governments doing as you suggest and hyper-inflation being the outcome, the Weimar Republic in Germany, along with Zimbabwe are two famous ones.

As I said, it only works under some circumstances.

[Mike T]

From Wiki:

When a bank issues a loan of $1000 to a customer, they debit the customer's loan account with $1000 and at the same time they credit the customer's deposit account with $1000, ready for using. The bank now has a new asset of $1000 and a new liability of $1000. The bank's accounts are still in balance because the assets and liabilities are increased by the same amount. The bank's balance sheet is simply expanded with the amount of $1000. The bank does not take the $1000 out of its reserves. The $1000 are new circulating money that did not exist prior to the transaction.[23]

A study of banking software demonstrates that the bank does nothing else than adding an amount to the two accounts when they issue a loan.[21] The observation that there appears to be no limit to the amount of credit money that banks can bring into circulation in this way has given rise to the often-heard expression that "Banks are creating money out of thin air".[20]

[Witton Park]

So banks and building societies just print the money to loan out do they? One wonders then why there was a Financial crisis at all in 2007/2008. All Northern Rock etc. had to do was turn on the printing presses. Job done.

Similarly with the Government. No need for taxes at all, we can just print the money and spend whatever we like. Well that might work in the fantasy world of the Guardian. Meanwhile on planet earth, that will just produce hyperinflation.

It's unbelievable isn't it.

[Witton Park]

From Wiki:

When a bank issues a loan of $1000 to a customer, they debit the customer's loan account with $1000 and at the same time they credit the customer's deposit account with $1000, ready for using. The bank now has a new asset of $1000 and a new liability of $1000. The bank's accounts are still in balance because the assets and liabilities are increased by the same amount. The bank's balance sheet is simply expanded with the amount of $1000. The bank does not take the $1000 out of its reserves. The $1000 are new circulating money that did not exist prior to the transaction.[23]

A study of banking software demonstrates that the bank does nothing else than adding an amount to the two accounts when they issue a loan.[21] The observation that there appears to be no limit to the amount of credit money that banks can bring into circulation in this way has given rise to the often-heard expression that "Banks are creating money out of thin air".[20]

https://www.thebalance.com/what-is-banking-3305812

Banking is an industry that handles cash, credit, and other financial transactions. Banks provide a safe place to store extra cash and credit. They offer savings accounts, certificates of deposit, and checking accounts. Banks use these deposits to make loans. These loans include home mortgages, business loans, and car loans.

[Mike T]

This is interesting:

https://www.economicsfaq.com/is-quan...oney-printing/

It is partly a matter of definition - printing money vs expanding the money supply. Clearly even economists disagree, but there would seem to be no doubt that treating a country's economy like a household budget - " don't spend what you haven't got" - does not work.

[Oracle]

I suggest you look at the evidence of your own eyes.

Look at the countries drowning in debt, and ask if you would like to live there.
Thats a no.
Japanese pensioners are committing crimes just to get locked up for free meals.
Look at italy.
Venezuela,
Greece.
Portugal.


It is a household budget.
The question is whether you steal from your grandkids.
Those with public sector inflation proofed pensions are doing just that. Taking from everyone else and the future.

Consider overseas... in the end exporters want cash in own currency or a reserve.
Printing devalues it, making imports more expensive.

For sure countries with their own currency are better off than the disaster that is the EU, since the indebted countries inevitably are set to get poorer, they lack any levers of control.

Cheap money is like giving a drug addict more heroin. It causes even more asset bubbles, The problem is made even worse when quantitative tightening happens. No amount of money , even negative interest rates is stimulating the economy now. We are now seeing heroin toxicity in the economy. Not least the programmed reduction of debt ( inflation) has absolutely destroyed saving rates.

So we have the haves , demanding 7-15 percent absolute inflation proofed return on public sector pensions ( if you are wondering why I hark on, it is a trillion unfunded debt)
Everyone else gets 2-3 percent return on dodgy equities, with a programmed destruction of value of 2 percent. Bond yields low or negative, So it impossible to save. I get why you never feel the pain of any of this Mike. It is rigged in your favour. Or you think printing money is no object, because you won’t ever feel it hurt. Just don’t rub everyone else’s noses in it, heh! HMRC even cheat on the multiplier for converting defined benefit pensions into value, so public sector get their noses even deeper in the trough.

The only reason the dollar does not collapse is the oil hegenomy, which protects the dollar by forcing oil markets to use it, over which the US has fought wars. NoW oil has tanked America has a problem.

Systemic banking collapse has never been closer.
Then the myth of fiat Money will explode.

my money is increasingly in gold.

This is interesting:

https://www.economicsfaq.com/is-quan...oney-printing/

It is partly a matter of definition - printing money vs expanding the money supply. Clearly even economists disagree, but there would seem to be no doubt that treating a country's economy like a household budget - " don't spend what you haven't got" - does not work.

[Muddy Retriever]

From Wiki:

When a bank issues a loan of $1000 to a customer, they debit the customer's loan account with $1000 and at the same time they credit the customer's deposit account with $1000, ready for using. The bank now has a new asset of $1000 and a new liability of $1000. The bank's accounts are still in balance because the assets and liabilities are increased by the same amount. The bank's balance sheet is simply expanded with the amount of $1000. The bank does not take the $1000 out of its reserves. The $1000 are new circulating money that did not exist prior to the transaction.[23]

A study of banking software demonstrates that the bank does nothing else than adding an amount to the two accounts when they issue a loan.[21] The observation that there appears to be no limit to the amount of credit money that banks can bring into circulation in this way has given rise to the often-heard expression that "Banks are creating money out of thin air".[20]

So why did Northen Rock (and others) collapse?