Uuh...I think I am going to have to watch this one again...a few times perhaps before I understand any of it. I will though because I need some understanding of these subjects! Many thanks for your work, Prof Murphy.
Then the government's attempt to fool you is still working. They deliberately made it very muddy, so that you wouldn't figure out that they were playing you.
Absolutely. And selling these bonds into the financial market means that the Dealer Banks will be buying as much as they can at this discount, and will either sell or lend them out at a profit, or redeposit them in their reserve accounts at the Bank of England which ensures they meet their capital Reserve requirements quite cheaply, and get paid interest as well. It's another form of subsidy to banks that should be able to stand on their own feet. As Mark Blyth, the political Economist argues: "First, it (the Labour government) could massively increase its fiscal space by telling the country’s central bank, the Bank of England, to stop paying interest on the commercial bank reserves that it holds to influence short-term interest rates. With the United Kingdom’s high interest rates, banks prefer to hold on to money and not invest in the real economy. As a consequence, they are expected to make around $286 billion in interest by 2033 by simply parking reserves at the central bank.” That's nearly £218 billion a year to the banks in interest. And who benefits from that? Only the shareholders of the banks, because banks are not investing in the real economy, because that is more risky than selling debt and speculating. That's why Sunak was going after the UK pension funds to start taking more risk by investing in capital projects. So, ou pensions are going to be exposed to investments that banks aren't interested in. What could go wrong?
And QE didn't benefit the population at all. BUT austerity was forced on us as a result. Banks received welfare from the state , WE received cuts to services.
@@rfxtuber those mortgage free people didn't benefit from QE.. They didn't lose their homes but suffered from austerity and cuts to services , job cuts etc like the rest of us.
We didn't have to find any money, bonds are effectively savings accounts at the BoE. All they did was an inter-account transfer so £45b of cash + fixed term interest becomes £45b of cash + short term interest (from 2006 the support rate was the base rate and Richard has done a video about interest on reserves)
Why make something simple, when government can use a ruse to benefit the financial sector, then pay through the nose for it? Our system exists to fund and exacerbate inequality. We even had the insult of Hunt reducing taxation on banks after they took the money. We all work for the banks; they don't work for us.
Actually really well explained. Financialisation & FIAT money needs its myths and fairy-tales or it could not work for long if most of the people realised what the few % were doing to us. Economics is not a hard science but I believe more a social behavioral science. Ask someone where does money come from and you'd be astonished how virtually no-one knows the real answer. Try to explain it and most times it doesn't sink in. I used to say trees when paper was used, now I just say mines (coins) and oil (plastic). "They" deliberately do not want people to know much at all about the economy and money. Keep it all simple, like supply and demand, which covid has shown is as much a fictional tale as QE, and price controls on goods, services, and housing. I have become a pessimist that things will ever improve for ALL of us within my lifetime. I feel for the very young and children who will also endure the way things are now too. It should get better for them and not worse.
Motre good work! First skim: I think I know what you are talking about. However, replaying three or four times while taking notes may be necessary for real understanding.
My head is still spinning with this (remarkably clear but confusing) explanation. One (simple-minded) question: what effect did QE have on asset prices? And if any, who benefited?
If you create more money, it always ends up in the hands of the most wealthy because wealthy people never spend anywhere near all of their income/ gain in any one year.
Having watched a number of videos which were really easy to understand, this one's done my head in. I was lost from the start....if tax etc. receipts were collapsing, why is that so important? Other videos explain that government spending is funded by their "overdraft" from their central bank. I think I missed the point that tax etc. receipts are important because government spending is really a combination of tax etc. receipts and their "overdraft", so if one goes down significantly the other must go up significantly.
For greasing a stalled economy, how does UBI compare to QE? In its first year UBI would cost £500bn (crude estimate) the vast majority of which would be spent in the active economy. But I don't know how sustainable it would be.
QE had a substantial effect on some pension savers due to the huge asset inflation it caused. Many private pensions, typically taken out through employers, had 'life-styling' which meant by the time you get to retirement age, about 75% of your pension would be in government bonds. When inflation spiked and interests increased, the capital value of government bonds dived, knocking eyewatering sums from soon to be pensioners, just when they needed the funds to move from work to retirement.
@@KirstenBayes Of course.. Its their debt Kirsten... They need most of it back so you can pay for bailing out all the Banks share holders... You are doing your duty Kirsten. 😍😄
We're amazingly effective as a country at using every crisis to increase the transfer of wealth from public to private sector, and from the middle and working classes to the very rich.
David Roger Webb (The Great Taking) saw it introduced in 2003, well before the 2008 crash. As he wrote: "In March of 2003 I started seeing a phenomenon I had never seen before. On individual days, everything went up, with no apparent source of the fund flows. There was no rotation. All sectors went up, as did bonds. This was not being driven by open market operations because money supply growth was falling. Something unprecedented was happening in the internals of the market. The only explanation was that created money was now being directly injected into the financial markets; I wrote about this at the time. It is not understood even now that this was the actual beginning of “Quantitative Easing” (QE), more than five years before it was officially announced during the Global Financial Crisis. I saw it as an act of desperation.."
If I understood you correctly the QE ruse was really only necessary to get around the EU rules intended to bar direct government borrowing from the Central Bank (the BoE in the case of the UK). Would this have been avoidable if the UK had been outside the EU at the time and therefore be one potential benefit of Brexit in the event of a further economic shock in the future?? I ask this as someone who voted remain and not as some ardent Brexiteer.
I believe that is correct. Many other countries and the EU itself have also hidden their money creation under the QE banner. It's a con job really and does real harm to the economy if overused and abused, as it has been - but the banks and certain others have profited very well from it. Savers Usually lose out as the currency is devalued, but assets like property and stock markets rise for the same reason.
@@julianclover1663 I understood it as the financial sector including all the share holders of banks... but if you get into trouble with your mortgage the same people would take your house... no bail out for you...
Yes, if we'd been outside the EU at the time, the government could have used its Ways & Means account at the Bank of England and none of this bond issuance nonsense would have been required.
It’s really heartbreaking to see how inflation and recession impact low-income families. The cost of living keeps rising, and many struggle just to meet basic needs, let alone save or invest. It’s a reminder of the importance of finding ways to create financial opportunities. You've helped me a lot sir Brian! Imagine i invested $50,000 and received $190,500 after 14 days
Some persons think inves'tin is all about buying stocks; I think going into the stock market without a good experience is a big risk, that's why I'm lucky to have seen someone like mr Brian C Nelson.
A well time presentation. The Sociology of Contemporary Business Life. P.F.P.M • PERSONALISATION • FINANCIALISATION • PRIVATISATION • MARKETISATION P. BANK F. S. T H. R O. QE A P D . E M. ACCOUNT P Marketisation to Financialisation QUANTATIVE EASING Financialisation to Marketisation Quantative Easing becomes the engine of the "market" This, in turn, "bailed out" the banks Clive Burgess
was the whole convoluted process to get around e.u. regulations, or was it to hide the fact that the u.k. government can run up an overdraft with the bank of england? or did it rather handily achieve both aims?
Till now I really struggled to understand QE properly at the least for the discrepancies on how it was supposed to work and what it really did - no matter which video you watch. Really wrong is the video of the bank of England itself, I believe to remember. Thank you for clarifying!! So does QE in fact helped asset price inflation but could not affect much consumer price inflation? I mean they also tried to use QE to get up to 2 % inflation, or so it was told in the media. 😉
If you fill up the system with reserves without draining into gilts interest rates will head to zero. It's a popular belief this leads to consumer inflation whereas it proved otherwise (though it was already obvious in Japan). Asset prices might head higher as the risk free rate is reduced to zero, ie, you need to take risk in order to make a return - which IMO is a sound principle.
"buying Back"all issued Bonds estimate to produce a "loss" equivalent to 3% GDP!! All the while supercharging the transfer of wealth from Government Debt to the richest who own most of the "assets"!!
It's all ridiculous and designed to confuse or get around the very process the government voluntarily agrees. Reserves are added into the system when the government spends and the same quantity drained into gilts by monetary operations, like moving money from a current account to a savings account. QE functionally moves existing money between accounts.
@@mikemines2931 No, Its the other way around? Its devaluing the currency (legal tender) against the goods and services you buy - (Devaluation of your purchasing power) Good for government bad for you... inflation inflates away public debt/borrowing. That is why its also called a hidden TAX.
@@mikemines2931 It's not that simple. Example: recent inflation caused by artificial scarcity of key energy inputs, stopping and starting economy due to Covid, commodity speculators, and corporate profiteering. Plus, no one seems to care about too little money chasing too few goods, ie. gross inequality reducing aggregate demand, leading to permanent stagnation. We need to turn every billionaire into 1000 millionaires. Too many people living off capital, not enough living off production
It was merely a way to get more money on Banks’ balance sheets in the form of real interest payments, effectively removing billions in working capital from the economy.
Quantitative easing was not 'started' after the 2008 financial crisis. Quantitative easing is just another name for printing money through a central bank's open market operations - and is therefore nothing new and has been going on forever.
No No, they call this moral hazard.... All the share holders get given free money/debt while you lose your house!!!! Now that's what I call a bargain...
@@rfxtuber YEAH - EXACTLY - you don't want those plebs getting any ideas about free stuff of they will want it all the time and then where will the rich get their free stuff...???
@@piccalillipit9211 That's pretty much it... So they invented the word QE!!! so, for fun... we call bankrupting you and your finances QB... have a guess what the "B" stands for... 🤣
My understanding is GMRA rules apply to repos with central banks. Coupons are effectively paid back to the original collateral holder. Bank of England does not keep the bond coupon. Bonds are issued by HM Treasury then sold to money managers then repoed back to Bank of England via commercial banks that take a spread. Reason QE has no effect on money supply is commercial banks are left holding bank reserves that have little to no use except settling inter-bank liabilities. Hence commercial banks do not lend from bank reserves into the economy. They just don't need bank reserves to lend. They can create real money out of thin air. Also instead of using Gilts to repo, repledge or transform into other collateral in order to make money, commercial banks would rather lend solely to Bank of England. That tells you how risk adverse they are. They'd rather receive a few basis points on repoing to central bank than take risk in real economy. Tells you low interest rates is sign the economy is sick.
Still very mucb in the learning phase here, so forgive me for asking, but didnt Liz Truss try the honest approach, only to be shot down by financial markets? Everything I've watched so far on MMT has led me to believe that politicians aren't honest about money creation because most people can't handle the truth, wont think about the impact on money supply, so will just vote for whoever promises the most in handouts from money creation. As a result, politicians continue to talk about macroeconomics using home finance comparisons in order to keep voters honest in their expectations. Thoughts?
This video explains the Truss affair from an MMT perspective. Basically, Truss caved instead of holding firm. The markets had no ability to do anything if the government didn't want that outcome: ua-cam.com/video/lADHLdjBESg/v-deo.html
@@marcopolotimetraveller 1) MMT is a lens which explains how the economy and government spending currently operates. It's not about finding more complicated ways of doing anything. 2) the government is the currency issuer. They are spending THEIR money, they just allow you to hold on to some of it so you can fund your lifestyle.
£895 billion, injected into the currency pool, diluting every prior-existing £. So my wages in 2008 and any savings I had, were reduced in buying power by this action; and the money-printing goes on to this day. The stealthiest tax ever devised.
They should have imposed a higher rate of tax on people that worked in the financial industry until they paid back the debt for us bailing them out. They only have their vastly overpaid jobs because we ended up paying more tax because of the higher borrowing to bail their sorry arses out.
Except we didn't get inflation until 2022 and that was because of the world opening up again after Covid, so your argument is meritless. If money creation was linked to inflation, we'd see predictable exchange rate movements every time the economy grew or shrank. But we don't, because it's neoliberal horseshit.
The BoE has sold gov bonds back to the financial markets to reduce the supply of money quickly in a high inflation period. Its takes liquidity out of the market and when the bond is sold, this money is 'destroyed' by the BoE. The alternative is higher interest rates, putting the burden of inflation more on people in debt.
Which in turn hides the fraud the banks have been engaging in since time memorial, meanwhile they have to re-possess your home and give it to someone who can leverage more borrowing on their so called income. FANTASTIC THIS!!!! Drip down capitalism is it? hahaha, No its total system failure and they just could not face that prospect...
Quantitative Easing is perhaps the most stark place where Richard deviates from classic MMT. He believes that new money is created to purchase the bonds whereas MMT would say that the money already exists, it's just a shift between a savings account and a current account so no new liabilities have been created. Now, to an ordinary person looking at this they'd say what does it matter? And on the face of it they'd be right to think that but it's important in the context of the macroeconomic framing and the MMT view makes it clear that bonds are just a different kind of finacialised money. Richard gets right up the nose of MMT economists with his views, although nowhere near as much as his good friend Steve Keen
Missed some important policy objectives here, notably relating to the yield curve (i.e. qe permits purchases of much longer term maturities compared to usual open market operations, which involves shorter maturity bonds. At the time, there was no scope to reduce rates further at the shorter end, having effectively reached the zero lower bound). I agree that many of the difficulties then and now could perhaps have been better addressed via fiscal policy. The analogy to an overdraft, however, is not apt here.
QE is simple. It’s printing money - conjouring it up from the magic money tree out of nowhere and then praying that inflation doesn’t skyrocket. QE is why some African counties have 50 billion currency notes (Zimbabwe, for example).
The EU ordering us to not have the BoE fund the government directly is so stupid and just required us to provide welfare to corporate interests. Thank God we left and could (let's be honest, the Red Tories and Blue Tories won't end it) now stop doing this.
It wasn't complicated. The key bit is the government "running up an overdraft with the BoE". Meaning there is still a debt the government has to deal with.
@@WarrenPeaceOG All debt is public debt... Inflation is a hidden TAX and then income TAX, community Tax (Council tax) and then sin taxes, then death taxes increase to pay for it, we are all quadrupledly Taxed..
The repayments on which are the mythical black hole so beloved of the labour party, you could have added that to your explanation, it would have been useful. I must say however that I believe you've got ownership of the BOE the wrong way round, my view is it is they who own the government and hence the country
But the current 22billion black hole in the governments budget is our fault, so the people who spent all the money keep telling us, and we must pay the debt that they have caused, sounds like business as usual,
In a nutshell you seem to be saying that the freshly printed money that was loaned to the government by the BOE need never be paid back? That the bonds held by the BOE shouldn't be sold to the financial sector and require repayment. That the money should be left in circulation, thereby devaluing the currency and causing the general price level to rise, making everyone poorer other than those with most of their money in assets?
It is, and so is the Federal Reserve and the Vatican Bank. The City of London, the Vatican Bank, and the District of Columbia are the 3 most financially corrupt entities ever created!
Not anymore - it was nationalised by the government in 1946, and now wholly owned by government - who ultimately pulls the strings is another matter......
What nonsense 😂😂😂 The BoE bought back Bonds from Banks and credited cash into their accounts, it’s a zero sum game. This increases the money supply and supports liquidity. At the time they were concerned about deflation, QE has the downside of inflation and so two problems were resolved, deflation and liquidity. When QE is unwound the Government should be ahead. It’s not confusing it’s just wrong !!
Would love to have you on the channel for a chat Richard. Struggling to find any contact email for you, feel free to contact me if you would like to come on sometime.
Uuh...I think I am going to have to watch this one again...a few times perhaps before I understand any of it. I will though because I need some understanding of these subjects!
Many thanks for your work, Prof Murphy.
Clear as mud, especially this time of the morning.
Then the government's attempt to fool you is still working. They deliberately made it very muddy, so that you wouldn't figure out that they were playing you.
It was always meant to be confusing.
Snap
A diagram would be most helpful 😅
QE used to recapitalise criminal banks.
but don't you know, all the investors in the banks would have lost their money... we can not have that... but you can lose your home tho?
Absolutely. And selling these bonds into the financial market means that the Dealer Banks will be buying as much as they can at this discount, and will either sell or lend them out at a profit, or redeposit them in their reserve accounts at the Bank of England which ensures they meet their capital Reserve requirements quite cheaply, and get paid interest as well. It's another form of subsidy to banks that should be able to stand on their own feet. As Mark Blyth, the political Economist argues:
"First, it (the Labour government) could massively increase its fiscal space by telling the country’s central bank, the Bank of England, to stop paying interest on the commercial bank reserves that it holds to influence short-term interest rates. With the United Kingdom’s high interest rates, banks prefer to hold on to money and not invest in the real economy. As a consequence, they are expected to make around $286 billion in interest by 2033 by simply parking reserves at the central bank.”
That's nearly £218 billion a year to the banks in interest. And who benefits from that? Only the shareholders of the banks, because banks are not investing in the real economy, because that is more risky than selling debt and speculating. That's why Sunak was going after the UK pension funds to start taking more risk by investing in capital projects. So, ou pensions are going to be exposed to investments that banks aren't interested in. What could go wrong?
And QE didn't benefit the population at all. BUT austerity was forced on us as a result.
Banks received welfare from the state , WE received cuts to services.
@@Incognito-jf1dr And those that were mortgage free lived to tell the tale!!! Not their fault though, but huge benefactors none the less.....
@@rfxtuber those mortgage free people didn't benefit from QE.. They didn't lose their homes but suffered from austerity and cuts to services , job cuts etc like the rest of us.
... and then we found £45billion of quantitative easing in the loft .... which was nice.
@@randomname978 magic money tree for banks , Austerity for the rest of us
We didn't have to find any money, bonds are effectively savings accounts at the BoE. All they did was an inter-account transfer so £45b of cash + fixed term interest becomes £45b of cash + short term interest (from 2006 the support rate was the base rate and Richard has done a video about interest on reserves)
Why make something simple, when government can use a ruse to benefit the financial sector, then pay through the nose for it? Our system exists to fund and exacerbate inequality. We even had the insult of Hunt reducing taxation on banks after they took the money. We all work for the banks; they don't work for us.
The EU was against it and Alister Darling never had the political spine to ignore the EU concerns.
It would be helpful if you explained using a diagram showing the money flows.
Actually really well explained. Financialisation & FIAT money needs its myths and fairy-tales or it could not work for long if most of the people realised what the few % were doing to us. Economics is not a hard science but I believe more a social behavioral science. Ask someone where does money come from and you'd be astonished how virtually no-one knows the real answer. Try to explain it and most times it doesn't sink in. I used to say trees when paper was used, now I just say mines (coins) and oil (plastic). "They" deliberately do not want people to know much at all about the economy and money. Keep it all simple, like supply and demand, which covid has shown is as much a fictional tale as QE, and price controls on goods, services, and housing. I have become a pessimist that things will ever improve for ALL of us within my lifetime. I feel for the very young and children who will also endure the way things are now too. It should get better for them and not worse.
As a member of the magic circle and the magic money tree, we now know how this sleight of hand works!
Motre good work! First skim: I think I know what you are talking about. However, replaying three or four times while taking notes may be necessary for real understanding.
My head is still spinning with this (remarkably clear but confusing) explanation. One (simple-minded) question: what effect did QE have on asset prices? And if any, who benefited?
If you create more money, it always ends up in the hands of the most wealthy because wealthy people never spend anywhere near all of their income/ gain in any one year.
@@warfish0r ...and they buy assets* using their wealth, so, asset prices rise.
*borrowing against them at low(er) rates, not selling.
Having watched a number of videos which were really easy to understand, this one's done my head in. I was lost from the start....if tax etc. receipts were collapsing, why is that so important? Other videos explain that government spending is funded by their "overdraft" from their central bank. I think I missed the point that tax etc. receipts are important because government spending is really a combination of tax etc. receipts and their "overdraft", so if one goes down significantly the other must go up significantly.
To mimic economic activity. Magic roundabout of money. To save face.
You missed the point entirely.
For greasing a stalled economy, how does UBI compare to QE? In its first year UBI would cost £500bn (crude estimate) the vast majority of which would be spent in the active economy. But I don't know how sustainable it would be.
It’s a great idea and would work. But certain conditions apply. There would need to be a rent cap first.
...phew... glad we got that cleared up
Making difficult explanations unnecessarily complicated is used elsewhere. For example the Royal Family's over-the-top outrageous financing.
Worth pointing out that many countries practiced QE, including the EU. And the US did it way back in the 1930s. So, not new or uncommon.
Criminal activity is not uncommon in the financial markets, e.g. Nancy Pelosi is a financial genius.
@@lozwalker2740 It is where the money is...
QE had a substantial effect on some pension savers due to the huge asset inflation it caused. Many private pensions, typically taken out through employers, had 'life-styling' which meant by the time you get to retirement age, about 75% of your pension would be in government bonds. When inflation spiked and interests increased, the capital value of government bonds dived, knocking eyewatering sums from soon to be pensioners, just when they needed the funds to move from work to retirement.
And of course, there was no public debate on any of this.
Why should there have been? Treasury makes the decision.
@@OneAndOnlyMe And the Treasury can magic up Debt out of thin air Right? So what's that £10, £20 £50 note in your pocket? Its not money!!!!
@@rfxtuber the money I had in my pocket now seems to be with HMRC and my local Council. The first of whom get paid before I do.
@@KirstenBayes Of course.. Its their debt Kirsten... They need most of it back so you can pay for bailing out all the Banks share holders... You are doing your duty Kirsten. 😍😄
Thank you Richard
We're amazingly effective as a country at using every crisis to increase the transfer of wealth from public to private sector, and from the middle and working classes to the very rich.
David Roger Webb (The Great Taking) saw it introduced in 2003, well before the 2008 crash. As he wrote: "In March of 2003 I started seeing a phenomenon I had never seen before. On individual days, everything went up, with no apparent source of the fund flows. There was no rotation. All sectors went up, as did bonds. This was not being driven by open market operations because money supply growth was falling. Something unprecedented was happening in the internals of the market. The only explanation was that created money was now being directly injected into the financial markets; I wrote about this at the time. It is not understood even now that this was the actual beginning of “Quantitative Easing” (QE), more than five years before it was officially announced during the Global Financial Crisis. I saw it as an act of desperation.."
If I understood you correctly the QE ruse was really only necessary to get around the EU rules intended to bar direct government borrowing from the Central Bank (the BoE in the case of the UK). Would this have been avoidable if the UK had been outside the EU at the time and therefore be one potential benefit of Brexit in the event of a further economic shock in the future?? I ask this as someone who voted remain and not as some ardent Brexiteer.
The US did it as well. It's main purpose was to provide a massive bung to the financial sector.
I believe that is correct. Many other countries and the EU itself have also hidden their money creation under the QE banner. It's a con job really and does real harm to the economy if overused and abused, as it has been - but the banks and certain others have profited very well from it. Savers Usually lose out as the currency is devalued, but assets like property and stock markets rise for the same reason.
@@julianclover1663 I understood it as the financial sector including all the share holders of banks... but if you get into trouble with your mortgage the same people would take your house... no bail out for you...
Yes, if we'd been outside the EU at the time, the government could have used its Ways & Means account at the Bank of England and none of this bond issuance nonsense would have been required.
Yes it's confusing, made worse by confusing and contradictory comments 😂
The right choice of an investment has always been a big problem for me I know picking a wrong investment will leave a big scar in the future
It’s really heartbreaking to see how inflation and recession impact low-income families. The cost of living keeps rising, and many struggle just to meet basic needs, let alone save or invest. It’s a reminder of the importance of finding ways to create financial opportunities. You've helped me a lot sir Brian! Imagine i invested $50,000 and received $190,500 after 14 days
Absolutely! Profits are possible, especially now, but complex transactions should be handled by experienced market professionals.
Some persons think inves'tin is all about buying stocks; I think going into the stock market without a good experience is a big risk, that's why I'm lucky to have seen someone like mr Brian C Nelson.
Finding yourself a good broker is as same as finding a good wife, which you go less stress, you get just enough with so much little effort at things
Brian demonstrates an excellent understanding of market trends, making well informed decisions that leads to consistent profit
A well time presentation.
The Sociology of Contemporary Business Life.
P.F.P.M
• PERSONALISATION
• FINANCIALISATION
• PRIVATISATION
• MARKETISATION
P. BANK F.
S. T
H. R
O. QE A
P D
. E
M. ACCOUNT P
Marketisation to Financialisation
QUANTATIVE EASING
Financialisation to Marketisation
Quantative Easing becomes the engine of the "market"
This, in turn, "bailed out" the banks
Clive Burgess
More interested at the moment in the conjuring up of Quantitative Black Holes which seems to be the current UK monetary policy.
😂
It's like one of those street corner cup-and-switch games. And it appears to be done with the same aim in mind - to cheat the punter!
Who is the punter in QE?
@@vgstb It's working-class vernacular for "the public"!
@@charliemoore2551 and plebs....
@@rfxtuber This proud pleb has no problem with that.
was the whole convoluted process to get around e.u. regulations, or was it to hide the fact that the u.k. government can run up an overdraft with the bank of england? or did it rather handily achieve both aims?
Till now I really struggled to understand QE properly at the least for the discrepancies on how it was supposed to work and what it really did - no matter which video you watch. Really wrong is the video of the bank of England itself, I believe to remember.
Thank you for clarifying!!
So does QE in fact helped asset price inflation but could not affect much consumer price inflation?
I mean they also tried to use QE to get up to 2 % inflation, or so it was told in the media. 😉
If you fill up the system with reserves without draining into gilts interest rates will head to zero. It's a popular belief this leads to consumer inflation whereas it proved otherwise (though it was already obvious in Japan). Asset prices might head higher as the risk free rate is reduced to zero, ie, you need to take risk in order to make a return - which IMO is a sound principle.
"buying Back"all issued Bonds estimate to produce a "loss" equivalent to 3% GDP!! All the while supercharging the transfer of wealth from Government Debt to the richest who own most of the "assets"!!
Political narrative defining policy. The biggest problem within our politics today.
I understand every word of this. Honest.
Printing money
It's all ridiculous and designed to confuse or get around the very process the government voluntarily agrees. Reserves are added into the system when the government spends and the same quantity drained into gilts by monetary operations, like moving money from a current account to a savings account. QE functionally moves existing money between accounts.
Once again excellent, thank you.
And none of this money creation led directly to inflation?
Inflation is triggered due to scarcity of labour and/or commodities.
@@vgstb Too much money chasing too few goods - inflation.
@@mikemines2931 No, Its the other way around? Its devaluing the currency (legal tender) against the goods and services you buy - (Devaluation of your purchasing power) Good for government bad for you... inflation inflates away public debt/borrowing. That is why its also called a hidden TAX.
@@mikemines2931 It's not that simple. Example: recent inflation caused by artificial scarcity of key energy inputs, stopping and starting economy due to Covid, commodity speculators, and corporate profiteering.
Plus, no one seems to care about too little money chasing too few goods, ie. gross inequality reducing aggregate demand, leading to permanent stagnation. We need to turn every billionaire into 1000 millionaires. Too many people living off capital, not enough living off production
@@vgstb How?
It was merely a way to get more money on Banks’ balance sheets in the form of real interest payments, effectively removing billions in working capital from the economy.
Quantitative Easing also increased the money supply, which in the long-term contributed to higher inflation.
Quantitative easing was not 'started' after the 2008 financial crisis. Quantitative easing is just another name for printing money through a central bank's open market operations - and is therefore nothing new and has been going on forever.
What are the financial markets?
A casino? What goes up must come down, but only if the AI says so...
*QUANTITATIVE EASING* you mean giving money to rich people for doing nothing...???
No No, they call this moral hazard.... All the share holders get given free money/debt while you lose your house!!!! Now that's what I call a bargain...
@@rfxtuber YEAH - EXACTLY - you don't want those plebs getting any ideas about free stuff of they will want it all the time and then where will the rich get their free stuff...???
@@piccalillipit9211 That's pretty much it... So they invented the word QE!!! so, for fun... we call bankrupting you and your finances QB... have a guess what the "B" stands for... 🤣
Barring natural resources, the only way for a nation to get rich is to trade at a profit, and in these days that means with other countries.
But how can both countries make a profit by trading with each other ?
My understanding is GMRA rules apply to repos with central banks. Coupons are effectively paid back to the original collateral holder. Bank of England does not keep the bond coupon. Bonds are issued by HM Treasury then sold to money managers then repoed back to Bank of England via commercial banks that take a spread. Reason QE has no effect on money supply is commercial banks are left holding bank reserves that have little to no use except settling inter-bank liabilities. Hence commercial banks do not lend from bank reserves into the economy. They just don't need bank reserves to lend. They can create real money out of thin air. Also instead of using Gilts to repo, repledge or transform into other collateral in order to make money, commercial banks would rather lend solely to Bank of England. That tells you how risk adverse they are. They'd rather receive a few basis points on repoing to central bank than take risk in real economy. Tells you low interest rates is sign the economy is sick.
Right, I think I get it, just.
Don't worry, it always was meant to be very very confusing
Running a lets scheme for a bit was fun creating an amount of imaginary currency to kick start it as people thought imaginary debt was bad !
Still very mucb in the learning phase here, so forgive me for asking, but didnt Liz Truss try the honest approach, only to be shot down by financial markets? Everything I've watched so far on MMT has led me to believe that politicians aren't honest about money creation because most people can't handle the truth, wont think about the impact on money supply, so will just vote for whoever promises the most in handouts from money creation. As a result, politicians continue to talk about macroeconomics using home finance comparisons in order to keep voters honest in their expectations. Thoughts?
This video explains the Truss affair from an MMT perspective. Basically, Truss caved instead of holding firm. The markets had no ability to do anything if the government didn't want that outcome: ua-cam.com/video/lADHLdjBESg/v-deo.html
@@marcopolotimetraveller
1) MMT is a lens which explains how the economy and government spending currently operates. It's not about finding more complicated ways of doing anything.
2) the government is the currency issuer. They are spending THEIR money, they just allow you to hold on to some of it so you can fund your lifestyle.
£895 billion, injected into the currency pool, diluting every prior-existing £.
So my wages in 2008 and any savings I had, were reduced in buying power by this action; and the money-printing goes on to this day. The stealthiest tax ever devised.
They should have imposed a higher rate of tax on people that worked in the financial industry until they paid back the debt for us bailing them out. They only have their vastly overpaid jobs because we ended up paying more tax because of the higher borrowing to bail their sorry arses out.
All inflation does this unless there is constant matching increases in productivity, which rarely happens, and deflation is never allowed.
@@foxmoongaze Labour Productivity (output per worker) basically tripled between 1970 and 2019.
@@davideyres955we are now paying them £30 billion pounds a year interest on the money the BoE invented to bail them out.
Except we didn't get inflation until 2022 and that was because of the world opening up again after Covid, so your argument is meritless. If money creation was linked to inflation, we'd see predictable exchange rate movements every time the economy grew or shrank. But we don't, because it's neoliberal horseshit.
The BoE has sold gov bonds back to the financial markets to reduce the supply of money quickly in a high inflation period. Its takes liquidity out of the market and when the bond is sold, this money is 'destroyed' by the BoE. The alternative is higher interest rates, putting the burden of inflation more on people in debt.
That's opposite of QE, quantitative tightening QT.
Which in turn hides the fraud the banks have been engaging in since time memorial, meanwhile they have to re-possess your home and give it to someone who can leverage more borrowing on their so called income. FANTASTIC THIS!!!! Drip down capitalism is it? hahaha, No its total system failure and they just could not face that prospect...
How can it be 'tax revenue' if Government DO NOT spend taxes?
The clue is in the word revenue. It means "that which is returned to you". Nothing to do with spending.
@@helenheenan3447 But taxation money is destroyed, hence, to call it revenue is being disingenuous.
@@helenheenan3447 Tax receipts is more apt.
in QE what was the actual cost of creating £1 ?
Somewhere between £1.05 and £1.1 (depending on the loss of the buy back and the interests rates)
Quantitative Easing is perhaps the most stark place where Richard deviates from classic MMT. He believes that new money is created to purchase the bonds whereas MMT would say that the money already exists, it's just a shift between a savings account and a current account so no new liabilities have been created. Now, to an ordinary person looking at this they'd say what does it matter? And on the face of it they'd be right to think that but it's important in the context of the macroeconomic framing and the MMT view makes it clear that bonds are just a different kind of finacialised money.
Richard gets right up the nose of MMT economists with his views, although nowhere near as much as his good friend Steve Keen
The old "ball and three cups" trick?
I'm certain there are no fairies at the bottom of my garden, there's no way the elves would let them move in!
Didn't we call goverments who bought their own debt bannana republics
Missed some important policy objectives here, notably relating to the yield curve (i.e. qe permits purchases of much longer term maturities compared to usual open market operations, which involves shorter maturity bonds. At the time, there was no scope to reduce rates further at the shorter end, having effectively reached the zero lower bound). I agree that many of the difficulties then and now could perhaps have been better addressed via fiscal policy. The analogy to an overdraft, however, is not apt here.
QE is simple. It’s printing money - conjouring it up from the magic money tree out of nowhere and then praying that inflation doesn’t skyrocket. QE is why some African counties have 50 billion currency notes (Zimbabwe, for example).
Buying banks assets.
Would a recession have been the better and healthier option for the economy?
Short term pain for long term gain?
Why should WE suffer because the financial sector destroyed the economy?
And during this the BofE actually printed more money to buy back millions of pounds worth of the Bank's debt bonds that it had put on the market 😂
QE (Quixotic Evasion) 🤔 QE (Quacky Eccentricity)
The EU ordering us to not have the BoE fund the government directly is so stupid and just required us to provide welfare to corporate interests. Thank God we left and could (let's be honest, the Red Tories and Blue Tories won't end it) now stop doing this.
It wasn't complicated. The key bit is the government "running up an overdraft with the BoE". Meaning there is still a debt the government has to deal with.
Which you pay for with TAX.. How you like those apples?
@@rfxtuber How do you figure?
@@WarrenPeaceOG All debt is public debt... Inflation is a hidden TAX and then income TAX, community Tax (Council tax) and then sin taxes, then death taxes increase to pay for it, we are all quadrupledly Taxed..
Thank you for your help in trying to explain economics. It really shouldn't be this complicated.
The repayments on which are the mythical black hole so beloved of the labour party, you could have added that to your explanation, it would have been useful. I must say however that I believe you've got ownership of the BOE the wrong way round, my view is it is they who own the government and hence the country
But the current 22billion black hole in the governments budget is our fault, so the people who spent all the money keep telling us, and we must pay the debt that they have caused, sounds like business as usual,
It sounds v stupid... unless you're a banker handling the transactions!
Also known as professional fraud
More QT than QE these days
In a nutshell you seem to be saying that the freshly printed money that was loaned to the government by the BOE need never be paid back? That the bonds held by the BOE shouldn't be sold to the financial sector and require repayment. That the money should be left in circulation, thereby devaluing the currency and causing the general price level to rise, making everyone poorer other than those with most of their money in assets?
Devalue the currency....next.
I wonder if Rachel Reeves gets this?
the Bank of England is a private bank
It is, and so is the Federal Reserve and the Vatican Bank. The City of London, the Vatican Bank, and the District of Columbia are the 3 most financially corrupt entities ever created!
Not anymore - it was nationalised by the government in 1946, and now wholly owned by government - who ultimately pulls the strings is another matter......
was, not is
@@foxmoongazeon paper yes however its controlled by the city of London corp, a foreign private entity
it's just printing money by another name isn't it?
Debt spiral
Only gold is money the rest is credit. We need to use better terminology
remind me of the Trojan horse the enemy within
welcome to neo liberal morality political economics. the rational way
What nonsense 😂😂😂 The BoE bought back Bonds from Banks and credited cash into their accounts, it’s a zero sum game. This increases the money supply and supports liquidity. At the time they were concerned about deflation, QE has the downside of inflation and so two problems were resolved, deflation and liquidity. When QE is unwound the Government should be ahead. It’s not confusing it’s just wrong !!
Is it helicopter 🚁 💰 so drop money into the market dilute money power
When will you apologise for making false accusations of fascism?
Nothing to understand, it is/was a con.
No one cares.
Would love to have you on the channel for a chat Richard.
Struggling to find any contact email for you, feel free to contact me if you would like to come on sometime.