My argument for giving people money was on the basis, that when the boe did quantitative easing, the money flowed to the financial system and not into anything tangible, therefore they woukd have been better off just giving the money to each member of the public to spend, it would have created more gdp than what the actually did.
In short I’m not advocating that we have a vote on how money is spent, read it properly next time.
Reply number 2: (To Melbourne) miss quoted me, I never said the" bank buys £10 of bonds off the BOE then with that as leverage plus £100 of deposits can lend £100".
I said with “£10 worth of boe bonds as leverage, the bank can lend £100” nowhere did I mention deposits being needed…because that’s not how it works.
Next time don’t add something to my own words, because you obviously did, otherwise it would have been right.
He’s missed the point completely therefore his understanding of how banks work is amateur at best…next!
These people are just trying to one up me with there own farcicle knowledge of how the banking system doesn’t work in practice therefore there comments are null and void.
They have no tangible solutions or argument to come back with.
How can he say that quantitative easing didn’t work? Unemployment in the US is very low, at some of the lowest levels in 50 years and that has been sustained. Unemployment pre-QE was over 10% and it is currently less than 5%. It worked.
Unemployment in the UK is also low, while in the EU it is still high. The difference is monetary policy.
In the next recession, they can set a higher inflation target and actually try to achieve it. The problem recently has been that 2% has not been a target, it has been an upper bound. If they really tried for 2% inflation they could hit it.
I’m pretty sure I talked about lending as a way to help people buy cars and houses. You can’t get more tangible than cars and houses.
Anyway, I’ve learned that you can’t educate people who insist they know more than the experts do. They don’t feel the need to study or research their assertions, and they reject any studies or research they don’t like. So I hope that his version of reality works out for him.
The boe needs inflation at 2% so they can inflate away the debt they accumulate, it’s not an upper bound it’s a target.
The increase in employment is a matter of fact, it has nothing to do with quantitative easing. Employment relies on a lot of other factors not just how much money is being artificially pumped into the economy. Unemployment has marginally decreased to near pre recession levels and not much more, currently at 5.1%.
If we had a more well constructed monetary system, these crashes and booms would be less and less frequent.
All quantities I’ve easing did was give an “alcoholic” more alcohol and hoping that will solve the problem, I’m afraid not, another bust is coming and it’s just around the corner. Give it 12/18 months at best.
Economical theory implies that markets should be striving for equilibrium but that is and has never happened. Because equilibrium is a failed theory in the first place, when you do not take account of people’s wants or desires within a model it is doomed to failure.
With the US unemployment figures I would say the same they are just about at present recession levels, which is nothing to brag about considering how much it will eventually cost us all.
Reply no 2: Dracoi He is looking for an argument and goading.
The UK has had under 2% inflation for two years, if that is really their goal they are not very good at their job. In my opinion they are announcing 2% as their goal as a sop to the doves while actually keeping it under 2% because of a mistaken belief that high inflation is right around the corner.
Keeping unemployment low by making aggregate demand steady is the whole point of monetary policy. Unemployment at pre-recession levels was the entire goal of QE. If low unemployment is not a victory for monetary policy then I don’t know what it could be.
If we had a better monetary regime crashes and booms would be less extreme because it would keep employment at a steady level. However, crashes and booms are the result of human psychology and until the robots take over they will be a feature of economics. A better monetary regime would automatically stimulate when GDP fell and tighten the GDP grew too fast. Outlawing FRB does not get us any closer to this regime it merely changes the mechanism used by the central bankers. If central banks changed to targeting the Nominal GDP growth rate they could keep aggregate demand steady and avoid periods of high unemployment or overheated growth.
His alcoholic analogy makes no sense if he is advocating the government control the entire monetary system. How does he think they will stimulate the economy under the new system? By providing a more accommodating monetary policy directly which is the exact same as providing more alcohol to the alcoholic in his analogy.
He sounds like he thinks that allowing government direct instead of indirect control over the monetary supply he will eliminate booms and busts which are cause by animal spirits of bankers and consumers. The problem with this is that the government is not composed of Vulcans. Politicians are even more prone to bubble behavior. William Martin once said that it was the job of the central banker to take away the punch when the party started getting going. Does that sound like something someone who was elected by the partygoers would be good at?
The corrections I put in bold were my corrections to your errors.
But you don’t have to learn about how banking works. You still have stuff you do understand, (the government should control loose money).
The banks don’t like having government control. They always argue that it makes money more expensive, and makes people poorer. You can argue that bad lending is proof that they are wrong.