According to the FT US Fed governor Lael Brainard gave a public speech yesterday that laid out why that organisation want to unwind US quantitative easing. She said:
The Federal Reserve is advancing plans to allow the balance sheet to run off at a gradual and predictable pace. And for the first time in many years, the global economy is experiencing synchronous growth, and authorities in the euro area and the United Kingdom are beginning to discuss the time when the need for monetary accommodation will diminish.
I think some wires are crossed here. Yesterday the UK's Office for Budget Responsibility issued a report saying (if I might, I think fairly summarise) that the UK's fiscal risk was high, the chance of a recession significant, and the expectation that there will be a need for considerable additional public borrowing very high indeed. Not one of these facts suggests that the UK is even remotely close to considering this issue. I'll be candid; I doubt it will be in my lifetime, and I'm planning on living a long time yet.
But let's ask why they might want to unwind anyway? There's only one reason I can think of. That is to restore interest rates as a weapon central banks might use to control the economy. That's it. But what this means is that some central bankers want to, in effect, trash the economy, threaten people's well-being and risk the fragile financial stability of a banking system over-dependent on excessive personal debt so that it has a weapon to deal with the next financial crisis, which they will in the process trigger. It takes staggering inability to believe this issue even worth discussing, but apparently it was. The central banks of the UK, Japan, Canada, Mexico, Switzerland, Singapore, China, Australia, Sweden, Australia, the eurozone and even Nigeria were apparently present.
Someone save us from the folly of central bankers, please.
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Mark carney uses fear to increase the power of central banks to further there political agenda and prop up woman biased by her husbands position.
While bankers and their economist lackeys fiddle, Rome burns. Unfortunately, largely because of the MSM, it’s all too easy to get caught up in their rhetoric. And this dialogue will simply go on endlessly, from one crisis to another. However, there is a ‘bottom line’. Anything other than a deep radical change in the way our economies function and are managed will, at best, only serve to mitigate against the worst effects.
In order to be both democratic and sustainable, any economic system – which is simply a human construct – must be subordinate to the people (majority) and the planet. As far as I know this has not been the case within recorded history. With neo-liberal monetarism now totally discredited and having stretched post-Keynsian policies beyond any useful future outcome, the time has arrived for a bottom-up political revolution that will deprive the current banking establishment, in its widest sense, of all its accumulated power. Anything less is simply re-arranging the deck-chairs. And we’ve been doing that for far too long already. The massive iceberg that has recently broken away from Antarctica, should be a wake-up call both symbolically for a potential Titanic moment and realistically for the planet.
No reasonable person wants to encourage a physical revolution resulting in the loss of life. But it’s difficult to see how we’re going to cut free from the long-standing shackles of dangerously out-dated economic management by the few over the many, without some form of revolution. As has been written many times here and elsewhere, we’re teetering on the threshold of historic change in the way society needs to reorganise itself for the forseeable future. Yes, it’s that Gramscian moment you mentioned the other day. However welcome Corbyn’s popularity is here in the UK, he’s no messiah. Just another minor prophet.
What’s this got to do with the US Fed and the OBR? Everything, I’d say. They’re all agents of this corrupt, malevolent, financial mafiosa which is still holding the world and the planet to ransome. For how much longer will we put up with it? Impossible to answer. Currently they’ve got the money which equals the power. As Charles Koch infamously said when discussing the Keystone XL pipeline “I want my fair share – and that’s all of it.” But, like Hitler in 1943, they must know their time is running out. Hopefully it could end up with a domino effect, whereby one major economy takes the initative, triggering off one revolution after another, not uinlike the political national changes of the mid 19th century. And why not the UK – not only the cradle of modern capitalism, the industrial revolution and so many subsequent progressive social movements? It would be historically befitting. And Friedrich Engels will be smiling in his grave.
Salvation from the Central Banks cannot be achieved by more modificaton of the staus quo, however well-intentioned and well-conceived. “It is difficult to get a man to understand something, when his salary depends upon his not understanding it!” (Upton Sinclair).
Does anyone understand this gobbledygook?
“The BoE is advancing plans to restore the UK National Debt to its prima facie level of £1.8 trillion. Currently the substantive debt total stands at around £1.365 trillion; this is because the bank’s balance sheet is carrying £465 billion of government debt bought back from borrowers.
The UK has borrowed around £780 billion since 2010 but, at the same time, the bank has repurchased £465 billion, broadly equivalent to the total of the annual deficits since 2012.
Many argue that the borrowing requirement of Brexit may amount to something akin to £465 billion since the discharge of the UK’s legal liabilities alone could be as high as £90 billion. However we are taking the view that a period of synchronous growth will allow the OBR to forecast significant gains, sufficient to offset the Brexit impact and to address the cumulative problems currently at large in the economy.”
It means that QE will be unwound
It means that they think there is a market for £465 billion of debt out there, which will be money simply sucked out of the economy
It’s madness
The source of this was?
Firstly, I was under the impression you said that the debt from QE could simply be written off and QE was never going to be unwound.
Secondly, you have repeatedly said that we need MORE debt for people to invest in, for pensions etc. unwinding QE so people can invest in this government debt would clearly be a good thing then?
The only useful debt is that which is used in a new transaction I.e, that which funds new activity
Unwinding QE does the exact opposite: it sucks cash and so real activity out of the economy, like all saving
How does saving suck cash and real activity out of the economy, given that savings are invested by definition?
“New” and “old” debt are wholly interchangeable. What you are really saying is that there should simply be more debt. Old debt was used to fund something at somepoint as well.
You haven’t answered the question I asked regarding QE being unwound – something you said would never happen. having listened to 2 days of yellen at the Humphrey Hawkins testimony this week, the FED are going to be doing it, and both the ECB and BOE are planning to do it as well.
Savings are not invested
They’re saved
They are incomplete transactions where value has been created by one party but not expended by the other who has instead withdrawn the cash from use, effectively rendering it worthless for economic purposes
ANd investment is funded by credit and as is now acknowledged by all informed parties, no deposit is are needed for a loan to be made
And as for unwinding – I think the Fed may do a few billion, but that’s because Yellen wants to bring down Trump. Here we already know the answer is ‘no way’
Savings are saved….right. I honestly don’t know where to start with that one it is so silly.
All savings are invested – otherwise there would simply be no return. Do you think bank deposits just sit there? The bulk of them get loaned out through money markets. Of course, the largest pool of savings by far are pension funds, which are all invested – by law.
The FED is going to be unwinding by 50-60bn a month. Yellen is unlikely to be in her job by next year and the FED is run by committee, so I doubt it has anything to do with Trump, let alone the fact that this plan was already mooted before he became president.
No: savings are just a claim on other people’s income
You have a great deal to learn
Ann Perrifor’s latest book may be a place to start
“£465 billion of government debt bought back from borrowers.”
Bought back from ‘lenders’, shurely?
Yup, apologies.
Empty rhetoric I suspect simply to prop up the myth that it is ‘debt’ in the usual sense of the word which then props up the further myth that the Government is like a household and the bank of England can’t really print money -all of which is wrong, so the ‘unwinding’ myth has to keep being aired from time to time. Since QE started there has been a periodic airing of the word ‘unwinding’.
Expect it to disappear out of sight for another year. It’s part of the pretence that there is no ‘magic money tree-but we know there is and we know that this guff is designed (consciously or not) to give people the impression that economic choices are limited.
Well I thought that you were our saviour to be honest!
What this also says to me is that the current powers have no intention of improving the lot of the people.
The new economic orthodoxy is therefore one with a lack of real money and the lack of that made up with rent seeking credit.
A concoction guaranteed to keep us all in penury and misery for ever. Awful.
Re the ‘ magic money tree ‘ again. I put the draft of a letter I intended to send to my MP Bim Afolami ( Conservative – Hitchin and Harpenden ) on here a couple of weeks ago and I duly sent the letter and yesterday received the following reply. It’s short so I’ll quote it in full :
Dear Mr. Hope,
Many thanks for your extremely well-argued, cogent and important letter.
I note your points, and in particular I completely recognise your point that government spending is not ( underlined ) the same as a household.
Many thanks,
Bim Afolami
Now putting to one side the flattering first paragraph here is a new, young ( 31 ) MP admitting something which almost all the senior people in his party deny.
What do you make of that ?
Good news
Now ask him what he think that means for policy
I will.
More on central bankers, with a name check for Carney, here https://storia.me/@Mitch-Feierstein/world-on-feier-rsr9l/central-banks-an-explosion-heard-round-the-world-3fa60l
Feierstein, I suspect, is a libertarian who would like Central Banks ditched completely. he’s right about the wage flatlining and asset bubbles but reveals his libertarian leanings by saying:
The U.S. Treasury is about to run out of money
That’s the libertarian hallmark -and reveals a lack of understanding of the monetary system.
“That’s the libertarian hallmark -and reveals a lack of understanding of the monetary system.”
I think you are being a bit kind there old chap. Either he does not understand or is trying to keep the same-old plate spinning = state controlled finance institutions have a finite money resource.
Another piece of cretinism by Feierstein: “For the past 11 years, the Federal Reserve has been run by non-elected officials” – so like the BoE, the ECB etc etc. His comment falls into the class “the un-elected European Commission” ah yes electing civil servants what a novel idea!
It’s worth bearing in mind the difference in operations and structure between The Fed and BoE. Ellen Brown has covered this in Web of Debt and this extract makes interesting reading.
http://www.globalresearch.ca/who-owns-the-federal-reserve/10489