"US President Barack Obama and myself know that the U.S. has no better friend in the community of nations than Israel."
- Thursday 11th March 2010: U.S. Vice President Joseph Biden at Tel Aviv University
Thursday, 11 March 2010
Monday, 8 March 2010
Quantitative Easing (financial laxative): QE not QED - revisited
Comment on Roger Bootle article
http://www.telegraph.co.uk/finance/comment/7393470/A-year-on-and-quantitative-easing-is-paused-but-when-will-it-return.html
So 'My Uncle'* Mervyn at the Bank of England pawnshop has been buying £200Bn of gilts.
Now that selfsame BoE has cut interest rates to an historical low; this has caused a corresponding rise in the price of gilts. So, the BoE is buying at high prices and the financial institutions which were holding the stock have made a tidy profit with which to pay bonuses.
Alternatively, the opportunity has been created for the institutions to make arbitrage deals between the Treasury's Debt Management Office and the BoE.
Roll on a couple of months and we see that the inflation number is not a “blip”.
The BoE raises interest rate; gilt prices fall correspondingly.
The BoE now starts to sell its holding and incurs losses.
Who is paying for this capital loss?
Presumably the cash has gone to “money heaven” as in the Iceland debacle.
* The English term of ‘my uncle’ as a euphemism for the pawnbroker dates back to the middle of the seventeenth century.
According to Tim Congdon of Lombard Street Research, the whole process "is quite idiotic, frankly". He believes that the Bank, if it ran the DMO, would simply issue fewer gilts in the first place and "quantitative easing" would be achieved by buying bank debt.
- Daily Telegraph 26/3/09
Q&A: Quantitative easing "Q&A: Quantitative easing Are there any risks?
QE is a high-risk strategy. If it is not done aggressively enough, banks will remain unwilling to lend and the crisis could drag on. To some extent that is what happened in Japan when this was tried 10 years ago. Like old-fashioned money printing, QE also runs the risk of going too far: pumping too much money into the economy and causing high inflation - even hyperinflation - as seen in 1920s Weimar Germany and modern-day Zimbabwe.
Why are the UK's actions different from 1920s Germany and Zimbabwe?
Printing money can be defined as the central bank financing of government debts. This is what happened in both 1920s Weimar Germany and Zimbabwe and what the British government will insist it is not doing, although the short-term effect is similar. According to the Maastricht Treaty, EU member states are not allowed to finance their public deficits by printing money. That is one reason why the Bank of England will buy government bonds from financial institutions, not directly from the government. The Bank believes this form of QE is different because it is "printing money" as part of monetary policy - to prevent deflation. It is not printing money to help the government finance its deficit. Also, unlike Zimbabwe, this is a temporary policy: the Bank expects to sell the government bonds back into the market when the economy recovers. "
http://news.bbc.co.uk/1/hi/business/7924506.stm 6/8/09
"an elaborate game of pass the parcel sees cash effectively shifted from one arm of government to another via third parties" - Rodney Hobson 6/8/09
So the story so far: the BoE has cuts interest rates; gilt prices have risen.
Next "the Bank expects to sell the government bonds back into the market when the economy recovers. " i.e. when interest rates will have increased; gilt prices fallen.
The BoE sustains a loss; paid for by?
http://www.telegraph.co.uk/finance/comment/7393470/A-year-on-and-quantitative-easing-is-paused-but-when-will-it-return.html
So 'My Uncle'* Mervyn at the Bank of England pawnshop has been buying £200Bn of gilts.
Now that selfsame BoE has cut interest rates to an historical low; this has caused a corresponding rise in the price of gilts. So, the BoE is buying at high prices and the financial institutions which were holding the stock have made a tidy profit with which to pay bonuses.
Alternatively, the opportunity has been created for the institutions to make arbitrage deals between the Treasury's Debt Management Office and the BoE.
Roll on a couple of months and we see that the inflation number is not a “blip”.
The BoE raises interest rate; gilt prices fall correspondingly.
The BoE now starts to sell its holding and incurs losses.
Who is paying for this capital loss?
Presumably the cash has gone to “money heaven” as in the Iceland debacle.
* The English term of ‘my uncle’ as a euphemism for the pawnbroker dates back to the middle of the seventeenth century.
According to Tim Congdon of Lombard Street Research, the whole process "is quite idiotic, frankly". He believes that the Bank, if it ran the DMO, would simply issue fewer gilts in the first place and "quantitative easing" would be achieved by buying bank debt.
- Daily Telegraph 26/3/09
Q&A: Quantitative easing "Q&A: Quantitative easing Are there any risks?
QE is a high-risk strategy. If it is not done aggressively enough, banks will remain unwilling to lend and the crisis could drag on. To some extent that is what happened in Japan when this was tried 10 years ago. Like old-fashioned money printing, QE also runs the risk of going too far: pumping too much money into the economy and causing high inflation - even hyperinflation - as seen in 1920s Weimar Germany and modern-day Zimbabwe.
Why are the UK's actions different from 1920s Germany and Zimbabwe?
Printing money can be defined as the central bank financing of government debts. This is what happened in both 1920s Weimar Germany and Zimbabwe and what the British government will insist it is not doing, although the short-term effect is similar. According to the Maastricht Treaty, EU member states are not allowed to finance their public deficits by printing money. That is one reason why the Bank of England will buy government bonds from financial institutions, not directly from the government. The Bank believes this form of QE is different because it is "printing money" as part of monetary policy - to prevent deflation. It is not printing money to help the government finance its deficit. Also, unlike Zimbabwe, this is a temporary policy: the Bank expects to sell the government bonds back into the market when the economy recovers. "
http://news.bbc.co.uk/1/hi/business/7924506.stm 6/8/09
"an elaborate game of pass the parcel sees cash effectively shifted from one arm of government to another via third parties" - Rodney Hobson 6/8/09
So the story so far: the BoE has cuts interest rates; gilt prices have risen.
Next "the Bank expects to sell the government bonds back into the market when the economy recovers. " i.e. when interest rates will have increased; gilt prices fallen.
The BoE sustains a loss; paid for by?
Saturday, 6 March 2010
Good government costs less with Conservatives
Dave has just posted:
http://blog.conservatives.com/index.php/tag/taxpayers/
My submission:
Public sector pensions are a huge problem as is amply illustrated in the report from the Taxpayers' Alliance this week.
Reform must start from the top.
How about a manifesto commitment on this topic?
You should start with the MPs' scheme.
http://blog.conservatives.com/index.php/tag/taxpayers/
My submission:
Public sector pensions are a huge problem as is amply illustrated in the report from the Taxpayers' Alliance this week.
Reform must start from the top.
How about a manifesto commitment on this topic?
You should start with the MPs' scheme.
Thursday, 4 March 2010
They Just Don't Get It
A continuing record of political incorrectness
2009: MPs' and Lords' expenses
February 2010: Lord Ashcroft/William Hague -
5th February 2010: Members of Parliament will get a 1.5% pay rise of nearly £1,000 from 1 April, taking their basic salary to £65,737 a year.
2009: MPs' and Lords' expenses
February 2010: Lord Ashcroft/William Hague -
5th February 2010: Members of Parliament will get a 1.5% pay rise of nearly £1,000 from 1 April, taking their basic salary to £65,737 a year.
Thursday, 25 February 2010
Whither/Wither Heathrow?
The Conservatives' position is clear
The LibDems' position is clear
The position of many in the Labour party is clear
Whatever the outcome of the impending General Election, Heathrow runway 3 will not be built.
This does, however, beg the question of how the demand for extra capacity (the estimated 222,000 extra flights which would have come with the third runway) will be met.
It is generally accepted that Heathrow “just growed”; starting from scratch it would not be there.
The problems with pollution, traffic congestion and noise with the current volume of flights at Heathrow
are apparent. These problems will be exacerbated by the more intensive use of the existing runways by improved air traffic control which will enable overlapped landing/take-off.
CO2 emissions may be reduced by new engine (open rotor) technology; however, this is noisier - it is highly probable that new generation planes with these engines could not operate from Heathrow
There is another elephant in the room: the issue of security/terrorism issue.
Consider: the ease with which the entry tunnels could be sabotaged, the appalling possibility of another 9/11 style attack on central London or Windsor – targets which could be hit only a few minutes after takeoff.
Let's call the whole thing off; close Heathrow entirely.
The Manifesto should advocate, if not enunciate, an holistic approach to the entire transport infrastructure of SE England.
The estuary airport as proposed by Boris could also encompass:
- TGV-style rail connections to UK & the continent
- the new Thames Barrier (needed in any case in consequence of climate change)
- tidal (therefore green) power generation
- wind power
- container port linked to rail for freight
This phased development would facilitate the re-development of the Heathrow area as:
- London's major rail centre linking Great Western, SouthWest Trains, Chiltern Rail, Chunnel
- rail freight interchange
- an exhibition & entertainment centre to rival to NEC
(this would also allow the redevelopment of the out-dated sites at Olympia and Earls Court)
- associated property/leisure development
The LibDems' position is clear
The position of many in the Labour party is clear
Whatever the outcome of the impending General Election, Heathrow runway 3 will not be built.
This does, however, beg the question of how the demand for extra capacity (the estimated 222,000 extra flights which would have come with the third runway) will be met.
It is generally accepted that Heathrow “just growed”; starting from scratch it would not be there.
The problems with pollution, traffic congestion and noise with the current volume of flights at Heathrow
are apparent. These problems will be exacerbated by the more intensive use of the existing runways by improved air traffic control which will enable overlapped landing/take-off.
CO2 emissions may be reduced by new engine (open rotor) technology; however, this is noisier - it is highly probable that new generation planes with these engines could not operate from Heathrow
There is another elephant in the room: the issue of security/terrorism issue.
Consider: the ease with which the entry tunnels could be sabotaged, the appalling possibility of another 9/11 style attack on central London or Windsor – targets which could be hit only a few minutes after takeoff.
Let's call the whole thing off; close Heathrow entirely.
The Manifesto should advocate, if not enunciate, an holistic approach to the entire transport infrastructure of SE England.
The estuary airport as proposed by Boris could also encompass:
- TGV-style rail connections to UK & the continent
- the new Thames Barrier (needed in any case in consequence of climate change)
- tidal (therefore green) power generation
- wind power
- container port linked to rail for freight
This phased development would facilitate the re-development of the Heathrow area as:
- London's major rail centre linking Great Western, SouthWest Trains, Chiltern Rail, Chunnel
- rail freight interchange
- an exhibition & entertainment centre to rival to NEC
(this would also allow the redevelopment of the out-dated sites at Olympia and Earls Court)
- associated property/leisure development
Tuesday, 23 February 2010
Comment on The Times web site
A view from San Diego: more to come on: SD, Tijuana, AAAS - Climate Change, Geoengineering
http://business.timesonline.co.uk/tol/business/columnists/article7038528.ece
Time to crank up the Bank’s printer
If the economy relapses, jobs may be cut, reducing spare capacity, so the Bank should start easing as soon as possible
Richard Tebboth wrote:
MK's Quantitative Easing policy (sounds like a laxative) seems to have served principally to have boosted banks' profits and the bankers' bonuses.
If he just sent every taxpayer a cheque for £1000 (if not £10,000) it would provide a much greater boost to the economy and cut out the middlemen.
February 24, 2010 5:07 AM GMT
http://business.timesonline.co.uk/tol/business/columnists/article7038528.ece
Time to crank up the Bank’s printer
If the economy relapses, jobs may be cut, reducing spare capacity, so the Bank should start easing as soon as possible
Richard Tebboth wrote:
MK's Quantitative Easing policy (sounds like a laxative) seems to have served principally to have boosted banks' profits and the bankers' bonuses.
If he just sent every taxpayer a cheque for £1000 (if not £10,000) it would provide a much greater boost to the economy and cut out the middlemen.
February 24, 2010 5:07 AM GMT
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