Eurozone QE would be catastrophic for outside investors.

  • Thread starter Thread starter morganist
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Quote from Martinghoul:

I don't want to argue with you. You're not listening to me (or not hearing what I am saying). If you were, you would realize that I have already responded to you regarding the first part of your query. As to the UK QE being "different to debt pay off QE, which would be seen in the Euro", that's just pure unadulterated nonsense. There's no way for anyone to tell a priori whether a central bank's QE program constitutes debt monetization (I guess you call it "debt pay off QE") or is used to "stimulate growth". If you believe QE is debt monetization and its primary effect is to debase the domestic ccy, this effect should be observed in all economies where the CB is engaging in QE. Finally, how the hell do you know that QE in the UK is NOT being used to pay off foreign debt? Do you have a direct line to George Osborne/Robert Stheeman, who are telling you things nobody else knows? What "reserve account" could you possible be referring to?
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No you are still missing my point. The QE is and has been stated to be to stimulate the economy in the UK. The QE I am talking about in the Euro would only be done to pay off debt under that scenario. The mechanism that creates the problem is when the actual payment happens from the debased currency to the foreign currency. There is actually a trade or transaction made which pushes the price up or reduces the relative purchasing power of the debased currency. As this was not the reason for the QE in the UK and as the transaction does not happen, at least not on a pay off instead of default level, there is nothing to push the relative price up on the pound.

Trust me you have completely missed my point. I can tell by your response that you still haven't understood it. The other posters on the thread have understood it and appreciate what I am saying. So I know there is some validity to what I saying. However the extent of the situation is debatable.

Good Luck to you.
 
Quote from morganist:
No you are still missing my point. The QE is and has been stated to be to stimulate the economy in the UK. The QE I am talking about in the Euro would only be done to pay off debt under that scenario. The mechanism that creates the problem is when the actual payment happens from the debased currency to the foreign currency. There is actually a trade or transaction made which pushes the price up or reduces the relative purchasing power of the debased currency. As this was not the reason for the QE in the UK and as the transaction does not happen, at least not on a pay off instead of default level, there is nothing to push the relative price up on the pound.

Trust me you have completely missed my point. I can tell by your response that you still haven't understood it. The other posters on the thread have understood it and appreciate what I am saying. So I know there is some validity to what I saying. However the extent of the situation is debatable.

Good Luck to you.
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I am not missing your point, which, incidentally, is trivial. You don't need to explain the basic exchange rate mechanism. As to the UK QE, do you always believe 100% what is stated by the CB/govt? Please... What do you expect them to say? "Yes, we're doing QE to devalue the currency and improve terms of trade"? (Funnily enough, if you read Merv's comments carefully enough, you'll realize he's been saying precisely that; if you look at trade-weighted GBP after QE1, you'll realize that he's been doing it, rather than just saying it). Moreover, what on Earth do you mean "the transaction does not happen"? What, are you telling me that foreign investors are refusing to accept gilt coupon payments?

As I said, you're hopelessly confused. Don't know about the other posters. Good luck to you as well.
 
Quote from morganist:

No you are still missing my point. The QE is and has been stated to be to stimulate the economy in the UK. The QE I am talking about in the Euro would only be done to pay off debt under that scenario. The mechanism that creates the problem is when the actual payment happens from the debased currency to the foreign currency. There is actually a trade or transaction made which pushes the price up or reduces the relative purchasing power of the debased currency. As this was not the reason for the QE in the UK and as the transaction does not happen, at least not on a pay off instead of default level, there is nothing to push the relative price up on the pound.

Trust me you have completely missed my point. I can tell by your response that you still haven't understood it. The other posters on the thread have understood it and appreciate what I am saying. So I know there is some validity to what I saying. However the extent of the situation is debatable.

Good Luck to you.
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For the record, the only point I can somewhat agree with is your econ 101 statement regarding inflation theory. As far as your thoughts concerning QE, I believe you are way off base... but this horse has been beaten well past dead. I respectfully agree to disagree with you.
 
Quote from kashirin:

maybe money just don't exist all?

Fed bought 1T$ bonds from banks and banks bought those 1T$ debt from the government and government spent those money and injected 1T$ fresh new money into the economy which boosted oil from $30 in 2008 to $100 in 2011 and gold from $700 to $1600


so is it just accounting?
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I like the Kyle Bass point. When he saw Barney Frank, Frank informed him that the US had just given the IMF fund $50billion (or some such number). Bass said 'how can we afford it', Frank replied 'we didn't actually give them any cash, it's just an entry in a ledger'.

So Bass said why not 'give them' £20trillion :)
 
Quote from Martinghoul:

I am not missing your point, which, incidentally, is trivial. You don't need to explain the basic exchange rate mechanism. As to the UK QE, do you always believe 100% what is stated by the CB/govt? Please... What do you expect them to say? "Yes, we're doing QE to devalue the currency and improve terms of trade"? (Funnily enough, if you read Merv's comments carefully enough, you'll realize he's been saying precisely that; if you look at trade-weighted GBP after QE1, you'll realize that he's been doing it, rather than just saying it). Moreover, what on Earth do you mean "the transaction does not happen"? What, are you telling me that foreign investors are refusing to accept gilt coupon payments?

As I said, you're hopelessly confused. Don't know about the other posters. Good luck to you as well.
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No you are still not getting it.
 
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