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QE all over again

including Budgets
ReformedCharacter
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QE all over again

#583003

Postby ReformedCharacter » April 15th, 2023, 6:22 pm

Ambrose Evans Pritchard wrote in an article in the DT yesterday:

Brace for QE all over again, and let us get it right next time:
Current levels of inequality and threats to democracy can be tied back to the last botched QE attempt...If you thought that zero rates and quantitative easing were a bad dream that we can all forget, you may be in for a surprise. It is again becoming clear that deflation remains the overarching structural threat to the world economy.

A few brave analysts are already starting to flag a return to emergency QE as soon as next year, convinced that the US Federal Reserve and the European Central Bank have over-tightened and set in motion a deepening credit crunch.

https://www.telegraph.co.uk/business/2023/04/14/brace-for-quantitative-easing-all-over-again/

I'm no economist but since economists rarely agree with one another I don't feel too embarrassed at my ignorance by suggesting that granting reasonable pay rises to nurses, junior doctors, teachers etc. might actually be good for the economy. Perhaps those who understand economics better than me could suggest why this is a bad idea.

RC

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Re: QE all over again

#583009

Postby Nimrod103 » April 15th, 2023, 7:55 pm

ReformedCharacter wrote:Ambrose Evans Pritchard wrote in an article in the DT yesterday:

Brace for QE all over again, and let us get it right next time:
Current levels of inequality and threats to democracy can be tied back to the last botched QE attempt...If you thought that zero rates and quantitative easing were a bad dream that we can all forget, you may be in for a surprise. It is again becoming clear that deflation remains the overarching structural threat to the world economy.

A few brave analysts are already starting to flag a return to emergency QE as soon as next year, convinced that the US Federal Reserve and the European Central Bank have over-tightened and set in motion a deepening credit crunch.

https://www.telegraph.co.uk/business/2023/04/14/brace-for-quantitative-easing-all-over-again/

I'm no economist but since economists rarely agree with one another I don't feel too embarrassed at my ignorance by suggesting that granting reasonable pay rises to nurses, junior doctors, teachers etc. might actually be good for the economy. Perhaps those who understand economics better than me could suggest why this is a bad idea.

RC


The is a well known and very prescient passage in the Hitchhiker's Guide to the Galaxy about the adoption of the leaf as a currency (https://www.goodreads.com/quotes/685739 ... ould-for-a). Any more QE and we are in danger of going down the same route, with the same ultimate outcome.

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Re: QE all over again

#583010

Postby BullDog » April 15th, 2023, 7:59 pm

ReformedCharacter wrote:I'm no economist but since economists rarely agree with one another I don't feel too embarrassed at my ignorance by suggesting that granting reasonable pay rises to nurses, junior doctors, teachers etc. might actually be good for the economy. Perhaps those who understand economics better than me could suggest why this is a bad idea.

RC

Perhaps by adding hugely to an already unsustainable payroll in the NHS. Over a million employees. Plus the teachers, civil servants etc..... all queuing up with their hands out.

Country has multi decade high inflation, record peacetime levels of taxation, record peacetime government borrowing and record budget deficit with borrowing soon to exceed 100% of GDP.

No wonder the country is broken everywhere you look.

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Re: QE all over again

#583031

Postby ReformedCharacter » April 16th, 2023, 12:42 am

BullDog wrote:
Country has multi decade high inflation

Yes, but the point of the article AIUI is that inflation will supposedly fall to the point that stimulus will be needed again. Whether that is true or not is another matter.

RC

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Re: QE all over again

#583040

Postby BullDog » April 16th, 2023, 7:16 am

ReformedCharacter wrote:
BullDog wrote:
Country has multi decade high inflation

Yes, but the point of the article AIUI is that inflation will supposedly fall to the point that stimulus will be needed again. Whether that is true or not is another matter.

RC

Yes, believe it when you see it? The UK over the longer term has a pretty poor record on inflation. We now have an economy almost entirely dependent on imported goods if all kinds and consumer spending. That makes us extremely vulnerable to what happens beyond our borders and IMO even more difficult to keep a lid on inflation.

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Re: QE all over again

#583043

Postby scotview » April 16th, 2023, 9:01 am

BullDog wrote: That makes us extremely vulnerable to what happens beyond our borders and IMO even more difficult to keep a lid on inflation.


Will there come a point when faith in the UK pound will be lost, or is that a long way off ?

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Re: QE all over again

#583044

Postby Nimrod103 » April 16th, 2023, 9:03 am

BullDog wrote:
ReformedCharacter wrote:Yes, but the point of the article AIUI is that inflation will supposedly fall to the point that stimulus will be needed again. Whether that is true or not is another matter.

RC

Yes, believe it when you see it? The UK over the longer term has a pretty poor record on inflation. We now have an economy almost entirely dependent on imported goods if all kinds and consumer spending. That makes us extremely vulnerable to what happens beyond our borders and IMO even more difficult to keep a lid on inflation.


Evans-Pritchard's argument is that Globally populations are getting older and therefore less productive and dynamic, and therefore less prone to inflation. Also, he sees no let up in Global competition and trade which will continue to drive down prices (NB he and other pundits often talk of deflation, when they really mean dis-inflation. It is extremely rare for money to actually increase in buying power).

However, the push for net zero around the World (but particularly in the UK) will be highly inflationary. In the UK we continue to run big deficits, and there is no prospect of ending deficit spending, and that is highly inflationary as well. Higher public sector remuneration can be achieved either by taxing more or borrowing more. We seem to have reached the limits of taxation such that I think our economy will be seriously impaired. So borrowing it must be, and thus we go another step towards the poor house. Our only way out is to cut unnecessary public expenditure ruthlessly, but no significant polictical party is advocating that.

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Re: QE all over again

#583078

Postby 88V8 » April 16th, 2023, 11:43 am

Nimrod103 wrote:
BullDog wrote:Yes, believe it when you see it? The UK over the longer term has a pretty poor record on inflation. We now have an economy almost entirely dependent on imported goods of all kinds and consumer spending.

We seem to have reached the limits of taxation such that I think our economy will be seriously impaired. So borrowing it must be, and thus we go another step towards the poor house. Our only way out is to cut unnecessary public expenditure ruthlessly, but no significant political party is advocating that.

Limits of taxation? I do not think that Labour would agree.

Trouble with cutting expenditure is that few would vote for it, especially health. Two thirds is public services. Wearing my right-wing hat I can think of a few areas for the knife but they would not rescue us for long. Unless we restart major manufacturing, long-term we are screwed, and that would need a bonfire of environmental measures and significant wage cuts so won't happen.

Yes, I can perfectly well imagine the return of QE. We already have hints of 'stimulus' in the proposed relaxation of banking regs. Politicians have been very slow to take advantage of Brexit but they will do whatever is necessary to maintain the fiction that we can afford to carry on as we are.

V8

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Re: QE all over again

#583085

Postby 1nvest » April 16th, 2023, 12:07 pm

Nimrod103 wrote:
BullDog wrote:Yes, believe it when you see it? The UK over the longer term has a pretty poor record on inflation. We now have an economy almost entirely dependent on imported goods if all kinds and consumer spending. That makes us extremely vulnerable to what happens beyond our borders and IMO even more difficult to keep a lid on inflation.


Evans-Pritchard's argument is that Globally populations are getting older and therefore less productive and dynamic, and therefore less prone to inflation. Also, he sees no let up in Global competition and trade which will continue to drive down prices (NB he and other pundits often talk of deflation, when they really mean dis-inflation. It is extremely rare for money to actually increase in buying power).

However, the push for net zero around the World (but particularly in the UK) will be highly inflationary. In the UK we continue to run big deficits, and there is no prospect of ending deficit spending, and that is highly inflationary as well. Higher public sector remuneration can be achieved either by taxing more or borrowing more. We seem to have reached the limits of taxation such that I think our economy will be seriously impaired. So borrowing it must be, and thus we go another step towards the poor house. Our only way out is to cut unnecessary public expenditure ruthlessly, but no significant political party is advocating that.

The UK political system is its downfall. Just repeatedly pendulum swings and selling the silver (assets). China's more constant mid/longer term based political system is now transitioning from saving (selling steel at below production cost ...etc.) to one where now it will be in decades of uplifting its population from field workers to middle-class and with less need to pull in foreign currencies.

The UK is becoming no different to any other prior case where bad management (political system) has led to over-dependence upon imported goods/services/skill but where that flow stagnates to leave the population relatively poor. The typical individualistic answer is ... to emigrate. As those that can afford to move self-exile, the 1% that pay a third of the total income tax take, so that leaves the 99% remainder having to pay 50% more in taxes just to fill that hole alone.

Inflation is just another form of taxation, so yes there is a tendency for both in the UK to increase. QE is just one means to induce inflation. State can print/spend money, albeit via suggested independence between the Bank of England and Treasury, that devalues all other notes in circulation that is inclined to induce inflation.

The UK would be better served by a technocratic political system, one that planned out beyond a five year window. Stability/consistency. In contrast we're pretty much doomed to continue with the pendulum Lab/Con swings of prior decades, micro management and inconsistency/instability. Relegated to a insignificant bunch of cold/wet islands to the north of mainland continental Europe, where the majority political choice is none-of-the-above (abstainers) given that neither Lab nor Con would permit any change (more often in power despite fewer than 1 in 5 of the population having voted for them).

If there were a candidate in each constituency that stood for a technocratic system alternative, ending of the existing Parliamentary system, I suspect it could gain considerable momentum. But in the absence of that or other form of 'revolution' it will be just business as usual, managed decline. Instances such as it taking 6 months for a governing party to elect a new leader, only to replace them 40 days later, or blowing over £100Bn on wasted furlough where only some were paid to stay at home, not others, in effect making that totally pointless.

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Re: QE all over again

#583099

Postby OhNoNotimAgain » April 16th, 2023, 12:39 pm

88V8 wrote:. Unless we restart major manufacturing, long-term we are screwed,
V8


Why is manufacturing so special?

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Re: QE all over again

#583105

Postby 1nvest » April 16th, 2023, 12:52 pm

OhNoNotimAgain wrote:
88V8 wrote:. Unless we restart major manufacturing, long-term we are screwed,
V8


Why is manufacturing so special?

Take British Steel for instance. China competed by selling it at below production cost that British Steel simply could not compete with. Following closure that leaves them in a position of monopoly where no matter what the price you have to pay in the absence of domestic production.

Would have been better to levy import duties that maintained price comparison/advantage for domestic producers, but that comes with a higher ongoing cost and more often Parliament will opt for lower cost today and kick the higher cost that entails mid/longer term into the grass.

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Re: QE all over again

#583120

Postby dealtn » April 16th, 2023, 1:19 pm

ReformedCharacter wrote:Ambrose Evans Pritchard wrote in an article in the DT yesterday:

Brace for QE all over again, and let us get it right next time:
Current levels of inequality and threats to democracy can be tied back to the last botched QE attempt...If you thought that zero rates and quantitative easing were a bad dream that we can all forget, you may be in for a surprise. It is again becoming clear that deflation remains the overarching structural threat to the world economy.

A few brave analysts are already starting to flag a return to emergency QE as soon as next year, convinced that the US Federal Reserve and the European Central Bank have over-tightened and set in motion a deepening credit crunch.

https://www.telegraph.co.uk/business/2023/04/14/brace-for-quantitative-easing-all-over-again/

I'm no economist but since economists rarely agree with one another I don't feel too embarrassed at my ignorance by suggesting that granting reasonable pay rises to nurses, junior doctors, teachers etc. might actually be good for the economy. Perhaps those who understand economics better than me could suggest why this is a bad idea.

RC


I am assuming that, since this is a sensible board, this is a legitimate question. So as one that is qualified as an economist, and taught it, I would hope to have a little less of that ignorance you self-possess, and can provide some answers.

However, you go first. Define and quantify "reasonable" so I can start (note the answer will be macroeconomic given the board).

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Re: QE all over again

#583131

Postby scotview » April 16th, 2023, 1:49 pm

88V8 wrote: Unless we restart major manufacturing, long-term we are screwed, and that would need a bonfire of environmental measures and significant wage cuts so won't happen.

Yes, I can perfectly well imagine the return of QE.

V8


Good point V8

If there isn't viable, productive manufacturing where will more QE go, straight to consumer spending, continuing the housing bubble, into bank coffers and into the top 2% wealthy bank accounts, again ?

The other thing I clocked this morning on Laura Kuenssberg was the panel members continued and even accelerated requests for significantly more expenditure on the NHS. Waiting lists apparently will not fall without significantly more money, this is getting scary.

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Re: QE all over again

#583133

Postby dealtn » April 16th, 2023, 1:52 pm

scotview wrote:
The other thing I clocked this morning on Laura Kuenssberg was the panel members continued and even accelerated requests for significantly more expenditure on the NHS. Waiting lists apparently will not fall without significantly more money, this is getting scary.


Are you saying its scary that people think the only solution to the problems of the NHS is more money, or something else is scary?

scotview
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Re: QE all over again

#583135

Postby scotview » April 16th, 2023, 1:57 pm

dealtn wrote:
scotview wrote:
The other thing I clocked this morning on Laura Kuenssberg was the panel members continued and even accelerated requests for significantly more expenditure on the NHS. Waiting lists apparently will not fall without significantly more money, this is getting scary.


Are you saying its scary that people think the only solution to the problems of the NHS is more money, or something else is scary?


It's scary that the current budgets aren't enough, that a degree of callousness is creeping into the attitude towards risk of increasing deaths and that the can of looming elderly care is being kicked down the road.

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Re: QE all over again

#583136

Postby dealtn » April 16th, 2023, 2:00 pm

scotview wrote:
dealtn wrote:
Are you saying its scary that people think the only solution to the problems of the NHS is more money, or something else is scary?


It's scary that the current budgets aren't enough, that a degree of callousness is creeping into the attitude towards risk of increasing deaths and that the can of looming elderly care is being kicked down the road.


So do you tackle this by improving efficiency within the existing budget, or raise the budget higher? If the latter how, and at the expense of what?

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Re: QE all over again

#583138

Postby scotview » April 16th, 2023, 2:04 pm

dealtn wrote:
So do you tackle this by improving efficiency within the existing budget, or raise the budget higher? If the latter how, and at the expense of what?


I don't know.

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Re: QE all over again

#583143

Postby Nimrod103 » April 16th, 2023, 2:27 pm

dealtn wrote:
scotview wrote:
It's scary that the current budgets aren't enough, that a degree of callousness is creeping into the attitude towards risk of increasing deaths and that the can of looming elderly care is being kicked down the road.


So do you tackle this by improving efficiency within the existing budget, or raise the budget higher? If the latter how, and at the expense of what?


We seem to have gone down the NHS rabbithole again, but no matter. I recall reading that the UK health spend is comparable to some European countries, but about 10% lower than France and Germany. This may be an artefact of exchange rates and I don't know whether private medical care was properly accounted for, but it does suggest that we get health care in the UK "on the cheap". It begs the question, how can France and Germany afford it, if we cannot?

Anecdotally, I have been exposed to far more of the NHS in the last 5 years than I would have wanted, but it is my observation that there is a huge amount of genuine demand out there for health services, which is serviced by a lot of recruitment of all levels of staff from abroad, mainly 3rd World countries. If the NHS is not currently coping, it may have something to do with the 10 million extra residents in the UK in the last 20 years, and more who do not appear in the census results.

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Re: QE all over again

#583156

Postby 88V8 » April 16th, 2023, 3:31 pm

Nimrod103 wrote:
dealtn wrote:So do you tackle this by improving efficiency within the existing budget, or raise the budget higher? If the latter how, and at the expense of what?

Anecdotally, I have been exposed to far more of the NHS in the last 5 years than I would have wanted, but it is my observation that there is a huge amount of genuine demand out there for health services, which is serviced by a lot of recruitment of all levels of staff from abroad, mainly 3rd World countries. If the NHS is not currently coping, it may have something to do with the 10 million extra residents in the UK in the last 20 years, and more who do not appear in the census results.

Yes, that may well be a factor and of course recent immigrants have not contributed through taxation.

And the NHS rabbithole, well it does eat 18% of govt expenditure and if the erosion of NHS salaries were to be made good - and I have sympathy with that - would eat a lot more.
But I suspect a lot of the increase has to do with the fact that on the whole we are getting older, and of course fatter.
In the long term the fatness will help as it limits life span, but that will take a while to kick in.

In the meantime what electorally palatable solutions are there... rationing by type of procedure &/or cost?
Refusing treatment to the fat, those on drugs, alcohol, tobacco (insert prejudice to taste) or over a certain age?

Solutions are easy... it's selling them to the electorate that's difficult!

V8 (in his 70s)

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Re: QE all over again

#583169

Postby Tara » April 16th, 2023, 5:48 pm

Nimrod103 wrote:
dealtn wrote:
So do you tackle this by improving efficiency within the existing budget, or raise the budget higher? If the latter how, and at the expense of what?


We seem to have gone down the NHS rabbithole again, but no matter. I recall reading that the UK health spend is comparable to some European countries, but about 10% lower than France and Germany. This may be an artefact of exchange rates and I don't know whether private medical care was properly accounted for, but it does suggest that we get health care in the UK "on the cheap". It begs the question, how can France and Germany afford it, if we cannot?

Anecdotally, I have been exposed to far more of the NHS in the last 5 years than I would have wanted, but it is my observation that there is a huge amount of genuine demand out there for health services, which is serviced by a lot of recruitment of all levels of staff from abroad, mainly 3rd World countries. If the NHS is not currently coping, it may have something to do with the 10 million extra residents in the UK in the last 20 years, and more who do not appear in the census results.


This is of course one of the main reasons for the deficits, the economic problems, and the general collapse of everything in the UK. The continuing mass and uncontrolled immigration of millions of illegal and economic migrants from mainly 3rd world countries. This has resulted in a neverending drain on the UK taxpayer who has to foot the bill for the free welfare, the free housing, and the free healthcare of these migrants and their extended families in perpetuity.

And apparently this problem of uncontrollable immigration is “unsolvable” for the UK no matter which Government is in power. So both Conservative and Labour seem to be quite happy with this situation. As long as this situation continues the UK will inevitably continue to decline in every way.

Funny how China and Japan and most other countries in Asia seem to have no problem in controlling their borders.


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