Monday, January 12, 2009

Wheel out the photocopiers, Darling!

Gordon Brown and Alistair Darling, yesterday.

A few days ago, we heard that Brown and his badger-faced sockpuppet were comptemplating indulging in a bit of "quantitative easing". No, that doesn't mean that Gordon is going to remove his arm from Alistair's arsehole, nor that Darling is going to remove his tongue from Brown's—it means that the hapless duo are going to print more money.
Alistair Darling is considering printing more money in an attempt to ease the credit crunch.

As interest rates appear certain to fall to an historic low today, the Chancellor and Mervyn King, the Governor of the Bank of England, are looking at expanding the money supply by billions and using the extra cash to buy assets ranging from government or commercial debt to private equities.

And on December 5th, Guido reported that there was something odd in the Banking Bill.
Guido is suspicious about this seemingly innocuous amendment in the new Banking Bill:
Banking Bill
Part 7—Miscellaneous

Weekly return
Section 6 of the Bank Charter Act 1844 (Bank to produce weekly account) shall cease to have effect.

The 1844 Banking Bill ensured transparency in the operations of the Bank of England. It has been good enough for over 164 years.

As Guido reported yesterday, the Telegraph has now cottoned on to the story...
The Government is set to throw out the 165-year old law that obliges the Bank to publish a weekly account of its balance sheet – a move that will allow it theoretically to embark covertly on so-called quantitative easing. The Banking Bill, which is currently passing through Parliament, abolishes a key section of the law laid down by Robert Peel's Government in 1844 which originally granted the Bank the sole right to print UK money.

Debating the issue in the House of Lords recently, Lord James of Blackheath, a Conservative peer, said: "Remove [this] control and there is nothing to stop an unreported and unmonitored flooding of the money market by the undisciplined use of the printing presses.

"If we went down that path we would be following a road which starts in Weimar, goes on through Harare and must not end in Westminster and London. That is the great fear that the abolition of that section will bring about – but the Bill abolishes it."

So, our monocular PM and his freaky puppet start putting a Bill through that will—quietly, quietly—abolish one of the major controls that we have over the Bank of England...

... and then Blackadder and Baldrick announce that they are contemplating the printing of more cash.

Coincidence? I think not.

UPDATE: Chris Dillow thinks that I am spouting a load of wibble...

UPDATE: Capitalists at Work outline why Chris Dillow's points are not entirely pertinent. In other words, they disagree.


Anonymous said...

No point getting angry. These tossers have screwed up the country, and will continue to do so. Our anger won't change the situation. Better just buy some gold and wait for the hyperinflation.

Roger Thornhill said...

He WANTS to trash Sterling so he can have a cast-iron excuse to adopt the Euro and then get some life-long cosy sinecure inside the belly of the Beast and above the law as a reward.

If he is caught before it happens, that is not good enough.

Brown is a traitor of the lowest water.

Henry North London 2.0 said...

I have a rather fetching five billion Mark note over on my blog

Its green

I wouldnt mind if they were printing one pound notes

I miss those

Its the one attraction of Scotland and Jersey of getting pound notes in your change

Or have Scotland dispensed with them aswell?

Well John when should we buy the bullion

Now or in a few weeks?

Word verification hodie ut ( hodie ie today and ut latin ( I forget what that means)

I shit ye not

Martin Meenagh said...

There were actually two little noticed banking provisions, in separate bills, before christmas. One was the one you've mentioned. Another now allows the government to seize and redistribute 'dormant' bank accounts which no one has been using to 'good causes'. The period of qualification at the moment is 15 years, but the principle that the government could reach into your bank account and take it away if you are not using it for some reason, after a period which shouldn't really be classed even as a generation, has been established.

Watch out and buy gold!


As in America,the communists are handing control of the money supply to jews to unaccountably rip the wealth of our nation from us.

Anonymous said...

Gordy and Darling have a cunning plan!

Anonymous said...

Now Now DK, don't be unfair.

Blackadder was actually very intelligent and cunning and Baldrick always meant well.

By contrast, Gordon Brown is a moron, and Alistar Darling wouldn't know "meaning well" if it dressed up as a badger and bit him on the arse...

Henry North London 2.0 said...

Oh yes I have dormant accounts with pennies in them well less than two quid does this mean that Gordy is taking my money?


Anonymous said...

Henry, it is a while since I got a pound note in my change, so I think they are disappearing here in Scotland.

So, for that matter, are fivers, but that is a cash machine problem in the main.

Darren Jones said...

LA has suggested an alternative to creating money with a magic wand and a printing press, it involves getting money to the people it is owed to. The idea is fleshed out on the LA blog. LA would be obliged if anyone could find a hole in this "cunning plan" no one has to date, yet no politician LA has spoken to has carried it forward (or it gets binned as it was not in the Great Leaders plan). LA really does require an active critique of the idea.


Anonymous said...

Well I think it`s a good idea.
They could print loads of fivers and send them to us.
We could then go down to the post office to pay our taxes, National Insurance , car tax, telly tax etc.
Or just post them back and call it square.

Earthlet Nigel said...

Ah yes the Michael Foot School of Economics. Social unrest anyone?

Harry J said...

The amount of notes and coins in circulation is about 3% of the overall money supply. The remaining 97% is debt in some form or other. It's numbers on a computer screen. The money supply increases year on year and with it comes inflation. Inflation is an inevitable result of a fractional reserve banking system and is essentially a hidden tax. A system that gives a monopoly on creating money, out of thin air, to private, commercial, banks. What they don't 'create' is the interest they charge.

The money supply in the UK has more than doubled since Labour came to power in 1997. The introduction of notes and coins is the one way of increasing it that does not result in debt. This whole 'credit crunch' nonsense is completely manufactured. It's an old trick that's been played many times before. Increase the money supply and availability of credit, with the resultant debt, and cause a boom, then decrease it, using whatever excuse you can find, and cause a bust. Gordon Brown is wholy culpable in all this.

"Banking was conceived in iniquity and was born in sin. The Bankers own the earth. Take it away from them, but leave them the power to create deposits, and with the flick of the pen they will create enough deposits to buy it back again. However, take it away from them, and all the great fortunes like mine will disappear and they ought to disappear, for this would be a happier and better world to live in. But, if you wish to remain the slaves of Bankers and pay the cost of your own slavery, let them continue to create deposits".- SIR JOSIAH STAMP, (President of the Bank of England in the 1920's, the second richest man in Britain):

"Banks lend by creating credit. (ledger-entry credit, monetized debt) They create the means of payment out of nothing." -- Ralph M. Hawtrey, Secretary of the British Treasury

"The few who understand the system, will either be so interested from it's profits or so dependant on it's favors, that there will be no opposition from that class." -- Rothschild Brothers of London, 1863

"We are completely dependant on the commercial banks. Someone has to borrow every dollar we have in circulation, cash or credit. If the banks create ample synthetic money we are prosperous; if not, we starve. We are absolutely without a permanent money system.... It is the most important subject intelligent persons can investigate and reflect upon. It is so important that our present civilization may collapse unless it becomes widely understood and the defects remedied very soon." -- Robert H. Hamphill, Atlanta Federal Reserve Bank

Furry Conservative said...

Goodbye Pound. Oh, and goodbye savings as well.

Harry J said...

Social unrest anyone?

Do you think all the 'anti-terror legislation was for Muslims? They're ready and waiting for 'social unrest'.

Sue said...

HE thought it was a "cunning plan" and no one would notice I expect!

Dave said...

Roger @ 9.41 wrote "He WANTS to trash Sterling so he can have a cast-iron excuse to adopt the Euro"

What makes you so sure that the Eu will let us join. The EU is struggling with the Greek, Italian, Spanish, Portuguese and Irish economies. Allow the UK to join?

I don't think so

Stew said...

ZANULabour are now taking economic advice from Mugabe.

Good Luck with that.

El Draque said...

This may be arousing fears of the wheelbarrow-for-your-wages without due cause.
The Sunday Times had an article.

Which explains how it works. Yes it creates more money for banks to lend. No they aren't printing fivers.
But it's still, as far as I could work out, inflationary. It has to be - more money, fewer goods. QED.

Dr. Raymond Cocteau said...

The first thing to be seized by the government will be gold and ownership of gold deposits abroad.

We will ProtectServe you!

Anonymous said...

This is their usual modus operandi. The joining up of umpteen little dots that may pass us by.

In like manner the new law to allow bailiffs to enter homes using force (and to use "reasonable" force on occupiers who attempt to resist them) is clearly connected to government concerns that people may start refusing to pay their council tax as "pay as you throw" and other local stealth taxes are piled on them. Councils have already demonstrated their enthusiasm for resorting to the bailiffs in cases of tax arrears. This just paves the way for them. They now consider they control us and having successfully pushed us around for nigh on 12 years, the thin edge of the wedge has become very fat indeed. I never thought I would see the day when a British government legalised the violation and assault of ordinary law-abiding people, their homes and their property. But in reality it is just the continuation of a theme.

Henry North London 2.0 said...

Roger Thornhill calls them fence posts

You should check out his blog Hes been warning about this for ages

Anonymous said...

Chairman Ben S. Bernanke, Quantitative Easing Can't Work.

In a Liquidity Trap although Saving (S) is abnormally high investment (I) is next to 0.

Hence, the Keynesian paradigm I = S is not verified.

The purpose of Quantitative Easing being to lower the yield on long-term savings and increase liquidity it doesn't create $1 of investment.

In a Liquidity Trap the last thing the Market needs is liquidity. This is why, Mr Chairman, we call it a Liquidity Trap,

Force-feeding the Market won't achieve anything useful.

If short-term risk free interest rates are at 0.00% doesn't that mean that credit is worthless?

Quantitative Easing does diminish the yield on long-term US Treasury debt but lowers marginally, if at all, the asked yield on long-term savings.

Those purchases maintain the demand for long-term asset in an unstable equilibrium.

When this disequilibrium resolves the Market turns chaotic.

This and other issues are explored in my tract:

A Specific Application of Employment, Interest and Money
Plea for a New World Economic Order


This tract makes a critical analysis of credit based, free market economy, Capitalism, and proves that its dysfunctions are the result of the existence of credit.

It shows that income / wealth disparity, cause and consequence of credit and of the level of long-term interest-rates, is the first order hidden variable, possibly the only one, of economic development.

It solves most of the puzzles of macro economy: among which Unemployment, Business Cycles, Under Development, Trade Deficits, International Division of Labor, Stagflation, Greenspan Conundrum, Deflation and Keynes' Liquidity Trap...

It shows that no fiscal or monetary policy, including the barbaric Quantitative Easing will get us out of depression.

A Credit Free, Free Market Economy will correct all of those dysfunctions.

The other option would be to wait till, on the long run, most of our productive assets get physically destroyed either by war or by rust.
It will be either awfully deadly or dramatically long.

In This Age of Turbulence People Want an Exit Strategy Out of Credit,

An Adventure in a New World Economic Order.

We Need, Hence, Abolish Interest Bearing Credit and Cancel All Interest Bearing Debt.

Exit Strategy Out of Credit

A Specific Application of Employment, Interest and Money
[Intended for my Fellows Economists].

Press release of my open letter to Chairman Ben S. Bernanke:

Chairman Ben S. Bernanke, Quantitative Easing Can't Work!

Yours Sincerely,

Shalom P. Hamou AKA 'MC Shalom'
Chief Economist - Master Conductor
1776 - Annuit Cœptis.

Anonymous said...

Even The Right Monetary and Fiscal Policy Can't Get Us Out of the Depression

DIE ZEIT: Can the right monetary and fiscal policy keep the US out of a recession?

Alan Greenspan:

"Probably not. Global forces can now override most anything that monetary and fiscal policy can do. Long-term real interest rates have significantly more impact on the core of economic activity than the individual actions of nations. Central banks have increasingly lost their capacity to influence the longer end of the market.

Two to three decades, ago central banks were dominant throughout the maturity schedule.

Thus, the more important question is the direction of long-term real interest rates."

Alan Greenspan
The Great Irony of Success
© ZEIT online, 30.1.2008

If short-term risk-free interest rates are 0% doesn't it that mean that credit is worthless?

A Credit Free, Free Market Economy will correct all of those dysfunctions.

The alternative would be to wait till, on the long run, most of our productive assets get physically destroyed either by war or by rust.
It will be either awfully deadly or dramatically long.

We Need, Hence, to Cancel All Interest Bearing Debt and Abolish Interest Bearing Credit.

This Age of Turbulence People Want an Exit Strategy Out of Credit,
An Adventure in a New World Economic Order.

Exit Strategy out of Credit

A Specific Application of Employment, Interest and Money. [For my Fellows Economists]

Press release of my open letter to Chairman Ben S. Bernanke:

Chairman Ben S. Bernanke, Quantitative Easing Can't Work!

Yours Sincerely,

Shalom P. Hamou AKA 'MC Shalom'
Chief Economist - Master Conductor
1776 - Annuit Cœptis.

Harry J said...

El Draque, it's still an indictment of the present system that the economy is reliant on people or businesses going into debt in order to have enough money to function properly. Until now the Government has produced some paper with symbols and writing on them called bonds or gilts and then exchanged them with banks for more paper with symbols and writing on them called (fiat) money. In the process the Government, ie us, goes into debt. We also have to pay interest (although it's not interest in the proper sense of the word in that the Government merely agrees to redeem the bonds/gilts at a higher price). The money to pay for those bonds/gilts comes largely from either private, commercial, banks who create the money 'out of thin air'. When the UK money supply increases by around £750 billion in 10 years where else does this 'new money' come from?

If what it says in the Times article you linked to is true then the plan is for the Bank of England to buy Government bonds already owned by commercial banks. In the fractional reserve system these bonds already act as assets for the banks; against which they can lend up to 9 times (though in practice it's always slightly lower than this) their value.

My question would be, where does the Bank of England get the money to do this? It was supposedly nationalised in 1946. However, in 1977 the Bank of England formed the Bank of England Nominees Ltd. A privately owned subsidiary that effectively became the owner of the Bank of England. Of course with Royal Charter status and the Official Secrets Act it's impossible to find out exact details but one look at the board of the Bank of England shows it's very much in the control of the private, commercial, banking interests.

The idea that this reduction in the money supply is all about a 'loss of confidence' on the part of the banks is risible nonsense.

We have workers willing to work and people requiring goods and services. All that's lacking is the means of exchange to enable this to happen. We are at the mercy of private banking in collusion with governments who act in their interests. Billions available to bail out banks while pensioners go cold.

It appears that the obvious solution is for Governments to create their own money which they then spend into the economy on essential services and/or infrastructure needs. This then percolates through the economy which it allows it to function at it's optimum. Of course this relies on the trustworthiness of the particular Government which is something I don't think we enjoy here in the UK.

You see, a legitimate government can both spend and lend money into circulation, while banks can only lend significant amounts of their promissory bank notes, for they can neither give away nor spend but a tiny fraction of the money the people need. Thus, when your bankers here in England place money in circulation, there is always a debt principal to be returned and usury to be paid. The result is that you have always too little credit in circulation to give the workers full employment. You do not have too many workers, you have too little money in circulation, and that which circulates, all bears the endless burden of unpayable debt and usury." - *Benjamin Franklin Autobiography

Anonymous said...

Mr Brown I shayk mi fist at you. You took mi ideers and made dem peeple tink you is boss o dem.

No de printing of de monee is mi ideer, you leave dem to me.

yors trooly,

Anonymous said...

Call me naive but if Billions of pounds / dollars have been wiped off shares etc the why not replace this imaginary money with other imaginary money in the form of paper?
All those people who have 'lost' money could then have it back.
Does it all really matter anyway?
Money is simply a means of facilitating trade between carbon based life forms of differing intellectual or physical abilities.

There will always be winners and losers

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