Bank of England first in G7 to roll back quantitative easing. 💲

It was already announced. Should reduce inflation but will also likely have an upward pressure on interest rates charged by banks (although it means the actual rate setting by the boe can be less aggressive)

/Awaits the mmt lot claiming it's all made up

We won't know whether or not it's good for the economy until BoE sells substantially more; sale to date is less than 0.09% of the total holding.
It doesn't matter what the MMT proponents say as that is not economic orthodoxy.

to save time

I can't say enough times, QE isn't debt, and has no implications for the economy that anyone can adequately explain. 

It doesn’t matter what the MMT proponents say as that is not economic

Q/E is not MMT. There is of course a relationship but MMT proponents simply acknowledge the mechanics and the almost go around the houses approach of Q/E to justify 'borrowing'.

It's a typically stupid and contradictory move by the BoE.

It won't in any way impact inflation all you're doing is swapping bonds for reserves. No net change. Especially when inflation has been driven by supply shocks.

I know this area is complex but people should spend time to understand what Q/E actually is. Too much conflation between MMT and printing money. Especially from the right.

In fact like everything the BoE seems to do it won't benefit the real economy.

I expect long term the BoE will eat their own choices and have to do more Q/E as the government eventually has to deficit spend more money into the economy or face depression.

The idea of 'chesp money' is economic garbage designed to keep the neoliberal arguments going. There is no such thing as cheap money - the BoE is the government's bank and is the sole supplier of net £££ to the economy. It doesn't produce cheap money. It's a ridiculous observation not supported by any logic.

See here for a bigger picture:

https://twitter.com/RichardJMurphy/status/1587366410002522112?t=jRH4EhknbaIS_9ho51uP6g&s=19

Also we will probably be the first in the G7 to make a mess of everything as usual.

What we are witnessing now is the establishment punishing everyday people for their long term mistakes at managing the economy.

Hence it's all shoring up austerity 2.0. This is political choice.

https://twitter.com/andyverity/status/1585563768599330816?t=iRKXqrI_FeiQ5Owuvconew&s=19

Also this is technically incorrect as the Fed has already performed Q/T - on and off very recently, and 2018.

So the title is completely incorrect.

No coincidence despite the strong dollar things are starting to look very grim for the US.

Look to the Fed today for rate decisions. Could be an interesting one.

If the BoE sells a bond then assume the buyer was already liquid with the capital. Swapping an asset for an interest bearing one.

No immediate net influence on money hence the total misunderstanding of the relationship between Q/E and inflation.

Seems like the Chairman of the BoE is running the economy and has made the decision that recession and austerity is the desired outcome. And we have a PM that has been selected by the markets to comply with that.

The Fed will raise by the already baked in 75bps. The interesting part will come when they do not give one piece of notice about any future pivot point (still raising but at a slower pace, 50bps) which the market is desperate for.

That will make Friday's Non-farm payroll exceptionally important. If comes in strong don't try catching the falling knife.

5lab
Full Member

It was already announced. Should reduce inflation

Inflation's being overwhelmingly driven by other factors. It's debatable whether QE has actually affected inflation in the real world at all, but certainly nobody can measure it and the main drivers have been crimea, brexit, and rich people's yacht money.

Mystic Northwind predicts that there are no quantifiable changes that can be reliably laid at the door of this change. But when inflation does fall in the future, people will declare it to be connected, even if it's years from now.

Buy high, sell low. Obviously.

Inflation’s being overwhelmingly driven by other factors. It’s debatable whether QE has actually affected inflation in the real world at all, but certainly nobody can measure it and the main drivers have been crimea, brexit, and rich people’s yacht money.

completely agree that its being driven by other factors - at the same time the BOE has a very limited set of tools with which to counteract inflation - QE (both directions) and interest rates. Selling bonds back to the open market should absorb some money that would otherwise be invested in businesses in some form, which should slow down the economy to some extent and thus calm inflation, by some amount. In the same way that you can't 100% link interest rate changes to inflation, I think this will have a measurable effect, but you wouldn't be able to scientifically demonstrate causation (in the same way you can't for nearly any government policy)

That will make Friday’s Non-farm payroll exceptionally important. If comes in strong don’t try catching the falling knife.

@Ro5ey what does that mean? (not being facetious!)

Non-farm payroll is the main US employment figure. If it is reported higher than expectations (or this time, in-line with expectations) that will be seen as inflationary and the Fed's pivot point will move out to the new year.

A good/bad figure.

Good in the sense of a strong jobs market/strong economy.... bad in the sense of strong inflation/higher rates/poor stock market performance.

The Stock market will dive as the expectation over the last two weeks is that the pivot point maybe December's meeting. Don't try and pick the bounce or catch the falling knife.

Thanks, rest makes sense now I know what 'non-farm payroll' is. I guess farming is excluded as it would vary massively seasonally.

So if the government creates endless money to pay for imports which is presumably transferring an economic cost to the exporting country,  then what happens if the exporters don't want to accept your currency anymore?

Not sure it really works like that, how many countries do you think are going to refuse to take GBP, besides lots of imports are paid for in USD anyway which just makes us lose out not the importer. Imports are really paid for by either the central bank increasing their foreign currency reserves, or exporting to offset import costs. With a weak GBP we aren't in such a bad position for exporting as foreign buyers will have decent purchasing power against us, but we haven't exactly made best use of that with Brexit and low domestic manufacturing output.

At the very far end of the scale you get what Sri Lanka has had but Britain is a million miles away from that point...

Not sure it really works like that, how many countries do you think are going to refuse to take GBP

It happened in the 70s following a sterling crisis, when people say "that will never happen" regarding financial matters, I get nervous.

or exporting to offset import costs

> checks how that is going <

Bugger.

The exporting power of a low pound is overblown in the post Brexit landscape. Sorry. It helps, but not enough to offset the hassle, cost and uncertainty of including our firms in supply chains.

when people say “that will never happen” regarding financial matters, I get nervous

Especially when it’s “that will never happen to Britain”.

We're in a very weird situation of high inflation but (what looks like) a contracting economy. Won't rising interest rates just make people save more? Arguably, this will cause a further contraction.
The only solutions I can see are an end to the war in Ukraine and improvements in trade e.g. loosening of immigration laws to boost output.