http://www.bbc.co.uk/news/business-18448636

'Jesus, can you believe they fell for it again?' a banker was heard to ask...

Will it be more of the "no-one wants to borrow" arguement they have used.

Not surprising when the banks borrow at 0.7% and try to lend at 8.5-10%. Not to mention credit card rates at 18-20% and more. Get the government to get the lending rates under control.

At a reasonable rate my (stable and creditworthy) buisiness would borrow 150k to build an extension. Provides work for the building trade chain short term and probably 6-8 permanant new jobs.

It's crazy. They're lending the banks money at preferential rates (presumably that means below LIBOR), on the condition that they lend it to other people, presumably at a significantly higher rate of interest. Why not cut out the faff and just hand the banks huge piles of our money? That's effectively what they're doing. The banks will skim the difference as extra profit and nobody else will be any better off.

Frankly, the mere sight of Gideon is beginning to turn my stomach. His only idea of fiscal policy seems to be 'give the banks more money, it'll turn out alright in the end'.

Jon

At least 'Gideon' probably knows what a fiscal policy is. The subject here is an expansion of the money supply, which makes it monetary policy.

Of course the banks are going to use arbitrage, that's what they exist for. Any commercial bank that doesn't take funds paid for at a low rate and lend them at a higher one is going to be in a lot of trouble. That is exactly what they do with your current account in case you hadn't noticed.

As an act of monetary policy, it looks fairly sensible. It's a way of printing money and moving it beyond the banks to their customers. It replaces a QE system that also worked fairly well but was mostly use to tidy up banks' balance sheets. In either case, the purpose of a policy like this is to have more money sloshing around so it gets used to do stuff, and to make bonds a slightly less tempting investment, which should push a little capital into equities where it ought to be a bit more active.

It may not be perfect (I'm sure pension funds will get grumpy again), but it isn't crazy.

Possibly true, although I'd argue that every initiative is not by definition policy. If you're pretty much flying by the seat of your pants and appear to gave no plan b, 'policy' is exactly what it isn't, or at least shouldn't be described as.

While I'm sure your argument is similar to the one he would have used in cabinet and will use to the press should he be asked, I fail to see how doing effectively the same thing he's done two times before to pretty much zero effect is suddenly going to make a difference this time. He's still got no 'stick' to force the banks to do what he wants them to do and even if he did, I have no confidence he'd have the guts to wield it.

I guess we will see whether this has an effect or not. Care to make a small wager to charity?

Yes but.

My dislike is for the degree of difference between what they borrow at and what they lend at. Smacks of usury.

Now there's a biblical word.

Fine, we shall from this day forward replace "policy" with "thingy" or "Whoopsie" when discussing actions performed by people whose middle names inspire rage within us.

No politician should ever under any circumstances be able to interfere with the running of a bank - even a state owned one. It leads to corruption and that stuff is hard to shift.

I don't think you have any evidence that all the QE that went before had zero effect. To describe this as effectively the same as QE is ambiguous; if monkeys are effectively the same as bears because they all poop in the woods then yes, you are right. Otherwise, possibly not so much.

I can just picture a posh Tory saying whoopsie when their thingy has backfired on them.

His middle name is merely a moniker he's become referred to by, it's his lack of competence, imagination, comprehension and nerve that bother me. 'enrage' though is far too strong a description. I haven't strayed into capitalising everything.


Right. You're suggesting that should he actually make some active effort to enforce his plan (I think it's fair to call it that at least) rather than just asking the banks nicely if they will play along it will somehow lead to him becoming corrupt? I didn't suggest he should nationalise the banks, merely that his method of.. benign encouragement has proved to be unsuccessful.


I don't need to have. Sans evidence that something is working, the simple logical conclusion to come to is that it isn't, given a reasonable passage of time. No economic indicator says it is working and he's been trying it for, what, 18 months? To continue with a second or third attempt at the same plan surely what's required is some evidence that it is succeeding, not merely a lack of evidence that it isn't. The money he's spending doing it could be put to other uses, so surely to continue he has to provide evidence that this is a good use of the public purse?

The other relevant question is of course is if it had worked the previous two times he's tried it, why is he having to try it again? Wasn't the problem it fixes fixed by the previous two attempts?


If monkeys and bears both looked and quaked like ducks, I'd call them ducks. His plan (apparently his only plan) is to incentivise the banks to significantly increase lending to businesses using public funds, either directly or indirectly, and thereby promote the economy to growth, create jobs etc... This has failed twice already, to the detriment of everyone expect the banks, frankly. Yet here we are a third time, hoping this time the banks will feel like playing ball. There are alternative plans and other nations which have tried them have returned to growth or at bare minimum not suffered a return to recession. We haven't returned to growth in any consistent way and have slipped back into recession. How exactly do you correlate that with his plan being a success?

Jon

A politician can use his bully pulpit to cajole, or he can stump up funds. In the past he used the former, now he is switching to the latter.
I didn't say the world instantly turns upside down and Gideon must become corrupt. It's just that once politicians start telling banks who to lend money to (aside from an instance like this where the politicians also supply the money), then the temptation is always there to extend that and start meddling further. Politicians start to direct investment to projects and companies they favour, and then the whole system gets messy.


I'm sorry, you aren't doing a thing there to justify your claim that QE didn't work. Against that I would point out that the IMF (who do know the difference between fiscal and monetary policy) recommended monetary easing in May
http://www.imf.org/external/np/ms/2012/052212.htm
You don't know how to look at an economic indicator and judge whether it says the things you claim, they do.
I don't accept that you can honestly claim to know that we would be better off or even no worse than we are now without the previous QE programs.

Have you ever been to a dentist and had your teeth fixed? If so you obviously will never need to do that again?


Cool. Well it's a completely different thing, so obviously you are not good at spotting ducks either. QE that went before was money printed by the government, and then used by the government to buy its own outstanding debt. This is money printed by the government, and then lent via banks to companies for the issuance of new debt. They are massively dissimilar except for the fact that they come under the general heading of monetary loosening and credit easing.

ShockWaffle I admire your patience in discussions with these homebrewed economists. They read Metro or CityAM every other morning and suddenly they feel like they could run BoE as a hobby and sort out current economic mess over a lunch break. I've given up on joing the debate on ecomomics on this forum, life is just too short to argue with car mechanics about economics. One has actualy told me (in real life) to return my degree in economics because I tried to explain to him that "Debt as money" comic on youtube is just BS...

Aww, we love you too.

The thing is the vast majority of the general public are home-brewed economists. Sure, we don't have degrees in economics, but we live in a real world where we have to deal with money and cash-flow and buying stuff to make ends meet. It's great to be edumacated by the Bigger Brains, but sometimes we just have to call it like it looks like to us.

My issue isn't really to do with that though. What causes me annoyance is that too often the arguments are disingenuous. The purpose and form of the proposal we are discussing is complex and there are aspects which probably none of us but Koli would get. But because we (including me) don't like the guy who makes the announcement, some are over eager to hate the idea on ad hominen principle.

Tribalism, whereby otherwise bright people choose to ignore rational argument or any kind of evidence, making snap judgments based solely on the basis of a perceived party allegiance, is the cancer of the body politic. The logic of being right in everything because the enemy are all rapacious, incompetent fifth columnists of the apocalypse is seductive because it allows us to turn our brains off and neglect our own duties as voters.

Politicians get to talk about stuff we can't comprehend, and instead of worrying about us taking the time to work out if they are frauds, they know that we can be sold cheap fairy tales that will maintain the status quo without them having to get anything right. It works ok most of the time because the political idiot theatre is largely for show, and all the important business of government is handled by relatively competent and largely honest (enough) technocrats. But the public is drip fed a series of meaningless controversies to be debated by means of vacuous soundbites, and that leaves us ill prepared to actually take serious decisions when they come along.

Everyone who participates in tribal allegiance politics is party in my view to the conspiracy of inane political theatre that serves only to undermine the value of representation. It is quite plausible that a Tory would be doing the right thing and for the right reason, even the dreaded Gideon.

Lol, I had lots of fun with that one. I remember trying to explain to one guy that the value of gold is exactly as imaginary as that of money. I think the notion caused him to haemorrhage.

The entire system is completely arbitrary and artificial. We (being the human race) could quite literally wipe away the "debt crisis" and all associated nonsense at the stroke of a pen. How's that for economics?