Ritchie still doesn’t understand QE does he?

The Bank of England agreed to do another £6.3 billion of quantitative easing today

No, maturing bonds were repaid: they put the money into more bonds. That is, they maintained QE, not did more.

Let’s be clear: that means the UK is still doing quantitative easing to support the finance sector.

That £6.3 billion could instead be used to capitalise a National Investment Bank.

Capitalising an NIB with that money would be reversing QE. The very thing that Ritchie assures us will never happen.

Sigh.

12 thoughts on “Ritchie still doesn’t understand QE does he?”

  1. The funniest thing about Murphy is that as soon as he leaves the comfort blanket of his own blog where he can delete comments, he is little more than a great fat fish in a small barrel, as the TES book review page is showing……

  2. This is terrible.

    He’s a professor of economics but the Essex wideboys in the City all understood this, why can’t he?

  3. Andrew C

    I like the last line:

    ‘there really is no defence….’

    What a narcissistic little gobshite!

    I am assuming ‘Arny old bollocks’ is asleep on the job as he hasn’t chimed in here yet to defend Murphy….

  4. Tim I assume you have the title ‘Ritchie still doesn’t understand (Insert word of choice here) does he? Saved as a Draft post…….

  5. “No, maturing bonds were repaid: they put the money into more bonds.”

    That’s an at best unclear description of what happened … it’s a roll-over, the Bank of England found willing buyers for £6.3 billion in bonds, and then paid that £6.3 billion to the holders of maturing bonds.

    If they ever fail to find willing buyers for enough bonds to pay the holders of maturing bonds, we’re in quite serious trouble.

    The £6.3 billion raised by selling the new UK government bonds was owed to the holders of the maturing UK government bonds; there wasn’t anything else the Bank of England could have bought with it without causing pensions across the world to stop paying out!

  6. So he could have posted

    Look I’m right this is more evidence that it will never be unwound or reversed as I’ve said before

    While a stretch, no one has said it would start unwinding now, it would be a point he could make to back up a position he holds

    And instead he totally misunderstood.
    Perhaps he has so many positions on different things that it must be hard to remember which version of events you need to use.

  7. “Capitalising an NIB with that money would be reversing QE. ”

    Sorry, for once I don’t understand…..

  8. NN, because you are not rolling over the existing QE but allowing the existing total of bonds bought by the BoE to reduce.

  9. Thanks for the response, Diogenes. Bear with me a bit longer! From Murphy’s words (as quoted) I understood it to mean that the £6.3 billion (QE) being used to buy more government bonds, should instead be used to “buy” shares in NIB. Admittedly, that differs from standard QE because it does nothing to push out the risk curve, but it still relies upon the BoE to create money and injecting it into the market. The only other source of the money would be the open market (which would then not be part of any QE). But I don’t think that is implied. Or am I still being dense?

  10. There were £6bn of bonds that matured. The BoE received the proceeds and bought £6bn of new bonds. Therefore the QE total remains the same. Investing that £6bn in a new financial entity reverses QE, a situation that Murph assures us will never happen, and adds a more conventional monetary stimulus which experience tells us will be totally futile, the bureaucrats investing in national champions and the mythical shovel – ready infrastructure projects. I sometimes wonder whether the Humber bridge has paid back yet.

Leave a Reply

Your email address will not be published. Required fields are marked *