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Financial help please...

Community Veteran
Posts: 7,149
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Registered: 30-08-2007

Financial help please...

SWMBO from time in her unfortunate post stroke limited grip on reality asks when, the news features the UK financial crisis, Why? can't we just print some more money.
Well I no we can't do just that (quantitative easing noted)  I launch into a long complex well reasoned answer but; wife's eyes glaze over and I know she's not listening any more. And certainly doesn't change her opinion.
Can anybody help with an short easy to understand answer in a few words please?
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Community Veteran
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Re: Financial help please...

As I understand it:- Printing more money, puts more money in circulation which pushes down the value of the pound which in turn increases inflation, which increases the cost of imports.
(Say we double the £'s in circulation the new £ would be the Old 50p, litre of fuel would be NewPound £2.80, but your wages would only have increased by a fraction of that)
Zimbabwe is a classic example, everybody is a millionaire, but a loaf of bread costs $ZIM 2 million.
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Re: Financial help please...

I remember Denis Healey being asked this by a young lad (I think) on Jim'll Fix It back in 1978ish and he gave a very clear easily-understood answer. Been searching for a clip but to no avail Sad

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David_W
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Re: Financial help please...

From my (admittedly limited) understanding.  We sell our debt in the form of bonds, government guarantees that they will buy back the bonds with interest.  If we were to print loadsa money the value of the bonds would drop through the floor, no one would want to buy them as their value is a bit on the worthless side so we end up with debt we can't sell so we go broke.  That's my understanding of how we handle the debt.
alanf
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Re: Financial help please...

Large  numbers are too difficult to comprehend. The best explanation that I heard many years ago reduced the explanation to an island with a small population and very limited resources.
Ellis
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Re: Financial help please...

Quote from: Petlew
Can anybody help with an short easy to understand answer in a few words please?

Don't bother, if she really is in that state, leave her be. She's probably happy not knowing.
Community Veteran
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Re: Financial help please...

journeys seems to have the right explanation as I understand it. Print too much money and that's when you see people having to take a wheelbarrow of cash with them to the supermarket.
Quantitative easing has a limited place in the economy. It has to be very limited to prevent inflation rising at a level that destroys the general economy.
Community Veteran
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Re: Financial help please...

We keep hearing how bad the euro is doing but at one time the exchange rate for the £ was much higher so on that basis should we be asking how bad is the £ ?
VileReynard
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Re: Financial help please...

OTOH The $/£ rate is still pretty good - so they can't be pleased either!

Community Veteran
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Re: Financial help please...

The £.vs $ vs Euro are all in downward trend against the background commodity prices.
Plot any of them against the Swiss Franc, Norwegian Krona or Australian $ (as examples), it shows they are all doing as bad as each other.
Compare each with the cost of a loaf of bread gives a more meaningful exchange rate.
Because of runaway inflation back in Germany in the 1920 is the reason why Merkel is dead against the ECB (1)  going for QE on the Euro, Germany has  experienced hyper-inflation .
But why she’s concerned about the English Cricket Board (1), I’ve no idea, they have other problems. Grin
johnnybebad2000
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Re: Financial help please...

and the money always streams in the same directions so the rich get richer and the poor get poorer.
Government should be focusing more on stopping million pound bonuses being paid to failing bankers and getting the government owned banks to start showing a profit.  Just think how much money the government will get back when the RBS share price goes up!! 
Isnt funny how the banks that havent been "bailed" out are able to show a profit?
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Re: Financial help please...

What I don’t understand, banks like RBS, Lloyds/TSBhave been ‘stress tested’ to prove they have sufficient 'assets' to prevent a run on the Bank.
What are those assets?, among other things, Greek & Italian bonds.
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Re: Financial help please...

Quote from: journeys
As I understand it:- Printing more money, puts more money in circulation which pushes down the value of the pound which in turn increases inflation, which increases the cost of imports.
(Say we double the £'s in circulation the new £ would be the Old 50p, litre of fuel would be NewPound £2.80, but your wages would only have increased by a fraction of that)
Zimbabwe is a classic example, everybody is a millionaire, but a loaf of bread costs $ZIM 2 million.

Best explanation I've seen and couldn't of put it much better myself.
Quote from: journeys
What I don’t understand, banks like RBS, Lloyds/TSBhave been ‘stress tested’ to prove they have sufficient 'assets' to prevent a run on the Bank.
What are those assets?, among other things, Greek & Italian bonds.

No wonder the CEO of Lloyds is off with stress then.
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