Europe’s QE

Europe has decided to do one trillion of QE(running the money printing presses on overdrive). But it’s injecting the cash into the banks in the hope they’ll lend to the wider ‘real’ economy. This is of course stupid since the banks will have more paper profit at less risk from trading between each other. The actual reality of QE as done is to increase the value of fixed assets, so the more assets the greater the gain.
The truth is the reduction in the price of oil will have greater results since it’s effects are felt from the unemployed up.

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8 Responses to Europe’s QE

  1. Ed says:

    In not very knowledgeable on economics and I have to admit, when the U.S. did QE, I was very skeptical. Now that we are past our worst recession in nearly 100 years, QE appears to have helped us out and didn’t do any harm that I can see but as I said, I am not an economics expert so someone could surely point me in a different direction.

    In general, I think we are loathe to give up the old ways such as gold standards and letting economies recover naturally. But times have changed and we are global economies all interconnected and thus I try to allow my mind to accept modern ways of getting things back up and running. It’s hard to do for sure which is why things like this will probably be more readily acceptable with future generations.

    • Vincent says:

      Economics isn’t all that complex in truth. They may produce stats graphs and charts but they are generally meaningless. The truth is the average bookie would have a better grasp of risk.
      The core thing they insist on forgetting is that wealth is a meaningless term, trade is the thing. In many parts of Europe at the moment we’ve got an aging population who are guaranteed a certain lifestyle. But to provide the lifestyle you need growth, and that growth requires ongoing investment, meaning risk. Which older people are adverse.
      OK. Put it like this. In Europe at the moment inflection is 0. Meaning it is less risky to put your money under a bed than invest in small business.
      Now don’t get me wrong. I think QE is the way to go. It was in the US. But it could have been far better deployed and only resulted in a benefit because of fiscal easing that went with it. Here no such moneys will be left in the pockets of the people.

  2. Sage says:

    The lower oil prices are a big boon, but I think we (in the US) should now tax gas more (as it is done elsewhere) to keep prices a higher and use the income for infrastructure improvements. Then, if oil suddenly rises, we could reduce the expenditure for infrastructure and reduce taxes… but no one asked me. I also think the understanding of the QE in the US is still a ways in the future as it seems like we have begun to recover, but we have also ballooned our debt.

    • Vincent says:

      There’s a cut off point where fracking makes sense and what the Saudi Kingdom has done is to turn all extraction except their own a nonsense. They make money at $10 a barrel. And here’s where it gets a bit awkward. Fracking is a bit like stone rolling down a hill, if it stops it’s one hell of a job getting it going again.
      But I do think you are correct for the sake of fuel security a greater level of tax needs to be levied in the USA to even out potential economic blowouts.

  3. Kimberly says:

    I’m going to have to read about the QE to reply to your thoughts. As mentioned above by the others, I have very little knowledge of what it even means, let alone how it affects the economy.
    However, I COMPLETELY agree on the gas prices. We’ve seen them drop significantly over the last couple of months, and I know personally that has cut the cost of filling my tank by more than half. That frees up about 100 bucks a month (only filling up about once a week mind you) to spend on other things. When gas is needed to get to work, it’s a priority. Freeing up some of those funds and getting people spending again is what gets the economy moving. In my own circle here, I know there’s been a collective sigh of relief over those gas prices going down and having some financial wiggle room that we didn’t have before.
    It’s still higher here (due to all of those taxes Sage mentioned that we are already paying), but I was told by some family who live in Arizona that it dropped to $1.65 a gallon today – we haven’t seen those prices since I was in high school. Which does beg the question…why was it that we were paying upwards of $5 a gallon a year ago? What nonsense!

    • Vincent says:

      QE does one thing, it pumps cash into the system. It’s a dilution of numbers. But how they are doing it is ideological rather than economic.
      What has occurred in the US is that all assets classes except labour has risen and that’s due to the theory of trickle down. But those hit worst are the people on fixed income like retired cops or anyone who has a pension. You will be hit too for as a civil servant you will be last to seek and get a pay rise. But since I believe the teachers were cute(Irish word meaning really really smart) enough to have a private pension the retirees will gain from the lifts in securities and stocks.

      What the price shows is just how much control the Saudi Kingdom has over the economic health of the rest of the world. But it also shows the need to be very careful. The USA as the largest consumer of fuel oils and also one of the cheapest places to buy fuel, by becoming near self sufficient through fracking you pulled the rug from under the high prices. But rather than lower to that point where fracking is bordering on an economic sense, the Saudi’s is seeking to utterly obliterate the fracking industry across the globe.

      • Kimberly says:

        Hindsight being 20/20 and all that, do you think this merging of economies with the EU and the euro is hindering what each individual nation can do to bring themselves out of their recession? It seems like what is needed for Spain or Ireland is vastly different than what is best for say Germany. You all are essentially tied to each other’s economies now, and it seems, from what I have read at least, that what might make sense for one’s economy to grow is like a weight pulling another’s down.
        As for trickle down economics, that theory hasn’t ever proven all that successful, except for the very wealthy. I’d imagine that’s why they keep pushing that one.

        • Vincent says:

          The idea of the €uro is good. The actuality not so much.
          What we’ve got at the moment is the worse of all possible scenarios, a currency union without a fiscal union. And yes, Italy Spain Portugal and Ireland pulling out of the €uro would allow them to devalue, then to trade themselves out of the problem at a lower exchange rate.
          The trickle down theory was always horseshite. It simply presented a soundbite to those that couldn’t work the compounding of percentages. And was designed to placate smallholders of fixed assets, like farms and shops. The reality has been pre-Victorian in aspect and intent.

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