Bank of England.....my arse !!

[BoyBlue_1985]

So what is it that Germany seem to be getting right? Read the Economist the other day and it seemed to show they had a GDP growth of +8%, whereas ours was 0.7%?

Not an economic expert by any stretch of the imagination, but surely it can't do any harm to at least have a look-see at what Gerry's up to?

Look outside your window and tell me how many German made cars you see? Probably the biggest industrial nation in Europe. We were like that once but swapped it all for the financial system

 

[tueartsboots]

-- Fri Oct 07, 2011 9:38 am --

All QE creates is inflation.

No it doesn't.

How does it not? Surely it's devaluing sterling? Please feel free to educate us

 

[metalblue]

So what is it that Germany seem to be getting right? Read the Economist the other day and it seemed to show they had a GDP growth of +8%, whereas ours was 0.7%?

Not an economic expert by any stretch of the imagination, but surely it can't do any harm to at least have a look-see at what Gerry's up to?

Look outside your window and tell me how many German made cars you see? Probably the biggest industrial nation in Europe. We were like that once but swapped it all for the financial system

Germany doesn't have +8% growth, it also has a higher long-term unemployment rate than us.

Anyway we had oil, unions on self-destruct, and a manufacturing industry seemingly intent on producing overpriced crap but most of all we had oil a much better per-head contributor to GDP than manufacturing - in the 60's it was quite a popular route to take with the think tanks; shows how good they can be!

 

[SWP's back]

So what is it that Germany seem to be getting right? Read the Economist the other day and it seemed to show they had a GDP growth of +8%, whereas ours was 0.7%?

Not an economic expert by any stretch of the imagination, but surely it can't do any harm to at least have a look-see at what Gerry's up to?

Manufacturing sector that is strong, efficient, not brow beaten by unions and a populace known for meticulous quality.

Add to that a non-capital centric model that shares and distributes wealth throughout the country and the fact that Germany experienced high unemployment at the beginning of the 2000's thanks mainly due to reunification. This led to the German government reigning in spending and welfare at a time (us included) when the rest of the world were spending their surpluses. Partly due to this, Germany were in a far better position when the "credit crunch" reared its head.

However German GDP over the last 5 years is:

2006 2007 2008 2009 2010
3.7% 4.4% 2.8% -3.5% 3.6%

Nb - CIA factbook on Germany states a -4.7% GDP drop in 2009 with an expected growth rate of 2.7% this year (not 8%)

<a class="postlink" href="https://www.cia.gov/library/publications/the-world-factbook/geos/gm.html" onclick="window.open(this.href);return false;">https://www.cia.gov/library/publication ... os/gm.html</a>

During this belt tightening reform (known as Agenda 2010), there was widespread criticism aimed towards the left at a perceived "decreased standard in living aimed at protecting the rich" - where have we heard this before.

In short, by luck or good judgement, Germany got its house in order due to internal factors when times were good. It was heavily castigated for this at the time by its own people as Brown continued to "buy off the electorate" with increased (and unaffordable) public spending.

When the rainy day came, they had saved and we were left with a knackered umbrella. Though they still have an employment percentage of 7.4% so its not at all utopian. (UK rate is 7.9%)

 

[yerwot?]

thought the 'new deal' pulled the US out of the bank-induced recession?

Nope, the Second World War did. So we've got to find some countries with money, who want to fight and then arm them both and let the money roll in. :) Israel and Iran possibly...

despite the neocons of the day claiming FDR was a communist,the 'new deal' had been regenerating jobs through gov't spending,at the same time national debt as a proportion of gnp had stayed the same,long before 1942.One of the main tenets of the new deal was banking reform to make sure the same thing could not happen again.Reagonomics made sure it could by turning the clock back.And it has.

 

[metalblue]

-- Fri Oct 07, 2011 9:38 am --

All QE creates is inflation.

No it doesn't.

How does it not? Surely it's devaluing sterling? Please feel free to educate us

It only creates inflation if the money gets into the economy, the previous round of QE remained on bank balance sheets (well actually the government encouraged them to invest in soveign debt - it's risk free don't you know!), yes it can have a devaluing effect if the whole world wasn't seemingly on a race to the bottom so currently sterling is in a debate that is akin to arguing who is the ugliest of the ugly sisters.

The truth with QE is it's a bit of an experiment so we can't be sure but while you're analysis is exactly what you should expect in a normal world, I'd back SWP's analysis on this in the current setup.

 

[SWP's back]

-- Fri Oct 07, 2011 9:38 am --

All QE creates is inflation.

No it doesn't.

How does it not? Surely it's devaluing sterling? Please feel free to educate us

You need to look at what I wrote TB.

The poster I quoted stated "All it creates is inflation"

This is simply not true. Inflation can be a byproduct of QE but that is not necessarily a bad thing at any rate. The answer as to why that is, is a long one and whilst I would love to educate you on this, I feel giving a couple of sources may be easier for both of us if that's ok. If there's any point you're unsure of, I'll try and answer.

<a class="postlink" href="http://curiouscapitalist.blogs.time.com/2011/02/03/is-inflation-good-for-the-economy/" onclick="window.open(this.href);return false;">http://curiouscapitalist.blogs.time.com ... e-economy/</a>

<a class="postlink" href="http://moneywatch.bnet.com/economic-news/blog/macro-view/inflation-now-might-be-a-good-thing/2687/" onclick="window.open(this.href);return false;">http://moneywatch.bnet.com/economic-new ... hing/2687/</a>

As an aside, you need to remember is that the majority are in debt. Low BoE interest rate combined with moderate inflation reduces the real value of people debt also.

 

[tueartsboots]

Cheers Metalblue and SWP. How does this effect current inflation, considering over the past 20 years the rules of gauging inflation have changed, manipulated and massaged?
ONS says RPI is what? 4.2% when in real terms it's around 11.8% or am I completely wrong ?

 

[SWP's back]

Cheers Metalblue and SWP. How does this effect current inflation, considering over the past 20 years the rules of gauging inflation have changed, manipulated and massaged?
ONS says RPI is what? 4.2% when in real terms it's around 11.8% or am I completely wrong ?

It depends if you are buying cars, TV's and houses as to what is "real" to you mate.

The is a supermarket price war going on at the moment also, so if you are shopping around and buying what you need to eat, live and be merry, you may be seeing a level of deflation in the things that you need. The cost of energy is an ongoing inflationary pressure but QE has no effect on the cost of getting resources out of the ground.

The RPI "basket of goods" can be found here and for me, is totally unrealistic.

<a class="postlink" href="http://www.ons.gov.uk/ons/rel/cpi/cpi-rpi-basket/2011/index.html" onclick="window.open(this.href);return false;">http://www.ons.gov.uk/ons/rel/cpi/cpi-r ... index.html</a>

 

[Anonymous]

My apologies, and ably demonstrating my earlier post at not being an expert in these things, I offer an Eric Morcambe-esque defense.

I correctly quoted The Economist, just not necessarily the right column of the table I read :-)