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you’re all my Saturday this while is from the daily Telegraph online who I often quote from mainly Ambrose Evans Prichard but those are some chap called brutal who won the actually won the competition to put in a proposal for the best way to break up the European Union and Jeremy Warner he seems to be the at the thrill of them seem to be the top economic people are Ambrose Evans Prichard is further mainly Europe and the world and the other two are mainly British and concentrated economic types but brutal and there are certainly economic types that is their job and the Telegraph is as newspapers go it’s all right in some ways it’s often better than the financial Times but not often anyway this is from the Lincoln be down below their arms and article about you know her Britons in the terrible state power what can walk and what can happen basically and anything else the Bank of England can do to counter these headwinds not convinced that all this talk of headwinds is brilliant but it’s the modern way of speaking so we understand what headwinds are we don’t understand what the headwinds are what particular factors they are but we understand by headwinds that they mean that seems to be something cool forcing against the goodness the wonderfulness of increasing GDP or whatever it might be possibly not monetary policy may have reached the limits of its effectiveness to do interesting comment and it’s something obviously over the next five years we don’t bump into a lot because we think we kind of believe could do anyway that the struggle is going to go on there saying it’s been five years now they seem to call it in a nursery now they said it five years now and does seems to be consensus that at least it can go on to the next five years in some form it’s on in the next five years were not just could go up through it and go into back into what could be called a normal period the next five years at least will be a struggle so the Bank of England like all central banks will struggle on with the problems and their problems are mainly obviously getting the banks to be if not profitable so they can fill the holes in their balance sheets but then also be seen to be doing something for the larger economy it’s a very difficult task for central banks because I am no consent can make up stuff that was awful lot of money at our awful something is they can do when we seen them do it over the last five years when you can just print up money but the thing is the printer money has only ever been used to buy things or swap for things assets on the outside world had gone into the central bank for example in the United States where a mortgage-backed securities 1.2 5 trillion the actual written signed partner of each asset paper is now residing in the central bank and completely new cash is out there in the world but it’s been in that case it was a there were bought and in some cases like in Europe it’s a swap where LL throw is swapping the paper for three years into the central bank for cash and the idea is after three years which is getting over two years now it’s got to be swapped back but the the ability of the central bank to invent brand-new money and put it out there in the world but in at the moment only for exchange for assets it’s quite a trick and covers an awful lot of our hiccups as we seen it do over the last five years been a very powerful tool okay Sam Ervin Summerlin is the boss man of the Bank of England rejects the idea that quantitative easing is losing its potency Something in had much potency to start with so that’s a moot point yet it is hard it is hard to point to unambiguous evidence that it is still doing any good, if a double dip recession is what we get with quantitative easing then what would things look like without it might they really be so much worse I think maybe yes I think the yarn that quantitative easing is a psychological trick that psychological tricks to work but generally they only do work for a certain amount of time till the masses is a tipping point where the masses say oh that’s only a psychological trick and I will not be tricked by any more and then the masses stop being tricked by it at the masses in this case happened to either the market masses the the Masters of the universe that manipulate paper but they are in a sort of Keynes way Kane said that the stock market is a beauty contest but not of the beauty of stocks per se but judging of what other people think will be the beauty of the words you’re judging what other people think is beautiful in the stock market not what actually is beautiful in the stock market and that is a psychological thing now you will pay a market that incident will be thinking our if he is she are they mentally manipulated are they being still tricked by this quantitation easing or not and when there’s enough dinner parties or interaction that they find out that no he and she and they are now not being tricked as super me wasn’t ever tricked by this and that is the tipping point in the mean goes the other way might they really be so much worse are because the UK has gone into a double dip recession and nothing nothing serious just kind of if it was just had slightly below the water minus very little how about something even more radical I asked him at a press conference at today’s press conference this was last Thursday I think it was when that Mervyn had his Bank of England a press conference for the inflation report buying at a beard so are representing the Telegraph obviously Warner went down there and asking why not for instance simply cancel gilts gilts are British Treasury is the Bank of England has bought to cancel so the Bank of England to put out cash and birth in the depths of paper these bits of paper that will not mortgage is their gilts which the equivalent of treasuries that government bonds much as 10 up and then the Treasury in the United Kingdom could then tear up the equivalent on their books and that’ll drop the debt to GDP because that debt number would drop down 21 offers and simply cancel gilts the Bank of England has bought thereby substantially reducing the national debt and creating the fiscal space for tax cuts fiscal spaces you drop the hand debt of the country down by just tearing up the gilts at the central bank and then the guy government has that space again because they were safe today at hand like the UK like the United States is paying very little on it gilts its treasuries so if they cancelled got the space the fiscal space fiscal is government spending to spend back up to that amount on our stimulus measures because you know if you spend back up to the amount that will do am good to the economy and you’ll only get back up to where you wear today and that where you wear today was acceptable today and probably would be acceptable in say the years time when you spend back up to it and that money you spend will do good in the economy is the idea here rather than spending money on future bond purchases perhaps he should states simply distribute it to consumers to spend Milton Friedman’s famous suggestion of helicopter drop and this is very difficult because of its easy to say it’s been a bailout for the banks what about a bailout for the people but the banks have something to give the central bank to balance their books I know they just invent the money but to balance the books they they balance it off with assets they buy assets and it’s a completely different home thing just to give the money away that is a completely different thing again and giving the money away all and buying or swapping are keeping in it is basically an accounting thing and that’s the reason the main grungy reason why it’s not done this accounting thing are but during the money away you can imagine the beauty contest of that what would the market think what will they think they will think this is terrible am sure there would buy the way her winner goes on neither of these ideas will die remotely support he doesn’t want the central bank to tout the treasuries and the government to have the fiscal space space to do more harm stimulative spending nor would he want our money just given out to the people by the way neither of these ideas I would remotely support there is no reason why quantitative easing as present as presently practised should prove seriously inflationary this is good Warner has now he’s picked up and used it dinner parties from the fact that it’s not seriously inflationary because the money isn’t being lent out At the that’s what he will be thinking he’s not quite up with what we’ll call Steve Keane and what we discussed in five that the the the quantitative easing money at their swap the assets into the central bank the central bank money goes in their reserve: which is huge at which is technically banks money but banked with the central bank and you got reserves and excess reserves O’Connor goes well called in the film Popeye you got user as their then excess reserves will all will go stacked up on top access reserves the just call reserves: what you like cash cash on the banks of the books THE BANKS AND CENTRAL BANK IT’S ALL THE SAME TOTAL CASH BUT THEY DON’T NEED THAT CASH ACTUALLY TO LEND THERE IS NO REASON WHY QUANTITATIVE EASING AS IT PRESENTLY PRACTISED SHOULD PROVE SERIOUSLY IMPRESSED INFLATIONARY CE IS NOT QUITE SURE HIMSELF BECAUSE HE’S PUTTING SERIOUSLY INFLATIONARY ECONOMY HEADS THAT HE DOESN’T HE’S NOT QUITE SURE WHO TO BELIEVE OR TO PAMPER WITH THESE WORDS PROVIDED IT IS QUICKLY REVERSED ONCE THE ECONOMY PICKS UP AND WE GO NOW NOW WHAT YOU MEAN BY THAT JEREMY PROVIDED IT IS QUICKLY REVERSED ONCE THE ECONOMY PICKS UP NOW THIS IS THE SORT OF THINKING THAT WAS PREVALENT ABOUT FOUR YEARS AGO AND OBVIOUSLY STILL PREVALENT NOW ENCIRCLE CERTAIN CIRCLES IS THE IDEA THAT THIS MONEY THAT THESE BITS OF PAPER HAVE GOT TO BE SWAPPED BACK TO THE BANKS AND THE CASH HAS GOT TO COME OFF THE BANKS BOOKS AND BACK SOLIDLY INTO THE CENTRAL RESERVE INTO THE CENTRAL BANKS BOOKS ONLY AND THEN THE BANKS ONLY HAVE BITS OF PAPER THEY DO NOT HAVE ACTUAL CASH WHEN IT COMES DOWN TO IT JEREMY WARNER DOES BELIEVE THAT THE BANKS DO LEND THAT STACKED UP AMOUNT OF CASH THAT THEY NOW HAVE FELT FROM THE CENTRAL BANKS HAVING THEIR BITS OF PAPER THAT OBVIOUSLY WHAT HE BELIEVES PROVIDED IT QUICKLY REVERSED ONCE THE ECONOMY PICKS UP AND I THINK WE ALL COMING WE PICKED UP ON THIS ABOUT FOUR YEARS AGO THAT THEY’D NEVER BE REVERSED NOW IT CAN’T BE REVERSED PARTICULARLY BASE THE MONEY BASE IS THIS STACKED UP RESERVES IS THE THE CASH THAT NO CASH PLUS ALL THIS WILL INCLUDE CASH NOT BITS OF SIGN PAPER ASSETS BUT ACTUAL CASH ARE CALLING IT ON THE BANK SPOKESWOMAN CENTRAL BANKS BOOKS I AM RESERVES THAT THE MONETARY BASE BUT IF THE MONETARY BASE IS PERMANENTLY EXPANDED LIKE SAYING IS IT WILL BE EITHER BY MONETISING THE DEFICIT OR OTHERWISE GIVING MONEY AWAY TO SUPPORT SPENDING MONETISING THE DEN TO DEFICIT WOULD BE THE TEARING UP THE OTHERWISE GIVING THE MONEY AWAY TO SUPPORT SPENDING SEAT NOW YOU KNOW HE’S LOST HE HASN’T GOT A CLUE WHAT HE’S TALKING ABOUT BECAUSE GOES THE SECOND PART OF THAT OTHERWISE GIVING THE MONEY AWAY TO SPARE SUPPORT SPENDING GIVING THEM MONEY AWAY IT IS NOW THE BANKS MONEY CENTRAL BANK GAVE IT TO THE BANKS IN EXCHANGE FOR PAPER THESE ASSETS THE BANKS AREN’T AND GIVE IT SO HE’S COMPLETELY AND UTTERLY CONFUSED HIMSELF OTHERWISE GIVING THE MONEY AWAY TO SUPPORT SPENDING EEGS CAN NOW TO HELICOPTER DROPS WHERE THE BANK HAS GOT TO SEARCH SOMEHOW GET THE MONEY OUT THAT THE PEOPLE WITH NO NO NO RED RECOMPENSE AND IT’S JUST WELL HAVE YOU DO THAT TO THE CENTRAL BANK HAS IN IT CAN’T DO THAT BUT THE ONLY WAY GET MONEY OUT OF PEOPLE IS TO BUY THINGS OFF THE PEOPLE IT CAN BUY YOUR GOLF CLUBS OFF YOUR IT CAN BUY YOUR WASHING MACHINE BUT IT CAN’T JUST GIVE YOU MONEY IF IT IS EVER TO GIVE YOU MONEY IT MUST GIVE YOU MONEY VIA THE GOVERNMENT THE GOVERNMENT MUST GIVE YOU THE MONEY AND THE CENTRAL BANK MUST DO OUR MANIPULATION IS BEHIND-THE-SCENES CENTRAL BANKS CAN NOT GIVE YOU MONEY CENTRAL BANK BANKS CANNOT GIVE BANKS MONEY THEY MUST ALWAYS DO IT IN EXCHANGE FOR BITS OF PAPER BECAUSE CENTRAL BANKS LIKE BANKS HAVE TO HAVE THEIR BOOKS BALANCED SO YOU CAN’T JUST GIVE MONEY AWAY BECAUSE YOU CAN IMAGINE WHAT AN UNBALANCING EFFECT THAT WOULD HAVE ON YOUR BOOKS GOVERNMENTS CAN WRITE A NEW RULE TO SAY THAT THEIR BOOKS DO NOT HAVE TO BE BALANCED CENTRAL BANKS AND BANKS CANNOT WRITE LAWS DIRECTLY THEY CAN ONLY INFLUENCE THE WAY GOVERNMENTS WRITE LAWS WHEN IT COMES DOWN TO WHICH IT IS THE GOVERNMENTS HAVE ALL THE POWER NOT THE CENTRAL BANKS ALL THE BANKS IF BANKS AND CENTRAL BANKS HAVE POWER IT IS AT THE DISCRETION OF GOVERNMENT AND SAYS AT THE END THAT WAY LIES WEIMAR WHICH IS JUST AN UTTERLY RIDICULOUS THING TO SAY WHICH IS A SHAME BECAUSE OTHERWISE THE ARTICLE IS NOT BAD BECAUSE IT EXPLORES SOME INTERESTING THINGS AND GIVES US GOOD DISCUSSION POINTS BUT TO SAY WEIMAR IT’S JUST MADNESS IT’S MADNESS LIKE THE GERMANY THE WEIMAR BASICALLY YOU DON’T HAVE TO HAVE BEEN BEATEN IN A WORLD WAR BUT WHEN IT COMES TO THAT SORT OF HYPERINFLATION REACTION AND THAT WHAT HE’S TALKING ABOUT BEING THRASHED IN A SECOND IN IN IN THE WORLD WAR ARM REALLY IS JUST ABOUT AM AN ESSENTIAL ASPECT OF HAVING YOUR ECONOMY GOING TO HYPERINFLATION WITHOUT BEING THRASHED IN THE WORLD WAR YOU’RE GOING TO REALLY STRUGGLE TO GO FOR HYPERINFLATION SO IS TALKING NONSENSE AS ARE THE MODERN-DAY GERMANS WHO LATELY HAVE NOT BEEN BEATEN IN A WORLD WAR AND THEY REALLY DOING RATHER WELL AND THE CHANCES OF ANYTHING HYPERINFLATIONARY HAPPENING IN GERMANY OR ANYWHERE ELSE IN THE WESTERN WORLD IS JUST ABOUT ZERO BACK
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