IMF poised to print billions of dollars in 'global quantitative easing'

[angryfirelord]

http://www.telegraph.co.uk/finance/financetopics/recession/4986287/IMF-poised-to-print-billions-of-dollars-in-global-quantitative-easing.html

The International Monetary Fund is poised to embark on what analysts have described as "global quantitative easing" by printing billions of dollars worth of a global "super-currency" in an unprecedented new effort to address the economic crisis.

Alistair Darling and senior figures in the US Treasury have been encouraging the Fund to issue hundreds of billions of dollars worth of so-called Special Drawing Rights in the coming months as part of its campaign to prevent the recession from turning into a global depression.

Should the move, which is up for discussion by the summit of G20 finance ministers this weekend, be adopted, it will represent a global equivalent of the Bank of England's plan to pump extra cash into the UK economy.

However, economists warned that the scheme could cause a major swell of inflation around the world as the newly-created money filters through the system. The idea has been suggested by a number of key figures, including billionaire investor George Soros and US Treasury adviser Ted Truman.

Simon Johnson, former chief economist at the IMF, said: "The principle behind it is that everyone would get bonus dollars and instead of the Federal Reserve having to print them, everyone gets them.

"The objective is to create a windfall of cash. However if everybody goes out and spends the money it could be very inflationary."

Now everybody can be like Zimbabwe! :puke:

[Idealism]

1. Purely an effort to ameliorate inflation between the US dollar and the euro.

In my estimate, that is...

[DJ13]

2. If the whole world has 1,000% inflation at the same time would we even notice the inflation?

:freak:

[angryfirelord]

3. I see your point

but unfortunately credit doesn't work that way. If everybody experienced 1000% inflation, then that would increase prices by 1000%, even if everyone was using the same currency. Remember that money is simply an IOU and it is expressed in this equation: (it may not be accurate, I didn't get it from an official source)

default = inflation + interest

Normally, when you, the consumer, pays for an item, you pay for it in full. When it is done so, default is equal to zero, so no harmful effects are incurred.

If, however, the government takes out a loan and "defaults" on it, then it comes out from two sources: inflation & interest. If the government is fiscally responsible, then eventually that money is paid back plus any interest during that time period. If the money is not paid back, then what immediately happens is inflation goes up due to more money in the system. The currency devaluates and buying power goes down, which means prices go up. Then, to add salt to the wound, interest has to paid back on top of that debt. What the IMF is doing is trying to drown everybody in inflation, which will only make the poor poorer and the rich richer. That's why Alexander Hamilton wanted a nationalized bank because bankers would otherwise be pretty much controlling everything. (which they are doing today)

[upi402]

4. Excellent

I'm wondering if I should take the penalties on my union pension and get it into my account in another country.
Seems like 75% is much better than nothing, or close to it.

[roamer65]

7. You already see it in the gold price.

Worldwide currency debasement is occurring as we speak. Since 2001, gold has risen significantly against all fiat currencies.

[Peace Patriot]

5. Does someone here understand this? I don't.

How does the IMF have authority (sovereignty) to print money?

"The objective is to create a windfall of cash. However if everybody goes out and spends the money it could be very inflationary."

What is meant here by "everybody"? They're going to print billions or trillions of 'dollars' or 'euros' or whatever and hand them out to "everybody"--like, the 'little people' who are losing their homes and jobs, or to countries to stem the loss of government, education, health care and infrastructure jobs--or just to billionaire banksters (to buy up foreclosed houses and ruined businesses, and pay themselves enormous bonuses)?

Who decides in what currency? Who gets the money? And how does the IMF have the right and authority to do this?

[notesdev]

6. Here's the reality

"Quantitative easing" doesn't work, never did, never will. It's basically lingo for flooding the market with cash, hoping people spend it. Except for the small little detail that it's not prescribed under any conditions where people aren't minded to save and pay down debt instead.

The futility of such a policy (and the Fed is currently demonstrating it live action for you right here in the USA) is shown in the M1 money multiplier. M1 is a measure of money supply; M1 is defined as hard currency + savings/checking deposits. The M1 multiplier is how fast the money is circulating through the system; if people are spending it rises, if they save or pay debt it drops. As you can see in the following chart, the implementation of "quantitative easing" destroys the multiplier and if anything causes the opposite of the intended effect:

http://research.stlouisfed.org/fred2/series/MULT?cid=25

Notice the corresponding sharp spike in M1:

http://research.stlouisfed.org/fred2/series/M1?cid=25

The sharp drop in the multiplier shows that no matter how much money the Fed tries to shovel into the system, nobody is going out and investing with it. It's not going to car loans or home loans or business loans or anything - it's being accumulated to absorb losses as banks pull out all the stops to try and survive.

So all this fretting about inflation under current or near term conditions is nonsense. We are experiencing deflation (the destruction of money and credit), not inflation. Credit is being destroyed at an incredible rate as defaults pile up and remaining loans get paid down.

[girl gone mad]

8. We'd be better off taking our medicine.

Instead we'll end up with a lost decade, like Japan... if we're lucky.

[Po_d Mainiac]

9. Finally an optimist appears

on the economy board :sarcasm:

If the IMF goes into competition with Treasury over who can print the fastest......greenbacks will be at the bottom of the heap