Will more money help?

[Senninha]

Picked this up from another thread that was going off topic ...



Quote:
TheSebringOne wrote
Thank god the BOE is printing more money!
Quote:
Noel Watson wrote
Is this a good idea?
I'm no financial expert but I do think that the current run of 'rescue plans' do seem to be lacking in overall direction and alignment.

By example and on a subject close to our hearts, the motor trade is currently experiencing tough times. Very low new car sales, pockets of interest for used cars and high job losses.

Why then is it that the UK approach to helping the industry is to inject cash to manufactureres who seem not to be doing anything with it? Would it not have been better to adopt the european tactic of incentivising owners of older family cars to p/x them with a agreed minimum value?

In Germany this is generating new 'best registration months' for companies like VW, albeit with low margins and on the lower end of the range. But surely the point is that they are selling the stock currently sitting around in storage. This in turn is keeping the economy moving. And again, if they are selling then the manufacturing can continue/resume and protect against further job losses.

If we then add to this the banking funds from tax paying cash injections, and the finance houses offer affordable credit lines, wont this simply further enhance the above results?

Moving away from the motor trade and banking funds we then have the troubled high street resellers. Has anyone really noticed the VAT cut? Would it not have been of more benefit to simply remove it from high street retailers for a period of time, thereby encouraging spending? (I would suggest keeping it on alcohol and tobacco, and cars are already addressed above)

As I said, I'm no expert, there may well be good reason for adopting what appear to be plans with no alignment.

Thoughts anyone?

[Sudesh]

Thank god the BOE is printing more money!

Surely that cant be correct!

From my understanding, if more money is simpley printed it would mean the currency/money has no value! When new notes are printed, the same amount of old notes is also destroyed.

Gold was one of the original currencies and became recognised amoung ancient people as ready means of transferring goods and services without direct barter. Paper was introduced by banks as a note of credit. Hence on English Pound Sterling bank notes you will see something like "I promise to pay the bearer the sum of ten pounds". Until the 1920s, one could go to the Bank of England, present a ten pound note and ask for one's ten pound's worth of gold. This "Gold Standard" was dropped at various times in the 20th Century by different countries, but gold is still a valuable reserve for a nation.

Incidently, at the start of the decade Gordon Brown sold off a large section of the UK's gold reserve, pushing down the value of gold in the economy. After the 2nd Iraq War, the value shot up once again so with the benefit of hindsight it wasn't one of his shrewest moves.
Paper money has no intrinsic value. It is merely a promissory note from the government which represents something of real value (usually gold) which is held by the government. It is a convenience for people to use, since it is a lot lighter and easier to use than gold is.

If you printed more paper money, you are creating more promissory notes without increasing the amount of gold held in reserve. This means that the actual value of the paper money goes down, since, in order to be able to cover all of the promissory notes, the government would have to give you a smaller amount of gold in exchange for your bank note. This means that the real purchasing power of your paper money will drop, and prices of things will have to increase, which will mean that wages will have to increase, which results in rampant inflation. This just creates economic chaos without doing a thing to get industries out of debt.

[simonprelude]

The bank are looking at printing more money to try and boost the economy.

History has shown us that printing money will only make inflation go crazy.
I have some stamps and notes that are overprinted with Million after the figure, that's what introducing 'cash' into the economy does.

Like the stories from the 40's of someone having a suitcase full of money to buy a loaf of bread, on the way to the bakers someone stole the suitcase and threw all the money inside it away. Good will rule.

[NoelWatson]

I think the problem we face is that a lot of this is unprecedented, so anyone claiming to know the solution is telling porkies. I'm not convinced that printing money is the way forward - it may be that we have to stop being so impatient demanding solutions and wait for people to pay down their debts.

Some interesting stuff on PH where people have been suggesting potential solutions

http://www.pistonheads.co.uk/gassing/topic.asp?h=0&f=141&t=612108&mid=31217&nmt=It's%20BAD,%20it's%20VERY%20VERY%20BAD%20-%20The%20be%20very%20afraid%20thread!

(but 95 pages worth!)

[gsuds]

The trouble with the incentive to trade in idea is that it'll get piggy-backed onto some hogwash about old cars polluting more etc etc, and then we see media headlines suggesting that all cars over 9yrs old are scrapped! The classic press fields these from time to time, but I gather one such proposal is up for consideration again.

That means all my wheels would be scrapped :laugh:

I think it's responsible recycling. Do we really need a bigger volume of new cars?? (Cue endless debate...economy protection / job & industry safeguards / knit-yer-own-muesli side / etc etc.)

Graham

[Lankstarr]

Printing money could lead to hyper-inflation at the extremes - check out stories on Zimbabwe if you're interested.

As for the VAT cut - I feel sh*t about it... as do a lot of other people running small businesses. I used to pay VAT at a flat rate of 11.5% meaning 6% of my billings counted towards my earnings (charge 17.5%, pay 11.5% with minimal expenses to offset).

Now it's charge 15% and pay 11% - the margin has reduced by 2% effectively giving me a pay - cut!

Didn't advertise that when you announced the cuts did you Brownie? He's a sneaky git and many headline cuts are subtly made up for in ways we don't hear about.

[SILVER BULLET]

The solution is really quite simple;) The government should give all the monies loaned to the banks etc, to the people(i estimate about £10,000,000 each would be about right)then we could all go out and buy our new cars,houses,boats,second homes, holidays,pay off our mortgages, have a spending spree in the high street and then deposit the balance with the banks.This would thus save all the various industries, shops and the banks.
After which we would all live happily ever after:laugh: This is my simplistic view and has no relationship with reality.
Cheers,
Ian