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World facing worst financial crisis in history, Bank of England Governor says - Telegraph

Sir Mervyn King was speaking after the decision by the Bank’s Monetary Policy Committee to put £75billion of newly created money into the economy in a desperate effort to stave off a new credit crisis and a UK recession.

Economists said the Bank’s decision to resume its quantitative easing [QE], or asset purchase programme, showed it was increasingly fearful for the economy, and predicted more such moves ahead.

Sir Mervyn said the Bank had been driven by growing signs of a global economic disaster.

“This is the most serious financial crisis we’ve seen, at least since the 1930s, if not ever. We’re having to deal with very unusual circumstances, but to act calmly to this and to do the right thing.”
Announcing its decision, the Bank said that the eurozone debt crisis was creating “severe strains in bank funding markets and financial markets”.

The Monetary Policy Committee [MPC] also said that the inflation-driven “squeeze on households’ real incomes” and the Government’s programme of spending cuts will “continue to weigh on domestic spending” for some time to come.
The “deterioration in the outlook” meant more QE was justified, the Bank said.

Financial experts said the committee’s actions would be a “Titanic” disaster for pensioners, savers and workers approaching retirement. Sir Mervyn suggested that was a price worth paying to save the economy from recession.

Under QE, the Bank electronically creates new money which it then uses to buy assets such as government bonds, or gilts, from banks. In theory, the banks then use the cash they gain to increase their lending to businesses and individuals.

By increasing the demand for gilts, QE pushes down the interest rate yields paid to holders of these and other bonds. Critics of the policy say it pushes up inflation and drives down sterling.
The National Association of Pension Funds yesterday called for urgent talks with ministers to address the negative impact of lower gilt yields on pension funds. Joanne Segars, its chief executive, said QE makes it more expensive for employers to provide pensions and will weaken the funding of schemes as their deficits increase. “All this will put additional pressure on employers at a time when they are facing a bleak economic situation,” she said.

Ros Altman, of Saga, said the latest round of QE was “a Titanic disaster” that would increase pensioner poverty. As well as fuelling inflation, she said, falling bond yields would make annuities more expensive, “giving new retirees much less pension income for their money and leaving them permanently poorer in retirement”.

The MPC also voted to keep the Bank Rate at its historic low of 0.5 per cent, another decision that hurts savers. Yesterday, protesters outside the Bank’s headquarters smashed a giant piggy bank to symbolise the situation of pensioners and others forced to raid savings to keep up with the rising cost of living.

Asked about the plight of savers, Sir Mervyn said it was more important to support the wider economy than to support them. He suggested that savers would not be helped by deliberately pushing the British economy into recession. Yesterday’s decision was the first move on QE since 2009, during the global credit crisis, when the Bank injected £200 billion into the economy.

Some analysts believe that this round of QE could be less effective than the previous one, forcing the Bank to create even more money this time.

Michael Saunders of Citigroup, forecast that there could be as much as £225 billion more QE by next year. “I think they will do lots more QE,” he said. “It’s both that the economy is weak but also that the MPC’s view is that QE is not a very powerful tool, or rather it takes a large amount of QE to have much effect on the economy.”

The Bank is supposed to keep inflation near a target of 2 per cent. Inflation now stands at 4.5 per cent, and the Bank admitted it is likely to hit 5 per cent as soon as this month. The Bank’s own research shows that as well as stimulating the economy, QE pushes up prices.

Sir Mervyn insisted that yesterday’s move was still consistent with the 2 per cent inflation target, saying that the slowing economy means inflation could actually fall below that mark “by the end of next year or in 2013”.

The Governor insisted that the MPC’s decisions had been the correct response to events. “The world economy has slowed, America has slowed, China has slowed, and of course particularly the European economy has slowed,” he said. “The world has changed and so has the right policy response.”
City traders took heart from the Bank’s move to boost growth, with the FTSE 100 rising 3.7 per cent to 5,29, its biggest two-day gain since 2008.

The Bank’s decision came after mounting political pressure from ministers worried that Sir Mervyn was not reacting urgently enough to the darkening global economic outlook.
George Osborne, the Chancellor, welcomed the Bank’s move, saying: “The evidence shows that it [QE] will help keep interest rates down and boost demand and that will be a help for British families.”
 

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So let me get this straight - they think printing up some more money is going to solve the financial crisis? Something tells me it won't have a positive effect.

Sent from my SPH-M910 using Tapatalk
 

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Buy it cheep and stack it deep... while your dollar is still worth anything...
 

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yah...

I haven't felt the urge to save my money for awhile. Prices are flying through the roof, and it only seams to be accelerating.

I just purchased one 30' 50amp RV extension cord and was thinking about picking up 1 or 2 more (I figure 100' of 6awg extension cord would save me from having to put in a sub panel to run a welder in my detached garage) after I got to see the first one in person...and saw that Amazon jumped the price $24 after I purchased the first one!

There are a bunch of things like that I'd like to buy before inflation explodes, but this not a great financial time for me. I wonder if Dad is thinking the same thing. He has been buying up the big toys (dozer, potable sawmill, some "smaller" things) like crazy these last couple of years
 

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This is the result of global financial mismanagement. At some point, we'll all be forced to use a lot more common sense in government just like we have at home on Main Street.
 

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Sir Mervyn King was speaking after the decision by the Bank’s Monetary Policy Committee to put £75billion of newly created money into the economy in a desperate effort to stave off a new credit crisis and a UK recession.

How do you do this again?

Anyone elses 401k in the tank? I have lost 10 percent. Anyone else? Cause I think I know were that "created" money just came from.
 

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I think that vacuum storage unit may be bought sooner rather than later. Does vacuum packing seeds harm germination rates?

If you are blessed to have a spot of land, NOW would be a good time to ensure it's able to support a large garden. Check the soil and adjust pH and other levels. Add organic content. You can get leaves in large quantity for free in the fall (duh!). Mow them up, add 10,10,10 fertilizer and lime then till in deep. Then water and cover with 1-2 feet of more mowed leaves. Water that good. That will make a decent mulch pile and will rot down quick. If your county has a mulch area where they grind the storm fallen trees, you may be able to get woody mulch free. Adding that stuff to the mix will help a lot too. If you add a lot of woody stuff, you may have to turn the pile or it will get too warm from the heat of decomp.

My dad never bought worms for fishing. He just piled leaves and raised them. All it takes is leaf material, water and time.
 

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Yeah, we keep being told that something is coming, but the vast majority are not listening ... I'm buying one more gun, and then just gold, silver, and food ...
 

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Hyperbole is the best thing ever!
 

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Yeah, we keep being told that something is coming, but the vast majority are not listening ... I'm buying one more gun, and then just gold, silver, and food ...
Smart! Especially the food. Regardless of what happens to the financial markets you are going to have to eat in the next 30 years. It won't go to waste.
 
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