UK QE To Resume In October

Tyler Durden's picture

Our thesis that global coordinated monetary stimulus is returning is playing out, first slowly, then very rapidly, with the Fed expected to announce at least Op Twist and an IOER cut at 2:15pm today, following a currency peg by the SNB, more printing promises by the BOJ, and the ECB now assumed to return to cutting rates shortly even as it purchases sovereign bonds in the open market. Sure enough, the latest entrant in the global resumption of printing is the BOE, which in minutes presented earlier, makes it clear it won't lag behind the Fed. From Goldman: "BOTTOM LINE: (i) The September MPC minutes revealed an unchanged vote (8-1 on asset purchases; 9-0 on rates). More significantly, however, for "most members" the decision was "finely balanced" and the committee was unusually forthright in signalling the likelihood of QE2. October now looks like the most likely date for a commencement of QE2. (ii) In other important news today, the ONS announced that public borrowing has been revised down by £6bn (0.4% of GDP) in 2010/11 and by £5bn (0.3% of GDP) so far in 2011/12. This potentially opens the door to a more gradual pace of fiscal tightening, with increased capital expenditure (the so-called "Plan A+")." And with that global relative FX devaluation continues, very much as expected, as does absolute devaluation of all currencies against gold, also very much as expected.

Full Goldman Note:

1.    The MPC generally dislikes providing explicit guidance on future policy decisions on the basis that, if it's clear what they should do in the future, why not do it now? In this context, therefore, the guidance provided by the September minutes is unusually clear. It is worth quoting in full: "For most members, the decision of whether to embark on further monetary easing at this meeting was finely balanced since the weakness and stresses of the past month had significantly strengthened the case for an immediate resumption of asset purchases. For some members, a continuation of the conditions seen over the past month would probably be sufficient to justify an expansion of the asset purchase programme at a subsequent meeting."

2.    One shouldn't overstate the strength of this signal: while "most" thought the decision was finely balanced, only "some" presumed an extension of QE would be justified at "a subsequent meeting". Nevertheless, given the speed of the ongoing deterioration in global growth prospects and in banks' funding conditions (Chart 1), we now think it likely that the MPC will commence QE2 at the October meeting, rather than waiting until the November Inflation Report forecasting round.

3.    The MPC also discussed other easing options, including "changing the maturity of the portfolio of assets held in the Asset Purchase Facility; revisiting the earlier decision not to lower Bank Rate below 0.5%; and providing explicit guidance about the likely future path of Bank Rate". However, the committee decided that none of these options would be preferable to increased asset purchases "at the current juncture". For a discussion of the Bank's easing options and our views on QE2, see this piece.

4.    Also released this morning, the public-sector net borrowing requirement excluding financial interventions (PSNB-ex) came in at £15.9bn in August: £2.9bn higher than Bloomberg consensus expectations and £1.9bn higher than the PSNB-ex over the same period of last year. This £15.9bn figure was a record for August. Including financial interventions, the PSNB was £13.2bn - also worse than expected.

5.    However, though the August data were worse than expected, this news was outweighed by the significant favourable revisions to past data. The ONS revised down its estimate of the PSNB-ex for the 2010/11 financial year by £5.9bn to £136.7bn. This is equivalent to 9.3% of GDP, and compares with the OBR's estimate of 9.9% of GDP (Chart 2). Around £4 billion of that 2010/11 revision is a result of revisions to local government data, following the replacement of budget forecast data with initial outturn figures for current and capital expenditure. In the current 2011/12 financial year, the PNSB-ex over the period April-July 2011 was revised down by £4.6bn. The July revisions are mainly due to revisions to central government revenue and expenditure (an upgrade of income tax receipts and a downgrade of departmental spending). The revisions between April and June are mainly due to revisions to local government data, again resulting from the replacement of provisional forecast data with reported budget forecasts. On a cumulative basis then, between April 2010 and July 2011, this morning's revisions put the PSNB-ex around £10.5bn lower than the ONS's July data implied (Chart 3). There were also upward revisions to the PSNB-ex in 07/08 and 08/09, and downward revisions in 09/10, but these were all minor in comparison to the revisions to more recent public borrowing data.

6.    Overnight, there were indications in the press that cabinet ministers had begun discussions relating to a potential £5bn increase in the government's planned capital expenditure (the so- called "Plan A+"). While these press reports were immediately denied by the Treasury, it is worth noting that - in the context of the £10.5bn cumulative improvement in the PSNB-ex over the past 16 months on this morning's revised data - a capital spending initiative of this magnitude could feasibly be financed by such 'savings' in the public sector's net borrowing requirement.

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oobrien's picture

Brother, let me give you the news.

This is a global economic fuck-up.

Final analysis?

We're all screwed.

Get used to pork and beans for the next 15 year.

Then get ready for war.

UGrev's picture

Good thing I love Pork-n-Beans. 

spiral_eyes's picture

4.5% inflation and a huge existing housing bubble not bad enough for Britain?

We need more QE to raise inflation to what? 6%? 10%? 500%?


TruthInSunshine's picture

I said yesterday that The Bernank will do the Twist/Torque, and not outright QE that expands the Fed's balance sheet.

Well, I had a dream last night, and in that dream I was being chased down the street by a tidal wave of fiat. It was a horrific thing; the most ominous of things, as it darkened the sky, building into a massive, cresting wall of money, crashing down upon all the population, crushing everyone and everything in its path.

No one and nothing was spared total annihilation.

And I could hear...I could hear the maniacal laughing of The Bernank & The Alan Greenspan beyond the distance. You see, I had not read until today that Greenspan just happened to show up at 33 Liberty Street yesterday, for a "haircut" (which was really a seance that he held with The Bernank wherein they engaged in ritualistic fiat worship, and sacrificed objects - word is that a rooster, pygmy goat blood, a cigar, some tungsten, gold spray paint, and other objects were used- to Moloch, in The Bernank's office).

The thing that sealed the deal, IMO, is the fact that all these reports are now being leaked to the 'financial media' about industrial companies, insurance companies and soon enough, toy companies, withdrawing their deposits from particular EU member state banks, and depositing said monies directly with the ECB.

So prepare for the tsunami.

And, oh...that pork & beans thing - here's my homage:

Weezer - Pork and Beans
Snidley Whipsnae's picture

Pork and beans for Thanksgiving... Grits and greens rest of the year.

dildo o flaherty's picture

Got physical,UKBitchezzz!!???

Michael Victory's picture



stack it high EuroZoners.

For the stacker's viewing pleasure:

Id fight Gandhi's picture

Wasn't the snb doing a floor with the chf/eur not a peg?

Josephine29's picture

If we go back to  summer then we got a hint then back on June 23rd.


A Further Bombshell: They are considering more Quantitative Easing

Tucked away in the nether reaches of the minutes was this sentence.

For some of these members, it was possible that further asset purchases might become warranted if the downside risks to medium-term inflation materialised.

Just so everybody is clear on this “further asset purchases” means more Quantitative Easing and on the Bank of England’s track record so far would mean more purchases of UK government bonds which are called gilts.But whilst we knew one member was in favour of more QE we were not as aware as this sentence suddenly made us that several or more were at least considering it. I guess some will be already wondering if our new member the ex-alumni of the Vampire Squid was one of those. However if I move on from the conspiracy end of the spectrum of opinions there was something else significant in that sentence.

Snidley Whipsnae's picture

"World Wide QE soon."

Once one soverign QEs the others must follow or lose competitive export advantage...

After all, this is a race to see who can have the lowest valued currency vs ROW currencies...

Why would this surprise anyone?

How to stop this bs? Repeg every currency (with dirty peg) to a standard; ie, basket of commodities, PMs, oil, or something real... Not fucking paper!

DrunkenMonkey's picture

Maybe, but the MPC have been whispering sweet nothings about resuming QE since May. The thing stopping them, in my opinion, is the catastrophic effect it will have on sterling.

Snidley Whipsnae's picture

"the catastrophic effect it will have on sterling"

Sterling was screwed whe the Brits Empire was lost... Singapore, India, etc

Without the close ties between London Banking and US Banking, US Military support and Fed/Treasury/US Gov support, England would be another also ran country.

Dugald's picture


Where is Robin Hood when you need him???

Lord Peter Pipsqueak's picture

Does anyone think the Bank of England gives a shit about the sterling exchange rate?They have been constantly devaluing sterling since the end of the First World War,since 1970 alone sterling has dropped from 20 swiss francs to 1.40.

The Bank of Englands main concern is to prevent house prices from falling further and will do whatever it takes to achieve this.

Alex Kintner's picture

So I guess the new plan is to wipe out the Savers and those on Fixed Incomes to make ALL debt just shrivel away -- thereby absolving the wreckless bastards who destroyed the world economies.

Poor savers. They actually believed that if they didn't play the risk game, then it couldn't hurt them. Alas the game is rigged.

Snidley Whipsnae's picture

"Poor savers. They actually believed that if they didn't play the risk game, then it couldn't hurt them. Alas the game is rigged."

The savers had a choice. Save in gold or save in paper...

You know the rest of the story.

youngman's picture

I think the end game is inflating this away....that is what they are trying to do..can they?  Can they controll the inflation?  I don´t think so...What if some other country does not like us exporting inflation and starving their people...?  Starve people just to save bankers does not fly for me...Making savers pay for the spenders does not fly for me either..

Snidley Whipsnae's picture

Youngman... Central banks have a poor record of control over inflation.

The Fed probably wants inflation of ~ 4% ...but easier said than done. 4% compounded would cut the 'real' debt in half in a few years.

What if inflation targeting fails and we get 10+% inflation? To cool it down would require interest rates be jacked well above inflation... Which would destroy the bond mkt, stk mkt, and whats left of the US, Main St.

Of course the azz hats could once again say... "we believe in a strong dollar" lol

Crash N. Burn's picture

 Nothin' new about it.


 The real question is are you ready for it and how to convince those close to you to prepare.

dildo o flaherty's picture

Im starting to worry about those criminal shits at the fed attacking gold even more fiercely than they have been. Things just don't add up lately.

 Scumbags have something up their sleeve.

Snidley Whipsnae's picture

Things the Fed/US Gov could do to hurt gold...

Jack up interest rates... not gonna happen without destroying US Economy.

Declare gold owner ship illegal... I doubt it while China is still encouraging it's people to buy PMs.

Place a large tax on gains on gold... Would create the worlds largest black mkt in PMs, Gov would need a new 'war on PM smugglers' and all the new employees to staff it.

Obvious choke points are the dealers and refiners... They might tax gold there... But that would cause arbitrage opportunities with row PM producers.

Who knows? I know that they will fight like crazy to keep the bs paper games going.

TruthInSunshine's picture

In many ways, ownership of gold versus other riskier assets is already severely penalized.

As just one example, long term capital gains tax on many risk assets equals 15%, while gains on precious metals, including gold, are subject to ordinary, and typically much higher, rates of taxation.

msmith's picture
More QE. That always the answer that never produces good results. Looks like the EURUSD has decided to makes its move lower.  A bearish trend channel has been formed with downside price action This should impact equities.
yabs's picture

definition of insanity

yeah detroy your curremcy when you are an net importer yeah wise move

i feel like sendinmg a death threqat to BOE

this is criminal ifd they do it

an outrage to debase a currency just to get a banker his bonus

tallen's picture

We just need to get Gordon Brown to be Prime Minister again so he can sell the rest of our gold, and then the UK has officially gone FULL RETARD.

spanish inquisition's picture

I have already priced in everything on the list .....I need something more than a promise of infinite printing and complete backstopping from the Fed at this point.

Where is the WOW factor that will get our attention. All I see is some book cooking, lies regarding holding interest rates and some reorganizing of the deck chairs...

yabs's picture

tis this intentional or are all these peolle ratarded

apparently we need QE as ban\ks have no money to lend

NO SHIT set interest rates at fucking zero and people do not give you deposits

wow nevewr have thought that

instead of QE raise interest rates you fucking idiots