[bmf]

http://www.cityam.co...ll-run-the-bank

Quote

CANCEL THE BANK’S GILTS
Speaking of which, in theory the Bank of England will eventually sell back to the markets the £350bn or so in gilts it will own as a result of quantitative easing (QE). Yet I doubt this quantitative tightening (QT) will ever happen. The UK will still be borrowing too much for years to come.

A more honest and preferable option would be for the authorities to admit that the £350bn has been permanently monetised and for the Treasury to cancel all of the gilts owned by the Bank – in other words, admit that the Bank has permanently created more money, and used that to pay off government debt. Do taxpayers really need to be paying interest to the Bank on the gilts that it holds? A cancellation would cut the UK’s debt to GDP ratio from 63 per cent to 41 per cent, and slash the interest bill on gilts from £50bn to £32bn per year. The Bank holds these gilts on behalf of the Treasury, so the Treasury is paying interest to itself (and regardless of definitional niceties, the fact is that the state is borrowing from itself).

As M&G’s Jim Leaviss points out, the gilt cancellation could take place using the same process and precedent set with the cancellation of £9bn of UK of gilts acquired from the Post Office pension scheme in April 2012. No default would take place (so there would be no CDS trigger and no D from ratings agencies only interested in failures to pay private investors). Of course, the credibility of UK monetary and fiscal policy would be badly shaken – but that is at it should be. We have a major problem – pretending otherwise doesn’t help anybody.

ps the title is b0ll0cks - I restrained myself yet still it's starred out!

This post has been edited by bmf: 12 April 2012 - 07:04 PM

[okaycuckoo]

 bmf, on 12 April 2012 - 07:03 PM, said:

http://www.cityam.co...ll-run-the-bank



ps the title is b0ll0cks - I restrained myself yet still it's starred out!

Not a legal move. We're in the EU and can't pull a fast one like that. Sure, we can devalue the £, but that's a different story, already done.

[bmf]

 okaycuckoo, on 12 April 2012 - 07:07 PM, said:

Not a legal move. We're in the EU and can't pull a fast one like that. Sure, we can devalue the £, but that's a different story, already done.

And the EU can't have circular accounting to fund it's own deficit? How is the EU in control of our central bank's issuance and repayment of debt?

Rules are overrated when things get tight in any case. Retrospective laws were added to contracts when Greece went under.

[no accountant]

 okaycuckoo, on 12 April 2012 - 07:07 PM, said:

Not a legal move. We're in the EU and can't pull a fast one like that.

The EU will probably fall to pieces soon, so we won't be in it for long.

More importantly, it is really worth us slogging our guts out to pay tax to repay these bonds, when we could just cancel them like the article says? The existing bondholders are then even more likely to be repaid, hence yields might drop further. (Unless the market thinks will do it again and cause proper inflation...)

[bmf]

 okaycuckoo, on 12 April 2012 - 07:07 PM, said:

Not a legal move. We're in the EU and can't pull a fast one like that. Sure, we can devalue the £, but that's a different story, already done.

Hey good news - they just outlawed mortgage fraud, politicians lying to get votes and war!

This quote from Napoleon springs to mind:

Quote

A throne is only a bench covered with velvet.

[okaycuckoo]

 bmf, on 12 April 2012 - 07:13 PM, said:

And the EU can't have circular accounting to fund it's own deficit? How is the EU in control of our central bank's issuance and repayment of debt?

Rules are overrated when things get tight in any case. Retrospective laws were added to contracts when Greece went under.

That's what bankers want you to say - the law doesn't matter. So they can get away with breaking the law.

It's your own grave ...

[bmf]

 okaycuckoo, on 12 April 2012 - 08:01 PM, said:

That's what bankers want you to say - the law doesn't matter. So they can get away with breaking the law.

It's your own grave ...

It's not against the law for the BoE to never rescind QE so this point is pointless!

You think they are going to pay back QE then? Merv - is that you?

[57percent]

My feeling is that it'll never get reversed (maybe a small part)

Right now it's just 2 accounting entries. Wait for a quiet time and scrub them both out.

But do we know what'll happen to the interest?

[okaycuckoo]

 bmf, on 12 April 2012 - 08:06 PM, said:

It's not against the law for the BoE to never rescind QE so this point is pointless!

You think they are going to pay back QE then? Merv - is that you?

There you have it - that is the conundrum, and we'll be living with it for decades.

But it doesn't mean gilts can be cancelled.

[MongerOfDoom]

 no accountant, on 12 April 2012 - 07:17 PM, said:

The EU will probably fall to pieces soon, so we won't be in it for long.

More importantly, it is really worth us slogging our guts out to pay tax to repay these bonds, when we could just cancel them like the article says? The existing bondholders are then even more likely to be repaid, hence yields might drop further. (Unless the market thinks will do it again and cause proper inflation...)

Why "slog our guts out" at all and pay any tax whatsoever? We just issue some bonds, buy them back, and cancel them. I really cannot see a flaw with that plan. And we could give everyone in the public sector a payrise too, and the rest of the country could be given huge tax-credits!

This post has been edited by MongerOfDoom: 12 April 2012 - 08:25 PM

[57percent]

 MongerOfDoom, on 12 April 2012 - 08:23 PM, said:

Why "slog our guts out" at all and pay any tax whatsoever? We just issue some bonds, buy them back, and cancel them. I really cannot see a flaw with that plan. And we could give everyone in the public sector a payrise too, and the rest of the country could be given huge tax-credits!

Gordon?

[Grrrr I'm a tiger]

Naive article - v. similar to one by the Bond Vigilantes the other day.

Illegal under EU rules.

Any profits/losses are the Treasury's anyway.

Might as well just wait until maturity to avoid any accusations of debt monetisation and just spin it out.


(don't forget £300bn of printing buys a hell of a lot more bonds than £300bn if the money keeps being recycled to buy more and more bonds - but no more than £300bn at a time)

[goldbug9999]

Quote

A more honest and preferable option would be for the authorities to admit that the £350bn has been permanently monetised

Forgiving the debt would would cause rampant inflation. As a big saver I would make a bigger real loss on my savings than I would save nominally in tax.

[Game_Over]

 bmf, on 12 April 2012 - 07:03 PM, said:

http://www.cityam.co...ll-run-the-bank



ps the title is b0ll0cks - I restrained myself yet still it's starred out!

Well this is exactly what I keep saying has happened when people claim that the Government has printed money and given it to the evil banksters

The government has printed money and given it to itself via the banks who have taken a cut

the problem is government deficit spending NOT insolvent banks

the sooner people realise that this is a political problem the sooner something 'might' get done about it

[benzlife]

 Milton, on 12 April 2012 - 07:27 PM, said:

This chap's response is quite tame compared to how most of the country feel about banking and government....................

[quick Prime minister, the serfs are getting uppity, give the police more powers so they can protect blatant government theft]

Can you post a link to that video please. Want to share it!