Answers In Plain English & Laymans Terms Please

[housespider]

Hello all!

There appears to many very well informed and intelligent people on here so, I thought I might get the answer to some questions I have. On and off over the last few months I have searched and searched the internet and cannot find (or perhaps cannot understand), the information so, here goes..........

1. Who 'owns' the Bank of England? - I have always assumed that we/government did but I have not been able to find confirmation of this at all.

2. The Goverment had all those billions of extra £'s printed right? So where has it gone?

3. If the Government can print it's 'own' money, why does it then borrow money?

4. Would it be possible for a government to print money and just not tell anyone/the rest of the world? If not, why not?

Many of you will probably think me really dim for needing to ask these questions in the first plade, but I don't mind......

[Guest Steve Cook]

Hello all!

There appears to many very well informed and intelligent people on here so, I thought I might get the answer to some questions I have. On and off over the last few months  I have searched and searched the internet and cannot find (or perhaps cannot understand), the information so, here goes..........

1.  Who 'owns' the Bank of England?   - I have always assumed that we/government did but I have not been able to find confirmation of this at all.

2.  The Goverment had all those billions of extra £'s printed right?  So where has it gone?

3.  If the Government can print it's 'own' money, why does it  then borrow money?  

4.  Would it be possible for a government to print money and just not tell anyone/the rest of the world?  If not, why not?

Many of you will probably think me really dim for needing to ask these questions in the first plade, but I don't mind......

Not dim at all

It appears you have decided to take the blue pill.

Be warned though. The rabbit hole goes along way down....

[housespider]

Not dim at all

It appears you have decided to take the blue pill.

Be warned though. The rabbit hole goes along way down....

Now, that's funny!

[General Congreve]

Hello all!

There appears to many very well informed and intelligent people on here so, I thought I might get the answer to some questions I have. On and off over the last few months I have searched and searched the internet and cannot find (or perhaps cannot understand), the information so, here goes..........

1. Who 'owns' the Bank of England? - I have always assumed that we/government did but I have not been able to find confirmation of this at all.

2. The Goverment had all those billions of extra £'s printed right? So where has it gone?

3. If the Government can print it's 'own' money, why does it then borrow money?

4. Would it be possible for a government to print money and just not tell anyone/the rest of the world? If not, why not?

Many of you will probably think me really dim for needing to ask these questions in the first plade, but I don't mind......

1. The Zionists

2. BoE printed it electronically and bought UK govt. gilts, effectively lending the Govt. money cos no one else will (called QE). Exactly the same as printing money, just by a different name.

3. It borrows money to keep up the pretence that one day it will pay it back. This is the crux of the worlds current financial woes - cos there is no way this money will be paid back to the creditors (mainly banks) cos the debts are so out of control, hence systemic financial failure looming on the horizon.

4. In any significant volume it just doesn't work. Zimbabwe tried it, it didn't work, I know, I've been there. e.g., If you're the baker in town and suddenly everyone is buying two loafs instead of one, you double your prices. Something like that.

[housespider]

1. The Zionists

2. BoE printed it electronically and bought UK govt. gilts, effectively lending the Govt. money cos no one else will (called QE). Exactly the same as printing money, just by a different name.

3. It borrows money to keep up the pretence that one day it will pay it back. This is the crux of the worlds current financial woes - cos there is no way this money will be paid back to the creditors (mainly banks) cos the debts are so out of control, hence systemic financial failure looming on the horizon.

4. In any significant volume it just doesn't work. Zimbabwe tried it, it didn't work, I know, I've been there. e.g., If you're the baker in town and suddenly everyone is buying two loafs instead of one, you double your prices. Something like that.

Excuse my ignorance but. Zionists, that's just an idiology/movement, like say Marxism, isn't it? How can an idiology own the Bank of England?

[cartimandua51]

Excuse my ignorance but. Zionists, that's just an idiology/movement, like say Marxism, isn't it? How can an idiology own the Bank of England?

The answer to (1) is on the Bank of England's own website :

'Does the Bank of England have shareholders? If the Bank does have shareholders who are they?'

The Bank of England is the central bank of the whole of the UK and was established as a corporate body by Royal Charter under the Bank of England Act 1694. The Bank was nationalised on 1 March 1946, and gained operational independence to set interest rates in 1997. The Bank is a public sector institution wholly-owned by the government - the entire capital of the Bank is, in fact, held by the Treasury solicitor on behalf of HM Treasury.

When any post contains the words "Zionist" or "New World Order" ( or, for that matter, "little green men from Mars") be wary. Treat it like Jehovah's Witnesses on your doorstep.

[Bloo Loo]

whatever the truth, you mr spider, should be wary of a man bearing a large shoe...specially in autumn.

[uptherebels]

whatever the truth, you mr spider, should be wary of a man bearing a large shoe...specially in autumn.

Errm, I think it's Mrs Spider. Sorry Housespider, I can't answer your questions, and have several similar ones myself. Would love to see a good answer to number four.

[InternationalRockSuperstar]

The Bank was nationalised on 1 March 1946

actually, if you look a 1a and 1b from the 1946 act...

http://www.bankofengland.co.uk/about/legislation/1946act.pdf

you'll see that the gov't bought the 'bank stock' off the stock holders and in return the gov't gave the stockholders 'government stock' bearing the same interest as the bank stock would have. so it looks like a paper shuffling exercise rather than a change of ownership i.e. the 1946 stock holders and their descendents still own the bank.

anyway, you could try a Freedom of Information Request asking who the private stock holders were in 1946, but you'd probably just get fobbed off and stuck on black list

[interestrateripoff]

3. If the Government can print it's 'own' money, why does it then borrow money?

http://en.wikipedia.org/wiki/Fiat_money

Fiat is based on trust you don't just print money, the illusion of borrowing from elsewhere ie other fiat gives confidence in your own currency and that the printed money is actually worth something.

It's all about the promise ie trust.

Everyone that has gone done we'll just print route has failed. See Zimbabwe as a recent example.

[Tired of Waiting]

The answer to (1) is on the Bank of England's own website :

'Does the Bank of England have shareholders? If the Bank does have shareholders who are they?'

The Bank of England is the central bank of the whole of the UK and was established as a corporate body by Royal Charter under the Bank of England Act 1694. The Bank was nationalised on 1 March 1946, and gained operational independence to set interest rates in 1997. The Bank is a public sector institution wholly-owned by the government - the entire capital of the Bank is, in fact, held by the Treasury solicitor on behalf of HM Treasury.

When any post contains the words "Zionist" or "New World Order" ( or, for that matter, "little green men from Mars") be wary. Treat it like Jehovah's Witnesses on your doorstep.

Agree.

[Tired of Waiting]

actually, if you look a 1a and 1b from the 1946 act...

http://www.bankofengland.co.uk/about/legislation/1946act.pdf

you'll see that the gov't bought the 'bank stock' off the stock holders and in return the gov't gave the stockholders 'government stock' bearing the same interest as the bank stock would have. so it looks like a paper shuffling exercise rather than a change of ownership i.e. the 1946 stock holders and their descendents still own the bank.

anyway, you could try a Freedom of Information Request asking who the private stock holders were in 1946, but you'd probably just get fobbed off and stuck on black list

Even if this is the case, the formers owners would only receive interests, but not decide what the Bank does.

[blankster]

The Bank of England is the central bank of the whole of the UK and was established as a corporate body by Royal Charter under the Bank of England Act 1694. The Bank was nationalised on 1 March 1946, and gained operational independence to set interest rates in 1997. The Bank is a public sector institution wholly-owned by the government

In which case it should be renamed 'Bank of Britain' or the 'Bank of the United Kingdom'.

[LuckyOne]

In which case it should be renamed 'Bank of Britain' or the 'Bank of the United Kingdom'.

Bank of the United Kingdom (BUK for short) gets my vote.

Headline writers could have a field day. The Bank BUKed up, we are BUKed, we have been BUKed by rising interest rates etc etc

[Tired of Waiting]

(...)

1. Who 'owns' the Bank of England? - I have always assumed that we/government did but I have not been able to find confirmation of this at all.

2. The Goverment had all those billions of extra £'s printed right? So where has it gone?

3. If the Government can print it's 'own' money, why does it then borrow money?

4. Would it be possible for a government to print money and just not tell anyone/the rest of the world? If not, why not?

(...)

Hi HouseSpider

Good questions. Not dim at all!

Question 1: Has already been answered well and directly by Cartimandua51 on post #6 above.

Question 2: Apparently, both people and banks, are saving and hoarding money - much more than before, understandably. This is linked with the issue of the speed of circulation of money. The same amount of money, if circulating more, generates a higher economic activity. If circulates less, it generates less.

Basically prices will depend on how much goods/services are available, and how much money is available. But will depend also on the speed (or “velocity”) of circulation of this money.

The basic formula is this: M x V = P x T

Where:

M - stock of Money,

V - Velocity of circulation (No, sorry, I don’t know why the don’t just use S, for Speed),

P - Pice level,

T - Traded goods and services

For instance, we do have a few hundred pounds in a drawer here, for emergencies. And before the crisis we would have less than a hundred, usually. So we are hoarding more too. Let’s see: Multiply that by 20 million households, if each keeps £1,000 at home, there goes = £20 billion. Hmmm, not much actually, compared with the £200bn of QE. Anyway, someone is hoarding it. It is not circulating.

Questions 3:

Because that would increase too much the amount of Money in the country, and that would drive prices up = inflation. See that formula above.

Question 4:

“Interestrateripoff” is right saying that today’s paper money is based on trust (Post #10). They can’t do that. And they can’t be allowed to do that either. Besides, even if they managed to do that secretly, and without leaks, the increased amount of Money in circulation, chasing the same amount of Tradable goods and services, would drive Prices up = inflation, and make obvious what they had done.

Besides, every time they print some extra sterling, it reduces the actual value (purchasing power) of the sterling in your pocket. It is, actually, a form of theft.

I hope that helped a little.

Just another point: don’t believe the Luddites. In the medium and long term, science and technology (progress) will keep improving the quality of our lives, as it did in the past few centuries, since the industrial revolution. The earth is huge when compared with humanity. And total population will peak at mid century, and then decrease. Resources will not be a problem. Malthus was wrong.

Edited May 21, 2010 by Tired of Waiting

[Alan B'Stard MP]

actually, if you look a 1a and 1b from the 1946 act...

http://www.bankofengland.co.uk/about/legislation/1946act.pdf

you'll see that the gov't bought the 'bank stock' off the stock holders and in return the gov't gave the stockholders 'government stock' bearing the same interest as the bank stock would have. so it looks like a paper shuffling exercise rather than a change of ownership i.e. the 1946 stock holders and their descendents still own the bank.

anyway, you could try a Freedom of Information Request asking who the private stock holders were in 1946, but you'd probably just get fobbed off and stuck on black list

Government stock will be gilts I imagine. DMO says there are only eight undated gilts in operation today. I think these, if undated, have long since been redeemed. If not - I imagine they are a pittance.

Edited May 21, 2010 by Alan B'Stard MP

[Bloo Loo]

Bank of the United Kingdom (BUK for short) gets my vote.

Headline writers could have a field day. The Bank BUKed up, we are BUKed, we have been BUKed by rising interest rates etc etc

Id go for Fed United Kingdom

[Concrete Jungle]

Hello all!

There appears to many very well informed and intelligent people on here so, I thought I might get the answer to some questions I have. On and off over the last few months I have searched and searched the internet and cannot find (or perhaps cannot understand), the information so, here goes..........

1. Who 'owns' the Bank of England? - I have always assumed that we/government did but I have not been able to find confirmation of this at all.

2. The Goverment had all those billions of extra £'s printed right? So where has it gone?

3. If the Government can print it's 'own' money, why does it then borrow money?

4. Would it be possible for a government to print money and just not tell anyone/the rest of the world? If not, why not?

Many of you will probably think me really dim for needing to ask these questions in the first plade, but I don't mind......

In addition to the answers on here, have a look at

http://www.greenenergyinvestors.com/index.php?showtopic=9623

[D.C.]

Yes it would technically be possible for the government to 'print' some money secretly.

But.

We are not a banana republic or secretive state. If we printed a significant amount of money it would be noticed, the sudden appearance of this unexplained and unaccounted for capital would scare the crap out of international investors, trigger bank runs, currency collapse and generally cause a very, very bad day.

[scepticus]

2. The Goverment had all those billions of extra £'s printed right? So where has it gone?

it is now in various deposit balances of people the government bought gilts off. This means it is in two places:

private deposit accounts, which means that the actual extra money is in bank reserves that banks keep on deposit at the BoE. This is not 'free money for banks' since they have an equal number of liabilities to their new private depositors.

3. If the Government can print it's 'own' money, why does it then borrow money?

Printing money has only been possible since the gold satndard was abandonded in the 70s. So in part the answer is that people still have gold standard mentality.

In reality printing money and issuing government debt amounts to more or less the same thing. The only difference between a fresh tenner and a 10 year gilt is the maturity date, the former zero, the latter 10 years. In actual fact investors use both forms of government debt as money assets.

If you have a little time to spend and would like to know more (specifically why printing money and issuing government debt are more or less the same), then see here:

http://knol.google.com/k/mechanics-of-fiat-money-and-credit#

and here:

http://knol.google.com/k/the-pure-credit-economy#

[Tired of Waiting]

The answer to question 2 is partial. My opinion is as follows....

The banks had been pumping money into the uk mortgage market by borrowing vast amounts from overseas...about £200bn-£300bn. The banks did this by creating off balance sheet SIV's and SPV's that took mortgages and re-packaged the stream of income to be derived from people's mortgage payments into 'bonds' that overseas investors could buy.

When financial crisis struck, the overseas investors fled. There was a 'maturity mismatch' between bank borrowing and bank lending. To avoid their bankruptcy, the BoE decided to open a massive liquidity scheme called the 'SLS'. In return for gilts from the BoE, the banks passed the mortgages as security to the BoE. When they needed any dosh, the banks were able to swap the marketable gilts in the second hand gilt market for readies.

Where did the BoE get these gilts from? They got them by printing money and buying gilts in the second hand market - often from overseas investors but increasingly from those very same banks.

So - much of the money has actually gone to prop up the mortgage market now that overseas investors have fled. This is becoming more visibly because it is starting to become 'on balance sheet'. The Bank of England freely admitted that they hadn't been fully aware of all the money that had been washing around the uk economy because they didn't measure this!

As ToW points out, a classic other effect in a recession is a tightening of lending criteria. They don't want to make risky loans and hurt their weakened capital bases even more. I personally believe this is much, much gretare than reduced demand as trolled out by the banks to explain their lack of lending.

+ 1

Looks like a good addition.

(I mean, I am not familiar with this topic, but it sounds sensible.)

[Alan B'Stard MP]

Printing money has only been possible since the gold satndard was abandonded in the 70s.

Are you sure about that?

[scepticus]

Are you sure about that?

it is a bit of a license I am taking there, but I would say its a reasonable first approximation.

ofc any system using printed notes as a promise of gold can print more notes, but in this case it is printing of credit (denominated in gold), not printing money.

You can't print gold. However if money is socially redefined as government debt of zero maturity, then you can print money. However I would argue that since government debt of zero maturity is credit, not money, then you can't print money even in a fiat regime.

Which is why I said that so called 'printing money' is no different in principle from issuing more gilts.

[doahh]

actually, if you look a 1a and 1b from the 1946 act...

http://www.bankofengland.co.uk/about/legislation/1946act.pdf

you'll see that the gov't bought the 'bank stock' off the stock holders and in return the gov't gave the stockholders 'government stock' bearing the same interest as the bank stock would have. so it looks like a paper shuffling exercise rather than a change of ownership i.e. the 1946 stock holders and their descendents still own the bank.

anyway, you could try a Freedom of Information Request asking who the private stock holders were in 1946, but you'd probably just get fobbed off and stuck on black list

If the government now own all of the stock in the bank (as the PDF states) then it looks like they control it completely. However, it also says that the original bank stockholder got government stocks (bearing 3% interest) and that a treasury official will be the new named holder of the stock. It would seem possible that the original bank stockholder controls the new bank stockholder via their government stock. Is that what you mean by a paper shuffling exercise? If so the original BoE stockholder now seems to have just received an additional 3% income for doing nothing.

If that is not the case and the treasury holds all of the stock of the BoE and also controls the holder of that stock, does our currency still get issued to the government at interest or do we no longer have a debt based currency system?

Edited May 21, 2010 by doahh

[Alan B'Stard MP]

If the government now own all of the stock in the bank (as the PDF states) then it looks like they control it completely. However, it also says that the original bank stockholder got government stocks (bearing 3% interest) and that a treasury official will be the new named holder of the stock. It would seem possible that the original bank stockholder controls the new bank stockholder via their government stock. Is that what you mean by a paper shuffling exercise? If so the original BoE stockholder now seems to have just received an additional 3% income for doing nothing.

If that is not the case and the treasury holds all of the stock of the BoE and also controls the holder of that stock, does the money still get issued to the government at interest or do we no longer have a debt based currency?

I think the old shareholders obtained government securities in payment which have long since been paid off. The treasury apparently receives 50% of the profits after corporation tax has been applied.

The other 50%, I wouldn't know but I would wager the yellow brick road begins here

http://wck2.companieshouse.gov.uk/44b29f0643ac6ed5b461e7f9a17f7f2e/compdetails

http://maps.google.com/maps?f=q&source=s_q&hl=en&geocode=&q=EC2R+7HH&ie=UTF8&hq=&hnear=London+EC2R+7HH,+United+Kingdom&ll=51.515126,-0.088706&spn=0.007358,0.021007&z=16&layer=c&cbll=51.514755,-0.089198&panoid=ZAk0kvz0et2SAhhqNXMp3w&cbp=12,162.18,,0,10.26

Edited May 21, 2010 by Alan B'Stard MP