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Bank Of England: 'inflation Not The Way Out Of Debt

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Telegraph article

Bank of England: 'Inflation not the way out of debt'

No one should fool themselves into believing that Britain can inflate its way out of its public debt mountain, the Bank of England's deputy governor has warned.

Charles Bean raised the spectre of hyperinflation, saying it is "severely misguided" to hope that a rise in prices would help Britain out of its current predicament.

His comments come amid growing suspicion that politicians around the world may eventually resort to inflation as a means of reducing what they owe in capital markets, and follow the Swedish Riksbank's decision to change its inflation target.

In an opinion piece for Telegraph.co.uk on Friday, Mr Bean writes: "Some people have suggested that a bit of extra inflation now might actually be a good thing. After all, wouldn't it help to get the economy going by reducing the real value of public and private debt? This is severely misguided.

"Aside from the dubious morality of redistributing wealth from savers to borrowers, we have seen from past experience that a bit of inflation has a nasty habit of turning into a lot of inflation."

He said the MPC should stick to its 2pc inflation target.

One thing I don't understand about the inflation debate is that some appear to assume that the government/BoE has free rein to pursue an inflationary policy to inflate debt away. But surely the bond market isn't that stupid and will start demanding higher yields on government debt if it believes this is being done? Won't the market constrain the government's ability to inflate debt away?

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Telegraph article

Bank of England: 'Inflation not the way out of debt'

No one should fool themselves into believing that Britain can inflate its way out of its public debt mountain, the Bank of England's deputy governor has warned.

Charles Bean raised the spectre of hyperinflation, saying it is "severely misguided" to hope that a rise in prices would help Britain out of its current predicament.

His comments come amid growing suspicion that politicians around the world may eventually resort to inflation as a means of reducing what they owe in capital markets, and follow the Swedish Riksbank's decision to change its inflation target.

In an opinion piece for Telegraph.co.uk on Friday, Mr Bean writes: "Some people have suggested that a bit of extra inflation now might actually be a good thing. After all, wouldn't it help to get the economy going by reducing the real value of public and private debt? This is severely misguided.

"Aside from the dubious morality of redistributing wealth from savers to borrowers, we have seen from past experience that a bit of inflation has a nasty habit of turning into a lot of inflation."

He said the MPC should stick to its 2pc inflation target.

One thing I don't understand about the inflation debate is that some appear to assume that the government/BoE has free rein to pursue an inflationary policy to inflate debt away. But surely the bond market isn't that stupid and will start demanding higher yields on government debt if it believes this is being done? Won't the market constrain the government's ability to inflate debt away?

bond yields have been rising.

Either of the flations has to be controlled because they can spriral and become a viscious circle.

We print, bond yields rise, we print more, yields rise, print more, gilt strike, run out of printer ink, see zimbabwe......

Edited by richyc

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One thing I don't understand about the inflation debate is that some appear to assume that the government/BoE has free rein to pursue an inflationary policy to inflate debt away. But surely the bond market isn't that stupid and will start demanding higher yields on government debt if it believes this is being done? Won't the market constrain the government's ability to inflate debt away?

Silly boy! They can do what they did last year and buy bonds with printed money like they did last year they printed 200bn and bought 200bn of UK government bonds with it.

I mean don'tcha know debt is wealth!

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Silly boy! They can do what they did last year and buy bonds with printed money like they did last year they printed 200bn and bought 200bn of UK government bonds with it.

I mean don'tcha know debt is wealth!

yeah, seems to be all the rage now buying your own bonds with freshly printed money, even the ecb are upto it now.

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I always assume they implement the opposite of what they say. So actually the BoE are actively persuing a plan to inflate the debt away. Mind you, on the other hand they've always erred on the side of squashing any potential inflation spikes by getting interest rate increases in early. Oh wait .. they've never done that.

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Conway mentions another reason why the UK cannot inflate away its debt in this article here:

http://blogs.telegraph.co.uk/finance/edmundconway/100006007/britain-risks-default-unless-government-cuts-public-sector-pensions/

...

But on the other front, Britain is worse-placed. As I’ve written before, I suspect that inflating away Britain’s debt will be far more difficult than some people think – because so many of Britain’s debts are index-linked – in a way that they weren’t before. If you include index-linked gilts (which weren’t around before the 70s), public sector and state pensions and PFI and local government debt, some four fifths of UK debt is linked to inflation[/b].

...

Edited by LiveAndLetBuy

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Conway mentions another reason why the UK cannot inflate away its debt in this article here:

http://blogs.telegraph.co.uk/finance/edmundconway/100006007/britain-risks-default-unless-government-cuts-public-sector-pensions/

So what's needed is inflation that stays out of any index used for linking.

Oh look, asset prices!

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Charlie says "please keep your savings in sterling so I can inflate them into oblivion and bail out my mates."

Charley_says.jpg

Yeah, I've never been more convinced of the need to get out of sterling.

Unless there is another currency that you fancy a punt on...er....doesn't this point toward converting some sterling into shiny metal?

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Charlie says "please keep your savings in sterling so I can inflate them into oblivion and bail out my mates."

Charley_says.jpg

Very true, just ******** from the bankrupt of england from now on in.

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Take note of what they do not what they say.

Just watch their pension fund investments.

This lot are even more crooked that the retail/investment banks.

There is no broader measure of the health of the economy than the main companies working in it. The BOE pension fund is instructed to shift their investments, the pension fund managers then do all the trading to match requested allocations. How much faith does the BOE have in their policies to improve the economy of this country? - a pissing half a million pounds out of a £2bn pension pot.

Like we've been saying the total mismangement of this country has reached such a dire state that even those who pull all the levers don't believe their own lies, moreover their pension allocation suggests that they know that what they are doing is going to push it over the edge into the abyss.

http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/6646330/Bank-of-England-staff-pension-fund-shuns-Gilts.html

Holdings in UK equities were cut from 5.3pc to 0.3pc over the year, or just £549,000. The return on shares was minus 47pc, so the fund must have sold after the crash.

Edited by OnlyMe

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Re printing money: it's probably the only thing they can think of doing. It was inflation that helped people pay off their mortgages in the seventies - fine for those who aren't, eg, on fixed incomes, or suffering from a wage freeze or job loss.

The fact is that the financial system is bust. It can't support the huge levels of public and private debt that have piled up (and private debt is not only far greater than public debt, but far more costly to service). The problem is that all non-cash money (now 97% of the total money supply) has to be created by private borrowers taking out loans at their own risk and expense; and we've now reached the impasse of being unable collectively to afford to service the debt or to engage in further borrowing. At the same time, as more and more people default or earlier loans are repaid, we face a drastic evaporation of purchasing power unless enough new borrowers are prepared to go even deeper into the red on behalf of their country. The only sensible solution is to stop depending on debt to create our means of exchange.

The Bank of England (Creation of Currency) Bill 2010 describes how this can be done. The Universal Principle behind the Bill is that "Throughout the entire banking and deposit taking system ... every credit to an account must be matched by an equal debit from a different account". Only the Bank of England will be exempt from this requirement, giving it a monopoly over the creation of all money, both cash and non-cash, in the UK (which is what many people wrongly believe to be the case already). The ability to vary the amount of money created, or to call a temporary halt to money creation, will be a far more effective check on runaway prices than attempts to control excessive or insufficient money creation by the banks through the manipulation of interest rates.

Enactment of the Bill will merely complete the reform initiated by the Bank Charter Act of 1844, which made it as illegal for the commercial banks to print notes as it already was for them to mint coins. The clear intention of this Act was to nationalise the money supply, but that intention has gradually been overtaken by the increasing use of non-cash money.

This Bill will put the economy on course again by nationalising the money supply, not the banks, which will continue to compete in the open market for borrowing and lending money - the difference being that the money borrowed and lent will already exist, having been created, free of any debt at source, by a non-political public authority along the lines of the MPC. Under these condition, the banks will no longer exercise a stranglehold on the real (ie, productive) economy.

The Bank of England (Creation of Credit) Bill 2010 can be read in full at http://www.bankofenglandact.co.uk/, with explanations and FAQs.

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Re printing money: it's probably the only thing they can think of doing. It was inflation that helped people pay off their mortgages in the seventies - fine for those who aren't, eg, on fixed incomes, or suffering from a wage freeze or job loss.

The fact is that the financial system is bust. It can't support the huge levels of public and private debt that have piled up (and private debt is not only far greater than public debt, but far more costly to service). The problem is that all non-cash money (now 97% of the total money supply) has to be created by private borrowers taking out loans at their own risk and expense; and we've now reached the impasse of being unable collectively to afford to service the debt or to engage in further borrowing. At the same time, as more and more people default or earlier loans are repaid, we face a drastic evaporation of purchasing power unless enough new borrowers are prepared to go even deeper into the red on behalf of their country. The only sensible solution is to stop depending on debt to create our means of exchange.

The Bank of England (Creation of Currency) Bill 2010 describes how this can be done. The Universal Principle behind the Bill is that "Throughout the entire banking and deposit taking system ... every credit to an account must be matched by an equal debit from a different account". Only the Bank of England will be exempt from this requirement, giving it a monopoly over the creation of all money, both cash and non-cash, in the UK (which is what many people wrongly believe to be the case already). The ability to vary the amount of money created, or to call a temporary halt to money creation, will be a far more effective check on runaway prices than attempts to control excessive or insufficient money creation by the banks through the manipulation of interest rates.

Enactment of the Bill will merely complete the reform initiated by the Bank Charter Act of 1844, which made it as illegal for the commercial banks to print notes as it already was for them to mint coins. The clear intention of this Act was to nationalise the money supply, but that intention has gradually been overtaken by the increasing use of non-cash money.

This Bill will put the economy on course again by nationalising the money supply, not the banks, which will continue to compete in the open market for borrowing and lending money - the difference being that the money borrowed and lent will already exist, having been created, free of any debt at source, by a non-political public authority along the lines of the MPC. Under these condition, the banks will no longer exercise a stranglehold on the real (ie, productive) economy.

The Bank of England (Creation of Credit) Bill 2010 can be read in full at http://www.bankofenglandact.co.uk/, with explanations and FAQs.

Sounds about right - "they've completely ******ed up, let's give thm more power!"

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Re printing money: it's probably the only thing they can think of doing. It was inflation that helped people pay off their mortgages in the seventies - fine for those who aren't, eg, on fixed incomes, or suffering from a wage freeze or job loss.

The fact is that the financial system is bust. It can't support the huge levels of public and private debt that have piled up (and private debt is not only far greater than public debt, but far more costly to service). The problem is that all non-cash money (now 97% of the total money supply) has to be created by private borrowers taking out loans at their own risk and expense; and we've now reached the impasse of being unable collectively to afford to service the debt or to engage in further borrowing. At the same time, as more and more people default or earlier loans are repaid, we face a drastic evaporation of purchasing power unless enough new borrowers are prepared to go even deeper into the red on behalf of their country. The only sensible solution is to stop depending on debt to create our means of exchange.

The Bank of England (Creation of Currency) Bill 2010 describes how this can be done. The Universal Principle behind the Bill is that "Throughout the entire banking and deposit taking system ... every credit to an account must be matched by an equal debit from a different account". Only the Bank of England will be exempt from this requirement, giving it a monopoly over the creation of all money, both cash and non-cash, in the UK (which is what many people wrongly believe to be the case already). The ability to vary the amount of money created, or to call a temporary halt to money creation, will be a far more effective check on runaway prices than attempts to control excessive or insufficient money creation by the banks through the manipulation of interest rates.

Enactment of the Bill will merely complete the reform initiated by the Bank Charter Act of 1844, which made it as illegal for the commercial banks to print notes as it already was for them to mint coins. The clear intention of this Act was to nationalise the money supply, but that intention has gradually been overtaken by the increasing use of non-cash money.

This Bill will put the economy on course again by nationalising the money supply, not the banks, which will continue to compete in the open market for borrowing and lending money - the difference being that the money borrowed and lent will already exist, having been created, free of any debt at source, by a non-political public authority along the lines of the MPC. Under these condition, the banks will no longer exercise a stranglehold on the real (ie, productive) economy.

The Bank of England (Creation of Credit) Bill 2010 can be read in full at http://www.bankofenglandact.co.uk/, with explanations and FAQs.

:lol::lol::lol::lol::lol:

Accountancy like debits and credits are by enlarge fraud! I know because I was an accountant! I remember doing jobs handed down to me from others and always found the debits and credits matched perfectly, I looked closer and phantom transactions would exist in the books purely to balance off bank accounts and expenses.

But this was the culture, they were cutting the hours on jobs so heavily thre was no other way!

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:lol::lol::lol::lol::lol:

Accountancy like debits and credits are by enlarge fraud! I know because I was an accountant! I remember doing jobs handed down to me from others and always found the debits and credits matched perfectly, I looked closer and phantom transactions would exist in the books purely to balance off bank accounts and expenses.

But this was the culture, they were cutting the hours on jobs so heavily thre was no other way!

"Yeah - just post it to suspense". Remembering doing that on a few occasions.

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No - just convenient until you can journal it out again.

You can't get round it being fraud by falling for it yourself!

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You can't get round it being fraud by falling for it yourself!

Well considering it was a Distillers I'm not sure what your point is.

Master records weren't loaded so we had to post to suspense.

Was all sorted out go-live.

Get over yourself.

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Re printing money: it's probably the only thing they can think of doing. It was inflation that helped people pay off their mortgages in the seventies - fine for those who aren't, eg, on fixed incomes, or suffering from a wage freeze or job loss.

But my point is, if it's so obvious that we are headed for an inflationary "solution" to our problems, why is the 10 year gilt yield only 3.6%? Is the bond market that stupid?

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Re printing money: it's probably the only thing they can think of doing. It was inflation that helped people pay off their mortgages in the seventies - fine for those who aren't, eg, on fixed incomes, or suffering from a wage freeze or job loss.

The fact is that the financial system is bust. It can't support the huge levels of public and private debt that have piled up (and private debt is not only far greater than public debt, but far more costly to service). The problem is that all non-cash money (now 97% of the total money supply) has to be created by private borrowers taking out loans at their own risk and expense; and we've now reached the impasse of being unable collectively to afford to service the debt or to engage in further borrowing. At the same time, as more and more people default or earlier loans are repaid, we face a drastic evaporation of purchasing power unless enough new borrowers are prepared to go even deeper into the red on behalf of their country. The only sensible solution is to stop depending on debt to create our means of exchange.

The Bank of England (Creation of Currency) Bill 2010 describes how this can be done. The Universal Principle behind the Bill is that "Throughout the entire banking and deposit taking system ... every credit to an account must be matched by an equal debit from a different account". Only the Bank of England will be exempt from this requirement, giving it a monopoly over the creation of all money, both cash and non-cash, in the UK (which is what many people wrongly believe to be the case already). The ability to vary the amount of money created, or to call a temporary halt to money creation, will be a far more effective check on runaway prices than attempts to control excessive or insufficient money creation by the banks through the manipulation of interest rates.

Enactment of the Bill will merely complete the reform initiated by the Bank Charter Act of 1844, which made it as illegal for the commercial banks to print notes as it already was for them to mint coins. The clear intention of this Act was to nationalise the money supply, but that intention has gradually been overtaken by the increasing use of non-cash money.

This Bill will put the economy on course again by nationalising the money supply, not the banks, which will continue to compete in the open market for borrowing and lending money - the difference being that the money borrowed and lent will already exist, having been created, free of any debt at source, by a non-political public authority along the lines of the MPC. Under these condition, the banks will no longer exercise a stranglehold on the real (ie, productive) economy.

The Bank of England (Creation of Credit) Bill 2010 can be read in full at http://www.bankofenglandact.co.uk/, with explanations and FAQs.

I'm not sure there is anything wrong with the way the bond market can be used to raise public money from the private sector within a country (it's just a circuit). Aren't the issues:

1. The politicians deficit spending. There is a good argument for preventing the government from funding its pet projects from borrowing, rather than taxation. It's morally wrong in many cases. They will claim that they are "investing in the future" or some rot, but gambling with the next generations money is surely questionable?

2. Selling bonds to those outside of the UK. As far as I understand it, this can cause all sorts of imbalances and inflation. Transferring money from the private sector to the public sector is one thing, but bringing in capital from another country's private sector is an altogether different beast. I pondered this on the other Role Of The Banks thread, but no one replied. Maybe I have it wrong, but I'd like to discuss it, to help me understand further.

P.S. Check a few links in my sig, if you are interested in monetary reform. Particularly, the Cobdem Centre, LPB and Hayek.

Edited by Traktion

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But my point is, if it's so obvious that we are headed for an inflationary "solution" to our problems, why is the 10 year gilt yield only 3.6%? Is the bond market that stupid?

i rather think you've answered your own question.

it isn't, of course, at all "obvious" that we're heading for mega-inflation.

the post you were responding to was, despite appearances, only a personal opinion.

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  • 140 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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