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George Osborne's Raid On Qe Proceeds Rejected By Statistics Watchdog

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http://www.guardian.co.uk/business/2013/jun/12/george-osborne-qe-treasury-statistics-wactdog

George Osborne's move to bring the £35bn proceeds of the Bank of England's quantitative easing scheme into the Treasury and score them against the public finances has been rejected by the statistics watchdog.

In the run-up to December's autumn statement, the Treasury announced that it would change the way it managed the interest payments on £375bn-worth of government bonds bought by the Bank of England with electronically created money under QE.

Instead of sitting on the Bank's books, the proceeds would go straight to the Treasury. In February, the Office for National Statistics, which produces the public finances, confirmed that these interest payments could be treated in a similar way to tax receipts – conveniently helping to reduce the deficit.

Although the independent Office for Budget Responsibility, which produces forecasts for the Treasury, publishes calculations of the deficit on the public finances with and without the bond payments, the move allowed Osborne to announce in the autumn statement that borrowing would fall by 1% of GDP in 2012-13, and 0.8% of GDP in 2013-14.

So not Ponzi at all then....

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Purely out of interest, what would happen if the BoE simply wrote off the whole £375bn?

I keep wondering the same thing. Everyone screams blue murder that the government is in so much debt - 80% of GDP - but about a third of this is owed to the BoE, a branch of the government. Are there laws, possibly international ones, preventing central banks from doing this? Is it about maintaining confidence in the £ - by keeping the bonds the BoE is pretending that all the money they printed is backed by a real government obligation?

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I keep wondering the same thing. Everyone screams blue murder that the government is in so much debt - 80% of GDP - but about a third of this is owed to the BoE, a branch of the government. Are there laws, possibly international ones, preventing central banks from doing this? Is it about maintaining confidence in the £ - by keeping the bonds the BoE is pretending that all the money they printed is backed by a real government obligation?

It would destroy any pretence that fiat currency has any real value and probably precipitate a huge Sterling crisis. Why on earth would you exchange valuable goods or services for pounds that have quite blatantly just been 'created' in their hundreds of billions to wipe out an existing state 'debt'.

What is IMO more likely is that the treasury will eventually begin to issue 100 year gilts that the QE-ed Gilts will be rolled over into as they mature. That way the smoke and mirrors stay intact and the small matter of paying the capital back can effectively be forgotten about.

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It would destroy any pretence that fiat currency has any real value and probably precipitate a huge Sterling crisis. Why on earth would you exchange valuable goods or services for pounds that have quite blatantly just been 'created' in their hundreds of billions to wipe out an existing state 'debt'.

What is IMO more likely is that the treasury will eventually begin to issue 100 year gilts that the QE-ed Gilts will be rolled over into as they mature. That way the smoke and mirrors stay intact and the small matter of paying the capital back can effectively be forgotten about.

Oh dear, does this mean the deficit is actually on the rise again?:

from Nov 2012:

An initial £11bn transfer will be made to the Treasury this year, and the remaining £24bn will be transferred in four instalments over the 2013/2014 financial year.

http://www.telegraph.co.uk/finance/economics/9666812/George-Osborne-bags-35bn-windfall-from-QE.html

The deficit for the year ended April 2013 was given as a smidgen under the previous years, at £120Bn or just less. Has this now been revised up to~£130Bn?

Edited by cheeznbreed

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  • 242 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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