As Larry Elliott has noted this morning in the Guardian another round of quantitative easing is now almost inevitable as money supply has fallen in the UK, again. Expect £75 billion next week. That will be £350 billion in all.
The outcome is simple: another £75 billion of government debt will be purchased by the Bank of England. And as I explained last week, this debt will never be resold. There is no chance of that. And this means that for all practical purposes the debt repurchased is cancelled. So far from having about £1 trillion in debt as was so loudly trumpeted by the government only a week or so ago the actual debt will pnly be about £650 billion after this issue, and the average government borrowing will, after tis repurchase, have fallen to less than £40 billion a year over the last seven years - the average rate (near enough, and lower after allowing for inflation) that was being incurred before the crash.
In that case shall we stop saying we have a debt crisis? It's very clear we have not.
And shall we stop saying that we have to stop spending to ensure our children can repay the debt when it is only growing very modestly at most?
And shall we stop talking about the growing debt interest payments when at least one third of them will now be paid straight back to the government?
And shall we then talk about what we can afford to do when it so clear that we do not have a debt crisis at all?
And shall we call the Tories bluff for lying about a problem that did not exist?
Because that way we have a new political narrative which right now we have not got.
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I think you need to cross-post this on Liberal Conspiracy again Richard as your usual band of naysayers fell over themselves to show their ignorance of basic accounting last week after your first report on this issue.
Sent to Sunny
One wonders, why does the BofE not simply buy ALL of it?
Because we really need that debt – it underpins all private pension payments
Why? Why not just print and pay those payments when they come due?
You can do all of these things Richard, and then wonder why everyone laughts at the Left for their lack of credibility.
Politely, have you ever noted what Schopenhauer said on your line of reasoning?
As he predicts, one day you will agree it was always obviously true that I was right all long
The oddity, of course, is that a vast chunk of the UK’s gross debt is money it owes to itself. Or rather, debtors owe creditors in a vast tangle, spread across the world’s sixth largest economy.
Not as odd as countingas debt the money the gov’t owes directly to itself
Richard
While you can argue that QE cuts the cost of funding the debt, the idea that the debt has suddenly vanished is simply incorrect. The assets purchased under QE are financed by a loan from the BoE to the Bank of England Asset Purchase Facility Fund Ltd, which sits on the BoE balance sheet. The other side of this are the reserve deposits of the UK banks, who might be little upset if the debt was cancelled. So the debt has to remain and there has to be interest paid on it, as base rate is paid to the baks on their reserve deposits.
In addition what average borrowing has been over the past 7 years is meaningless, it is how much needs to be borrowed going forward, and that is £150bn a year, which must come from the markets, as QE can’t continue indefinitely without having some impact on inflationary views and the currency.
You are respectfully playing silly games
The reality is the debt is not there
It has gone
Now stop denying the truth
And stop pretending cash is not created out of thin air. Bank deposits do not pay for QE. It is money printing
Deny that and you really are in cloud cuckoo