Attached to the new paper I have out this morning is a short glossary explaining some of the terms used within it in rather more detail than would be possible in the flow of the text.
The glossary entries in question might go on to form part of the book that I am working on, which is entitled 'How are you going to pay for it', about which I have already written in this blog and which I hope will be out early next year.
Am example of a glossary entry is this one on bonds, which many people find a particularly confusing issue:
Bonds or gilts. A bond is, in effect, a form of savings account available to save in for a fixed period of time. It is offered by a savings institution, whether that be a bank, building society, government, or company. The currency in which the bond is issued is fixed. The interest rate payable upon the savings bond is also usually fixed for the duration of the period for which it is made available. That period can vary in length. It can be a few days but is usually a period of a year of more. Both governments and companies now issue bonds for periods as long as fifty years. Those offering repayment within two to ten years of issue are usually the most popular.
In some cases no early redemption or repayment of the capital invested in the bond at the outset is allowed. In others this capital can be repaid early with a penalty being paid by the saver seeking that early repayment, usually in the form of interest foregone. This usually applies to the bonds offered by banks and building societies.
In the case of government and corporate bonds early repayment is very rarely an option but the bonds are instead traded on a stock market. To achieve this goal a bond issue is made on a specific date by a company or government. That bond issue is then effectively split down into many parts. So, for example, a £10 million bond issue could be traded in 10 million units of £1 each, or one million units of £10 each, or any other arrangement that suits the issuer. The bond in question can then be traded, with people buying or selling parts of it. In that case the price paid by the buyer of a bond reflects their assessment of the creditworthiness of the issuer and the value of the interest rate paid on the bond when compared to current alternative issues. Bond prices can vary as a consequence.
The bonds issued by governments are sometimes called gilts, because the UK government once printed its bonds with a gold edge. The term now more commonly refers to the fact that a bond issued by a government like those of the UK, USA, Japan and Australia cannot fail as the central banks of the countries can always create the funds to ensure that repayment will be made. This cannot be said of other bond issuers. Because of this implicit Treasury guarantee in some countries, such as the USA, government bonds are called Treasuries. Collectively, government bonds form a part of what is commonly, and inappropriately, called government debt. The term is inappropriate because whilst bonds are liabilities of the government they are not actually used to fund its activities, which funding is always provided by money creation by the Bank of England: they are merely the voluntarily deposited savings of those who want to take advantage of the security that the government can supply to savers. To describe these sums as debt is, therefore, inappropriate when they are simply part of a savings mechanism offered by the government.
There are plenty more entries in the new paper, but my question here is a simple one, and is to ask whether this is useful, and is the level of detail excessive, too short or about right, which questions might also be relevant to the tone, which is aimed very specifically at the non-technical reader? Constructive comments would be appreciated. Thsoe offering anything else might be wasting their time.