A couple of Tweets from yesterday as I do not have time to elaborate these stories today.
The first is glaringly obvious. As a matter of fact, in economic substance quantitive easing debt is cancelled, as the governments own consolidated accounts prove because debt subject to such arrangements is not shown to exist within them. Meanwhile, central bank reserve account balances are not national debt, as the ONS recognises. So, my claim is correct:
Then there is this story:
£10 billion has not been saved. The loss in question is just not going to be accounted for within ONS data.
There are two things to note. One is that the loss need never be suffered; quantitative tightening is not necessary. Therefore this loss is being voluntarily incurred now.
Second, the framing is also wrong: a sleight of hand that lacks accounting credibility is not a saving.
The real story is that £100bn of government debt is being sold and we are not benefiting, and that is a scandal. We could relieve poverty, fund a massive NHS investment programme and kick start the Green New Deal with that £100bn. Instead it will just be used to reduce the central bank reserve accounts held at the Bank of England by our commercial banks to keep interest rates high and the UK on track for a recession. That means economic misinformation is in this case being used to hide negligent mismanagement of the economy.
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The vast majority of that 100bn is the BoE not issuing new debt to replace bonds that mature. Not rolling over in other words. It’s a passive thing where you do nothing when the bonds reach term. To say that the BoE is ‘selling’ £100bn is mistaken.
That is still net selling in its economic effect
Hi Richard
Have you posted anything about the past PFI disaster and the incoming PFI contracts , rebranded as PPP contracts but essentially the same.
An expensive accounting ruse to keep borrowing off the books ?
If those contracts were added to the borrowing ledger, then this nonsense wouldn’t cease.
Thank you
Not for a long time – but use the search box for the old stuff.
Mr Goldsmith,
When you have reduced the capacity to present essential facts, only by recourse to use of the plain word “selling” in inverted commas, and describing the execution of monetary policy transactions as “passivity”, you have entered a world in which facts, clarity and transparency have effectively been eliminated, in order to promote a shadow world of obfuscation.
Then you have to ask – why? But since we are now playing a knowing game, requiring inverted commas (wink), perhaps you would care to explain why the Government does not produce a fully consolidated balance sheet, then we could see where all these inverted commas are finally collected?
You could do with tightening up your use of “misinformation”. Whether its strictly relevant to this particular blog, or not, I’ve noticed you tend to use it very loosely, sometimes when “disinformation” would be more appropriate; certainly better than the “deliberate misinformation” you used, in a reply, recently:
https://www.google.com/url?sa=t&source=web&rct=j&opi=89978449&url=https://www.dictionary.com/e/misinformation-vs-disinformation-get-informed-on-the-difference/&ved=2ahUKEwiQ893js9OIAxUAaEEAHfINBagQFnoECCwQAQ&usg=AOvVaw0PDuxKBbOEcTH6K-j11CMg
Which is worse, in this instance; being presented [by Reeves] a deliberate falsehood, or that she actually believes the line she’s feeding us?
It seems to be one slap in the face after the other with these political and economic harlots.
We seem to be heading for a show down don’t we?
These actions are redolent of Mattei’s description of the austerity playbook – a government induced recession – or SABOTAGING of its own economy aimed at harshening economic conditions so that it can deliver excuses not to do what it said it would before the election.
It was not enough that they worked harder to destroy Corbyn than they did as HM opposition to protect us against the Tories.
This is the next insult to democracy and another ‘up yours’ to the country at large. This is the next big low from the Labour party – which like the Tory party, is not what it seems.
The long term plan to return the UK to its pre-first world state is on track I would say.
Subservience to wealth and knowing your place is back on the agenda.
Austerity on the grounds of made up fiscal rules is bad. That the rules are based on poor data that is misunderstood is even worse.
First, BoE and HMT are on the same team. Any transactions between them are neutral for the team/nation.
So, to reiterate what you have said many times, QE, the sale of gilts by HMT and purchase by BoE, from a consolidated accounting perspective, can be ignored.
Second, whether HMT or BoE sells gilts to the private sector doesn’t matter either.
Consequently, we can see QE and QT merely as gilt issuance delayed….. so what is the “loss”? None…. except the opportunity cost of issuing now rather than 3 years ago. What this opportunity is is unknowable because we have no idea what yield would have prevailed without QE.
To hang such weighty policy choices on such flimsy hooks is foolish.
Agreed
“Austerity on the grounds of made up fiscal rules is bad”.
Outside this Blog, and a few recalcitrant economists it is bad enough that this trenchant observation of the blatantly obvious is neither acknowledged nor even broadly understood; but that fact that it is not widely and publicly discussed is incomprehensible. Where we go from here is becoming difficult to believe is not going to end badly.
Stamer’s U-turn on clothing is, to me, far worse than the original bad judgement; because it goes to the nature of his judgement and the nature and effectiveness of his natural intuitive values.
Starmer’s ‘U-turn on clothing’ misses the point. While it should be beyond the pale for a Labour MP, whatever their role in government, to accept donations towards their clothing, it is also completely unacceptable for them to accept personal donations for anything. In any other organisation this would be called corruption. I don’t like donations to political parties much, but donations to individuals can only be seen as bribes and should be banned.
I don’t believe the government publish which bonds are maturing.
So weather they sell bonds or don’t replace the £ for bonds that do mature has exactly the same effect.
The actual amount is insignificant to tell the difference.
Correct
But they do announce the redemptions – if you dig for long enough
What I can’t figure out is why. These are intelligent people. They would definitely want all those billions to spend. They have certainly seen the arguments other economists put forward. So what are they seeing differently in the world that prevents them from taking advantage from the possibilities that you describe.
Keeping on repeating the arguments and expecting a different response may not work. A new approach may be required.
“…What I can’t figure out is why. These are intelligent people.”
You think that do you? I’m not sure I do. Sure they have had an education of sorts, but ……
“By their fruits ye shall know them” (Says so in the ‘good book’). Are these the fruits of the tree of intelligence? I think not.
They are the fruits (surely) of ignorance, stupidity or wickedness.
Is there any possibility that you could be an economic adviser for the current government?! Please?
They could ask
I would consider it.
But, they will never ask. So this is a bit academic.
Why are they doing this? Reeves is an economist. Surely she doesn’t believe the kitchen sink economy claptrap. They surely know that they cannot grow the economy on austerity. So why? What is their cunning plan?
There is no plan, cunning or otherwise.