I was a little surprised to find that I posted so much about bonds yesterday, because that was not my plan for the morning. However, I woke early, and that was how things turned out.
I admit, I have been thinking about the issue because so many people have asked me to explain what bonds (or gilts) are, how the bond market works, and why they can supposedly hold us to ransom. Precisely because of that commonplace claim, the series that I am intending to make once that on wealth is complete is on bonds.
I still think that is likely to be true, but the six-part series on this issue that I have been thinking about might need to expand now, because I now realise that I do not just need to explain how the bond market works, and why they need not threaten us, but also how that market can actually be, in very large part, replaced.
The Functions of the Bond Market
As I have said many times, the reasons why we have a bond market are numerous, and include:
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The need to effectively withdraw from circulation that part of government-created money that is injected into the economy and not reclaimed through taxation, if we are to control inflation.
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To provide the City of London, and financial institutions within it—including banks, pension funds, and insurance companies—with a safe place to deposit funds where they can be guaranteed repayment, which is something only the government can do.
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To provide a place for the secure deposit of funds that people from overseas wish to hold in sterling, which, again, is exceptionally difficult to do in any other way.
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To provide the necessary financial instruments that City of London banks can use to operate what is called the repo market. This is the basis for overnight bank deposit facilities operated in London when UK companies wish to place billions of pounds that they are not using during the night on deposit until the early morning arrives. At present, there is no other way to do this but by these companies buying government bonds from banks in the evening, only to sell them back the following morning, with the price differential representing the interest paid. The reason why they will only deposit funds in this way is that they do not trust banks not to go bust in the meantime. The government bonds do, as a result, provide them with security against bank failure overnight.
Bonds Do Not Fund the Government
As I've often explained, none of this has, of course, anything to do with funding government activity—any more than taxation has anything to do with funding government spending. Government spending, in the way the structure of government funding has worked for a very long time, has always been funded by new money creation by the Bank of England. Tax and bonds create balancing consequential inward financial flows to neutralise that money creation within the macroeconomic financial cycle, but they do not fund anything.
That said, as I have also noted for a long time, whilst bonds fund nothing, their existence is fundamental to the operation of the City of London, and, come to that, of other financial markets where bonds of a similar nature are issued by other governments where other currencies are in use. Without bonds, those markets simply could not work. That is one of the reasons why the idea that we are beholden to financial markets is quite absurd, when it is glaringly obvious to anybody who wants to think about it that the financial markets are actually beholden to the government.
Again, as I have long said, it is also the case that interest rates on these bonds are not set by financial markets. They are—very odd occasions excepted—set by central bankers. So, for example, the reason why UK government borrowing costs are higher than those of other countries at present is not because markets dictate this, but because the Bank of England has, both by setting rates too high and then, by the use of quantitative tightening, reinforced those excessive rates. The reality here has to be understood, and it is too often ignored or pretended to be other than what it really is.
The Change in My Thinking
That is my preamble, and in offering it, I have not covered all the issues that a series on bonds would address. The rest will have to wait, though, because at this point, let me suggest where my thinking has changed since yesterday morning—because it most definitely has in several ways.
Direct Saving for Social Investment
Again, as long-term readers of this blog will know, I have long promoted the idea that the government should offer direct savings mechanisms to those in the UK who want a safe place to put their money—without there being a deposit guarantee limit—knowing that the funds that they deposit would be used for a social purpose. (See page 281 and following here).
I have suggested that bonds might be issued to fund the green transition, the NHS, education, health, social housing, and other programmes—all of which are capable of generating returns either directly or through multiplier effects, which is a consequence the government should be more than willing to underpin through guarantees of safe return.
The purpose of these instruments has always been quite different to that which government bonds have been meant to fulfil. The intention is that they should promote new, real investment in the economy that will deliver a social return. I have suggested the idea of hypothecation of funds because I think that this would appeal to savers, and I think they should have some choice on this matter, whilst accepting the government would still have the job of making up shortfalls in critical areas if savings were not forthcoming.
These savings are not, then, intended to be used in the way that government bonds are, which is to take money out of circulation. They would be quite deliberately promoted with the intention of putting more money into circulation by re-creating the relationship between savings and investment—if a strict taxonomy (which simply means regulation that defines what might be invested in) was created for these bonds, and so use for social purposes could be guaranteed.
Mobilising Existing Savings
If, as I previously suggested, all ISA savings were now required to be deposited in such funds, and 25% of new pension contributions were required to be saved in this way, then more than £100 billion a year is likely to be available for investment in the UK economy as a consequence. The macro data on savings in these instruments suggests that there will be ample liquidity to cover movements arising from withdrawals.
Promoting this idea is not new. What is new is suggesting that these bonds should be made proactively available as an alternative to saving through the products now offered by commercial funds, when those commercial fund operators are doing three things which are failing savers:
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Firstly, they are threatening our government, which is undemocratic.
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Secondly, they are refusing to invest in those things that are essential to guarantee that we have a future, which is contrary to the best interests of savers.
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Thirdly, they are exploiting savers by extracting excessive rewards.
Turning Savings into Investment Funding
In other words, what I am suggesting is that some of the funds now deposited by financial institutions in government bonds that have had the macroeconomic effect of simply balancing the money supply equation to control inflation should be diverted into positive macroeconomic activity that will have microeconomic consequences, with the intention of ensuring that more desirable investment takes place.
Of course, the necessary corollary of using savings as active money to fund investment, rather than to deposit them in passive accounts, which is what happens at present, is that the money supply equation within the overall economy could become unbalanced. There could be too much money being used for constructive purposes unless money was extracted from that economy in some other way, to which the obvious answer is that if we are to fund investment in this way, then we very obviously need to tax wealth in all its forms more. Although, as usual, I am suggesting that this should be by taxing the income gains derived from wealth, rather than wealth itself. This does not mean wealth will fund investment, of course: it means it must be taxed to maintain economic balance.
Questioning the Need for Bonds
I am, however, thinking beyond this issue and how bonds work now, and am now beginning to ask the question: why do we even need bond markets now? Aren't they simply an anachronism from a past era that we could at least to some degree do without?
For example, whilst I can see a continuing use for bonds for some purposes, direct saving in government-issued bonds of the type that Clive Parry has described on this blog could diminish the role of structured pension funds—I think with obvious benefit—because it is not clear how they are now delivering value in the economy, which is a point on which even Rachel Reeves would agree.
Rethinking the Repo Market
And then there is another issue, which is why it is the government's job to provide bonds to the City to undertake activity in the so-called repo market, when in practice, the problem that this market exists to tackle is the lack of confidence that business has in banks. That could be overcome by simply allowing large companies to place funds which they wish to deposit overnight directly with the government. I accept that there is an issue here in determining just what it might be that the government might wish to pay interest upon, and why, but if the primary reason for the repo market is not the generation of a return, but is instead the seeking of security, then why shouldn't the government provide this directly?
Maybe, for the first time, I can see a reason for a digital currency. This idea needs further exploration, and I'm not pretending that I've done all that thinking as yet, but there has to be merit in exploring this.
Alternatives for Overseas Investors
Then, if such an account were created to eliminate the waste of resources currently dedicated to managing the repo market, why shouldn't the same type of account be made available to those who want to hold significant quantities of sterling but are based overseas? In other words, why couldn't the Bank of England offer a digital currency account to such people? Why use gilts for this purpose? Isn't there a better way to manage this activity and eliminate yet more wasteful bank activity from the market in the process?
A Vision for Reform
Thinking in the above way has suggested that three of the four major uses for bonds can be replaced with potentially more efficient and effective mechanisms better suited to user needs. In summary, then, the goal of my thinking on this issue at present is, in that case, to suggest the following things:
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Firstly, we can fund more investment, which is absolutely essential if our economy is to be adapted to meet the needs of the people living in this country, if only we change the way in which we save, and most especially the bond market.
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Secondly, the corollary of this might be a need to increase taxation of wealth, but I stress that does not mean that the taxation in question does fund the investment. As ever, the tax will be there to balance the macroeconomic financial cycle.
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Thirdly, if appropriate savings vehicles for pensions were created, the power of the City could be significantly diminished, to the great advantage of democracy in this country. That could be reinforced by the effective ending of both the overnight repo markets and the sterling deposit facilities market through the provision of direct facilities with the Bank of England.
A consequence would be that the supposed threat that the financial markets pose to the government could be very largely, or entirely, eliminated—meaning that the political economy of this country would be radically transformed, and all of this by simply imagining that we can end a market that was invented in the 17th century, and which has long outlived its socially useful purpose.
Isn't it time to explore that?
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I shall follow with interest in hope of beginning to understand bonds.
Meanwhile, a nagging small question about wealth.
If the surplus money in hands of the wealthy is “lazy” money, trapped as savings, because an individual can only spend/buy so much, then what (apart from redistribution) is the macro-economic effect of taxing it/withdrawing it from circulation, if, in fact, it isn’t really “circulating” anyway?
If someone on the omnibus asked me that, I wouldn’t know how to answer them.
Hi Robert,
I realise that I set your comment aside to answer later, and since then have managed to overlook it. My apologies, and I can’t blame you for asking an awkward question, which this one is.
In fact, you have raised a point that has come up many times, which is how can redistributing the savings of the wealthy can have any beneficial influence without releasing inflation when the very fact that they have saved does take money out of circulation, meaning as a consequence that in principle the risk of inflation increases as a result of forcing redistribution in this way.
The answer to this question is a little complex and is something that I’m going to have to return to in much more detail, but in essence the answer depends on three things.
Firstly, you are assuming that we are at full employment, and I am quite certain that we are not. I actually think that there is substantial underemployment, at the very least, within the economy. No one has any real idea as to the scale of the economic activity of the approximately approximate one sixth of people working in the UK who are supposedly full-time self-employed, but whose income is, on average, usually significantly less than the minimum wage. I think we can be quite sure that large numbers of these people would take employment if it was available, as they are in fact being used as the slack in the system at present which means that there is significant capacity to increase economic activity before any risk of inflation rises.
Secondly, and to restate this argument in a slightly different way, whilst the government can never run out of money it can run out of things to buy, but presuming there are a large numbers of people who could be put into more gainful employment, and who would willingly undertake it, as I believe is the case, then this redistribution does not result in money chasing nothing of value, but does instead create value without inflation of consequence.
Further, and perhaps most importantly in some respects, remember what Stephanie Helton had to say about taxing the rich. Doing so important not just because of the money that can be collected, which is then, after all, destroyed, but also because they are wealthy and it is their concentration of wealth that denies opportunity within the rest of the economy, which I believe could be released without harm, for reasons as noted above.
Much the same would be true if we were to relocate dead savings into being active capital. Active capital has a massive multiplier effect within the economy. There would, as a result, be things to buy with the effective distribution of savings from dormancy into having a productive use.
I am not denying that I will, as I said, have to return to this, but does that work for you at present, and if not, can you let me know what I need to address?
Thanks, and apologies. Richard.
Thx. Just knowing it was a valid question is good enough for me.
I take the point of underemployment, esp re self-employment at well below min wage (and with no pension saving). That is significant in my neighbourhood.
Part of learning this stuff for me, is knowing what NOT to claim for MMT. I have quite a list. And it helps when answering objections, if I already know about the “straw men” I might encounter.
I will await developments. Thx for your diligent thoroughness.
And distinguishing economic facts from political policy – that’s important too.
Thanks
I will keep going
A key issue here – and indeed (as far as I know) one not adequately addressed by MMT in general – is the effect on currency exchange rates.
They float…
Could we not just default on all outstanding gilts? Why not if we are not going to use them in the future? As you have stated they are only used by the wealthy. It therefore massively reduces inequality, gets rid of an out dated funding mechanism and we no longer have the bond market holding the Government to ransom. Sounds a perfect strategy and outcome.
No!!!!!!!
Of course not. Do you want to crash pension schemes, the City, banking and life assurance all at once?
Why?
This makes no sense at all.
I might occassionally be a bit radical, but trashing the swystem is not radical, it’s just plain stupid.
The Repo market has always struck me as very odd
Does it exist in all other developed nations
In many, yes.
And does the UK government pay daily interest on the funds it holds overnight?
Whilst I cannot claim to fully understand the detail, I like the sound of bonds created that will directly support public services. I currently hold a very small amount of bonds and have been thinking about moving them to somewhere like Triodos Bank, where they will have a more positive impact.
The overnight bonds would be the equivalent of Treasury Bills – and they exist over very short periods.
“and all of this by simply imagining that we can end a market that was invented in the 17th century, and which has long outlived its socially useful purpose.”
I love this.
No doubt there would be cries of outrage at the ending of the gravy train for some entitled and well connected people…
Also, how would National Savings fit in with this idea ?
It would become the bond market
Hello Richard.
I’m wondering about this bit that you say near the beginning –
‘The need to effectively withdraw from circulation that part of government-created money that is injected into the economy and not reclaimed through taxation, if we are to control inflation.’
Is this related to inequality? I mean that if wealth was spread more fairly in society, if income to the wealthy/income from wealth was taxed fairly, then there would be more money with more people, so more economic activity, more tax paid and less hoarding by the wealthy, so less need for bonds. Not sure if this is correct or not.
Thanks.
No, this does not realte to inequiality.
It is a simple fact that most government created money must be cancelled eiother by tax or by savings taking it out of circulation.
If we use savings as capital, and not as dead money, anpther means of taking money out of circulation (i.e. morwe tax on wealth) is needed. That’s it.
I love this little summary, thank you Mr McKendrick for asking the question.
Are you saying that new bond issues to fund the green transition, the NHS, education, health, social housing, and other programmes would somehow be linked to specific new government expenditure in those areas? Surely the investors will be using money already spent into existence by the government?
Money can be capital.
I am suggesting that saving become capital.
That happens in the private sector.
Why can’t that be in the state sector, if we want?
It’s a radical idea, but why can’t it be true?
Lots to say….. But currently sailing off Ireland.
I will look at your comments in detail when I can.
What mechanism would you suggest to set short term and long term interest rates?
We have a Treasury to do that as part of the management of the macroeconomic cycle.
A brilliant idea that cuts the City out of the equation. Bring it on.
Thanks for another blog which is both informative and thought-provoking. It raises a few questions, which I hope aren’t too naive.
I get the role of bonds in removing money from circulation. For that to work from the government’s point of view, are the long terms typical of government bonds a necessity? They presumably mean only a small proportion of the total value of bonds needs repaying (or replacing by new bonds) each year without which the money removed from circulation would be harder to predict and more subject to market volatility. If so it means any replacement for bonds as they are now might need to retain that feature.
(In passing, I note that while I recognise your need to point out that from an MMT analysis bonds don’t “fund” government spending, if the money in circulation is to be controlled to limit inflation then it is the case that bonds “balance” government spending. From the point of view of the bonds market the difference is surely slight, even if the political implications are significant).
Thank you for explaining the “repo” market (including the glossary link). I think I now understand what it does – but still not why it has to exist in this way. Aren’t there less clumsy ways to fulfil the same need? However the other functions of government bonds do seem to be important, and mean any replacement for bonds would have to have similar properties to the extent that it isn’t clear that a replacement is needed.
I like your idea of hypothecated infrastructure bonds, provided they can be combined with a way of offering bonds as retail products. At the moment bonds are really only accessible to “wholesalers”, the big financial institutions like pension funds and insurance companies, even if the money ultimately comes from ordinary people. As you say a well thought out project which benefits the country, for example infrastructure to provide future cheap low-carbon energy, might attract investment to allow government spending beyond the restrictions set by current tax levels and routine bond issue. But retail saving has different requirements from institutions (for example needing to be mostly on shorter timescales than actually needed by infrastructure projects, which better fit pension funds holding money for future liabilities) and there would need to be some sort of intermediary market aimed at the levels of saving by ordinary people and their expectation of ease of investment/withdrawal.
Para 2. This is a real issue my suggestions can replicate.
Para 3. The difference is massive. I cannot see how you cannot see that.
Para 4. Noted. And yes, the other needs must be met, but I think that would be easy.
Para 5. Noted.
On that para 3 point, a few years ago you gave me a real light bulb moment when I understood the implications of that difference for tax. And obviously the issue is the same for bonds in principle, it is just that tax has rather more possibilities for being used for the wider benefit of the country. For me it is by far the most important insight of MMT.
But the importance is about the politics of it, if you like substitute “massive” where I wrote “significant”. It doesn’t affect the mechanics, from the point of view of the bond market surely the only thing is that the government has issued those bonds. Just as when I get my annual tax code notice, it doesn’t matter whether my future income tax payments are “funding” or “balancing” government expenditure, they will still be taken from my income before I get it.
Bond markets need to be more long term, more controlled and constrained – it is no good trying to turn them into stocks and shares markets or treat them like it – which to me was the big problem up to 2008 – I mean the volume and the velocity of the trading of MBS’s was part of the problem and instead of stopping , derivatives came into play all too often extended the principle, enabling trades that should never have happened.
In the real world we know that even if you had all the money in the world, you would till have trouble finding the capacity to spend it. The problem with financial markets is that they do not face this problem and maybe it is time this was imposed.
I’ve been working, with AI assistance, a bit more on the digital coin idea, and we’ve come up with this. Is it too good to be true?
—
A 21st Century Public Finance Tool: The Digital Sovereign Coin
As governments face growing demands for investment in health, care, climate resilience, housing, and global development, a fundamental question arises: how can we fund this vital spending without triggering inflation or increasing public debt?
This note outlines a simple, legally viable solution: the Digital Sovereign Coin (DSC) — a one-time-use, non-tradable digital instrument that allows the state to reallocate existing financial capacity, without creating lasting inflation or breaching fiscal rules.
What is the Digital Sovereign Coin?
The Digital Sovereign Coin is a time-limited digital instrument issued by the UK Government and exchanged with commercial banks for their existing reserve balances at the Bank of England. After the swap, the coin is immediately cancelled, leaving no increase in the money supply.
This approach enables public spending on targeted programmes — such as social care, housing, climate work, or restoring the international aid budget — without issuing new bonds or raising debt-to-GDP ratios.
How it works — Step by Step
1. Parliament authorises a spending programme (e.g. £10bn for green retrofitting or £12bn for restoring overseas aid).
2. The Treasury issues the equivalent in DSC.
3. The Bank of England exchanges the coin with commercial banks in return for their existing reserve balances.
4. The coin is destroyed, and banks release matching sterling balances into the economy for project delivery.
5. The net money supply remains unchanged — avoiding inflationary effects.
⚖️ Legal Considerations
This proposal does not require radical changes to monetary law or central bank independence. The legal adjustments needed are limited and realistic:
Statutory authority would be required to allow the Treasury to issue DSC under parliamentary oversight.
Clear rules would need to define that DSC is:
Non-interest bearing,
Non-transferable,
Single-use,
Extinguished on redemption.
The Bank of England would require a mandated mechanism for exchanging DSC with commercial banks in return for reserve balances.
Existing rules on independence of monetary policy remain intact, since the DSC would not affect the base interest rate or open market operations.
These are far simpler legal changes than:
The creation of a full central bank digital currency (CBDC),
A new People’s QE or permanent monetary financing regime,
Or any system that involves altering BoE independence or the Accounting Officers’ rules for the Treasury.
What happens to reserves?
The UK banking system currently holds hundreds of billions of pounds in excess reserves — largely inert and non-circulating. These are liabilities of the Bank of England and are not being lent out or used productively.
The DSC mechanism allows a small portion of those reserves to be:
Temporarily exchanged,
Redirected toward vital public investment,
And then returned to the system without lasting inflationary effects.
This is not inflationary, and no private actor is made worse off. It is a reallocation of idle monetary capacity already within the government-banking system.
What scale is realistic?
Spending of £20–50 billion per year via this method is likely feasible without inflation or systemic distortion — particularly when applied to sectors with:
Slack in productive capacity (e.g. care, training, infrastructure),
External outflows (e.g. overseas aid),
Long-term returns (e.g. climate adaptation, housing).
Careful monitoring and programme design are essential, but this is well within the capacity of the UK state and economy.
Reinstating the UK’s Aid Commitment
One especially appropriate application is restoring the UK’s Overseas Development Aid (ODA) budget to 0.7% of GNI, reversing the cut to 0.3% planned for 2027. This would require an additional £10–12 billion per year — a modest figure compared to overall UK reserves.
Because this spending flows overseas as imports, grants or foreign currency transfers, it has minimal inflationary pressure on the domestic economy.
DSC offers a morally and economically sound route to fulfil international obligations — debt-free, non-inflationary, and legally practical.
Why not just use the reserves directly?
Under current practice, the Treasury cannot directly access or spend central bank reserves. These are not legal tender and sit outside the normal government accounting framework. By using the DSC to mediate the exchange, the state can unlock public value without violating:
Treasury accounting principles,
Central bank independence,
Or the rules of monetary control.
The DSC acts as a governance and transparency device, enabling productive use of reserves within existing constitutional norms.
Summary
The Digital Sovereign Coin is a practical bridge between monetary potential and public need. It enables:
Debt-free, targeted public investment;
Non-inflationary reallocation of idle reserves;
Simple and realistic legal adaptation;
Accountability and control by Parliament.
It deserves a central place in debates about how modern governments can meet urgent challenges without reverting to austerity or relying on volatile bond markets.
Cliff
That makes absolutely no economic sense at all
We need reserves
Cancelling them would be a catastrophic error – banking would collapse
All we do not need to do is pay banks to have them
Can you not waste time on this again, please?
Richard
Lots and lots to agree with in the post. I’m really glad you wrote it. The bond market does need deep reform.
It seems to me that the bond market was designed for a gold standard world. Bonds are essentially the equivalent of the receipts given by ancient goldsmiths for depositing money. As such they make no sense in a world of fiat currencies. As such the bond market was out of date when the UK left the gold standard in 1931. Or, perhaps, that should be 1971 when the pound floated (and ended the defacto link to the gold standard via the dollar exchange rate). Either way it is out of date now.
Most of the functions of the bond market can be replaced by more appropriate mechanisms as you suggest. Then we don’t need the City to take an unproductive cut of many transactions, thereby freeing up real resources, including talented people, for more productive uses.
I do question the requirement for bonds to remove untaxed government spending from circulation. It seems to me that most of the money spent on gilts is not in circulation anyway, and therefore will not cause inflation. It is spare money whose owners don’t want to spend it. You point to an explicit example in the repo market. Here businesses have “spare” money that they don’t want to spend but wish to keep safe. They could do this better by depositing it, somehow (see: “Has Brazil Invented the Future of Money?” https://paulkrugman.substack.com/p/has-brazil-invented-the-future-of), with the government rather than buying bonds. My point is that they don’t want to spend the money. They don’t need to be induced not to spend by offering interest payments. In general, purchasers of gilts don’t want to spend the money and therefore won’t do so even if they can’t buy gilts.
Of course, we don’t want oodles of spare money sloshing around, as it is now. This creates a potential, future, inflation hazard should it’s owners decide to spend it. It’s also a democratic hazard because it allows the wealthy to buy political influence (hence your comments on West Streeting). And, of course, in is inequitable. So, if you don’t have bonds you need taxes on wealth (not a wealth tax) to remove the surplus money. But not to avoid inflation now.
It seems to me that bonds really only have one purpose, which is to set the interest rate. The Japanese government have been using it for precisely that purpose for decades. If a government bond offers secure savings with a particular interest rate then no one can profitably sell investments with a lower yield. Conversely, the government can buy as many bonds as it wishes, ultimately all of them, using money “borrowed” from its own central bank, thereby reducing the yield other investments need to offer. So gilt purchases and sales control interest rates/investment yields, for all investment periods. The government chooses not to use this power at the moment. But ultimately it is the only use for bonds that cannot be provided better in another way.
Quite why the government needs to control the interest rate, it’s certainly not to control inflation, is a question for another day.
Thanks Tim.
Much to muse on.
In answer to your final question: Definitely!
Wow! An AWFUL lot of rich turkeys would get plucked if this ever happened.
How would/could a government implement such changes in the face of the wealthy and powerful interests who would feel >very< threatened by such big changes to their ancient livelihoods!
We need a courageous government. We used to have them.
If the government wants to offer the non-government sector financial assets that take currency out of circulation for a while, wouldn’t it be far simpler to offer domestic and foreign individuals and businesses, and foreign governments, interest-bearing accounts at the central bank? Why go through the charade of “borrowing” one’s own currency by issuing bonds? Just let everyone have an ordinary transaction account at the central bank that pays no interest, and let account holders transfer funds from their transaction account to a term deposit account if they want to. When the term is completed the central bank debits the term deposit account and credits the transaction account with an amount equal to the principal plus interest.
I am not convinced of the need for this for most people. I am increasingly so for the repo and reserve currency markets.
I am wary of a CBDC Central Bank Digital Currency / accounts for the general population considering the power that would be given to government / central banks if widely adopted. In the current state of the (non)acceptance of MMT and the profound incoherence of mainstream neoliberal /neoclassical / fascist economics it probably would be misused. Better controls would be needed as well as a redirection of private bank lending for productive real GDP purposes. The problem is they may well be needed when global warming hits hard and the non-government finance sector commences to collapse and a UBI Universal Basic Income or so some sort of government aide is necessary to survive.
The model of decentralised local not for profit banks lending to local entrepreneurs that has powered the German Mittelstand such that banks serve their original purpose not lending for speculation as they do now. See https://www.youtube.com/watch?v=zcAFqcO5ZN8 . Rolling back housing loans to Building Societies that lend for loans out of deposits rather than create new money along with lending controls (loans max 10 times rental income) , reduce housing asset inflation/ prices without homeowners loosing equity see https://www.patreon.com/posts/new-liberals-61077693 . And/or a bold debt jubilee , see https://www.youtube.com/watch?v=yQZGv2xL-fw . Forcing Private Equity out of housing should also be considered.
I haven’t commented for ages partly due to increased family carer responsibilties & partly to the idea that many contributors seem to write things with which I am largely in accord.
Reform of of bonds/digital currency etc…..interesting stuff.
In this kind of vein, we don’t “recycle” collected national taxation. It simply as you say cancels out part of the money created for public spending. By the time it reaches HM Treasury, it is of course just electronic data.
Why not therefore recycle it some or all of it into some form of sovereign wealth fund to be used externally only (for obvious reasons) a la Norway. This may provide an alternative to the current surely discredited foreign aid & investment programs in 3rd world countries.
This is no worse than the electronic skulduggery that BoE & HMT get up to every day.
Is there anything in this or is it just wishful thinking?
Alan
There is nothing to recycle.
Paying tax cancels two debts: from the government to you and you to the government.
There is nothing left when the debts are cancelled. The account is closed.
Thanks for your incredibly quick response. I was aware of its conclusion from your many comments on the subject. Perhaps my choice of the word “recycle” was amiss when I really meant data manipulation. Upon reflection it ought to have been blindingly obvious however that they would never ever admit to it, I will not therefore waste any more of you valuable time.
Of more concern to me is that despite your Herculean efforts & the reach you have achieved, most politicians & the corporate/neoliberal/media cabal that owns them, are simply either not listening or deliberately reinforcing their own agenda.
What more can I & the rest of your readers so to help? Petitions do little or no good, similarly so with writing to ones MP or party organisations or newpapers/broadcast media etc…although I do these things regularly anyway! Last month, I wrote to the Guardian, politely suggesting that they give you a weekly column at the very least. No reply. I have also written 3 times to BoE & HMT. Only one reply; from BoE, who tersely stated that I was right in asserting the current MO arose from the 1866 Act & as a result their policies, despite “operational independence” were sublect to the directives of their political masters. I would therefore have to consult them!
The only suggestion I have is to to see if you can encourage your readers (as many as possible) to write in volume to all of the agencies mentioned. It does not have to be standard content but simply expressing the same theme i.e. the status quo has failed & there are alternatives.
There is a need to break through this “glass ceiling”. Any ideas – anyone?
There is a video coming on this….