One of the best uses for AI that I currently know is to ask it to summarise the arguments in an article or paper.
This does not, I suggest, mean that reading the article is not necessary. However, it does save time in working out just what an author means, provided the AI output is checked for consistency with the paper just read. This addresses the problem that all too often authors fail to express themselves very clearly, making the construction of counterarguments to what they have to say a great deal harder, even if doing so is desirable. To put this another way, AI cts the crap.
I did this with an FT article this morning. The article in question was by someone called Philip Coggan, and was entitled 'The bond market maths does not add up for governments'.
The article, as far as I was concerned, was lacking in imagination, seeking to find problems without considering possible solutions or counterarguments. However, I wished to summarise just what issues the author was seeing in the world he apparently spends his life observing before seeking to tackle what it seemed that he was saying. This is how ChatGPT summarised his arguments:
Core Argument:
Governments in developed countries are struggling to find reliable buyers for the rapidly growing volume of debt they are issuing — and this is pushing up borrowing costs, with serious fiscal implications.
1. Rising Debt Burden
OECD governments will issue $17 trillion in bonds in 2025, up from $14 trillion in 2023.
Total debt is projected to reach $59 trillion, or 84% of OECD GDP.
Much of this debt is short-term: 45% will mature by 2027 and will need refinancing at higher interest rates, raising fiscal costs.
Interest on debt is already 3.3% of GDP on average — higher than defence spending.
2. Political Constraints
Cutting deficits is politically difficult: voters oppose spending cuts or tax rises, and populist movements are gaining strength.
Populist governments may worsen deficits with spending promises and less fiscal discipline.
3. Demand for Government Bonds Is Weakening
During the 2010s, bond demand was strong — even negative yields were accepted.
Central banks played a key role via QE, buying bonds in secondary markets and reassuring investors.
Now, central banks are reversing course via QT (quantitative tightening), selling off bonds:
Central bank holdings of government debt fell from 29% (2021) to 19% (2024).
QE is unlikely to return soon — rate cuts would precede it.
4. Pension Fund Demand Is Changing
Traditional defined benefit (DB) pensions invested heavily in government bonds.
Now, defined contribution (DC) pensions dominate (59% of global pension assets), and they invest less in bonds.
This shift reduces steady long-term domestic demand for bonds.
5. Rising Reliance on International and Speculative Buyers
With central banks and pensions retreating, foreign investors (e.g., hedge funds) are becoming more important:
Their share of bond holdings rose to 34% in 2024, up from 29% in 2021.
These investors are return-sensitive and volatile.
6. Risk from Japanese Yield Rises
Albert Edwards notes that rising Japanese bond yields (10-year up from 0% to 1.6%) may trigger instability.
This undermines the “carry trade”, where investors borrow in yen to buy higher-yielding foreign bonds.
As Japanese yields rise, leveraged investors must unwind positions, potentially triggering bond sell-offs globally.
7. Consequences: Higher Yields, Higher Costs
The basic supply-demand balance in bond markets has worsened: more issuance, less steady demand.
Result: bond yields will likely rise further, increasing borrowing costs.
This tightens fiscal space and makes governing more difficult.
Conclusion:
The developed world faces a structural problem: growing debts, declining sources of reliable finance, and rising costs of borrowing. Without radical shifts in fiscal or monetary policy — or new, dependable buyers — the maths of modern government is becoming unsustainable.
To be candid, I found that a lot more useful than the original piece, and one that was much easier to use as a basis for preparing a counter-narrative.
This is the counter-narrative I prepare.
Philip Coggan's claims as to the problems of government funding in the FT are deeply misleading. In his article, he ignores the structural failures of the financial system, misrepresents the nature of government finance, and clings to outdated ideas about how public funding should be raised in a modern economy.
First, we are not short of funds. We are awash with them. As Martin Wolf has often pointed out in the FT, we live in a world of persistent and chronic excess saving. This is a vital observation. The financial system is flooded with money looking for a safe home. If governments are struggling to find buyers for their bonds, the problem is not with the amount of debt that they are seeking to fund, or with deficits, but is instead the consequence of financial markets having stopped functioning effectively in their primary role, which is connecting surplus savings to useful investment.
Second, quantitative tightening is a choice, and a damaging one. This issue exacerbates the problem Philip Coggan observes at present. The reversal of quantitative easing (QE) programmes by central banks at this moment through so-called quantitative tightening (QT) is not a necessity. It is a political decision, rooted in misplaced and dogmatic fears about inflation and government deficits.
Third, QE worked. It lowered borrowing costs, stabilised markets, and underwrote investment. It could and maybe should be used again, although the technicalities would need to be revised, as I note below. There is actually nothing that prevents central banks from reversing QT and resuming bond purchases. In fact, doing so would make sense at this moment in a world where financial markets are proving incapable of allocating capital toward productive, long-term public goals.
Fourth, governments have other tools at their disposal. The idea that governments are financially constrained in the same way as households is economic nonsense. They issue the currency. They can, if they so choose, borrow directly from their central banks to fund critical spending, especially in times of crisis. There is nothing illegal about this in the UK. It might well be better to do this than repeat QE.
Fifth, governments can and should raise more tax revenue from those most able to pay. The wealthy, who have benefited most from asset inflation and tax cuts, are not paying their fair share of taxes. If there is a need to manage inflationary pressures while sustaining public investment, taxing wealth is the most logical tool.
Sixth, cutting spending is not viable and nor is it necessary. The FT piece suggests that politicians face hard choices; either find new buyers for bonds or cut spending. But cutting government spending is not a real option. It would worsen economic hardship, deepen inequality, and threaten society, and all to satisfy a broken bond market. That makes no sense at all, especially since, seventh, the problem lies in the structure of the market and not in excessive public sector economic activity.
I stress, this is not a crisis of economic overreach. This is a crisis caused by our failure to reform outdated financial structures. Gilt markets, like many aspects of modern finance, are based on assumptions often made centuries ago about the nature of money, the savings needs of society, and about inflation, risk, and monetary discipline. They are designed to benefit speculators, not society. Most especially, they are not designed to meet the modern needs of either savers or the government, so the real question is, why perpetuate them? Governments should not be beholden to the whims of hedge funds or the bond vigilantes. If the current system of bond issuance is failing, it is time to reform it.
So, eighth, it's time for purpose-driven public finance. Rather than issuing generic gilts for speculative saving and trading, governments should offer modern, purpose-driven savings products aimed at consumer markets when pension funds have departed the bond markets. These could include:
-
Green New Deal bonds targeted at climate infrastructure.
-
NHS bonds designed to fund health investment and training.
-
Local resilience bonds aimed at supporting regional renewal.
Such bonds would appeal to domestic savers, and most particularly those holding the excess funds Martin Wolf describes, who want security, purpose, and social return on their capital. These are the modern equivalents of the post-war savings movements that helped rebuild Britain. They could do the same again.
In conclusion, the story we are being told is that governments are running out of financial road, but the truth is that the road is being narrowed, not by public spending, but by ideologically driven constraints on government finance. We do not lack money. We lack the courage to reimagine how to use it. It is time to reject the panic about public debt and build a financial system fit for the future: one that works for both people and the planet, and not just institutional savings portfolios.
In summary, AI plays a role in focusing arguments.
Now, the question is:
Would my argument have been more useful if structured in the way the AI summary response noted above was?
- Not sure unless I saw it (42%, 73 Votes)
- Yes (29%, 50 Votes)
- No (29%, 50 Votes)
Total Voters: 173
Loading ...An AI-generated summary is available here.
Taking further action
If you want to write a letter to your MP on the issues raised in this blog post, there is a ChatGPT prompt to assist you in doing so, with full instructions, here. Just remember to copy and paste my arguments, not the discussion on AI.
One word of warning, though: please ensure you have the correct MP. ChatGPT can get it wrong.
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I could see each of those bonds being used for retirement planning/ saving, and I wonder if an explicitly badged ‘retirement’ bond might also be valuable, not least to end the over complex charade that is the DC savings and annuity/ drawdown markets which seem to serve no one but the share trading industry and financial advisers.
Clive Perry would argue we should do that…I think
The option to purchase an inflation linked income for life starting at (say) 67 should be made available directly by government to anyone that wants to buy it. It cuts out the risk that one’s “pot” of savings won’t buy enough income when you retire. (Of course, you forgo the possibility of your “pot” doing extremely well… but individuals should have a choice).
The question is “how much income would £1 today buy me when I retire”. It will depend on standard actuarial calculations regarding life expectancy and, crucially, the Real rate of interest (nominal rate minus inflation)….and can be taken from the index linked gilt market. Government will issue these pension payment promises instead of I/L Gilts (at no extra cost).
I would go further and allow individuals to buy (say) the first £10k of annual pension (above the State Pension) at more attractive rate to encourage savings.
The private sector has clearly failed to make the investment we need…. Government must do it (with our retirement savings) instead.
Much to agree with
I couldn’t agree more with Clive Parry. There is another reason it is important that government provides forms of Bond direct to the public.
Currently cash is in decline. This means we are being delivered into the hands of banks; and Government is being separated from its important monetary links, traditionally direct with the publi, through the dpendence of all on Government issued notes and coin. The cashless society is breaking that link. This link is important. Lose it, and people will slowly start to believe Government (which more people will see only in the context of being taxed), and is therefore only there to make the public’s life difficult; and that only the private sector facilitates upsides (which is false, because the banks are licensed by Government, and only prevented from ripping the public off, or crashing the economy through the regulation/guarantees of government under which they operate). In this sense the direct sale of bonds to the public is a critical relationship in securing confidence in Government. The crisis we are in is, in part a loss of confidence and trust in Government; because the public is being delivered, unprotected by Government, and into the hands of a private sector that cannot be trusted (often even when there is regulation in place). The provision of Bonds direct to the public is an excellent move to repair the damage (not least to the trust in democracy). Clive Parry’s Pension Bond idea is an excellent first step. Direct Gilt sales should be considered a potential second step.
I like that.
There will be be more to come on this.
Certainly, making gilts available for direct sale should happen.
Should be done via your NS&I account.
First, individuals should be permitted to buy gilt directly at auction on a “non competitive” basis (IE they get price determined by the competitive auction process.
Secondary market trades would happen at a market price determined at (say) 11am by dealers. The government would issue or redeem gilts accordingly without touching the market.
All this would be simple…. and, as John Warren says, connect people with Government debt. There are client education issues but it should happen now.
Agreed
I would like to see the return of National Savings Index linked bonds. I assumed that they were withdrawn when they were because governments were intending to inflate away their debt. It is a pity that they are no longer sold as it gave small savers a risk free asset for retirement.
I have a quibble.
“financial markets having stopped functioning effectively in their primary role, which is connecting surplus savings to useful investment”; and,
“QE worked. It underwrote investment”; sit unhappily together.
Why? QE underwrote investment; but it didn’t deliver it, which is why we are where we are.
In Britain we now live in a world in which the financial sector is able to dictate that Government provides a public safe haven for financial sector funds; so that the finance sector can invest freely, preferably only in private safe havens it judges is only provided long term by property, or increasingly by politically protected private monopolies guaranteed or funded, directly or indirectly – by Government. Such risk capital that is available doesn’t invest long term. It does the opposite; it lives on instant realisation, and parks the risk in debt that can be left behind for others (or government) to clean up. Such a finance sector, effectively running Government, guarantees we remain exactly where we are now. Forever.
Accepted. Maybe that should have been clearer. But, I also think I also made clear my preference, and why. And let’s also be clear what is going on here. I am taking on your ‘forever’ comment. I changed my thinking this morning. Forgive me if Imake mistakes whilst doing that in realtime. I have changed my ideas on bonds.
Mistakes are how we learn. We learn less from being right; far more form making mistakes. Making mistakes is an essential part of the creative process. Which is why the uncreative, those with no imagination and less insight hate mistakes, and are so hostile to making them. Which is probably why the people who are always right (they think); invariably prove to be wrong about almost everything.
I prefer mistake strewn thought. The problem is that when confronted by a mistake, the first response of those who hate mistakes, is to deny the mistake. The effect of this is catastrophic, and has ruined genuine discussion and dialogue in this country. It is the intolerance to mistakes that has created the hostile jungle that has become social media. The hostile imply they make no mistakes. They are lying.
I make mistakes.
That full stop is deliberate, because I often omit them in comments
This time, it says, I know.
Coggan was weekend money editor of the Financial Times about 25 years ago then left to join The Economist. He retired a couple of years ago and now occasionally freelances.
The numbered list of points followed by your text worked very well for me, as I could ‘see’ the big picture before diving into the flow of sentences. But my brain is a bit funky in its wiring.
Mine, too
I’m going to post a reply to your reply pointing out the various problems with what you have said.
1. We live in a world of excess savings, but the UK itself does not have such a phenomenon. Regardless, money is not flooding into government bonds as they are not seen as being such a safe home any more, especially when you consider the real yields/returns you get from them. That is also before you consider the huge amounts of supply of government debt as governments run huge budget deficits with no real plans to reduce them.
This is why the risk premium on government bonds has increased globally.
2. QT is indeed a choice, though I do note at this point you have said it would never happen, which has been proved incorrect. Regardless, given inflation is high, some form of tightening is necessary, and is wholly consistent with both traditional and MMT forms of monetary policy.
3. Why would we use QE now? We have relatively high inflation. Are you saying real rates should be negative on government bonds? Or are you really saying that the government should really just be allowed to borrow without limit?
If you did more QE now, it would be seen as fiscal dominance by a government, and after an initial rally in bonds, investors would simply sell them all given it would create negative real rates, weaken the currency, be an implicit increase in supply and point to a loss of fiscal control.
You also mention “financial markets are proving incapable of allocating capital toward productive, long-term public goals.” Apart from having no evidence for this as far as I can see, I would argue that financial markets are doing exactly the opposite.
The UK has run large deficits yet ha sown declining productivity and very little GDP growth. Rather undermining the idea that government spending is always productive. It’s also very difficult if not impossible to claim that “public” goals, in this case state directed spending is more efficient than private sector directed.
4. You mean printing money. Which would increase inflation directly and then again through the secondary route of a weakening currency. The UK also runs a current account deficit. Which means it needs to raise foreign currency through net inward investment. Who would hold sterling or invest in sterling assets if you knew that the government is printing money (and there simply can be no argument that this would not devalue sterling) and increasing inflation?
it is also worth pointing out that printing money like this would be an implicit default.
5. You can argue for more wealth taxes, but it is already apparent that they are becoming unproductive, as they are already high. They are not raising any significant new revenue and will raise less revenue the higher they go. The taxes Labour have already raised have caused investment to decline, growth to slow and jobs to be cut. It seems quite crazy to argue for more of this.
You also say the rich aren’t paying their fair share of taxes. What is fair?
The top 50% already pay 90% of all income tax, with the top 10% paying 75% and the top 5% paying 47%. You see similar statistics for the other “wealth” derived taxes like capital gains. This also ignores the effects of benefits which go primarily to the bottom 50%.
Is it fair that 50% of people are essentially not contributing?
You also say that inflationary pressure should be managed by taxing the rich more. I know the basis for this is from MMT, but the reality is that taxing a few rich people more wouldn’t make a difference when inflation is broad based. There simply aren’t enough rich people to tax to reduce demand sufficiently to reduce inflation. Not that MMT has ever laid out, anywhere, how in practice this would work.
6. By your logic, Labour’s increase in spending at the last budget should have increased growth. In fact, it has done the opposite.
You also claim inequality is increasing, though the gini for the UK has been roughly static sine the late 80s.
But most importantly, your claims about the bond market are very wrong. The thousands of investors which make up the bond market are rightfully concerned about the government’s lack of fiscal rectitude, the lack of growth, inflation and are simply assigning a higher risk to an investment in government bonds. To make a higher risk investment worthwhile you require a higher return, and hence yields (interest rates) have risen. otherwise they can and do simply invest elsewhere.
This is exactly how bonds markets should be operating.
7. Where is the problem in the structure of the bond market, other than investors are unwilling to hold government bonds are yields which are guaranteed to lose them money, which is what you imply you want.
I’m not sure how the “modern needs” of savers differ from the old ones – wanting a return investment.
Leaving aside your rhetoric about speculators, you seem to be of the mind that investors should suffer for the benefit of government. You are arguing that investors should essentially be forced to place money at sub optimal rates but then wholly ignore that reality of what would happen – nobody is forced to invest and the 35% of the bond market owned by offshore investors certainly isn’t – they will sell all their holdings.
8. How would the investments you suggest either differ from government bonds or pay a return?
Green investments are highly risky when considered as stand alone investments, so would have a higher interest rate attached. Which I assume you are not keen on. Which leaves the government issued green bonds being identical to all other government bonds.
The NHS certainly does not produce a cash flow. So how would these bonds pay interest if they were not exactly like any other government bond?
Regional or renewal bonds again, I assume they would not be tied to specific projects (as this would bean they have higher interest rates again, given they are more risky) so how do they differ from government bonds?
It’s all well and good making up various types of bond to invest in but that doesn’t change the basic economics of them.
To conclude:
What you have written is a polemic, often filled with angry rhetoric. It is full of factual and ideological errors and if these plans were put into place – especially those surrounding fiscal dominance and money printing – were put into place you would see a collapse in the currency and interest rates spiking higher.
As the current government is clearly showing us, increasing spending does not always increase growth and raising taxes tends to hamper it. Yet you continuously argue for ever more?
ANSWERS IN BOLD
DO NOT BOTHER REPLYING. YOU ARE A TIME WASTER WHO HAS NOT READ WHAT I HAVE WRITTEN.
——
I’m going to post a reply to your reply pointing out the various problems with what you have said.
1. We live in a world of excess savings, but the UK itself does not have such a phenomenon. Regardless, money is not flooding into government bonds as they are not seen as being such a safe home any more, especially when you consider the real yields/returns you get from them. That is also before you consider the huge amounts of supply of government debt as governments run huge budget deficits with no real plans to reduce them. This is why the risk premium on government bonds has increased globally.
A) THE UK HAS £15 TRILLION OF WEALTH. OF COURSE WE HAVE EXCESS SAVINGS BY SOME.
B) GOVERNMENT BONDS ARE RISK FREE.
2. QT is indeed a choice, though I do note at this point you have said it would never happen, which has been proved incorrect. Regardless, given inflation is high, some form of tightening is necessary, and is wholly consistent with both traditional and MMT forms of monetary policy.
C) MMT SAYS DON’T DO QE, FUND BY THE CENTRAL BANK. IT WOULD NEVER SUGGEST QT, OR THE ABSURD FINANCIAL RATIONINg TO RAISE RATES IMPLICIT IN IT.
3. Why would we use QE now? We have relatively high inflation. Are you saying real rates should be negative on government bonds? Or are you really saying that the government should really just be allowed to borrow without limit?
D) REAL RATES SHOULD BE ZERO AT MOST.
E) I SAY WE BALANCE THE ECONOMY. WE ARE NOT.
If you did more QE now, it would be seen as fiscal dominance by a government, and after an initial rally in bonds, investors would simply sell them all given it would create negative real rates, weaken the currency, be an implicit increase in supply and point to a loss of fiscal control.
F) MARKETS LITERALLY CANNOT SURVIVE WITHOUT BONDS. YOU ARE TALKING NONSENSE, AND DO NOT UNDERSTAND THIS MARKET.
You also mention “financial markets are proving incapable of allocating capital toward productive, long-term public goals.” Apart from having no evidence for this as far as I can see, I would argue that financial markets are doing exactly the opposite.
G) SO YOU THINK THE ECONOMY IS WORKING? YOU CLEARLY ARE DELUDING YOURSELF.
The UK has run large deficits yet ha sown declining productivity and very little GDP growth. Rather undermining the idea that government spending is always productive. It’s also very difficult if not impossible to claim that “public” goals, in this case state directed spending is more efficient than private sector directed.
H) HOW DO YOU DEFINE PRODUCTIVITY IN EDUCATION, HEALTH, REDISTRIBUTION? TTHE FAILURE IS DOING THE WRONG THING. TEACHING FAILED IDEAS. NOT TACKLING BIG BUSINESS THAT’S CREATING ADDICTION. PRODUCTIVITY IS BE8NG DESTROYED BY MARKET IDEOLOGY IN GOVERNMENT.
4. You mean printing money. Which would increase inflation directly and then again through the secondary route of a weakening currency. The UK also runs a current account deficit. Which means it needs to raise foreign currency through net inward investment. Who would hold sterling or invest in sterling assets if you knew that the government is printing money (and there simply can be no argument that this would not devalue sterling) and increasing inflation? it is also worth pointing out that printing money like this would be an implicit default.
I) I NEVER TALK ABOUT PRINTING MONEY. I TALK ABOUT THE FACT WE CAN AFFORD WHATEVER WE CAN DO, AND WE AREN’T DOING IT. THE DEFAULT CLAIM IS JYST GIBBERISH.
5. You can argue for more wealth taxes, but it is already apparent that they are becoming unproductive, as they are already high. They are not raising any significant new revenue and will raise less revenue the higher they go. The taxes Labour have already raised have caused investment to decline, growth to slow and jobs to be cut. It seems quite crazy to argue for more of this. You also say the rich aren’t paying their fair share of taxes. What is fair? The top 50% already pay 90% of all income tax, with the top 10% paying 75% and the top 5% paying 47%. You see similar statistics for the other “wealth” derived taxes like capital gains. This also ignores the effects of benefits which go primarily to the bottom 50%. Is it fair that 50% of people are essentially not contributing?
J) READ THE TAXING WEALTH REPORT. YOU OBVIOUSLY HAVE NOT. ONLY THEN COME BACK.
You also say that inflationary pressure should be managed by taxing the rich more. I know the basis for this is from MMT, but the reality is that taxing a few rich people more wouldn’t make a difference when inflation is broad based. There simply aren’t enough rich people to tax to reduce demand sufficiently to reduce inflation. Not that MMT has ever laid out, anywhere, how in practice this would work.
K) SO THE RICH PAY ALL THE TAX, BUT NIT ENOUGH ACCORDING TO YOU TO CONTROL INFLATION. YOU ARE TOTALLY INCONSISTENT.
6. By your logic, Labour’s increase in spending at the last budget should have increased growth. In fact, it has done the opposite.
L) LABOUR DELIVERED A DEEP AUSTERITY BUDGET. DIDN’T YOU NOTICE? DO YOU LIVE IN FANTASY LAND. .
You also claim inequality is increasing, though the gini for the UK has been roughly static sine the late 80s.
M) GINI DOES NOT MEASURE INEQUALITY AT EXTREMES.
But most importantly, your claims about the bond market are very wrong. The thousands of investors which make up the bond market are rightfully concerned about the government’s lack of fiscal rectitude, the lack of growth, inflation and are simply assigning a higher risk to an investment in government bonds. To make a higher risk investment worthwhile you require a higher return, and hence yields (interest rates) have risen. otherwise they can and do simply invest elsewhere. This is exactly how bonds markets should be operating.
N) SO, YOU SY BOND MARKETS AREN’t WORKING AND THEN THAT THEY ARE. WHICH IS IT?
7. Where is the problem in the structure of the bond market, other than investors are unwilling to hold government bonds are yields which are guaranteed to lose them money, which is what you imply you want. I’m not sure how the “modern needs” of savers differ from the old ones – wanting a return investment.
O) MY ARGUMENTS ARE ABOUT NEEDING INVESTMENT. YOU SEEM TO COMPLETELY MISS THE POINT.
Leaving aside your rhetoric about speculators, you seem to be of the mind that investors should suffer for the benefit of government. You are arguing that investors should essentially be forced to place money at sub optimal rates but then wholly ignore that reality of what would happen – nobody is forced to invest and the 35% of the bond market owned by offshore investors certainly isn’t – they will sell all their holdings.
P) REPEATING DRIVEL ON THIS DOES NOT MAKE IT RIGHT.
8. How would the investments you suggest either differ from government bonds or pay a return?
Green investments are highly risky when considered as stand alone investments, so would have a higher interest rate attached. Which I assume you are not keen on. Which leaves the government issued green bonds being identical to all other government bonds.
The NHS certainly does not produce a cash flow. So how would these bonds pay interest if they were not exactly like any other government bond?
Regional or renewal bonds again, I assume they would not be tied to specific projects (as this would bean they have higher interest rates again, given they are more risky) so how do they differ from government bonds?
It’s all well and good making up various types of bond to invest in but that doesn’t change the basic economics of them.
Q) WHY NOT READ WHATNI HAVE WRITTEN ON THIS BEFORE WRITING TOTAL NONSENSE.
To conclude:
What you have written is a polemic, often filled with angry rhetoric. It is full of factual and ideological errors and if these plans were put into place – especially those surrounding fiscal dominance and money printing – were put into place you would see a collapse in the currency and interest rates spiking higher.
R) THAT SEEMS TO BE YOU DESCRIBING YOURSELF
As the current government is clearly showing us, increasing spending does not always increase growth and raising taxes tends to hamper it. Yet you continuously argue for ever more?
S) YOU MUST BE THE ONLY PERSON HAPPY WITH THE ECONOMY AS IT IS
The obvious solution it seems to me is…..
1. Taxation to reduce the amount of surplus money slopping about in the system
2. Better distribution of income so we have more people spending money and fewer hoarding it, and
3. Government Bonds are used by financial services to allow them to manage their liabilities etc. What about either products designed to ‘cut out the middle man’ eg a National Savings Defined Benefit pension, reinsurance etc? or ‘bonds’ set up to meet the need of ‘legitimate’ financial services, Insurance Pensions etc?
I think this cutting out the middle man bit is key.
It used to be possible for private investors to buy Gilts through the Post Office, by filling out a form and submitting it with a cheque. Then Thatcherism killed it by privatising the service to Computershare. Here are the terms from the Debt Management Office website:
https://www.dmo.gov.uk/investor-information/retail-investors/purchase-sale-service/
It can be done
It’s ridiculously hard
And unadvertised
Not all ‘middle men’ are bad news, speaking as one myself (an IFA). It is often the case that I help people avoid mistakes, for example, particularly with their pensions. You learn a lot over 35 years in practice, and I try and learn something new every day to keep my mind active. It amazes me that so few people think for themselves; many have become blank consumers of others thoughts, rather than creating their independent point of view via critical thinking.
Agreed
But you are not the problem I am addressing.
Gilts are very easy to buy. You can buy through all the major investment platforms such as Hargreaves Lansdown and AJ Bell. Accounts can be set up easily and the purchase of a gilt is done electronically in seconds, thereafter all the custodian responsibility is undertaken by the platform. It is incredibly easy. All the information you need about gilts can be found on the platform. I think between them AJ Bell and Hargreaves Lansdown now have about 3m retail investors in the UK with the vast majority small and inexperienced investors. The platforms really do make ownership or equities, bonds and gilts very straightforward.
Very politely, that is intensely remote from most people’s experience.
Currently, as you’ve often advised us, if I’ve understood properly, the money invested in Government Bonds just sits there not doing anything except gather interest. With the new types of Bond you’re proposing, would the money actually be invested, with the (small?) risk that would entail, or would it mirror the current system?
This would be the requirement.
It would be required that the money be related to actual investment.
The sorts of investment you are talking about don’t generate cash flows – how will the money be repaid?
Don’t be stupid.
Green energy pays, handsomely.
Health pays massive returns, and if markets were regulated to stop addiction could yield massively more.
And you think local housing does not pay?
What planet do you live on?
A crowd lending platform I’m on which focuses on lending for councils to build green energy generation has recently been making noises suggesting it’s looking at moving towards offering councils loans more broadly, which suggests a movement in this direction. It’s still being run by a commercial business separate from the councils themselves, but I’ll take that for the time being- it’s creating the link between the investment and what you’re investing in specifically and it’s making it more directly available to punters which is two of the boxes checked, at least
The problem is, no amount of available funding will solve a government that doesn’t want to invest. I put a petition on the Government site suggesting they look into adopting crowd investment, and as soon as it got through the process of being published, I immediately lost interest because coincidentally the same day it went live, the Government made it very clear to me that they’re all but ideologically opposed to actually investing in anything themselves.
The site is?
It’s “Abundance”- https://www.abundanceinvestment.com/
The noises came from a user survey they put out fairly recently so you won’t find much about it on the site as-is, but there are currently four council investments open, two of which specifically name solar installations as an objective, the other two more leaning into energy efficiency.
Thanks
Maybe it should be possible to nominate a charity, or the International Development Aid budget, to receive the interest earned on the bonds.
[…] 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 […]
What does it mean to say that health care is a human right? It means that in a society that has the real resources to provide free health care to everyone, it is the currency-issuing government’s responsibility to make it happen. It doesn’t mean that health care staff have an obligation to work for free or to work for unfair pay and conditions. The plight of the junior doctors is the fault of an economically illiterate national government that thinks it needs to “balance the budget” like a household or a sub-national government. The government currently has a lot of non-inflationary scope to increase net spending. It shouldn’t be adopting a contractionary fiscal stance.
A currency-issuing government is constrained by real resource availability, not by money. The purpose of national taxes is to drive demand for the government’s currency, not to “raise money” for the government. A currency-issuer doesn’t collect, earn, save, or borrow its own currency. The government creates currency by spending and it deletes currency by taxing. It’s as simple as that.
A currency-issuer that doesn’t understand its own monetary operations might create complex accounting arrangements that give the appearance that it is borrowing its own currency, such as by issuing bonds or “gilts”. But this is not really a borrowing operation. It’s just giving the non-government sector the opportunity to swap one form of financial asset for another. A bond or a gilt pays a higher interest rate than a balance in a transaction account at the central bank so naturally there is huge demand for bonds or gilts. These assets are wrongly called the national debt or the public debt. They are not a debt in the normal sense of the word because the government services them in the same way that it makes all payments – by keystroking currency into existence. The bonds or gilts are totally unnecessary – the government could stop issuing them immediately and it wouldn’t affect its fiscal powers one iota.
TLDR: The national government can and should pay the junior doctors more because it’s true that they are being treated unfairly. Therefore the people of the UK can and should be entitled to a right to free health care. The public doesn’t understand currency-issuer monetary operations any better than the politicians do so they wrongly blame the doctors for striking instead of blaming the government for underpaying the doctors.
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