As investors assesses the remarkable turnaround in fiscal policy from one of the world’s number-six economy, the U.K., the one conclusion surely is that a nation’s financial flexibility is limited by the willingness of world markets to finance it.
“Ending MMT is the international lesson of the U.K. debacle—any populist selling fiscal pipedreams will be confronted by the precedent of the U.K.,” said Paul Donovan, chief economist at UBS Global Wealth Management, in a recent note.
To which Stephanie Kelton, the leading proponent of modern monetary theory and author of The Deficit Myth replies, “rubbish.” ...
Market Watch
Steve Goldstein
15 comments:
If you don't have Gilts, you don't need collateral because you already have the money on deposit and don't need to get a bank to create it.
Bad for banks, good for everybody else - particularly if the central bank guarantees the deposit is 'money good'.
Shuttering the Gilt repo market would remove another set of money changer's tables in the temple.
But Neil they probably needed the higher yield from their bond scheme to achieve the yield they needed for the future pension liabilities the actuaries estimated.. they probably submitted their plans to government pension regulators and they were fine with it.,,
It’s not the “bond vigilantes!” increasing the risk free rate it was the BOE which is another govt institution…
All she had to do was like Trump and Erdogon tell the CB not to increase the rate under any circumstances…
It’s like you’re saying they are too stupid to coordinate policies between the 2 govt institutions so we can’t have bonds… instead of fixing the government institutions…
All the pension fund regulator had to do was tell the rate reguators how high they could go before it would cause a problem with NPV of pension assets under the current scheme.., then BOE could adjust the rate within those limits.,,which would be a non zero adjustment and a substantial adjustment coming up off the previous zero rate…
Then BOE could go up to that level and if the monetarist morons still thought they were seeing thei figure of speech “inflation!” BOE could just tell them they were as far as they could go and any further price issues would have to be addressed via supply and fiscal policies…
The whole MMT “no bonds” schtick is a product of their ideological bias…
They are like uneducated Greta the “climate expert” now coming out full commie.., they should just come out already…
There are always various technical approaches that can each work…
Why didn’t Jesus just simply propose that the exchange rate between the denarii and schekel instead be regulated? And have them set up a separate numismatic temple where that exchange rate could be administered and take place?
Doesn’t sound hard to do…
It’s like you have one firm that specializes in suspension bridges and another firm that specializes in truss bridges and then they would choose a truss bridge so then the suspension bridge people would say “we can’t have any bridges!”
It’s childish and stupid..,
And commies would bias towards covering for the technical incompetence of the government institutions…
iow to a commie, if it came down to either #1 exposing incompetence of govt institutions or #2 a petulant knee jerk “no bonds!” reaction I’d think 9 times out of 10 the commie would go with #2…
Just sayin’
You might get rid of the bonds but you’re still stuck with dumb Art degree people running the institutions..,
No thanks.,,
Well the people that believe in bond vigilantes are the same people that created the market based pension system because otherwise the government will be 'out of money' so...
It’s not a “market based!” pension system the government is increasing the risk free rate.., the rate is an economic policy..,
Maybe take a course in Finance where you’re taught the equations used to determine a financial asset value as a function of risk free rate,,,
Here’s a reference link:
https://www.investopedia.com/ask/answers/061715/how-bond-yield-affected-monetary-policy.asp
It’s like you are saying “well, the people who designed and built that bridge rated for 20,000 lbs are the same ones who just drove that 70,000 lb tractor trailer over it..,”
Yeah thats right .., they’re f-ing stupid and they need to be disappeared you’re making my point.,,
Oh but that’s right the MNT people all think it’s rather all a part of the vast “neoliberal conspiracy!” LOL…
It’s not a conspiracy… They’re f-ing dumb…
Examine the academic practices that led to this for the root cause.,, all Art Degree morons..,
"It's not a conspiracy...They're fucking dumb."
I can absolutely confirm that. Search my many posts on conversations I've had with people like Dadid Stockman and David Walker.
It’s like you are saying “well, the people who designed and built that bridge rated for 20,000 lbs are the same ones who just drove that 70,000 lb tractor trailer over it..,”
Yeah thats right .., they’re f-ing stupid and they need to be disappeared you’re making my point.,,
Oh yeah we're in absolute agreement here.
"The whole MMT “no bonds” schtick is a product of their ideological bias…"
It's a product of reality Matt. There's no need for bonds and as usual we don't need them in the UK because we already have advanced institutional structures that remove the need for them.
The bond vigilantes and the bond market can't control anything if they are shuttered and shutdown. You can't change institutions, so you just close them. It's like Musk clearing out the entire woke HR department of Twitter. The same approach is needed.
Those who then shout and scream about it are doing that solely because it gets rid of their free money from government. Money that can be redirected to uprating benefits and pensions.
In the UK all we do is take the APF, the DMO, the Ways and Means and merge them all into National Savings. Then it is crystal clear what 'government debt' is - it's all on the balance sheet of National Savings.
Shutting the gilt market down is something the UK can do because it isn't that big and there is a ready made alternative.
Paying interest on sovereign debt and allowing it to be negotiable is a 400 year old mistake. Time to correct it.
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