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“They said that the way to tackle that risk was to sell more long gilts.”
Risk? There is no risk with gilts (i.e. with UK sovereign securities) since the UK government and Bank of England can create infinite pounds sterling out of thin air: the government as spending, and the Bank as interest on gilts. The Bank of England decides what interest rates to pay on gilts, and its decisions are based on on monetary policy, which is political. The policy is designed to serve the UK financial economy at the expense of the UK real economy.
Federal Reserve policy is likewise political.
“The correct longer term, lower cost borrowing approach that would have protected public money from sudden spikes in interest rates would be to use the Ways and Means account at the Bank of England and stop issuing Gilts altogether.”
Illogical. The UK government and Bank of England have no borrowing “costs,” since (again) they can create infinite pounds sterling out of thin air.
“To avoid the impact of a ‘spike in interest rates’, we should stop the Bank from needlessly raising rates. Instead, we should follow the example of Japan and keep them permanently low, preferably at zero.”
Again, the Bank of England’s interest rate decisions are political. The Bank always seeks first to maximize profits for the money masters in the City of London.
After the 2008 crash, this meant “quantitative easing,” i.e. near-zero interest rates for 14 years. Now it means “quantitative tightening,” i.e. repeated rises in interest rates in order to boost unemployment and render small and medium-sized banks insolvent, so that the big banks will have no competition.
In order to stave off disaster, the government must get control of the central bank and the creditor oligarchs. I don’t see this ever happening. The West is doomed by its financial parasites. Its neoliberal and post-industrial model is unsustainable.
Many people are in denial about this. This always happens when civilizations approach their end. Half of its people always deny what they see with their own eyes. Reality is too frighening to acknowledge.
"Illogical. The UK government and Bank of England have no borrowing “costs,” since (again) they can create infinite pounds sterling out of thin air. "
The Ways and Means account is the way 'infinite pounds sterling' is created out of thin air. It's the account to which the balance on the Consolidated Fund and National Loans Fund is written out to.
2 comments:
“They said that the way to tackle that risk was to sell more long gilts.”
Risk? There is no risk with gilts (i.e. with UK sovereign securities) since the UK government and Bank of England can create infinite pounds sterling out of thin air: the government as spending, and the Bank as interest on gilts. The Bank of England decides what interest rates to pay on gilts, and its decisions are based on on monetary policy, which is political. The policy is designed to serve the UK financial economy at the expense of the UK real economy.
Federal Reserve policy is likewise political.
“The correct longer term, lower cost borrowing approach that would have protected public money from sudden spikes in interest rates would be to use the Ways and Means account at the Bank of England and stop issuing Gilts altogether.”
Illogical. The UK government and Bank of England have no borrowing “costs,” since (again) they can create infinite pounds sterling out of thin air.
“To avoid the impact of a ‘spike in interest rates’, we should stop the Bank from needlessly raising rates. Instead, we should follow the example of Japan and keep them permanently low, preferably at zero.”
Again, the Bank of England’s interest rate decisions are political. The Bank always seeks first to maximize profits for the money masters in the City of London.
After the 2008 crash, this meant “quantitative easing,” i.e. near-zero interest rates for 14 years. Now it means “quantitative tightening,” i.e. repeated rises in interest rates in order to boost unemployment and render small and medium-sized banks insolvent, so that the big banks will have no competition.
In order to stave off disaster, the government must get control of the central bank and the creditor oligarchs. I don’t see this ever happening. The West is doomed by its financial parasites. Its neoliberal and post-industrial model is unsustainable.
Many people are in denial about this. This always happens when civilizations approach their end. Half of its people always deny what they see with their own eyes. Reality is too frighening to acknowledge.
"Illogical. The UK government and Bank of England have no borrowing “costs,” since (again) they can create infinite pounds sterling out of thin air. "
The Ways and Means account is the way 'infinite pounds sterling' is created out of thin air. It's the account to which the balance on the Consolidated Fund and National Loans Fund is written out to.
What was called 'book debt' in the 1856 "Report from the Select Committee on Public Monies".
It still all has to be accounted for remember. The rules of double entry bookkeeping have to be adhered to.
Perfectly logical - once you understand how the UK system works.
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