Giving it to Investors Greek-style....

pqrdef

pqrdef wrote: »

What are UK gilts worth when the Bank now holds 1/3 of the Treasury's entire debt, and bought most of it with money magicked out of thin air? The Bank has promised to destroy the money, eventually, but that's not in anybody's contract.

And if the Treasury gets into bother with the repayments, the Bank can take the hit with no great pain. It can just renege on the promise to destroy the money. That also would be a species of default, but the creditors losing out would ultimately be all the holders of Sterling.

In effect the Bank has subordinated a third of the national debt, but unlike the ECB it's subordinated its own third. No wonder the triple-A is holding up and gilt prices are sky-high.

michaels

120% of gdp is affordable at 2%, it is only at 7% that it is unsustainable.

If all your borrowing is from the imf/esf at an affordable rate then you are fine - of course if those who have lent to you have had to borrow to do so what happens when people start to question their creditworthiness.....

Degenerate

pqrdef wrote: »

And if the Treasury gets into bother with the repayments, the Bank can take the hit with no great pain. It can just renege on the promise to destroy the money.

In fact it wouldn't even have to do that, there is no need as there was never a commitment to destroy the money by a particular date. So it can just roll-over the QE perpetually by purchasing new gilts to replace the ones that reach maturity, until it eventually can fulfil the promise and destroy the money at some unspecified future point where inflation and economic growth have rendered the sum insignificant.

Such are the benefits of a sovereign currency. Such was the stupidity of the Euro.

Mr_Mumble

Generali, you'll be interested in page 3 (sorry, no topless girls) of this document.

Generali

michaels wrote: »

120% of gdp is affordable at 2%, it is only at 7% that it is unsustainable.

If all your borrowing is from the imf/esf at an affordable rate then you are fine - of course if those who have lent to you have had to borrow to do so what happens when people start to question their creditworthiness.....

I suspect that by the end of next year, even France is going to struggle to borrow in the debt markets. Sooner if Hollande gets in.

Generali

Mr_Mumble wrote: »

Generali, you'll be interested in page 3 (sorry, no topless girls) of this document.

You're right, I am interested (although it would have been even more interesting with topless girls).

I agree with everything except the risk premium. The market point I think they miss is that because buyers of sovereign debt are looking for a 'risk free asset', this political risk renders the bonds unsaleable to traditional customers.

Expect a lot more financial repression before this ends.

sabretoothtigger

wotsthat wrote: »

I would have let HBOS go bust too.

Those were the days. I remember thinking at the time as a LLOY shareholder how wonderful it was that LLOY had finally managed to pick up HBOS after years of sniffing them out at a knock down price.

I thought it was so wonderful that I kept buying LLOY shares happy to be able to 'average down'. I've never sold those shares - that big red number in my portfolio reminds me that I'm not as clever as I thought I was.

So long as they are allowed to operate that bank for the next twenty years they'll get the money back I guess. Thats a longer timescale then most people would be happy with.

Average down took 1 year on my asia tracker to turn a profit in 08/09 because sterling fell so much asia was almost safe but Lloyds is more like 10 years of buying sub 40p shares to average down enough for a profit, owch. They could be at 100 though