Corbynomics: A Dystopia

Rusty_Shackleton

I dont think its embarrassing to own up to an error.

How can the BoE hold bonds and that not make them a creditor to the government? The BoE records them as an asset on their books, the government records it as a liability.

The government have borrowed the money when they issued the bonds. Thats what a bond is, money now in exchange for the money + interest back later... If thats not a loan i dont know what is?!

The BoE has bought the bonds on the secondary market through QE, so by (figuratively) printing money. Now the BoE holds the bonds, the state (the treasury) owes the state (BoE) for the debt... So what happens in 30 odd years when they mature? The treasury repays with interest, but then gets half of the interest back (BoE splits profits with the treasury)... The other half, with the BoE, still effectively belongs to the government. Since theres no gain or loss overall by the government in the future, there is only the cost of buying the bonds now, which has been done by printing money.

Going round in circles at this point... The BoE paper i linked to earlier is a really interesting read about how money actually works, and if you bother to read it you might see where im coming from - maybe you'll find something else ive got wrong but unless youve got something new to say I dont really see the point in repeating myself further, you've attacked me, you've attacked an error on my part, but youre still not actually discussing what you think im getting wrong beyond some of the minor detail.

Malthusian

steampowered wrote: »

What is your view on QE then?

Exchanging government bonds for cash to get the money markets moving and prevent the disaster of deflation has nothing to do with what the Corbynists want, which is to print money to spend on government pork barrel projects.

QE was from the outset tightly controlled to ensure that avoiding deflation didn't tip over into rampant inflation - hence why the left all complain that all the money went into the greedy hands of "bankers" and not into the wider economy. Corbynists claim that because the UK has its own currency we can print unlimited amounts of money to inject directly into the economy and finance their favoured projects without any consequences. And if you attempt to point out that printing unlimited amounts of money might have consequences you get their new favourite duckspeak, "You can't compare a country's finances with running a household budget!" quacked at you. Quack quack quack quack quack.

System

Malthusian wrote: »

QE was from the outset tightly controlled to ensure that avoiding deflation didn't tip over into rampant inflation - hence why the left all complain that all the money went into the greedy hands of "bankers" and not into the wider economy. Corbynists claim that because the UK has its own currency we can print unlimited amounts of money to inject directly into the economy and finance their favoured projects without any consequences. And if you attempt to point out that printing unlimited amounts of money might have consequences you get their new favourite duckspeak, "You can't compare a country's finances with running a household budget!" quacked at you. Quack quack quack quack quack.

I thought the point of QE was the money SHOULD find its way into the wider economy quickly so as to stimulate inflation. If it went into the hands of bankers and no effect was seen on inflation then it failed.

QE is another mechanism which can be used as evidence of why there's only a loose correlation between the UK's finances and those of her citizens.

System

mrginge wrote: »

The government has not borrowed anything. They have not leant anything either.

Not quite.

The balance sheet of the BoE is bigger. They have an asset of the a loan they made (effectively to themselves) to buy gilts etc and a liability which is the increase in reserves created to fund the loan.

The government has increased their debt by the amount of gilts they sold to the BoE.

Thrugelmir

ilovehouses wrote: »

The government has increased their debt by the amount of gilts they sold to the BoE.

Gilts were purchased on the open market from investors. The BOE holds an asset and the Treasury a liability. The Treasury is responsible for debt and cash management on behalf of the Government.

Fella

Sarah Champion, MP for Rotherham, forced out of the Shadow Cabinet by Corbyn for speaking her mind:

http://www.telegraph.co.uk/news/2017/08/16/sarah-champion-quits-jeremy-corbyns-shadow-cabinet-warning-pakistani/

Corbyn has no time for anybody who dares to offer an opinion that doesn't fit with his party line, even when they're the MP for Rotherham:

http://www.telegraph.co.uk/news/uknews/crime/11391314/Rotherham-child-sex-abuse-scandal-council-not-fit-for-purpose.html

Misplaced political correctness by Rotherham’s Labour led council combined with a staggering culture of denial allowed more than 1,400 vulnerable girls to be routinely abused by gangs of Asian men, a withering report has concluded.

Oh dear Jeremy Corbyn

Thrugelmir

Fella wrote: »

Oh dear Jeremy Corbyn

Another one bites the dust. The pool of talent available to him diminishes even further......

Fella

Talent is not a requirement for those who want to serve Corbyn. He demands unquestioning loyalty and adoration from his followers, I mean shadow cabinet. Nothing less will do.

Being booted out of the Shadow Cabinet is just the start of it. Deselection will be next as he exerts his grip over what used to be the Labour Party. The moderates haven't realised yet that trying to crawl back into his affections won't work. They are toast. His tyranny within the Labour Party is only just starting.

Thrugelmir

Fella wrote: »

Talent is not a requirement for those who want to serve Corbyn.

With no skills people wouldn't even last a week in the job.:eek:

There's a little more to being a Shadow Minister than simply serving Corbyn.

mrginge

ilovehouses wrote: »

Not quite.

The balance sheet of the BoE is bigger. They have an asset of the a loan they made (effectively to themselves) to buy gilts etc and a liability which is the increase in reserves created to fund the loan.

The government has increased their debt by the amount of gilts they sold to the BoE.

Balance sheets do not get bigger. They balance to zero. That's the point of them.

Increased reserves are not a liability.

The govt debt already existed. It was originally a debt for the govt and an asset for a pension fund (for example). The BoE bought them using an increase in reserves and equivalent increase in their bank balance. They did not lend anything. Nor did they borrow anything.
The BoE then holds the asset and the govt still holds the same debt but now payable to the BoE. They also did not borrow or lend anything.

Effectively as steampowered said, they netted off existing debt by repurchasing the asset, although in effect both will exist on the B/S until maturity.