NS&I to shaft savers again. RPI to CPI (index linked bonds)

Glen_Clark wrote: »

Do you think printing money reduces our debt?

yes, when the printed money is used to buy back gilts.

the gilts that were bought back have effectively been cancelled. the BoE owns those gilts. but the UK owns the BoE. you can't owe money to yourself. the UK treasury pays interest on those gilts to the BoE. and the BoE returns that interest to the treasury. this is just a pantomime.

QE is an asset swap. as a result of QE, there are less gilts in existence, but more cash (to approximately the same value).

cash doesn't count as debt. gilts do count as debt. so what else can we say?

i know this may seem like magic, but look at it this way: not very much is changed by QE. cash and gilts are actually very similar to one another.

both cash and gilts are part of a social contract. in the sense that they are a form in which we can keep savings that the rest of society will recognize as having a value in the future.

cash (in sterling) is IOUs issued by the UK, on which no interest is payable. gilts are IOUs issued by the UK, on which a very low rate of interest is payable.

in some ways, we shouldn't think of gilts as being debt. debt issued by a country which has its own currency, where the debt is denominated in that currency, is not like other forms of debt. there is no issue with ability to pay. and the interest rate is so low that rolling up the interest into the debt doesn't make it spiral out of control.

Depends on the cost they have committed us to. I've heard stories about £100 to change a light bulb etc

there is huge wastage in PFI, both the capital and service parts. both parts should be bought out, for appropriate but not over-generous, compensation. i.e. profit gauging that's already happened may have to be allowed to stand; but there should be no compensation for loss of future rights to change light bulbs for £100.

That plan would mean HMG would have to actually pay real money to people whose certificates where being forbidden from being rolled over under your idea.
Which in turn means HMG would have to borrow the money from somewhere else to do so - remember that HMG does not have any money at all - it is all our money either borrowed or taxed.
At the moment most people roll over their holdings in NS&I so although they get interest paid its is paper exercise only in that no real money is actually paid out to the investor. So it's actually costing the government next nothing in real money terms.