Pound in biggest monthly fall against the dollar since 2016...

[wellyfish]

UK to unveil record £400 billion borrowing plan next week

British finance minister Rishi Sunak will announce the heaviest public borrowing since World War Two when he spells out his spending plans next week after the biggest economic crash in over 300 years.

www.reuters.com

It's all nonsense trying to justify nonsense. You cannot magic money out of thin air, which is the impression that you and your dishonest governments are trying to give.

The UK govt has it's own fiat, floating currency.
It instructs the BoE to create new £'s, via keyboard strokes, every time it buys something.
It happens every day.

Gordon Brown 'first used' MMT?? what nonsense.

 

[wellyfish]

UK to unveil record £400 billion borrowing plan next week

British finance minister Rishi Sunak will announce the heaviest public borrowing since World War Two when he spells out his spending plans next week after the biggest economic crash in over 300 years.

www.reuters.com

It's all nonsense trying to justify nonsense. You cannot magic money out of thin air, which is the impression that you and your dishonest governments are trying to give.

Where do you think £'s come from?

 

[carmanmemoranda]

The idea that you can simply print the money you need has been given the respectable title "Modern Monetary Theory" and it was first used in Britain by Gordon Brown. The trouble with it is that, once you've done it, you have to keep doing it, and so each chancellor after Brown has done it, even the supposedly conservative ones. A truly conservative government would never do this, because implicit in the word conservative is being careful with money - if you can't afford something, do without it.

but we can afford it ? We are 1 of the wealthiest countries in the world apparantly, although I see very little evidence of that in day to day l ife.

some other countries must be in a real mess

 

[wellyfish]

The UK govt has an inexhaustible supply of £'s and can 'afford' anything and everything that's available to buy in £'s. All it takes is for Parliament to authorise the spending.

 

[Deleted member 18243]

The UK govt has an inexhaustible supply of £'s and can 'afford' anything and everything that's available to buy in £'s. All it takes is for Parliament to authorise the spending.

That's right, but it's wrong, if you see what I mean. Under MMT every bit of new money printed (or "created by keystrokes") makes the money already in circulation worth less, and so any person or business that has been responsible with their money is made poorer.

The amount of money in circulation should be finite. A sensible government would cancel the existing British system and start anew, reapportioning the value to people who work and who have worked for the economy (the deserving). That will never happen; every subsequent government has to continue the madness.

 

[ajohn]

Here is a blame game on QE. Might but only might give some a better understanding. Blaming Brown is stupid. The thing people forget is that without it many countries would have been stuffed. The first to use it was Japan. They were really stuffed when they did.

https://committees.parliament.uk/publications/6725/documents/71894/default/

Like many reports like this various people are asked for their opinions. They vary. What they fail to do is come up with alternatives. As it mentions most use seems to be to avoid debt. It also mentions the other problem - once used it isn't easy to stop. Japan is a brilliant example.

Rather than relate it to inflation look at actual numbers - wow some deflation. Rather short period. They hate that as it would result in a falling GDP.

£1 in 2000 → 2018 | UK Inflation Calculator

This inflation calculator uses the official UK consumer price index. An inflation rate of 2.80% per year means £1 in 2000 is worth £1.64 in 2018.

www.in2013dollars.com

The current spike has nothing what so ever to do with it. The bulk is down to Ukraine and how the UK is set up power wise. There are secondary covid effects - eg for various reasons mostly demand container shipping costs increased. Shortages also jacked up prices. of alls sorts of things.

The other problem with it is that it hasn't had some of the expected effects - eg low interest rates haven't resulted in higher investment levels - other than maybe houses.

Anyway. I don't much care if people make silly posts that clearly do not understand the problem.

 

[ajohn]

but we can afford it ? We are 1 of the wealthiest countries in the world apparantly, although I see very little evidence of that in day to day l ife.

some other countries must be in a real mess

Pointless answering him as he hasn't got a clue and lives in a la la land that only exists in his head.

Currently while they aren't being entirely honest about it the route out of QE appears to be an increase in base rates. The latest view is that 2% should be manageable by all major economies. QE and very low interest rates are difectly related as that pdf mentions - it's part of the actions taken. Some asset values are increased - the pdf mentions the complications in that area - but not the one on houses.

 

[wellyfish]

QE is widely misunderstood. It's nothing to do with govt spending, it's an attempt at monetary policy - interest rate manipulation.
It's simply the BoE reversing the transaction that issued the security in the first place.
Much better to use fiscal policy to address the issues as monetary policy is almost useless.
The route out of QE is simply to stop QE - that's it.

I agree with most of your post about inflation being completely supply side but I'd disagree with the importance of Ukraine/Russia, it's more to do with gas production and usage in the far east and, of course, a complete failure of govt to implement food and energy security.

 

[wellyfish]

That's right, but it's wrong, if you see what I mean. Under MMT every bit of new money printed (or "created by keystrokes") makes the money already in circulation worth less, and so any person or business that has been responsible with their money is made poorer.

The amount of money in circulation should be finite. A sensible government would cancel the existing British system and start anew, reapportioning the value to people who work and who have worked for the economy (the deserving). That will never happen; every subsequent government has to continue the madness.

It's not wrong at all. That's how the current system works.
There's no such thing as 'under MMT':

"MMT is a system of understanding how modern monetary systems work and the capacities of the currency-issuing government.
It also allows us to understand the consequences of using that capacity or giving up the currency sovereignty altogether."

The amount of money in circulation is completely endogenous; banks keep lending until the last creditworthy customer willing to pay the current price of money fills in a loan application.

The neoliberal, capitalist system in place (and supported by all major parties in the UK) means that those who produce the wealth are, as you say, unlikely to find themselves on the end of a positive redistribution of wealth.

 

[ajohn]

This is the part that gives rise to some opinions about QE

What is quantitative easing?
4. Quantitative easing is a monetary policy tool that central banks can use to inject money into the economy through the purchase of ‘financial assets’, usually government bonds.5 Quantitative easing is also known as ‘asset purchasing’.

5. Usually, when an economy is slowing down or entering a recession, central banks will cut interest rates to make borrowing and investment—which help to create economic growth—cheaper. However, in circumstances in which a central bank has already lowered interest rates close to 0% (known as the ‘zero lower bound’), quantitative easing has been used with the intention of stimulating spending, investment and growth

6. Whenever the Monetary Policy Committee decides that it needs to undertake additional quantitative easing, the Bank of England creates new money to purchase government or corporate bonds from private sector entities, such as pension funds or insurance companies. Once the Bank of England has purchased bonds from, for example, a pension fund, the pension fund receives new money in the form of a deposit in a commercial bank. The commercial bank has the deposit (a liability to the pension fund) and additional interest-paying reserves—a type of money that commercial banks use to pay each other—in the Bank of England (an asset).

7. The Bank of England expects these actions to have effects that will boost the economy. These effects are sometimes referred to as ‘transmission mechanisms’ and they include:

blsh bla read the rest yourself.

While this refers to the BofE the pdf also shows how it has been used by other central banks. The FED way more than others. Even the Swiss ~ similar to ours.

Ukraine - the German central bank outlines the causes of inflation and also give pre invasion numbers due to other effects.

The impact of the Russian aggression on inflation prospects and monetary policy’s response

Closing keynote address at the International Economic Symposium co-hosted by the Deutsche Bundesbank and NABE

www.bundesbank.de

When it mentions other exports they aren't kidding. It's not just gas and oil.

UK well we are the UK. Sometimes we seem to get things wrong. Severely cutting gas reserves wont have helped. They needed maintainance so abandoned instead leaving us at lower levels than others.

 

[wellyfish]

6. Is the misleading part. It's contradicted in the WGA 2010-11.

When, by political choice, HMT issues securities it's the equivalent of moving £s from a 'current' account to a guaranteed 'savings' account. QE reverses that process.

The UK and other countries resorted to QE (monetary policy), rather than govt spending (fiscal policy) because they have been utterly captured by the idea that there is a magic interest rate that makes everything OK; there isn't.

QE is a dreadful policy and does nothing productive at all.

He's banging on about monetary policy (surprise, surprise) in that article. As though a magic interest rate is available, it's laughable and, of course, Germany uses the euro, it gave up it's own currency so it shouldn't too surprised at the options it has.

 

[Vinty]

We're not alone.

Now Britain is in the 100% debt-to-GDP club, what’s the spending plan?

Its only money.
A period of hyperinflation should reduce the debt substantially.

 

[wellyfish]

If people understood what the so-called 'national debt' actually is I reckon they would be a lot less concerned about it and hugely more disinclined to get rid of it.

 

[ajohn]

there is a magic interest rate that makes everything OK

It can as intended have an effect on inflation. Main problem is having very low rates don't have as much effect as might be expected. Depressions and factors that crop up can influence the confidence companies have in making investments.

A couple of links. One tell you how many gilts they have and the other what it looks like they are going to do with them.

Results and usage data

Results and usage data for our facilities

www.bankofengland.co.uk

Asset Purchase Facility: Gilt Sales – Provisional Market Notice 4 August 2022

This Market Notice describes the Bank of England’s provisional approach to the sale of gilts held in the Asset Purchase Facility, which would be operationalised following a confirmatory vote by the MPC.

www.bankofengland.co.uk

The link from the German central bank explains the current causes of inflation. The currency is irrelevant. It's the same generally the world over but actually levels will vary - gas for us for instance has it's own factors. One eg reported on the news. Ship heading for S America, diverted to come here for the simple reason we will pay more for it.

 

[wellyfish]

Insofar as interest rate hikes work at all it's in taking money out of people's pockets which depresses demand which causes unemployment. Unemployment is the way the system tackles inflation. What

It's of little importance what value of gilts the BoE currently hold and it's obvious what it's going to do with them - start slinging them.

It's a link from a German bank, what would you expect it to say? What's the magic rate?
Also, they never seem to consider the potentially inflationary effects of rate rises, do they?

Currency isn't irrelevant, it's absolutely critical. If you don't control your own currency, like all those countries in the euro zone, you are the equivalent of a local authority ie you have to raise revenue before you can spend.

A monetary sovereign country with it's own fiat, floating currency (UK, US, JPN, AUS etc) have no such constraint.