Tax cuts for the rich, hurrah!

[wellyfish]

Ok, so we are borrowing from ourselves ( or more likely countries or business' around the world),

Nope. It's true to say govt borrows from the BoE. However, UK govt owns the BoE so it never needs to pay back any of it's debt. No dramas there.

with a debt to GDP of around 96/97% ?

Debt to GDP is a meaningless figure. Japan has run huge deficits for years
No dramas there either.

The bonds we sell can be owned by anybody in the world.

Initially the bonds are bought by banks in the primary market. They are obliged to buy them at the rate offered and have done so every day since 2008. These banks then sell the bonds in the secondary market. Anyone with the £s to buy them can do so.

 

[carmanmemoranda]

Nope. It's true to say govt borrows from the BoE. However, UK govt owns the BoE so it never needs to pay back any of it's debt. No dramas there.


Debt to GDP is a meaningless figure. Japan has run huge deficits for years
No dramas there either.


Initially the bonds are bought by banks in the primary market. They are obliged to buy them at the rate offered and have done so every day since 2008. These banks then sell the bonds in the secondary market. Anyone with the £s to buy them can do so.

If we never need to pay back any of our debt, then lets just borrow more than we need and go on a wild spending spree and reinstate all the public services we want, plus a bit more.

It doesn't matter who owns these bonds if we never have to repay them. Any interest payments needed we can just borrow more to pay them with.

I do believe you have found the answer to a magic money tree. Or you are missing out something important.

 

[wellyfish]

Ok, so we are borrowing from ourselves ( or more likely countries or business' around the world)

Nope. It's true to say the govt 'borrows' from BoE. However, govt owns the BoE so it never needs to pay back any of it's debt. No dramas there.

with a debt to GDP of around 96/97% ?

Debt/GDP is a completely meaningless figure. Japan has run huge deficits for years - no Debt/GDP dramas there.

The bonds we sell can be owned by anybody in the world.

Initially the bonds are bought by banks (with the excess reserves the govt injected earlier that day) in the primary market. They are obliged to buy them at the rate offered and have done every day since 2008. These banks then sell the bonds in the secondary market. Anyone with the necessary £s to do so can buy them.

 

[wellyfish]

If we never need to pay back any of our debt, then lets just borrow more than we need and go on a wild spending spree and reinstate all the public services we want, plus a bit more.

It doesn't matter who owns these bonds if we never have to repay them. Any interest payments needed we can just borrow more to pay them with.

I do believe you have found the answer to a magic money tree. Or you are missing out something important.

Don't know why it seems to have posted multiple times ... hey ho. Anyway...

Govt never needs to pay back any of its debt to the BoE (as the BoE is the govt's own bank) and IIRC it never has. It's not borrowing in the sense you or I would understand it as it never has to be paid back.

Fair point about public services, we can come back to that later if you like.

I never said it doesn't have to 'repay' the bonds - it does. When the bonds are sold in the primary market it's a simple swap; £s are swapped for the bond i.e. £s are taken from the commercial bank's account at BoE and offset against the govt's 'current account', the bank is given a bond in return. When the bond matures, £s are moved from the govt's 'current account' back into the commercial bank's account at BoE.

Think of buying a bond as moving money from a current account to a guaranteed, interest bearing savings account, and when the bond matures, moving the money back again.

Interest payments are made from the govt's 'current account'.

Govt/HMT doesn't need to go through any of this palaver at all - they choose to do it. Any spending it wanted to do in the day is already done by the time they come to issue bonds. Govt spending and Bond issuance aren't operationally dependent.

What do you think I'm missing?

 

[ellal]

What do you think I'm missing?

That we are descending into a tory led brexit dystopian nightmare!

What is happening is that rather ignorant xenophobic people have voted to distance themselves from the 'European Social Model'...

In other words they've cut their own throats!

And given carte blanche for the elite to laugh at them, whilst said elite enrich themselves at the same time as they push millions into poverty!

 

[Odds]

If we never need to pay back any of our debt, then lets just borrow more than we need and go on a wild spending spree and reinstate all the public services we want, plus a bit more.

It doesn't matter who owns these bonds if we never have to repay them. Any interest payments needed we can just borrow more to pay them with.

I do believe you have found the answer to a magic money tree. Or you are missing out something important.

Italy is currently running a deficit of 150% of GDP so it appears the Magic Money Tree has deep roots - making everything the Tories have told us during the years of Austerity a huge pile of Bull Shine.
"Strong and Stable government", they said in 2017.
"Get B*****t Done", in 2019.
"Money, money, money", in 2022.

 

[Notch7]

Italy is currently running a deficit of 150% of GDP so it appears the Magic Money Tree has deep roots - making everything the Tories have told us during the years of Austerity a huge pile of Bull Shine.
"Strong and Stable government", they said in 2017.
"Get B*****t Done", in 2019.
"Money, money, money", in 2022.

the Tories forced austerity onto us - which was an excuse to run down public services.

But they should’ve borrowed in 2010 onwards when rates were low and borrowing was cheap.

there was no need whatsoever for austerity.


BTW during austerity the top earners massively increased their wealth, whilst wages for workers stagnated.

 

[carmanmemoranda]

Govt never needs to pay back any of its debt to the BoE (as the BoE is the govt's own bank) and IIRC it never has.

Fair point about public services, we can come back to that later if you like.



What do you think I'm missing?

not for me to tell you what I think you are missing.

if you have found the magic money tree then our future is bright.

borrow borrow borrow, spend spend spend

 

[transam]

Debt to GDP is the 2nd lowest in the G7

 

[wellyfish]

Italy is currently running a deficit of 150% of GDP so it appears the Magic Money Tree has deep roots - making everything the Tories have told us during the years of Austerity a huge pile of Bull Shine.
"Strong and Stable government", they said in 2017.
"Get B*****t Done", in 2019.
"Money, money, money", in 2022.

As I said, Debt/GDP ratio is an utterly meaningless figure for currency issuing govts with no foreign debt.

Italy has the self-imposed constraint of using a foreign currency - the Euro - but that doesn't seem to matter , at least for now as the ECB has decided to ignore it's own SGP & EDM and keeps buying member state debt ... because it has no other option really.

the Tories forced austerity onto us - which was an excuse to run down public services.

But they should’ve borrowed in 2010 onwards when rates were low and borrowing was cheap.

there was no need whatsoever for austerity.


BTW during austerity the top earners massively increased their wealth, whilst wages for workers stagnated.

I agree, austerity is never necessary it's always a purely political choice driven by ideology.

There's no need for the UK to borrow it's own currency to spend.

 

[Pat ex]

According to Wellyfish, if UK wants more money, it just prints it.
So why, when UK borrowed $3.75million from USA during WW2, why didn't UK just print its own money, instead of borrowing it from USA
And why didn't UK just print enough £'s to convert to $'s and pay off the loan straight away?
This debt wasn't finally cleared until 2006.

And why is UK's debt increasing now?

 

[wellyfish]

not for me to tell you what I think you are missing.

if you have found the magic money tree then our future is bright.

borrow borrow borrow, spend spend spend

The UK govt is not fiscally constrained in any way. Whatever spending parliament authorises, regardless of size or purpose, cannot legally be stopped.

As I explained in posts 183 & 184 UK govt has no need to borrow it's own currency to spend.

Spend, spend, spend ... why not if the resources are there to be spent on?

 

[wellyfish]

According to Wellyfish, if UK wants more money, it just prints it.
So why, when UK borrowed $3.75million from USA during WW2, why didn't UK just print its own money, instead of borrowing it from USA
And why didn't UK just print enough £'s to convert to $'s and pay off the loan straight away?
This debt wasn't finally cleared until 2006.

And why is UK's debt increasing now?

No, Pat ex, if the UK govt 'wants more money' then parilament has to authorise the spending - once that's done it can't legally be stopped.

No, Pat ex, it doesn't print it. It instructs the BoE to mark up accounts of recipients, it's digital.

WWII - you've inadvertently pointed to the core understanding that most don't get; it's not about £s, it's about resources. UK didn't borrow money from USA because it didn't have enough £s. It borrowed $ from the USA to buy the resources that the USA could provide. It's about stuff, real resources, not £s.

Why didn't they just 'print' enough £s to convert etc. ... that's your homework for the next day/week/month/year/decade ... figure out why they didn't 'just do that'.

Why is the UK's 'debt' increasing now? SImple, the govt is injecting more than it's draining.

 

[Pat ex]

No, Pat ex, it doesn't print it. It instructs the BoE to mark up accounts of recipients, it's digital.

Digital currency during WW2?
You got to be having a larf'!
Why didn't Germany think of that and just print a lot more UK counterfeit currency, digitally?
Why didn't Germany just "mark up accounts of recipients, digitally"?
No-one would have been able to discern real from counterfeit.

Why did the UK withdraw all B&W notes above £5?
Why did they change the colour of 10/ and £1 notes?

Why didn't they just 'print' enough £s to convert etc. ... that's your homework for the next day/week/month/year/decade ... figure out why they didn't 'just do that'.

I guess you're stumped for an answer.

 

[ellal]

The UK govt is not fiscally constrained in any way. Whatever spending parliament authorises, regardless of size or purpose, cannot legally be stopped.

Has the latest tax giveway been authorised by parliament?

Last I knew MP's were on holiday and the 'trussed up one' was hiding in a (borrowed fridge?) for the best part of a week...