Tax cuts for the rich, hurrah!

[carmanmemoranda]

As you now know, they create more every single day.

What makes you think debt is 'the issue', what debt are you referring to?

So we are not in financial crisis ?

We can just create more money and spend that, and no repercussions.

 

[Justin Passing]

We were talking about debt/GDP figure but, anyway ..

The only 'meaning' you can attach to govt debt is: what was it used for?

Borrow for ever? You already know the UK govt never needs to borrow it's own currency and all it's spending is direct money creation via BoE which credits recipients and debits govt. No dramas.

You said banks are obliged to buy them. Just main clearing banks and preferrence stocks or has that changed?

 

[wellyfish]

So we are not in financial crisis ?

We can just create more money and spend that, and no repercussions.

What are you talking about?

 

[wellyfish]

You said banks are obliged to buy them. Just main clearing banks and preferrence stocks or has that changed?

No, not main banks and nothing to do with preference stocks. Never has been as far as I'm aware.

There are a 'chosen few'. They are known as Gilt-edged Market Makers or GEMMS for short.

 

[Justin Passing]

So we are not in financial crisis ?

We can just create more money and spend that, and no repercussions.

Seems to me we're on a slightly conical wall of death where the slope depends what we do.

We can create money by saying to the world that thay can buy our bonds at say 5% return per annum, plus you get your money back at the end of the life of the bond. One type of bons anyway.
So we get money in, great. As long as people (like pension companies) think the 5% is a good rate, and that 100% of your pounds back in x years' time is going to be worth having back.
Tits rise if nobody wants your bonds, so you use your other account to buy them yourself, then you have to issue more bonds and promise more % money back so they look attractive.
If the world knows your pounds are going to halve in purchasing power relative to the dollar over the period, you're screwed.
I don't know what stops it all imploding.
Anyone who does, phone LIz.?

Basically iIts like you keep money coming in by promising to repay more - which is fine as long as the system allows you to repeat forever.
Japan in particular seems to be playing the game well.

Exporting goods which bring in foreign money seems a good thing. The more your currency devalues, the easier that gets. As long as your country still has products other countries want. Oooops.

 

[carmanmemoranda]

What are you talking about?

You have repeatedly said, we don't borrow money, we create it as we want it.

So let's just create loads more and spend spend spend. Pay for everything we want, never have to pay anything back.

As I said yesterday, it's the magic money tree. Looks like Truss and Kwarteng know about it, but all the banking institutions and finance people don't.

Or, something is missing from the information ?

 

[wellyfish]

You have repeatedly said, we don't borrow money, we create it as we want it.

Correct. As long as it's been authorised by parliament.

So let's just create loads more and spend spend spend. Pay for everything we want, never have to pay anything back.

As long as there are resources to spend on then there's no issue with spending to acquire them. What do you want to 'spend, spend, spend' on?

As I said yesterday, it's the magic money tree. Looks like Truss and Kwarteng know about it, but all the banking institutions and finance people don't.

You think bankers don't know how the money system works? Right, right.

Here's the info I've given you:

. Whatever spending parliament authorises cannot legally be prevented
. Govt never needs to borrow it's own currency
. Every time it spends it does so via direct money creation
. Govt issues Gilts by choice

That's a simple explanation of how the money system works injection-wise. We haven't discussed the drains at all.

How much govt spends, when it spends and what it spends on are all driven by the political ideology of the govt in power. In other words, that's the politics of spending.

I haven't said anything political at all.

 

[JohnD]

Tax cuts for the rich, Hurrah!

Nope.

Massive majority of Tory voters reject UK Government's tax cuts, poll finds

A NEW YouGov poll suggests there is widespread dissatisfaction with Liz Truss's government ...

www.thenational.scot

 

[wellyfish]

Seems to me we're on a slightly conical wall of death where the slope depends what we do.

We can create money by saying to the world that thay can buy our bonds at say 5% return per annum, plus you get your money back at the end of the life of the bond. One type of bons anyway.
So we get money in, great. As long as people (like pension companies) think the 5% is a good rate, and that 100% of your pounds back in x years' time is going to be worth having back.
Tits rise if nobody wants your bonds, so you use your other account to buy them yourself, then you have to issue more bonds and promise more % money back so they look attractive.
If the world knows your pounds are going to halve in purchasing power relative to the dollar over the period, you're screwed.
I don't know what stops it all imploding.
Anyone who does, phone LIz.?

Basically iIts like you keep money coming in by promising to repay more - which is fine as long as the system allows you to repeat forever.
Japan in particular seems to be playing the game well.

Exporting goods which bring in foreign money seems a good thing. The more your currency devalues, the easier that gets. As long as your country still has products other countries want. Oooops.

Govt can create £s without saying anything at all to the world.

Govt has no need to 'get money in'.

There's no need at all to issue bonds, it's a complete waste of human effort.

It's nothing like 'promising to repay more '

Japan, like uk, is a currency issuing govt with it's own fiat floating currency.

Imports are a benefit - other countries send us the product of their resources a d we give them some of our digital tokens in return. Exports are the opposite.

 

[festive]

So this is all about a government daring to reduce Tax. They must be taught a lesson by the IMF etc.. BoE have the hump as they weren't consulted etc.

 

[Justin Passing]

When ah were a lad my uncle told me about long dated government bonds , called gilts, you could buy through the Post Office. Put simply, they paid a return which was fixed, say 10%.
If interest rates were 15% generally,
10% was a crap rate, so the price was low, say £85 for £100 nominal , so you got £10 on your £85. 11.75%. Still not great, but hold on...

When bank rates dropsd to 5%, 10% return is very arttractive, so the bond price shoots up. Obviously £200 for £100 nominal would give you 5%

Then you sell.
The nice thing about bank rates is that you generally know which way it's likely to go next. Not least because that's reflected in their price, but even so, unless something trusses them up, they're fairly predictable

He was ranting on about this all during the blue dot phase above so when it turned green he was on to me and I put all my worldly wealth in, and we waited until it turned. The rates went from 15% to 5%, so the gilt price went the other way. I can't remember exactly but it was something like 80% increase in 18 months.
That's what set me off watching stocks.

 

[carmanmemoranda]

Correct. As long as it's been authorised by parliament.


As long as there are resources to spend on then there's no issue with spending to acquire them. What do you want to 'spend, spend, spend' on?


You think bankers don't know how the money system works? Right, right.

Here's the info I've given you:

. Whatever spending parliament authorises cannot legally be prevented
. Govt never needs to borrow it's own currency
. Every time it spends it does so via direct money creation
. Govt issues Gilts by choice

That's a simple explanation of how the money system works injection-wise. We haven't discussed the drains at all.

How much govt spends, when it spends and what it spends on are all driven by the political ideology of the govt in power. In other words, that's the politics of spending.

I haven't said anything political at all.

What you are saying is different to what is happening.

 

[Justin Passing]

Govt can create £s without saying anything at all to the world.

Govt has no need to 'get money in'.

There's no need at all to issue bonds, it's a complete waste of human effort.

It's nothing like 'promising to repay more '

Japan, like uk, is a currency issuing govt with it's own fiat floating currency.

Imports are a benefit - other countries send us the product of their resources a d we give them some of our digital tokens in return. Exports are the opposite.

I think you must be being disingenuous!.
You aren't making sense.

A gov can't keep printing digital money forever. That leads to rampant inflation. A litre of water becomes, £1, 10,...
If you get money in in from selling bonds, you can use that money to help pay your water suppliers.

If issuing bonds is a waste of effort then why do they do it?
And why did the gov just shore up its own bonds?
We, and the world, DO know about it, like we get told when the US Fed has to "step in".

 

[ajohn]

Govt can create £s without saying anything at all to the world.

Which they don't for very obvious reasons.

 

[wellyfish]

I think you must be being disingenuous!.
You aren't making sense.

A gov can't keep printing digital money forever. That leads to rampant inflation. A litre of water becomes, £1, 10,...
If you get money in in from selling bonds, you can use that money to help pay your water suppliers.

If issuing bonds is a waste of effort then why do they do it?
And why did the gov just shore up its own bonds?
We, and the world, DO know about it, like we get told when the US Fed has to "step in".

The mechanics of fiat economies like the UK can be boiled down to this:

. Govt spends £s into existence
. Those £s are used (or saved)
. Each time they are used they attract taxation
. All govt spending, except that which is saved, eventually returns to the Exchequer

Inflation isn't simply a matter of the number of £s in existence.

Even more simply: Govt spending injects £s, taxation drains £s.

Why issue bonds? It's a great question.

Well, it's mostly vestigial, a hangover from the Gold Standard days (as is much of the language used around govt fiscal ops) when govt had to issue them.

As well as the hangover aspect there's also the provisions in the Maastricht and later Lisbon treaties which prohibited govt being directly financed by central bank overdraft ... Hmm, wonder why they insisted on that? Anyway, they no longer apply either.

As well as the above, it's free, guaranteed money for bond holders; a form of corporate welfare, a kind of ubi for rich folk if you like.

I assume you are asking about BoE intervening in the bond market to shore up pension funds?
Why? It was either that or watch some pension funds go kaput due to being on the wrong side of derivatives they'd leveraged.

We and the world know about what exactly?