Bank of England governor Mark Carney yesterday implied that talks of a cut in interest rates nearer to zero were overblown.
He also ruled out cancelling government debt held by the Bank to reduce the headline figure.
You know, Ritchie’s idea that the national debt just isn’t as large as it is said to be because the Bank owns the government debt and it can just be cancelled?
Carney also dismissed an enquiry from former chancellor Nigel – now Lord – Lawson, who asked whether the Bank could write off the £375bn of government debt it owns as a result of its past quantitative easing programme. Such accounting wizardry would wipe a third off of the UK’s national debt.
The Bank is owned by the government, so its holding of government debt is essentially the state holding its own debt.
But Carney said that extra bank reserves had been created to purchase the debt it holds, and these reserves may need to be reeled in again. To do this, it would sell the bonds for reserves, and then erase the reserves – they are mostly electronic.
That was more of a soft lob from Lawson to get Carney’s reaction on record.
It also, of course, entirely rules out that Green QE that Ritchie and Colin Hines are so keen on. The bank isn’t about to start spending base money directly into the economy,. On exactly the basis that I’ve been pointing out all along. It’s not reversible when you do that. So they’re not going to do it.
Odd he doesn’t mention that today really, isn’t it?