But, since the Treasury remains committed to quantitative easing the Bank of England has no choice but go back and buy new bonds to replace those that are being replaced. And that is precisely what it will do – to the tune of more than £15 billion.

Now, let’s first of all think what this means. First, it means that the government still has an active quantitative easing programme. That needs to be said because no one else is doing it.

Nobody else is saying what I and everyone else has been saying all along? That the BoE is topping up the stock of QE bonds as some of them mature?

Or is this no one as in no one I know voted for Nixon? That is, no one in Ritchie’s bubble?

Second, what it means is that in effect the £375 billion is not being repaid: it is instead being rolled over. The paranoia about QE that it must be repaid is not happening in practice. When debt comes up for repayment it is simply being replaced. In other words, a lot of nonsense about the need to replace QE in times of growth (which it is claimed we are enjoying) is not being evidenced in practice. In practice we are still going ahead with QE in a supposed time of growth. Some honesty on this point would be very useful.

Yes, everyone agrees that the BoE is topping up the stock of QE bonds as they mature. QE is not being repaid yet. As everyone knows and agrees.

Third, given that People’s Quantitative Easing and quantitative easing are the same in their financial functioning as both buy government issued bonds to be held for an indefinite period by the Bank of England there is no reason why the money to be reinvested next week could not be used for People’s Quantitative Easing.

Err, yes, there is. PQE injects base money into the real economy. QE does not. It’s a rather large difference there.

It really is time for those to object to come up with some real arguments as to why it should not be done.

Because it’s the monetisation of government spending. The same problem we all identified the day you first started talking about it as Green QE 5 years ago.

It’s almost amusing, the manner in which his own ignorance won’t let him understand the points being made. Almost.

7 thoughts on “Sigh”

  1. I suspect that Murphy thinks that:

    – QE is intended to be reversed, but is not being reversed yet: so although intended to be temporary, the period over which it will be in effect is indeterminate

    – PQE is not intended to be reversed, although in theory it might be: so although intended to be permanent, the period over which it will be in effect is indeterminate

    – So, as each of them will be in effect over an indeterminate period, QE and PQE are identical.

    The analogy seems to be with funding a war by increased taxes, or by issuing war bonds. Increased taxes are a permanent thing, not to be repaid, although a future government might reduce taxes to compensate so you might get your money back. War bonds are intended to be repaid, although a future government might cancel them so you might not get your money back. In either case you might or might not get your money back, so taxation and bond issues are essentially identical.

    Oh… wait…

  2. It amuses me that when ‘The Joy of Tax’ is finally published because of Murphy’s new high profile it will get lots of serious reviews in mainstream publications. Since it will almost certainly be full of howlers the serious public drubbing he will take knock his reputation and damage his future grants. Sadly the magical thinking of the Corbynistas won’t be effected.

  3. Some technical points here.

    Rolling over existing holdings of government debt as they mature is not the same as active QE, which involves the Bank of England increasing its asset holdings. Rollovers simply aim to maintain asset purchases at their existing level. The Bank has already explained that it would unwind QE by ceasing to roll over gilt holdings as they mature.

    However, rollovers do have a slight easing effect, because they increase the duration of the Bank of England’s asset holdings. It’s the same as a very small Operation Twist.

    We do actually have an active QE programme at the moment, but it doesn’t buy government bonds. Funding For Lending is a form of QE.

  4. As there’s still a deficit being run wouldn’t reversing QE mean more severe austerity targets. So by claiming conditions are right for repaying QE isn’t Murphy arguing for more severe austerity targets.

  5. Bloke not in Cymru

    No, you can’t make that assumption. Tightening monetary policy does not imply concurrent tightening of fiscal policy. What it does imply is that the effects of the fiscal tightening already planned by Mr. Osborne would not be offset by monetary generosity. So unwinding QE now would indeed mean concurrent fiscal and monetary tightening, but not because one caused the other.

    In this respect RM is correct. However, I am not convinced that it would be “severely” deflationary. But then I am not convinced that QE has any significant effect on anything at all except asset prices.

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