The message is abundantly clear. Britain (and the whole world) needs more government debt to meet the demand for stable, secure places to invest. And the UK government is a particularly good provider of that stable, secure investment opportunity. And such is the demand for it that people are willing to, in effect, earn no interest at all (after inflation is allowed for) on those funds just to make sure they’re in safe hands.
Any rational government would meet this demand by issuing more of the debt the markets demand. They would be consciously using the offered chance to borrow at zero per cent real, and actually incredibly low nominal rates, to pour debt into the market and on very long terms. Thirty year, fifty year or even perpetual debt would sell right now. The funds could then be used to build the future those pension funds want for their membership, including homes for their grandchildren.
Not entirely sure how you build a pension on bonds carrying negative interest rates to be honest.
But the real misunderstanding from Spudmonster is that he’s right, the market is shouting that it would like more government debt. So the Bank of England should sell that debt it owns to the market, right? Unravel that QE which Spuddy insists will never be unravelled.
This leads us to what he’s ignoring. The4 price of government debt is deliberately and specifically raised by the BoE owning so much of it. Meaning that we cannot, without unravelling that distortion, say very much about the true price of government debt can we?