Second, and coming to more important issues, the bond market creates the most secure form of saving available to anyone. The UK government simply cannot default on its debt if it is in sterling because it can always, and without exception, instruct the Bank of England to make payment of that debt for it and it always will. As such bonds are the place for savers in the last resort. And long term savers have traditionally wanted that; gilts used to be fundamental to pension funds for this reason, for example, although less so now because the rates are so low (see below).
People did used to invest in gilts for their pensions. Then they got fucked over by government through inflation. So they pretty much stopped. So Gordy Brown forced the pensions funds to do so again.
Perhaps not wholly accurate in every detail but my sketch there covers the basics.
There is this fun though:
Third, the existence of this secure asset provides an essential alternative for the safe deposit of funds for those for whom government guarantees on cash deposits do not work. That is, companies and those with more than £85,000 to deposit. Government bonds are then the backbone of the so-called repo market, which is at present fundamental to the smooth operation of the City of London. I happen to think that important still: when banks are not reliable (and they are not), and funds deposited with them are at risk (and they are) then the government needs to create an alternative form of currency for the safe deposit of funds.
Repo isn’t companies with surplus cash buying gilts. Which is what he implies it is.
The repo market is an important source of funds for large financial institutions in the non-depository banking sector, which has grown to rival the traditional depository banking sector in size. Large institutional investors such as money market mutual funds lend money to financial institutions such as investment banks, either in exchange for (or secured by) collateral, such as Treasury bonds and mortgage-backed securities held by the borrower financial institutions. An estimated $1 trillion per day in collateral value is transacted in the U.S. repo markets
So, you know, not really.
I stress the last point noted above. Bonds do not fund government spending. That spending can happen whenever the UK government wishes by it simply instructing the Bank of England to make a payment. It is purely convention, as previously noted, that the resulting overdraft at the Bank of England is then cleared by a form of debt issue.
Nope. The first is called “monetisation of fiscal policy” and the second ain’t.
The claim by Sir Robert that the cost of borrowing must be minimised for taxpayers is profoundly wrong. Government money is not taxpayers’ money.
So we can have all the outsourcing we want because those profits made by the companies don;t impact upon anything at all then, not even the taxpayers?
You know, joined up stuff that Snippa never does quite manage. And of course tax subsidies to savings don;t make any difference either.
This falsehood is that the government is beholden to maximise return to taxpayers. This is simply a deeply corrupt form of the false thinking
Therefore government should just piss it away?