Snippa and thinking

OK, it’s takes me some time, sometimes, to spot the problem. But then again, I’m not the person proposing these ideas:

I was also told I did not have the right to say that QE funding need not be repaid, since I was told that it must be, which would have required endorsement by me of an austerity narrative.

So, conventional argument. If, as and when, inflation arises then QE should be reversed. The bonds are sold back to the market, the money collected, fed into the Bank of England’s computer and destroyed. That reduces the money supply, lowering inflation. We, that is, reverse the increase in the money supply that caused the inflation.

In Snippa’s world something very different happens. Instead of reversing QE, we tax more to extract that extra money from the economy. Hmm, OK. So what do we do with that extra money we’ve now extracted? We can’t spend it because that defeats the purpose of extracting it. We have to have taken the money collected, fed into the Bank of England’s computer and destroyed. That reduces the money supply, lowering inflation. We, that is, reverse the increase in the money supply that caused the inflation.

If inflation appears -if! – then we end up in the same place. The money supply is reduced by paying off QE debt through higher taxation of the populace.

Snippa thinks he’s found some world in which QE debt need never be repaid because tax. But because he never does think through things he’s described the world in which tax will cause QE to be repaid. His own case contradicts his insistence that we don;t need to repay QE and also that we don’t need to do it through austerity.

17 thoughts on “Snippa and thinking”

  1. “In Snippa’s world something very different happens. Instead of reversing QE, we tax more to extract that extra money from the economy. Hmm, OK. So what do we do with that extra money we’ve now extracted? We can’t spend it because that defeats the purpose of extracting it. We have to have taken the money collected, fed into the Bank of England’s computer and destroyed. That reduces the money supply, lowering inflation. We, that is, reverse the increase in the money supply that caused the inflation.”

    So you accept that QE is just money printing by another name then? Something you’ve always sworn blind isn’t the case? If printing money and spending it and then taxing it back out of the economy and destroying it is the same as printing money, buying government bonds with it and then selling them back into the economy then they are both MMT aren’t they? They both rely on the authorities doing something in the future to remove the printed money when inflation kicks off. And IMO they are as unlikely to ever reverse QE as they are to tax people extra when inflation rises, because no politicians wants to tax people extra when times are hard already, and selling all those gilts back into the market would flood it, collapse prices and raise yields, which makes borrowing more expensive. Either way they have an incentive to keep printing and follow St Augustine’s prayer – we will control inflation, but not just yet.

    So QE=MMT, QED.

  2. Snippa’s fallacy is quite common on the left: if something “can” be done, it “must” be done. But the very point of QE is that it can be done when circumstances allow. And that when is determined by the BoE, quietly, and becomes apparent after the fact.

    To Jim: circumstances have allowed some QE to be reversed, and it’s happened, quietly without spooking the markets. Don’t confuse the UK with the entire world,

  3. I agree that QE is just printing money. That it is, when it is done to fund spending, simply monetisation of fiscal policy. I’ve said that all along.

    I’ve also said that it is different because it is reversible, the very point Snippa wants to deny.

  4. Sounds awfully familiar to me. Some clever person tells you they’ve a better way of doing something & when you look at it closely it’s what you’ve been doing anyway with a bit of shuffling footwork in the middle, just happens to put dosh in their pocket. Question you should be asking is whether you should be doing it at all. Concur with Jim.

  5. Bloke in North Dorset

    OT for your bemusement:

    I’ve just had an email from the marina at Portland where I keep my boat.

    I’m allowed to leave home to go to the marina to go sailing.

    DEFRA has just decreed that maintenance and winterisation aren’t valid reasons to leave home, so I can’t go down there to fix anything that gets damaged while I’m out sailing or from the gales that will be coming through.

    I can leave home to go to Portland to exercise though.

    I’ve given up being exasperated, its not good for my health.

  6. I’ve also said that it is different because it is reversible, the very point Snippa wants to deny.

    I don’t remember Capt Potato denying that QE was reversible so much as claiming that it didn’t have to be reversed which seems pretty close to your current position which, as I recall it, used to be that QE had to be reversed once it had done it’s job of nudging us all along the risk curve.

    It has always seemed bonkers that an economy where cash saving was rewarded with derisory or negative interest rates could ever be considered normal or healthy.

  7. “I’ve also said that it is different because it is reversible, the very point Snippa wants to deny.”

    He doesn’t deny its reversible, just that there’s no need to reverse it.

  8. No, I’ve said that QE must be reversed once inflation shows up. Which I think inevitable after we’ve all shifted along the risk curve – at some point at leat.

  9. “Which I think inevitable after we’ve all shifted along the risk curve – at some point at leat.”

    And Japan?

  10. We are in the bizarre position where the BoE owns about half of the UK’s stock of gilts. It makes you wonder why government is still issuing the things

  11. BiND

    More and more people simply need to ignore this bollocks. It’s obviously still a complete travesty that a so called Conservative Government still has us in the “You must not leave home unless” routine, and which is legally binding to the extent that one can be fined/criminalised for non compliance, but simply from a practical perspective, there are enough valid reasons that one can legally drive a coach and horses through it.

    Maybe maintenance is a form of exercise? From my experience, it was rarely sedate… Etc.

  12. Could you, and a friend who also has a boat, employ each other to maintain each other’s boat?

    Then you would be travelling for purposes of work, not doable from home. You might even be a “key worker” in the Transport sector.

  13. “Could you, and a friend who also has a boat, employ each other to maintain each other’s boat?”

    And then sub-contract the work back to each other so each gets to work on his own boat.

  14. Bloke in North Dorset

    “Could you, and a friend who also has a boat, employ each other to maintain each other’s boat?”

    And then sub-contract the work back to each other so each gets to work on his own boat.

    It could work but you have to be registered with the boatyard as contractors, and that’s not just Covid related, and show your liability insurance, so no doubt the tax man would come knocking at some point.

  15. Ah Mr BiND. You need to think like a leftie. Make yourself a non-profit or charity. Then apply for grant money & get paid for working on you own boat.

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