Collectively, government bonds form a part of what is commonly, and inappropriately, called government debt. The term is inappropriate because whilst bonds are liabilities of the government they are not actually used to fund its activities, which funding is always provided by money creation by the Bank of England: they are merely the voluntarily deposited savings of those who want to take advantage of the security that the government can supply to savers. To describe these sums as debt is, therefore, inappropriate when they are simply part of a savings mechanism offered by the government.
From the point of view of the bank that deposit is a loan from me to it, made entirely voluntarily. It’s also a debt from it to me because that’s what it means.
Interestingly one of his posts on QE and Mervyn King he acknowledges other contributory factors to inflation albeit indirectly, so he is damned by his own words. He is likely to be responsible for the deaths of millions indirectly. Who is the ‘fascist’ now?
– address Brexit; The EU intransigence and attempts to punish the UK for Brexit have contributed to inflation
– continue measures to tackle the impact of Covid on society; >/i> COVID lockdowns and the ongoing hangover of the unnecessary over-reaction continue to cause mayhem
tackle the causes of war in Ukraine; the War in Ukraine and the unnecessary escalation has caused huge impact which is only likely to increase
reform energy supply and make it more sustainable The absurd unilateral commitment to Net Zero is a millstone which continues to make energy far more expensive than it needs to be
So where should the government put bonds on its balance sheet or accounts? As Assets? I’ve never seen anyone so ignorant of basic accounting principles. Either that or he is consciously making the decision to put out false information.
i’ve had a bash at richie today, dunno if he will print my final comment.. he is clueless here. To believe the unwinding of QE is distorting the bond markets is bizarre.
others with a knowledge of fixed income should get stuck in !!!
Brian James says:
June 15 2022 at 10:48 am
Bond markets have been manipulated since the introduction of QE.. so the reversal of QE is bringing some order. Of course long term rates will rise because it makes no sense for medium and long dated bonds to yield circa -7% or so. Cheap money has led to a boom in the money supply. Inflation and the price of goods is a combination of the supply of goods and at a given time the amount of money in circulation and the velocity of that money in circulation. Central banks can no longer print money to solve economic problems and the legacy of that policy over recent years is partly a reason for the inflation we have now. And bringing inflation under control is now an economic priority.
Reply
Richard Murphy says:
June 15 2022 at 11:26 am
That is utterly incoherent
The yield on long-dated bonds is about 2.5%
And you have clearly not read what I wrote
Please do not waste my time again
Reply
Brian James says:
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June 15 2022 at 12:28 pm
“The yield on long-dated bonds is about 2.5%”
nominal yields are 2.5% but real yields are circa -7% will inflation pushing 10%.
Nothing incoherent there. Long dated bonds have been ridiculously overpriced through QE and at a -7% real yield they remain so. I expect the yield curve to steepen both here in the US and in the Eurozone.
He’s quite mad.
Collectively, government bonds form a part of what is commonly, and inappropriately, called government debt. The term is inappropriate because whilst bonds are liabilities of the government they are not actually used to fund its activities, which funding is always provided by money creation by the Bank of England: they are merely the voluntarily deposited savings of those who want to take advantage of the security that the government can supply to savers.
So, per Spud, the liability isn’t debt if the money received in exchange for the bond isn’t used to fund “government activities”.
I can’t help but notice that he leaves the term “government activities” undefined.
Double-entry accounting has only been around for 800 years or so.
Brian James
I’ve just seen his response to you – just brilliant! I’m surprised he can actually turn on the PC/ Laptop. And he has the gall to call the FT journalists ignorant of money and Banking!!
Brian James says:
June 15 2022 at 12:28 pm
“The yield on long-dated bonds is about 2.5%”
nominal yields are 2.5% but real yields are circa -7% will inflation pushing 10%.
Nothing incoherent there. Long dated bonds have been ridiculously overpriced through QE and at a -7% real yield they remain so. I expect the yield curve to steepen both here in the US and in the Eurozone.
Reply
Richard Murphy says:
June 15 2022 at 1:05 pm
So you want low inflation and high rates
Utterly incoherent
Well done, Brian James. And well done for recording what may well disappear!
The man’s a fool!
Oh, and seeing your second post, you haven’t expressed any preferences at all, but merely pointed out what is extremely likely to happen. Heaven know what the Spud wants, or thinks he wants.
Murphy knows about a lot of things, some in decent detail..it’s his interpretation which is questionable… in other areas he knows a tiny amount and believes he knows everything…financial markets falls into that bracket. I have worked in fixed income derivatives for 20 odd years and occasionally he strays there..interest rate swaps. forwards or credit analysis. He is a fukcin cretin and knows absolutely nothing.
Brian James
Absolutely agree (Although I’d be curious as to what things you think he knows about – I find his ignorance of matters to be near total. certainly he has minimal understanding of politics, economics, science, history or geography) – his understanding of how markets work could be written on the back of a fag packet (one with all the health warnings) I think in bygone days our erstwhile host tried to make these points with increasing levels of exasperation but I find Murphy the embodiment of the following proverb’s first line – unfortunately too many people embrace him as an ‘expert’ when he knows the square root of F%^& all on a topic
‘He who knows not, and knows not he knows not, he is a fool — shun him;
he who knows not, and knows he knows not, he is simple — teach him;
he who knows, and knows not he knows, he is asleep — wake him;
he who knows, and knows he knows, he is wise — follow him.’
“He is a fukcin cretin and knows absolutely nothing.”
I don’t think anyone could be that stupid and manage to remember to breathe. I’m firmly of the opinion its all an act, he’s providing a performance to an audience. He knows what they want to hear and he’s providing it. Admittedly the shtick is failing to gain much £££ now, but thats more down to him being a c*nt than any inconsistencies in his arguments. If he could play nicely with people he could have some very lucrative sinecures by now, there’s enough people on the exact same gravy train who are espousing the very same nutty ideas. They just know how to work with other people.
@Jim
I’ve long suspected he’s a gig. Maybe he’s fallen into a common trap for conmen. They come to despise the marks for their gullibility. So they’ll keep pushing the limits of what they’ll swallow.. And he does have some supremely stupid & gullible followers. BBC journalists, for a start.
Brian,
I’ve got more years than I care to remember of running Corporate and Government debt funds, and you don’t need to see him stumble around and make a twat of himself in the more exotic stuff. I’m afraid his knowledge of even basic instruments, and what moves them in what direction, would be humiliating if he had even a modicum of an idea of what he was talking about.
DK personified I’m afraid. But also just a vile cunt with it.
@Jim, it is fortunate that he can’t get along with anyone for more than 5 minutes – think of the damage he can do if he was to gain a position of influence and not fall out with who he was working with. Think how close he came with Corbyn before his overwhelming arrogance scuppered his chances. Strangely he must have some charm, otherwise he’d never be able to con various charities and universities to give him money. Thankfully he can’t keep up the pretence of noy being a cunt for more than 5 minutes. It’s not an act – I’ve met him and he truly believes he’s the smartest man in the room,( or any other room )
“I’m firmly of the opinion its all an act, he’s providing a performance to an audience. He knows what they want to hear and he’s providing it.”
Jim, I agree. I remember an old e-mail exchange (before I found Timmy’s place) where – after I had effectively accused him of being dishonest (on avoidance) and simply playing politics – he freely admitted that all tax was politics. It was a long time back (I never kept the e-mail). Keeping that in mind, I don’t always see the inconsistencies that others see on here.
VP
“he who knows, and knows he knows not, he is wise”
FIFY..