Add just that data together and the deficit in the next year might easily exceed £275bn. That is wholly unprecedented in UK economic history.
And now the Bank of England has announced that it will also be selling £80 billion of the government debt that it technically owns back into financial markets over the next year.
Add this factor into the mix and what it means is that the Treasury plus the Bank of England will be seeking total funding of £355 billion (or more) from financial markets over the next year or so.
This will all drive up interest rates. Of course, it will. Which is what they want to do anyway, drive up interest rates. But, according to the Tuber, this is bad. We should, instead, use modern monetary theory.
Third, instead the new money that the Bank of England must necessarily create to fund the planned level of government spending (because all state spending is initially funded in this way) should be advanced interest free to the Treasury.
Yep, the solution to inflation is to print more money. Weimar here we come!
Sigh.
Then there’s a part of it that is just so cute you’ll scream with joy.
Then, fourthly, when those funds are spent into the economy they should be credited to what might be called special reserve accounts to be held by the commercial banks with the Bank of England on which interest of no more than 0.1% should be paid.
I am aware that this sounds like a technical issue, but it matters. These special reserve accounts need never be repaid. The interest rate would make them affordable into the future without limit, or concern.
But if that money’s just been spent into the economy then it’s not sitting in the bank’s special accounts at the Bank of England, is it?
Sigh.
That’s not even the biggest whopper in the quote. Think on this:
These special reserve accounts need never be repaid. The interest rate would make them affordable into the future without limit, or concern.
His intellectual deterioration continues unabated.
Oh no Mr Tim, you mis-understand! (let me just wipe my drool). When the money is taken out of the bank to be spent it should also be put into the bank to be saved! Bank withdrawls create monhey, how else does it get into the cash machine? Every tenner somebody takes out of the ATM creates a recipte – I’ve seen ’em! farsands ov ’em! – that recipt gets put in the bANK of eNGLAND.
Has he suffered a TIA or a mental breakdown? Such utter gibberish suggests he has a real health problem.
Ed P
I have wondered that for many years. It would certainly go some way to explaining his apparent lack of mental faculties.
As far as I can tell, he wants the government to both spend the created money and also put it into these accounts owned by the government.
When done by individuals, this is called “fraud”.
But I suppose it’s government, so it’s OK right?
It’s a pity that the UK’s “No 1 economic blogger” doesn’t have any training or background in double-entry bookkeeping.
PS, should one be going long on wheelbarrows?
“Yep, the solution to inflation is to print more money. Weimar here we come!”
You supported QE in the first place. You can’t blame politicians for drinking themselves stupid when you agreed with giving them the key to the wine cellar. There’s a lot of good reasons why you don’t allow politicians to ever get their hands on the money creation system, history shows us that. Yet you thought that they could be trusted to only use it when there was no alternative. Strange how suddenly those sort of ‘unprecedented’ crises come along a lot more often once they know they can print their way out of trouble. But hey, you’re an economist, you know better of course…….I’m beginning to think that Pol Pot was right. If all people with a degree were sent to work in the fields the country would be far better un.
Far better run even.
When will this website get a comment edit function?
be far better un.
Jim just missed the apostrophe before “un” and the “a” between “be” and “far”
Although I have two humanities degrees. So I am not sure why I am agreeing wi’ thee.
Did Weimar have an unlimited dollar swap line with the Fed?
Why doesn’t money spent into the economy just move around between bank deposits at the central bank?
What would happen if we just… raised interest rates to 5% in one go?
Why peel the bandage off so painfully slowly?
What would happen if we just… raised interest rates to 5% in one go?
How much money has the government borrowed again?
PJF – Yeah I know, but they’re *borrowing more money* while trying to slow boil interest rate rises, so far all that’s achieved is inching up the pain dial while not actually stopping inflation or the crumbling value of the Pound. Looks like we’ll get to 5% anyway, and get all the additional debt and interest payments anyway.
They’re all shit choices when we’re in a bad position, but maybe there’s a shit option we can choose that prevents the When Money Dies scenario?
As far as “Looks like we’ll get to 5% anyway, and get all the additional debt and interest payments anyway.” goes, I suspect we won’t be stopping there.
We’re doing full-on 70s stagflation. The unemployment is hidden by fiddling with the definitions, as is the inflation right now. But if you look at who’s not even looking for work and things like the PPI it’s there.
Which means we’re likely getting rates of 10% or more before this is over. One thing standing in the way would be the higher debts this time around, but I think that’s likely to be solved by repudiation or something similarly drastic.