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Well, yes, obviously

Although the Telegraph has got this entirely wrong.

George Osborne saddles taxpayer with £133bn bill as accounting trick backfires
Treasury is on the hook to cover losses on government debt held by the Bank of England

Yep. Treasury booked the profits – the vast river of interest payments on QE – so Treasury gets to book the losses.

Under a deal cut by Mr Osborne, the Government foots the bill for any losses the Bank incurs from the difference between returns on its bond holdings and the interest it pays out.

Recent interest rate rises and chaos in gilt markets “will mean cash starts flowing from the Treasury to the [Bank]”, the OBR said.

The policy was introduced by Mr Osborne in November 2012 when the Bank was making a profit because interest rates were lower than bond returns.

Mr Osborne, who was then Chancellor, declared that income from these bonds could be used to reduce government debt.

At the time, the The Treasury was given £120bn as a result.

Quite. But this being the modern media:

This bill came about because commercial banks are paid interest on reserves held at Threadneedle Street at the current interest rate, which climbed from 0.1pc last December to 3pc this month.

No, different thing. Part of QE and all that, but still slightly different thing. Whatever the rate being paid the banks on reserves, BoE will still be booking losses on QE.

4 thoughts on “Well, yes, obviously”

  1. One thing I don’t understand is the idea that the BoE is backed by the UK government – if it runs out of capital the UK taxpayer will stump up the losses. Thats the UK government who can’t make ends meet unless the BoE prints money to buy its debt. Isn’t that two bald men fighting over a comb territory? Is it possible that we could find ourselves in the scenario whereby the UK government could be issuing debt to recapitalise the BoE, which itself is then printing the money to buy said debt? At that point isn’t it turtles all the way down?

  2. The nghtmare scenario happens when no one will lend to or buy debt from the government. The UK govt probably has too much collateral to default ,( eg gold, foreign reserves ) but it is not impossible. Austria and Weimar Germany are the models there.

  3. Faced with the choice of which to punch first between the utter, utter cvnts Gideon Osborne or Richard Murphy, it would be Osborne first, on the business before pleasure principle.

  4. Why are Brits acting like little punks?

    Do you actually just submissively want to fade away into irrelevancy? What happened to stiff upper lip? Why not use the proven power of world central bank networks to print the world’s most demanded money?

    Do you enjoy scarcity so much, you have to create psychological hard money prisons for yourselves so you can create scarcity of money to compensate for actual real superabundance?

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