One of his wilder contentions is that government doesn;t have to issue bonds at all. But it does so because it provides a safe form of saving for the financial markets. Goodness of the heart style stuff.
UK government debt currently stands at around £2.7 trillion, with the Government’s interest bill this year expected to be around £100bn. David Miles, a member of the OBR’s budget responsibility committee, warned that the decline in full-salary pensions schemes, which were traditionally big buyers of UK government debt, could push up long-term borrowing costs by as much as £20bn.
Those financial markets desire less safe form of savings. So, Govt will have to pay higher coupons or issue less debt. Hey Ho, we get to the same answer whichever logical structure we use, eh?
The IMF jet is taxiing to the runway…
Oh, don’t worry, they’ll just force the pension funds to buy more gilts again. Trebles all round (except for the pensioners, and who cares about them?)