Now it is reversing that process through quantitative tightening (QT). QT increases the amount of government debt that private investors must absorb and may therefore contribute to higher yields.
It is impossible to understand today’s gilt market properly without understanding QE and QT, and their role on interest rates, but Gary almost ignores them.
The purpose is to raise interest rates therefore “may” is the wrong word there.
Government bonds also underpin the financial system because they are widely used as collateral in the City of London repo markets. Banks, investment firms and other financial institutions rely upon them to manage liquidity and finance their own activities. Without bonds, banking in the City of London would fall apart.
No. That gilts are so used is wholly true. But if gilts did not exist something else would be used. That is, that something is used does not mean it is essential that thing be used.
The City does not simply do the government a favour by buying gilts.
The City absolutely depends upon a continuing supply of gilts for its own business model to work.
This isn’t true.
Anyway, the real lesson today is that everyone should listen to me, The Potato of Ely, not Gazza.
The purpose is to raise interest rates therefore “may” is the wrong word there.
And ‘must’ is shirley open to question …
Murphy criticisms remind me of Denis Healey’s joke at Geoffrey Howe’s expense
“like being savaged by a dead sheep”
The repo market is useful but far from essential: the City of London would continue to function if it was abolished overnight.
“How did you come to acquire such a detailed knowledge of the bond market Mr Potato?”
“Well, for decades,. I simply avoided working in it,. investing in it or reading anything about it and everything just feel into place”
He’s bent out of shape that:
As for the analysis – channeling Goebbels once again. Apparently hoping that if you repeat the lie on MMT it will become the truth when it is rapidly falling apart.
He also confirms that I took the correct decision to ditch the Telegraph by revealing he subscribes to it!! It has become the bible for the Control Left.
“The purpose is to raise interest rates “
I thought the purpose of QT was to remove the excess printed money from the economy. Raising interest rates is a consequence of that, not the primary purpose.
So we got the answer to what he’s focusing on now – picking fights with people more successful than him, getting things wrong and churning out his new age hippy economics. No change then, nothing to see here.