A vision for the future.

Grany

Good Maisie knows and explains about how the economy works, there is no need for austerity we know it does not work. So we have to ask ourselves why Labour our next probable government is following the Conservative austerity way. And not canceling the 100 new gas and oil drilling licences. The Green Party would and they would tax the richest 1% this is what this country needs.

Are going to vote Tory, if the Labour Party don't give you what you want, Grany?

DAR so who were the extreme left economists that developed this idea?

Where did I say that, Whitewave?

Good Maisie knows and explains about how the economy works, there is no need for austerity we know it does not work. So we have to ask ourselves why Labour our next probable government is following the Conservative austerity way. And not canceling the 100 new gas and oil drilling licences. The Green Party would and they would tax the richest 1% this is what this country needs.

Just as an aside. One thing that I think helps explain this form of state funding is that the states needs to know that the funds are there when needed. So this is why it must rely on money creation and not tax receipts, bond issuance etc as neither are a reliable source.

That’s my version, so I’m probably wrong.

I’m hoping that maizie will put me right if I’ve made any boo boos

DAR so who were the extreme left economists that developed this idea? I am at the moment getting to grips with MMT and trying to see how it has developed from Keynesian economics. I understand that MMT was developed in one of the American universities?

The idea (I’m not completely convinced yet that it is a theory) is that government spending is funded by what in effect is money creation, and has been developed as a result of what the economists argue is what actually happens.

So put very simply

The state has the draws down money from the BoE - (for accounting purposes this is debited to what is known as the consolidated fund) the money is then deposited (credited) into the various spending departments bank accounts and thus used as necessarily/planned.
All this money finds it’s way into society at large, but
is then brought back into the system (otherwise we would have inflation, if not hyperinflation) through three means. Taxation, public debt (in the form of bond issuance and cash reserves.

So from this perspective Money is an abstract and unlimited unit of account.

The only power that can define this unit is the state, and this power derives from the states ability to tax that unit.
So tax then drives the demand for currency rather than raising funds for the state to spend.

There is a lot more ( even more to learn) but I hope you can agree that rather than coming from an extreme position, it is in fact nothing more than a description of the actuality of the way things are.

I do have questions but I hope to get these answered as I plod my way through the material.

Climate betrayal

Labour admitted they will not cancel the new North Sea oil and gas drilling licences that Rishi Sunak has given to multinational companies – many of which have given work to his wife’s family business.

Both Conservatives & Labour support 100 new oil & gas licences in the North Sea.

Whitewavemark2

It isn’t my opinion🙂.

It just is.

It is coming from the extreme left. They are pushing the case for viewing the start of a circular process at the point of printing/creating currency.

I don't know how many people do or don't agree, but I'm happy to believe that the start of an economic process, to me and to many other people, will be being assured you have the money or the collateral or have legal commitments that you will have one or the other, before you commit to a process. To me that is where it starts and nothing anything I have read, here or elsewhere has convinced me differently.

You cannot put your signature on something that say "I promised to pay" unless you have something to pay it with. This is my opinion. I simply don't agree that what you are saying "just is" is the truth that implies.

Katie59

I understand that the bank can sell the bonds accumulated under QE at a discount and they will receive interest attatched to individual issues. Currently the discount is estimated at £150bn, while those bonds have been held interest amounting to similar amount has been saved, time will tell wether there is a net loss

Question
Why sell bonds that are costing nothing, and at the same time sell bonds costing 4%+?.

The bonds are being sold at the market valuation, which is, at the moment, less than was paid for them.

Interesting question
Question

Why sell bonds that are costing nothing, and at the same time sell bonds costing 4%+?.

Why sell bonds that are costing nothing?

Well, they're costing nothing in real terms because the interest paid on them is just numbers swapping between the Treasury (a UK govt. department) and the Asset Management Facility, also part of the UK Treasury. And the Treasury and the BoE, respectively, created the bonds in the first place and the money with which to purchase them!

So that's a very good question To which no-one seems to know the answer...

and at the same time sell bonds costing 4%

They didn't 'cost 4%'. ' The 4% is the annual interest paid on them by the Treasury, they are called '4% gilts'.
Though to tell the truth, I'm not altogether sure where you have got this 4% figure from. Can you clarify?

I understand that the bank can sell the bonds accumulated under QE at a discount and they will receive interest attatched to individual issues. Currently the discount is estimated at £150bn, while those bonds have been held interest amounting to similar amount has been saved, time will tell wether there is a net loss

Question
Why sell bonds that are costing nothing, and at the same time sell bonds costing 4%+?.

Katie59

Maisie

Interesting article, Murphy is saying that there is a power struggle between the BoE and government, there is only one outcome, the BoE will get overruled. This £150bn potential loss is to the bond holders, that’s the risk you take investing if they keep them until maturity they get face value

Murphy did not say that the BoE was making a loss he said the investors would if they sold now. We have just had a period of high inflation and little growth the value of many things has fallen.

A crude calculation is
UK value £100, growth 1% inflation 10% value £91 at yr end

Bond purchasers at 4% now are probably going to loose in the short term while interest rates are high but are betting on interest rates falling later in the bonds life and I think that is a reasonable strategy. Why would you think that’s irrelevant it's the purchasers judgement

We made a similar decision 2 yrs ago we fixed Electric supply at 18p/Kwh for 3 yrs prices are over double that now the supplier is either loosing money or he hedged the price forwards

I'm sorry, Katie59 but you appear to be completely misunderstanding the the ownership of the bonds purchased for QE. They were purchased by the BoE from the market (including bonds newly issued by the Treasury for the sole purpose of sale to the BoE) and the 'bondholders' are nominally the BoE, though in fact they are 'managed' by the government in the Asset Management Facility. They have no connection whatsoever with other bondholders. The only 'investor' that will make a loss is the BoE, because they are the body that purchased them,;with entirely newly created money, BTW.

As far as I am aware, the BoE is embarking on selling these bonds at a loss with the approval of the Chancellor. There is ultimately no 'power struggle' because the UK owns the BoE and it works under the ultimate direction of Parliament. It's only real independence is in the setting of interest rates.

Bond purchasers at 4% now are probably going to loose in the short term while interest rates are high but are betting on interest rates falling later in the bonds life and I think that is a reasonable strategy. Why would you think that’s irrelevant it's the purchasers judgement

I think it's irrelevant because that is always the judgement that an investor has to make and the only thing it has to do with the BoE sale of the QE bonds is whether or not the 4% bonds will attract purchasers. Which I think they will because they are being sold for far less than they cost and canny investors know that inflation will fall within the lifetime of the bonds, and, that if their market value increases they could sell their holding at a profit.

Galaxy

Grany your use of that blog, (I am for reasons I wont go into aware of the case) confirms everything I have thought for a long time.
Daisy's info is not completely up to date (no criticism Daisy ) he was later imprisoned for further charges. He caused great distress.

I was not aware of of him or his blog, charges or imprisonment before I posted I shall look carefully at sources next time. The next post about KS I stand by he needs thorough investigation everything about him as he lied to get to be leader and u-turned on most of his pledges.

Maisie

Interesting article, Murphy is saying that there is a power struggle between the BoE and government, there is only one outcome, the BoE will get overruled. This £150bn potential loss is to the bond holders, that’s the risk you take investing if they keep them until maturity they get face value

Murphy did not say that the BoE was making a loss he said the investors would if they sold now. We have just had a period of high inflation and little growth the value of many things has fallen.

A crude calculation is
UK value £100, growth 1% inflation 10% value £91 at yr end

Bond purchasers at 4% now are probably going to loose in the short term while interest rates are high but are betting on interest rates falling later in the bonds life and I think that is a reasonable strategy. Why would you think that’s irrelevant it's the purchasers judgement

We made a similar decision 2 yrs ago we fixed Electric supply at 18p/Kwh for 3 yrs prices are over double that now the supplier is either loosing money or he hedged the price forwards

Katie59

MaizieD

Katie59

Of the £2,600 billion national debt just over £800 billion was created by QE since 2009. Currently QE is being reversed (Quantitive Tightening), bonds are being sold at a nominal interest rate of 4.3 % significantly below BoE base rate. The BoE cannot buy unlimited amounts because financial institutions need bonds because they are a very safe investment needed to secure long term commitments like pensions.

It seems to me the government is paying that interest to go some way to maintain the value of long term commitments which QE would not.

Katie59, government bonds are no more in finite supply than is money. The Treasury just issues them as they see fit. The BoE holdings are not depriving the pension funds of opportunities to buy.

There is no reason at all why the BoE should be restricted as to the quantity it can purchase and no reason at all why they have to be selling them at a loss at this moment in time.

As I have said previously the limit is what international markets and investors see as being prudent otherwise the value of the currency falls. Selling at a loss? Do you mean paying over 4% interest on bonds sold?, at a time when inflation is at least double that, seems a pretty good deal to me.

In 2016 sterling fell over 30% because investors saw it as a stupid decision, it was recovering until Truss crashed it again, now it is better around 20% up from the low. Personally I think Sunak should invest a lot more for growth, particularly technology, probably the obstacle to that is inflation

Hmm,

The Financial Times reports that the BoE is calculating a loss of £150billion on its current holding of the bonds bought in the QE exercises. So far this is an accounting loss only based on the current market value of the bonds, but if the bonds are sold (as the BoE seems determined to do) the loss would become a reality. As there is no reason why the bonds should be sold right now this just looks irresponsible.

Professor Murphy explains:

www.taxresearch.org.uk/Blog/2023/07/28/the-bank-of-england-wants-to-make-a-loss-of-150-billion-so-that-goverments-will-be-forced-to-cut-spending-that-is-the-real-banking-scandal-of-our-time/

The 4% interest rate is completely irrelevant. All bonds are sold at a certain rate of interest which remains fixed over their lifetime. (The only exception being if the interest rate is index linked, which it isn't.) Holders of 4% bonds are paid 4% interest on their holdings whether the rate of inflation is 2% or 10%. That is what makes them a safe investment, the return can be guaranteed for the lifetime of the bond.

Grany your use of that blog, (I am for reasons I wont go into aware of the case) confirms everything I have thought for a long time.
Daisy's info is not completely up to date (no criticism Daisy ) he was later imprisoned for further charges. He caused great distress.

It isn’t my opinion🙂.

It just is.

DaisyAnneReturns

^So I think we can put that to bed.^ Whitewave

I don't know when people started thinking "This is my opinion. I'm entitled to my opinion. My opinion is MY truth. Therefore, my opinion is therefore THE truth."

I gave you my opinion as seen from my from my perspective. Just because you have a different perspective does not make me wrong or you right, or vice versa.

If one person is standing at the top of a hill and one at the bottom, they will each have a very different perspective as to whether the road is going up or down. Add to that the person who stands halfway. That is a third perspective and an equally valid one.

Stick to your opinion by all means but please do not tell me that your opinion overrides mine.

When I said that MMT theory is not one developed by the extreme left, I think you misunderstood what I meant.

So

Just like classic and Keynesianism economics MMT is not developed by someone from the “extreme left” Like other branches of economics and those that have progressed the founding fathers they are to that extent “neutral”. They are theories of the way the economy works. So classic economics centres on laissez faire and small state economics, Keynesianism was developed between the wars to take account of more state involvement - re the Great Depression etc, and MMT describes the flow of capital/currency - taking issue with the traditional way of looking how the state funds its spending. That is all it does. It is neither left nor right it is to that extent neutral.

I was making the point though about those having to go independent, crowd fund.

Seems Starmer doesn’t want decent hardworking for their constituents people in Labour Party?

There is another blogger Council Estate who thinks both Labour and Tory both want same keep austerity it’s a class war.

councilestatemedia.substack.com/p/the-establishment-has-declared-class?utm_source=substack&publication_id=1336368&post_id=135640546&utm_medium=email&utm_content=share&triggerShare=true&isFreemail=true

There is another political crowd fund to do a deep dive on Starmer, who he is what he stands for and his voting record etc seeing as he likely PM next year sometime and has U turned on most of his pledges

www.justgiving.com/crowdfunding/SirKidStarverprofile?fbclid=IwAR2Aj1_atXnhf-npKJ630iHILFF6K7S-ARzqwywxCsP4sDFtn0bnK3knHvE

We don’t need more austerity A Labour Party is meant to stand for the working people.

Labour is conservative vote red or blue same. People are looking for alternatives

MaizieD

Katie59

Of the £2,600 billion national debt just over £800 billion was created by QE since 2009. Currently QE is being reversed (Quantitive Tightening), bonds are being sold at a nominal interest rate of 4.3 % significantly below BoE base rate. The BoE cannot buy unlimited amounts because financial institutions need bonds because they are a very safe investment needed to secure long term commitments like pensions.

It seems to me the government is paying that interest to go some way to maintain the value of long term commitments which QE would not.

Katie59, government bonds are no more in finite supply than is money. The Treasury just issues them as they see fit. The BoE holdings are not depriving the pension funds of opportunities to buy.

There is no reason at all why the BoE should be restricted as to the quantity it can purchase and no reason at all why they have to be selling them at a loss at this moment in time.

As I have said previously the limit is what international markets and investors see as being prudent otherwise the value of the currency falls. Selling at a loss? Do you mean paying over 4% interest on bonds sold?, at a time when inflation is at least double that, seems a pretty good deal to me.

In 2016 sterling fell over 30% because investors saw it as a stupid decision, it was recovering until Truss crashed it again, now it is better around 20% up from the low. Personally I think Sunak should invest a lot more for growth, particularly technology, probably the obstacle to that is inflation

Katie59

Of the £2,600 billion national debt just over £800 billion was created by QE since 2009. Currently QE is being reversed (Quantitive Tightening), bonds are being sold at a nominal interest rate of 4.3 % significantly below BoE base rate. The BoE cannot buy unlimited amounts because financial institutions need bonds because they are a very safe investment needed to secure long term commitments like pensions.

It seems to me the government is paying that interest to go some way to maintain the value of long term commitments which QE would not.

Katie59, government bonds are no more in finite supply than is money. The Treasury just issues them as they see fit. The BoE holdings are not depriving the pension funds of opportunities to buy.

There is no reason at all why the BoE should be restricted as to the quantity it can purchase and no reason at all why they have to be selling them at a loss at this moment in time.

Is this the same David Lindsay?

www.thenorthernecho.co.uk/news/23577422.county-durham-blogger-denies-breaching-restraining-order/

Grany

Emma Dent Coad standing as independent crowd fund

davidaslindsay.blogspot.com/2023/07/casting-net-wide.html?spref=tw

It’s not too clear is it the Monster Raving Loony party?.

So I think we can put that to bed. Whitewave

I don't know when people started thinking "This is my opinion. I'm entitled to my opinion. My opinion is MY truth. Therefore, my opinion is therefore THE truth."

I gave you my opinion as seen from my from my perspective. Just because you have a different perspective does not make me wrong or you right, or vice versa.

If one person is standing at the top of a hill and one at the bottom, they will each have a very different perspective as to whether the road is going up or down. Add to that the person who stands halfway. That is a third perspective and an equally valid one.

Stick to your opinion by all means but please do not tell me that your opinion overrides mine.

Emma Dent Coad standing as independent crowd fund

davidaslindsay.blogspot.com/2023/07/casting-net-wide.html?spref=tw

Of the £2,600 billion national debt just over £800 billion was created by QE since 2009. Currently QE is being reversed (Quantitive Tightening), bonds are being sold at a nominal interest rate of 4.3 % significantly below BoE base rate. The BoE cannot buy unlimited amounts because financial institutions need bonds because they are a very safe investment needed to secure long term commitments like pensions.

It seems to me the government is paying that interest to go some way to maintain the value of long term commitments which QE would not.