Whitewavemark2
MaizieD
That's one policy that I agree with too.
The bank reserves that the BoE pays interest on are money that was created by the BoE in the first place. The rationale for paying interest on reserves is that they are deposit accounts with the BoE. As the commercial banks didn't actually make the deposits the interest payments are completely free, unearned profit for the banks, used to pay equally unearned excessive bankers' salaries and bonuses.
The economic ramifications IMO are that it takes some bricks out of the government's 'we can't afford it' wall.
I think that an announcement such as Farage is suggesting would crash financial stability, and we would once again be at the mercy of the markets, and in a full blown financial crises.
And default? How would they deal with that?
I am not suggesting however that interest payment should continue for ever, I think that the BoE might say that it intends to stop paying interest once the QE has been fully re-paid.
I know that the discussion has moved on a bit, but I’ve been belatedly taking down Christmas decorations.
The interest paid to commercial banks is nothing to do with QE. It is the interest paid on the huge reserves the banks need because of the govt’s guarantee that deposits of up to £85k would be honoured by the government in the event of a bank failure (such as were threatened at the time of the GFC)
As it was the BoE who credited the banks with the extra reserves why would not paying interest on them cause any problems?
As I said, this has nothing to do with QE.
As. matter of interest, though, who do you think the UK owes the QE money to?