Thursday, 16 May 2013

IMF drops HM Treasury a hint

Playing clever funny money games is ok, up to a point, but watch you don’t find yourself getting stung when the time comes to try and unravel them.

My latest blogpost: IMF drops HM Treasury a hint Tweet this! Posted by Bob E at 19:40

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6 comments:

Mark Wadsworth said...

Subheading "Eonomists [sic] at the IMF found the Bank of England could sustain losses of anything up to 5.5% of GDP, or almost £80bn, when it sells the government bonds back into the market"

Well they know shit about fuck, as ever. The bought back bonds do not need to be reissued. They are so much waste paper. They do no exist any more. The government has swapped old liabilities for new liabilities. It is the new liabilities (the deposits at the BoE) which might or might not need to be refinanced.

Or they could just slap the banks with a 2% annual bank asset tax and cancel the deposits over a 5 - 10 year period.

16 May 2013 at 22:42
Bob E said...

Or - in a killing two birds with one stone way - convert a proportion of the deposits at the B of E into RBS and Lloyd's shares - for this purpose valued at the actual purchase price the taxpayer paid for them or the market price at the time, whichever is higher; and with the balance met by transfer of the residual NR and B&B "assets" held by NRAM, thus ensuring that the banking sector as a whole makes a gesture of thanks to the taxpayer for the kindness shown to them 2008 - 2014? :-)

17 May 2013 at 01:20
A rage spread thin said...

I'm not holding my breath until these bonds are "sold back into the market"

This is just a polite fiction to pretend that the whole exercise isn't just straight debt monetisation.

In fact, I reckon come about 2017-18 Chancellor Balls might announce that he won't "spend tax payers money funding fat-cat bankers bonuses" or some such hyperbole, and cancel the debt via the shredder. Later he will claim to have reduced the debt.

All madness of course.

17 May 2013 at 03:26
Mark Wadsworth said...

BobE, they can't convert those deposits into shares - that's the wrong way round. You've got your debits and credits mixed up.

ARST, do you believe that the bonds which were bought back still exist and need to be re-issued? I've explained many a time that they do not exist. Remember: you cannot owe yourself money!

And "monetization" is a meaningless word dreamed by by right wing zealots? While I agree that government debt is usually a Bad Thing not a Good Thing, that's about it. The form of the borrowing does not matter and it is all equally bad whether "monetized" or not.

17 May 2013 at 08:22
Derek said...

MW is right as usual on this one. There is absolutely no reason to sell these bonds back to the market. In essence they do not exist. And even if you think that they do still exist, all HMG needs to do is wait for them to mature and then pay itself the money.

17 May 2013 at 11:12
Bob E said...

MW - thanks for putting me right, and er thanks for ruining my Friday - I've been running a splendid scheme involving lending money to myself for some time, and had been stockpiling the interest I've been paying myself on my loan with the specific intention of adding it to the capital when I repay it to myself and buy shares in RBS - I've never really believed that 'rumour' that we might be given them, but I did think we might be offered them at a hefty discount.) Well that get rich quick scheme has now gone out of the window. Anyone know of anyone offering really cheap loans that I could borrow from in order to settle that "debt I owe myself" I've lumbered myself with?

17 May 2013 at 16:56

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