Monday, 29 July 2013

"Simply put, this means that we borrowed money from the sector which needed bailing out and gave it back to them as a bailout"

"Nowhere is the ludicrous circularity of debt more starkly exposed than when looking at the domestic holding of UK gilts. The biggest single holder of UK government debt is the Bank of England, mainly through the programme of quantitative easing – which is essentially issuing gilts and buying them back from yourself with interest using imaginary money. Banks and other financial institutions are also in on the act. At its peak in the second quarter of 2012 their holding of UK gilts was worth £215bn. Simply put, this means that we borrowed money from the sector which needed bailing out and gave it back to them as a bailout. Not only have banks, including RBS and Lloyds, been buying gilts with the money we gave them, we specifically demanded that they do it, in order to detoxify their investment portfolio.

At this point, no doubt, some sage is already furiously typing in the comments section that we didn't just give them the money; we purchased shares in the companies. But as the sale price of Northern Rock and attempts to revalue and hurry the sale of Lloyds and RBS demonstrate, we will never make anywhere near the money we put in. So, at least some of it was a generous gift from all of us, including future "us", to the incompetent bank directors' bonus fund".
 "If you think you know what 'debt' is, read on"


Mark Wadsworth said...

It's Sarkonomics, aka Abenomics. The whole thing is nuts, but guess who's paying?

DBC Reed said...

It would be better to create money and divvy it out to the people to prop up demand. Boosting the State Pension would be a discreet way of doing this , especially if some attempt is made to stop house price inflation.(Any divvy out of State created money would need LVT back -up to quell House Price Inflation).The Labour Party should be onto this but of course are stuck with Mini Me Austerity: we'd do the same as the Coalition except not so fast and not so much.

Lola said...

Aaaaaarrrrggghhhh, again.

Alex's Gruniad article is prety good, and then he ruins it all by blaming bankers and the market. Duh.