Comments by "" (@blackbulldog4897) on "Why doesn’t the Bank of England tell the truth?" video.

  1. Their job depends on them not raising it.
    12
  2. @andybrice2711  the Truss & LDI episode revealed how things work. She should have sacked Bailey but that would have given the game away so instead, she got the tap on the shoulder and was told "time to go". The legislation, Bank of England Act 1998, shows which is master and which is servant so the architecture is in place. All we need is a political system which will use it.
    7
  3. @shauneden4229  it can't control inflation, it's almost exclusively a supply side issue. All the BofE can do is alter the price of money and that doesn't do anything at all to ameliorate supply side inflation. I could understand why people say "it's not owned and controlled by govt" etc. if there was any evidence to support that view but I haven't seen any, ever. I agree though, the BofE doesn't serve "our" purpose but that's because it's political masters ideology prevents it. This situation will continue unless and until we have a completey different political landscape to the current one dominated by neoliberalism.
    5
  4.  @grantbeerling4396  the BofE is subservient to govt. It's all political choice.
    4
  5. I suppose the "big deal" is this: The UK govt faces no purely fiscal constraint, the only constraints it faces are availability of resources at a price it's willing to pay and politics. Therefore, when you hear politicians rolling out excuses like "there's no money for xyz", "where's the money going to come from?", "we can't afford it" etc, you know they are gaslighting.
    3
  6. @shauneden4229  it's clear the 1946 Act brings the bank under public control, the share capital of the BofE is owned by the Treasury solicitor on behalf of HMT. The 1946 Act, along with the Bank of England Act 1998 show exactly which is master and which is servant. So the BofE, owned and controlled by govt must, by law, comply with authorised requests from HMT. I've seen all the "it's not owned by govt etc." before but the legislation clearly shows who owns and controls it so I don't understand why people would say otherwise.
    3
  7. I'm not sure what you mean. Spending comes via the supply process, taxation is laid out in the finance bill.
    3
  8.  @peterweston1356  it's important to realise that roughly 10% of the £s govt injects into the economy is saved, not spent. So, for every £100 govt injects the national debt increases by around £10. Money doesn't circulate, it's an injection (creation) and drain (delete) model.
    2
  9. Sort of. All govt spending, which is "borrowed" from it's own bank, is returned to the issuer; except that which is saved. These savings are what's referred to as the national debt.
    2
  10. @andybrice2711  There's no doubt about the legislative position, the BoE is completely under political control. The Bank of England Act 1998, particularly sections 1, 1a, 12 (in relation to section 11) and 19 show exactly which party is master and which is servant. Sacking Bailey would not have been allowed as it would have given the game away.
    2
  11.  @evildrome  Sure, govt could provide liquidity. Private credit creation is a political choice.
    2
  12. @garethhumphries4039  the BofE isn't independent, have a look at the Bank of England Act 1998. MMT is a framework, part description of fiat money systems, part prescriptive (Zirp, JG) part "lens" for analysis of policy choices.
    2
  13. Which parts of the core MMT literature led you to believe MMT has anything to do with "printing boundless money to solve every ailment in the economy" ?
    2
  14. Try to think of things in terms of stuff (real resources) rather than £s. For example, how would simply handing out £s to people in poverty make more stuff available?
    1
  15. The Bank of England Act 1946 & the Bank of England Act 1998 disagree with you.
    1
  16. @jasonbradley7365  our government thinks it's a good idea to manage the economy via the price of money (interest rates); it's not. To that end, it tells it's own bank to set a floor interest rate, the bank rate. This is the rate it wants to maintain to, as it thinks, best manage the economy. To maintain this rate it decides to ensure that govt spending has no net effect on the level of reserves in the banking system. So, on days where it injects more reserves than it drains it issues securities (at a higher rate) to drain the excess reserves.
    1
  17. Because they choose to use interest rates (the price of money) as the primary tool for attempting to manage the economy.
    1
  18. @carlton7015  Well, they instruct their bank to mark up the reserve accounts of recipients retail banks which the bank does; it also marks down the Consolidated Fund by the same amount - this is where the "borrowing" arises. Unfortunately for us, the UK govt believes the best way to manage our economy is via the use of interest rates so that's exactly what they try to do.
    1
  19. @carlton7015  we pretty much have that already. Why do you want to get rid of everyone's savings?
    1
  20.  @carlton7015  Simplified, Reserve accounts are the mechanism by which the BofE interacts with retail banks, each retail bank has a "reserve account" with the BofE. The Consolidated Fund is the equivalent of the government current account; it's the legal/accounting structure from which all payments are made and into which all receipts are collected.
    1
  21.  @carlton7015  that's not how it works. Issuing securities and paying interest on them are political choices.
    1
  22.  @carlton7015  please explain
    1
  23.  @carlton7015  it's not financial, it's a policy choice. Gilts aren't a funding operation, they are a refinancing operation, they are issued ex-post of spending. If govt didn't issue securities then any deficit would reside in the Ways and Means Account as a non tradable entity at the bank rate. Issuing Gilts refinances any deficit at a higher rate. The idea behind issuing securities is to drain any excess reserves injected by prior govt spending.
    1
  24.  @carlton7015  You've misunderstood. Simplified, the process works like this: . Parliament authorises spending, normally via the Supply process . When government comes to buy things/spend it instructs it's own bank (the BofE) to mark up the reserve accounts of recipients retail banks . BofE must, by law, comply so it marks up the reserve accounts and marks down the Consolidated Fund - this creates new £s every time . Retail banks then mark up the deposit accounts of recipients Nothing else needs to happen, all payments have been made via the creation of new £s and all those new £s are sitting in reserve accounts and deposit accounts of recipients. By default, at the end of day, any deficit will reside in the Ways & Means Account at the BofE. By political choice the government later issues securities for any deficit or buys securities for any surplus. These securities convert any deficit from a non tradable entity in the W&M Account (at the bank rate) to a tradable commodity at a higher rate. The UK government isn't a "private business" its the currency issuer, the only entity legally allowed to issue the currency; it neither has nor doesn't have £s, it issues them into existence every time it needs them.
    1
  25. @carlton7015  well, govt neither has nor doesn't have £s, it issues them into existence when it needs them. It issues £s into existence every day. Don't forget the other side of the system, the drain. Govt also drains £s from the economy every day via taxation. Monetary policy redistributes £s upwards.
    1
  26. The Bank of England Act 1946.
    1
  27.  @spulevic  is this new country using it's own currency? If so, where would it "borrow" it from?
    1
  28.  @peterweston1356  tax is the drain, the removal of previously issued £s. Govt buying things/spending is the injection of newly created £s.
    1
  29. Check out the BofE Quarterly Bulletin from Q1 2014 entitled "Money creation in the modern economy"
    1
  30. @metallitech  it's clear that deposits don't fund bank lending, in fact it's clear loans create deposits.
    1
  31.  @metallitech  the same reason they offer any other product, because they believe they can make a profit from doing so. Nothing to do with them being able to make loans.
    1
  32.  @metallitech  I've heard the BofE described as many things but I've never heard it described as having an "MMT bias", whatever that is. The "created deposits" may lead to outflows when they are moved to a different bank, it depends on what else is happening and how it all nets out. By "central bank money" I assume you mean reserves. Obviously, banks use reserves for settlement. Savings accounts don't create reserves, only the BofE can create/destroy reserves.
    1
  33.  @metallitech  Bank lending doesn't require funds, but don't take my word for it, here's what the BofE says: "The reality of how money is created today differs from the description found in some economics textbooks: . Rather than banks receiving deposits when households save and then lending them out, bank lending creates deposits.
    1
  34. I think I replied to you elsewhere but I'll do it again here. Truss was cooked by the LDI debacle. The entire episode provides a very handy narrative for the TINA types.
    1
  35.  @WarrenPeaceOG  banks provide liquidity.
    1
  36.  @anglo-irishbolshevik3425  the primary constraints are inflation (resources being available for govt to use at a price it's willing to pay) and politics.
    1
  37. All of that is incorrect. The bond market has nothing to do with fiscal policy in the UK. By the time HMT securities are issued, the spending has already happened. Gemms are obliged, as part of their licence, to make market in Gilts under all conditions.
    1
  38.  @coAdjointTom  I'm not sure what you are asking there but, for context, there are a few things to consider about the Truss episode as it provides some valuable insights. . The £ was "plummeting" since Feb 2022 but, oddly, we didn't get the 24/7 breathless coverage we got with the Truss budget, did we. . Truss was cooked, in large part, by the LDI debacle. . She should have sacked Bailey but, of course, she couldn't.
    1
  39. The UK government owns the BofE.
    1
  40.  @foxmoongaze  you think politicians lying about what is and isn't possible is "playing with word's"? Understanding what MMT actually is leads one to understand the important things are resources and how govt uses them, not £s. In what way do you think confidence in GBP would "plummet", what's the mechanism?
    1
  41. @foxmoongaze  if govt doesn't continue to create £s and continues to tax at the same rate what do you think happens to the private sector? Please explain what this confidence thing is.
    1
  42. @foxmoongaze  well, it depends, doesn't it. Why do you suppose people buy Gilts and not stocks and other assets? What's the mechanism for "losing confidence" in a currency?
    1
  43. It's a myth. The BofE isn't independent in any way.
    1
  44.  @shauneden4229  which Act is it?
    1
  45. @shauneden4229  the provisions of the Act look pretty clear cut in terms of ownership, what makes you say it's still a private bank?
    1
  46. @sailawayteam  maybe we are talking across each other. I'll try to elaborate. Govt spending and taxation are separate functions and they are not operationally dependent. All govt spending, except that which is saved (somewhere between 10 & 15%) is returned to govt via taxation.
    1
  47. @garethhumphries4039  Well, the act explicitly states it's not independent in any way. Sorry but MMT isn't just descriptive at all. It is indeed prescriptive in terms of the JG and Zirp or close to. If you don't understand how and why the JG is fundamental to MMT then you don't really understand MMT.
    1
  48. @sailawayteam  from an MMT perspective all govt spending is just spending, it wouldn't be split between "investment" and other spending. You aren't considering the private sectors desire to save (around 10% or so) so how would you accommodate that?
    1
  49. @sailawayteam  yes, sort of. An MMT perspective leads one to understand that starting from a number (the budget) is the wrong place to start. And yes, people like to save so, if it's not being spent then it won't attract taxation and return to the issuer. It's the equivalent of leaving money in a drawer or under the bed.
    1
  50.  @garethhumphries4039  exactly what are neo Keynesian ideas? Again, MMT doesn't describe how our economy works, see my other post regarding this. Have you actually read the core literature?
    1
  51. @sailawayteam  The fundamentals are correct. That is: Whenever govt buys something/spends, it instructs it's own bank to mark up the reserve accounts at recipients retail banks. The BofE must, by law, comply so it marks up the relevant reserve accounts. The retail banks then mark up the recipients deposit accounts. New £s are created every time.
    1
  52. @CuriousCrow-mp4cx  well, he's laying out the fundamentals of govt fiscal ops in the UK.
    1
  53. They do, they don't want the public to know.
    1