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Bank of England proving there IS such a thing as a free lunch
Britain has just carried out one of the greatest victimless crimes in modern financial history.Just ignore the millions of victims, they don't count. It is in effect wiping out public debt worth 20pc to 25pc of GDP -- on the sly -- without inflicting serious macroeconomic damage or frightening global bond markets. nothing else counts. Governor Mark Carney more or less acknowledged this morning that the Bank of England will never reverse its £375bn of Gilts purchases. Quite right too. Deputy Governor Charlie Bean yesterday that the Bank will "only contemplate selling back Gilts once the recovery is on a firm path." He admitted that some holdings may never be sold and is implying there will never be a recovery. The Bank can sit on its Gilts forever. These can be switched in zero-coupon bonds in perpetuity. The certificates can be put in a drawer and left to rot. The debt is eliminated in all but name. A debt that is repudiated / cannot be repaid / is never repaid/ is also eliminated in all but name. The remaining issue is, who's left holding the bag? Remember the bagholders don't count. QE has been a huge net transfer from savers to borrowers. This is unjust, but ultimately a better outcome for society than driving borrowers to the wall in a replay of the early 1930s (or as the eurozone has done over the last five years). Governments should act in the interests of creditors alone. Neither a borrower nor a lender be, but a creditor - that's something else entirely. Can there really be such a thing as a free lunch in economics? We will never be able to prove it either way, but on balance it looks like the answer is yes. This seems to be the way the Federal Reserve is socializing the private losses of the financial industry which have been peaking over the last 7 or 8 years. Welcome to the recovery-less recovery. Posted by: Anguper Hupomosing9418 2014-03-12 |
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