Britain Accelerates Money Printing – Trustnodes

Britain Accelerates Money Printing

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Andrew Bailey, BoE chief

The United Kingdom has began a second round of money printing as northern Europe enters a second round of locked down.

The Bank of England has announced they are to continue printing £20 billion for corporate debt and an extra £150 billion for government debt.

“The Committee voted unanimously for the Bank of England to continue with the existing programme of £100 billion of UK government bond purchases, financed by the issuance of central bank reserves, and also for the Bank of England to increase the target stock of purchased UK government bonds by an additional £150 billion, financed by the issuance of central bank reserves, to take the total stock of government bond purchases to £875 billion,” they say.

That’s close to 50% of GDP with government debt levels already surpassing 100% of GDP in the biggest money printing certainly in living memory.

This is debt owed to the central bank which finances it through their reserves, that being financed by their power to declare whatever number they enter into their computer systems is actual money.

This debt has to be paid back with interest to the central bank which is owed by the British government and by the British commercial banks.

This debt reaches the government through the commercial banks, rather than directly by the central bank.

The British government has to go to commercial banks which then say yes or no to the British government wanting to borrow whatever amount.

The commercial banks then sell it onto the market where you and anyone else can buy these bonds. Alongside you, the central bank is buying these bonds too and so far to the tune of $1 trillion.

Any profits you make from these bonds you bought from the government are taxed at variable rates depending on your income. That’s unless you’re rich enough to know the loopholes like the commercial banks.

This tax you pay is used more and more to pay back this debt, instead of to pave the roads and furnish the schools.

A gradual decline generally follows with it visible in Milan where fine roads are more a luxury than a reality as even their main roads now look like from developing countries.

Bank of England balance sheet, Nov 2020
Bank of England balance sheet, Nov 2020

UK  public debt, Nov 2020
UK government debt, Nov 2020

Britain currently has very fine roads, even in neighborhood streets, because up until 2008, an Act of Parliament ordered the government to have no more than 40% of the GDP in debt.

Milan too had fine roads in the 90s, just before their government let go of any discipline whatever:

Italy government debt, Nov 2020
Italy government debt, Nov 2020

The gradual decline is unfelt but predictable, and this gradual decline is a choice by the British government.

Taxation in the United Kingdom and much of the west has not been revised, reformed, or even looked at for decades.

That’s important because this money printing is taxation, but a most regressive tax for it hits bread too.

Children who may otherwise have become Einstein, therefore, may instead have to focus more on finding even more expensive bread.

The above example is extreme, the difference in reality is in very fine shades, but the results of these debt levels are know: stagnation and decline.

A new band of taxation must be implemented for income or wealth above $100,000, $500,000, $1 million, $10 million, $100 million and $1 billion.

Currently, taxation effectively stops at circa $40,000 in as far as anyone who earns more than that pays the same rate.

That bundles the middle class together with billionaires and the rich with the very rich when we know money is not moving and it is not moving because it is not going to those who need it and thus can spend it, but instead goes to those who already have too much money to know what to do with it.

The only way to address this monetary crunch, which is very real despite all this money printing, is through taxing the rich and by that we mean anyone who earns above $40,000 through continuing progressive taxation rather than stopping it there for no reason whatever.

Failure to do so means undeclared state level bankruptcy and a stealth monetary contraction which we are currently witnessing despite money flowing for the rich.

That’s something that another £150 billion won’t fix. Instead the government needs to stop pretending they are rich and tackle the hard issue of fair taxation now that their Keynesian and neo-liberal ideology has collapsed.

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