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Thread: Printing money

  1. #1

    Printing money

    If the BofE can print 200billion and pump it into the Bond market why didn't they just pay it off the country's debt?

  2. #2
    Maybe because the net national debt for the UK in July 2011 stood at 2300 billion (140% of GDP) if you include bank bail-outs or 940 billion (64% of GDP) excluding the bank bail-outs.
    For really scary figures, look at total cash in circulation for any country against the value of their reserves, most major economies hold billions in gold but trillions in debt. A bit like having a 1million mortgage on a 1000 house.

  3. #3
    A 1 million mortgage on a 1,000 house?

    That would really make job mobility a bit hard, but then a country can't just 'up sticks' and move, can it?

    Well, it can actually (sort of) by taking over other countries.

    Debt and economic stagnation unfortunately can lead to war.

  4. #4
    The printing of pieces of paper to pay off the country's debt would simply lead to hyperinflation. It has been tried before many times and it always ends up with a financial disaster. Have a read of "This Time it is Different" by Rheinhart & Rogoff. It should be compulsory reading for anyone wishing to stand for Parliament. Mistakes would hopefully not then be repeated by governments.

  5. #5
    The purpose of Quantitative Easing was to stop the banks going bust and allow them to resume lending to business. Businesses borrow money to buy raw materials and machinery; and to build factories, shops and offices. Businesses provide the things and services we all need. They make profits to pay shareholders' dividends (our pension funds). to pay taxes and to invest in growth. Functioning businesses keep people in work supporting themselves and paying taxes. Not out of work on unemployment benefits.

    Paying off the country's debt all at once is impossible. It is too big. But paying it off over decades to come through prosperous companies and employees all earning is possible. If company and personal incomes rise, you don't even need to raise tax rates because the same proportion of a bigger pie is a bigger slice.

    Using that money to make a small dent in the national debt would leave the banks to go bust, the companies in need of loans and overdrafts to go bust, the employees thrown out of work to go bust. Who picks up the pieces? The government = the tax payer. If nobody has a business and nobody but the people in the dole office has a job who pays the taxes? No one. So the government has to borrow to get people back to work.

    Much better not to bankrupt the banks and the businesses they support in the first place. Hence quantitative easing. A stitch in time saves nine.

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