The T-accounting is: "making losses on the APF" would be the debit side of the transaction, which means settlement accounts at banks are on the credit side.
A really interesting article that asks some very important questions. There is no doubt that QE was a funnel for profits for the banks and no doubt the QT will be equally valuable. The banks’ balance sheet looks increasingly healthy and bonuses are rising once more. It is the poorest in society who pay for this largesse through the debasement of money that leads to rising inflation. Why don’t we windfall tax on banks? For fear of an exodus- why do we not renationalise the Bank of England, because politicians can’t be trusted to do the right things ahead of elections. Who holds the power in this relationship- certainly not society. If we continue on in this vain inequality will continue to rise along with social and political instability. No one wants to own a currency like that.
Not sure about that. In 1998 it gained a degree of independence but remains charged with stability of the financial sector and independent control of inflation. I guess by bolstering banks profits and driving interest rates higher they are aligned to their mandate.
Nominally independent of government interference in it's day-to-day operations, though it's remit (such as inflation targets) is determined by government. Of course not really politically independent in the broader sense, since it's an integral part of the finance industry, which is a major political actor. This is exacerbated by 'revolving door' executive appointments.
"The Bank of England paid for the purchase of those sovereign and corporate bonds with ‘high powered money’ which took the form of reserves deposited in commercial banks."
Just for the clarity of the non-economists that I hope are reading this excellent blog, (I presume) this means deposited in the reserve accounts that commercial banks hold at the BoE (?) , not a deposit at the commercial bank itself.
It seems to me that we should look at the power dynamics of the inflation balance sheet. Articles largely treat it as impersonal, abstract and exogenous and seems to imply it is perhaps caused by invisible hands.
Inflation is the imposition of liabilities —prices — on us — society — by those with the power to impose prices. The purpose is to extract or transfer more assets for the benefit of those with the power to set prices. Mythical supply and demand curves do not actually apply but demand-pull explanations are preferred to cost-push ones as the cover story.
When central banks raise interest rates to allegedly fight inflation they signal the financial markets to impose more liabilities in order to transfer more assets to those financial operatives.
Purely and simply, inflation is price gouging by those with the power to do so when there are or may be some shortages in supplies. They may not be real but expectations of shortages also justifies raising prices and imposing liabilities just in case shortages occur. Demand usually remains the same but the pretense is that it must be suppressed. That covers the real issue which is the facilitation of more transfers of assets to those with power to set prices.
In conclusion, inflation is yet another cover story for asset transfers to the wealthy as is raising interest rates to fight inflation. By focusing on price increases or liabilities, emotions are aroused stirring up more animal spirits to justify austerity measures.
The outcome of more liabilities and more asset transfers is more wealth and income inequality.
BoE can hit my settlement account with 100 bn in gilts any day. I'll even agree to restrict the acc and call it Mike's 'reserve' account.
The T-accounting is: "making losses on the APF" would be the debit side of the transaction, which means settlement accounts at banks are on the credit side.
A really interesting article that asks some very important questions. There is no doubt that QE was a funnel for profits for the banks and no doubt the QT will be equally valuable. The banks’ balance sheet looks increasingly healthy and bonuses are rising once more. It is the poorest in society who pay for this largesse through the debasement of money that leads to rising inflation. Why don’t we windfall tax on banks? For fear of an exodus- why do we not renationalise the Bank of England, because politicians can’t be trusted to do the right things ahead of elections. Who holds the power in this relationship- certainly not society. If we continue on in this vain inequality will continue to rise along with social and political instability. No one wants to own a currency like that.
AFAIK the Bank of England has been a Crown entity since 1948.
Not sure about that. In 1998 it gained a degree of independence but remains charged with stability of the financial sector and independent control of inflation. I guess by bolstering banks profits and driving interest rates higher they are aligned to their mandate.
Nominally independent of government interference in it's day-to-day operations, though it's remit (such as inflation targets) is determined by government. Of course not really politically independent in the broader sense, since it's an integral part of the finance industry, which is a major political actor. This is exacerbated by 'revolving door' executive appointments.
Still a Crown entity though.
"The Bank of England paid for the purchase of those sovereign and corporate bonds with ‘high powered money’ which took the form of reserves deposited in commercial banks."
Just for the clarity of the non-economists that I hope are reading this excellent blog, (I presume) this means deposited in the reserve accounts that commercial banks hold at the BoE (?) , not a deposit at the commercial bank itself.
CNBC Business News made the same point back in September.
https://www.cnbc.com/2023/09/11/bank-of-england-bond-sales-creating-a-selling-gold-at-the-bottom-moment.html
Basically a conveyor-belt of £150bn from future-taxpayer to the worlds wealthiest financiers.
NZ government and RB are doing the same thing.
It seems to me that we should look at the power dynamics of the inflation balance sheet. Articles largely treat it as impersonal, abstract and exogenous and seems to imply it is perhaps caused by invisible hands.
Inflation is the imposition of liabilities —prices — on us — society — by those with the power to impose prices. The purpose is to extract or transfer more assets for the benefit of those with the power to set prices. Mythical supply and demand curves do not actually apply but demand-pull explanations are preferred to cost-push ones as the cover story.
When central banks raise interest rates to allegedly fight inflation they signal the financial markets to impose more liabilities in order to transfer more assets to those financial operatives.
Purely and simply, inflation is price gouging by those with the power to do so when there are or may be some shortages in supplies. They may not be real but expectations of shortages also justifies raising prices and imposing liabilities just in case shortages occur. Demand usually remains the same but the pretense is that it must be suppressed. That covers the real issue which is the facilitation of more transfers of assets to those with power to set prices.
In conclusion, inflation is yet another cover story for asset transfers to the wealthy as is raising interest rates to fight inflation. By focusing on price increases or liabilities, emotions are aroused stirring up more animal spirits to justify austerity measures.
The outcome of more liabilities and more asset transfers is more wealth and income inequality.