UK 19:27 Friday, 23 October 2026
Breaking news and expert analysis on fast-moving AIM and LSE listed shares
Disclosure: I own shares in one or more of the stocks mentioned. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.
I think it was six years ago that we all thought low interest rates would not last. They have, and there is no sign, as far as I can see, that they will rise any time soon. They may even continue to bump along at their present lowly level for another six years.
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Comments
Yuff
In your first paragraph, I think you meant “ rise anytime soon” :-)
Marvin
You would have thought QE would make the deficit terrorists rethink what they actually believe if they’ve ever thought about it in the first place.
QE is the government reversing previous issue of public debt to the tune of 375 bn. Think about it. They have previously issued IOUs for 375bn. Now they have taken those IOUs back by paying the bondholders cash. What is the status of the debt ? According to any logic the debt has gone. No that would have undermined the austerity agenda. So the BOE sets up a 100per cent owned subsidiary, makes a loan to it of 375bn in order to buy back the ‘debt’ so it holds the asset of the debt and the liability of the loan which means government can say the repurchased bonds are still part of the national debt. Meanwhile all the interest the government paid on those bonds was redistributed back to…… yes…. the government.
I think the initial idea was that the bonds would be sold back to the market. With negative inflation there is no chance that will happen. More likely the bonds will start to mature and since the government would redeem them by paying itself the nominal value the farce would be complete.
Conclusion. How is the national debt DEBT when government can simply swap it back for cash any time it likes resulting in negative inflation ? Clearly the level of the money supply has absolutely nothing to do with inflation when you have high un and underemployment and unused productive capacity.
Rant over.
Jimbo
Marvin, what you’re describing is covert monetisation of government debt. I don’t disagree that it’s happening, but where we differ is seeming to perceive it to be benign. I’m in the camp that see this ultimately leading to currency destruction – especially once some kind of shift takes place to cause the necessary increase in the velocity of money. At some point a critical mass of people will switch on to what is happening; usually when it’s far too late for them to take action to protect themselves.
Malcolm, I cannot disagree with you more when you state QE has been a success. It’s been great for asset prices, but has done nothing to improve the real economy which is why growth has been anaemic at best. Also, using ZIRP to rob the prudent to bail out the feckless is in my view, not only immoral, but if history is any guide, will lead to disaster. Just my tuppence worth.
Phil
I don’t understand any of it, which is why I own and keep part of my wealth in Gold. Seems the prudent thing to do, as Gold is as cheap as chips right now.
I’m minded this unholy mess has been created by a load of university educated “experts”. I have no doubt when all these seagulls have left, when all the ice creams have been pinched, it will be down to the un-educated like me to clean up the mess
Marvin
Jimbo
It’s just an asset swap. It’s what the BOE does every day in its open market operations. Non-government decides what proportion of cash, reserves and government debt it wants and the BOE accommodates this through the member banks. How much more liquid do you think cash is to a government bond?. The request to turn bonds into reserves or cash will always be accommodated. I think the word is endogenous. The supply of state money is determined from within by effective demand and not by supply. The government is the monopoly issuer of state money and, as with any monopoly, it can only determine the price or the quantity of it. Never both. It figured this out in the 80s and has decided to control the price via the base rate ever since.
J P Spaghetti
“un-educated”
shouldn’t really be hyphenated Phil (though I largely agree with you) :-)