johnhemming wrote:JamesMuenchen wrote:johnhemming wrote:Try checking what happened to total public spending in real terms.
Did it increase at a slower rate than overall GDP?
Public spending increased in cash terms, but was around constant in real terms. Which means on an aggregate basis arguing that there has been severe cuts is not true. On an aggregate basis there were not cuts. It did, however, increase at a rate lower than GDP. The idea of that was to enable the deficit to be reduced both to initially ensure that the debt reduced as a proportion of GDP and then move towards reducing the debt.JamesMuenchen wrote:johnhemming wrote:
It certainly looks that way, yes
https://www.ons.gov.uk/economy/governme ... es/may2020
At the end of May 2020, the gilt holdings of the APF have increased by £46.7 billion (at nominal value) compared with the end of April 2020, to £475.1 billion in total. This increase is of a similar order of magnitude to the new issuance by the DMO in May 2020, which means that gilt holdings by units other than the APF have changed very little since April 2020.
It is a bit more subtle in that the debt is issued to the market and then bought back by the bank. The interest is paid to the bank at some stage if I remember rightly started paying some to the treasury.
Arguably this results in some asset value inflation, but partially that is an objective of it. If normal inflation started increasing then QE would have to stop.
Is that not the whole objective. A 2% target inflation rate, where the BoE set interest rates to steer towards that, or failing that (interest rates at/near zero) using QE scale up/down. In a zero interest/inflation rate world people with money can just fill mattresses with money and draw upon that as/when needed. If that money is being devalued by inflation they instead will typically look to 'invest' that money - which generates economic activities that otherwise wouldn't have occurred had the money been left idle.
Controls/micro-management typically leads to lower volatility. Without intervention for instance stock prices would have dived recently, by printing money and buying up bonds so pension funds etc. see bond prices rise and reduce bonds to buy stocks - that pushes stock prices higher. At the extreme, the BoE could just declare what prices bonds and stocks should be, totally fixed/rigged. Not a free floating market as originally devised to be. Carried to conclusion on the present path and the ECB/whoever could continue printing and buying up all assets, until all stocks, bonds and houses were owned by the state. Before then however given that its such a interconnected system (US Fed, UK BoE ...etc.) faith is lost and a flight of money occurs, leaving hyperinflation for the currency that money is flighted from.
'Old-money' recognises that, generational wealth spanning back 800+ years tend to be diversified across land/art/gold type assets, not in controlled stock, bond, commodities pegged to a particular single fiat currency. Where income/interest is intentionally avoided - seen as just a tax raising event. Where assets are sold whenever cash is required, at times and in a location where the capital gains are relatively tax efficient.
Used to be that the private sector was larger than the public sector. But where the public sector in liking spending other peoples money so much has the private sector struggling to sustain such spending levels. In the 19th century for instance investors were rewarded around 3% real for lending to the state. Nowadays the state wants to pay nothing, keep/spend that for itself, and as its greed/spending increase further even see negative returns for 'investors', individuals wealth eroded by costs/fees/taxes. Capitalism is on the brink of transition towards either Post-Capitalism - for which Paul Mason is a somewhat optimist of how that might pan out; Or a significant 'Correction' along the lines of the 1970's. Buffett seems to think that is a rising risk as even during recent declines be bought nothing, even sold some - to raise his mountain of cash to even higher levels. Of the two I suspect Buffett is more inclined to be right.