That’s debt in the hands of the Bank of England.
See here.
That’s not the first time he has made that sort of
suggestion. See here.
I suggested the same in a letter in the Financial
Times about a year ago. And others have
made the same suggestion.
Also that idea is kind of Modern Monetary Theory
compatible, at least in that Warren Mosler suggested abolishing national debt:
the only liability issued by the government / central bank machine being base
money.
Judging by the the report linked above, Adair's thinking is muddled and incompatible with MMT.
ReplyDeleteIt seems that he doesn' t understand that the NET public sector national debt and NET public sector interest payments consolidate the Treasury and Bank of England since these bodies are both within the public sector.
His conclusion that there would be a reduction in public sector interest payments is gibberish, and likewise his statement that "the Chancellor could use this new fiscal leeway to drive the recovery more sustainably than relying on another surge in household debt".
Yes, tearing up public debt in the hands of the central bank ispretty much of a non-event, far as I can see. It doesn't affect anything REAL, like "driving the recovery more sustainably".
DeleteDo we all have the same concept of "National Debt"?
ReplyDeleteTo me, the national debt held by the central bank is bonds from government to the central bank. These bonds were issued in exchange for dollars (Federal Reserve Notes) which were created by the central bank (in the United States).
Following the transaction, government spent the dollars but the central bank kept the bonds on it's books. It follows that the total value of bonds on the central bank books is the total amount of dollars issued by the central bank and spent by government.
Private parties can also hold government bonds. It follows that the private parties must have first acquired dollars and then traded dollars for government bonds. Dollars are property and must have be created by someone; in the fiat money system; I think that someone is the central bank.
Now to the question of tearing up the national debt held by the central bank, it seems to me like we would be destroying the record of how many dollars are available and are in circulation either by currency or ledger. What would this mean for the value of existing money and for the future creation of money? I would need to consider this question carefully before venturing an opinion.
I don’t agree that tearing up those bonds would destroy records of the total amount of base money held by private sector. There’d still be a record of that total. It would simply be the total in the accounts of all private sector entities with accounts at the Fed (that’s mainly private banks) plus the total amount of physical cash in circulation (unless I’ve dropped a clanger, which I frequently do).
Delete