Robert Pearson

the government doesn't borrow our savings in order to run a deficit, it runs a deficit so that we can have savings

[Robert Pearson @robert19pearson]

@roberthorrocks @wgoggin That depends on whether banks hold onto the securities they purchase or sell them on to non-banks. And it also depends on whether those non banks purchase them with money borrowed from banks for that purpose

[Robert Pearson @robert19pearson]

@wbmosler @wgoggin In the UK it is widely reported that hedge funds are large leveraged buyers of Gilts, that use bank deposits created for them by commercial banks for that purpose. Not only do these sales have no effect on aggregate demand and spending, they have little net effect on broad money

[Clint Ballinger @clintballinger]

Aliens: and what’s all the gold for?

Earth: I dunno

Aliens: But why do you keep it carefully stored away for decades- does it have some special property to fight some disease or something?

Earth- no

Aliens: so you just…keep it for nothing?

[Robert Pearson @robert19pearson]

@malcolm_reavell @VoteYesSept @clintballinger And these days, even the expression ‘money leaving the country’ doesn’t really apply.

Gone are the days of gold being shipped across oceans to settle trade imbalances

[Robert Pearson @robert19pearson]

@GeorgeSelgin I tried scanning those and the top one came back as a can of Heinz Baked beans, £1.40

[Robert Pearson @robert19pearson]

That’s not how it’s meant to work, is it

[The Wall Street Journal @WSJ]

Bitcoin-hoarding firm says it sold the cryptocurrency to fund distributions on preferred stock https://t.co/xqlAA306wr

[Robert Pearson @robert19pearson]

@brokebyclose @JGS952 @aedmans Which gets interpreted as some sort of verdict on govt policy, with words ‘confidence’ and ‘credibility’ being bandied around a lot.

The DMO should only be issuing what is demanded, via tap, under its terms. If it reserves that are being demanded, then don’t issue gilts!

[Robert Pearson @robert19pearson]

@brokebyclose @JGS952 @aedmans I would say that the issue is more that ‘demand for gilts’ gets conflated with ‘demand for Sterling’.

We know that demand for long duration Gilts from pension funds has more or less evaporated, but the DMO (and the BofE) continue to try and sell them, forcing yields higher

[Robert Pearson @robert19pearson]

@brokebyclose @JGS952 @aedmans Your argument seems to be that the U.K. public sector cannot stop issuing Gilts, because the private sector really needs them.

Well, yes, OK

So who should be dictating terms?

[Robert Pearson @robert19pearson]

@JGS952 @brokebyclose @aedmans and that question is predicated on the fact that buyers of Gilts need duration, but the issuer of Gilts doesn't.

Which tells us that issuing Gilts, as well as being a hangover from the gold standard era, is undertaken as a public good - as a service to savers

[Robert Pearson @robert19pearson]

@brokebyclose @JGS952 @aedmans you think balances at the Bank of England cannot be traded?

they are literally the ultimate settlement asset!

[Robert Pearson @robert19pearson]

@brokebyclose @JGS952 @aedmans Why would there be reduced demand for sterling if balances of it were held in interest bearing current accounts instead of what are effectively interest bearing savings accounts?

[Robert Pearson @robert19pearson]

@DrGABaines @JGS952 maybe start from that thing that is technically true and then ask yourself questions such as 'so why does the govt collect tax' 'What is the purpose of tax' 'does the govt need to borrow its own currency (or can it even do that)?'

Others on this thread have asked those questions

[Annie Bishop @AnnieBishop123]

We’ve come a long way baby or at least we thought we had. I found this letter in the house that I bought

[Robert Pearson @robert19pearson]

@JohnWad84222151 @robprogressive In order for one person to save by spending less than his or her income, somebody or something else has to spend more than theirs. If we are all to be savers, who should that somebody else be?

[Robert Pearson @robert19pearson]

@hobson1999 @BallaTheSenior @afneil Logically, how can the U.K. govt collect payments in Sterling, before it has put Sterling into circulation? It puts Sterling into circulation every day by spending. Only once in circulation can it collect back most (but not all) via taxation

[Jamie Smith @JGS952]

@BCdrainoty Just offer gilts at a range of maturities at prices and coupon rates that give you a fixed primary yield curve of your choice and allow all primary bids to obtain the quantity they want. Let any net spending not swapped for these fixed yield gilts stay as overnight reserves.

[Robert Pearson @robert19pearson]

@hobson1999 @BallaTheSenior @afneil It doesn’t pay for anything with taxes. It has to spend its currency into circulation first, before it can collect tax (which is simply deleted from the money supply) and before it can sell savings bonds.

[Robert Pearson @robert19pearson]

@fartelengelbert @ProfHall1955 Back in 2013 the BofE very politely pointed out that the mainstream economics profession had money and banking completely around the wrong way.

Being a ‘trained economist’ is actually an impediment to understanding how money works

[Robert Pearson @robert19pearson]

@afneil If you’d actually bothered to read anything about MMT you would know that taxes are vital and necessary, just not for ‘raising money’ for the issuer of the currency