Andrew Berkeley

Poorly coded lefty bot

[Andrew Berkeley @spatchcockable]

An Accounting Model of the UK Exchequer – 2nd edition https://t.co/i8F3DxbTfI

[Andrew Berkeley @spatchcockable]

@BCdrainoty @afneil The CF is not irrelevant, it is the legal foundation for all government financial flows. The DMO has no raison d'etre related to spending at all. Spending arises from the CF, which only ever receives funds once all spending has happened.

[Andrew Berkeley @spatchcockable]

@BCdrainoty @afneil The consolidated accounts tend to be in credit by policy design but this is not a requirement as demonstrated by the occasional use of the W&Ms. The consolidated balance offers no operational control function.

[Andrew Berkeley @spatchcockable]

@BCdrainoty @afneil I understand how the DMO's operations work. I was describing money being added by fiscal expenditure occurring via intraday credit on the CF as the "add".

Then the conversation moved to how the DMA balance is built which is a completely separate process coordinated with Bank.

[Andrew Berkeley @spatchcockable]

@BCdrainoty @afneil There's no intraday balance sheet published but the debit is the negative balance on the CF which is then formalised as Ways and Means when persisting overnight.

[Andrew Berkeley @spatchcockable]

@BCdrainoty @afneil The intraday overdraft on the CF.

[Andrew Berkeley @spatchcockable]

@BCdrainoty @afneil It's *targeted* to be in credit as a policy choice, but there is no control function which *requires* it to be in credit. And in cases wherein it is *not* in credit, nothing of any significance happens. It is cosmetic.

[Andrew Berkeley @spatchcockable]

@BCdrainoty @afneil What on Earth, in this system, makes you think there's any requirement imposed (by whom) to obtain money *first* before spending?

There is none.

[Andrew Berkeley @spatchcockable]

@BCdrainoty @afneil For the purposes of building the DMA balance it is coordinates with the Bank.

Regardless, what is your point about the DMA balance? What's it's operational significance? What control does it impart?

[Andrew Berkeley @spatchcockable]

@BCdrainoty @afneil DMO uses bills and gilt repo for cash management. I was being terse due to character limit. The level of the DMA balance is chosen in consultation and coordination with the Bank, which does offsetting operations to leave sterling balances unaffected. All my points remain valid.

[Andrew Berkeley @spatchcockable]

@BCdrainoty @afneil And of course, the DMA is sometimes exhausted requiring the formal W&Ms to be used. This happens about once decade.

There is no control function the DMA balance provides that a notional target balance of zero would not do equally.

[Andrew Berkeley @spatchcockable]

@BCdrainoty @afneil Gilts are oversold by the DMO (above full funding requirements) and then bought back by the Bank of England in close coordination to build the balance. The net result is no different to the W&Ms: treasury debt held by Bank, sterling balance held by HMT.

[Andrew Berkeley @spatchcockable]

@BCdrainoty @afneil Correct, because of the DMA. But this is of no significance since that balance is discretionary and built in coordination with the Bank of England. It is effectively a pre-funded Ways and Means account used for cosmetic purposes.

[Andrew Berkeley @spatchcockable]

@afneil It's worth emphasising that the institutional process *is* in contention with the common mainstream claims that the government can run out of money, default on its debts and is beholden to bond markets. These claims are not compatible with the institutional reality.

[Andrew Berkeley @spatchcockable]

@afneil No MMTer suggests we can or should stop paying tax. In fact what they do is to correctly identify the role and function of tax (as well as bonds sales) which are usually contrary to the mainstream depictions which are wedded to describing the government as akin to a household.

[Andrew Berkeley @spatchcockable]

@steve6690 @malcolm_reavell @afneil The interest costs of monetary policy make the Bank of England the 4th largest government department by expenditure yet this is *never* scrutinised because independence. Of course this reveals one of several ways in which the Bank is far from independent.

[Andrew Berkeley @spatchcockable]

@steve6690 @malcolm_reavell @afneil So under the most generous interpretation - if you believe that monetary policy is effective - it comes at the cost of £70B, £80B, £90B, £100B per year in the most regressive transfer payments as well as an impossibility of full employment.

[Andrew Berkeley @spatchcockable]

@steve6690 @malcolm_reavell @afneil If course, monetary policy isn't effective. It's missed the inflation target 50% of time since the GFV, can't deal with supply side problems or the zero lower bound, has a lag of 18 months and is geographically indiscriminate. Is it really worth the huge fiscal cost?