Question for one of the many economists we have on here:
What's the benefit of servicing debt and borrowing? If all of the major economies have huge national debt, I assume it can only be to the banks, but they'll be privately owned and therefore investing back in those same economies. Why wouldn't an economy like ours, look at quantitative easing and create the money to match their debt then slowly reduce it over time? It would short term devalue the currency, but long term you only owe to yourselves and stop paying interest on interest. I've thought it for a while and pretty sure I'm missing a trick somewhere as greater minds than mine must've considered and dismissed the idea.
I’m no economist and it’s complex but I will try to explain my view…you might be better trying Google Ai though !
Firstly, I’d imagine if you proposed this the market for U.K. gilts would collapse as anyone holding would likely sell off due to uncertainty and knowing they are being paid back with money printed/made out of thin air. All making large losses potentially causing huge pension, bank and investor issues
Id also imagine we’d lose all credibility as a country and again due to uncertainty Sterling would sell off/devalue, this would massively increase import costs/prices (as we all know we manufacture fuck all). As costs increase on the back of this, people would start to charge more because they’re worried prices of their inputs will continue to increase, employees will want more pay etc ….so inflation would likely snowball. Who would invest in a country where this is happening ? Everyone’s savings and investments would also suddenly be worth a lot less due to debasement. Anyone holding significant amounts of Sterling would sell/exchange, devaluing it further. I’d imagine the experiment would end very quickly with a financial crisis.
Japan are the only large economy that have semi done what your suggesting recently, their debt to gdp is 250%+ and the Bank of Japan owns about 50% of government debt. They’ve done it more to control borrowing costs rather than full replacement. I personally think they’re in the shit, time will tell. Smaller countries have ended up with hyper inflation.
My overriding view of QE has always been it negatively impacts the poorest (who don’t own assets) most. Id rather us front up to the public and tax people more which is a fairer/more progressive solution that QE. I also believe QE has been totally misused in recent years (fair enough in 2009) which is possibly one of the biggest drivers behind the massive increase in wealth inequality. Thats not to say it doesn’t have a place in terms of liquidity etc like during financial crisis or to help fund/boost economy during times of major recessions where inflation is less of a risk
It’s not a silly question though, many on the left believe stuff like this is possible. Maybe it is but I personally wouldn’t want us to try it and wouldn’t hang around to see the results
www.bankofengland.co.uk
