I'll add here that in the UK it is quite literally illegal for the government to do this. If HM Treasury tried to avoid paying a redemption on a gilt, then the gilt holder can go to court and the court would order HM Treasury to make the redemption. And since the Bank of England has no power to refuse a Treasury Order the relevant accounting entries would be made and the redemption would happen.
The law is very clear on the matter: "The principal of and interest on any money borrowed ... shall be charged on and paid out of the National Loans Fund with recourse to the Consolidated Fund".
Both Houses of Parliament would have to vote to change the law, and the King would have to sign it off before any repudiation could happen.
In the United States of America, an amendment to the Constitution literally says that the debts of the United States cannot be questioned. But for that to matter, it would require the courts to hold that the Constitution binds Republican politicians (lol, lmao).
Great piece. Mainstream economists continue to look foolish when it comes discussing bond yields, government debt, government spending and interest rates. Thankfully, MMT has been a leading voice when it comes to accurately discussing these topics.
Nothing wrong with a “greatest hits”. Economists have been trotting out the same bullshit for centuries, “greatest bullshits” if you will, to justify usury. These bullshits are pulled out every time a central banker talks about rates, to justify whatever it is they are doing to us. And, they still can’t tell us what, how, or when fiddling with rates does, beyond some vague “transmission channels” and “uncertainties”. It’s a game of bullshit bingo.
Governments increase spend when rates lower and decrease higher behind the curtain it is fiscal policy... Raise interest rates supposed to encourage saving and discourage loans loans would have to go down while deposits up (accounting impossibility) cost of credit incorporated all goods and services raise rates cause inflation...
"You might repudiate your debts"
I'll add here that in the UK it is quite literally illegal for the government to do this. If HM Treasury tried to avoid paying a redemption on a gilt, then the gilt holder can go to court and the court would order HM Treasury to make the redemption. And since the Bank of England has no power to refuse a Treasury Order the relevant accounting entries would be made and the redemption would happen.
The law is very clear on the matter: "The principal of and interest on any money borrowed ... shall be charged on and paid out of the National Loans Fund with recourse to the Consolidated Fund".
Both Houses of Parliament would have to vote to change the law, and the King would have to sign it off before any repudiation could happen.
In the United States of America, an amendment to the Constitution literally says that the debts of the United States cannot be questioned. But for that to matter, it would require the courts to hold that the Constitution binds Republican politicians (lol, lmao).
Another great article! I'm new to your articles, and I have to say they are very good. I might have to join soon.
Thanks. This article is a “greatest hits” of old rants, which made it pretty easy to write…
Well said... From a rates strategist
Great piece. Mainstream economists continue to look foolish when it comes discussing bond yields, government debt, government spending and interest rates. Thankfully, MMT has been a leading voice when it comes to accurately discussing these topics.
Nothing wrong with a “greatest hits”. Economists have been trotting out the same bullshit for centuries, “greatest bullshits” if you will, to justify usury. These bullshits are pulled out every time a central banker talks about rates, to justify whatever it is they are doing to us. And, they still can’t tell us what, how, or when fiddling with rates does, beyond some vague “transmission channels” and “uncertainties”. It’s a game of bullshit bingo.
I like to use this in response to "conventional economists" - https://www.youtube.com/shorts/rRyG7x1PgL8
Governments increase spend when rates lower and decrease higher behind the curtain it is fiscal policy... Raise interest rates supposed to encourage saving and discourage loans loans would have to go down while deposits up (accounting impossibility) cost of credit incorporated all goods and services raise rates cause inflation...