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£35 bn. windfall from QE??

Please John (or maybe David Gardner), could you please explain how this works?

It looks like jiggery-pokery to me!

Re: £35 bn. windfall from QE??

It looks like jiggery-pokery to me as well.

link

Re: £35 bn. windfall from QE??

Like any dodgy business, the UK Government moves dubiously acquired money between accounts that it controls. Please forgive me for neglecting to waste my few remaining brain cells on probing the entrails of one such transaction.

Re: £35 bn. windfall from QE??

This is fundamentally a failure to understand a really simple equation.

R > E

Revenue > Expenses

This is just another way of saying

Energy (in) > Energy (out)

Which is just a way of saying Entropy Increases.

There is another equation that mystifies people on the left.

Federal Revenue = SUM ( Citizen Revenue * Citizen Tax Rate).

"The rich have to pay their fair share!" "Warren Buffet's secretary pays a higher tax rate than her boss, that's not fair!"

These lovely fair minded people do not recognize that the Citizen Revenue is a function of the Citizen's tax rate. Warren Buffet recognizes this by not realizing revenue. He then says "This isn't fair, I should pay more!"

As soon as we decide to make him pay a larger part of his revenue, he will take even less revenue and pay even less in taxes. He does get to feel morally superior because he stood up for fairness. He has to know that what he has said is completely bogus.

Re: £35 bn. windfall from QE??

"Warren Buffet recognizes this by not realizing revenue. He then says "This isn't fair, I should pay more!"

Buffet is a jerk, there is no reason, what-so-ever, that he can not pay as much as he would wish to pay. He could pay 100% of his income to the govt, if he wished to do so.

Govts do indeed use our monies in any way they wish.

Monies collected for education often wind up paying for pet projects and cuts in spending amount to no more than not increasing spending as much as projected.

Re: £35 bn. windfall from QE??

It still ende up in inflation. Arguably not very much inflation with interest rates effectively negative, but they are only there because the central banks are dictating such. It's not long ago they were providing unlimited liquidity for free to anyone who wanted it - there are real genuine market interventions required to hold the commercial banks to the interest rates dictated by the BoE, ECB, FED and so on.

Forgiving the interest on a loan is akin to saying capital has no cost - that it can be deployed with equal efficiency on any venture that will at least cover its costs. And as Japan teaches us, that might actually be the situation we find ourselves in, but that governments are always going to be a special case. It's hard to argue that the first chunk of spending on keeping a functional state, well, functioning, is not good value for money. It's far harder to argue that absolutely everything a kleptocratic western democracy does produces value equal to the cost.

The idea of essentially forgiving interest on debts is nothing new, and does nothing to address the fundamental problem of excessive govermnent indebtedness. Indeed, it only encourages more of the same problem. As a one-off in exceptional circumstances, it might be tolerable. It would be bad news for it to become the new normal.

Re: £35 bn. windfall from QE??

>>
brad tittle
Nov 12, 2012 - 4:50PM

"The rich have to pay their fair share!" "Warren Buffet's secretary pays a higher tax rate than her boss, that's not fair!"
<<

Warren Buffet’s secretary is estimated to earn between $200,000 and $500,000. As this is regular income, she can’t really take the kinds of deductions her boss can. In any case, the income of Buffet’s secretary does not really place her in the non-rich class. In fact, the secretary is the exact person, whom Obama wants to target.

Jim