https://twitter.com/PMotels/status/1128522847092125696

https://hat4uk.wordpress.com/2019/01/27/the-sunday-essay-dissent-or-deny-care-or-cry-devolve-or-die/#comment-784628

Ten Years after

As far as I can see when it was established it profited from lending to governments to finance wars etc. As there was hardly any capital in the bank, this was a textbook fractional reserve system.

In 1946, the bank was nationalised. The Treasury then became shareholders in the bank. This sounds like a good idea but what in fact happened was that the government paid for the shares in government so stock so that although the Treasury receive the profits, they then have to pay most of this out to the holders of the government stock as interest. In fact even if there is no profit from the BoE, the stockholders get paid. No wonder they allowed the bank to become nationalised – a guaranteed risk free income! It has never been disclosed who the owners of the stock are.

Anyway that is what I can find about the BoE and seeing as they issue our currency at interest, seem to be above government with regard to printing money and are answerable to the Bank of International Settlements, who we have had no say in electing, I think the bank needs a through audit and investigation as does the Fed.

So long as the market believes that the UK and USA will respect property rights and they put in place a `respectable` amount of GDP-debt that the ratings agencies can claim is ok, then the charade will continue. When you go outside this, then it becomes apparent you are living on a house of cards where debts fall quicker than you can raise or carry over in the market re. Bear Stearns, or Lehmans or as it looks the Greeks.

The Greeks wont fail because the Germans are playing a very clever game. They are instructing the Greeks to cut, the issues the greeks are making can be bought with Greeks own banks (or central banks) and roll it over. Lends money to itself, no default and no one has to pump any money into their economy. Hey presto, a miracle.

SO long as there is confidence assured in the economy, the ponzi scheme keeps going.

I think China is buying via brokers in London. WHat I also think however is that part of the reason they are doing so is to sell Long dated debt with one hand while buying short dated debt with the other. This allows them to decrease their long term exposure quietly.

If they continue to sell like last month this changes the game.

As for the UK hedging its bets. I don't think this makes too much sense. What money did we buy with? If we borrowed the money, then the rate we paid to borrow the money will have been greater than the rate of return we will get on the dollar debt. Our borrowing rate is higher than the US's. So its a net loss proposition for us. That's how I understand it at least.

Of course if the dollar were to rocket up against the pound then you could argue the BoE would cover its costs and make a profit that way. Could be. Could also be, I suppose that the BoE is speculating with cash on deposit from its clients ( the banks we bailed out). If so, however, once again it is our money being used. Money we as a nation printed or borrowed.

The BoE and its profit I am no expert on. Please remember I'm not an expert on any of this. All I try to do is think clearly, and for myself, about what I see and read. That's all.

The BoE profit – was the profit at the BoE or BoE Nomiees Ltd? They are different. The nominees is a private limited company with share holders who are the major banks. But large though a billion sounds in comparison with liabilities and exposure to risk, I think it's no guarantee of success.

I need to read more on the BoE generally. ANything you can tell me I would appreciate.

Must go out now. Thank you for writing.

Also, what are you views on the Bank of England? I notice that they have had a bumper year, making almost 1bn in profits which goes to shareholders. Who are these shareholders and if it is the Treasury, who does the Treasury pay interest to in return for these shares?