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Borrowing billions (From Salisbury Journal)
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Borrowing billions
12:41pm Wednesday 2nd January 2013 in Salisbury Letters
SALISBURY MP John Glen is right in one respect at least – the Coalition certainly isn’t borrowing its way out of debt. (View from the Commons, December 27) But this incompetent and pitiless government has been forced to borrow more and more (£8.6billion in October compared with £5.9billion at the same time last year) not to invest in the country, but in a futile attempt to climb out of the economic hole it has dug for itself.
And its only claim to any kind of economic respectability is through the dodgy and desperate accounting wheeze of grabbing the £35billion in interest payments the Bank of England received on the £375billion of gilts bought since the start of its quantitative easing programme in early 2009.
DICK BELLRINGER, Salisbury
karlmarx says...
10:34pm Wed 2 Jan 13
"The role of the bond market
The British Government borrows money by selling bonds, known as 'gilts'. These bonds are sold at regular auctions held by the UK Debt Management Office (DMO), on behalf of Her Majesty's Treasury. The term gilt is short for 'gilt-edged security' and is a reference to their perceived safety as an investment. The Government has never failed to make a repayment on a gilt.
When a gilt is sold, the Government guarantees to pay the holder a fixed interest payment every six months until the maturity date, at which point the full value of the bond is repaid. The proceeds from a gilt sale are then spent by the Government and the value of the gilt is added to our national debt.
On average, the bonds that make up our national debt need to be repaid within 15 years. With government spending so far out of control, interest on the national debt will cost over £42 billion this year. Currently we can only afford to make repayments by selling even more gilts. When run on this basis, government deficit financing is similar to an illegal Ponzi scheme."