George Osborne's £35bn raid on the Bank of England - MoneyWeek Investment Tutorials

Like this MoneyWeek Video? Want to find out more?
Go to: www.moneyweekvi... now and you'll get free bonus material on this topic, plus a whole host of other videos.
Search our whole archive of useful MoneyWeek Videos, including:
· The six numbers every investor should know...
www.moneyweekvi...
· What is GDP?
www.moneyweekvi...
· Why does Starbucks pay so little tax?
www.moneyweekvi...
· How capital gains tax works...
www.moneyweekvi...
· What is money laundering?
www.moneyweekvi...

[@MoneyWeekVideos]

In very brief - monetary policy is the Bank of England's job. They use interest rates and money printing for example to influence the supply and price of money. Fiscal policy is the responsibility of the Treasury - reducing the national debt as a % of GDP for example. In a system where the central bank has full independence these two roles should be clearly split. My question in this video is; are they? I now have my doubts...Tim.

[@MoneyWeekVideos]

What worries me is the lengths the government will go to (using off balance sheet vehicles) to present the Bank of England as independent and fully in control of monetary policy as distinct from fiscal policy. Then, when it suits, they jump over the chinese wall and take QE profits. Sure they could have done this anyway, at any time, but why pretend the APF is anything other than a subsidiary controlled in substance by the Treasury? Answers on a postcard! Tim.

[@MoneyWeekVideos]

Yep. Bank of England independence has been compromised (the APF was always a thin veil for Treasury control IMO), monetary policy is being used as a tool to solve fiscal problems and Osborne has revealed he will do anything to hit his own targets (just like Gordon Brown). I'd say those are big ramifications, politically as much as financially! Tim.

[@MoneyWeekVideos]

They are taking the profit in the form of coupons that the Treasury should pay on the debt held by the APF. £24bn of these have been paid and will be returned to the Treasury and the remaining £11bn is due and won't be paid. That's how they get £35bn in total. Tim.

[@MoneyWeekVideos]

Quite right - sorry if I didn't clarify in video. Tim.

[@peterstannard]

I guess the hope is that by the time the gilts come to be sold off the public finances are in a better state such that any losses can be absorbed? Either that or QE won't be reversed.

[@thebrosbeanz]

At 11:05 I lost you a bit. You said "take the profit that's accumulated over here, which is about 24 billion....etc" how did you get 24 billion? dont they just make a clean 35 billion profit? thanks btw, these videos are really helpful.

[@petejwill2650]

So if the APF keep the Government debt for say.. 5 years, will they get that 2.9%, and pay that 0.5% each year, and therefore accumulate an extra £175bn? If yes, will George Osborn try and take that too? Thank you :)

[@jajsmoke]

Is the 375bn created out of thin air or does the taxpayer ultimately guarantee this, that would put inflation up yes? The APF is an 'arm' of the BOE i assume to make things legal in some respect.

[@bamm427]

"This could have large ramifications going forward." OK. Is that it? Hmmm.....need to watch out for ramifications.....whatever they may be.........

[@bamm427]

I think we may need a lesson on the differences between fiscal and monetary policies, their effects and interactions.

[@paintballwizard239]

So, the UK governments using money made from quantitative easing, isn't that what tends to generate hyperinflation?

[@CapFinance]

Why does the Bank of England charge the APF for buying guilt?. Why not just waiver the interest?

[@dizzib]

Good question. Why doesn't Osbourne raid this 0.5% profit ? Who owns the BoE ?

[@-xl7ep1se3i]

Hแล้วชื่อใครส่งมาละคะฟีด

[@SunnieDae1]

I wish the Bank of England would give me a loan with 0.5% interest...

[@thegoonist]

why must the BOE create the APF? cant it just issue the debt itself?

[@rillywoop]

Thanks for the video! what's the difference between gilts and bonds?

[@thebrosbeanz]

Gilts are what they call bonds in the UK.

[@Gabriel21733]

Is this a shell game what Te uk s doing?

[@Thensolomonsaid]

Who are the BOE nominess? who owns it?

[@-xl7ep1se3i]

Hสวัสดีคะคุณช่วยดิฉันหน่อยนะคะเพาะตอนนี้อดเหลือเกินคะ

[@stephenmulrine8790]

Hi Tim Great stuff I have watched a few of your vids but I must be missing something here. According to the latest numbers APF now owns about 25% of UK Gov Debt. My questions are as follows 1. Who really owns the APF and therefore the debt? The Gov or BOE? 2. If the Gov owns its own debt why cant they just cancel it releasing the tax payer from the debt and the interest payments. As it seems to me the tax payer is paying interest on money created out of nothing. 3. If the BOE owns it why are we paying them interest on the created money and the Bond coupon value?

[@cosmosgato]

You are good sir.

[@Gabriel21733]

@MoneyWeekVideos

[@DeniseAshurstUK]

Great tutorial on QE. Would love to see you work along side the RSA like the (eg) Crisis of Capitalism video here

[@OliversSmart]

Thanks for your video's Tim. I've just started watching and they're really interesting.