Britain’s money-printing experiment turns into a £150bn taxpayer ‘disaster’

Yahoo Finance ^ | May 19, 2025 | Szu Ping Chan

[Red Badger]

The dangers of printing money are well-documented. Too much money chasing too few goods leads to higher prices and lower growth.

Hundreds of billions of pounds of so-called quantitative easing (QE) during the financial crisis skewed this perception as the Bank of England repeatedly fired up the printing presses to try to revive the UK’s ailing economy.

Inflation at first failed to rear its ugly head, until it did. And policymakers and taxpayers are now counting the cost of Britain’s £895bn monetary experiment.

QE is a process where Threadneedle Street creates money that is used to buy government bonds, known as gilts, to help drive down the cost of borrowing.

Commercial lenders then park that cash at the central bank where they earn interest at the current base rate.

When interest rates were at record lows of 0.1pc during the pandemic, the Bank earned far more on the returns from government bonds than it had to dish out in interest.

By the end of 2021, the Old Lady was in profit to the tune of £123.9bn.

But that was quickly eroded when interest rates started rising, with a “consistently higher Bank Rate” resulting in “large interest losses” of £18.5bn in the last financial year alone, according to the Office for Budget Responsibility (OBR).

But that’s not all. The Bank is also actively selling its stockpile of gilts back to the market in a move called quantitative tightening (QT), crystallising billions of pounds of losses for the taxpayer.

Many economists, politicians and central bankers believe this is a mistake, as it means that some of the bonds Threadneedle Street bought during the crisis are being sold at knockdown prices.

In some of the most extreme cases, bonds bought for the equivalent of £1 have been sold for 28p.

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TOPICS: Business/Economy; Government; History; Politics
KEYWORDS: bankofengland; gilts; governmentbonds; greatbritain; oldlady; quantitative; quantitativeeasing; threadneedlestreet; tightening

[for-q-clinton]

Actually the reason we got away with it for years is because our productivity kept going up and up. So we could offset the production of money. But now productivity isn’t going through the rough any longer since covid has people paid to stay home.

So less productivity and even more QE == huge inflation. I predicted it when we did it. And I was proven correct. We’ve been doing QE for quite a while but without the gains in Productivity to offset the inflationary pressures of printing money there was only one thing left...inflation.

[vikingd00d]

Then the Gods of the Market tumbled, and their smooth-tongued wizards withdrew,
And the hearts of the meanest were humbled and began to believe it was true
That All is not Gold that Glitters, and Two and Two make Four–
And the Gods of the Copybook Headings limped up to explain it once more.

As it will be in the future, it was at the birth of Man
There are only four things certain since Social Progress began.
That the Dog returns to his Vomit and the Sow returns to her Mire,
And the burnt Fool’s bandaged finger goes wabbling back to the Fire;

[monkeyshine]

It’s a great business. Borrow when money you can make profits on the interest, and when you have to pay interest just pass the losses onto the taxpayer.

I flirt with the idea of no central bank at all. Congress (or in this case Parliament or P-Funk as it were) just orders the treasury to print money when it needs it. Yes this causes inflation. But there will be NO INCOME TAXES. Inflation is the tax. But inflation hits everyone, rich and poor, worker and boss, children and retirees. That means everyone has a stake is what our government spends money on. When milk and bread and cars and yachts all go up in price everyone screams. When everyone finally has a stake in how money is spent that is when people will start responsibly voting. No tax games. No kicking the can down the road. If people want low inflation and thus low taxes they will vote for people and policies that will keep the government spending, and thus inflation, in check But as long as the government and banks can play the shell games the true costs won’t get noticed.

[Brian Griffin]

Central banks should only buy callable debt with a rate that goes up by 1% a year and is never bought at less than the rate of increase of national government spending in the prior fiscal year.

The rate increase protects the central bank.

The callable feature protects the borrowers.

[Brian Griffin]

buy high

sell low

The method of interest rate manipluation is stupid.