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The Guardian is reporting that the bankers are breaking Labour’s economy, so why doesn’t Rachel Reeves act?

It seems the banks are selling bonds at a loss in an act known as Quantitative Tightening, and this is pushing up the interest rate on government debt; that’s why the government is paying more to service its debts.

Reeves could stop this. Why doesn’t she? Was it her idea?

The Guardian stated:

The Bank of England has been doing “quantitative tightening” – selling back to the financial markets bonds that it… acquired from them during the financial crises of 2008 and 2020.

The article explained how the system works:

The money won’t fund government spending but will be removed from the private sector economy. The private sector doesn’t want to buy this many bonds, so it needs an incentive – and the incentive is a high interest rate.

Worse still, because bond prices and interest rates work as an inverse of each other, the cost of the bonds themselves will be low. So it will be making large losses for the government on the sale.

It artificially raises interest rates, which means the cost of government borrowing has risen – it is the Bank of England that is responsible for this trap into which Rachel Reeves and her Treasury have fallen.

And it explained what this means:

Reeves will find it much more difficult to balance her books – even though we all know that she doesn’t really need to do that in any case.

Oh – no, wait! I wrote that, back in January. And I got it from the economist Richard Murphy.

Either the Guardian‘s staff have only just realised what’s going on, or they have only just decided to tell their readers – who, even now, outnumber those of Vox Political many times.

It’s nice that they have finally got round to it – but feel free to tell all your friends who has the best information at a better time.

Source: The Guardian view on Rachel Reeves’s spending cuts: a choice, not an economic necessity | Editorial | The Guardian

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