Quantitative Easing. Who pays?

[longjohn]

If the Bank of England is buying government bonds with money from quantitative easing, then at some time the government has to replay the Bank of England when the bonds mature and any interest occurring. As the government has no money of its own any more, I guess it’s the tax payer who replays the Bank of England so we owe the Bank of England 350 Billion. Anyone here who disagrees with this conclusion?

[clockwork]

They are creating the money and devaluing the pound to do this.

So nobody pays directly, but everybody does indirectly when inflation increases.

[angelman]

They are creating the money and devaluing the pound to do this.

So nobody pays directly, but everybody does indirectly when inflation increases.

The volume of money increases, therefore the value of your Pound decreases. Anyone/everyone who is holding Sterling is paying for QE. If we had an economy where we were nett exporters, then I suspect all would be fine and dandy. As we don't, this has an affect on both our BoP and inflation.

[longjohn]

But the bonds one day will mature. Then what?

[clockwork]

I'd assume the government are hoping that by the time they'd have to pay them back, the economy would have picked up.

They are probably long bonds, so its more likely the government are passing it to future generations to worry about, rather than dealing with it now.

[longjohn]

You may be right there. I understand that in general terms long bonds are 10/15/20/25 years so that is a long time to pay back interest on 350 Billion even interest on the bonds is low.

[Roland]

You may be right there. I understand that in general terms long bonds are 10/15/20/25 years so that is a long time to pay back interest on 350 Billion even interest on the bonds is low.

Your original post is an interesting one because I can can't get my head around this subject for the life of me.

I could be totally wrong here but I don't think the debt is ever repaid by the government the debt is paid through inflation so it is basically a hidden tax.

[Traditionalist]

Inflation the tax on the working man.

[Roland]

Inflation the tax on the working man.

It's not just a tax on the working man the middle class lose out big time. If you have in the bank we'll say £50,000 a year later your 50k will only have the purchasing power of £45,000. Now I'm sure you won't be getting the violin out at the plight of the middle class but in my example that's 5k less they have to spend on a new kitchen or a swimming pool in the garden both of which provide jobs to the working man.

[Traditionalist]

It's not just a tax on the working man the middle class lose out big time. If you have in the bank we'll say £50,000 a year later your 50k will only have the purchasing power of £45,000. Now I'm sure you won't be getting the violin out at the plight of the middle class but in my example that's 5k less they have to spend on a new kitchen or a swimming pool in the garden both of which provide jobs to the working man.

I would think the price of food is far more important.