Economics 101

[Monk]

Small & Medium sized enterprises

[Merging Cultures]

SMEs? (this is Econ 101) 

 

Small and Medium Enterprises. 

 

Sorry

[Jon the Hat]

 

Not confused at all... incredibly simple, spread the wealth and reduce the gap between the super wealthy and the poor.

 

 

How is taking money out of everyone's pensions and giving it to the government to spend helping the poor?  The last thing we should do is tax companies too much, they pay for our retirement.  By all means look at ways of taxing the super rich, but keep your hands off my pension man!!

[Webbo]

Right, I thought I had a basic understanding of Quantitative easing but there was a thing on the radio today and it's confused me. The central bank creates money out of thin air to buy Govt bonds. The question is;

 

a) Does the govt pay interest on these bonds?

 

b) If so what does the central bank do with the money it earns? 

[Sir Fynwy]

Right, I thought I had a basic understanding of Quantitative easing but there was a thing on the radio today and it's confused me. The central bank creates money out of thin air to buy Govt bonds. The question is;

a) Does the govt pay interest on these bonds?

b) If so what does the central bank do with the money it earns?

The Bank of England gave the interest to the Treasury, real money from nothing stuff. http://www.thisismoney.co.uk/money/news/article-2230579/Treasury-receives-35bn-money-Bank-England-QE-gilts-interest.html

[MooseBreath]

When the money gets paid back to the central bank it disappears in the same way as it appeared. If you pay interest you effectively create say £350bn and then pay back say £375bn including the interest, leading to a loss of £25bn. Since you're creating money to lend to yourself and then paying it back to yourself, the interest seems like a bit of a pointless feature to me. I believe it's now standard practice across the world not to pay the interest.