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How to fix the government's borrowing costs

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Summary

This article discusses how government borrowing does not have an initial cost due to the way accounting functions. It provides options for the government to reward savers, such as offering a savings product with a variable or fixed interest rate and a fixed term. There is no need for the Debt Management Office if National Savings can do it. Pension funds would not have had a problem if they used National Savings rather than gilts. Lastly, the article encourages readers to join a growing New Wayland community on Discord to discuss government borrowing and other topics.

Q&As

How does government borrowing work?
Government borrowing has no initial cost because of the way accounting functions and the payment system provides the funding.

What options are available to reward savers?
The government could offer a savings product at National Savings with a variable interest rate, a £100 savings bond at National Savings with a fixed interest rate and a fixed term, or a £100 treasury gilt at the Debt Management Office with a fixed interest rate and a fixed term.

How can the Debt Management Office be replaced?
National Savings could replace the Debt Management Office and do it all.

What would happen if pension funds used National Savings rather than gilts?
If pension funds used National Savings rather than gilts, they wouldn’t have had a problem.

How can government borrowing costs be fixed?
If National Savings issues a bond at 2%, then 2% is all anybody will get. Nobody can make the government pay more than it wants to.

AI Comments

👍 This article provides a great overview of how government borrowing works and how the debt management office can be replaced by National Savings. It's insightful and provides helpful solutions.

👎 The article does not provide enough detailed analysis of how the government's borrowing costs can be fixed. It does not explain how the government would be able to provide a savings product with a variable interest rate, nor does it discuss potential risks associated with such a move.

AI Discussion

Me: It's about how the government can control its borrowing costs. It suggests that if the government issued bonds at National Savings with a variable or fixed interest rate, or a treasury gilt at the Debt Management Office with a fixed interest rate and a fixed term, it could control its borrowing costs.

Friend: That's interesting. What's the implication of this?

Me: The implication of this is that the government has a lot of control over its borrowing costs, and can therefore manage its debt more efficiently. It also suggests that if pension funds had used National Savings rather than gilts, they would have avoided the problem of high borrowing costs. This could potentially be a more efficient and cost-effective way to manage public debt.

Action items

Join the New Wayland community on Discord to discuss MMT topics.
Research the different savings products offered by National Savings and the Debt Management Office.
Consider investing in a £100 savings bond or treasury gilt with a fixed interest rate and fixed term.

Technical terms

Borrowing: The act of obtaining money, goods, or services in exchange for future repayment of the principal amount plus interest.
Variable Interest Rate: An interest rate that changes over time in response to market conditions.
Fixed Interest Rate: An interest rate that remains the same over the life of a loan or other financial instrument.
Fixed Term: A period of time during which a loan or other financial instrument is in effect.
Treasury Gilt: A type of bond issued by the UK government.
National Savings: A government-backed savings institution in the UK.
Discord: A voice and text chat platform for gamers and other communities.