At Last – An Admission That Bankruptcy Is Not A National Issue
January 7, 2015
by Martin Odoni
(Just a quick article to say, “I-told-you-so!” really.)
Last month, you may recall, I wrote out an explanation for why the constant terror the UK seems eternally embroiled in that the country is about to ‘become insolvent’ is unfounded. Basically, because the country has its own Central Bank that issues the very currency the Debt is composed of, the UK can’t go bankrupt unless the Government is stupid enough to apply to.
The interesting development today is that the minutes and documents of The Bank Of England’s activities at the height of the financial crisis from 2007-9 have been published.
Now, it’s always satisfying when the official line is contradicted by official evidence, so today I am grinning to myself. As the Guardian has highlighted in its summary of the documents, officials working in the Bank Of England do not noticeably endorse the aforementioned line that the country has been on the edge of bankruptcy for about six years; you would have thought their opinion on the matter would be worth something. Certainly far more than George Osborne’s.
The last bullet point in the Guardian’s article states the following about the bail-out of the banks in 2008; –
“The Bank fully supported the increase in national debt sanctioned by the then Labour government to rescue the banks and considered the action to be no threat to the solvency of the UK.” (Bold emphasis mine.)
As I pointed out last month, the National public sector Debt increased to around £850 billion with the bail-outs, and in no time at all the media, the Conservative Party, and general right-wing opponents of Government spending in any and all forms, were crying out in horror that the Debt was set to make the country go into default.
But the people within the Bank Of England are the folks who actually, you know, process the Debt, including the repayments, and therefore have some intimate understanding of how it all works. They were completely okay about the surge in the Debt.
And now, a near-redoubling of the Debt later, we still haven’t been declared bankrupt. Which means the country is still able to keep paying back all debts when they fall due with no more difficulty than it could before.
I guess that means the Bank Of England people were right and the Thatcherite foaming-at-the-mouth brigade were wrong.
Funny that, eh?