More QE insanity

From The Daily Mail:

The Chancellor has bagged a £35bn windfall that will reduce public borrowing by reclaiming the surplus cash sitting in the Bank of England's £375bn quantitative easing programme.

The change in policy will cut both the public debt and budget deficit, flattering the public finance figures when the Office for Budget Responsibility updates its outlook at the Chancellor’s Autumn statement next month.

Critics immediately accused George Osborne of fiddling the books, but the Treasury insisted that the move will draw Britain into line with the US and Japan, which also have big QE programmes.

Under the current arrangement, the interest paid on the gilts bought through QE is held by the Bank – effectively transferring the funds from one part of the state to another. As long as the funds remain at the Bank, though, the Treasury has to raise extra borrowing in the market.

Once past the idiot headline and opening paragraph, as the article says, this transaction nets off to nothing and "spending" this extra £35 billion merely means that the government has to borrow another £35 billion from elsewhere (assuming constant government spending - that is the real problem, not how it is financed).

It's like the underlying bonds themselves, they are a nullity, a nothing, an accounting fiction, a point which I'm relieved to say, seventy per cent of respondents understand. Those bonds are no longer real debts, what are real are the replacement debts of £375 billion which the government issued in exchange.

George Osborne might as well argue that the government can save itself £35 billion by cancelling the interest payments on the QE bonds now held by the Bank of England, that would be just as moronic. Describing somebody who points this out as a "critic" shows how desperate they are, these "critics" are merely stating blindingly obvious facts (even though many people oppose QE because they think it increases deficits - it does nothing of the sort, it is merely a way of financing or re-financing government deficit spending, whether past, present or future).

Via HPWatcher at HPC.