Whitehall's Magic Money Roundabout

Ever seen a Whitehall Farce? Typically these knockabout romps involved at least one trouserless character being pursued offstage while his double immaculately appears from opposite stage to replace him. Farces at the Whitehall Theatre in Westminster ceased in the 1960s. But over at the Treasury they seem to be carrying on the tradition with gusto.

To get our facts clear: the Treasury is the body responsible for issuing government gilts. These are long-term IOUs that help the government pay the nation's bills.

Now, we know that thanks to quantitative easing (QE), Gordon's magic answer to the money shortage in our banks, the Bank of England is aggressively buying back gilts and bonds in order to issue its freshly printed money.

Not only does this increase the national money supply it also lowers long-term interest rates, both of which (other serious consequences notwithstanding) appear presently as good things for our broad economy.

But, hey, what about all those massive government debts? The hundreds of billions of pounds already handed to the banks? The hundreds of billions more guaranteeing their toxic assets? And the hundreds of billions needed to provide the public services? That's right, the government needs to borrow a great deal more. A very, very great deal more.

So what are they doing about this over at the Treasury? Well naturally, they're issuing bundles more government gilts! Which, if I have this right, is the direct opposite of the Bank's policy.

Uh... It makes you scratch you're head, doesn't it? But then you realise this is merely reviving a uniquely British tradition (last seen during Harold Wilson's confused swinging Britain).

The Whitehall Farces carry on starring Gordon, Alistair and Mervyn.

Magic Money Roundabout – The Gilts and Bondage Season

Programme: Mondays, Wednesdays and Fridays... 'No Gilts Please, We're British'
Tuesdays and Thursdays... 'Gilts Away'

So have you bought your tickets yet? Or are you selling?