Now raising intellectual capital

So that’s why the Bank buys all that government debt

I’ve found the answer to the monetary puzzle de nos jours. The ritual of the UK Treasury’s DMO issuing new government debt one day, only to have the Bank of England buy similar amounts of almost identical stock the next, has puzzled me ever since Quantatitive Easing began.

How much simpler it would be for the Treasury to borrow directly from the Bank – the modern equivalent of running the printing press faster – to pay the government’s bills.

It turns out that the Maastricht treaty (Article 104(1)) expressly forbids European governments from borrowing directly from the central bank. The prohibition was drafted during a period when inflation seemed endemic, requiring strict controls to prevent monetary incontinence among European Union governments.

So QE is a mechanism to circumvent the rules. Perhaps you knew that already. The traders in gilt-edged stock, many of whom are not natural europhiles, should raise their Roederer Crystal to the treaty, as they laugh all the way to the (taxpayer-supported) bank.

from Neil Collins:

Gilts buyers forced to pay protection money

It's expensive, this risk-free investment business. You can lend to the UK government for 28 years and be guaranteed a real return, after inflation, of  a magnificent 0.816 per cent on your money.

Put another way, if there was no inflation over the period, 100 pounds would have turned into about 125 pounds by 2037, to add to the 81.6 pence a year (before tax) you'd have had in annual interest.