Bonds are a creature of the law that passes them. There are ways to manage it, depending on... Maybe you'd cash your bonds into buy stuff. You can have bonds that are sold directly to the central bank. It's a flexible instrument which can be used for far more purposes than currently being done by the current banking system. But what would that do to the money supply? That would substantially increase the money supply, wouldn't it? Well, yes. The large part of it will be paying down private debt.
We last had a financial crisis in 2008 (ignoring the pandemic years), and if we’re not in another crisis now, we’re well on the way to it, with mortgages rising, taxes increasing and the price of everything continuing to rise. Your spending power is being hit in three directions. But, isn’t that what central banks want? So we spend less and inflation comes down, theoretically. Yet the banks, who might not be to blame this time, are now feeling the hurt. In fact, they stand to gain from rising interest rates because they can raise their borrowing costs. This week Phil asks Steve, will the banks always win, come what may?
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