I've discovered the smoking gun that proves the UK's government debt system is the biggest financial scam in British history. Academic studies by Joyce et al. (2011) show that the Bank of England's first £200 billion of QE purchases reduced gilt yields by approximately 100 basis points, while Bridges and Thomas (2012) estimate asset price increases of around 20%. Joyce and Tong (2012) found yield reductions of up to 120 basis points in the 15-20 year maturity range.
Think about what this means. When the Bank of England announced QE purchases, gilt prices soared. The banks that had exclusive rights to buy these gilts at auction - the 18 Gilt-Edged Market Makers - suddenly found themselves sitting on assets worth 15-20% more than they'd paid. This isn't market economics. This is a rigged casino where the house always wins.
Here's how the scam works. Only 18 banks can participate in gilt auctions - no pension fund or foreign government can buy directly from the Treasury. So we've created an artificial monopoly. Then the same central bank that forced the Treasury to issue debt promises to buy that debt on secondary markets, pushing prices up by 15-20% and guaranteeing massive profits for the banks.
Under banking regulations, UK gilts carry a zero risk weight, meaning banks need no capital to buy unlimited quantities. They can create new money from thin air to purchase them with no regulatory limits. The result? Banks create money to buy government debt, the central bank inflates the value by 15-20%, banks pocket the profits while taxpayers pay £105 billion annually in interest.
And now it gets even better for the banks. The Bank of England is currently selling gilts from its QE portfolio through "quantitative tightening," pushing prices down and creating fresh profit opportunities. Banks can buy cheap gilts from the Bank of England's fire sale, knowing the government will keep issuing more debt they'll have exclusive access to purchase.
Here's the ultimate irony: when the Bank of England holds gilts, the Treasury pays interest to the Bank, which returns those payments to the Treasury - essentially creating a closed loop with no net cost. But the Bank claims it must sell these gilts to "create space for future QE operations." This is costing taxpayers £24 billion annually in losses, with total expected losses between £50-130 billion over the programme's lifetime. The Treasury Committee concluded that the Bank "has taken a leap in the dark" with QT, admitting "experts are divided regarding the risks."
Here's what really gets me angry. Since Brexit, the UK is no longer bound by EU Article 123, which prohibited direct central bank financing. The government could simply have the Bank of England create money directly for public spending, eliminate the middlemen, and save the £105 billion annual interest payments. Instead, we maintain a system designed in Brussels to benefit European banks even though we're no longer bound by European law.
Some ask, "Can't we reform this?" But the system is working exactly as designed. The QE profit mechanism proves this isn't a bug - it's the feature. Each "reform" would undermine the fundamental structure because extracting taxpayer wealth is the system's primary function.
The Bank of England openly stated it wanted to push up asset prices through QE. What they didn't mention is that these "asset price effects" are direct transfers from taxpayers to financial institutions. When gilt prices rise by 15-20%, future taxpayers pay higher costs while banks pocket the gains.
No manifesto ever promised voters we'd let 18 banks create money to buy government debt and pay £105 billion annually in interest on money created from nothing. That £105 billion could double the NHS budget, build 350,000 homes annually, or give every household £3,750 per year.
The solution is simple: end the GEMM monopoly, stop unnecessary gilt issuance, use Bank of England money creation directly, and save £105 billion annually. Post-Brexit, no EU law prevents this. The Bank already creates money - it did £895 billion for QE. The Treasury could credit government accounts directly with no intermediaries, no interest payments, no bank profits.
The choice is stark: continue paying £105 billion annually to maintain a rigged system benefiting foreign investors and banks, or use our monetary sovereignty to fund public investment directly. There is no middle ground. The system cannot be reformed because the wealth extraction isn't a bug - it's the entire point. It must be abolished.
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