"the lowest rate the British government has ever paid for borrowing money."

[Beet]

At one point, in 1975, British prices were rising by 2 per cent a month.

This is very probably the lowest rate the British government has ever paid for borrowing long-term money. In their monumental history of interest rates, Homer and Sylla found that the lowest yield on consols was 2.2 per cent (undated gilts that still trade today), all the way back in 1896. Back then, there had been no long-term inflation over 200 years, and the pound was the centrepiece of the gold standard. Britain was still just about the largest economy on earth and had the biggest empire. Following the example of William Gladstone (who last left office in 1894), governments had been balancing their budget for decades. Gilts looked like the ultimate risk-free asset.

Now the UK inflation rate is 5.2 per cent, the pound floats against other currencies, the ability to create money is theoretically unlimited, and the government has a deficit of around 9 per cent of GDP, a shortfall that is partly financed by the Bank of England. To use a joke crafted by Jim Grant, instead of a risk-free return, this looks like return-free risk.

...

The ability to print its own currency at least means investors can be sure that Britain will repay its debts, something that cannot be said of Greece or Italy. Yes, money printing may lead to a bit of inflation. But there would have to be a lot of inflation before investors suffered anything like the kind of losses they are about to incur on a Greek default; getting back just 50 cents on the dollar."

http://www.ftadviser.com/2011/11/21/investments/economic-indicators/philip-coggan-low-gilt-yield-issues-need-resolving-6tUMfOuov0RssKxOECQHtL/article.html

[SPQR]

Which I suppose goes in support of the ECB as a last-resort lender for the members of the eurozone...

[opebo]

Precisely, printing is not defaulting, not by a long shot.

[Beet]

Precisely, printing is not defaulting, not by a long shot.

Actually it is; but the UK is unquestionably in a better position than Spain or Italy.

[opebo]

Precisely, printing is not defaulting, not by a long shot.

Actually it is; but the UK is unquestionably in a better position than Spain or Italy.

No, it isn't.  There is no guarantee it will cause inflation.  If you had the choice of being told 'no, we have no money so we won't pay you back' or 'yes we can print more money to pay you back', which would you choose?

[Wonkish1]

Alright we'll see how much the people of the UK are willing to put up with this when their inflation rate passes 10%.

Then we'll see if the UK can maintain their precious low cost of capital at current monetization rates.

Both of these things are not long off. So enjoy today UK because it definitely isn't going to last long.

[Beet]

Alright we'll see how much the people of the UK are willing to put up with this when their inflation rate passes 10%.

Then we'll see if the UK can maintain their precious low cost of capital at current monetization rates.

Both of these things are not long off. So enjoy today UK because it definitely isn't going to last long.

Just you wait, 'enry 'iggins, just you wait!
You'll be sorry, but your tears'll be to late!
You'll be broke, and I'll have money;
Will I help you? Don't be funny!
Just you wait, 'enry 'iggins, just you wait!

[scoopa]

Precisely, printing is not defaulting, not by a long shot.

Actually it is; but the UK is unquestionably in a better position than Spain or Italy.

No, it isn't.  There is no guarantee it will cause inflation.  If you had the choice of being told 'no, we have no money so we won't pay you back' or 'yes we can print more money to pay you back', which would you choose?

It'd entirely depend on who was saying those things. I'd rather have loaned hard-money to Greece in 2006 than to Zimbabwe.

What's the point of being fully paid in a currency that isn't worth anything?

[Politico]

Do not feed opebo. His persona does not even have the most rudimentary understanding of monetary policy.

[Beet]

It'd entirely depend on who was saying those things. I'd rather have loaned hard-money to Greece in 2006 than to Zimbabwe.

What's the point of being fully paid in a currency that isn't worth anything?

True, but the UK is not Zimbabwe, and if you have word that the pound is worth nothing, please tell everyone to theirs to me. In all seriousness, there is little doubt that holders of debt in any troubled European country would prefer ECB intervention and rather take the minuscule currency risk over what they're currently facing.