There is a world of a difference, the Bank has always insisted, between primary financing of government deficits, where the central bank simply prints the money the government needs to finance itself, and so-called QE, where it buys up the debt in secondary markets after it has first been bought by investors.
If you think the distinction is academic, you’d be right.
In truth, the two explanations – the official one and the never-to-be-admitted one – are just two sides of the same coin. If demand is depressed because the private sector isn’t borrowing to spend, the public sector must borrow to support that demand instead.
And if in so doing it ends up borrowing from itself, then at least it can’t go bankrupt.
Do not believe, however, that all this monetary financing is somehow costless. It won’t be this year, or next, but the stars seem ever more well aligned for an eventual upsurge in inflation.
Jeremy Warner Telegraph 6 November 2020