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π¬π§ Energy Cap: Will the New King's Coin Save Britain?
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π Inflation, recession and energy uncertainty will darken the British reality for a long time to come. Difficult times call for emergency measures: last week the UK introduced a program to control energy costs. Will the new government be able to convince the markets to finance this difficult period?
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Due to national mourning, the BOE has decided to reschedule its meeting from 15 September to 22 September. The forecast for a key rate increase of 50 basis points (up to 2.25%) remains.
Government has committed to hold down consumer and SME energy bills while the Energy crisis continues. Doing so will remove economic misery for millions. No numbers have been provided, but itβs reckoned to put a Β£150-200 billion hole in the state finances over the next year that can only be covered by additional borrowing.
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But can the UK afford it?
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Analysts are confident are saying there simply isnβt the willingness for investors to fund the uncapped expense of the new Energy Cap via the Gilt Market. The UK can issue securities as much as it likes, but will have to accept whatever price the market is prepared to pay. Issuing an additional Β£150bn of securities at a time when the BOE is raising rates and a recession is looming is very dangerous.
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But there is one monetary idea that was invented a long time ago, but never used.
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Zonk is a small British coin that no one has heard of until now: it will be minted at the direction of the UK Treasury with the image of the face of the new King Charles III.
The Zonk coin is expected to receive a nominal value of Β£1 trillion and be used to purchase Β£838bn of BOE's current gold holdings, as well as an additional Β£172bn of speciality securities realized solely to fund the Energy Cap program. The
Zonk coin will remain on the balance sheet of the BOE and will represent repaid UK government loans. This solves the accounting problem and is not an inflationary factor. Let's see what happens.
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Profits to yβall!