Bank of England's Hidden Treasures and Debt Dilemma Exposed
The Bank of England has more than just a few secrets up its sleeve. With over 400,000 bars of gold stored in its vaults and 'giant' banknotes worth up to £100 million, it's clear that there's more to the central bank than meets the eye.
According to Jack Leslie and Rupal Patel, Bank of England economists and authors of the book Money: The Inside Story, these hidden treasures are just a small part of what goes on behind closed doors at the BoE. In an interview with MoneyWeek's Kalpana Fitzpatrick, they explained how electronic payments in the UK go through the bank's 'black box', allowing for seamless transactions from coffees to house purchases.
Leslie and Patel also shared a fascinating story of how a sewer worker in the 1800s accidentally discovered an old drain leading to the Bank's gold vaults. The duo attributed this discovery to the BoE's extensive network of hidden tunnels and passageways beneath its headquarters in Threadneedle Street.
However, their discussion wasn't limited to mere anecdotes. They also addressed the pressing issues facing the central bank, including rising wholesale energy costs due to ongoing tensions in Ukraine and the Middle East. Patel described increasing interest rates as a 'blunt tool' to combat inflation, admitting that it can reduce demand but is less effective at counteracting supply-side shocks.
Furthermore, Leslie emphasized that printing more money would only exacerbate the problem of soaring government debt, which has now surpassed £3 trillion according to recent analysis from The TaxPayers Alliance. He likened this approach to the hyperinflation seen in countries like Zimbabwe and Germany, where 'money was printed and caused something called hyperinflation...and that's just not useful.'
Interestingly, Leslie also provided insight into what can be done with old banknotes no longer classed as legal tender. He revealed that the Bank of England will exchange any note issued back to 1694 for a modern equivalent, and even offered a 'fraction more than 50%' of a note can be swapped for a new one.