I'm sharing this because although the tone will be alien to many in the UK and I can quibble here and there (sometimes a bit more than that, but mainly for policy reasons) it is worth looking at:
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Arnold Nesbitt 1721-1779, Member of Parliament etc. Where are you when we need you? Professor Namier in History of Parliament has the tale of his financial dealings. His Colebrooke affiliate had a daughter Emma who became Countess of Tankerville and was a close friend of Jane Austen with a mutual interest in rare plants. What a pity Jane did not follow up the connections, she might have found Arnold’s magic money tree.
I suppose one big quibble is that the China thing is relevant because IFF China chose to offload all those US dollars it is holding, because it holds so many of them it would devalue the currency. For a while at least.
China doesn’t do this because a devalued currency means US consumers can no longer afford Chinese made goods, which would hurt the Chinese economy. So China is happy to hold all those US dollars while it is still doing big business with the US.
Trump threatening a trade war with China makes it more likely that China might offload some of that US currency, which is why it would be a bad thing. Trump has not gone there yet, probably because some clever people explained some of this to him.
He can bet his bottom dollar that China understands this. They have after all been issuing currency for a VERY long time.
Arguably, a state could issue as much money as required to finance its comprehensive public services, but ignore currency depreciation and allow local industry to meet demand. This might, temporarily, reduce consumer choice, but it would free the UK from the neo-liberal world order.
You could argue that
If you live in a fantasy world where there is a closed economy
I am trying sincerely to understand this. If all or most of the video narrative is accepted as established fact : Given the UK is also thus far responsible for controlling /creating its own sterling currency as is the US for its dollar ( although admittedly the latter is still hanging by its fingernails as the global undisputed reserve coin)
Why were the UK MSM obsessed in the Seventies and Eighties ( and to a lesser extent through Nineties ,
Noughtues todate ) with the objective of balancing Britain s books by exporting more goods ( later morphing to include services) than importing same?
Why does the US ( identical currency position as UK) bemoan its ever increasing deficit/debt load excoriating ( as we do) its current generations for ” selfishly feckless spending in order to leave our grandchildren to grapple with the cumulative bebt mountain”?
Why , in the seventies was Denis Healey forced to U turn his driver from London Airport back to HMT in ordero to comply with an urgent summons by an IMF delegation descended thereupon to urgently renegotiate the then current debt /gdp and deficit positions in anticipation if granting Britain a further crisis loan?
Surely is not the situation that there are two schools of diametrically opposed economic thought on this matter and that these two limbs have been at odds with each other since at least Adam Smith without any chance if their ever being reconciled?
Why?
Because they did not understand what you now know
That’s why
And because this system has only existed since 1971 – and the legacy of the old has lasted for far, far too long
China holds US Treasury notes, which are US dollars with an interest payment and a term, paid for by the dollars that they receive from the US in exchange for what they sell to the US. The Chinese state collects the dollars from the Chinese banks, in which they have been deposited, reimburses them in yuan and exchanges their new dollar holdings for US Treasury notes. That’s my understanding. Now, what would the Chinese state do otherwise with its dollars? Stuff cushions? It’s a circuit. With an interest-paying savings account built in. And there are indications that Trump would like a cheap dollar to assist US exports… as if it were his decision…
No real policies in there, Richard, so I assume when you meant ‘quibbles with policy you meant ‘quibbles with definitions? For example the video doesn’t mention where the taxation falls-that would be a policy issue -so your quibble must be with the theoretical framework, although you might have taken the concept of spending and taxing to maintain full employment as ‘policy’, I’d say that’s a theoretical framework rather than a policy -anyway, I’m trying to guess what you were thinking-better if you tell me!
No, I mean quibbles with policies
Tax is treat as technical
And almost as an after thought
And that is just wrong
The quibble is not about policy. The quibble is that unless MMT makes the social dimension of tax a core theme it’s morally bankrupt and I have no time for economics of that sort
I am surprised you have. That type of economics has been the curse of nations
Richard,
No tax policies were mentioned in the video and it treats Tax as technical because the video is a general framework not a policy recommendation. MMT proponents like Wray and Mitchell are very clear that tax has a social dimension. I accept you have thought out criticisms of the technical framing . which is fair enough. I haven’t yet come across an economic framework that makes the social dimension more core – true, it generally doesn’t see tax as central as you do as it focuses more on regulation and spending capacity of the Government – Reading Wray’s work the phrase ‘social purpose’ occurs everywhere.
Some years ago you wrote a blog on Beardsley Ruml approvingly -well that’s pretty much pure MMT stuff -your views might have changed since then which, of course is fair enough.
I approve of MMT in theory
But I am a million miles from Mitchell and Wilson on tax
When I hear MMT embrace the social power of tax I will consider it a solution
Right now their attitudes are repugnant to me
Tax is not theft but Mitchell describes it as such
That is the language of the repugnant right
What a great video Richard, thanks for sharing it.
1. So does the sane apply to the UK and Sterling? I guess so since we still issue our own currency.
2. Does this mean our government (via the Bank of England) could create whatever amount of money it needed for public investment e.g. building schools, hospitals, roads etc? If yes, why should we borrow money from private banks and pay them vast amounts of interest? Why not just get the Bank of England to create what money we need and pay no, or minimal, interest/tax I.e. we’d need to pay the production costs associated with creating/issuing the money but no more.
3. Does this make the need to reduce the deficit and pay off the national debt redundant?
1. Yes
2. A) Yes b) Bankrupt thinking c) that’s what I called Pwople’s QE
3. yes
Thanks Richard. Re 2b, could you help me understand why it’s bankrupt thinking? The UK government doesn’t have to borrow from private banks does it? If yes, why? Surely, the Bank of England can create money and lend it to government, individuals and companies in the same way private banks do?
It can
It is EU law and pro bank thinking that demanded otherwise
Apologies if my description of it as bankrup was wrong
But I stress, there are good reasons for bonds: people need safe places to save