I like this by Ann Pettifor - my fellow Green New Dealer:
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Very good – short & to the point. Hopefully it will be spread widely.
It seems to me that the ending to that video is quite unsatisfactory, leaving as it does the sense that the government needs to borrow in order to spend.
Richard, you have kindly explained that that borrowing is mostly from the BoE, but as the Treasury owns the BoE in the first place, it’s not really borrowing as we know it, and is effectively an accounting device, and ‘contained’ within the Whole of Government accounts.
Unfortunately, Anne does not go on to state that, or at least not in the video, and nor does she proceed to explain that the other form of gov borrowing, ie Gilts issuance, is simply a form of safe investment, and which if necessary, unlike our common or garden mortgages, bank loans and credit cards, can be paid off at a keystroke by the BoE, should the need arise, viz. QE.
So… the impression is left hanging that if the gov wants to spend, it needs to get into debt. This leaves her argument as a hostage to fortune, and easily, though wrongly, countered by the Osbornomic rallying cry that all the gov does when it spends (our) money, is burden our children with debt (as if they care, even if it did!).
Perhaps it’s just badly edited by someone who didn’t appreciate the risk of misunderstanding that could arise from that, IMO, premature and ambiguous ending, but nevertheless I feel that that clip is now in need of further clarification, but in a simple form that won’t scare the horses (or rather, the financially misinformed) about the true nature of UK public borrowing.
I hope it’s just badly edited
I am one of the financially misinformed, trying to change that by subscribing to the blog. The comment above has deterred me from watching the clip, let alone sharing it.
There will be another….
Hi Richard
I’ve been following your blog for a couple of years now and really appriciate what I have learnt from my daily reading. I have also read (and appreciated) a couple of your books (Joy of Tax, Courageous State). It seems to me that the management of the economy is the key to greater justice both here in the UK and globally. And that means political change. Our recent general election has shown a groundswell of support for radical change. Yet most people’s understanding (including mine) of the way the economy functions is sorely lacking. Facebook and the internet generally are very efficient at getting new ideas across to ordinary people but we need the arguments presented in a digestible form.
I think somebody suggested recently on your blog that a short video capturing, with punch and clarity the way in which money works, was desperately needed. I get so frustrated when I hear high profile Tory MPs and many Labour MPs saying we can’t afford the NHS or the scrapping of tuition fees. You have taught me to understand that the government budget is not like the household budget. We can afford these things. I want to be able to pass on my new knowledge.
Unfortunately, because I don’t have any background in finance or economics, it is still hard for me to grasp some of your arguments. It needs someone (or several someones) with more understanding and also ideally with excellent animation skills.
I would post Ann Pettifor’s video on facebook… but am not sure that the arguments are clear enough to get through. How do we reach those ordinary, questioning people like me who recognise the injustice of the present system and would love to see change.
I have searched the internet for appropriate short videos which give a clear idea of how money works and can find nothing suitable. It needs to be something really punchy, something perhaps in the style of this video which presents a summary of Noam Chonsky’s Manufacturing Consent: https://www.youtube.com/watch?v=34LGPIXvU5M.
I realise this video is probably not to everyone’s taste but you get the idea. It needs to be able to appeal to as wide an audience as possible and to put the arguments clearly and succinctly. Please can someone have a go, put it as a challenge to students or other interested parties, perhaps as a competition with a prize offered by an interested donor. We desperately need a way of convincing people that change to the accepted wisdom of neoliberalism and unregulated free markets is possible.
Thanks
I would live more time to do this
Right now I am up against it with work
I found this very interesting but I still cannot say that I fully understand
Is it possible to give an example of the operation/creation of money (using double entry T charts (every Debit has a credit, etc)
I would be indebted to you if you offer this proof of your thinking on money
Thanks
Might you see if this works?
http://www.taxresearch.org.uk/Blog/2013/04/19/all-money-is-a-confidence-trick-4/
Thanks.
What was confusing me with all the talk of a money tree was the idea I had in my mind that it was free money
From your example I can see that having borrowed £10000 from the bank, I owe them £10000. I have a debt of £10000 to the bank and they will sue me to be bankrupcy if I fail to repay that debt
So it follows that if instead of me it is a government that borrows the £10000, this debt must be repaid
So the money tree can be treated by government to create the money it needs to fund NHS, infrastructure, etc. But the other side of the double entry is a debt that will need to be repaid, perhaps by future generations if not this one.
So there is no free money tree as any money spent from the tree will need to be repaid and therefore cannot be regarded as being free
You are missing the point
That is how money is made, which is what you asked
But the government has its own bank which will not sue it. Nor does it need interest (none is paid in the QE debt it owns). It makes money at the government’s behest free of charge and never asks for it back
The government is unlike everyone else because it has a magic money tree and no one else does
Thanks Richard
So what are the downsides of using the money tree?
For instance does its use effect inflation, interest rates, U.K. Credit rating, UK’s international financial reputation, is it possible to over or under use?
It can be used until there is full employment
Then you get inflation
That’s the limit