I am finally back in the UK with time to notice the budget. And one of the most notable things about it was Philip Hammond's discussion of the national debt. He claimed, as do the Office for National Statistics, that our national debt is now about 85% of GDP. That, he and they say, is about £1,764 billion.
Except that is simly not true. Near enough £435 billion worth of the UK's national debt, which is supposedly owing by the government, is owed to the Bank of England, which is owned by the government. So the government owes itself. And debt you owe yourself is not debt at all. That's because paying it off makes no difference to your well-being. You are in exactly the same overall state with the rest of the world as you were before you paid it if you do that. So the debt does not actually exist. That is the only obvious logical consequence of that fact.
In other words UK national debt is near enough £1,329 billion. Tht is 64% of GDP. Which is, in national debt terms, neither here nor there and certainly poses none of the threats to the UK economy that Hammond claims the national debt does.
Not that national debt of £1,764 billion is a threat to well-being either. That is unless private wealth is a threat to well-being. Because the national debt is simply national savings because it represents the amount that people want to save with the government. It's no more than people putting money on deposit in the safest account available in the UK economy. And what is so terrible about that?
Philip Hammond cannot get his facts, or his logic, let alone his fear-mongering right. It's really rather depressing that a man with so little comprehension of macroeconomics is in notional charge of our national economy. For now.
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Hello Richard,
How can this point be made to the people that just don’t get it.
For years people said Banks create money.
Then it was said that the government creates it and owes it to itself.
Then MMT which says the government can create as much as it wants as long as it taxes it back.
(Am I following it ok so far?)
So how do we move the narrative when it seems even the big tax justice players like TJN, Oxfam and so on and so on don’t even get it even either! We need to duplicate you to get the point across.
I agree that the tax justice movement just does not get this
There is a mighty conspiracy to keep the status quo
Thanks for taking up the point you mentioned in another thread. Therefore, I am taking the opportunity to repeat what I feel is the absurdity of May, Hammond, Conservative discredited ‘Household budget’ metaphor: because if they actually believed it, they would not claim that austerity is now over, because their test of that must be the elimination, long-term of the deficit, which plainly it is not (save for short-term windfall gains of seriously uncertain reliability) and second, the required assured reduction of the national debt, which clearly has not been secured. It follows that either the Conservative ‘Household budget’ political mantra is false (which of course it is), and even they know it; or they are quite deliberately conducting an economic policy they know to be irresponsible.
The IFS (who, with adventurous eccentricity, actually believe in the ‘household budget’ model) has made clear, the Government is now ‘abandoning’ elimination of the deficit in the Budget, and by implication abandoning reduction of the debt. Either they know the Government is contradicting its own economic beliefs, or it knows the policy is nonsense, but realises (with Brexit) that a bad argument which delivered cheap but false popular economic credibility in the distorting lens of the media, will now quickly destroy them. There is no third option here, because to coin a fatuous phrase, “nothing has changed”.
He said (or someone said – wasn’t paying that much attention) that this brings us back to the level of debt after WWII. Well, that was a disaster, wasn’t it? What was the growth rate?
We had debt at 250% of GDP post WW2
Worth mentioning, if I may, that it depends on who owns the so-called National Debt. If it was mainly foreigners it would be a problem. But happily, in the UK it isn’t. As you rightly point out around a quarter is held by the Bank of England which is part of the consolidated government. At least a third is owned by insurance and pension funds plus private individuals. Nearly a fifth is held by banks, one would hope on behalf of their depositors and investors. A little more than a quarter is held by foreigners, and most of that arises from their need to park sterling balances earned as a result of the balance of trade.
In other words, there is no issue
Actually, there is not even an issue if the debt is owned by foreigners: they are owed in sterling come what may
Thank you for correcting me.
There is no particular problem with foreigners owning debt.
Actually, as you suggest, one could argue that it is a sign of the ‘health’ of our economy that foreigners want to own our debt.
Plus as the debt is dominated in pounds, interest is paid in pounds, which have to be spent in the UK, so it all comes back.
The only problems arise if it is one agent rather than many owns most of the debt, which would be true regardless of where that agent is based.
On the contrary. I believe he knows full well what he is doing. It’s being done deliberately to justify austerity.
Not any more! What is “said” by the Conservative Government is whatever will keep the Conservatives in power for another term, or at least another year, or even a month, or day or solitary hour. Whatever is “said” is whatever it takes; howsoever meaningless the pronouncement, contradictory the policy, incoherent the beliefs. The media will cheerlead for them, whether it makes any sense, or no sense at all.
I think the point is whether it is either 85% nor 64% does not really most a difference. It is what we do that counts.
The economy was in a mess and the government decided to do QE (liquify the assets of the wealthy) rather than fiscal stimulus (get stuff done) which was a massive mistake and we are still in the same mess.
Surely not a mistake, more an effort to make the rich comparatively richer thus helping to shield them from the effects of the next collapse.
The MMT Podcast says that the National Debt is the same as the currency supply, as does Warren Mosler. Is that right?
I think you are simplifying
But the two are linked, of course
I’ve been studying MMT on the web and in books for the last six months, yet information is very hard to find and understand, and apparently contradictory. I wish there were clear sources of information and definitions about things like this.
Next year a text book will be published
Nick H, a lot of economic/financial talk is jargon that makes it hard for normal people to understand. But there is a lot of great information out there that does make basic sense. Because actually the basics of how the system works are easy for almost anyone to understand, once we’ve got past common misconceptions, like the household budget analogy. I think MMT to a great extent lifts the veil and reveals was was previously hidden (probably by a mixture of ignorance and design).
I find that nearly all of what Richard says on this blog and in his books is perfectly clear and intelligible to the non-economist.
His recently podcast addresses a lot of the basics in a way I could understand:
http://www.taxresearch.org.uk/Blog/2018/10/15/talking-mmt-a-new-podcast-from-me-and-the-mmt-podcast-team/
Most of what Stephanie Kelton says in the many videos available on Youtube is clear and informative. Check out ‘deficit owls’.
Here is a fantastic explanation of MMT and spending chains that perfectly makes the point about spend and tax rather than tax and spend (and much else besides):
http://www.matchesinthedark.uk/spending-chains-sankey-diagrams/
Hope this helps.
Thanks Jim
And for the kind words
Nick H. If you haven’t already read it I consider L Randall Wray’s Modern Money Theory to be the most definitive book on MMT available to date and he painstakingly explains all the jargon. It was the first thing I read when I got into MMT and borrowed it from the British Library, but I now have my own copy. If you understand everything contained therein it arms you very well to do further research. I was particularly keen to make sure it really does work that way in the UK and I got a huge amount of assistance from Andy Haldane at the Bank of England and the team that fields damn fool questions from the likes of me. I got quite a lot of archived papers that are not normally available. I have written my own paper that shows that the Bank’s monetary operations are fully consistent with MMT but I’m not brave enough to publish it.
Why not brave enough?
I feel it needs peer reviewing. I already found one thing that was wrong with it (now corrected) and it is no good publishing something that isn’t right. A couple of MMT friends have read it but they are not experts, though more so than me. Would you have a go at it? I do think it is useful new research. If so please email me.
Right now I am inundated
Bill Mitchell is the right guy
Richard, Bill Mitchell is even more inundated than you are. It’s only 5,000 words and I’d hugely appreciate the feedback.
Send it my way
Contact details are on the blog
Thanks everybody for all the tips.
One question I have in particular is that I seen, in a video, Richard Murphy holding up a £10 note and saying “this is national debt”.
I am struggling to understand how money is debt, because I don’t understand who it is owed to.
I understand how money used to be debt when we had the gold standard (and long before that when money was a claim on a commodity in a warehouse) . But now the “I promise to pay the bearer on demand the sum of £10” is a tautology.
Money is surely not debt, not a claim on gold.
And if money is not debt, how can the national debt be debt?
See my other reply
Thanks everybody for all the tips.
One question I have in particular is that I seen, in a video, Richard Murphy holding up a £10 note and saying “this is national debt”.
I am struggling to understand how money is debt, because I don’t understand who it is owed to.
I understand how money used to be debt when we had the gold standard (and long before that when money was a claim on a commodity in a warehouse) . But now the “I promise to pay the bearer on demand the sum of £10” is a tautology.
Money is surely not debt, not a claim on gold.
And if money is not debt, how can the national debt be debt?
When rthe govenment creates money (cash or electronic, and it does both) it creates a liability – by defitnion. The debit is the spend it incurs or the asset it acquires with that money.
The liability is cancelled when tax is paid – which is the reclamation of the money created.
Of course, that might take a very long time to achieve or might never happen. That does not stop it being a liability.
Thanks, Richard, for the explanation.
I can certainly see what you’re getting at.
I’ll put it in my pipe and smoke it.
Richard, With the greatest of respect your response to Nick H about how money is debt doesn’t quite get back to the root of it.
When the government procures goods or services it does not pay for them. (Shock horror). It issues a promise to do so in the form of an IOU that we think of as money. That’s why it says “I promise to pay” on a banknote. It’s a liability for the government to pay at a later date – that is a debt. Later on, the recipient of the money gets a tax demand from the government and s/he can then use that money to settle the tax liability. That’s why Warren Mosler calls money a tax credit. Meanwhile, however, the holder of the money can use it to obtain goods and services from somebody else because that person can also use it to settle their tax demand. The government’s money and only the government’s money can be used for that purpose. If there is any of the money left after spending some of it and settling a tax liability, s/he can save it. Also, as the money circulates each recipient has tax liabilities as well, and it can be shown that for every 100 pounds issued 94 are received back in time, the 6 having been saved (I am willing to be corrected on those proportions). The speed at which the money is recovered through taxation depends on the tax rate.
So you can see that unless the government issues money by way of obtaining goods and services there is no way of extinguishing tax liabilities.
The way the modern monetary system works is hugely more complicated than that, but if you can understand that basic principle it easily allows you to follow through on how interbank settlement systems operate and what role government bonds play, plus how banks creating money is like a time machine which allows the lender to spend money today that the government will issue in the future.
I have to say I think Warren wrong on that
Money is a means of settlement
I do not think the government remains in debt to the supplier when issuing money
It has issued credit – but of indeterminate date, so we call it money. It cancels the money with tax
The difference is largely semantic, but I prefer my version
“I do not think the government remains in debt to the supplier when issuing money”
I am not saying that. The government does not remain in debt to the original supplier when the money is used as a means of exchange. Who owns the debt changes. It is still a liability of the government which it eventually has to settle – normally by way of accepting it as tax. (There may be others but that would need thinking through).
I would not try contradicting Warren if I were you. Steve Keen attempted it and it was not pretty.
I will contradict anyone if I think they are wrong – and Warren knows I am happy to do so
Government debt, or to be a little more accurate, debt instruments, ie IOUs, are what we use for money. So, we need it, because if there weren’t any govt debt instruments floating around, there’d be no money in the economy, because that’s what money is. If we start talking about the National Debt though, things can get a little murkier, not least because, before you know it, our politicians will have clandestinely decided to redefine it to suit their own narratives, just as they have unemployment and employment. All this crap about the govt owes all this money and our grandchildren will have to slave to pay it off… utter rubbish. No educated population would countenance austerity for a single minute. I ask again, not for the first time, what is it that happens to us at school? It’s certainly not education.
So most of our national debt is owned by BoE, other banks, pension funds and the like. But what about the 25-30% owned by foreign investors? I can see that profits and interest are paid in sterling and so will be spent in the UK but can’t quite work out the over all implications of this. So for example property prices can be pushed up as this investment finds a home – is that right? But what other implications are there, for good or ill? I’ve been hunting for a fairly straightforward explanation without success – everything I’ve found has a neo-liberal foundation. Can anyone direct me to something that might help?
Since the money is in sterling the implications are limited, in my opinion
“It’s a sterling asset they sell..It the buyer has a sterling asset..How does that change the exchange rate..They can buy and sell it in another currency if they like..But that does not impact sterling..Try again”
err..lets say i am a Swiss institution owning UK Gilts..I am bid for my holding and sell and i receive pounds..i can choose to hold pounds or sell my pounds and buy CHF. This puts downward pressure on the price of sterling. For the market to clear a buyer needs to be found. If all international investors choose to sell sterling (because of the fear of money printing and an infinite supply of sterling for example) then the price will fall in the FX market. Sellers outweigh buyers etc etc and there is a run on the currency..
So my point again..putting capacity constraints aside, the UK could be hit with an inflationary problem through a run on the pound and our relatively inelastic demand for imported goods (oil for starters) and there really isn’t a policy response in the MMT handbook.
You assume a non-UK buyer of a sterling asset will pay in sterling that must then be sol
You ignore how the non-UK buyer acquired the sterling
You commit a basic error – ignoring double entry when it suits you
Bill Kruse says:
” I ask again, not for the first time, what is it that happens to us at school? It’s certainly not education.”
You could call it indoctrination or perhaps brainwashing. Either will do and neither is much of an exaggeration.
Of course. It is still (just about) a free country and we are all entitled to our opinion. Provided we are prepared to shift it, and I know you have done so over the last couple of years for which I greatly applaud you. As far as I know you are the only UK macroeconomic academic who understands MMT.
I agree with Leigh.
Hammond & Co know what they are doing. It’s called ‘making the world shit’. If they can make the state perform badly enough, then they can justify cutting it further. They are as Chomsky says ‘manufacturing consent’. It has nothing to do with stupidity. It has gone too far beyond that.
It is obdurate vandalism of the commons based on the ideology that only private property exists.
I may have said this before but when they were closing the Great Central railway during the Beeching cuts, my Father told me that they used to put the worst engines and rolling stock on services (even with smashed windows) on the route and the timetable went out the window. People began to stay away. It worked.
This is how they destroyed the most modern and fastest railway route in Britain – built to the European loading gauge no less – and left many a slower or more awkward route in place.
And this is how the Tories will destroy the post-war socially secure state and take us back to Edwardian times where everyone knew their place in the ‘natural’ order of things.
“This is how they destroyed the most modern and fastest railway route in Britain..” Why would they want to do that?
My neighbour concurs with PSR’s father’s telling of how old rolling stock was used prior to the closure of the Great Central Railway. As for why the line was closed, perhaps this article about the Minister of Transport of the time, Ernest Marples, can offer some insight: https://www.conservativehome.com/thecolumnists/2014/03/from-lewis_baston-ernie-marples-yes-a-rogue-but-he-brightened-up-the-1950s-and-he-made-things-happen.html
I’ll certainly spare a thought for him while driving over the old trackbed of the Great Central on the way to my nearest mainline station.
The GCR was the last UK mainline and the Midland and Great Northern apart, really the first to close by a deliberate act of management vandalism intended to deny it of traffic (and but like the Somerset and Dorset that followed it). It could have made much of HS2 redundant now.
They don’t want us to have nice things. They don’t want us enabled, because once we become sufficiently enabled, it’s the end of them, and they know.
Read Neil’s post Nigel. Marples’ background was well known. He was what I would call a Thatcherite MP before Thatcher actually got in with her coterie of ex-city boys to cheer here on. That is to say that Marples abused his position for personal gain.
The idea behind the British Transport Commission (BTC) was to have a post war integrated transport system in the UK using rail and road, sea and air. But it was undermined by people like the Road Haulage Association and others who wanted a more competitive market instead of a collaborative one.
We also had to deal with the march of automobile. Buying expensive cars seems to be better for inflating GDP figures than cheap rail fares and freight costs. Getting rid of trolley buses and trams was a big mistake. It was all about short term economic gain and that is why we are choking to death in our cities today.
Agreed
I’m not so sure they do know they are telling lies. I think many of them believe it. Otherwise wouldn’t there have to be a kind of conspiracy amongst politicians, think-tanks, journalists, economists to keep repeating the same mantra – “like a household we can’t live beyond our means” etc – and woe betide anyone who breaks ranks? Of course it also suits their political dogma of shrinking the State, delivering economic power to business, enriching the already wealthy and attacking the poor, the unemployed, those with disabilities.
I can see how it can be difficult to admit you’ve been wrong: if you’ve invested your career in a particular theory, whether in the field of politics, science or whatever, to be confronted with the evidence that your whole working life has been spent barking up the wrong tree could be devastating. Like Macbeth, it’s easier to go on than to go back.
It’s a clever con-trick, based on the household analogy & it traps opponents into somehow appearing to say that we CAN live beyond our means. But the con is easily unmasked. The fact is we CAN’T live beyond our means, but our means is our ability to create wealth & NOT the amount of money in the exchequer. This is absolutely basic economics & was pointed out by Adam Smith in 1776.
And the ‘debate’ about whether Austerity is over is a cleverly manufactured side-show of smoke & mirrors. Austerity was (& still is) a con-trick about grabbing state assets & turning us into a nation that is forced to rent its own country back. Austerity CAN’T be stopped – because it’s already happened. The final act will be grabbing the NHS by use of ACOs (now alphabet-souped into ICPs)
To achieve that, the Tories need only hang on for about 2 more years. So that’s what they’ll do. Then they can declare Austerity is over, because it will be – IE the con-trick has worked & can be wound up.
Correct
I particularly like your clear statement that, “The fact is we CAN’T live beyond our means”, because this the canard of the ‘tax and spend’ sophists who wish to misrepresent the idea of ‘spend and tax’. I understand and commend why you then say, “…. but our means is our ability to create wealth & NOT the amount of money in the exchequer”, but wish to add a comment that I hope is not pedantic.
I just wish to say your argument is true of a fiat currency. Historically it was different, for example where currencies were linked to gold, silver or other commodity deemed to carry the real intrinsic value. As demonstration, before the Union of 1707 Scotland’s economy was hamstrung by the limits of the exchequer, and John Law wrote ‘Money and Trade Considered: with a proposal for supplying the Nation with money’ in 1705 because there was a serious exchequer problem to be solved. It was not implemented, but Law provided in this and other papers, an important early step on the rocky road to modern monetary economics.
Agreed
Well said
See what though G. Hewitt?
They have ben doing the same thing since 2010 and have not stopped at all. Yet there is evidence that they are causing harm all around them.
They deliberately lie that they are doing more. The voter then experiences ‘cognitive dissonance’ as even though they are told that something is being done (raising expectation) it actually isn’t and things remain bad or worse.
And the result?
People lose faith in the system and people will accept the next idea which is that it is abandoned or privatised . And thus consent is manufactured.
It is very simple and effective and it works.
Could I add further that under George Osbourne, the Tories have intended to shrink the state on the basis that it was pushing out the private sector. As a public sector employee who uses private sector contractors to build new social housing I would say that this is a fallacy in itself!
Anyhow.
What Osbourne did was even worse. He based the public sector cut backs on a paper by economist (?) Kenneth Rogoff and one of his mates that gave an ideal ceiling on the size of the public sector in the economy. The Tories seem wedded to this idea despite the fact that the paper was exposed by a student for fundamental mistakes in the spreadsheet that worked out the ideal size of the state. Or so the story goes. But the result was that the figures were wrong and meant that the Tories would actually be over cutting the public sector back to the point where it would have deleterious effects on the economy.
I know that the Tories have been putting money in here and there but the amounts are just niggardly compared to what has been lost. Again I’m sorry to say that the Tories know EXACTLY what they are doing – and doing it badly too. There is no excuse for further 3% cuts that are still due in many departments and will happen.
This has gone beyond ‘stupid’. It is callous and cold ruthlessness based on ideology.
Agreed
I am astonished the Rogoff and Reinhart idea is still being used
I enjoy reading your blogs even though I have the academic comprehension on these matters of a 14 year old, and would have none at all on a practical level if I wasn’t a tax-paying, mortgage-holding, domestic budget-balancing 51-year old married father who is currently subbing his son through first year of University because his maintenance grant doesn’t cover his rent (let alone food and beer!). What gets me is why we don’t hear these points on national debt from other people in Parliament. Why doesn’t Corbyn or McDonnell or other opposing members of any political hue say these things back to the Chancellor and why don’t I hear it discussed on Channel 4 News or Newsnight? Why isn’t there a narrative or a public discourse on these things? Is it just, sadly, that most people – even those like Hammond – are actually no more knowledgeable than I am on matters of macro-economics? That says a lot about education, doesn’t it? And that we are just not equipped to confront our leaders on the financial questions affecting our nation (or the World) – except to bark at them that we need more money for schools, hospitals, police, the environment and social care. That’s if what you are saying about national debt is true Richard; I can’t find another readable blog that comes from the other side saying that it does matter – so I have to trust you.
I wish I could justify why this is not discussed
Unlike some here it is because I think most politicians really believe the nonsense they talk, which is taught at universities, and so the debate does not get a chance to be aired
Perhaps I should then expand my query about what it is happens to us at school to include what happens to us at universities;p again, surely not education.
I’m pretty sure the Chancellor and any other reasonably sentient governing Tories understand the underlying economic relationships. It’s simply that it serves their interests to project optical illusions (such as the household or credit card analogies) that serve their interests and their more well-heeled supporters. They want to minimise the scale of public expenditure so as to minimise any taxation required, to manage the composition of public expenditure so that it favours their natural supporters (and punishes opposition voters), to maximise the rent extraction opportunities of corporate capitalists and high net worth individuals – with some trickle down to property-owning, pensioned-up voters – and to be able to use monetary policy either to club workers in to submission or to hose the wealthy with money or both.
And it appears Labour is committed to stick to this “Fiscal Credibility Rule” designed by Simon Wren-Lewis and Jonathan Portes. This should allow some scope to increase the scale and to alter the composition of current expenditure. This commitment may be a necessary evil because it should defend against the inevitable right-wing media storm during the next election campaign. But there’s a long way to go before then.
I think Labour is digging holes for itself
You cannot con an electorate with a rule and then change your mind
And that rule is pure nonsense and deeply detrimental to Labour’s best interests
It seems clear that the UK Government are at sixes and sevens on the issue of deficit and debt reduction, and have been since Osborne had to “adjust” his fiscal targets. And of course Phil the Joker has now spoken of keeping fiscal headroom in reserve for a bad Brexit deal. Where exactly is he storing this headroom? However, the nonsense about household budgeting remains alive and well in the media, including the so-called economics editors on TV, and is promulgated by many think-tanks, politicians and ex-politicians – Michael Portillo being perhaps the fiercest advocate amongst the latter. The general public get most of their information from TV, so it will require a concerted effort to counter this.
Unfortunately, the real (left wing) debate on this has become polarised and even a bit nasty at times. The MMT folk (a cult according to some) have been castigated as purists or just plain wrong, and their principles and policies have been misrepresented. The other folk (cowards according to some) have been labelled as supporting a neoliberal policy, and were taken to task for being confused on principles and policies. For anyone who has missed this debate, which has largely taken place on Twitter, “other folk” consists mainly of the progenitors and supporters of Labour’s Fiscal Credibility Rule (FCR).
I’ve read many of the arguments for and against the FCR, and its potential outcomes, and I don’t pretend to understand all of them. However (for me) it boils down to four issues –
1) The FCR says “everybody knows that if you’re putting the rent on the credit card month after month, things needs to change”;
2) It says they will eliminate the deficit (regardless of rolling whatsits);
3) It will rely on the Bank of England MPC to decide if fiscal policy is required;
4) It insists on only borrowing to invest, potentially leaving infrastructure without ongoing support.
Actually, I don’t need a list – the first item will suffice. NB: I’ve heard John McDonnell on BBC Radio say his mum was the best economist he knew.
More seriously, does anything in my list misrepresent the FCR, perhaps due to some factor I’ve not understood. It’s only one page, so it shouldn’t be hard to analyse.
I wonder at times if Labour have plans to replace the executive at the BofE. Can they do that?
They could
John S warren said ‘I just wish to say your argument is true of a fiat currency…’
No, John, it’s true of any currency. When Smith said what he said about the difference between money & wealth:
‘Money is only a tool of exchange, a highway that helps get the nation’s product to market, but produces none itself. Real wealth resides in what money can buy, not in the coins themselves’
we did NOT have a fiat currency.
So to go back to the family analogy, we as a country are a wealthy country – so why are we being forced to live like paupers? Because we are being swindled. It’s not a case of living beyond our means – we are being forced to live BELOW our means. Our means are our ability to create wealth & we are being prevented from doing so.
I have to confess I am not entirely comfortable with your statement regarding Smith, although my real concern is the statement that it makes no difference whether the currency is or is not a fiat currency. I would wish to see a lot more evidence, and evidence first of precisely what you mean by this, and certainly more than a single reference to Smith that (forgive me) intuitively seemed to me more a paraphrase of Smith than a direct quotation. I would want chapter and verse.
I have no axe to grind on Smith. Smith was not a ‘metallist’ in the ‘metallist-chartalist’ debate. He wrote shrewdly that “A prince, who should enact that a certain proportion of his taxes should be paid in a paper money of a certain kind, might thereby give a certain value to this paper money.” (Wealth of Nations). I think Stephanie Kelton quoted this approvingly in a paper, because it provided a way of of continuing to circulate paper money when it has no value (from a Metallist perspective).
Perhaps someone may wish to step in with an informed comment on Smith.
Mike W says: “we are being forced to live BELOW our means”. Nail on head. My wife spent her entire working life in schools. In 1975 the Houghton Report into teachers’ pay recommended substantial increases of around 27%. I remember it well. Once the neoliberals got into power pay started to stagnate, but perhaps more seriously, cuts in funding started to bite. Year after year there were demands for “efficiency savings”, or cutbacks, in staff and resources. It never stopped. Every year. As headteacher it became more and more difficult to provide what was required and things that once upon a time could be afforded were no longer possible. It was, and is, the same in every public service.
And so we get (un)Think Tanks wringing their hands over balancing the books without tax increases, or the funding of the NHS, (the microcosm of “living below our means”), and, further, if we don’t ‘[raise] more money from tax, this could generate “some very scary numbers” for the national debt’. (NIESR – in the Guardian) And Moody’s too is worried about the NHS and how we pay for it and laments “the fundamental long-term weakness of UK fiscal policy that comes from healthcare spending” – well, they would be agitated remembering how they triple “A” rated all those “safe as houses” slicing and dicing scam securities. So that’ll be another “A” knocked off the UK as it heads south to Zimbabwe.
Yes, living below our means, apart from those at the very top of course, for whom this entire scam has been designed. There are certain people, who have walked into very comfy directorships, or Ermine, or editor’s chairs who really should be in gaol for crimes against the British people.
My children were state school educated in the 90s/early 2000s and the facilities and the teaching was fantastic..it is nonsense to associate it with a developing nation.
tom says:
“My children were state school educated in the 90s/early 2000s and the facilities and the teaching was fantastic..it is nonsense to associate it with a developing nation.”
Erm….that’s like 20 years ago, Tom. Things have changed. Quite a lot actually.
Ask your children to describe how printing money in the Weimar Republic actually helped them recover from hyperinflation… then perhaps the function of the Bradburys… then upon their failure ask yourself was this truly an education when it contained such glaring omissions? We don’t seem to be educated at all in things which seriously matter.
Hi Richard. Why can’t i share this on facebook and beyond? Has something gone wrong?
I am not sure…..we have updated the security certificates and maybe that is it
I will check
On the ignorance in Parliament, I tend to see it as ‘data’ in a broader stream of the failure in education and public debate. There are many paradoxes involved, not least the democratic epistemology of deciding on majority when we know the electorate doesn’t behave Ilike an aggregate of critical thinkers. Clearly, this paradox is one most of us want to live with. How do we keep democracy and get good sense operating? Our MPs and Lords are supposed to have good sense, but it is evident in their poor quality of debate they mostly do not. Transfer of learning is notoriously difficult, even at scientific levels (think of the introduction of a new species to an ecosystem). 90% of MPs didn’t even know private banks loan most money into existence in a fairly recent poll. There is a lot we need to consider beyond reform of economic and accounting systems,
You summarise an existential crisis for our way of living
It has become sufficiently complex, and subject to sufficient mythology, that few can see what is really happening
According to the UK Debt Clock, UK debt is £2.097278 trillion…..External debt-to-GDP ratio is 253.53%……Public debt-to-GDP ratio is 94.48%
The ONS disagree
Hmm. The ONS also say: “Debt at the end of September 2018 excluding Bank of England (mainly quantitative easing) was £1,599.4 billion (or 75.3% of GDP); a decrease of £38.0 billion (or a decrease of 4.2 percentage points) on September 2017”
https://www.ons.gov.uk/economy/governmentpublicsectorandtaxes/publicsectorfinance/bulletins/publicsectorfinances/september2018
I’m sure someone, somewhere, has the correct figures…maybe..
Suddenly it feels like the last ten years never happened and reality has been put on pause since the GCF.
Household budgets, debt to GDP ratios, WWII deficits and the need to balance the books has all been talked to death around a decade ago!
Sadly this reflects the harsh reality that nothing has changed and nothing has been learnt, not within the ‘system’ at least. I say learnt but that excludes the very real likelihood that this ignorance is feigned because it suits a purpose to disenfranchise and destabilize the general population. Like geobbals and the big lie and thatcher’s ‘no alternative’.
It gives me no hope that the torys can offer anything for the future of the general population of Britain.
It gives me no hope that labour have any chance of delivering anything that contrasts and condradicts this narrative.
The obvious fact that these myths are perpetrated in practically all media and political avenues around the entire globe illustrate that the elite control the narrative and there is no avenue for facts to be voiced on a platform that breaks through into the mainstream.
Now we have the hysteria of fake news leading to censorship of the few left leaning outlets of credible information on social media without potentially the general population even knowing theae sources have gone.
Sadly austerity and this total lack of compassion and understanding from those with power and political clout, including the MSM, is leading to the very dispair and resentment that is now fueling the rise of neofascism.
Our broken neoliberal system is leading to a collapse of democracy and a rise in nationalism as people look for someone to blame for their woes.
That too points towards isolationism, rascism and exceptionalism and reduces any change of combating the very real existential threat that climate change poses to us as a global family.
The Me First and fuck everybody else attitude of this entrenched capitalism has captured the political process leading to the shredding of our community safety net and the flogging our mutual assets and effective regulation in the name of these balanced books and household budget myths.
How you keep going, Richard, when faced with this wall of willful blindness that it feels we are just repeatedly banging our heads against for the later decade is incredible.
I’m glad you do as it feels like one of the few rays of light that shines into this mess to show there is a rational way forward of only we can somehow embrace it as a society.
There has to be a shift away from mythology and hegemony and potentially it is only through education and skeptical enquiry that maybe the youngest members can become truly engaged enough to wrest control of their future from the dying grasp of neoliberalism and its associated dogma.
Roll on this new MMT text book!
Sorry that became a bit of a rant but TEN YEARS!!!
Zachariah says:
“Sorry that became a bit of a rant but TEN YEARS!!!”
A lot of us feel like you do, Zachariah. No need to apologise to me at least.
This blog page is a rare glimmer of light in the enveloping darkness.
@Nigel Hargreaves – “I’m not brave enough to publish it”. Why not publish it as samizdat? After all, we seem to be heading into those times.
Someone mentioned Portillo. It beggars belief that a man who was Her Majesty’s Chief Secretary to the Treasury clearly (from last Sunday’s This Week programme) has no idea how the monetary system works. Liam Byrne the same.
Nigel Hargreaves says:
“Someone mentioned Portillo. It beggars belief that a man who was Her Majesty’s Chief Secretary to the Treasury clearly (from last Sunday’s This Week programme) has no idea how the monetary system works.
Grace Blakeley made him look very silly, I thought.
…..not that making Michael Portillo look silly is anything he needs help with.
In the province of Ontario Canada a key minister who has an impressive resume of experience and economics education – https://www.linkedin.com/in/peterbethlenfalvy/?originalSubdomain=ca –
uttered 19th century economics when he started his government budget comments with “Just like any family, you can’t spend more than you take in every year.”
He seems to have no understanding of the “householder fallacy” ( Fallacy of the Composition) or ‘The Paradox of Thrift’ . The latter is #1 in Nobel Prize winning William Vickrey’s short paper ‘Fifteen fatal fallacies of financial fundamentalism’ http://www.pnas.org/content/pnas/95/3/1340.full.pdf : “Deficits are considered to represent sinful profligate spending at the expense of future generations who will be left with a smaller endowment of invested capital. This fallacy seems to stem from a false analogy to borrowing by individuals.”
In his book on the crash, Tooze wrote, “The IMF itself would be calling for a rethink. In its briefing ( https://www.imf.org/external/np/g20/022512.htm ) for the full meeting of finance ministers and central bank governors that would convene in Mexico City on February 25—26, 2012, the IMF’s headline was stark. The “overarching risk” to the world economy was of an intensified global “paradox of thrift.” As households, firms and governments around the world all tried to cut their deficits at once, there was an acute risk of global recession. “This risk is further exacerbated,” the IMF went on, “by fragile financial systems, high public deficits and debt, and already-low interest rates, making the current environment fertile ground for multiple equilibria–self-perpetuating outcomes resulting from pessimism or optimism, notably in the euro area.” 2 The place where the paradoxes of thrift were most visible was Greece.
Thanks
And spot on