Labour clearly is very worried about the threat that modern monetary theory (MMT) poses to it. No sooner has James Meadway popped up in Tribune to attack a policy that could deliver full employment at a living wage for all, plus the investment we need to deliver a fairer and sustainable economy, then along comes Shadow Treasury Minister Jonathan Reynolds on Labour List with an even more bizarre attack on MMT.
James Meadway had the good grace to grudgingly agree MMT was right in his piece, albeit he gets much else thereafter wrong, as I have already pointed out. But Jonathan Reynolds goes nowhere near such compromise. Nor, come to that does he go very near the truth. He claims:
It is widely understood [that MMT] holds that countries with a sovereign currency (such as our Pound Sterling) can print as much money as they like to meet spending commitments, without any adverse consequences occurring, because the central bank can always print more money.
This is complete nonsense. No one who seriously promotes MMT (in other words, who understands what it really is) says any such thing. In fact they'd say the exact opposite. First they'd say, first of all, that central banks do not print money, the rather limited exception of notes apart. Instead they'd say that they create it. And that's very different, indeed.
And second, they would most certainly not say there are no consequences of printing money, and that you can do it forever without issues arising. The reality is that there is always a consequence of creating money. Very often, of course, that is favourable, lest anyone forget this obvious point. But MMT always recognises that sometimes money creation can create inflation (although so, too, can other things as well) and has a very precise mechanism for both pre-empting and addressing the issue. So, very politely, Reynolds either has not a clue what he is talking about or is not telling the truth. Neither is encouraging from a Shadow minister.
Having got MMT fundamentally wrong Reyonold's then claims:
[I]n my view, MMT is both deeply flawed and a dangerous distraction for people on the left.
And why is that? After reeling off a pile of pointless rhetoric he says:
Claiming John McDonnell, Jeremy Corbyn or anyone else in the Labour Party are closet neoliberals is, with respect, absurd.
I wish that were true. I would believe it if it were true, but it is not. Reynold's says:
All of Labour's plans are underpinned by our fiscal credibility rule, an overarching economic policy drawn up in conjunction with Nobel Prize-winning economists including some who have spent much time attacking neoliberalism.
I have addressed the neoliberal foundations of that rule, its Swiss cheese opt-out clauses, and the deceptions inherent in them, far too often to repeat it all again here. Try this instead. I will instead simply ask Reynold's to name who the Nobel Laureate who endorsed Labour's fiscal rule was, because I confess to be struggling on this one and am really not sure any has.
Then let me ask another question, which is about this claim:
Most importantly, unlike the Conservatives, we recognise the importance of suspending these targets in the case of an economic shock that stops monetary policy dealing with the problem.
I presume Reynolds realises that the rule he's espousing would not have applied at any time in the last decade? And I presume no one can imagine when it might? That's because it does not apparently apply when interest rates are at the so-called zero bound, or are effectively nothing, as official rates are, in effect. And that's where they're also likely to stay for a long time to come. So my question to Reynolds is why is he hanging his hat on a policy he knows cannot be used? What is this fiction of an economic policy for? And why not instead adopt a policy that might work? Or at least be relevant? Which for a start would mean abandoning this pretence of using neoliberal monetary policy and to instead use the only viable policy to control those forms of inflation over which government might have any control, which is fiscal policy.
Of the latter Reynolds says:
Advocates of MMT instead claim governments with sovereign currencies like the UK can simply spend whatever they like, and taxes only exist to deliver other public policy goals, like controlling inflation or reducing inequality.
I've already dismissed the first, obviously incorrect claim. And the second claim, that tax has other purposes if it does not fund spending (as James Meadway has conceded) has to be true. Those include the rather useful functions of controlling inflation and tackling inequality. And addressing market failure to, come to that? What I'd like Reynolds to explain is why he has problems with those aspects of tax? Since when did Labour not like such things?
Reynolds does not, unfortunately, address such questions, instead claiming MMT is inherently inflationary and so undermines the value of the currency. I will not spend much time addressing these points. When his fiscal rule has no anti-inflation mechanism in it in current circumstances I will simply note the claim he makes is fairly absurd when MMT clearly has such a mechanism.
And since Reynold's version of the claim that MMT will devalue sterling is also based on his claim that MMT says money can be issued without limit, which it does not do, I'll dismiss that as well as the nonsense it is in the form that he makes it. Just as his claim that QE differs from MMT is also bogus.
Which finally brings us to the politics (which is a relief when Reynold's has almost everything else wrong). The trouble is he gets this wrong too, claiming:
It should also be noted that there is nothing inherently left-wing about MMT — it supporters include members of the Tea Party and Trump supporters in the US.
I'd be very grateful if he would say who these people are. Because I know no one on the right who prioritises full employment over inflation control and state spending to create wage growth as a greater priority than austerity. Frankly, this is the left / right divide and MMT falls on the left of it, always. So yet again, Reynolds is wrong. As he is when making this comment:
Rather, MMT is a glib, “silver bullet” solution to the major economic problems we face. This accounts for some of its appeal, but in my view it is a direct barrier to winning the battle of ideas about transforming the economy and taking on the establishment with higher taxation.
So, then, higher tax matters more than full employment, does it? And tax for the sake of it matters more than having a fiscal plan to deliver investment, a Green New Deal, transformation in well-being and guaranteed opportunity for all? Is that what Reynolds really thinks? If so, why?
What I can say with certainty is Reynold's final comment is wrong:
Labour's current policies allow us to oppose austerity whilst credibly proposing an alternative, giving the Labour movement the confidence that we can deliver a better future for the UK. MMT is a barrier to both.
Of course Reynold's version of MMT is an obstacle to any credible economic plan. But then, no one with any MMT sense recognises Reynold's version of MMT. And it is certainly not the MMT anyone proposes. Reynold's is, then, fighting something that does not exist. And as far as I can see that's because he wants to use a fiscal rule that could not have worked in the last decade and is highly unlikely to do so for a very long time to come, and because he wants to mindlessly impose tax on the rich without knowing why he's doing so in an overall, co-ordinated policy framework that both justifies this and suggests the balancing consequential policy this necessitates, as MMT does.
It's deeply embarrassing for the left that Reynold's has written something so economically absurd. But I struggle to think of any other description for it. And I am genuinely sorry to say that.
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Politics used to be about continuous debate.
Now it is about the promotion and retention of ignorance and dogma.
And this statement:
‘It should also be noted that there is nothing inherently left-wing about MMT — it supporters include members of the Tea Party and Trump supporters in the US.’
Well this is just tribalism of the worst kind – is it not?
‘Houston – we have a problem’. Dear oh dearie me. I’m sorry to say it but Thatcher lives on in the Labour party too it seems.
To add to my missive about counter intuition over MMT, must also be the issue of ignorance in society concerning the utility of an effective tax system in the management of MMT outputs.
Tax continues to get a bad rap yet it has a major beneficial effect on fiscal policy.
I can not entirely agree that one can say that MMT is a “left wing” idea. It is true that currently labour policy cares more about full employment, but we do live in pretty unusual times. Pre-1970 the Conservatives accepted the role of the government in taking up slack in the economy and indeed historically the party has a long history of understanding the need for intervention.
There might be some who seen neoliberal/neoclassical/newKeynesian economics as simply a PR vehicle for a smaller state, but for most people in politics and the media I think the problem is genuinely one of a lack of understanding. What these frequent and confused articles on MMT show is that some seemingly intelligent and well-meaning people simply don’t get it. I don’t think its malicious or even political, its the product of a post-Thatcher consensus that left all sides of the political divide accepting the role of neoclassical economics without questioning or evening understanding it.
Sadly we live in a world where a new idea prompts people to shut down and defend themselves, rather than open up and think about what they can learn. That makes brining the world back to the reality of the way economies function much harder, but the key step is in bringing understanding. I might be being naive, but I feel that once this is achieved there is no reason for this to be a left-right idea. People have stopped considering that there might be value in the ideas of others, and this is the battleground.
Oh dear …
What I think is embarrassing is how little those tasked with economic matters actually understand of what money is and how it works. If much of what we see is the quality of our “economic management”, then to suggest we’re ill-fated is perhaps a bit optimistic and the grim cycles of unnecessary boom, bust and un/under-employment bear that conjecture out. I don’t know how long we can tolerate said shower of amateurs.
That said, I’m concerned that the selling of MMT often is heavy on the money creation and tax elements and does not sufficiently discuss physical constraints in sectors we want to focus on developing. Therein lies part of the trouble in selling the message I fear.
It isn’t enough to have generic un/under-employment as a resource, you need the right skill set in that labour for the sector you wish to build up. Take GND, what are an underemployed Deliveroo’s welding skills like? An IT-displaced accountant is how good at wiring up a sub-station? GND is intensely enegineering orientated – multiplying the current elec system – we need engineers of all sorts by the truck-load – and yet we already have shortages in many of the key areas. Having a potential labour source is not enough – we must start with the training and retraining and phase in the deployment projects at a rate to match the expanding skilled workforce. Else we certainly will generate unhelpful wage inflation, perhaps extreme, if we simply dive into spending in that sector. Moreover, we’ll also pull in skilled labour from elsewhere damaging those areas’ ability to deliver their own GND – shifting carbon elsewhere – also we could potetnially damage other productive sectors locally by making off with their skilled workforce.
Again GND, what will we trade for the copper, neodynium, cobalt and various other resources which we have no native deposits of?
All such is do-able, but I think we need to be telling a somewhat more sophisticated story, pointing out physical resource constraints, means of dealing with them (think training & retraining on labour) and being clearer (as Richard notes) that wanton money creation and spending is not what MMT is about. It often does come across as “print as much as you like” – this is wrong and that idea is strangling MMT as people quite correctly smell a very stinky rat.
I entirely accept your point
It is one reason why I suggest the GND has to spend heavily on training, which is, of course, revenue spending
The resource issue is one I intend to come back to soon.
Hi Richard,
I completely agree with your argument. My only concern is the politics of all this. Labour as a unified whole doesn’t believe this because I am a labour member. Some of the leadership believe this. Much of the membership are probably much more open to MMT.
As we have seen in recent polls and the EU elections, under our First Past the Post electoral system splitting the left vote just hands victory to the right. We’re left arguing about combined vote share instead of having actual representatives for our cause. Without PR we need a single progressive repository for left wing ideas and power. This can be regionally divided if necessary like the SNP but the loss of Scotland will probably make life harder for the left in England, so I’m sad that nationalism is winning in the corners of the lands where people speak my language. As Socialists shouldn’t we believe in unity and internationalism not factions and nationalism?
So the choice of strategy to achieve our goals becomes one of choosing how to build unity. Do we choose Labour, the Greens, PC or the SNP? I have forsaken all hope for the Lib Dems after their failures on PR, austerity and tuition fees. In Scotland the SNP are too dominant to challenge so although I would rather see them fight for all of the UK it is too late there. I can only hope that when the leave they set a good example for the rest of us. In most of England and Wales the best choice is probably still Labour. Flawed as their leadership and ideas are, isn’t it easier to drag them to the right place from inside rather than try to destroy them from outside? Wouldn’t Caroline Lucas be better as Shadow environment minister? If the liberals had wound up their party and joined the Tories after the referendum they’d be the ones about to win the leadership race now and we’d probably be facing the prospect of a one nation Tory government instead of one lead by Boris Johnson, Michael Gove or Dominic Raab.
So I think we’d be better challenging Corbyn, McDonnell and Reynolds from Labour CLPs and conference than by dividing the progressive vote.
Alberto
I have always said I am open to coalition
I wish Labour was
If this is the shape of things to come from Labour (i.e. economic illiteracy) then perhaps it would be better that they did not win the next election. Reynolds falls into the class of politico that loves policy-based evidence making (labour have a long & dishonourable tradition in this area) and his recent “tour de force” falls into this class. The only question left to answer is why? Why does Reynolds come out with this nonsense – perhaps he is channelling Brown? Perhaps his mind is so closed that he is incapable of looking at things in a fresh way. If this is the case then it is very difficult not to regard the man with total contempt if this is the best he can come up with – ditto the party of which he is a member.
Perhaps this is yet another case of a Blairite revealing themselves, one more closet Tory abandoning the pretence.
I suspect that what they are worried about is not MMT in itself but the Media, and the people who are behind it. It’s like the anti-semitism thing, they feel they have to duck and dive, trim and triangulate, apologise and appease, so as to not provide more fuel for the newspapers and the BBC and Sky and LBC, etc., etc., etc. Logic, reality and truth get lost along the way. It won’t work of course.
It’s pathetic, and also depressing, because they are actually our only hope. I don’t have much of that at the moment.
It’s quite depressing really isn’t it.
We’re supposed to trust these people in ‘high places’ and they demonstrate by what they say that they have no idea how to solve the problems we face and no practicable vision for the future.
They are only in ‘high places’, these people, because people in low places vote for them. if government by politician is to work, then we need a far less casual electorate.
#Facepalm
I despair, I really do. This is a spokesperson for the party that is the most likely alternative, in the short term, to the long, painful decline of the UK that is continued Conservative government.
Does he really misunderstand MMT so badly, or is he deliberately engaging in strawman attacks to hide an ulterior motive?
Is this really the best we can hope for? A Labour government, perhaps finally buckling under pressure to deliver PR, leading to a parliament that actually starts to deliver progressive economic policy?
It’s going to be a long and rocky road…
Indeed….
Hi Richard,
Could you please help me understand what your definition of a real living wage (including an approx figure?) is that you make in your statement, “…attack a policy that could deliver full employment at a living wage for all….”
Do you mean the current UK living wage that I hear mentioned often in the press etc. which is circa. £9-10 p/h or something much higher? Realistically I cannot see how £9-10 p/h could ever cover someone’s basic living costs in this day and age in the UK, especially in London and also if you had a family support, given the current cost of living for basic things like rent or a mortgage, food etc. Many thanks, Robin
You make a good point
Only benefits make that possible
But this wage is still a dream away for many
It is where I start for now
But clearly more is desired
Seems like a position sorely lacking in radicalism; campaigning for a slightly less crushing form of poverty. Anyone advocating incrementalism would seem to not really grasp the scale of the crisis we face.
I’m reluctant to impose on what you defined as holiday time, but the attacks on MMT are coming thick and fast – and you’re responding.
In addition there are panicky efforts to shore up the rapidly diminishing vestiges of central independence so as to entrench the wealth and rent-capturing of the super-rich. Kenneth Rogoff is having a go while having a swipe at MMT:
https://www.project-syndicate.org/onpoint/how-central-bank-independence-dies-by-kenneth-rogoff-2019-05?barrier=accesspay
I suspect there is hardly anyone alive who has first hand experience of the abuse and vitriol Keynes encountered when he tackled the then malign orthodoxy. So no one should be surprised at the intensity of the current assaults. It was always thus, as Upton Sinclair mordantly noted so long ago.
Labour has a particular problem as it wants to keep the high priests of orthodox economics on its side. And it has an additional problem, because the high command has a reflexive antipathy to functioning markets and the use of regulation and competition policy to make them work effectively. The response is always nationalisation and some sort of vague bottom-up democratisation.
Its energy renationalisation proposals are a perfect example. The rip-off behaviour of the network owners and energy suppliers generate fuel poverty and sectoral inflation. Labour supported the imbecilic price cap which is being gamed ferociously by the suppliers and now wants renationalisation. The sensible option would be to put collective energy purchasing on a statutory and make the rip-off suppliers really compete for custom. Back this up with effective regulation of the networks. The better suppliers would survive and provide an efficient service, but the rip-off merchants would cut and run. Similarly, many of the rip-off owners of the networks would cut and run. In a similar fashion to the rail franchises which were returned to the government when the rip-off merchants there cut and ran, the state could acquire these businesses without any of the palaver and very little of the expense of renationalisation.
There are many ways, other than the use of taxation, to squeeze any inflation out of the system that an application of MMT might generate – and thereby generate significant additional benefits. But they must all be used. Labour simply doesn’t understand this.
Thanks
How right you are about Rogoff . His flawed 90% of GDP as the magic number above which government borrowing would lead to catastrophe led George Osborne by the nose into the policy of Austerity which his successor , the doleful Hammond bought into without demure.
Your critique of energy and rail re-nationalisation is spot-on and goes to the heart of the failure of Corbyn and McDonnell . They are a couple of old lefties with no understanding of how anything works in 2019. So their alternative to the Tories is to out -Tory them ; so in order to overcome their inferiority complex they try to square the circle – we will eliminate the deficit and austerity at the same time – in an attempt to show that they can be trusted with the ‘ money ‘ . But they don’t understand money anymore than Osborne or Hammond.
I grew up in the fifties and sixties when , whatever their deficiencies , there was at least a sense that a government was connected to the people it existed to serve. That’s gone and
the present Members appear utterly unconcerned with the rest of us, whatever their party .
I write to my MP ( Conservative ) regularly in an attempt to get into a conversation about the direction of the present government . In reply, if I receive one, I get glib platitudes and this from a man who is less than half my age whose experience of life is limited by his age if nothing else. It’s pitiful .
Hi Richard,
It does indeed sound like utter nonsense.
At the moment we have much human capital being damaged and going to waste e.g. the heartbreaking increase in children being taken into care because of the impact of austerity. This is due to a shortage of money. Money to support people before they fail, money to train people such that the productive capacity of the economy could be increased, money to invest and use with the available human capital to address the climate emergency.
And this money that is needed now could be created at will. Without at this stage causing unmanageable inflation.
The last Labour government was criticized for “not mending the roof when the sun was shining” in relation to borrowing. The current government seem determined to poke holes in the roof whilst it’s raining!
As I have said before, the Labour party need to avoid becoming prisoners of unwise promises that they make to get elected, as I believe that Tony Blair and Gordon Brown did.
Reynolds’ article is worse than Meadway’s, which is quite a feat. This does not bode well for Labour.
I would guess that the attacks on MMT are because Labour believe that trying to explain it in an election campaign would be a gift to the Tories. Most people aren’t capable of grasping the mechanics of money creation and attempting to explain it properly would be impossible given the composition of the media.
I do however accept the ‘power’ criticism of MMT. The idea that the UK could adopt MMT without neoliberal nations responding is very naive. There would definitely be a ‘counter revolution’ on a drastic scale.
MMT is undoubtedly necessary for our future but right now it has to be considered with things like degrowth, reducing meat consumption and nuclear disarmament as a policy which if Labour were to publicly campaign for would make it less likely to happen. We are 40 years into the Neoliberal era and the electorate’s values and reasoning reflect that. The UK needs a government which releases the economic pressure on the population before we are able to consider building a better future.
But the good news is everywhere knows of MMT know
And sometime soon everyone will realise it is the way forward – pretty much simultaneously
That is what happens
SB says:
“I would guess that the attacks on MMT are because Labour believe that trying to explain it in an election campaign would be a gift to the Tories. ”
Which is precisely why they should be doing it now, before an election campaign starts, but they won’t ……because they prefer to stick with the orthodox housekeeping budget economics, because they (having mostly climbed the greasy pole via local government) understand the tax and spend model and understand (apparently) little else.
Because they don’t understand what MMT is about, and freely accept the false (neoliberal-classical-orthodox) narrative that it is exclusively a left-wing policy prescription they are frightened even to look objectively at it, let alone risk a mauling by the right wing press an a subject they don’t have even a basic understanding of and therefore are incapable of arguing the case for.
Without Labour understand the economic case what is the point of having them elected. ? Their campaign promises will be fantasy. Perhaps not as willfully vicious in their policies as the Tories, but not much use either.
Read my tweets today with James Meadway who was John McDonnell’s adviser and you will realise just how bad it is
I’m a regular reader of this blog and, like others, I’m not an expert in economics so a lot of what is written here goes over my head. However, I think I’ve learned enough about MMT to understand what MMT proposes.
The coverage of the news that the Bridgend Ford engine factory is going to close in 2020 has got me thinking and I wonder if the experts here can tell me if and where I might have got the following wrong.
Putting aside the debate as to why Ford are pulling out for another day, 1700 jobs will be lost directly and the effect on the local supply chain is expected to be “very grave”. Politicians and union leaders are lining up to say they’ll fight for the jobs, do everything they can to mitigate the impact and create task forces and so on.
The truth of the current system is that there’s nothing they can really do because getting central government to release money needed to re-employ and/or re-skill a workforce that size would mean taking it from elsewhere in the form of tax or cuts. That’s never a vote winner and as long as the GDP of the country isn’t badly affected then central government are unlikely to be all that bothered anyway.
Under MMT, the guarantee/target of 100% employment would mean that money would automatically be made available for the appropriate reskilling and re-employment – including starting infrastructure projects as required (and businesses too maybe?).
Rather then crowding out the private sector, the state would fill a void left by the private sector.
Rather than causing inflation the state would prevent stagnation in a local area.
Is that right?
Basically yes
After all, putting these people into gainful work p and they have the skills to make technology for the Green New Deal – can’t cost because it does not now if what they produce is useful
The only challenge is to decide what use their skills are best used for
With all this utterly sincere, and not in the least bit disingenuous, concern about inflation, it is strange that the massive amounts of inflation caused by capital speculation, are little more than a footnote in discussion of this topic.
Having read JR’s article I was waiting for your response. Well done for producing it so quickly. The issue he raises which I don’t think you properly address is the issue of the exchange rate. The value of sterling is likely to fall when a government starts behaving on the basis of an acceptance of MMT won’t it, either because of a failure of currency speculators to understand MMT or a wish of those currency speculators to undermine such a government, or a combination of the two. I haven’t read an answer to the question ‘ how will you deal with a falling pound ‘ ? which is easy for the general reader to understand.
I have addressed that this morning in another post
I simply don’t see the issue in the way it is suggested to exist
And I explain why
Your response to James includes the following
“All exchange rates revolve around buying power at the end of the day – speculators can only change that for limited periods at most at a time”
I think you are saying that, in time, sterling would recover given the benefits to the UK economy of an MMT approach. That may be correct but in the short term, in the event of a substantial fall in sterling in the early weeks of a new MMT influenced government, will there not be a need for a popular narrative about there being ‘ no need to panic’ etc and shouldn’t we be trying to create one now ?
Yes, but I also do not think this will happen
Why would it?
Richard,
I copied this from MMT Scotland. it’s a tweet by James Tapper
â€@JamesJohnTapper
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Dear @LabourList @siennamarla, when can we expect an accurate account of Modern Monetary Theory in Labour List to balance the erroneous account by @jreynoldsMP? I suggest you retweet the rebuttal of @meadwaj by @billy_blog and @battleforeurope and print a reply by @DerbyChrisW.
I see that, after a polite request from James Tapper, Labour List are not up for debate on MMT –
Geoff
Richard,
Thank you for an effective demolition job on an awful article. Shadow Economic Secretary to the Treasury? I despair.
It ties in with something I have been trying to write for my own benefit on MMT and loans, which I paste in below as a slightly off target comment.
“It is a truth, not universally acknowledged, that a government with its own currency (or an approved bank) can create money out of thin air. This is Modern Monetary Theory (MMT) and sometimes even surprising facts can be true.
I have been trying to look at loans from an MMT perspective, I suggest there are three different types:
1) In the first and simplest type of loan, a bank lends money against an asset or a project. The loan repayment has three components. The main component is return of the money borrowed. However, the borrower also pays interest. Part of this interest is the bank’s profit. This part comes out of the wider economy and goes back into the wider economy so that the effect is broadly neutral. The second part of the interest is an insurance against the loan going bad, i.e. the cost of bad loans is recouped by higher interest rates on good loans. This money comes out of the wider economy and does not go back.
2) Surprisingly, banks are allowed to create the money that they lend out of thin air (within limits). It is the formal equivalent of the bank making itself a zero interest loan. This is the second type of loan, and nice work if you can get it. The security for the zero interest loan is the conventional loan that the bank has used it for.
In the same way, when the government “prints money”, it is also making itself an interest-free loan of this second type. Why pay for a loan when you can get one for free?
3) The third type of loan is when the government spends money. It is the formal equivalent of the government “lending” money to the economy. In practice, it is more like buying shares. If the economy does well, the government gets better than a fixed return. However, instead of interest or dividend payments, the “loan” or investment is repaid as tax.
On this classification, there are important differences between government “lending” to the economy, and bank lending to an individual or company. I see several problems for a socialist government with bank lending.
1) Bank lending has a natural tendency to create asset bubbles. When a bank lends money to buy an asset, it puts upward pressure on the price of the asset. Overall, it makes the asset appear safer when it is in fact riskier. Worse, a victim who has borrowed to buy an asset at an inflated price has a vested interest in keeping the bubble going as long as possible. Sanity becomes a vote loser.
2) Bank lending is completely regressive and a driver of inequality. The riskier the loan, the higher the rate of interest. Effectively, the cost of bad loans is paid for by the least well off section of society and the part of the economy where money is scarcest. In principle (not necessarily practice), tax can be progressive, and repayment to the government can be made from where money is most plentiful, thus reducing inequality.
3) Banks do not create the actual money they use to recoup bad loans. That money comes from the wider economy, and ultimately from the government “printing money”. The Labour fiscal rule is a long-term promise not to replace the bad loan money that is lost to the economy.
4) Modern Monetary Theory suggests that instead of interest rates, tax can be used to control inflation. Tax can be progressive and reduce inequality. But if what I am saying here is correct, the use of interest rates to correct inflation, is the equivalent of using increased inequality as a weapon.
So should Labour be using progressive or regressive tools to control inflation?”
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