The Guardian has reported this exchange at this evening's Prime Minister's press conference on coronavirus:
Q: National debt is rising by hundreds of billions. How great a risk is there of a new era of austerity after this?
A: Johnson says he thinks the economy will bounce back strongly.
He says the government will encourage that in a number of ways.
He says he has never liked the term austerity. It won't be part of his approach, he says.
So Johnson does not like the term 'austerity' but did not rule it out.
What's he going to call it then?
Or rather, what's Cumming's going to call it?
'Taking back the debt?'
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Almost complete lack of awareness in the country the National Debt is actually an Interest Rate Maintenance Account or Record!
See the section headed “The Interest Rate Maintenance Account (IRMA)” in the following document:-
http://moslereconomics-kg5winhhtut.stackpathdns.com/wp-content/uploads/2019/10/35432615-Soft-Currency-Economics.pdf
Is it any wonder the UK looks set to have the worst number of coronavirus deaths in Europe given austerity cuts mania resulted in an ill-prepared NHS. The country is profoundly backward. Absolutely minimal awareness by voters this outcome has anything to do with an abject failure to understand their country’s monetary system!
I agree, and, sadder still, the question itself shows how badly we’re being failed by the mainstream media to inform.
Helen.
Thanks for the link.
Yet more to get my head round!
But how to condense it all down to understandable bite size chunks?
I’m interested in knowing all this stuff and am using up heaps of my time trying to understand it all. But I think I’m odd. Most people don’t have the interest or the time to understand this stuff.
How does the general public ever get to grips with the concepts? It’s too bloody complicated!
The “household” analogy is so much easier to understand. People have income and they have outgoings. If the latter is bigger than the former, then they have to borrow or go bust.
That this doesn’t apply to government, just doesn’t add up (literally) to people.
How to simplify the explanation of the system??? That is the challenge in order to bring about publicly driven change.
Hi Helen.
Just tried to read the Warren Mosler article you linked above.
I didn’t get very far!!!
I was ok with half the Dad, kids, business cards, household chores analogy.
I get it up to the point where the kids might earn extra cards. After this I start to struggle.
I get that the kids may want to earn more business cards than they need to pay back to Dad. They use the excess cards to trade between eachother. (Not sure I did much “trading” with my siblings, but happy to let that one go!)
What I don’t get is why they would store their excess back with Dad?
Why Dad would want to store them?
And why would he want to pay interest on the excess cards he is now holding for his kids?
I’m sure there are good reasons why but, without understanding this, the rest of the piece made no sense to me at all?
How about conscious un-spending
🙂
With the narrow ideology of the current Tory party, they know no other way. Spreadsheet Phil was on the radio in the last few days reciting the usual mantra – balance the books, reduce the debt. I hear no dissenting voices amongst them. Some, maybe many, seeing this an opportunity to indulge their wildest dreams of tax cuts and state shrinkage together with backing off efforts to tackle climate change
That suggests no recovery or worse. Followed by a potentially pyrrhic win for Labour at the next election, whenever that might be.
Excellent – as ever – Richard.
This is just more postmodern PR bullshit (that’s not a blanket condemnation of postmodernism, some of it very interesting) – but the Tories and Trump are, in uncanny ways, the manifestation of the theory. It will be austerity, we just won’t be allowed to call it austerity. It’ll be fake news – they’re already playing this game – BBC Panorama for example. Ironic that Cummings – with his declared hatred of Lacan – would seem to be the embodiment of what the postmodern describes. Perhaps this is why he hates it – because it reveals him and his fetishes – his love of illusory big data, which in no way exhausts the territory of what needs to be known, especially in terms of human relations – which, let’s face it, is not really their thing.
I too like conscious un-spending!
By chance I’ve written on the closely related why we really should never accept austerity under any guise:
http://www.progressivepulse.org/economics/a-disciplining-device-for-governments
OK Peter, the principle is that we do not accept any austerity. But the problem is, HOW do we express this? How do progressives win the argument?
Because it’s coming; it’s on the cards.
@PSR, I agree how to prevent austerity is difficult.
The only way in my view is that we have to press home at every opportunity the knowledge of how money is created. And always ask who the government ‘debt’ is owed to. Whose asset is it?
If the Daily Telegraph knows there’s a Magic Money Tree then everyone should – and must…
As a half-baked market fundamentalist Simon Wren-Lewis still hasn’t worked out that with the demise of the Gold Standard a sovereign government operating a fiat currency is operating a monopoly (anathema to Classical economists who live and die by the Invisible Hand!).
Government is now a price maker in terms of how much spending intervention it wants to make over and above automatic stabilisers. This monopoly position was inherent in Keynes’s recognition the private sector rarely optimises investment in the economy because of investment risk uncertainty. Repeated cycles of high unemployment should be telling you this!
To be fair to the Invisible Hand, I think Adam Smith (who refers to it only in passing in the Wealth of Nations) was merely applying to economics a concept with far wider application shared with and used by a number of the literati; notably Adam Ferguson (in what became sociology). The term ‘Invisible Hand’ was an impromptu characterisation of a critically important aspect of what is best thought of as a ‘meta theory’ of the development in civil society developed by the literati*, and our capacity both to understand the nature of that process, and understand it. The meta-theory had huge influence, beyond social science theory; the misleading element of Adam Smith’s brief example was not the economics, but because he seems to have felt impelled to use it a little adventurously to reconcile what he observed with his religious vision of providential progress in history.
* I hate to say this, but one of the few 20th century intellectuals who understood what was going on here was Friedrich Hayek – I know, I know, hear me out – who was a much, much better intellectual historian than he was an economist; and whose historical understanding of Enlightenment ideas seems to have been much less clouded by his own bad experiences of youth than I believe intruded into and seriously clouded both his politics and economic judgement; an emotional angst that he conflated with his politics and economics in irredemable confusion in the ‘Road to Serfdom’ (Helen Schofield in a link on another thread directed readers to an excellent Solow paper which touches on just this matter).
Two ‘understands’ in on sentence is not understanding.
It should read ‘understand the nature of that process and manage it’.
You are forgiven
I need forgiveness, often
It appears once in the 500 odd pages of the Wealth of Nations…it is bizarre it has such prominence
Richard,
In your Donation software you seem to be currently experiencing (with fortitude) a little of the other side of the Invisible Hand; the bit that is always there, but not always in the service of providential progress. I am confident your software will soon sort itself out, providentially. QED.
🙂
The work of C. B. Macpherson needs to be checked out because the whole concept of the “Invisible Hand” (what we now know today as Libertarian half-baked market fundamentalism which denies sovereign government has a monopoly on currency creation which can be used for the benefit of all) was being brought into being long before Adam Smith put pen to paper. It was appearing in the work of Hobbes, Harrington and Locke even the Levellers from the 17th century onwards as the Industrial Revolution began to take off. Macpherson described this predecessor of the Invisible Hand as Possessive Individualism:-
https://scholarworks.gsu.edu/cgi/viewcontent.cgi?article=1073&context=political_science_facpub
https://en.wikipedia.org/wiki/C._B._Macpherson
Of course sponsors of Blue and Red Tory Libertarians from the FIRE sector (Finance, Insurance and Real Estate) have taken over the work of denying sovereign government’s currency monopoly power in the latter part of the 20th century in order to wage an invisible war on the populace that seeks tribute by imposing high levels of indebtedness for a wide range of basic needs. See Michael Hudson for more on the Invisible Hand as war.
Mz Schofield,
Here we must disagree. The meta-theory of which I wrote was not in essence political at all. I cite here Friedrich Hayek, Law, Legislation and Liberty: London: Routledge and Kegan Paul, (1973); and in spite of the title, which in this regard specifically is misleading.
I’ll tell you how they (or Cummings) will do austerity.
They will level down other parts of the economy (the public sector for example, that I am a part of) and call it being fair to those who were furloughed or who lost their jobs.
They will use the anger, frustration and hopelessness of those furloughed or now on UC to drum up consent to do that, all under the banner of ‘fairness’, helped by the blue MSM. Nick Robinson will talk about this on Radio 4 as ‘only being fair’.
The Tories do not do ‘levelling up’ – it’s not in their nature. They will level down.
For the record, I am in work today although I have been working from home, still managing to get affordable home projects going. A number of us are in as we have to run void properties as private landlords are still making families homeless because they cannot pay their rent, or for emergency domestic abuse cases or helping out at our hostels which are full of homeless people. We still have to report figures etc. ,and manage staff.
I helped clean out a void the other day before we handed it to someone. I am on the list to help empty bins in the city, as are hundreds of my colleagues who have volunteered to help out at care homes and deliver PPE to the care homes in the city boundary. We report rough sleepers to the rough sleeping unit and report all safeguarding cases as usual – all of these have gone up in our town.
I’m sitting here watching these colleagues coming in, adapting to new work streams, helping on essential services, the banter of getting organised, short of PPE, grabbing a quick drink and setting out to do good and I wouldn’t want to be anywhere else or with anyone else at this time than this lot turning up, trying to keep things going.
And yet all of this will be forgotten when Covid is under control. It will not be Jews, Muslims or homosexuals they come for after Covid; it will be those in the public sector who will be made to pay the price, made to look lucky or special and undeserving – even after 10 years of Tory austerity and Labour betrayal over our pensions in 2003. It will be the same for the teachers who have tried their best to keep teaching but all people will see it that they have been paid whilst not in the school or just somewhere to dump the kids. The Tories will use the jealousy of others – like Labour tries to use jealousy aimed at the rich – to justify further punitive measures. The poor or just about managing will fight each other over the scraps.
Anyone who has managed to be paid during this crisis is a potential victim of the austerity to come. The undeserving, the enemy of normal, the exceptions – that’s what we’ll be. They will be the target. NHS staff might get more, but there will be reductions elsewhere. Remember that there will not be more money for the NHS or care workers – it will just be money moved around from others who will have to lose because the Tory thick-fucks think that all the money that has been created already exists and it is their job to just redistribute it (mostly to those at the top and sod everyone else).
The economic hit man John Perkins said:
“I’ve never met anyone who wanted to be a terrorist. They are desperate people.”
I am sure that more austerity may be a step too far after this. If the Tories do go for it (aided and abetted by an equally thick Labour party) then I suggest that there needs to be consequences for the those who pursue that course of action. Consequences.
I fear you are right
The arrival of the coronavirus means there’s a morality play now taking place here on Planet Earth! On the one side you have Darth Vader and the Forces of Darkness on the other side the Forces of Reason the MMTer’s!
Over-dramatised you think? Well the Darth Vader’s are the Libertarians who believe in the half-baked ideology of market fundamentalism that the Invisible Hand of the market will provide glorious well-being for all. The only obstacle to this glory is the arrival of any force of monopoly to mess it all up like government or trade unions. They lie of course to themselves and us because the historical existence of repeated widespread large scale unemployment suggests otherwise.
An MMT voice of reason comes along and points out that in fact the Darth Vader Libertarians have always been wrong there always has been a monopoly in existence or the potential for one that would correct the disfunctional tendencies of the Invisible Hand and that’s a sovereign government’s monopoly over currency creation. Here’s a Jedi called Warren Mosler pointing this out:-
“The Classical economists said that without monopoly markets would clear and there would be no mass unemployment. That is, it’s only a monopolist, such as a labor union, that causes unemployment and excess capacity in general. Keynes, on the other hand, said that even in the absence of monopoly there could be persistent mass unemployment, and then discussed characteristics of the monetary system that caused this to be the case. This ongoing impasse alone, which has continued unabated in academia for over 80 years, is sufficient evidence that neither side has yet to recognize that the currency itself is the monopoly in question.”
It is ME/MMT that recognizes both sides are correct. The classics were correct in stating it was a monopoly that was the cause of unemployment. And Keynes was correct in stating that it was the characteristics of the monetary system as he described them that caused unemployment. And the reason for the continuing disagreement is simply that neither side has yet to specifically recognize that the currency itself is a monopoly causing the unemployment in question.”
http://www00.unibg.it/dati/corsi/910003/64338-Warren%20Mosler%20Bergamo%20paper%20March%2010.pdf
Put more simply Jedi Mosler is saying the failure of voters to realise their government has monopoly power and use it to rectify the deficiencies of the Invisible Hand is the cause of much of our lack of glory like an NHS ill-prepared to tackle the coronavirus because of austerity cuts. This is the big moral issue now dramatically brought to our attention by the pandemic.
Of course the Darth Vader Libertarians have a hidden motive for denying the existence of this government monopoly as Jedi Michael Hudson has repeatedly warned us. Their hidden sponsor is the FIRE sector (Finance, insurance and Real Estate) the members of which want to massively indebt the voters for the basic necessities of their lives, such as an adequately equipped healthcare system. Government’s monopoly powers to prevent this form of “warfare” the extraction of tribute as Jedi Hudson calls it must be obscured!