The FT has splashed with this headline today:
And it added this chart:
Before saying:
A collapse in receipts flowing into the exchequer and a surge in spending led to the £174bn borrowing, which pushed public debt to 99.6 per cent of gross domestic product.
And the claim is wrong.
This entire deficit was covered by QE from the Bank of England, meaning that borrowing did not go up at all and that national debt is below 70% of GDP and not as claimed - because the government cannot owe itself, and central bank reserves are not part of the national debt.
When, oh when, will I have to stop saying this?
It's tedious to have to point out time and again deliberate economic misrepresentation designed to provide cover for a forthcoming round of austerity, which Rishi Sunak has signalled today, none of which is necessary.
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Here we go again the backward British on a campaign yet again to shoot themselves in the foot. As if the country hadn’t got enough health problems with Corvid-19 and needs to add obsessive self-harming to the list!
https://www.theguardian.com/business/2020/jul/21/uk-borrowing-record-coronavirus-pandemic-economy
There was poor old Keynes over-heating his brain to get the British to understand money his most key explanation being :-
“For the importance of money essentially flows from its being a link between the present and the future.”
Chapter 21, Part I, “The General Theory of Employment, Interest and Money” 1936
https://www.marxists.org/reference/subject/economics/keynes/general-theory/ch21.htm
And nearly 85 years later virtually nobody understands him even in an economy deflating pandemic! Sad country!
Indeed
Spot on. Yes,it’s sad that the vast majority of the public not only have almost no understanding of economics, but have also been indoctrinated by the politicalRight and a compliant media to believe a fraudulent narrative. As if Keynes, and others, had never existed.
50 years ago Ezra Pound offered this prescient warning: https://media.allauthor.com/images/quotes/gif/ezra-pound-quote-in-our-time-the-curse-is-monetary.gif.
Very good
Whole of Government Accounts for 2018-19 out today at http://gov.uk/government/publications/whole-of-government-accounts-2018-2019
(interestingly, it covers Covid-19 and Brexit issues)
This (of course) backs up what you say about QE, and should be well known to the FT –
“In the case of QE, the basic mechanics involve the central bank creating money by extending a loan to the Bank of England Asset Purchase Facility (BEAPFF).
The BEAPFF uses this money to buy gilts and high quality corporate bonds from the private sector which results in a rise in central banks reserves held by commercial banks.”
On the numbers, they say –
“At the end of the financial year ending March 2019, UK general government
gross debt was £1,821.3 billion, equivalent to 85.2% of gross domestic product
(GDP) (source ONS).”
Although, on the preceding page, we see –
“Government borrowing is achieved through the issuance of gilts and
Treasury bills. The total nominal value of central government wholesale debt
(excluding government holdings) as at 31 March 2019 was £1,407.2 billion, up
from £1,347.4 billion as at 31 March 2018.”
An interesting concept, that government debt excludes government held debt!
So the total nominal value of central government wholesale debt, at £1,407.2 billion at the end of 2019, was just 65.8% of GDP (no surprise to readers of this blog).
A blog tomorrow
Thanks
Backward aren’t we?
Not being backward is a three step process:-
1. Acknowledging we live in a “monetary economy” where money is used to achieve well-being.
2. That from time to time events will conspire to limit our desire to spend money to invest and consume and we’ll want to hoard money as we wait to see how matters unfold.
3. Hoarding money reduces the capacity for well-being and we therefore need to be able to counteract the effects of our hoarding. The only viable agency that can create money for hoarding as well as increase spending to counteract economic fear for the future is a sovereign government. A sovereign government does this by adjusting the quantity of its influxing and refluxing of money.
Agreed