I did a series of tweets yesterday pointing out that the dispute between the Westminster government, the mayors of English northern cities and the First Ministers of devolved government around coronavirus lockdowns does, when push comes to shove, come down to money. The heavy involvement of Rishi Sunak in the issue makes that clear.
What is also clear is that the Treasury is claiming that there ‘is no money left'. It is being suggested that there is no money available to provide further lockdown support. This, of course, is absurd.
Firstly, that is absurd because so far this year every single penny that has been spent on coronavirus support has been created by the quantitative easing process. There has been no extra demand of taxpayers. There has been no net borrowing this year. Everything has been paid for, costlessly, by Bank of England money creation. And, because we face growing unemployment there is no risk of inflation arising as a result of this money creation process. The consequence is that at this moment more money could be created to support these cities and devolved nations in tackling the problems they face, but the government is refusing to do so. Of course it is right that they are outraged as a consequence.
Secondly, though, what is annoying is that this argument is not being used by these mayors and these First Ministers to support their case. If only they understood just a little bit more about macroeconomics, or quantitative easing, or even (dare I say it) modern monetary theory, they would find that they have all the arguments that they need to demand the money that they require to support their regions through the periods of crisis that they face. It is deeply frustrating that they will not present the right arguments.
Thirdly, it is as frustrating that Labour is not doing so nationally.
There are massive potential constraints on action at present, almost all of them imposed by reasonable fears of infection. The one thing that we are not constrained by at present is money. Of that, given our current circumstances, we can have pretty much whatever we need, so remote is the possibility of full employment at present. And yet, through ignorance, politicians do not make this point. I wish they would learn, very quickly. It would be good for all of us if they did.
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Place your bets on this No. 1 issue that Keir Starmer will never come out of the closet on how money is really created in the UK by both government and private sector banks despite the serious implication that by not doing so it prevents the UK economy from living up to its potential in dealing with the pressing problems of coronavirus and climate change amongst others.
I share your frustration, but politicians rarely have economic expertise or much time to acquire it; they are dependent on those who do have such expertise. So where are they getting their advice and expertise, if they are getting it? How can they get better advice and expertise?
They could call
We have a system which actively weeds out those who have a real understanding of how modern economies work. Nobody who does, could in good conscience, stand on the platform offered by any of the main political parties. All constrain themselves by slavish adherence to a antediluvian mythos as to what money actually is, and how it comes into being
@ Ross
“antedeluvian mythos” is about right now getting close to the same kind of mental inadequacy and rigidity of mind-set that drives QAnon belief:-
https://en.wikipedia.org/wiki/QAnon
@ Peter Cave
I can’t believe you wrote that. We live in a predominantly monetary economy the workings of which greatly determine the quality of the well-being citizens experience and you pretend politicians should be let off the hook for not making the effort to properly understand the basics of how the country’s monetary system works! Wow you set a low bar for democracy!
Helen,
The bar has been set.
https://www.rt.com/uk/407973-money-mps-poll-bank/
I actually spoke with my MP(a Labour front bencher) on this matter a few years back. She the said to me that it all” made head head spin”,at least she knows how money is created now.
Helen, I would love it if politicians were to have the ability or time to understand such issues with confidence. And actually, I do tend to agree that they should make more effort to do so. But I think you greatly underestimate the many other demands on their time, and the genuine intellectual demands of economics. The need of politicians to depend on economic advisors is far from new – it has been so forever. It would be great if every leading politician were of the intellectual calibre of Denis Healey or Gordon Brown, but that is not the case, and I don’t think it ever will be.
I have discussed this issue with two MPs this week
@Peter Cave
In the few weeks following every election have some seminars for which attendance is mandatory for new MPs to explain money creation, economics etc. For that matter, it might also be useful to have some that explain the importance of the rule of law, human rights, ethics etc
Surely the least we can expect of our representatives is that they have a basic understanding of the job they are there to do.
Interesting discussion with Prof D Blanchflower on Alex Salmond show this week. Alex Neil also pointing out that a substantial amount of gov debt is owed to itself and will never need to be repaid!
Is this the emergence of MMT into political discourse?
https://twitter.com/AlexSalmondShow/status/1316471501374337024?s=20
Looks good
Going on the blog soon – even if I watch it later
I get on well with Danny and Robin – good enough for me!
Your explanation of the availability of money is so clear and convincing that it is strange that an apparently capable and intelligent person like Andy Burnham does not use this argument. Similarly with providing school meals for hungry children during the holidays. Rushford was able to persuade Sunak to do the right thing in the summer, so why not now as the financial circumstances are exactly the same?
I gather he has been sent the blog post
Once again spot on.
I believe this from Robin McAlpine ( I’ve never heard him so angry) supports your views 100%.
https://sourcenews.scot/robin-mcalpine-as-the-government-sleeps-at-the-wheel-this-is-how-we-could-save-the-economy/
I would actually go further. I’m becoming ever more concerned that Ms Sturgeon is concentrating too much on her vanity projects of Political Correctness and Positive Discrimination and bowing to these twin goddesses and her army of ‘Woke’ Followers on Twitter to do her day job.
More and more each day I’m comparing the above with the activities of Billy Graham’s missions of the 1950s/early 1960’s where hundreds of thousands attended his rallies in Scotland alone. Where anyone who dared question his credentials or his far right motives was humiliated and publicly pilloried. There was talk of people being jailed for publicly condemning his actions.
It was only when the old saying of `power corrupts and absolute power corrupts absolutely’ overtook him and he went too far that the good Scottish folk eventually so through him and life returned to normal.
I’ve got this gut-feeling that we’re getting close to that tipping point.
I will nit post you under this name again
It is – as time goes on – simply very worrying that even so called progressives are tongue-tied about MMT or even PQE.
I have gone beyond what to call this complete and abject failure to see beyond the orthodox constraints that are simply self imposed when so many people are depending on something better.
This is pure tragedy – it really is.
The situation is very bad indeed – I am in a major professional dispute on the issue right now
Well good luck.
My mother in law is ill with dementia and as of recent weeks seems to be forgetting how to eat. She is becoming very frail and week.
My partner was able to hold her hand yesterday, but now the care home she is in is going to lockdown of it s own to protect staff and residents. So now she can only see her Mum using Skype or a mobile phone. We have been told that she may not survive beyond next year and die in the company of kind strangers.
The thing is, come the next election – what will people remember about this time? About how badly this was all managed? About the lack of financial support? About the lack of local testing?
Will they compare it with how the private banking sector was bailed out in 2008 without a blink?
We can only hope so.
But the Tories I wager will lean heavily on their funders – rich Brits and Russians alike – they will spend a lot of money to win again and then there is that they also good at:
https://www.theguardian.com/uk-news/2020/oct/16/tory-election-agent-guilty-of-tricking-voters-into-nominating-candidates
Sorry PSR
I have experience of how tough this is
To be honest, I can see that Andy Burnham et al don’t see themselves in the job of telling the Treasury how to manage money availability. They can’t raise money in the same way themselves, so they need to put their effort in persuading Sunak to provide some. (They know he has found it when he wants for other things).
But obviously, the principles championed on this website demonstrate money could be found if there was political will.
Richard labour politicians know about MMT, at least the major ones do, but they have not the courage to talk about it in public. They are cowards
Hi Richard I would like to conflate your “don’t blame me tweet” of last night with this post. I voted Corbyn in the last two elections and also voted leave. It has always been clear to me that any capital cost of leaving the EU could be funded by MMT approaches as the cost of COVID can be. I think the former a worthwhile investment and we will have to differ on that. I leave it to you on whether to blame yourself on shaping the thinking of others on how Brexit could be funded. If it helps I can honestly say I have not a scintilla of influence on how things have turned out in terms of Johnson cocking things up. So don’t blame me either.
When we have the disasters of COVID and Climate Change why on earth do you think adding Brexit is a sane thing to do? What benefit exactly will we all gain by “funding Brexit” – And very sadly we already are funding this insanity, billions being spent on developing new computer systems and staff to try and manage the border you have created, green land being covered in tarmac to become lorry parks, the high likelihood of farmers to be driven out of business and crap food imported instead — please do tell me what benefit are we deriving, and don’t say sovereignty- in case you haven’t noticed we are very rapidly becoming a dictatorship and the Henry VIII powers will add to that.
AliB we didn’t have the disaster of COVID in 2016 and the question of doing more, sooner on climate change has not been put to the people in a referendum. I am not confident such a point would have been won if it was put. More likely as the years go by. Sadly no party elected to government has taken the climate issue seriously despite promises to the contrary.
It amazes me that the “will of the people” may end up being respected. A Brexit with a reasonable trade deal for both sides was what most sensible Brexiteers wanted and we may end up getting one yet.
Phil
I can’t help but say that your optimism is deeply deluded
Do you really think the havoc to come was ever there will of the people’?
And did anyone say that the vote was for significant unemployment?
Richard.
“every single penny that has been spent on coronavirus support has been created by the quantitative easing process. There has been no extra demand of taxpayers.”
I am often confused with references to the use of tax. I believe that you say that taxation DOES NOT pay for anything – spend first, then tax as necessary. Yet here you are running with hare and hounds again. Small wonder then that MMT is not well understood?
What I said is true
And MMT consistent
More “ship of fools” nonsense from The Guardian today:-
“UK credit rating downgraded by Moody’s amid growth concerns”
https://www.theguardian.com/business/2020/oct/16/uk-credit-rating-downgraded-by-moodys-amid-growth-concerns
Whereas previously they wrote in the aftermath of the GFC:-
https://www.theguardian.com/business/2011/aug/08/us-treasury-bonds-shrug-off-downgrade
Of course The Guardian learnt no lessons from the bond vigilantes failure that time round and continues to this day it’s right-wing economic garbage whilst pretending to be a liberal newspaper! Massive cognitive disconnect in the UK!
What we have is a fear of looking ridiculous. Advocating money printing as Adair Turner once said, “is the last taboo”, though he calls it Overt Monetary Financing .
I used to run a Positive Money supporters group in my region. About 4 years ago the Green party adopted Positive Money’s proposals in full . However when they appeared on the TV or radio in interviews they never discussed money creation at all. The problem they said was that they only ever got small time slots on the media and they needed to get their message across in that short time. To have to get into the finer detail of money creation and crucially how they would pay for it all, to a very sceptical interviewer was in their view not a good use of limited time. Nor were they experienced enough in the in and outs of such a subject, so they felt slightly insecure about broaching what is a massive, controversial and grossly misunderstood subject…money creation.
They still feel like that
Thankfully they are moving to MMT though
I still follow Positive Money ,as well as this erstwhile blog, and even they are becoming more or less an outright MMT movement.
I agree
They have had to change, a lot
“Nor were they experienced enough in the in and outs of such a subject, so they felt slightly insecure about broaching what is a massive, controversial and grossly misunderstood subject…money creation.” I think you have put your finger on a key problem. Arguing for MMT is a huge political risk when (it seems) most of the economics establishment is unwilling to engage in a serious debate on the issue, and when the media is saturated by the language of ‘taxpayer’s money’, national finances as like household finances, and the IFS as the go-to oracle on all matters economic. A coordinated effort to change this, using all the prominent economic voices available, would help a lot, I think, to break the ‘there is no alternative’ mentality.
I very much agree, I’ve been personally trying to make a differencea dn tell every single person I can. Positive Money asked us to target and lobby our MP’s as 85 % of them did not know anything about money creation. So we all need to speak to our MP’s and let them know how we feel. We have to make them aware of this.
It’s not just money creation though that this nation refuses to withdraw its head from its proverbial is it whilst its economy falls apart it’s understanding what’s currently going on with global trading:-
https://www.propublica.org/article/robert-lighthizer-blew-up-60-years-of-trade-policy-nobody-knows-what-happens-next#new_tab
This feels very much like a country that’s gone into “intellectual” hibernation or suspended animation and it did this long before policies of pursuing Austerity and Brexit arrived!