I get really annoyed by all the economists going around saying that we have to work out how to pay for Covid when the simple fact is that we already have. When we realise that we will all be a lot better off. Until we do we could remain in an almighty mess. In this video I explain why.
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Quantitative Easing was a ruse to get round an EU law that said no government is allowed to borrow from its own cenral bank? I didn’t know that! So the EU was stopping the B of E creating money ad lib. Surely a case for Brexit? No, because QE got round that little problem. But it seems that the government liked the idea that government spending ad lib was not possible. As Richard says, although now we are out of the EU, and the government can spend, it won’t! Presumably because the idea that we can’t spend ad lib is politically important to the government. So QE was not just a ruse for allowing the government to spend ad lib pre-Brexit, post-Brexit it continues to be important as a cover for ad lib spending when the government wants to, whilst excusing it to starve essential services when it doesn’t. Machiavellian or what?
The US and Japan use it too, as do Switzerland
So the EU was not the reason
The reason was central bankers did not like admitting what they were doing when funding government
How are we going to pay for it is very widespread. I get particularly annoyed when the phrase is used in a way that suggests that it is a factual statement. The BBC has done this, a number of times during editorial pieces or interviews ‘its got to be paid for somehow’ is framed as an absolute.
An example below is from an article on Navy Lookout, formerly Save the Royal Navy, who admittedly like to make judgements about what is and isn’t affordable for the navy.
‘Somehow the bill for COVID will have to be paid’
Who presented this bill and who do we pay?
By way of a request for clarification to anyone in the know, the UK only fairly recently finally paid off its debt for the second world war. Is the difference between this and money spent on Covid, for instnace, that in the case of WWII we did actually borrow money from the US. With the Covid spend we have not borrowed from anyone but have created the money. Anywhere near correct?
in 1918 the world was on the gold standard
Money was rationed
Debt as real
None of those conditions hold true now
There is simply new money – and that is it
Very clear explanation, thanks.
I suspect the government knows full well how money can be spent into existence. It knows all about the magic money tree. It knows that Covid is the perfect cover for paying its friends and associates. As you have discussed here and in another post, inequality is what is likely to follow.
The new money goes nowhere near the public sector. Instead it’s given to Serco or Deloitte or Cummings’ mates. The purpose is simply to direct money to the haves and keep it away from the have nots.
That the government can perform this trick right in front of our eyes, tells us how easy it is for an effective propaganda machine to straight jacket our thinking. We believe there is some debt to be paid. We are kept ignorant of the true mechanism. But there is a price to be paid for keeping people so badly informed.
I cannot see how any government can perform this trick forever. Remember, it results in more and more money flowing into the pockets of the super rich, and the gap between rich and poor widening.
Eventually something must give. The economy, will become starved of money because the rich will have locked it all away in their savings accounts. They could print more but we already know where that would end up. With no money to drive things, the real economy will be forced to slow down.
Ultimately, if the government goes too far in stealing everything for itself, the people will respond. It may take years but eventually a backlash will happen. This particular government will probably try to walk a tightrope. It will push its luck to the limit of what it thinks it can get away with.
Just heard about the “hole” in public finance on Channel4 news. Is there any news media anywhere that gets MMT and the fact that QE has paid for Covid measures?
No – they will not publish the proper narrative