Twitter has been my focus this morning. Here are some more of my posts on the national debt in the past hour or so:
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Brilliant Richard
How much of the widely-reported £24.3 billion public sector net borrowing in May 2021 is represented by “borrowing” from the Bank of England’s asset purchase facility, which it entirely funded by HM Treasury?
The vast majority
Excellent as usual, Richard.
Thank you.
I just wish Ken Clarke had seen it before the 07.50 spot on Today, this morning.
Economic facts Richard Murphy doesn’t seem to understand:
“The government can create all the money it wants, costlessly”
This is totally untrue. Governments can print money, but it is NOT costless. Increasing the money supply erodes purchasing power, weakens a currency and promotes inflation. It also tends to inflate the prices of real assets, which in turn means inequality increases.
“Tax doesn’t fund spending. It exists to control inflation.”
Only in the wibbly wobbly world of MMT. Which has been repeatedly shown to be poor at best, totally wrong at worst. Yet even MMT, in all it’s texts, hasn’t bothered to show HOW tax can be used to control inflation. It just it can be. No proof, evidence or theory – just a statement.
“Balanced budgets never solved an economic problem”
Massive budget deficits have caused more than a few. Printing money even more.
“Full employment pays for itself”
Not always true. Plenty of economies have full or near fully employment but are running massive budget deficits. If what you say is true, you wouldn’t see this.
I post this just for the sake of it
I have answered such pints so often I can’t be bothered to do so again
I think the problem is that none of the papers or proponents of MMT can answer these questions.
Instead they rely on just asserting the various points you made when the facts get in the way.
For example, we know that printing money is not costless. We know that tax cannot easily be used to control inflation, if it can be at all. We know that massive budget deficits and debt have caused far more economic disasters and collapses than balanced budgets ever have. We know that full employment doesn’t always pay for itself.
How do we know these things? We just have to look at the real world and economic history.
Unfortunately, they basic premise of what you are proposing – print money and keep interest rates at zero to make it costless – has been tried before. Every time resulting in economic failure.
That you don’t even acknowledge the costs, effects and risks of doing so either make your economic analysis so basic as to be childlike, or you are intentionally omitting the risks at which point you are doing nothing more than selling snake oil.
As a matter of fact money creation is costless. It is done on a keyboard. There is no physical process involved, barring the energy expended in typing the entry. Central banks all recognise that this is how all money is created. The Bank of England did in 2014. Your claim that this is not acknowledged is false.
£800bn (near enough0 has been created in this way in the last decade. Please point out the inflation to me.
As a matter of fact tax can be used to control inflation: anything that takes money out of circulation does so. Some taxes are better suited than others. VAT is vastly more effective than interest rate changes, but regressive in impact (but then, so are interest rate changes)
Has the UK ever collapsed for having a national debt? Please tell me when it did
And given that the 500 year history of interest rates has been downward the current near zero is inevitable and sustainable
The facts are all on my side
Try to find some in an economy like that of the UK (not another type of economy: I wrote about the UK) where this is not the case
And don’t use gold standard era data: we have a fiat currency now.
“As a matter of fact money creation is costless. It is done on a keyboard. ”
I’m not sure you are being serious here. I was OBVIOUSLY not talking about a physical cost of printing money.
I was talking about the cost in terms of currency depreciation, purchasing power and inflation.
“£800bn (near enough0 has been created in this way in the last decade. Please point out the inflation to me.”
Much of that money was created post the 2008 crisis, when the money supply was falling dramatically. Even then we saw measured inflation above base interest rates and massive asset price inflation. Average UK house prices for example are up approximately 50% in the last 10 years.
This crisis is a bit different though isn’t it. We’ve had QE, but no banking crisis. Financial market liquidity was never at threat. As a consequence the money supply is growing by over 10% year on year. Yet by your logic, the money supply has no effect on things like prices. Basic economics be damned.
UK inflation, the narrow metric, is already 2.1% and set to rise. The RPI measure is 3.3%. PPI has gone from 0% at the start of the year to 4.6% – and is a good leading indicator for CPI.
“As a matter of fact tax can be used to control inflation: anything that takes money out of circulation does so.”
Once again, you are just stating it as fact. No evidence. As with all the MMTers, no explanation of exactly how this can be done. The mechanism is really rather important.
The literature – of which there is a lot – says tax basically is useless as a means of controlling inflation. There are too many substitution effects and too much of lag to make it work. Which is why rates are used instead.
“VAT is vastly more effective than interest rate changes”
You’ve literally just made this up. There are plenty of studies out there showing that increasing VAT rates can INCREASE inflation in some cases. Yet you are saying that you can increase taxes to decrease inflation.
“Has the UK ever collapsed for having a national debt?”
Depends what you mean by collapsed. The low growth period after WW2 was heavily down to the debt incurred. Or in 1976 when the UK went to the IMF. Besides the point really – in general terms we know that too much debt slows a country’s growth, and many other countries have had debt derived economic crisis around the world. That the UK hasn’t had one as serious as yet doesn’t mean it is impossible.
Name a single country EVER that has had an economic crisis because it had too little debt.
“And given that the 500 year history of interest rates has been downward the current near zero is inevitable and sustainable”
This is idiotic. Interest rates were lower in the 1600s than they were for almost all of the 1900s. For most of the 20th century they were rising. So not only are you wrong about the history of interest rates, you’ve made a totally stupid assertion based on the last few years – with literally nothing to back it up.
“The facts are all on my side”
Apart from getting them all wrong, of course.
“Try to find some in an economy like that of the UK (not another type of economy: I wrote about the UK)”
Ah, I suppose the UK is different. Special somehow? Probably because you pontificate on it with your self-made up version of economics?
Every country that has defaulted on debt or had a debt led economic crisis in the modern era has had a fiat currency as far as I remember. Every country that tried to finance spending by printing money has also had a fiat currency. There is no magic money tree specially for the UK. Economics is the same for all countries – only the situations differ. But as mentioned, the UK is not is a particularly special situation.
Pretending that the UK can simply print money essentially without limits (which is exactly what you are doing above) tells me that you are either a totally incompetent economist (if I could even describe you as that, given your claims), a liar and propagandist or just plain old stupid.
I suppose we should just be thankful that idiocy on this scale is confined to some dank little corner of the internet and rightly doesn’t get a look in when it comes to mainstream economics.
Let’s be quite clear: MMT is a bogus theory pushed by cranks and fools.
The initial round of QE in this crisis was announced precisely because we did have a financial crisis – in March 2020 when Andrew Bailey then claimed to have saved the whole economy
He did not, of course. But if you are not aware of that, and not aware that there was also a liquidity crisis over the last year only averted by QE then very clearly you have not a clue what you are talking about and all else you say is simply rubbish because it is so ill-informed
MMT is not perfect, but then no theory is since all are abstractions from reality, expecting yours that is, which appear to be abstractions from fiction.
And I note you can’t name a country like the UK that has failed for having a fiat country – because of course there is no evidence to support any of your claims. You can literally provide none
Please do not call again. And do your research – if you think your claims on interest rates are right please tell the BoE why they have got theirs wrong
But who gets taxed if tax is used to control inflation? As has been said, the very wealthy save lots. If tax rates go up, they might save less but they won’t spend less. So there’s no point increasing taxes on the wealthy to try and control inflation.
So tax rises will have to be across the board. At a time of rising inflation, you suggest telling the poor that taxes on them will have to rise? How will that go down with the electorate?
Could you at least have the honesty to admit this? And accept the political impossibility of doing so? Which is the difference between theory and practice, between those pontificating from the safety of a sofa and those who would actually have to implement the policy.
First, taxing wealth is of enormous importance to tackle asset price inflation — the biggest area of risk of all now
Maybe you have not noticed?
Second, I have made proposals for progressive consumption taxes. Again, maybe you have not noticed?
You see, I address reality. You pontificate
You are also the owner of what seem to be many identities here, none of which ever seem to have resulted in useful contribution.
Your refererence to the 2008 crisis and “mainstream economics” in the same comment was unfortunate; it served as useful reminder to us of the failure of the economic neoliberal mainstream to identify the critical economic data in a usable timeframe up to 2007-8, and comprehensively failed to predict the crisis. For the avoidance of doubt, the central purpose of science is prediction. Economics has lost considerable credibility in the last ten years, as a consequence of its own failures. Neoliberal theory is flawed, and its empirical methodology is weak. May I sympathetically advise that apologists for failed economic theories are ill advised to start throwing stones, especially while occupying their own glasshouse.
I see you have not provided your full name, so I am glad to see that you have spared yourself some embarrassment.
>>Name a single country EVER that has had an economic crisis because it had too little debt.<<
The United States. In fact every depression has been preceded by a big decline in Federal debt:
http://www.asymptosis.com/does-reducing-the-federal-debt-cause-financial-collapse.html
Well said Richard
My simple-minded view
Governments don’t spend money, they invest it.
A good investment more than pays for itself (Charles Adams. http://www.progressivepulse.org/economics/basic-econimics/the-magic-multiplier-effect)
There will always be enough money for good investment
I wonder if it might be worth turning the whole ‘National Debt’ argument on its head and explaining what ‘Government Stock’ is used for – I suppose in effect it is (interest bearing) banknotes as far as financial institutions are concerned then the idea of what might happen if they were taken away might be easier to understand?
The argument is correct
Good lord – this Huw chap – what a load of crap. Please don’t let him in here again peddling his Neo-lib bullshit.
On the contrary, I say let him in with the same juvenile arguments that politicians are fond of spouting so that people here can counter his misguided assertions.
It’s fair enough for a supporter of any economic idea to come on here and state their case. Personal abuse is not on. It does show that the neolibs are beginning to panic. Their paid trolls simply can’t keep up, and their frustration manifests itself as abuse of others.
The stuff off here is worse….