I have an article in The Big Issue. It's now available online here:
The core argument is this:
If it was acceptable to use [QE] to save Lloyds, NatWest and many other banks in 2008 then it is most certainly acceptable to do so again now to save 10 million or more UK households from debt, cold, hunger and the risk of homelessness that face all of them.
And to put this money creation process in context, less than £50bn of the £900bn of money created has to date been cancelled, because it can't as such be repaid, for technical reasons. Given the current state of the economy it's to be hoped that no more will be cancelled for a long time to come. That's because this money that the government created has become a key part of the money supply that keeps the UK economy going, and inflation means we need more money in circulation now, and not less. The £150bn or more I suggest that the government should spend is, in fact, essential new money to keep the economy and money supply afloat that will never need repayment as a result.
The reality is that we now face a massive crisis but also have a proven way to solve it, using money creation and quantitative easing. No one need be fearful of the winter to come if only the new prime minister uses the tool that has got us through the last two crises. But if she won't, we are in the deepest of trouble. We can only hope Truss can change her mind. If she does not the consequences are almost impossible to imagine.
I am beginning to think Truss will be using QE, and very soon. If so, the argument has not been in vain.
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There is also the possibility that she knows that she has to do something (like Sunak) but its the narrative that will follow on later as to how the expenditure is to be portrayed (as a huge debt?).
It’s interesting to see if Truss has misled the Tory faithful in order to get into power by talking Thatcherism and then does things that are the opposite.
If so, what a user.
As one american Neo-liberal said about Neo-liberals – ‘We make our own reality’.
I think she may be announcing QE by next week
James Meadway has an article in The New Statesman saying that the Tories under Truss will venture into Modern Monetary practices and print money to ease the crisis.
I always thought that possible
The other strangeness is that James Meadway thinks MMT possible
Certainly it seems that “borrowing” is being briefed as what will happen. https://www.bbc.co.uk/news/business-62801913
The problem, as you have pointed out previously, is that subsidising the retail side of the industry just means public money being given to the banks and the generating companies because of the way the totally artificial energy market works. It is absurd that by dividing it up we have ended with one bit charging high prices to consumers and needing state bail-outs while another bit is making unprecedented profits. As you have said, it needs putting right so that the charge to consumers is the actual generation and distribution cost plus a fair modest margin, achieved either through getting industry agreement or by taxation.
Even then though, costs are genuinely going up and need to be dealt with. I wonder whether for domestic customers that can largely be accomplished by changing the charging structure in the price cap. While there are reasons why a standing charge is used, it has the effect that low users (few kWh) are paying a much higher unit price than high users; why can’t the charges be changed so modest usage costs similar to the recent past, while energy beyond a suitable threshold gets charged at a much higher rate? If well planned the total charges would pay for generation, but pensioners and low-paid with less energy use would be protected while high users would be incentivised to conserve energy which is what the planet needs. However government money/QE will still be needed to meet the energy costs of public services and to prevent the collapse of industry.
“why can’t the charges be changed so modest usage costs similar to the recent past, while energy beyond a suitable threshold gets charged at a much higher rate?” From a societal POV that’s good sense, but it goes against the unfortunate fact that selling more product through the same infrastructure is more profitable and (in a rather narrow sense) more efficient. As such I suspect it goes right against the traditional received wisdom not only in the commercial but also the technical sides of the energy industries. Getting better plant utiisation has been a pwerful objective of the electricity supply industry – reasonably enough, from its own perspectives – pretty much from day one.
Standing charges need to go. When I worked in supported housing for formerly homeless young people they would not use any electricity when their key meter ran out and they could not afford to top it up. No fridge, cooker, light or hot water until they got their next benefit payment. They would still end up in debt because of standing charges. And the cycle continued, with the debt eating into the key top up. My elderly mother had to pay gas bills although she had no gas appliances just because there was a gas meter in her flat. She couldn’t get it removed as it was a local authority flat.
I have already seen, on social media, several dire warnings of inflation and ruin which will be caused by borrowing. Burdens on our grandchildren etc.
A lot of the money will go to the oil and gas extractors who are not British and , I presume, we can’t tax. And if it is not circulating here, it can’t be inflationary. I also presume it will affect the exchange value of the pound and that might increase prices.
However, much of £150 billion will be used to pay people more. That is the only way to reverse the exodus of people from the NHS, teaching and other public services. That will be taxed with Income tax and National Insurance, and when they spend through excise tax, VAT, Council tax and so on. The people who sell them also pay taxes.
So the net cost, over time, will be less than the figure. I am sure it was you, or Peter May, who pointed this out at some point.
It does puzzle me to an extent that the journalists don’t mention it. I suppose they prefer a black or white narrative-unless they just don’t know. Surely not.
So, if Rees-Mogg is one of her backers and he has been talking about borrowing we can only conclude that it is going to happen?
As others have alluded to here though, the borrowing that Rees-Mogg is so enthusiastic about is that to help the market at the end of the day and create a trough for the banks to feed off as well I imagine. I see it as a form of disaster capitalism as there are so many other better ideas spoken about here.
But I think we all know what is coming next.
It will be about a finite money supply and what they can’t do in the public sector.
And then the use of higher interest rates to increase profits for the rentiers involved in the scheme (telling the public that that’s just how it is and that we’re doing our best).
The Tories will give with one hand and take away with another I wager – they still want to reduce public sector GDP by 12% a year – they now have a smoke screen behind which to do it and enrich the 1% too.
As Mirowski has pointed out, Neo-liberals are never ones to let a good crisis go to waste.