This video has received some favourable comment in the last day or so, so although it is two years old and the numbers will have grown a bit in the meantime, it seems worth sharing again as all the arguments are the same as they were then:
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Still good “second time around”.
Since it was made we have seen how the failure to supply enough gilts to the market worked out. It drove yields on very long dated gilts to absurdly low levels (0.5%) which, when reversed, caused real problems (BoE intervention to support pension funds etc.).
Also, Singapore – a country with no need to “borrow” money – creates a “National Debt” for all the reasons you identify. Why would they go to all that trouble unless what you say was true?
Money must be universal in its use in any community; you cannot privatise it. A Tory Government attempted to privatise the National Debt, 1710-1720 – lterally; it created the South Sea Company, privatise the Debt, which imeediately first, and is probably biggest, most spectacular financial crash in British history: the South Sea Bubble. Fixing it created Walpole’s name, and made him probably the most powerful P< in history (in spite of his own doubtful financial affairs), by fixing the Tory mess. It took a long time for the electorate to forget that you simply cannot trust Tories with the public finances.
Actually, you simply cannot trust any political parties: period. The elcotrate should learn to use them for pragmatic reasons; but that requires the end of FPTP, simply to make a start.
“which immediately produced the first, and probably biggest financial crash in Britiah history”
I never lrean to hasten slowly ….
Government debt = Nation’s Wealth.
It is simply money in the economy that has not yet been taxed back. It is your saving, and money in your pocket.
If you want to pay back the National Debt, then you must empty your bank account and send it to the government.
The National Debt can not and should not be paid back.
An excellent video which I have sent to several people. But I am not sure that any Tory is saying ALL the national debt should be repaid, are they? Isn’t the argument mainly about the validity of debt/GDP and deficit/GDP target ratios ? Rogoff I belive was discredited. My understanding is that these ratios are arbitrary, with no basis in economic theory or empirical evidence. The treasury, I presume , would disagree. They must have SOME rationale ?
And there is the question of the “sustainability” of the debt. Last year the OBR was forecasting the possibility of debt/GDP ratios of 400 percent in 50 years time. Do we MMTers just say, so what?
What about the alleged death spiral of borrowing to pay interest on the debt, which increases the interest payments , so more borrowing is needed , and so on to infinity. Is there a good counterargument? I know we could just create an infinite amount of money to pay an infinite debt, but it’s not a good look , is it?
Could someone provide good answers for my sceptical freinds?
Jeff
Apologies for getting to this. It has been a mighty busy week
Japan is the evidence we can carry on, if the ‘debt’ is owned by the government and central bank reserve account interest is controlled, and inflation is not threatened
‘Debt’ is an artificial constraint
Inflation is not
Full employment is the goal
Real world issues matter in other words, not artificial balance sheet ones if no price is paid for artificially created debt supposedly owned by banks
Has anyone noted film maker Ken Burns’ documentary about the United States and the Holocaust – it was on BBC4 recently.
https://www.bbc.co.uk/iplayer/episodes/p0dm3cbt/the-us-and-the-holocaust
It’s a remarkable documentary – as good as his Vietnam one – and yet another warning about Fascism – Tim Snyder makes an appearance too.
I’ve come to the conclusion that in their own way, the Tory party is just as depraved in their delivery of 12 years of austerity and the underfunding of the NHS as any Nazi. They are not innocent or misdirected in my view.
But I’m still puzzled/frustrated etc., about the capacity for some of our society to still contemplate voting Tory. At the end of Burn’s documentary, it quotes Eleanor Roosevelt with some thoughtful words about how Nazism was allowed to grow which I’ll try to reproduce here:
” I have a feeling that we let our consciences realise too late the need for standing up against something we knew was wrong.
We have therefore had to avenge it but we did nothing to prevent it.
I hope that in the future we are going to remember that there can be no compromise at any point with things that we know are wrong”.
People dying in A&E; ambulances queuing at hospitals; cancelled appointments; knackered staff; long waiting lists for all sorts of services; Social Care in crisis.
These are all wrongs. What does it take I wonder for some of us realise it? Or is the awful truth that the Tories have succeeded in normalising it? Just as the Nazi normalised the rounding up of Jews and other unfortunates.
This is my deepest fear.
Your concern is justified
Is Inesrest payable to the banks on the QE part of the debt?
Yes
But at the voluntary discretion of the Bank of England and there is no need to do so
Not all countries do
many apply it to some of the balances but by no means all
We pay it on it all
I believe you Richard but I can’t say I understand it.
It’s a bit like when I first asked in a mobile phone shop about having a phone and they asked what sort of a contract I wanted. I had never heard of a contract and had no basis on which to answer.
I think it’s hard for you to understand the depth of my ignorance re financial matters.
Can you start further back with what the debt means?
( I grasp the basics of MMT I think but not well enough to convince other people)
A fair question
I am trying to work out how to do this
Blissex comments here:
https://stumblingandmumbling.typepad.com/stumbling_and_mumbling/2014/03/credit-controls-the-crisis.html
“BTW, it occurs to me that the “traditional” explanation I reported that *banks* create “money” out of thin air is not quite right.
Who has actually created the “money” is the *borrower*! (remember that you read it here first :->)
Because the whole thing starts when the borrower deposits a previously non-existing IOU (created out of thin air or at least paper and ink) with the bank, and the bank gives them their own IOUs (chequebook) or the BoE’s IOUs (banknotes) in exchange.
The logic behind the above is always and only *acceptance* by sellers as people borrow “money” in order to buy something from a seller.
Buyers borrow by depositing their own IOUs into banks to get bank IOUs because they assume that sellers will accept the bank’s IOUs but will not accept their own IOUs.
This has as a corollary: it is *sellers* that extend credit, not banks, and they prefer to extend credit to banks (by accepting their cheque IOUs) or to the BoE (by accepting BoE banknotes IOUs).
Otherwise if a seller were to accept the IOUs of the buyers, why should the buyers (and the sellers) pay a bank “interest”/”seignorage” to act as middleperson?
And as a consequence, bad things happen when sellers no longer accept the IOUs (“money” as cheques) of banks, and ever worse things happen when they no longer accept the IOUs (“money” as BoE banknotes) of the BoE, and that’s why the acceptance (“legal tender”) of BoE banknotes is backed by lots of guns.
Of course the question is why should a bank issue their own well-accepted IOUs or those even better-accepted of the BoE in exchange for a random customer’s IOU deposited with them.
And that’s a difficult question indeed, and that’s why it is a matter of estimating risk and collateral and loss reserves, and why so much recent and widespread financial fraud is based on clever customers depositing with banks IOUs collateralized with great “optimism”.
Bank management may also have a great personal interest in accepting optimistic collateral for the IOUs deposited with them by customers, if they get significant commissions every time they issue a bank IOU in exchange…”
Money is created by the exchange of promises between a customer and a bank
You can’t deposit money in a bank
You exchange promises with a bank