I posted this thread on Twitter this morning:
Quite extraordinarily, leading politicians, including Kier Starmer and Rachel Reeves have in the last few days returned to talking about the country maxing out its credit card, just as David Cameron did in 2015. This is utterly absurd. A thread…
[This is a long thread. If it appears to stop part way through, push the button to ‘see more replies' and the rest should appear.]
As a matter of fact, a country can't have a credit card. It's even questionable whether the UK has a national debt when what politicians describe as such is made up of all our notes and coins plus all the savings accounts that people have with the government.
Some of the savings accounts are literally with a bank, because that is what NS&I, or National Savings & Investments, which is what it used to be called, really is. Around £230 billion of the so-called national debt is made up of deposits with this state-owned bank.
Premium bonds are also part of this so-called national debt. I am pretty sure that most people who have such things have no idea that by doing so they actually own a part of the so-called national debt, but according to our politicians, they do.
We would never describe deposits with a bank as a threat to its viability and something that they must urgently pay back or limit in amount. So, in that case, why on earth are we saying that about this national savings bank?
Most of the rest of this so-called debt is made up of bonds. Saving in bonds is commonplace because most banks and building societies issue them. They're pretty easy to understand. You save a fixed sum, for a fixed period, at a fixed rate of interest. They're just savings accounts.
The only real difference between bank savings bonds and those issued by the government is that gov't bonds can be bought and sold during their life because they are traded on stock exchanges. But they're still savings accounts, just like those from banks and building societies.
And given that pension funds and life companies are the biggest owners of these government bonds we can be sure that they really are savings accounts - because our savings are what, after all, those companies exist to manage. So why do we call them debt?
That's only because we know that, like all savings accounts, the person depositing the money can at some time ask for it back. But we don't say banks are in debt because they also owe the money saved with them back to depositors. So why do we do that in the case of governments?
It literally makes no sense to do so. But then there is something else really weird to note about this so-called national debt. This is that about one-third of it, or roughly £750 billion right now, is owned by the government itself.
In other words, the government is saving money with itself, or it owes itself money, whichever way you want to look at it. In either case, who cares?
Saving with yourself is as economically meaningless as owing yourself money, so why do politicians pretend debt that the government owns exists when it really does not? The reality is that this debt (or these savings) is much less than what all our politicians claim.
Having said all that, let's get back to this maxed-out government credit card story and let me ask a simple question, which is, have you ever heard of anyone who saved in their credit card account? No, me neither.
In that case, and given that the government only provides savings accounts to people who want to save with it, it has nothing like a credit card. To suggest it has is utterly absurd.
But, let's for a moment assume that these politicians are right (I know, it's hard to imagine, but do so, just for a moment). Assuming that they are, who is it that they think issued this credit card?
I guess the only bank that could would be the Bank of England. But the government owns that. Imagine for a moment having your credit card issued by a bank you owned. Do you think they'd get very stroppy with you about how you managed it? I don't think so.
And do you really think they'd get tough on your credit limit in that case? I really do doubt that as well.
In other words, not only is there no credit card to worry about, nor is there any credit limit. And just to be clear, through the Bank of England the government can also set the interest rate it pays. If there was a credit card this one would be the best issued, ever.
The truth is that all this is absurd. There is no credit card. There is no credit limit on what our government can borrow. And, in reality, it's borrowing a lot less than most other equivalent countries in Europe are and they're generally doing a lot better than us.
So, what politicians are saying is total nonsense. They are telling you what might best be technically described as falsehoods. Other words are available and might be more appropriate.
That we have a debt problem is untrue. What we actually have are vast numbers of people who want to save thousands of billions of pounds with the government because they know it is the safest place to put their money.
What we also have is a track record lasting more than 300 years of the UK government always being able to repay sums deposited with it and without ever having any difficulty in doing so, not least because it can always create the money required to make that repayment whenever it wishes.
In fact, so good is the government at repaying deposits that most people in the UK would not save with a commercial bank unless they knew that the government was guaranteeing the first £85,000 of deposit that they saved with it.
They don't trust those commercial banks with their money unless the government guarantees the repayments owing by those banks. Saving with the government is that secure. It really is, ultimately, the only organisation most people ever trust with their money.
Let's also be clear that if the supposed cost of this national debt is currently high, that's because the Bank of England wholly unnecessarily increased interest rates in a completely inappropriate attempt to control inflation, which those interest rate hikes could never achieve.
Any politician who understands that fact should tell the Bank of England to cut those rates, which they can because they own it. It's just another myth backed up by nonsensical law that could be changed at any time that interest rates are set by the Bank and not by the Chancellor.
To put it another way, almost everything politicians say about the economy is made up of convenient myths that they create that have not a single element of truth within them.
Why, then, are both the Labour Party and the Tories so obsessed with the national debt that does not really exist? It would seem that this is entirely because both parties are desperate to control the size of the state so that we do not get the public services that we need.
Your guess is as good as mine as to why they do not want us to have the healthcare, social care, education, social housing, justice system, defence, and other things that we all want, but they make up these stories about the national debt to make sure that we cannot have them.
Wise economists (and there are, unfortunately, far too few of them) actually know that the government can never be constrained by debt because the government creates the money that we use, so it can always pay its bills.
We are instead only constrained by the limits of what we can actually do as a nation. What I know is that as a nation we could have the health service, education, social care, and everything else that we need.
That cannot really be in doubt. After all, we did have those things for very many decades, without any problem. It's only when we made up debt-related myths after the 2008 financial crisis that suddenly none of those things seemed to be possible.
Those myths are being perpetuated by our leading politicians from all the leading parties (the Tories, Labour, the SNP, and LibDems), denying us, as a result, the chance to live in the country we want with the services that we need being supplied to everyone who requires them.
The maxed-out credit card myth and everything that goes with it is the real reason why this country is in the mess it is.
So the real question that Labour and others spreading these falsehoods have to answer is why are they so anxious to be in power when the only thing that they want to do when they get into office is to fail us all? I wish I knew the answer to that.
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Might our « leading » politicians be afflicting themselves, and us, with « Willful Ideologicial Blindness », with the consequences that they only allow themselves to see/ admit to seeing what fits with their ideological structures which, in turn, are managed by unstated purposes.
Might such perception shortcomings be reduced or removed by having truly independent, objective, analytical mainstream media outlets?
Too logical for our Political class unfortunately.
One small nit pick, though, I seem to recall that MHT was very vocal abound only spending what the household purse could afford. That was her justification for putting millions out of work, off-shoring most of our manufacturing to increase our carbon footprint, whilst removing all controls on casino banks. She also set up the myth that directors only work hard if offered big bonuses, but workers only work harder if their pay is constrained. She both combined in current NHS disputes.
I am delighted you wrote this, Richard. It presents the issues in form to which the public can directly relate; and reveals the gross mischief of all politicians who descend to the lower depths and resort to the tawdry credit-card political scam. It requires wide circulation; but if I was going to carp, for the general public; it is probably too long.
As a generally usable and accessible example of public information when confronted with politicians intending to mislead (or incapable of understanding the issue), it is, if I may use the current American vernacular; right in my wheelhouse!
It is going reasonably well on Twitter, but not as well as my reworking of Sunak’s tax return.
Richard, we need a backer to pay for one, or better a series of full page ads in the Tory 4 papers where the gist of this is printed in large type, with a simple pie chart or two. Explaining the truth of the credit card myth, and then how a government can invest in public infrastructure and services by creating new money.
Exactly Steve – Why cant BBC R4 Today programme – just ask Reeves – ‘really’? do we have a credit card?’
I have linked Richards twitter post to R4Today.
Richard has said this many times before – but surely the ‘person in the street’ can follow this one? Brilliant.
Thanks
People really can’t get their heads around the fact that money is not a thing but acts as a lubricant in an economy in two vital ways it tackles the threat of broken promises which in turn enables greater reciprocation or cooperation if you prefer. A power saw that moves back and forth is a reciprocator. Thiis is exactly what money is!
Just to add human beings of all creatures on this planet excel at cooperation with each other and the use of money is a huge aid to this. For politicians not to know this and in particular accurately understand how and who can create this money reveals politicians completely unfit for office because these basic rudiments are missing from their brain! It’s also increasingly hard to excuse voters from not understanding these things also after nearly fourteen years of the Tory austerity policy. Effectively by not making this effort voters are destroying their democracy.
Excellent account, Richard.
It appears to me the politicians want to create an impression they are ‘responsible’ with ‘taxpayers money’ (another dubious concept) and the ‘other lot’ are not. By relating it to personal finance they have a message simple enough to be understood even by the illiterate. Showing they have a grasp of the real issues is not the priority.
Reagan’s ‘if you are explaining your are losing,’ exemplifies Dumbed Down Democracy. It is like advertising for consumer goods-create an image and slogans which can be triggered when needed-such as maxed out on the credit card.
The billionaire owned press pander to this, with never an apology when they get it wrong. EG the Mail urged all its readers to support Liz Truss !
Several posts here this week have been almost despairing when contemplating the reactionary forces arrayed against positive change. I can see their point only too clearly but I continue to hope. I am not as knowledgeable as some of your contributors on economics but I do know some history. Change is the one thing that can be relied upon. People move on or die. Institutions can grow or decline. Who in 1980 expected the USSR to wind itself up in only ten years?
Dumbed down Democracy has its weaknesses. While there are folk like you -and I could name others like Caroline Lucas-DDD is not invulnerable.
When the Starmer/Reeve Labour Party get elected and try to run the country in strict accordance with their absurd self-imposed fiscal rules and maxed-out credit card it will hopefully become more and more clear for all to see that running a country and running a household are two entirely different things.
The household myth has become so entrenched not just because neoliberal politicians and economists keep going on about it, but also because the household budget idea supposedly makes intuitive sense to ordinary people since it chimes with the the financial constraints on their own lives. But with Labour’s being so explicit about their intended financial management regime, then the ongoing but ever deepening societal and economic devastation they will bring will be easier to associate with those rules.
Labour may therefore unwittingly help re-educate the public into a new intuitive knowledge based on common experience: that it is a nonsense to conflate currency-issuing government finances with currency-using household finances. And that the people that propagate that myth do so either out of deep and culpable ignorance or with a devious and harmful political agenda.
“But we don’t say banks are in debt because they also owe the money saved with them back to depositors.”
Actually we do. Deposits are listed on a banks balance sheet as liabilities, along with other debts such as commercial borrowings and bond debts. Deposits are usually the largest single item in the list of a banks’s liabilities.
Politely, stop talking drivel
Capital is also a credit on the balance sheet. That does not mean we describe it as debt.
We describe deposits as deposits
If you don’t know what you are talking about don’t say it, I suggest
So why does HSBC (to take a random example) show ‘Customer accounts’ as the single largest liability on its 2022 Balance Sheet? Over $1.5tn in deposit liabilities out of total liabilities of $2.7tn?
HSBC 2022 accounts here: https://www.hsbc.com/investors/results-and-announcements/annual-report
Page 328.
I am a chartered accountant. I know a balance sheet. I have explained the double entry of banks here many times. Politely, you can’t teach me anything in the subject.
And you (like all trolls) completely miss the point. HSBC see deposits as a strength. They are. They do not see them as a threat. So my question was why don’t government when all they do is provide a banking facility? Now answer that question. In detail.
Or, shut up.
Which begs the question – whose interests are being served by maintaining this facade and how? Clearly not the wider public
“whose interests are being served by maintaining this facade and how?”
Follow the money. Pretending that government finances work like a household budget gives the plausible excuse to cut down on public spending.
Neoliberalism claims that every pound spend by the government is a pound less that the private sector could earn.
So reducing public spending will ultimately break the public sector (as we see with the NHS, water companies, schools) resulting in their privatisation, and huge profits for those that own them. And when that fails, the public bails them out.
I would add to this that the one time I was at a dinner table when a committed neo liberal businessman held forth on such matters he declared that all welfare states made for poor economies because they created lazy workers.
I was so flabbergasted by such cruel ignorance I had no words. Also, he was paying for the dinner !
They appear intent on maintaining an effective oligarchy against the interests of the broader community and, indeed, humanity itself overall.
I find myself wondering where politicians’ belief (?) in these myths comes from. Is it just lop-sided teaching in Oxford, or sheep-like subscription to previous generations’ misguided models?
Is it too much for us to hope for leaders who think can think?
Probably
My suspicion is that when you get people who are genuinely not stupid and are often well-meaning, and have demonstrated all of this in some other walk or stage of life, you often also get people who don’t realise that, notwithstanding the lack of stupidity, there is a lack/gaping hole in their knowledge and understanding in this rather important area. Exacerbated when surrounded by lots of other not stupid people with the same gaping hole – Rumsfeld unknown unknowns country . Terrifying.
Related to this post… but not directly. Good to see Andy Beckett in the Guardian today referencing your work on Labour and Tory records on debt accumulation.
Yes, I noted that too
Some of us are old enough to remember when in the 1980s Tory Chancellor Nigel Lawson suddenly declared that the balance of payments did not matter any more, for decades previously an issue that had been deemed so important that it dominated political policy making.
So not a change in reality but just a self-serving change in belief systems more akin to the Thatcherites ignoring all that inconvenient Christian stuff about the difficulties the rich would face trying to get into heaven.
Magnificent post but in answer to Steve above, our politicians hold this narrative because it will suit their rich funders and them.
And where will the political funding continue to come from?
From the huge exploitation of public services of course by the wealthy with huge amounts of cash – huge profits.
By pretending that there is no more public money and then artificially creating opportunities for private investment to replace the false lack of public money, a perfect capitalist nirvana system has been created where even cancer can turn in a nice profit for the investor.
And what is worse, the politicians and their parties will get their cut to or gravitate to one of the boards of management that oversees the transactions – a nice little earner.
What we are heading towards is the perfect ‘non-aggression’ pact between politics and capital by letting the latter make money out of everything.
Government money only exists when private capital messes everything up of course – I’m sure that a bail out is there – in fact, looking at the size of the CBRA – it already is there isn’t it?
But us mere mortals are not allowed that money it seems to improve the service we need. Instead we can only have that if it generates a return on the false and very narrow value that services must generate revenue in order to pay for them and small tax we will impose on the rich who are taking a share of the out put.
It will all end in tears.
It will
That’s a pretty fair answer to my rhetorical question above.
It’s clearly in the narrow, short term interests of the selfishly wealthy to pay as little tax as possible, and if that means trashing public services they don’t care as they don’t depend on them. They just grumble about pot holes in the roads they have to use or the lack of police. At which point Richard reminds us that taxes don’t pay for public services…
They and the politicians they support (and fund) will then argue that the private sector will run these services more efficiently – even though that’s mostly rubbish. Rewards the mates they flog or outsource to, with plenty of collusion there. And where the government sells off assets, usually on the cheap, further opportunity to use that income to cut taxes.
Bankers and the City benefit from both of those two factors. They also don’t want the government to interfere in their divine right to supply and profit from the supply of finance. They go on about ‘crowding out’ even though they are far more interested in speculation and pumping up asset prices. Investment in real innovation invariably requires government to take the lead, as Marianna Mazzucato and others point out.
What have I missed..? Of course there is an ideology behind it and one that will as PSR says, end in tears.
“It will all end in tears”.
Ah, whose tears? Not the tears of the Conservative Party, or the electors still prepared to vote Conservative Party after fourteen years of Cameron, May, Johnson, Truss and Sunak. Only humans shed tears. Crocodiles, curiously, shed tears when they eat prey….. or hunt.
The Conservative, Labour, SNP, and LD parties all want to instill fear into the general population so a maxed-out credit card is something that everyone is familiar with and fears. It is an ideal false analogy to press home their destructive austerity and cuts to public services mentality. There is fear and dread for the politicians themselves who are in fear of the mainstream media who have been hoodwinked by the secretly funded Tufton Street think tanks to pursue this policy which is enriching the rich and causing havoc or increasing inequality and poverty for the rest us and devil take the hindmost.
Why should we
worry about the
National Debt
When all it is
is money which hasn’t
been taxed away yet?
And why would
government borrow
what it has the power
to create?
It provides
a safe home
for your money
while to use it
you await
After all,
we have lived with it
for over
three hundred years
So why should it
suddenly
result in tears?
Thank you
It’s not just about getting rid of the selfish and incompetent Tories it’s about acting on climate change. Starmer and Reeves reveal their idiocy and therefore unsuitability for office in not connecting the need to thoroughly understand how the UK’s monetary system works in relationship to this need to act!
https://www.theguardian.com/environment/2024/feb/09/atlantic-ocean-circulation-nearing-devastating-tipping-point-study-finds
Rishi Sunak is still claiming that Debt is falling, in spite of the mess Laura Trott was in trying to make sense of it. In fact the debt does rise from where it is now, until 2028: “Debt is on schedule to fall as measured by the independent Office of Budget Responsibility, which they’ve affirmed at the last autumn statement that the chancellor gave. The projection is that debt will rise from 89% of GDP now to 93.2% in 2026/27. It will then decline in the final two years to 92.8% of GDP by 2028/29”.
Sunak said: “The projection is that debt will rise from 89% of GDP now to 93.2% in 2026/27” (I cannot even reconcile these figures with ONS stats). Taking even these figures as roughly right, that is a rise over the next three years, at least. Up is down in Downing Street. No wonder they find it such an inefficient building to use for Government (Covid Inquiry).
Sunak is relying on an eventual slight turn down in 2028, or beyond of the Debt ratio. He knows perfectly well that with economic forecasts over time there is a huge drop off in the accuracy of any forecast. The shorter the time period, the more secure the forecast (and even that is not reliable- economic trends are badly forecast three months ahead). Any forecast five years out is not a forecast; it is, frankly simply a punt (of doubtful efficacy); and it is certainly not a ‘schedule’. You simply cannot “schedule” a five year forecast (you are in Stalinist 5 Year Plan territory – pure fantasy); it is, therefore either just plain stupid, or deliberate misinformation. In addition, while there is a guess that the debt-to-GDP ratio will show a slight fall eventually, the actual quantum of debt is not even being forecast to fall; that implicit assumption, left unacknowledged in itself, is deeply misleading. The facts are in the quantum alone; the ratio is an indirect derivative, and is therefore subject to distortion. Sunak is misleading everyone; yet again. This is a pernicious signal of his premiership.
We can see the range of problems for the forecast five years out in what the OBR says, ‘Office for Budget Responsibility:Economic and fiscal outlook’, 2023 here: https://obr.uk/docs/dlm_uploads/OBR-EFO-March-2023_Web_Accessible.pdf:
“Supported by the fiscal loosening in this Budget, GDP growth gathers pace to reach 2.5 per
cent in the middle of the decade. GDP growth then eases back towards its medium-term
potential growth rate of 1¾ per cent by the end of the forecast.
That medium-term potential growth rate is unchanged from November but the level of
potential output (and actual GDP) at the end of our forecast is around ½ per cent higher.
This reflects modest upward revisions due to higher migration, lower energy prices, and an
increase in labour supply from Budget measures. But these are partly offset by a weaker
path for the amount of capital available per worker and a lower pre-Budget-measures path
for labour market participation” (OBR, 2023; p.5).
This is riddled in insecurity, risks and uncertainties. Sunak’s debt decline hopes can largely be discounted as posturing, and certainly not cashable scheduling. The wish is father of the sound-bite.
And there you have it: this is what ‘out of touch’ actually looks like.
I can’t get those figures from those issued by the OBR every month. And they only show a decline in the last year.
We should not be provided with figures from two alleged authoritative, official sources (ONS and OBR) and be faced with a problematic mystery how we are supposed to reconcile the differences in results they provide. It is almost as if it is a deliberate charade. It is not good enough. The facts are hard enough to establish.
I entirely agree
But it seems the data never reconciles and it is always impossible to explain why.
So you have two parties saying they can’t invest any money, because the economy is in such a bad state. Why is the economy in such a bad state? Because we didn’t invest any money. Why didn’t we invest any money? Because the economy was in such a bad state. Repeat every five years.
Well put. This has been obvious for so long you have to wonder when the penny will drop.
…. and that is why we need to reverse the line argument.
“We can only have public services if we have a strong economy” to become “we can only have a string economy if we have functioning public services”.
Now, this is in danger of becoming a “chicken and egg” argument… but the point is that 40 years if having public services dependent on a “growing economy” has failed. So, let’s try the other way round.
Spot on
This sounds very old fashioned, but it used to be understood in business that you ‘invested’ to build something that generated a future return. And 40 or so years ago the finance world understood that. Not any more. Post Big Bang. Which goes a long way to explain the dreadful productivity of U.K. business. Lack of investment, and just squeezing out maximum profit.
Then we applied that same corrupted mindset to the public sector. Those smart business people must know better how to run things. And they even have MBAs. And now they’ve stuffed the public sector too.
Agreed
Quite possibly Kier Starmer thinks it makes sense to talk of the country maxing out its credit card. I find it hard to Believe Rachel Reeves does.
Given the potential future redundancies of teachers because of Tory austerity cuts any Labour Party member or Labour politician who continues to support Starmer’s maxed out credit card argument is quite literally betraying their own country not to mention the other big issues of tackling climate change and rescuing the NHS. “Traitor to their country” is a phrase we ought to now be using!
https://www.theguardian.com/education/2024/feb/10/teachers-facing-redundancy-as-record-number-of-english-schools-fall-into-deficit
Labour in hiding as to how and by whom the country’s money (medium of exchange) is created! You might think we were living in a communist or fascist led country because that’s exactly how these type of leaders behave refusing to be accountable on serious issues!
So we have the worst ever UK government….and the worst ever opposition. If cowering in a foxhole and surrendering to your opponent’s ideology even as they disintegrate in front of your eyes can be called opposition.
In the CS we’ re getting this twaddle that we have to do ‘more and more with less and less’. Pure nonsense. You don’t get owt for nowt.
What the UK needs is investment, investment and more investment. Such as the New Green Deal.
I am not a financial expert, but I do understand, in a limited way, your argument. Also the allure of the simplistic (if wrong) maxxed out credit card.
Anyone who has an income and a budget understands the credit card analogy. They understand the statement, “There is no more money” and can readily apply it to government finances, just as they can to their own. The difference being that a government can print money whereas anyone else can’t.
My questions are;
1. are you the only economist who sees/says this?
2. if a politician/party were to adopt your approach, what would the market do? Would it be Trussonomics all over again?
1. No. See Stephanie Kelton and Steve Keen, but there are many more.
2. The markets would breathe a sigh of relief for sanity. Then they’d work out how to still make money.
Both parties keep saying that they are constrained by a weak economy. Both parties deflect from recognising raising inequality. This over a period national debt has risen significantly. A couple of related question are bothering me. Why is the economy weak and where is the money flowing?
Standing right back and simplifying here’s a suggestion where the money flows and goes – which might help explain the weak economy.
The wealthier have got steadily weathier, especially the super wealthy. That wealth has been driving up asset prices and inflating share prices (and encouraging financialisation).. The economy is not ‘weak’ everyone!
There has been an unsated demand of new assets in which to invest, to generate income streams. Hence the constant pressure of states to sell and privatise, which shifts assets from one balance sheet to another. Under utilised wealth is looking to generate more wealth and offer security.
Wealth has become locked up in housing. At the top of the market it’s become another asset class. More generally relative increase in house prices have broken the housing market. The costs for individuals borrowing (or renting) trickles back to the already wealthy. The big divide in the UK has become between those who benefit from intergenerational wealth, and those who don’t.
History shows that concentrated wealth undermines democracy and distorts if not corrupts politics. An economy where private wealth triumphs over common wealth and the individual over community, suits the most wealthy and a dependant elite who service them.
Regardless of whether this gross oversimplification is recognised, your post and the comments have stimulated my morning thought experiment which has increased my appreciation that tax is one of the few leavers available to control flow.
The Bank of England, on its own website, has made it clear that it creates money from nothing as ‘central bank reserves’:
“The money we used to buy bonds when we were doing quantitative easing (to pay £445 billion for the 2009 financial crisis and £300 billion for COVID) did not come from government taxation or borrowing. Instead, like other central banks, we can create the money digitally in the form of ‘central bank reserves’. We use these reserves to buy bonds” (Bank of England, 13 Jan 2023)
In other words, there IS a ‘magic money tree’ available to the government. (and Theresa May, David Cameron, Rishi Sunak, Keir Starmer et all knew better than the Bank of England!), and there IS such a thing as public money, not ‘only taxpayers money’, as Margaret Thatcher was given to claim.
So ‘spending deficits’ do not require funding. Only household deficits need funding. What DOES need funding is economic growth, which we are unlikely to see if Sunak and Starmer persist with their fiscal nonsense.
How can such economic ignorami become First Lords of the Treasury?
Good question
Here’s the link that explains the BoE can create reserves digitally:-
https://www.bankofengland.co.uk/monetary-policy/quantitative-easing
“We can use our bank reserves to buy bonds. The money we used to buy bonds when we were doing QE did not come from government taxation or borrowing. Instead, like other central banks, we can create money digitally in the form of ‘central bank reserves’.”
They then proceed to cloud the issue by telling a lie in which they pretend one part of government can owe another part!
“We use these reserves to buy bonds. Bonds are essentially IOUs issued by the government and businesses as a means of borrowing money.”
Yes, they do rather confuse matters by not explaining why they’d need to be borrowing money at all when they’ve just made it plain they can create it. Perhaps this is deliberate obfuscation, the idea being that after reading the BofE’s helpful explanation of its inner workings, anyone remotely alert is left more confused then ever.
Members of the BofEs Monetary Policy Committee behave as though they are under the same delusion.
Andrew, the BoE reference is most useful. I have used it (& duly credited you as the info source) in an e-mail to Rachel Reeves. I hope you don’t mind. Here’s a copy of it – feel free to use any of it that you wish.
https://drive.google.com/file/d/1qjnPXo2k3oOznLDxn7b_IJ9wpKqJ0MBv/view?usp=drive_link
It seems that you will need to give permission to those wishing to see that
It may be easier to copy and paste it into another comment
“Your guess is as good as mine as to why they do not want us to have the healthcare, social care, education, social housing, justice system, defence, and other things that we all want.”
I think it is because they are greedy, and they are too blinkered or stupid to realise that having a thriving society helps them too.
As far as I can see their idea is that it’s a zero sum game, that if they squeeze the little people they can have more. If they starve state services they can reduce taxes on themselves. They seem to think that they can pay for all the services they need.
It’s idiotic of course. It doesn’t matter how expensive your luxury car if you can’t drive on the road because of pot holes. You may have private health insurance, or can just pay as you go, but that doesn’t help if you have an emergency, can’t get an ambulance or there are too few staff in A&E. And, of course, money won’t help you escape global warming.
It’s not a zero sum game. Public goods help everyone, even the selfish rich.
Perhaps it’s more useful to imagine the motivations of the rich as relative rather than absolute.
If we all had better healthcare, education and transport infrastructure then so would the rich and wouldn’t they see that as a good thing? No. Because they would no longer have the status of being richer than everyone else.
If your desire is simply for better wellbeing then you would have no problem if others have that too. But if your desire is for status then you want relative difference. There are two ways to win. Do better, or make everyone else do worse.
Right now the rich are managing both. Win-win… for them.
Any credit card has a limit. Why do journalists never interrogate what that limit may be –
and how it was arrived at?
There is is no credit card
There is no limit
What don’t you get about that?
It still might be worth a journalist asking a politician “You say the country has maxed out its credit card. Well then, could you tell me what the credit limit on this supposed card is and how it was arrived at?”
It might be worth adding for good messure “Who issues credit cards to governments? And what does whoever it is do when a government goes over its limit?”
I can’t imagine anyone giving sane answers to questions like this.
Ok
But that concedes the argument to their territory
Why do that?
Because by doing that the absurdity of their position is exposed.
Why do you deliberately choose to misconstrue my point?
It’s you that does not ‘get it.’
I didn’t
But I have just checked and it’s clear that like the average troll you appear unable to spell your email address consistently.
You’re now on the banned list
The only place that I see some recognition that we are unable to run out of money is in the purchase of weaponry so evident over the last few months. So why can’t we afford health care, education.. all the good things in life instead of everything we need to kill each other?
It would be an interesting experiment to ask Rishi Sunak where did he get the money for the insane Help Out to Eat Out scheme, did he borrow it if so from whom?
I think we all know the answer, it is that he borrowed it from the Bank of England which is wholly owned by the Chief Secretary to the HMT. We borrowed it from ourselves, which begs the question why can’t we un-borrow it by cancelling the debt to ourselves. I called it debt here but fully appreciate from your arguments that it isn’t really debt.
Steve