One of the most important things to understand about how government finances work is that in a country like the UK, which issues its own currency, has its own central bank and a reasonably well-functioning tax system, government spending always comes before tax is charged, and has to do so as a matter of fact. That simple fact changes everything. There are a number of reasons.
Empowering macroeconomic management
First, it means the government is never dependent on tax receipts to spend. If the UK government wants to pay for nurses, teachers, or infrastructure, it does so by instructing the Bank of England to make payments. That creates new money in the economy. Only after that money exists can it be taxed back.
In fact, and rather importantly, unless the spending came first, the money to pay tax due would not exist because it is, of course, the job of the government to create money, and it can only do that by spending it into existence.
This being said, the only constraint on this spending is the availability of the resources to buy. So long as they exist, the expenditure can always take place without the risk of inflation. The consequence is that understanding this permits policies of full employment and economic growth to be pursued in ways that would otherwise be impossible. Understanding that spending precedes tax does then allow for macroeconomic management that is otherwise impossible.
Avoiding the curse of the household analogy
Second, reversing the sequence, i.e. believing that tax must come first, traps policy thinking in the household analogy. Households do need income before they can spend. Governments do not. When politicians think otherwise, they create unnecessary limits on public investment, cut services, and pretend there is “no money left” when the only real constraint is the availability of resources, skills, and technology.
Understanding dependencies
Third, the two perspectives rest on fundamentally different assumptions.
-
Tax and spend assumes that the state is dependent on the rest of the economy; spend and tax assumes the rest of the economy depends on the state.
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One assumes the books must be balanced like a household; the other recognises that this is not only not necessary for a currency-issuing government, but is not desirable, because the state is the only sustainable low-risk supplier of the new money that a growing economy with desirable low rates of inflation requires to function.
Liberating tax to work for society
Fourth, spending-first thinking makes clear that tax has a fundamentally different and more adventurous role to play in the economy. It is not there to “fund” spending, but to:
- Manage inflation.
- Give value to money by requiring that government-issued currency be used within the economy since tax has to be paid using it.
- Shape the distribution of wealth and income.
- Encourage or discourage certain activities in society.
- Manage the economic cycle.
- Reinforce the social contract between a government and those who elect it.
Tax is, then, more like an economic steering wheel. It is not a fuel tank.
Making clear political possibility
Finally, if you think spending comes before tax, you realise that austerity in the face of unused capacity is a political choice, not an economic necessity. You see that the government can always act to maintain full employment, support the green transition, and tackle inequality. You also see that the real limits are ecological and social, not the Treasury's bank balance.
The difference between “spend first” and “tax first” is massive. One liberates public policy to meet social and environmental needs. The other chains it to an entirely false idea of financial constraint. And that matters enormously when it comes to our well-being.
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I am sure that the key factor in this not being widely accepted is that too many powerful people have a vested interest in maintaining the myth that the state is ultimately dependent on the private sector. One would have thought the bail outs after 2008 would have made that impossible but like an invasive weed it has come back stronger than ever. We desperately need a government that believes in the power of government.
As James K Galbraith argued we should expect private sector bankers to attempt to brainwash voters with the idea that only money that makes a profit is possible. They want to make as much profit as possible! The very idea that money can be created from nothing for the national public benefit has to be discredited!
You keep repeating these same claims, but you miss the key point (or pretend it isn’t the case). The fact remains, whether you tax then spend, or spend then tax makes no practical difference – public spending is constrained by tax and therefore ‘austerity’ (what used to be called spending within one’s means) is unchanged.
If it doesn’t ‘earn’ the money (through taxation) then the government can’t spend the money or else we will suffer the consequences of inflation and a declining economy as our imports get more expensive.
You can’t ignore those facts, as much as you keep trying to.
How is tax constrained?
We have a tax system that works and could work better.
Why is it constrained.
What constrains it in the UK at much lower levels than in Denmark or France?
What is your evidence – because I know there is none?
Sorry, you have to ask why tax is constrained?
Have you heard of the Laffer curve? You think that you can just increase the tax rate and you’ll keep raising more tax?
You think that’s the highest earners will bother to work harder / longer if the result is that most of the money will be taken from them in tax?
We have plenty of evidence of how the wealthy are mobile and one of the considerations for them is the tax rate in different jurisdictions.
There’s so many examples of higher tax rates leading to lower tax revenues.
Even if that was the case (which it isn’t), are you proposing tax rates above 100%? If not, again it should be obvious that there is a constraint on taxation.
To pretend otherwise is to deny an obvious reality – why would you do that and in the process make yourself look very stupid?
Sure I have heard of Arthur Laffer.
And I wiped the floor with him.
https://www.taxresearch.org.uk/Blog/2021/10/07/the-day-i-took-on-arthur-laffer-and-won/
And your comment is crass – of course I am not proposing tax rates of 100%, or anything like it.
The Laffer curve is laughable. Developed by Arthur Laffer, an economic advisor of President Reagan in the 1980s, the Laffer curve illustrates a THEORETICAL
relationship between rates of taxation and government revenue.
1. In practice, economists and studies have failed to find conclusive evidence that cutting taxes in a developed economy like the United States, would lead to an increase in total tax revenue.
2. The optimal tax level can not be observed, making it difficult for policymakers to know whether they are on the “right” or “wrong” side of the curve.
3. The Laffer curve is an oversimplified model that reduces a complex economy to a single tax rate and a single curve.
4. The curve ignores other factors that influence economic behaviour and government revenue. It assumes that individuals’ and businesses’ behaviors are primarily driven by tax rates, which isn’t always the case
More: “Why the Laffer Curve is garbage” (2018)
https://ctmirror.org/2018/01/18/why-the-laffer-curve-is-garbage/
Thanks
“Have you heard of the Laffer Curve?”
The Laugher Curve? Not that absurd old chestnut, again, surely? It is unendingly surprising how easily people fall for bad ideas. As well as Richard’s seminar with Laffer, you could also read Philip Mirowski, ‘What’s Wrong with the Laffer Curve?’ ‘Journal of Economic Issues’, Sep., 1982, Vol. 16, No. 3 (Sep., 1982), pp. 815-828: yes, it was crisply disposed of as early as 1982, but like much that is now sold on the internet, too many foolish people will fall for anything. Mirowski provides a robust sketch of some very basic issues Laffer has never answered. Let me offer you an ‘amuse bouche’ from Mirowski, as a taster. I suggest you read the paper.
Laffer appeared before a US Congessional committee on the proposed Kemp-Roth tax cut, under Reagan (1981), and was questioned by Senator Packwood (a politician, not an economist), on the measurement of the optimum tax point on the curve. Laffer’s response was, frankly amateurishly embarrassing. Here is the crux, which Mirowski quotes (p.820):
“SENATOR PACKWOOD: Now, let’s go back to finding this optimum again,
because obviously, if indeed you can define it and we can arrive at it …
MR. LAFFER: I cannot measure it frankly, but I can describe to you what
the characteristics of it are; yes, sir”.
He can’t measure it. Therefore, it isn’t science. He wants to ‘describe characteristics’ instead. Allow me to describe what that description is, in scientific terms: waffle. Laffer simply begged the question, and wandered off into a non-sequitur. The Laffer curve looks like an algebraic curve representing a polynomial equation, but actually it is simply a freehand line, drawn by Laffer and representing…… well, you tell me. If Laffer can’t measure all the points on the curve; then it is all utterly, em….., ah, yes…. pointless.
Thanks
During a garden gate discussion with my MP (Labour, elected in July last year, he was campaigning for the local election in May), he stated that we couldn’t tax the rich because of the Laffer curve!
Whether this genuine Government policy or his own interpretation wasn’t clear, but, either way, it was very worrying, particularly as I had voted for him!
What a fool
If, for example, a factory is running below capacity, then it can produce more goods WITHOUT putting the price up, without stoking inflation. Maybe, in practice, this just means that the personnel have stuff to do more of the time. Or maybe it means that, perhaps automatic, machines are not idle. The factory owner/manager will want to produce more because it increases profit. But they won’t want to put up prices because that would reduce their output (fewer people would buy), which was already below capacity.
Price is non-linear. Factory output can increase without pushing up cost until full capacity is reached. Then no more output is possible without further investment (more people, more machines, more premises) with takes time. At full capacity the price can, and probably will, increase to limit demand.
This is just an example but similar thinking applies to the whole of the economy.
So if the government spends more, and the economy has spare capacity, then inflation won’t increase. Beyond that point more spending does lead to price increases. It’s non-linear. A small amount of spending does not lead to significant price increases, too much spending does.
The trick is, of course, to figure out whether the economy is “at capacity”. But, at present, I hope it is obvious that our economy is significantly under capacity. The government can safely spend more.
Much to ageee with here.
The British economist George Shackle picked up on Keynes’s theme about uncertainty in investment:-
https://en.wikipedia.org/wiki/G._L._S._Shackle
Good quote from Keynes.
“public spending is constrained by tax”
This was heavily publicised by Margaret Thatcher: ” There is no such thing as public money, there is only taxpayers’ money”.
It is nonsense, and a ploy by her government to restrict government spending with a view to defund public services.
Thatcher wanted to privatise all public services, not because they were “inefficient” or working badly, but because she wanted public money in private hands.
The result is that water, energy prices, and rail fares are the highest in Europe. Investment in the infrastructure is low (takes away from profits).
Of course taxes have their place, but not in funding government spending.
1. 1. Spending must precede taxation operationally:
The UK government creates pounds when it spends (crediting bank accounts). Taxes redeem those pounds.
Without spending, there’s no currency to pay taxes.
This isn’t theory—it’s how central bank reserves work.
2. 2. Taxes don’t “fund” spending:
Taxes create demand for the currency and control inflation by removing private spending power. But the financial capacity to spend comes from being the currency issuer, not tax receipts.
The UK can always pay GBP debts.
3. 3. The real constraints:
Inflation: Spending beyond the economy’s productive capacity (goods/services/labour) bids up prices.
Imports: If spending sucks in imports faster than exports earn FX, the pound can fall, raising import costs.
4. 4. Austerity is a choice, not a financial necessity:
If the economy has slack (unused labour/resources), deficit spending won’t cause inflation—it boosts growth.
Austerity during slack deepens recessions.
If the economy is at capacity, spending should be reined in (or taxes raised) to cool inflation—but this is about real resources, not “affording” GBP.
Bottom line:
Yes, unchecked spending causes inflation/currency risks.
But the UK isn’t “revenue-constrained.”
It can fund any GBP obligation.
Austerity isn’t about “living within means” like a household—it’s a (often misguided) tool to manage inflation when capacity is full.
MMT’s point: we should focus policy on real resource limits, not artificial debt ceilings.
Prof DeepSeek MMT (2025)
Thanks
And correct
Steph is just so wrong.
What he or she or it is saying is that government spending is a sovereign issue for individuals – that their consent is needed before the government can spend anything. It places money/ financial sovereignty on the shoulders of every tax payer; that we are dependent on them.
As we know, this is complete tosh. The tax payer is a user of the pound, not a creator. They are micro not macro. The money they are receiving is after the fact – it has already been made. Remember ‘Steph’ that your pay slip tells you your gross amount of pay and THEN tax is deducted. And that it how it works and government too.
We have a sovereign – King Charles – as symbolic head of state (we hope) . But ALL sovereignty – we hope – lies with Parliament. It is parliament that gives legal certainty to the pound and governs how it is made and distributed.
Therefore spend and tax is the truth of the matter.
‘Tax and spend’ is just a false consciousness created by Margaret Thatcher’s cult of personality. Thatcher – as she was wont to do – lied to us – a lot (the Belgrano, monetarism). Thatcher did not believe in anything but ‘individuals and families’ and her ‘tax payers money’ beliefs echo that. What is was was a denial of history and the facts – about how the pound was created – by Britain’s central bank (now owned by government) – who eventually turned debt notes into legal tender and helped make this island punch above its weight internationally.
1. You will not make Britain great again until you stop austerity and issue the money we need which enables us to own our country.
2. Tax will help to make sure that all sectors will have the economy working for them – equalise opportunity – (not just the rich).
3. Tax will curb inflation.
4. Tax is the cost of democracy, order and stability and our sovereignty – not ‘borders’ or ‘laws’ or other BREXIT bullshit.
5. Tax essentially pays for nothing – it is the fundamental engine/process in the creation and destruction of money that pays for and creates useful things for society. By under taxing the rich in particular, huge piles of useful money is sidelined and wasted.
Thanks
Just for the record PSR, although in England, and by extension the UK, sovereignty rests with the King in Parliament. in Scotland sovereignty traditionally resides with the People, as famously expressed in the Claim of Right for Scotland and reaffirmed by the Scottish Parliament in 2012 . In 1953 Lord Cooper in a landmark legal judgement stated “The principle of the unlimited sovereignty of Parliament is a distinctly English principle and has no counterpart in Scottish constitutional law.”
Steph makes 2 assertions that she does not provide evidence for (because there is none).
1. “Gov spending is constrained by tax”.
No! Gov spending is constrained by availability of things to buy, and the political will of the government authorising the creation of the money by BoE.
2. “Gov earns money through taxation” (not a direct quote)
I haven’t a clue what this means. I must try it out on my next Self-Assessment return to HMRC as an explanation for why I’ve decided not to pay tax this year, because they haven’t “earned it”.
Gov’t doesn’t “earn” tax, it passes a finance bill and acquires the legal powers to DEMAND it. One of several things that help gov’t decide how much money to tax out of the economy, is inflation. If inflation is high, then taxing money out of circulation MAY be necessary to constrain certain types of money-supply induced inflation. But that tax doesnt liberate or constrain spending that has already occurred via money creation.
I look forward to Steph enlightening us with evidence & explanations for her 2 assertions.
I have not banned Steph.
But trolls never respond.
I doubt ‘Steph’ is this entity’s real name s/he doesn’t appear to have actually read Richard’s post.
I am sure you are right
I like that Starmer hasn’t done a very good job so I’m with-holding some of my taxes! Just plain hasn’t earned my hard-earned money! You OK with that Steph? Should have done it with Rishi Sunak too!
Steph Carter that’s a complete and utter illogical argument revealing you haven’t done any historical research into money.
The UK government has run deficits for most of the time for at least 300 years. It clearly couldn’t have “earned that money through taxation” before it decided to deficit spend could it? This was clarified in an Act of Parliament in 1866 which declared the government could go ahead without having any balances in its account with the Bank of England (not even receipts from selling government securities) these revenue sums could come along later mainly in the form of taxes.
This of course makes total sense because one of the purposes of having a government is for it to be able to take immediate action if a serious crisis occurs, think financial crashes, pandemics and wars. All the hard of thinking voters who believe the right-wing nonsense their government must operate like a household never even get to the point of figuring out their government needs a permanent contingency arrangement to be able to quickly respond to crises or for that matter recession. Creating currency both physical and electronic from nothing is that commonsense arrangement.
https://www.taxresearch.org.uk/Blog/2020/12/22/uk-law-has-already-enacted-modern-monetary-theory-and-was-last-updated-to-do-so-in-2000/
https://gimms.org.uk/2021/02/21/an-accounting-model-of-the-uk-exchequer/
not “constrained” by tax, it needs tax to exist, in the car analogy Money is the fuel and the central bank can produce that without limit, if tax is the steering wheel then the car is could still go down the road without it but would tend to crash a lot.
Economist Abba Lerner used a similar (but not identical analogy) in a 1941 essay ‘The economic Steering wheel’, in his analogy conservative/Laissez-faire economics didn’t fit its economic cars with steering wheels hence they veered down the road eventually crashing – but mistaking the steering wheel for the fuel would doubtless have a similar effect.
Perhaps the repetition is a result of people not hearing the msge? I cannot pay tax if the Treasury doesn’t direct the BoE to print and spend money into economy.
“Tax is, then, more like an economic steering wheel. It is not a fuel tank.”
A perfect phrase to understand the whole article.
Thank you.
I wrote several versions of that before finding the write formula.
Thank you, Richard, for covering this crucial subject again. You could not be clearer. I like your analogy of tax being like an economic steering wheel, not a fuel tank. I feel such analogies are an effective means of getting the message across and should be used regularly.
This was an absolutely key point for me because the household analogy and the “common sense” of taxpayers money and “tax and spend” underpins so much of the discourse.
Once that falls away you quickly realise that the range of political choices is much wider.
Thanks
Thanks. I’m getting close to an understanding now. If the BBC is the country’s main educator it needs to broaden its curriculum a bit.
Maybe those who cant get their head around ‘which comes first, tax or spend?’ can at least accept that the state paid hundreds of billions to people and businesses during the pandemic shut-down in 2020-2021, and to bale out the banks in 2008.
This actually happened because the spending was needed at the time – the money was created, it clearly wasn’t paid out of tax receipts. A household would never be able to do that.
The sceptic would have to grant you this.
What gets me is people who claim both that the govt needs to borrow money, AND that it can cause hyperinflation by creating too much of it.
Well exactly a government security is the dreaded “printing money”!!! But it’s not OK for the government to go bananas with it because there’s too much interest being handed out especially index linked bonds. Sorry Mr Hitler the door is open for you to invade because it will cost too much interest to stop you!
On new money and inflation there’s also Prof Richard Werner’s ‘Quantity Theory of Credit’ – If banks create credit (money) and allocate it for non-GDP transactions:
1. financial/asset transactions, this affects asset prices if large, never sustainable.
The ‘real economy’ (GDP transactions):
2. consumption purposes, this creates consumer price inflation (unsustainable).
3. productive purposes (productivity enhancement, technology-implementation, value added generation) = sustainable growth without inflation and with a more equal income and wealth distribution: Money is allocated for productive, sustainable work, producing income streams, not speculation (at best producing capital gains).
In 1995 he coined ‘Quantitative Easing’ = Expansion of credit creation for the real economy
Model the German banking sector = hundreds of locally-controlled, small not-for-profit banks, lending mostly to productive SMEs
https://freelawlibrary.org/library/Banking/402893360-werner-richard-pdf.pdf
How many more times will you have to tell the flat-earthers that the planet is,in fact, spherical. Quite a lot, I fear, but that doesn’t change the truth. Orwell said that we should hang on to truth, even if we are the only person alive who knows it. There are perhaps 10 per cent of people who will admit to knowing the truth you so clearly explain above. Others know it, yet keep quiet. Many of them are distinguished scholars and they should hang their heads in shame for denying facts and stop describing themselves as professors.
Those who deny facts they know to be true are the same as those early astronomers who knew the truth about our planet yet challenged Copernicus, so that they protected their own positions in society.
Much to agree with
I suspect that in addition to protecting neoliberal interests there is a certain amount of political cowardice at play. As Richard has mentioned, there is a political choice to maintain 100% employment (at decent salary levels). Currently, the government maintains / accepts a certain level of unemployment and excuses itself (from maintaining 100% employment) because it variously claims the market doesn’t need more employees, there needs to be more growth, it can’t afford to maintain certain services and people lose their jobs, etc. How much more difficult for them – and hence my comment about political cowardice – if it was clear that failure to achieve or refusal to maintain100% employment was a deliberate choice by government. They would have to confront, justify and own-up to their political choices.
The failure to maintain a fully functioning (and hence properly funded) NHS is a better illustration of their political cowardice. They can bring this money to bear on the NHS and create jobs, growth, etc., whilst doing so. However, they choose to use the excuse/fictions of fiscal constraints, national debt, the household analogy, pay demands of doctors, etc., rather than have the courage to say that they will support the NHS and spend the required monies into the system. Classic ‘jobs worth’ approach, i.e., blame something or someone else for your failure to deliver.
There is no question that choices – and sometimes hard ones – have to be made. I do so almost every day. However, you have to make clear why you have made these choices and recognise that you are accountable for the choices made. Our government system – putting aside the lunacy of the household analogy regarding the economy – is designed to cover the backsides of politicians and government officials. It is not designed to encourage decision-making and accountability. For example, let’s imagine there is a gizmo that could save 1 life per annum and it costs the NHS (the government ) £10,000,000. The decision could be that you would invest in it, or, that you wouldn’t. The decision either way impacts the person afflicted. The choice made is difficult with others (who don’t have to make the choice) being for or against it. Much easier when you can fall-back on the household analogy to justify not doing it.
In my opinion, the reliance on the “household analogy”, whilst wrong, provides politicians (and those they really serve) with an image that the public easily swallow without question. I fell for it for some time. The first time I began to question it was when Ken Clarke in a radio interview quipped about there being an interesting debate to be had on what money actually is and where it comes from. As usual, the interviewer did not pursue the point so I was left none the wiser but all the more curious. I now view money as little more than tokens of exchange issued by the government and backed by the understanding that the government will honour those tokens and which the government can issue or withdraw according to its policies at the time. If the “household analogy” were correct, where did the COVID money come from? We do have a good idea of where some of it went! Am I wrong to take this view?
You are right to take this view
I second what Roy Lovett said about your image of “Tax is [then, more]like an economic steering wheel..”
Brilliant summary.Fully deserving of being the title of a chapter in a book,a poster, a slogan on a mug or a tattoo worn by Rachel Reeves.
Please let me congratulate you on a wonderfully clear article expressing very powerful thoughts in a concise way. My question is given how this approach liberates how a government can approach policy how do we improve the economy so that it creates good jobs for our young people?
I like it.
Some thoughts:
Current situation
The UK’s legal requirement to match government spending with bond issuance creates a system that mimics a household budget – the government appears to “borrow before it spends” and must repay that borrowing with interest. This framing reinforces the idea that public finances are constrained like a family’s, even though a currency-issuing government is not revenue-constrained in the same way.
How it could change
If some spending were financed through permanent, non-debt money creation – for example, via a legally recognised “digital coin” issued like physical coins – the link between spending and bond issuance would be reduced. This would break the household-budget analogy, lower interest costs, and give the government more fiscal space without increasing recorded debt.
There is no legal requirement to create the balance you refer to. It is practice, but not law.
There is literally no need for a digital coin. Your fixation with them is wasting your time.
I accept that there is no absolute legal requirement for the government to issue bonds equal to the deficit – and that this is largely a matter of convention and operational practice rather than statute. The Debt Management Office (DMO) and the Bank of England could, in principle, run the system differently.
However, in practice the UK’s fiscal framework, combined with the remit of the DMO and the political interpretation of “sound finance,” means that deficits are almost always matched with gilts. Treasury guidance, market expectations, and international norms lock this in as a de facto requirement – one that successive governments have treated as if it were law.
That’s why I think a proposal like the digital coin idea still has merit. Even if not legally necessary, it provides:
A concrete operational mechanism to bypass bond issuance for a part of spending.
A visible break from the household-budget analogy, helping the public and markets see that some spending can be funded without “borrowing.”
Lower interest costs on that portion of spending, since coins – physical or digital – do not accrue interest or add to recorded debt.
So while you are right that the law does not compel bond matching, the political and institutional reality means we act as if it does. I think it could well be that changing that reality directly is politically far harder than introducing a new, clearly lawful form of non-debt financing. So I don’t want to give up just yet. And it’s a pretty harmless fixation!
You are wasting my time
If they dint think they will vary the existing remit why waste my time with fantasies? Please don’t do so again.
@ Natsai Bokhara
https://www.taxresearch.org.uk/Blog/2025/08/09/why-it-matters-that-government-spending-comes-before-tax/comment-page-1/#comment-1036612
I’m not yet convinced that the Duke of Westminster’s income, or wealth, would diminish, if he decided to stay in bed for a few weeks, because he felt he was paying too much tax to make it worthwhile to get out of bed.
But when Birmingham’s refuse collectors feel it isn’t worth their while working on inadequate wages and poor conditions, then that DOES cause a lot of problems, for them and the rest of Birmingham.
Perhaps worry more about THEIR situation, than of those whose wealth and income is derived from capital and not from labour?
Just a thought.
“UK Landed Gentry announce National Wealth Strike. FT Top 100 Rich List members to strike in sympathy. Nation fails to notice the difference. “
Thanks
In my mind, this fundamental approach to how the state is a game changer. It is so important that is should be rammed down the throat of politicians. The only way to do this is for you to go on tv shows such as newsnight or make a program that the bbc will show otherwise it’s just not going to get to a wide enough audience, and we’ll all be banging our heads across a brick wall for a long time. On another note, I’m sure that the BoE could provide clarity as to the mechanics of state funding. Has anyone asked them to provide official technical guidance as to how this works? you could incorporate this (or say they’ve been asked to comment but refused) on your tv show.
Others have tried…
@ Mat Rouge
What does the Bank of England say?
https://www.bankofengland.co.uk/explainers/money-payments-and-spending
Bartering makes an appearance, but no mention of Sumerian temple granaries and token to represent some of the debt.
Bonds make a appearance but no explanation is given as to how the bonds are purchased.
If you can find where it openly admits to fiat currency issuance, and redemption of the loan by taxation, I would love to see the citation. Until such time, as you read the link you might hear the faint echoes of my scream.
“If you can find where it openly admits to fiat currency issuance, and redemption of the loan by taxation, I would love to see the citation.”
Thanks Anne – so would I as I think being able to cite it (with link to source) could help Richard to persuade more people of the truth of spend & tax.
I raised this in a comment on a previous blog as I’m sure that some while back, Richard did indeed say they had in fact admitted that, but am unable to find any link to it now. Has the BoE quietly buried it?
I have offered the Canadian version, but as noted yesterday, it was UCL paper that shows tax is the redemption.
Yes. I saw that about the Bank of Canada, but am unable to find something equivalent from the BoE. The best I can find is this:
“Who owns the Bank of England today?
We are wholly-owned by the UK government. The capital of the Bank is held by the Treasury Solicitor on behalf of HM Treasury.
Although we are owned by HM Treasury, we carry out our responsibilities independently. We’re free from day-to-day political influence.”
https://www.bankofengland.co.uk/explainers/who-owns-the-bank-of-england
But after that, they concentrate on their ‘independence’ of the government and admit nowhere that they can (and do) actually create money from thin air. There is also an odd page headed “Where does our income come from?”:
https://www.bankofengland.co.uk/explainers/who-pays-for-the-bank-of-england
Could they be deliberately hiding the truth from the public? In any case, surely HM Treasury could always instruct them to create the money they need to fund public services?
This is the closest they get
https://www.bankofengland.co.uk/-/media/boe/files/quarterly-bulletin/2014/quarterly-bulletin-2014-q1.pdf
I understand what you say. Where I fail is in explaining how inflation can be avoided. Please say more on that.
You don’t overheat the economy.
That’s it.
Excepting external-shock created infaltion, as that which happened in later 2021, infaltion can only happen by over-spending within the economy by other consumers or the state. The whole point of fiscal policy is to manage that. Moentary policy canot do that: the reaction times are too slow. And this comes down to judgement.
I have just sumamrised most of what there is to know about inflation management.
I just listened to your debate with Arthur Laffer.
C’est magnifique!
Laffer seemed very ill-prepared, more reliant on mantras and unevidenced slogans, and a touch arrogant. He came up with several howlers along the way. He didnt seem to want to debate the actual motion, but a different one “we believe in small government and unfettered free trade” (he would have lost that too).
His Free Trade mantras haven’t aged well…
Thank you.
It was a good (unpaid) day in Paris.
Hi
A most informative thread.
Who is in real charge of what happens to UK LTD?
Thanks.
There is no U.K. Ltd. The idea is part of the false household analogy.
As I’m sure you have realised by now I think this is the most important aspect of what you do, both here and especially on YouTube. As far as I’m concerned getting this actually quite simple and obvious understanding across is fundamental to funding the future
Thanks
Given that the process licenced banks use to create money is ex nihilo or “a from nothing one” before they impose interest why should citizens not be allowed to use the same process without interest for public purpose? This clearly is a moral issue and those who oppose the idea of government creation are lacking in morals. For example, should just a few be allowed to benefit financially from creating money from nothing for the purposes of a nation fighting a war?
https://eprints.soton.ac.uk/384540/1/IRFA%25202015%2520Werner%2520Lost%2520Century%2520in%2520Economics%2520-%2520Banking.pdf
[…] a post I published here yesterday, I explained that in a country like the UK, which issues its own currency, has an effective tax […]
[…] at least one like we have in the UK, that can issue its own currency, can do all those things. As I have recently explained, it spends before it raises taxes, creating money in the process. It taxes later, partly to […]