This video has just been released in the States. The interview was recorded last week.
The cover picture came from the dark ages of our channel, taken during Covid lockdown.
I was interviewed by Jack Farley of this channel.
He gave me the time to explain my ideas: that is all I can ask for.
Jack can also be found on Twitter.
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Excellent! You got to cover a lot there Richard
Thanks
The dogma, despatched by your searing accountancy/critical analysis of BOE/Fed was very effective, as was the ‘tooth fairy’ national debt vigilantes/media put into the context of reality.
Thanks for what you do.
Thanks
I am very surprised as an accountant to hear you say the BoE creates money for the Gov to spend.
The ONLY time the BoE creates new reserves is when it:
1. Buying private sector Assets from banks, which is an asset swap for the bank but a balance sheet BS expansion for the BoE.
2. Lending newly created reserves against assets (secured lending)
3. Paying interest on reserves IOR.
In none of these scenarios is even a single pound provided for the Treasury to spend.
If the Treasury wishes to deficit spend, since the BoE cannot buy Gilts directly from the Treasury, the ONLY option is to sell bonds to the public, or banks, which means 100% of deficit spending is by borrowing from the public or banks.
When borrowing from the public, this has no net effect on the supply of Reserves or deposits, there is no new money created when bonds are sold to the public, or sell bonds to banks which does result in a net increase in deposits after the Gov spends the reserves they borrow.
The BoE does not provide any money for deficit spending. The self financing state article by A. Berkeley shows if the BoE credits the reserve account of the banks of Gov payees, and the Treasury does not have enough Reserves to complete all payments, the BoE will put those amounts on a credit line, but this has not happened in 15+ years. However, this is still borrowing, which taxpayers must repay, and the full funding rule requires the Treasury to sell bonds to the public to retire the credit line, so no way around it, 100% of deficit spending is funded by borrowing from the public or banks.
Agreed?
Completely wrong in every way.
See https://www.ucl.ac.uk/bartlett/publications/2022/may/self-financing-state-institutional-analysis
You quite literally have nothing right.
Wow! I literally quoted that same article to support my view. Have you actually tracked the accounting in it? Or just read the conclusions?
Again, I assume we agree on numbered points 1, 2 & 3 above. If there you disagree please show what I missed.
“The self financing state article by A. Berkeley shows if the BoE credits the reserve account of the banks of Gov payees, and the Treasury does not have enough Reserves to complete all payments, the BoE will put those amounts on a credit line, but this has not happened in 15+ years. However, this is still borrowing, which taxpayers must repay,”
How can you factually disagree with this?
“and the full funding rule requires the Treasury to sell bonds to the public to retire the credit line,”
Or this, if it ever happened?
But you should know the Gov sells Gilts in advance, which the paper conveniently ignores, so payment among accounts on the BoE ledger is simply a Liability Seap for the BoE:
+Liabilities (+Reserve acct of bank of Gov payers)
-Liabilities (-Reserves Treasury/debt office)
No new net reserves. No new money. That’s forensic accounting for the last 15 years, which you of all people should recognize.
“so no way around it, 100% of deficit spending is funded by borrowing from the public or banks.”
The BoE NEVER issues new money for the Treasury to spend that is not a loan, or the BoE would be bankrupt in 3 days.
As an accountant, how can you not see and agree with this?
If you believe I have made a specific mistake, please show me how/what. Otherwise, you should update your thinking to follow the ACTUAL forensic accounting, agreed?
Let the apolitical facts of accounting rule the day, not preconceived philosophy that is refuted by the facts of accounting and reality in 2025.
Reply 1.
The UK state can fund itself
The paper from the UCL Institute for Innovation and Public Purpose shows, in meticulous institutional detail, that the UK government is self-financing. Its central finding is simple but profound: government spending creates money, not the other way round.
Under UK law, once Parliament authorises spending, the Bank of England must credit government accounts. It has no power to refuse. That rule, originating in the 1866 Exchequer and Audit Departments Act and unchanged since, means the government cannot run out of money in its own currency.
The Consolidated Fund, the core of the Exchequer, provides a sovereign line of credit. When the Treasury spends, it issues reserves that the Bank of England records as claims on that Fund. Bonds are then issued mainly for policy or portfolio reasons — to provide safe assets for the financial system — not to fund expenditure.
The authors conclude that the UK government faces no genuine financial constraint:
1. No liquidity risk, because spending creates new money.
2. No default risk, since repayment of interest and principal is permanently authorised by Parliament.
3. No bond-market constraint, as commercial banks use the reserves created by government spending to buy the debt issued.
4. No need to “repay” debt, because gilts are simply interest-bearing forms of sterling money.
The supposed funding rule — that taxes or borrowing must precede spending — is therefore inapplicable in the UK.
The only real limits are political and real, not financial: the nation’s productive capacity, the government’s political will, and Parliament’s consent. Inflation, not insolvency, is the relevant economic risk.
The authors argue that fiscal “discipline,” debt ceilings, and “fully funded” spending are political devices designed to obscure the monetary reality of public finance. They propose ending the “full funding rule” to make explicit that spending comes first and taxation follows.
Their conclusion aligns with Modern Monetary Theory but is grounded in UK law and accounting practice. The true limits on the government’s spending power, they write, are the economy’s capacity, political choice, and parliamentary consent — not the balance on a bank account.
Reply 2
This is the double entry
https://www.taxresearch.org.uk/Blog/2022/06/21/the-double-entry-behind-the-money-creation-in-the-central-bank-reserve-accounts/
Reply 3
Bizarrely you claim the for the last 15 years the BoE has created no new reserves, They say otherwise of course.
And read this.
https://www.bankofengland.co.uk/-/media/boe/files/quarterly-bulletin/2014/quarterly-bulletin-2014-q1
That is how they create money – out of thin air.
Very poltely, don’t waste my time again.
I am watching and enjoying the video.
Could you come up with a term for the type of taxation you advocate for the wealthy? At 8:42 you say “we don’t need wealth taxes”, at 10:15 “wealth tax is a way to improve…”
I understand from your output that you’re advocating taxation on the income from wealth, not on the value of the assets, but this could be confusing for someone new to your work.
Noted…
I’m beginning to think that wealth and the wealthy may be too nebulous. Not yet I feel but at some point I think it needs to be more personal, or at least by citing some examples. Easy for me to say but I’m not the one who will be in the firing line!
Richard,
Thoroughly enjoyed this video with Jack Farley.
Please keep going.
Thanks