Ignorance about money is set to become an even more important feature of UK politics, it would seem. As the FT has reported:
A former Tory minister and top bank executive have contributed to a Reform UK affiliated think-tank report that claims the UK is heading for a debt crisis.
Former Conservative cabinet minister Sir John Redwood and Mark Dowding, chief investment officer at RBC BlueBay Asset Management, are two of the contributors to a report by the Centre for a Better Britain, according to people familiar with the matter.
And, as they note:
The first report since the launch of the CFABB in September,outlines what the UK government should do if markets lose confidence in its ability to service the national debt.
This is now a Farage theme. His talk is of IMF bailouts and a forthcoming loss of confidence in the pound, all based on a claim he is making about the supposed rapid deterioration in the UK's ability to service its international debt obligations.
As a matter of fact, everything that this think tank and Farage will be saying is wrong. The UK's international debt obligations are denominated in sterling. Sterling is, and can ultimately only be, created by the Bank of England. Therefore, there is precisely no chance whatsoever that the UK will not be able to meet its international debt obligations: the UK can always pay what it owes because it alone has the means to create the money to make settlement of them, and those signing up to buy that debt did so precisely because they knew that. That is the security they bought, and the security upon which the value of their savings depends, but which knowledge appears to have passed Farage by.
Is, then, anything about to change? Is it possible, for example, that the Bank of England might refuse to pay what is legally due by the government? No, of course it isn't: it legally has to pay what is due.
Is there instead going to be a crash in the value of the pound, meaning we are all going to be walking around with wheelbarrows of worthless notes because the pound has ceased to be of value, banking has collapsed, and hyperinflation has broken out? It is impossible to say that this could not happen. It is equally possible to say that the probability is smaller than that of my going to Mars by Christmas.
So what is happening? That's much easier to explain. Farage is playing on people's ignorance of the nature of money, of how it is created, of the role of the national debt in that process, and of the means by which debt interests obligations are settled, to create an environment in which panic can be induced to further his polotical claims. As acts of irresponsibility go, that takes some beating, but when was responsibility part of Farage's stock-in-trade?
And what we should note is that all of this is possible because people really do not know how money is created, what the UK national debt really is, or why it is not a threat in any way. In other words, this is happening precisely because the narratives that I have been talking about here for so long are not understood (and are denied by other politicians), meaning that Farage can seize the opportunity to abuse the resulting ignorance to undermine the economic credibility of the UK.
What does this mean? I suggest that this requires me to talk even more about modern money theory, because knowledge of it is now the way to beat fascism. And that matters.
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Far too much ignorance in the wider world of MMT. we are working uphill in that regard. I think you give farage far too much credit, he’s just an opportunist, see’s RR is ratttled & sets out to stoke fear. He doesnt understand how money works either. Far too many people equate sovereign money with a tangible, such as gold, when the reality is different. I think we’ll never have a govt that truly understands money. If the public truly catch on we’ll have revolution on our hands!
I ask myself ‘do Farage and the others standing with him really believe all the doom scenario?’
My conclusion is they don’t really care whether it is true or not as long they use it as a weapon.
Which implies they can’t be countered by reasoning with them.
We can do that with the uncommitted but unlikely to succeed with the ideologues.
Richard’s work in explaining how things really work is vitally important.
But I feel it will need some other factor to counter Reform et al. It won’t be trying to run a lite version of their program. Quite what that other factor is I have still to work out.
Garage, Redwood, the UK financial elite, “economists” and the UK media are constantly pushing the trope public sector is a drag on the UK economy because it’s not productive enough. wasteful, the UK peasants are not paying enough tax and the UK state must be very much smaller.
The average member of the UK population is not aware of how money is really created nor the purpose of tax, is not to see how the elites can be required to pay more.
They believe this garbage because the correct view because the main stream is scared and blocks it.
Nowhere do the neos’ say the “workers” should be paid more, education /health/sustainability/reduced “growth” are important. It’s all the “UK depends on freeing the elites from any shackles”.
Ensittification rules.
John Redwood being remotely involved in anything is a red flag.
John Redwood has masqueraded as a politician of a pretend democratic country for years, cynically using his political position to benefit the investment (actually divestment) banking sector, supporting privatisation and enriching a few people in his social and professional circle.
He has been one of the most destructive political figures I can think of, his cloak of a doctorate from Oxford akin to a wolf in sheep’s clothing.
Yes Richard, you have your work cut out.
I know
And this morning I am very, very tired.
But Fa***e KNOWS where money comes from, his party has a Quantitative Easing Bill all about it, somewhere at the back of a long line of legislation in the Commons (although he wasn’t in the country to sign it).
He has even speechified (incoherently) about the BoE creating money.
He will, of course, get away with this hypocrisy in the MSM.
As for John Redwood….
Please rest. Less posts = less comments. Another note to readers that moderation will happen in due course. Consider having one day a week off from posting. Your output is hugely appreciated, but it should not be a treadmill. That said, this post would make a v good ‘short’ on YouTube!
🙂
My problem is I love writing. It is existential for me. So I then publish. And I am tired now by the rest of life.
It needs to be said that MMT has an Achilles Heel which boils down to a failure to consistently point out that extortion of other human beings always needs to be identified to run alongside our use of money. Two obvious examples of this are firstly some countries both left and right wing depress demand for goods and services especially public ones in order to depress their currencies for global price point advantage. Secondly, if inadequate wages are topped up by public goods and services (for example, affordable social housing is a public good and benefits are a service) then by necessity taxation will rise and if this is inequitably administered then there will be at some point resentment of this by increasing number of voters who will then ignorantly thrash around for politicians who promise to sort things out. Often such politicians are actually sponsored by the extortionists but most voters fail to see this!
“The “economics” favoured and promoted by so very many politicians, think tanks and the main stream media is a set of lies agreed upon.”
(From Napoleon)
P.S. “Almost everything will work comfortably again if you unplug it for a while, including you.”
(From Anne Lamont)
I think of it in terms of knighthoods.
The King doesn’t need to ask anyone to hand in knighthoods before giving the next lot out. He is THE source of ALL knighthoods. No one ever asks him ‘where are you going to get the knighthoods from?’ It is obvious even to stupid people that this is a nonsense question. It may be that the King issues too many knighthoods over time and they are considered a lesser prize, but that has nothing to do with his ability to issue them in the first place.
Then imagine that for every knighthood that the King issued, he committed to writing an email of congratulation to the holder twice a year. Again no-one in their right mind would be asking him ‘where are you going to get the emails from?’. Because even stupid people know that as long as your computer and server are working, you can write as many emails as you wish. The only thing you can run out of is people to send them to.
But reform are asking us to believe that not only can the King run out of knighthoods, but can run out of emails too.
Its insanity gone mad.
That is very neat.
I might borrow that.