This is Jacob Rees Mogg saying government borrowing does not matter and that QE has cancelled £875 billion of the national debt.
This might need to be used time and again….
https://twitter.com/skynews/status/1554361779857362945?s=21&t=Tq17_VJ124Fb-1yeu4RxwQ
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We should be careful to stay away from any arguments put forward by the likes of JRM. I doubt if this is his real opinion. He won’t be saying this for any longer than he thinks is necessary to support Liz Truss’s campaign become PM.
What would happen if the Govt abolished all bonds as MMT economists would advocate? If the BoE bought them all up for created cash would that mean there would be little or no National Debt? Would it make any real difference?
How does this square with the MMT argument that the Government’s debts are everyone’s else’s financial assets? If we didn’t have a National Debt does this also mean we wouldn’t have any?
That he said it is what is important
My worry here that they have started using your arguments to defend their own policy.
Does that risk them then dismissing the arguments you make, claiming JRM already knew this?
And does that then lead them to actually justify using MMT in nefarious ways (as alluded to by a poster on the other thread to do with this)?
I can’t be alone in being concerned by this?
I have always been concerned by this possibility but MMT is a theory that explains a truth
Some MMT supporters don’t like government bonds, but that is simply their personal preference. As MMT isn’t a policy prescription then MMT does not say anything about whether you should or should not have government bonds. I think the sensible view is that issuing bonds serves a number of purposes, not least of which is that the citizens value a safe store of their savings.
They also provide essential security to the banking system and Scotland will need a strong banking system
Tim Rideout – I meant to ask you – how are you doing?
You don’t need bonds to have a safe store of savings. 100% insurance on bank deposits would achieve much the same. The reason MMT people don’t like bonds is they are an unnecessary abstraction which confuses. Allowing individuals to hold reserves would be the equivalent (though no different in practical terms to properly insuring deposits).
Let’s get real: the finance system can’t function without bonds so let’s stop playing silly buggers by pretending otherwise
I really do not appreciate theoretical foolishness
If BOE purchased all debt with newly created funds there would be a mass of money in the system but nothing for it to purchase. Therefore in order to provide a safe haven for that money…guess where institutions etc would want to place it
This is why a right balance has to be found – as I have always argued
But let’s be clear – bonds are not borrowing, they are deposit taking
Except it is Base Money in the CBRAs of the commercial banks, so there is very little it can be used to purchase that will have an effect on the total outstanding. That is because it will just move around in the BoE accounting system without any reduction in the overall balance. You (the commercial bank) can take it out as notes and coins, pay your tax bill or buy something from the state (which could be anything from a Rail Franchise to some surplus MoD land). If there are no State bonds then there is nothing much else that the commercial banks can do with it.
He actually said that QE is owed BY the government TO the government. That’s the important point. A very useful clip to save for the future.
If we consider both bonds and issued currency as types of Government IOUs, isn’t QE just a process of swapping one type of IOU for another? Nothing much changes, especially if the Govt/BoE allow interest paying deposits on stored cash.
QE is just a swap, I agree
But that does not mean it is without significance, politically
Your perspective on all these issues is far too narrow
why do people on this forum think you have “discovered” the monetisation of Govt debt?? … can you enlighten them and explain this has been “known” by generation after generation before them..
If I had time
Read Money for nothing and my Tweets for free
‘MMT is a theory that explains a truth’: can you explain this please?
Read the Deficit Myth or my ebook (freely available) Money for nothing and my Tweets for free
I’ve read the Deficit Myth and I am half way through your ‘Money for nothing’. My understanding is that MMT is not a theory per se but a description of the monetary arrangements of the Govt as set out by law (and practice). However, I am not very happy about the use of the word ‘truth’. Even descriptions can be (or are, necessarily) theory-laden? Your comment caught me on a morning when, waiting for Covid to work it’s way through my system, I am reading Bryan Magee on Popper! I’ve always struggled with the ‘theory’ aspect of MMT.
You clearly need to read more about what theory is
Ursula Lucas, what is it that Magee says about Popper that changes the definition of a theory? From a tiny bit of research just now, it seems that, for Magee, Popper’s insight was that: We humans, in trying to understand the world, don’t start from facts and then form theories, we instead start from theories (or basic ideas) and then verify them against facts. This seems a rather abstract exploration of human thought, and mostly irrelevant to any specific theory or fact.
Thus I don’t understand how this is in conflict with either the description of MMT as a theory, or with Richard’s statement. A theory is still a thing which describes something in the world, as MMT does money, and there still exists a concept of actual truth (how money is used) which are the test of whether the theory fits the world.
Thus, MMT is a theory which describes a truth. The truth being that money does in fact behave have the characteristics that MMT describes. Don’t see how philosophies about human thought have any bearing at all on that.
Agreed
So, now the Tories think Government debt is OK, despite beating Labour over the head 1with it for so long.
Because they say so.
Because they are are in Government.
But the same will not apply to anyone else wanting to govern I warrant you.
We’ve had a Labour party intensely relaxed about people getting rich as long as they pay their taxes which helped towards their own downfall.
Now a Tory Government intensely relaxed about Government debt. Is this a sign of the end for the Tories?
But what a reason to fund something like tax cuts? Ridiculous.
what is important here is the potential impact on the so-called overton window.
JRM is making an argument now which is anathema to what the Tories were arguing about public finances ever since Cameron assumed office.
If Labour or anyone else had made JRM’s statement, they would be derided by the Tories and most media commentators as peddling fantasy economics, the magic money tree etc. You would see the look of derision and disbelief on the faces of smug-faced interviewers and breakfast tv hosts.
But the same rules do not apply to the Tories. They can say and do all kinds of different things and it’s left unchallenged or parroted as accepted fact by much of the media.
If they make arguments which align, if only in piecemeal terms, with the economic truth and reality, that hopefully is a step in the right direction towards normalising what we want to achieve.
Well, Richard, I captured that clip off my PC and put it in your thread from this morning but I see it had also been captured elsewhere and you’ve got it
It’s nice when a Government Minister confirms what you’ve been saying for a good while
I’ve kept that clip for future use on Twitter when the doomsayers try to explain I’m wrong!!
here’s hoping Richard doesn’t get known as “the man behind Moggonomics”
Am I reading this right? Is JRM advocating MMT? Or is he just trying to confuse us all and look like he knows what he is talking about. If so why have we spent the past 12 years with ‘austerity’ and failing to bring the debt down? Rather confused
Who knows what he might mean?
Thanks, Robin, for your comments. The direction I am coming from is this – I was a university accounting lecturer. The stance I took in my teaching is that I wanted to my students to question taken-for-granted ways of seeing the world. I hoped that they might critically reflect upon the notion that accounting ‘communicates a reality’ and that they might start to identify the ways in which accounting ‘constructs a reality’. A key part of this critical reflection was to identify the contestability of ‘facts’ i.e. that some concepts are so taken-for-granted and uncontested that they are accepted as facts without considering the value/theoretical framework giving rise to them.
So, now that I am interested in learning more about MMT (as a non-economist), I want to be sure that I understand which aspects of the MMT ‘reality’ straightforwardly communicate (e.g. legal ‘facts’) and how the remaining aspects construct (theorise) a reality. I am wary of ever assuming that there is a ‘truth’ – rather I anticipate that what MMT provides is a pragmatic, working model that has predictive and explanatory power in our current socio/economic context.
So, to what extent, and in what way, is MMT a ‘theory’? The point of this question is to highlight, within MMT, which aspects are relatively uncontestable in contrast with those where we can/should question the nature of the theoretical components. I have always considered MMT to have two constituent parts: descriptive and theoretical. Kelton, in the Deficit Myth (2020, p233) states of MMT: ‘it is, first and foremost, a description (her italics) of how a modern fiat currency works’. I see the descriptive part of MMT as describing the detail, as set out in law (and maybe by uncontested practice?) of how a government creates currency. This is ‘factual’ in the sense that it describes a legal status. Kelton describes this as: ‘a simple and uncontrovertible fact: our national currency, the US dollar, comes from the US government, and it can’t come from anywhere else – at least not legally.’ As I currently view it, the theoretical element arises from the further modelling (or theorising) of how that currency is/could be used and from what Kelton (2020, p.234) refers to as the ‘prescriptive’, policy-making side of MMT.
You state that a: ‘theory is still a thing which describes something in the world’. I don’t disagree with that. But there is a difference between a description that is as near to ‘factual’ as you can get i.e. set out in law and, for example, the description of a complex socio/economic system that is underpinned by a variety of assumptions and definitions. You state: ‘The truth being that money does in fact have the characteristics that MMT describes.’ I see truth as an aim that we work towards but, given the complexity of the model, not something that is ever achieved.
Apologies. This got lost because I got busy.
I like your approach to accounting. I am
Not sure we agree on what a theory is, but I like your questioning