I asked when posting a poll this morning whether a bullet-point summary of my argument for eliminating bond markets, generated by AI, would be beneficial.
This is what ChatGPT made of that article. I asked it to summarise it using numbered headings with bullet-pointed sub-headings. I have not edited the output. Your opinion would be of use.
1. We are not short of funds – we are awash with them
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As Martin Wolf has frequently highlighted in the Financial Times, the world suffers from a chronic savings glut.
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Vast pools of capital are searching for safe and meaningful returns.
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The problem is not excessive government borrowing, but the failure of financial markets to match surplus savings with socially useful investment.
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This is a structural failure of capitalism, not a fiscal crisis.
2. Quantitative tightening is a political choice – and the wrong one
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The reversal of QE through QT is not an economic necessity but a decision driven by inflation fears and deficit dogma.
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QT drains liquidity from the financial system at a time when capital is not flowing to where it is needed.
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QT worsens market dysfunction and increases the appearance of funding stress for governments.
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Ending QT would relieve pressure on bond markets and reduce borrowing costs.
3. QE worked – and could work again
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QE lowered borrowing costs, stabilised financial markets, and supported public investment.
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It showed that central banks can play an active role in supporting government finance.
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There is no technical reason QE cannot be reactivated, albeit perhaps redesigned.
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Reintroducing QE would be rational in a world where private markets are failing to deliver capital for public need.
4. Governments are not like households – they have more tools
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Governments issue currency and are not revenue-constrained in the same way private actors are.
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The UK government can, legally, borrow directly from the Bank of England via the Ways and Means Account.
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This option avoids reliance on private bond markets when those markets are dysfunctional.
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There is no constitutional, legal, or economic requirement for the government to behave as if it is financially constrained.
5. Wealth taxes are the obvious and fair alternative
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The wealthy have gained the most from low interest rates, asset price inflation, and generous tax cuts.
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They are not paying proportionate tax relative to their gains.
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If inflation control is needed alongside investment, taxing wealth is the best solution.
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This also addresses inequality and improves social cohesion.
6. Cutting public spending is not a real option
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Philip Coggan suggests governments must either cut spending or find new bond buyers.
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Cutting spending would deepen poverty, reduce economic activity, and destroy essential services.
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It would hurt the vulnerable and make inequality worse.
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No serious economist believes this is a viable route to long-term economic health.
7. The problem is structural – not excessive public spending
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Gilt markets and modern finance are based on 19th-century assumptions about money, savings, inflation, and state risk.
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These markets serve speculators, not society.
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The system is no longer designed to deliver long-term capital for public good.
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Blaming governments for the failures of these systems is a fundamental misdiagnosis.
8. It's time for purpose-driven public finance
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Governments should move beyond selling generic gilts into volatile markets.
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They should create savings products that meet social goals and attract domestic savers:
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Green New Deal bonds for climate infrastructure
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NHS bonds to invest in care and staffing
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Local resilience bonds to support communities
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These instruments could appeal to savers holding excess capital who seek safe, socially purposeful investment.
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This echoes the post-war savings drives that rebuilt Britain – and could do so again.
9. The real crisis is political cowardice, not public debt
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The idea that we have run out of fiscal road is false.
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The road has been narrowed by ideology – not economics.
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We lack courage, not cash.
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We must stop appeasing markets and start designing financial structures that serve people and planet.
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It is time to reimagine government finance for the 21st century.
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[…] An AI-generated summary is available here. […]
Yesterday ‘wealth taxes’ were bad, today they’re good again. It’s impossible to keep up when your comments are so inconsistent with each other.
Issue 1 – Define ‘wealth’
Issue 2 – even MMT admits that you can’t print money without causing inflation (hence QT is entirely consistent with MMT)
Issue 3 – ‘care and staffing’ don’t create income, so how can you pay investors coupons and redemption proceeds?
I did AI wrote that
And I do propose taxes on the wealthy
I voted No before I saw you had added this AI summary – a format which I think may be easier for some.
But it will indeed need careful scrutiny & editing before you use it. Notably, AI seems to have replaced ‘taxing the wealthy’ (which you propose) by ‘a wealth tax’ (which you disagree with). I have noted previously that this important distinction is almost never mentioned, with ‘wealth tax’ frequently used indiscriminately – sometimes even by you!
This needs more publicity.
I voted No before I saw you had added this AI summary – a format which I think may be easier for some.
But it will indeed need careful scrutiny & editing before you use it. Notably, AI seems to have replaced ‘taxing the wealthy’ (which you propose) by ‘a wealth tax’ (which you disagree with). I have noted previously that this important distinction is almost never mentioned, with ‘wealth tax’ frequently used indiscriminately – sometimes even by you!
This needs more publicity.
Noted
Well Doubting Thomas, at least you lived up to your name! And I doubt you read intro to AI the post.
But that does not change the fact that Richard is showing us what AI did to a previous post. Richard has always advocated that tax and MMT go together in order to cope with inflation.
I sometimes struggle to understand Richard’s arguments so I try harder – I don’t post rude comments. Richard has always pointed out that there are various ways in which you can tax the wealthy but that A single wealth tax is not the way.
Have you followed his excellent series on Wealth?
But Doubting Thomas the licenced banks can also create inflation by “printing” money (UK’s long running housing inflation bubble and the ensuing housing crisis):-
https://eprints.soton.ac.uk/384540/1/IRFA%25202015%2520Werner%2520Lost%2520Century%2520in%2520Economics%2520-%2520Banking.pdf
So where are we at? It has to be and can only be the UK government’s job to regulate both its own and the licenced banks creation of money from scratch.
You issue 2 is wrong on every count and not just within the context of MMT.
Milton Friedman could only make ‘printing money causes inflation’ work with some absurd assumptions, including helicopter money where huge sums were printed and were randomly dropped for no reason and a significant proportion of the people who picked it up had then (not unnaturally) to decide to spend the large quantity of extra money in addition to their normal spending and there had to be insufficient slack in the economy to accommodate the extra demand
Inflation and the Money Supply : https://www.youtube.com/watch?v=gJ8w51q3Yzw&t=442s
Keynes also said, “The second task is to prevent a demand in excess of the physical possibilities of supply, which is the proper meaning of inflation.” (1942) making it clear that he considered inflation was about demand exceeding supply, not monetary operations.
When Obama hit political problems because of the ‘debt ceiling’ being reached, one proposed solution was that he mint a trillion dollar coin to get round it, a wide range of economists accepted this would not be inflationary, if, for some incredibly bizarre reason, he tried to spend it all at once then it would doubtless be inflationary like Friedman’s helicopter money but as long as it was just used to fund normal spending then creating (printing) it would be no more, or less, inflationary than the spending that would have occurred from the debt ceiling being lifted.
QE is not inherently inflationary, as long as it merely sits on BoE and/or commercial bank balance sheets, which is its functionary purpose, then it’s not inflationary, Since it also means the central bank acquires large quantities of long term paper, primarily government bonds, it does tend to put upward pressure on asset prices as the main alternative to the bonds the central bank is extracting from the marketplace though.
Even the BoE claims “the aim of QT is not to affect interest rates or inflation.”
If an MMT supporter was in favour of QT because QE was supposed to be “money printing” and therefore inflationary, then they really have not been paying attention
Much to agree with.
Thank you.
Can I change my vote?
Though I notice point 5 in the AI summary says the wealthy have gained most from, amongst other things, low interest rates, which does not appear in your original post. I’m not sure it is correct either, but I’m sure you’ll let me know if I’m wrong.
It may well be true. But AI added it…
You’ve claimed that low interest rates benefitted the wealthy followed the financial crash band Covid and now claim that high interest rates are benefiting the wealthy.
You do understand that this is totally inconsistent (and impossible), don’t you?
Both are true
Low rates inflate asset prices
High rates inflate interest yields
They can swap asset categories to win both ways
Why is that so had to understand?
I like your articles, I also like the summaries like this as the issues and arguments are very easy to see all together. Useful for letter writing as I’ve not got to grips with AI and have always, being an introvert, written letters rather than debating verbally. Useful also as a refresher when coming back to a topic. Thank you for trying all these things.
I experiment
I enjoy doing so
I keep trying to find things that work
Excellent! Spot on! Misinvested savings glut mirrors the argument found in Klein’s and Pettis’s book “Trade Wars are Class Wars.”
I think this is a useful aide-memoire format and would have uses for many multifaceted topics, both economics-based and anything else. So, I would like to see this type of post again, as and when appropriate.
The addition of links back to earlier posts where fuller explanations were given would, for me and my short memory, be incredibly useful. I know I can use the search facility, but is it possible for the AI in use to produce that information automatically with little or no extra effort? – It’s just a ‘nice to have’ really.
It is useless at doing that….
Yes, it is very easy for AI to do that.
No it isn’t. Hallucinations are the well known problem.
Helpful and clear, I’ve learned so much from FtF, thank you.
BTW found this regarding Layard and his explanation for populism, apparently we are not more discontented with growing insecurity, we are just more vocal and ‘feel entitled to disrespect the elite’ on social media!!!
‘ But I think that the main reason for this sudden change is social media. When you talk to people face to face you have to moderate your language. But this economic method of communication has led to people feeling much less constrained by the normal rules of etiquette, and people have become quite wild in their expressions of their frustrations. To sum up, there has not been a big increase in discontent but there has been a complete change in the way people express it. They feel entitled to disrespect the elite and they feel entitled to do this on social media and in voting.’
https://www.theguardian.com/books/2020/jan/19/richard-layard-everybody-could-have-a-better-time-extract-from-can-we-be-happier
Can’t emphasise the reach and influence of Layard and his CBT oxford mate D Clark in adult and children’s mental health.
Thanks
The AI version is easier to read than your version but know better for a reader like myself with a finance background. You are a good writer. ChatGPT looks like it’s better than a mediocre writer but not a good one.
Thanks