Because I have been a little distracted over the last few days I did not look at the Office for Budget Responsibility's report on the state of government finances issued on 25 September until today. When doing so I noticed this, on debt:
They plotted that data like this:
What this data makes clear is that to date the government has borrowed no money in the current financial year. What that, then, makes clear is that when the question 'Who is going to pay for the coronavirus crisis?' is asked the answer is 'The government, and it's already done so.'
What is more, it looks likely that this trend will continue, not least because the Bank of England has ample opportunity to announce more quantitative easing as yet, and I expect it to do so instead of moving towards negative interest rates.
What this data also means is that so far this year no effective demand has been made of the bond markets to support the government. They have, in effect, been entirely sidelined. And yet, no one is saying this, even though the Office for Budget Responsibility has confirmed this to be true. Instead, we hear, time and again, about the threat that the national debt is currently creating to our future well-being, and that action must be taken to begin repaying it. But, the claim that the national debt has risen is untrue, and as a consequence the demand for repayment is inappropriate, as will be any economic policy based upon the premise that this is required.
The most that has happened this year is that the central reserve balances maintained by the UK's banks and building societies with the Bank of England have gone up, but none of them is asking for repayment, largely for the very good reason that they know that, such is the nature of the banking system that this would have no net consequence: Any repayment to them would be immediately re-deposited with the Bank of England.
In other words, might I recall the phrase 'Crisis, what crisis?' I think it is appropriate to do so.
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This is a really brilliant article – clear and concise and really illuminated for me why my tutor wasn’t worried about the amount of money we are spending on furlough payments.
While the uk is in a deflationary cycle, we should be able to release more gilts and we won’t cause the economy to overheat because there is so much slack in it already,
If life really will never the same and the corona virus is here to stay then maybe there is an argument to spend the fiscal stimulus on Workers
And also a chance to invest in much needed infrastructure and similar, especially if we need to make permanent changes such refitting offices with air filtration etc.
Will we loose this opportunity? Once the economy settles into its new long term productivity then we will cease to have all this spare productive capacity.
At that point will we feel like we’ve missed an opportunity to invest in much needed works. This might winky not Possibke – people need to socially distance and that’s what’s driving the slack in the economy – not a lack of demand. But still, there’s a lot healthy educated people who love something to do at home not working. So
Bit rambling. But it looks like an appalling waste of money at a time when we may need to refit the economy with all new equipment and offices etc that help tk slow the virus?
I think your understanding is correct
The UK is a society that overwhelmingly thinks it’s smart but refuses to ask whether there’s a Financier of Last Resort and how it goes about being so!
It would rather commit econocide than ask itself these questions!
Does this not make the society a Death Cult because it clings so tenaciously to Libertarian/Neoliberal ideology?
To some degree, yes…
I am glad to see you using econocide
This needs to creep into usage
No I like your invention of the word “econocide” for me it fits with what I believe is a Libertarian/Neoliberal ideological Death Cult that’s had this country in its grip for over four decades now. It reminds me of Maoism which had China in it’s grip for nearly three decades and resulted in the death of millions from famine and ideological persecution. Obviously Parliamentary democracy has restrained the worst excesses of Libertarian/Neoliberal ideology but Covid-19 and Brexit may well change this.
https://en.wikipedia.org/wiki/Mao_Zedong
Agreed
“No I like your invention of the word “econocide””
Simon Drescher, who coined the phrase in 1977 in his book on the abolition of the British slave trade, might dispute that Richard ‘invented’ the word. It’s been used many times in many situations since.
I did not claim to invent it, although I had never heard of it before
I am using it in a broader context that embraces the use originally given to it though
Is this part of a more analytical take on the proposed sound bite ‘to whom do we owe the national debt?- …….largely to ourselves’?
(Need to try to better understand the arcane world of gilts – DMO/Treasury/BoE relationships etc…)
The Government has literally exposed the truth of money by its own inaction on the bond markets.
The only problem is getting enough other people to see what is obvious.
I share L’s admiration for the salient point you have raised.
Thank you for all you do on this subjuect and on many others. Your Youtube videos are particularly useful. This may be a silly question, but if the government has not borrowed any money over the Covid-19 period, why is the national debt going up?
It isn’t…they’re lying to you
I am doing a lot of work on this right now
It may take time to come to fruition
What you say is clearly and obviously true – and I use the words “Clearly” and “Obviously” carefully*.
Why don’t people understand? Really! Please tell me what is it that makes reasonably sensible folk have a complete blindspot with regard to this simple observation of a straightforward statement of fact??
*We all know that when a politician prefaces remarks with either “clearly” or “obviously” then what follows is anything but clear and obvious.
🙂
The Daily Mail discovering the wonders of gov financing;
https://www.thisismoney.co.uk/money/news/article-8801909/Free-money-Bank-England-150bn-UK-debt-disappear.html?fbclid=IwAR356cO9iSfjpxtH5GKG8wXYLZoNJHOxSRyxsQqHhq62XpfgtxnEsHRastY
They have that one wrong: the money ha been rolled over into new purchases
There is an issue in the national debt right now, but that’s not it