I really appreciate your articles but, being totally numerically illiterate, I struggle with some of the numbers!
How long can they keep borrowing and taxing before everything collapses? What happens then? What is "adult social care" that it costs so much? How can a government be so irresponsible? Is there no way of stopping them (other than the pointless general election in four years time)? Doesn't the Office for Budget Responsibilty have any actual power?
According to modern monetary theory a country with a fiat currency like the dollar or the pound can create money out of thin air and therefore can never go bust because it can always create new money to pay off its debt. I suspect that some in government believe this is true. I am not at all an expert by the way. Quite the opposite.
If a government can just print money then why would they borrow any? If they just print the stuff then surely that just makes it worth less and less so they would need to keep devaluing it wouldn't they? But other than having to carry around wheelbarrow loads of notes or print ones worth a trillion dollars/pounds, what difference would it make if it's just bits of basically worthless paper - why would anyone lend "proper" money only to be paid back in toy town currency? (asking as one non-expert to another! although we seem to be vastly over-qualified for the job of Chancellor of the Exchequer)
I don't know the answer. What I do know is that governments have increased the money supply enormously since 1971 when Richard Nixon took the Dollar off the gold standard. This was when the reins were loosened from money supply. As you say, this has had the effect of reducing the value of our money with the result that everything has become a lot more expensive especially housing. You can google this. There's an interesting website called WTF happened in 1971. One of the graphs shows how long it took for people to save for a house and there's a distinct change of slope in the graph at 1971 where it took 2.4 years. By 2020 it was 7 years. As it happened, my wife and I bought our first house in 1974 so we were lucky. There's another graph of the price of a tin of Campbells Tomato Soup which shows the same kink at 1971.
Can you explain a bit about how the borrowing cycle works? From what I understand the deficit is a figure which covers a period of time. It's not a figure for a point in time. So the deficit is the difference between spending and income for a period of time, say a year. The deficit has to be covered by borrowing. But I think borrowing is done on a month by month basis. So do they look at the deficit for the month and then at the end of the month say the deficit for this month is £15bn so therefore we have to borrow £15bn this month?
Thanks for an excellent article. Can you explain the difference between the deficit and what is called "The Black Hole". Since we are always in deficit isn't there always a black hole? The government always spends more than it receives.
The Black Hole was a term by Reeves because they claimed the Conservative Government did not have a plan for all the committed spending. That was a load of nonsense.
Who are the government borrowing from?
I really appreciate your articles but, being totally numerically illiterate, I struggle with some of the numbers!
How long can they keep borrowing and taxing before everything collapses? What happens then? What is "adult social care" that it costs so much? How can a government be so irresponsible? Is there no way of stopping them (other than the pointless general election in four years time)? Doesn't the Office for Budget Responsibilty have any actual power?
According to modern monetary theory a country with a fiat currency like the dollar or the pound can create money out of thin air and therefore can never go bust because it can always create new money to pay off its debt. I suspect that some in government believe this is true. I am not at all an expert by the way. Quite the opposite.
If a government can just print money then why would they borrow any? If they just print the stuff then surely that just makes it worth less and less so they would need to keep devaluing it wouldn't they? But other than having to carry around wheelbarrow loads of notes or print ones worth a trillion dollars/pounds, what difference would it make if it's just bits of basically worthless paper - why would anyone lend "proper" money only to be paid back in toy town currency? (asking as one non-expert to another! although we seem to be vastly over-qualified for the job of Chancellor of the Exchequer)
I don't know the answer. What I do know is that governments have increased the money supply enormously since 1971 when Richard Nixon took the Dollar off the gold standard. This was when the reins were loosened from money supply. As you say, this has had the effect of reducing the value of our money with the result that everything has become a lot more expensive especially housing. You can google this. There's an interesting website called WTF happened in 1971. One of the graphs shows how long it took for people to save for a house and there's a distinct change of slope in the graph at 1971 where it took 2.4 years. By 2020 it was 7 years. As it happened, my wife and I bought our first house in 1974 so we were lucky. There's another graph of the price of a tin of Campbells Tomato Soup which shows the same kink at 1971.
Can you explain a bit about how the borrowing cycle works? From what I understand the deficit is a figure which covers a period of time. It's not a figure for a point in time. So the deficit is the difference between spending and income for a period of time, say a year. The deficit has to be covered by borrowing. But I think borrowing is done on a month by month basis. So do they look at the deficit for the month and then at the end of the month say the deficit for this month is £15bn so therefore we have to borrow £15bn this month?
Thanks for an excellent article. Can you explain the difference between the deficit and what is called "The Black Hole". Since we are always in deficit isn't there always a black hole? The government always spends more than it receives.
The Black Hole was a term by Reeves because they claimed the Conservative Government did not have a plan for all the committed spending. That was a load of nonsense.