Britain is borrowing £132 billion, sending more money to France, watching jobs weaken, and cutting future paramedic training in Wales. Taxpayers are paying more, but the basics still are not working.
The Govt isn't borrowing anything. Being the monopoly issuer of £s sterling, a non-interest bearing IOU (remember I Promise to Pay the Bearer etc?), when it's exchanged for a Gilt, an interest-bearing Govt IOU, all that happens is an asset swap, one sort of Govt IOU for another. Govt isn't any worse or better off after any such exchange than it was before. Why would wealthy folk want to swap their money (non-interest bearing Govt IOUs) for Gilts, (interest-bearing Govt IOUS)? That's pretty obvious; if you've got lots of quids lying round doing nothing and you want to be making profit from them, you can lodge them with Govt who will handily agree to repay you the principle at some predetermined date in the future together with regular payments of what's termed 'interest' in between again on a predetermined schedule. You come out ahead, so this is a great facility for the wealthy.
This Govt facility is also very useful if you want to lodge your money somewhere safe especially during difficult times, like when we're on the brink of a potentially global war and at the very least due to energy shortages likely to last years if not decades society as we've known it is ending very soon. If folk are lodging £132bn or whatever with the Govt, it illustrates a) how scary the times are and b) the faith they have in Govt to survive as opposed to anywhere else they could lodge their money.
What's in it for the Govt then, you might be asking? All Govt spending involves money creation into the economy. Potentially that's inflationary. Govt therefore taxes some money back, and removes more from the economy via 'bond sales', really an asset swap as I've said. Because what we use for money is Govt IOUs (Bank of England March 2014 Quarterly Bulletin, read the PDF), returning it to the issuer (Govt) via taxation or 'bond sales' destroys it, helping ameliorate inflation.
IMV the version of events you read in the MSM is gaslighting designed to make us accept austerity, that pulling your teeth out with pliers while you're queuing for the foodbanks is somehow perfectly normal.
Thanks Bill – the MMT framing is an interesting one and I know it has its advocates. But in practice, debt interest payments are now costing the UK over £100bn a year – that's real money leaving the public finances that can't be spent on hospitals, roads or schools. Whatever the theoretical mechanics of Gilt issuance, the practical constraint is very real for the people waiting 18 months for an NHS appointment.
If I may, "debt interest payments are now costing the UK over £100bn a year – that's real money leaving the public finances"; it's entirely wrong to speak of money, non-interest bearing Govt IOUs according to the BoE itself (Google for 'money creation in the modern economy', there's a video explaining banks create money when they lend it and a PDF explaining what we use for money is Govt IOUs), as some sort of cost when they're created ex nihilo, out of nowhere, by civil servants pressing on keyboards at the Treasury (which includes the BoE as it's owned by the Treasury). There's no realistic cost involved there. If the Govt wanted to create an extra umpteen £bn at the same time to spend on the NHS etc. it could easily do so. We can only conclude then it doesn't because it chooses not to. I strongly suspect myself this is because Ministers stand to profit far more from acting as the servants of private enterprise while in office and after than they do from their ministerial salaries.
As for interest on the national debt leaving the public finances... where do you imagine it goes? A lot of it, recent controversies remind us, goes into peoples' private pensions. How is that a bad thing in any way and how can it be described as leaving the public finances when it's being used to swell the public's private pensions? A great deal too will simply be used to buy more Gilts (rolled over, effectively), for the same reasons it was used to buy Gilts in the first place. British Gilts are looking good which is why they're being bought in such quantities, unlike, say, US Treasuries which are being rapidly abandoned. The co-called National Debt is in reality a storage facility Govt offers the wealthy who prefer it over similar offers from other Governments, stability being the attraction rather than interest rates. It's not nor can it be the albatross round our neck it's routinely misrepresented as.
The Govt isn't borrowing anything. Being the monopoly issuer of £s sterling, a non-interest bearing IOU (remember I Promise to Pay the Bearer etc?), when it's exchanged for a Gilt, an interest-bearing Govt IOU, all that happens is an asset swap, one sort of Govt IOU for another. Govt isn't any worse or better off after any such exchange than it was before. Why would wealthy folk want to swap their money (non-interest bearing Govt IOUs) for Gilts, (interest-bearing Govt IOUS)? That's pretty obvious; if you've got lots of quids lying round doing nothing and you want to be making profit from them, you can lodge them with Govt who will handily agree to repay you the principle at some predetermined date in the future together with regular payments of what's termed 'interest' in between again on a predetermined schedule. You come out ahead, so this is a great facility for the wealthy.
This Govt facility is also very useful if you want to lodge your money somewhere safe especially during difficult times, like when we're on the brink of a potentially global war and at the very least due to energy shortages likely to last years if not decades society as we've known it is ending very soon. If folk are lodging £132bn or whatever with the Govt, it illustrates a) how scary the times are and b) the faith they have in Govt to survive as opposed to anywhere else they could lodge their money.
What's in it for the Govt then, you might be asking? All Govt spending involves money creation into the economy. Potentially that's inflationary. Govt therefore taxes some money back, and removes more from the economy via 'bond sales', really an asset swap as I've said. Because what we use for money is Govt IOUs (Bank of England March 2014 Quarterly Bulletin, read the PDF), returning it to the issuer (Govt) via taxation or 'bond sales' destroys it, helping ameliorate inflation.
IMV the version of events you read in the MSM is gaslighting designed to make us accept austerity, that pulling your teeth out with pliers while you're queuing for the foodbanks is somehow perfectly normal.
It isn't; it's a scam.
Thanks Bill – the MMT framing is an interesting one and I know it has its advocates. But in practice, debt interest payments are now costing the UK over £100bn a year – that's real money leaving the public finances that can't be spent on hospitals, roads or schools. Whatever the theoretical mechanics of Gilt issuance, the practical constraint is very real for the people waiting 18 months for an NHS appointment.
If I may, "debt interest payments are now costing the UK over £100bn a year – that's real money leaving the public finances"; it's entirely wrong to speak of money, non-interest bearing Govt IOUs according to the BoE itself (Google for 'money creation in the modern economy', there's a video explaining banks create money when they lend it and a PDF explaining what we use for money is Govt IOUs), as some sort of cost when they're created ex nihilo, out of nowhere, by civil servants pressing on keyboards at the Treasury (which includes the BoE as it's owned by the Treasury). There's no realistic cost involved there. If the Govt wanted to create an extra umpteen £bn at the same time to spend on the NHS etc. it could easily do so. We can only conclude then it doesn't because it chooses not to. I strongly suspect myself this is because Ministers stand to profit far more from acting as the servants of private enterprise while in office and after than they do from their ministerial salaries.
As for interest on the national debt leaving the public finances... where do you imagine it goes? A lot of it, recent controversies remind us, goes into peoples' private pensions. How is that a bad thing in any way and how can it be described as leaving the public finances when it's being used to swell the public's private pensions? A great deal too will simply be used to buy more Gilts (rolled over, effectively), for the same reasons it was used to buy Gilts in the first place. British Gilts are looking good which is why they're being bought in such quantities, unlike, say, US Treasuries which are being rapidly abandoned. The co-called National Debt is in reality a storage facility Govt offers the wealthy who prefer it over similar offers from other Governments, stability being the attraction rather than interest rates. It's not nor can it be the albatross round our neck it's routinely misrepresented as.
Not a word about MMT there, I remind you.