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Is that the royal ‘We’?
Folk that were already going to food banks and making the choice between heating and eating, I suppose they’re doing very well too are they?
What’s the comparison here, some industrial city in Siberia?
I’ve read some dumb shit on here recently but this is a whole other level.
I did say "collectively" - I don't think poverty started last Tuesday.
I will take from your use of expletives just because you may not agree that you're not interested in respecting basic plurality of opinions principles and don't want to engage in rational and respectful debate.
That’s not what you said. You said that people seem to want money to flow from the poor to the rich.
and they obviously do if they believe in magic money tree's. Unless you believe in unicorns its the same thing.
Either money is paid back sooner out of our present economy by the poorest to the richest or it's paid back later by the poorest' s children to the richest's children.
Anyone else list to PMQ's?
Seems now that it's to be celebrated (according to Sunak and his baying party) that 10's of millions of UK citizens need Govt handouts to be able to afford to live.
Funny old world...
government debt not being real money or needing to be repaid
It's almost like some people are wholly unaware of the concept of undated govt bonds which were never due to be repaid. Among other things.
(Though the govt has recently repaid some as a political stunt, at least they said they would a few years back, I wasn't really paying attention..)
it seems that way, wages aren't really going up, food and energy bills have gone up 15-25%
and stealth taxes seem to have been brushed under the carpet.
- Income TAX / Paye Thresholds static for the decade 2028
- Capital Gains allowances reductions from £12.3k pa to £6k this tax year to £3k pa in 2024/25
- Dividends Allowance reduction £2k to £1k to £500
even Interest allowances are down to £1k basic rate tax payer £500 HighRate
Either money is paid back sooner out of our present economy by the poorest to the richest or it’s paid back later by the poorest’ s children to the richest’s children.
This would be a functionally stupid thing to do. It's money that is circulating in the non-government sector that has yet to be taxed back. It would included NS&I, Bonds, savings etc - you want to contract the economy ? Your children won't pay it back and neither will their children.
Can you detail how often the national debt is repaid?
(clue hardly ever.)
The public is not on the hook for it.
Bonds are purchased with money previously spent into the economy by the government. It's simply how it works.
It’s almost like some people are wholly unaware of the concept of undated govt bonds which were never due to be repaid. Among other things.
Insofar as money is "real" explain who pays back these undated govt bonds or who buys them if they are never going to be repaid.
https://royalsociety.org/blog/2018/09/perpetual-motion/
The lure of perpetual motion, however, is such that designs continued to be submitted to the Royal Society, by individuals as diverse as reverends and shoemakers, even after it had been repeatedly debunked. There appears to have been a mistaken belief that the Society offered a prize for anyone who could solve the conundrum.
There is a very good fake in the Royal Soc... noone with any sense believes it's anything other than a fake/illusion.
Insofar as money is “real” explain who pays back these undated govt bonds or who buys them if they are never going to be repaid
Well the BoE owns £896Bn of them for a start. Are you concerned that the issuer of currency owns Bonds it purchased with new money creation?
Does that make you not sleep at night?
New bonds are issued all the time as old ones are expired. It's been happening for years.
Debt per se isnt the issue
Its the respective interest charge that goes alongside it
We're currently spend more on interest than Policing, and once the increased interest rates fully feed through, it will end up being greater than the amount we spend on Education.
For every £1 of tax someone pays, 7.6p of that goes out in interest.
Whos receiving that interest?
(its not the poor)
Its the respective interest charge that goes alongside it
Why is that a problem? Ever thought about where the money comes from to pay that interest (clue: it's not taxes!)? The interest paid on govt 'debts' is simply the result of the fiat money system being based on debt and a promise to pay. Without interest fiat money systems would collapse. It's essentially a big ponzi scheme, but the reason it doesn't collapse like other ponzi schemes is because the government can create new money in peretuity to keep it going.
For every £1 of tax someone pays, 7.6p of that goes out in interest.
See above. Interest paid on govt bonds is not funded from taxes. Where do you think the money to pay those taxes came from in the first place?
(its not the poor)
It's everyone. If your money is in a bank rather than hidden under the bed, then you're the recipient of interest which comes from the issuance of govt bonds. Assuming of course that we don't have negative interest rates.
Well the BoE owns £896Bn of them for a start. Are you concerned that the issuer of currency owns Bonds it purchased with new money creation?
I'm concerned that anyone would think this is new money creation?
If money is a promissory note for goods or services then goods and services being equal all this did is devalue the goods and services.
New bonds are issued all the time as old ones are expired. It’s been happening for years.
Seems like an endless transfer your debt with a free month bank/CC offer.
To give a local example ... my local council borrowed about £2Bn of public works money
This was distributed to some developers and contractors and we now have net assets <<£2Bn (in total not just where the money went) and total debt is £2.4Bn (per 100,000)
So either they do a s104 (equivalent of bankruptcy) or something else??? (increased CT/less services???) the interest alone is many times the total income of the council ... they made a loss on practically EVERY "investment"...
Either way the developers/contractors have been paid this money and it has been transferred to the rich already..
So however you look at this, the money has gone to the rich (it's been paid and in their accounts)... so where did it come from?
At the point it was paid or somewhere it became "real" (even if it started as some hypothetical self loan)... so it had to come from somewhere (inflation, low pay ??)
Seems like an endless transfer your debt with a free month bank/CC offer.
That's exactly what it is. The difference though is that the govt can create new money to pay the transfer fees where you can't. So an individual would see their capital shrink and disappear, whereas the govt can protect it's capital by using new money to pay the interest.
To give a local example … my local council borrowed about £2Bn of public works money
This isn't a valid comparison. Just like you and I, local councils are currency users not issuers. They are bound by the same rules as all of us. The government however is not, because it has the unique ability to create money and spend it into the economy. You simply can't compare how loans and debts work at govt level to how they work for everyone else.
Simple fact
Once again rone I am reading a lot from you, of course on a finance thread, which you present as fact.
When I do believe much of it is your opinion, and other opinions are available.
Look around you.
I will. And learn, and I hope remain open to learning more about differing views on the economy and how our government and others influence it.
That’s exactly what it is. The difference though is that the govt can create new money to pay the transfer fees where you can’t. So an individual would see their capital shrink and disappear, whereas the govt can protect it’s capital by using new money to pay the interest.
But its not new money, its new debt...
This isn’t a valid comparison. Just like you and I, local councils are currency users not issuers.
The money they borrowed (or 2Bn of it) is FROM the government.
The money has ended up in the bank accounts of developers and contractors...
My point is this "hypothetical ponzi money" at some point went into their accounts and became "substantiated"
As Chew pointed out 7.6p of that goes out in interest so who is receiving that?
But equally that's 7.6% NOT being spent on services... or inflation.
At the best your endless "ponzi scheme" would be the government "creates" money and gives it to the rich... but it's not because interest is being paid... but this 7.6% is
For every £1 of tax someone pays, 7.6p of that goes out in interest.
So this is assuming those with net worth's in billions are actually paying tax...
It’s essentially a big ponzi scheme, but the reason it doesn’t collapse like other ponzi schemes is because the government can create new money in peretuity to keep it going.
It's not actually creating new money though.. the UK net worth in dollars (or whatever) doesn't increase but decrease.
It's more like doing a share split... you created new shares but the overall "value" is the same.
It's like saying I had 100 shares at £1 but I'm better off now because I have 200 shares at 50p?
It’s like saying I had 100 shares at £1 but I’m better off now because I have 200 shares at 50p?
Well no not really. The point is that the government is playing a completely different game to everyone else who has any GBP.
It’s everyone. If your money is in a bank rather than hidden under the bed, then you’re the recipient of interest which comes from the issuance of govt bonds
If you're poor you dont have any savings/investments
Molgrips
Well no not really. The point is that the government is playing a completely different game to everyone else who has any GBP.
Perhaps but then monopoly money isn't real.
Ultimately people need food/shelter/heat (and bikes) and this government "game" doesn't make any of those more affordable (at best).
To back up - one way or another the poor are paying and the rich are receiving.
But equally that’s 7.6% NOT being spent on services… or inflation.
Even less would be spent on services if the govt decided to reduce the size of the debt. And how do you 'spend' money on inflation? Inflation isn't something you can pay back, it's just a measure of the rate of change of prices in the economy. If you want inflation to come down you need to tackle the source of that inflation, which currently is energy prices, and that would involve more debt to fund their subsidisation.
It’s more like doing a share split… you created new shares but the overall “value” is the same.
Again that's not a valid comparison. The difference is that the 'shares' that are created by the govt are used as a means of exchange that drives everything that happens in the economy. Company shares have no utility beyond entitling you to a share in a company's profits. You can't buy food with shares in a company.
To back up – one way or another the poor are paying and the rich are receiving.
Absolutely right. But that's not because the govt has too much debt. The problem is one of allocation and distribution of resources, not the scale of those resources. Through various means as a result of govt policy the rich benefit more than the poor. The answer isn't to stop spending, but to spend the money on different things. That's what MMT proposes. You're looking at this the wrong way round. MMT and the whole system of fiat money and govt financing could be used to reduce poverty and provide universal public services and infrastructure. It's the potential solution not the problem.
Perhaps but then monopoly money isn’t real.
Sorry to break it to you but none of it is real. But that's no big deal because we are all playing monopoly.
If you want inflation to come down you need to tackle the source of that inflation, which currently is energy prices
How much inflation is due to Brexit red tape? I mean, if you need to hire a team of people just to do the same trade you were doing before, your prices must go up right? Or if you have to pay lorry drivers to sit in queues at ports? Isn't that going to have a small inflationary effect?
How much inflation is due to Brexit red tape?
I have no idea. It’s certain to have some inflationary effect but compared to the tripling of energy prices on which all economic activity depends I suspect it’s pretty negligible. And besides, are we going to focus effort on solutions that are possible now or something that will take decades to achieve? Much as I would love the UK to rejoin the EU it’s not happening.
Sigh.
He said ‘workers’ asking for higher wages specifically.
@rone - no, he didn't.
people demanding higher pay and businesses passing on increased costs by putting prices up
Was the exact quote. He said it was one feeding the other in an unsustainable spiral that beyond UK shores made the UK unattractive. High product prices mean we sell less, high wages mean we import more, high inflation means we can afford less. Spending power both at home and abroad is thus reduced.
He didn't single out wages at all.
compared to the tripling of energy prices on which all economic activity depends I suspect it’s pretty negligible. And besides, are we going to focus effort on solutions that are possible now or something that will take decades to achieve?
Quite, I was simply pondering.
Molgrips
Sorry to break it to you but none of it is real. But that’s no big deal because we are all playing monopoly.
Yes to an extent but ultimately there is a difference between Casino money and monopoly.
Ultimately your casino chips can be converted into something buys food / heat etc.
The Mail headline is hilarious. Yes blame the person earning £190000, do not mention the super-rich and their yacht money.
Ultimately your casino chips can be converted into something buys food / heat etc.
So can monopoly money if someone else wants it.
o give a local example … my local council borrowed about £2Bn of public works money
Your local council is currency user and fiscally constrained. The government is a currency issuer.
There is no comparison.
Huw Pill said workers asking for higher pay and shopkeepers putting up prices were “self-defeating” as both fuel inflation.
It's all over the shop and he said households too.
No idea where you're going with this.
Absolutely right. But that’s not because the govt has too much debt. The problem is one of allocation and distribution of resources, not the scale of those resources. Through various means as a result of govt policy the rich benefit more than the poor. The answer isn’t to stop spending, but to spend the money on different things. That’s what MMT proposes. You’re looking at this the wrong way round. MMT and the whole system of fiat money and govt financing could be used to reduce poverty and provide universal public services and infrastructure. It’s the potential solution not the problem.
The problem is the "money" is being funnelled (or really gushing) from the poor to the rich
Unless and until that is addressed we are just pouring more money to the rich.
I was away so not sure what happened on the tax reform thread.. but my point there was there are a bunch of people don't pay tax or pay so little it barely counts and worrying about them leaving if we tax them is as pointless as worrying about getting rid of parasites making you ill.
To take Marx's levels of society, these are primitive society, slave society, feudal society, capitalist society, and socialist society.
As far as I can observe in many ways we are currently going from capitalist back to feudal.
If I put that into a 21C context...
we are increasingly chattels to be bought and sold for services we have no choice over taking or not.
If your ISP or mobile provider gets bought the valuation is not based on infrastructure but on people locked into contracts
It’s the potential solution not the problem.
As of now I can't see it...
Firstly it isn't sustainable long term UNLESS we have a positive trade balance.
Secondly the money will flow to the parasites... and effectively OUT of the system.
We need to get rid of the parasites before we feed them otherwise it will be like treating a virus with an antibiotic.
The entire system has evolved/transformed into something that intrinsically only channels wealth one way.
Northwind
The Mail headline is hilarious. Yes blame the person earning £190000, do not mention the super-rich and their yacht money.
Ah yep Jonathan Harold Esmond Vere Harmsworth, 4th Viscount Rothermere
He was a supporter of the former Conservative Party leader David Cameron. He ranked fourth in the Publishing, Advertising, and PR section of The Sunday Times Rich List of 2013 with an estimated wealth of £720 million. In April 2015, The Sunday Times estimated his net worth at £1 billion.
Once again rone I am reading a lot from you, of course on a finance thread, which you present as fact.
When I do believe much of it is your opinion, and other opinions are available
And once again I ask you which bits?
Or offer an alternative view?
You don't seem to be able ever counter anything other than with a luke warm remark.
I've studied the hell out of the Government spending mechanisms and passed an exam on the subject, and currently pre-producing a film about it so offer something up and I will listen.
All I ever get from the opponents of MMT is passive aggressive threats rather actual counter narrative. Happens all the time.
Once again MMT is not an opinion.
Some of my other stuff might be. Guilty.
https://twitter.com/andyverity/status/1650759444899278850?t=AAlBsfNFVwB3ic3qtwY0yQ&s=19
Your local council is currency user and fiscally constrained. The government is a currency issuer.
There is no comparison.
Once again they borrowed this money (2Bn) from the government (public works) this isn't their only debt this is money thewy borrowed from the government... and this money from the government loans has been given to developers and contractors who have provided assets <<2Bn
This money is now in the accounts of the developers and contractors so unless you can think of a way its reclaimed its gone from magic money tree money to rich developers.
This money is now in the accounts of the developers and contractors so unless you can think of a way its reclaimed its gone from magic money tree money to rich developers.
So they're in debt to the government?
Look you're confusing being irresponsible with money with the machinations of government spending so I've no idea of your point.
There's corruption at all levels of government none of this negates the way central government finances spending.
Are you suggesting just because someone screwed up - governments can't fund things with central bank money?
What's your point?
As far as I can observe in many ways we are currently going from capitalist back to feudal.
Just you wait until your lord of the manor/local Tory MP has his wicked way with your daughter. And then gives you a damn good thrashing for being insolent and complaining.
It's the worse Tory government ever.
The problem is the “money” is being funnelled (or really gushing) from the poor to the rich
Unless and until that is addressed we are just pouring more money to the rich.
I was away so not sure what happened on the tax reform thread.. but my point there was there are a bunch of people don’t pay tax or pay so little it barely counts and worrying about them leaving if we tax them is as pointless as worrying about getting rid of parasites making you ill.
That's not MMT's fault.
That's bad policy choices.
Government spending happens irrespective of left or right thinking.
The tax part of MMT specifically says you can use tax as a means of redistribution, by taxing the wealthy - to remove spending power if necessary.
The Mail headline is hilarious. Yes blame the person earning £190000, do not mention the super-rich and their yacht money.
Reminds me very much of this…
<p lang="en" dir="ltr">Careful mate... that foreigner wants your cookie! #StandUpToRacism pic.twitter.com/lM8dWIUMTl</p>— Dan Roy (@roydanroy) January 17, 2020
https://platform.twitter.com/widgets.js
It’s the mega rich oligarchs (that lets face it, don’t add any value to society, they just hoard wealth) pointing at the (hard working) merely well off and blaming them for being the reason the working classes can’t afford nice things… To most people £190k a year is a very big salary for sure… In the grand scheme of things, it’s a drop in the ocean, and arguably for the amount of skills/experience/responsibility attached to the job, it’s quite underpaid compared to anything else out there… But then so is the UK PM position, but it’s not what that position pays, it’s what opportunities it affords that’s the problem!
The "household budget" concept of public finances was possibly Thatcher's biggest lie, and it's been used to con multiple generations since.
Honestly, just think about it for a second. "Money doesn't grow on trees", they said. At a time at which money was literally made of paper, created from trees. I mean, as "big lies" go, that's an absolute whopper. (OK, perhaps it was cotton at that time, etc blah blah.)
Imagine standing in front of a brick house and saying "houses aren't made of bricks". Or proclaiming "water isn't wet". Now imagine being a person who was brought up to believe and regurgitate these absurdities.
*I* can't grow more money for myself, because I don't have the legal authority to do so. Govts can literally create money at the press of a button, and *they do it all the time*.
@thecaptain - clear point well made.
Don't know why some are fighting this so much. The system is accurately described.
I completely get being shocked that something is not what you've been led to believe.
But like I say aim your angst at Prof Stephanie Kelton, Prof Bill Mitchell, Prof L. Randall Wray, Warren Mosler, Prof Richard Murphy. Etc.
Or at least study their work.
So they’re in debt to the government?
Look you’re confusing being irresponsible with money with the machinations of government spending so I’ve no idea of your point.
There’s corruption at all levels of government none of this negates the way central government finances spending.
Are you suggesting just because someone screwed up – governments can’t fund things with central bank money?
Yes they are in debt to the government and can't repay or even repay the interest
What’s your point?
Where has this magic money come from and gone to...??
If this money started off as some bonds the BoE issued and bought (magic money) that then got loaned to the council at some point this became real money/debt (to the extent any money is real)
One way or another that money/debt is money taken from the economy even if it wasn't "real" to start off.
There’s corruption at all levels of government none of this negates the way central government finances spending.
Well the council should have applied the criteria of "a prudent investor" but hey, its not a criminal offense.
Some of the councillors should have remembered to declare their interests... oops sorry bye... not illegal just against the Nolan principals...
The point is the system is set up to pour this money to the rich...
I know I'm not personally liable for the £37k debt but equally that has somewhere got to lead to a loss of services I pay for.
It's just an example from my local council... how this "magic money" is realised.
The amount of dissonance from you in this thread and others on financial policy is staggering. YOU highlighted his wages and that he'd specifically highlighted wages, I pointed out that his statement was far broader and ultimately, his wages were less relevant as a result. You simultaneously criticise the BoE for raising rates whilst acknowledging that it's the only lever that they really have to attempt to control inflation. Had they not done something, how would the international markets have reacted? You state that Monetarists don't fully understand MMT, but fail to explain what a self professed MMT expert would do instead.
Is there a risk that massive borrowing, massive inflation and a stagnant economy can lead to a downgrading of cash flow, decrease credit ratings and ultimately a sovereign debt crisis? It's not unprecedented.
I don't want high inflation, I would like a payrise, but perhaps if one can be reduced, the other can be mitigated and that's what he was (poorly) stating, no?
Do we believe that the BoE wanted to increase rates or did they feel it was the least worst thing they could do to attempt to shorten the cycle?
*I* can’t grow more money for myself, because I don’t have the legal authority to do so. Govts can literally create money at the press of a button, and *they do it all the time*.
No they don't create money they create currency. That currency has a value against food/shelter/heat etc.
If we are importing food/energy then the more currency they print the less we get for a £
If the balance of trade is positive that doesn't matter... we are earning more than we are spending.
If the balance of trade is negative then our costs (tons's of wheat/pork belly whatever) we import gets us less and those using the currency to buy it get less for their money
Do we believe that the BoE wanted to increase rates or did they feel it was the least worst thing they could do to attempt to shorten the cycle?
It was and is the wrong thing to do. Tell me how raising interest rates changes a supply side driven energy issue? Other than putting people out of work to stifle demand.
Had they not done something, how would the international markets have reacted? You state that Monetarists don’t fully understand MMT, but fail to explain what a self professed MMT expert would do instead.
I would prefer a governments and central banking system that makes its first priority the well-being of its bloody citizens and not the markets.
Governments enable markets not the other way around.
Is there a risk that massive borrowing, massive inflation and a stagnant economy can lead to a downgrading of cash flow, decrease credit ratings and ultimately a sovereign debt crisis? It’s not unprecedented
What are you talking about? What is a sovereign debt crisis in the context of a country that issues its own currency?
Who gives a toss about credit rating agencies?
You seem to forget the victim in all of this the low-waged worker. Where do they feature in your defence of well paid economists? You've lost sight of the actually victims here.
You state that Monetarists don’t fully understand MMT, but fail to explain what a self professed MMT expert would do instead
MMT is saying and would have said ten years ago invest in your energy infrastructure - we can afford it whilst monetarists would be arguing about how we can't afford it.
That's all they ever say unless they're after a bail out themselves. Because they love the state money too.
MMT is saying and would have said ten years ago invest in your energy infrastructure – we can afford it whilst monetarists would be arguing about how we can’t afford it.
Even without MMT you could have easily argued that government should have made that decision. It hasn't been done because of who we elected to govern us, and who they are beholden to, not because we can't afford it. We've been stuffing the pockets of anyone prepared to seek out and extract more fossil fuels... all that money from the government went where...?
If we are importing food/energy then the more currency they print the less we get for a £
That's simply not the case.
The USA issued trillions of new spending and its currency value went through the roof up until very recently.
Currency value is determined by markets not by how much money is being spent.
You don't dilute a currency that's not pegged to anything.