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It’s cheap credit that is causing the issue with increasing rents
No I'm not talking about cheap credit. I'm talking about an economy where wages are enough to pay for things like housing, food and the odd luxury like an annual holiday. Low interest rates have their place, but far better for the govt to actually use it's spending power and position as a currency issuer to invest in infrastructure and services. All you're doing is looking at the problems with MMT through the lens of a monetarist neo-liberal economy. With MMT you'd get rid of most of the economic dogma that's associated with neo-liberalism. Stuff like the fiction that taxes prevent investment and growth, that govts can't intervene in markets (ie the property market) or cap prices (rents). The govt can do all of these things and mostly through fiscal policy.
There are plenty of people who can’t “accept being poorer”. In Cambridge for example… minimum wage take home is about £1500 a month. Rent on a 1 bed flat is around £1300. Council tax another £75. With zero travel costs, walking to work every day, that leaves just £125 a month to live on. That’s less than energy and water costs each month. So foodbanks are the only option along with charity clothing with zero luxuries. So “we” are not, as an earlier poster said, doing very well.
So “we” are not, as an earlier poster said, doing very well.
If you're talking about me then I never said we were doing very well. I said the economy wasn't collapsing and the currency wasn't worthless. There are clearly enormous problems with poverty and economic insecurity which have all been caused by the current economic system and it's failure to provide decent wages and stable prices and enable govt investment in services and infrastructure. We have the worst of both worlds, politicians who choose not to invest because they refuse to be honest about how the money system works, and a stagnant economy which encourages and amplifies the accumulation of enormous wealth by private individuals and corporations. The end result is that working people are being squeezed from both sides. This could all be fixed with some simple changes of policy. We already have the tools, we just need to want to use them.
The housing bubble has been fed via cheap credit (which you’re advocating)
No, cheap credit is a monetarist policy introduced by the likes of Thatcher 40 years ago. In the early 80's Governments all over the world exchanged wage controls - the ability to keep wages tracking against inflation via policy, for easy access to personalised credit, because "The Market will correct" Thatcher presumed that wages control were a thing that the private side of the economy should manage, not governments.
That went well.
Yup, decent wages were replaced with easy credit. Before Thatcher there had been credit controls to stop people borrowing more than they could afford.
It’s cheap credit that is causing the issue with increasing rents
... or lack of rent controls or good social housing...
I’d take a look at whats happening in Berlin.
So do it differently. Just because the policy in Berlin didn't work doesn't mean all rent controls won't work. Or instead of controls introduce taxes which make being a landlord less attractive, or which gives tax reliefs for landlords who keep rents low etc. There's more than one way to skin a cat, and it can mostly be done with fiscal policy and be targeted very specifically.
Also a policy of private rent controls needs to be supplemented with sufficient social housing. If there's enough social housing then that would control the private market in itself. So use the money creation from MMT to build houses. In one policy you solve the housing problem and stimulate the construction industry. The only thing it needs is the willingness from the govt to invest and the spare capacity in the economy to do the building.
Why aren't new houses built by the state via paid contractors? Why are private companies profiting?
I'm sure Persimmon just do the same thing anyway, they just get to skim a load off the top.
It boils down to this - you can have the state provide the things society *needs* or you can lap up the problems with your own income and/or private debt and watch state services collapse.
But your income in that process will regress and regress as lack of public spending dries up the private sector.
Working out what should be in the private sector and public sector is not really that hard. Just look at where the deficiencies in services/£ currently lie.
dazh
Sigh. Once again, no one pays.
I'm too thick to understands but the smart people who say they do variably say.. it is debt, it isn't debt, it needs repaying or it doesn't.
To be fair you have a consistent explanation... we don't seem to get past that as others who also understand MMT keep contradicting it.
I'm struggling with the idea no-one pays ... because like a free lunch invariably someone does.
That is not in any way saying I am a fan of the current scheme .
To STWify this a bit it's like saying if a bike manufacturer offer 50% discounts then noone loses out but the reality is way more complex and there are a bunch of winners and losers.
Some small bike companies and their employees might be badly affected from non availability of parts to loss of sales.
Someone looking to sell their used bike is affected.
Other big manufacturers jumping on or in could spiral that..
dazh
As long as the taxes are weighted towards those who can afford them I see no problem with that. Fiscal policy is a fantastic tool for redistribution and preventing unsustainable bubbles in things like property prices
I've separated that out from the description and mechanism question.
As I pointed out in another thread but best summed up by "Only the little people pay taxes."
Until we can use the money taken out of the system for the rest of us the rest of the system is just an increasingly small minor part of the "money" that is available to be used for anything else.
it is debt, it isn’t debt,
The National Debt has been used by politicians since the 1930's in a propaganda war about spending choices. Not ability, just choice. The fact that some dumb-arsed Tory MP is happy to point out that our debt is larger than at some random point 200 years ago is just another way of saying. "Our economy is bigger than it was 200 years ago" which clearly isn't going to have the effect he wants.
I’m struggling with the idea no-one pays
Have you or any of your family or friends ever been asked to make a contribution to pay off any part of the National Debt at any time?
Chew
It’s cheap credit that is causing the issue with increasing rents
It encouraged many people to get into the BLT market. In most instances rent is just a multiple of mortgage repayments.
NickC
No, cheap credit is a monetarist policy introduced by the likes of Thatcher 40 years ago.
Other than the tasty sandwich... these seem to be symptoms of a Thatcher ideology so to me it's like you are arguing over symptoms rather than the pathogen.
I'll describe this in a generous way towards Thatcher... but for the sake of she's dead lets assume she believed she was doing some sort of levelling up?
Dream is universal and the only poor people in America are poor because they are lazy and/or don't have access to the same mechanisms of wealth as the rich. There is an element of truth in those BUT it's not the whole story.
The bigger picture is the rich are alien lizard people (well not really aliens or lizards just rich) ... but they may as well be because they operate in their own little bubble and the "money" they have stays in that bubble whilst the "money" outside the bubble overwhelmingly flows into that bubble because the rich control the mechanisms.
We were at the time rapidly losing the middle classes... the necessary buffer for the rich to keep power.
In that context Thatcher gave a small and very limited access to one of the bubbles in terms of cheaper credit... along side making more middle class jobs etc.
BTL is a consequence of both the cheaper credit and the Thatcherite dream/nightmare.
I’m struggling with the idea no-one pays … because like a free lunch invariably someone does.
And that's where you go wrong. Money creation is a free lunch. What isn't a free lunch is the labour and materials to do stuff. The 'debt' isn't a debt owed to someone, it's just an accounting record of the money the govt has spent. Tax is levied to remove money from the economy to maintain price stability, but it's not paying back the debt, because most of the time the debt gets bigger. The only time it reduces is if the govt runs a surplus, and when that happens we get recessions.
To put it another way, if we thought paying back the debt was a necessary thing, then we'd be in permanent recession. Instead of perpetual growth (which is silly), we'd have perpetual recession which is even worse. If you want confirmation of this go do a simple search about how much of the national debt has been paid back in the last couple of hundred years.
Other than the tasty sandwich…
@stevextc What on earth are you talking about? Seriously, try not to just type the stream of consciousness that spills out of your head, and compose your thoughts on the page so that they are comprehensible to other people.
Honestly, I don't understand any of your analogy.
NickC
Have you or any of your family or friends ever been asked to make a contribution to pay off any part of the National Debt at any time?
Have you even been in a supermarket lately?
Other than the post someone did on page 1? with "where your tax goes" with the part for "interest on debt" I think it's either naive or disingenuous to suggest someone from government turns up with a collection bucket labelled specifically "contribution to national debt"
Have you even been in a supermarket lately?
The national debt is the total quantity of money borrowed (from itself in the form of future debt) by the Government at any time by the issue of securities by the Treasury.
As I pointed out in another thread but best summed up by “Only the little people pay taxes.”
Until we can use the money taken out of the system for the rest of us the rest of the system is just an increasingly small minor part of the “money” that is available to be used for anything else.
I don't disagree. This is the bit that's going very wrong in the economy. The little people shouldn't be the only people to pay taxes, the rich should too. In fact I'd argue that working people should pay next to no taxes on their incomes and instead the tax burden should be focused on wealth and consumption. That's got nothing to do with MMT though, it's simply a policy choice by politicians who are lobbied by the rich to protect their interests.
The rich are basically parasites feeding off the economy, sucking money out of it and preventing it from being spent on useful stuff. That can't go on forever because it's simply not sustainable and I think we're approaching the point where it's going to change.
@stevextc What on earth are you talking about? Seriously, try not to just type the stream of consciousness that spills out of your head, and compose your thoughts on the page so that they are comprehensible to other people.
Honestly, I don’t understand any of your analogy.
BLT is a sandwich... BTL is buy to let... other than that there is no analogy it is what Thatcher both professed** and did.
She just left out the part about being in the club.
If you prefer an analogy it's like your music teacher telling you all you need is the musical ability of the spice girls and you to can be a millionaire pop star and all those struggling musicians who can't even pay their rent are just crap musicians or not working hard enough.
Other than the post someone did on page 1? with “where your tax goes” with the part for “interest on debt” I think it’s either naive or disingenuous to suggest someone from government turns up with a collection bucket labelled specifically “contribution to national debt”
The lack of evidence for people being concerned about the national debt is telling.
It make me splutter how if clearing the national debt was so fundamentally positive to the economy - why do surpluses hardly ever happen?
And when they do they're often followed by recession actually.
Go where the evidence goes and stop listening to idiots at newspapers that have never done a bit of economic journalism in their lives.
If you prefer an analogy
I'd prefer it if you just typed more clearly to be honest.
Steve - thats not an analogy at all, on any level.
If you get a mortgage from a bank do you think they have a big pile of pound coins somewhere, or notes, and that your mortgage comes out of that pile? Tip. They don't . They have a big ledger of money they have, mooney they owe, and money owed to them. The only actual money they carry is enough to conduct day to day business, everything else is potential.
And there in lies the problem. If there is nothing underpinning money then it is just Monopoly money. It used to be tied to the gold standard so it could be backed up by something real but that ship has long since sailed and now it’s not backed u by anything tangible.
The system that underpins money is the Government/Central banks ability to pay whatever it needs to.
Why do you think you get an 85,000 guarantee on savings etc?
There isn't a load of money waiting to pay that but the promise to pay is as robust as it gets. Job done.
Tying it to gold is just ridiculous and not practical. As has been demonstrated.
Fractional reserve is also not really a thing these days.
Got to say I don't really understand macro economics fully - but I see people so rich they can have their own space programmes and others who are struggling to heat and feed their kids. Its just not right, there is more than enough for everyone to be comfortable if there was fairer distribution - and I'm not talking about screwing those who are doing slightly better than the 'poor'. I'm talking about the super rich. So I agree with the sentiment that money is being funnelled to the super rich
Having a multi billionaire for a PM probably doesn't help with a grasp on reality and wanting to change the status quo. In fact no-one in charge will ever want to change things as for most of them it will be like turkeys voting for christmas
The massive spending of WW2 resulted in a massive debt. What did nearly every country do? Yes, that's right went on a massive spending spree building infrastructure and housing and investing heavily in industry and jobs, and the West enjoyed almost twenty years of unrivalled prosperity. Having learned that lesson...
After the financial crash of 2008 Governments all over the world gave the banks millions, which they hoped banks would give to people in the private sector to rebuild the economy but in fact banks used it to....errr replace all the money that they lost and rebuild their finances,
So noting that plan didn't work after all; after the massive spending and recession caused by the results of Brexit and Covid, the Government learned the lessons of 2008 and didn't spend any money at all, in fact did the opposite, and the result is..?
So there's 3 massive spending and debt cycles that have happened in the period that governments of the West have been free from the need to "pay back" government debt. Only one of which has resulted in the outcome the governments actually wanted.
Also on the banker issue from the OP and folk trying to down play what he's saying - nonsense.
We are poorer because of the Bank of England's decisions, and the government. They are all protecting people with capital at the expense of workers.
Inflation is what happens when people try to shift the burden of increasing cost around. Currently people with income interest are being protected by central banks.
You want to pay more for stuff from the EU - fine you got it - a tariff was just stuck on by the government. That is inflationary.
These institutions are making it harder for you to live - rather than making it better for you. Get that one in your head and stop screaming about currency markets.
Given most central Banks have gone on an interesting raising exercise in unison what do you think the net effect of that is to currency?
Because it's certainly not a good thing for people with debt.
Such a complete but succinct post Nick. Need more like buttons...
Can I also jump in here add a tiny bit of exposition.
MMT happens when the government spends. Every time.
Quantitative easing happens when the government needs to justify spending lots of money and make it appear it's been borrowed. Q/E is a sham.
Let's be clear that Q/E is not MMT, and is often called printing money. So much balls on the internet about printing money.
The net money effect of Q/E is technically zero. (Though I don't doubt it causes ripples somewhere beyond the scope of my knowledge.)
The net effect of government spending is the money that enters the real economy and produces things or services.
Q/T was used as a balance sheet exercise in COVID.
Given most central Banks have gone on an interesting raising exercise in unison
I'm interested to why this is happening across the board, regardless of the political compass of those governments.
I’m interested to why this is happening across the board, regardless of the political compass of those governments
Because there's an absolute belief they can control inflation with interest rates despite evidence to the contrary.
It's madness.
As I demonstrated in that graph earlier employment is still good in the USA and inflation is ticking down. So why do they want to create unemployment?
Did the US also have debt after WW2? To whom did it owe money? Itself?
Yes, that’s right went on a massive spending spree building infrastructure and housing
Much of Europe didn't have a lot of choice.
Did the US also have debt after WW2? To whom did it owe money? Itself?
Yes but given everything was dollar orientated, and then they moved to the Bretton Woods system. There was still a pegging to gold at that point.
Which was a whole bag of trouble.
This why it's so tricky to use the dollar as comparison being the world's reserve currency and all the trade that flows through it.
Lol "interest" not interesting.
Too many typos.
More coffee needed.
dazh
I don’t disagree. This is the bit that’s going very wrong in the economy. The little people shouldn’t be the only people to pay taxes, the rich should too. In fact I’d argue that working people should pay next to no taxes on their incomes and instead the tax burden should be focused on wealth and consumption. That’s got nothing to do with MMT though, it’s simply a policy choice by politicians who are lobbied by the rich to protect their interests.
That's why I chose to separate it... maybe start an informative thread on MMT. I'm not "against" it - I just don't understand it or have a explanation anywhere between Level 1 (5yr old) or Level 5 (Post grad).
The rich are basically parasites feeding off the economy, sucking money out of it and preventing it from being spent on useful stuff. That can’t go on forever because it’s simply not sustainable and I think we’re approaching the point where it’s going to change.
This is something I can both see and understand though I don't have optimism for "change" because unless people realise it will just be an evolution of what we have benefits the rich to another way to benefit the rich.
Right now regardless of if debt is repaid etc. all I can see happening if we "print" more money is that money will overwhelmingly get siphoned off into the big rich people's pot not the pot that benefits the proletariat.
To take the 2Bn I mentioned earlier... borrowed from the government and REGARDLESS of if its paid back or not it's been used to (on balance overwhelmingly) negatively affect the local population, environment and a large part of it will doubtless have been funnelled offshore.
This isn't about MY council, it's about how that "free money" got used, who it benefited and who it negatively impacted including the many who lost their jobs and housing as a result.
Much of Europe didn’t have a lot of choice.
well, it could've chosen to step aside and let the private sector rebuild the economy, which is what the orthodoxy of todays Tories would suggest should've been the correct response. Then you could point out that the private sector didn't really exist any any real form, and most Western governments were stuffed with lots of folks who were all pretty good at "getting shit done" becasue for the previous 6 years or so their lives had literally depended on it.
Right now regardless of if debt is repaid etc. all I can see happening if we “print” more money is that money will overwhelmingly get siphoned off into the big rich people’s pot not the pot that benefits the proletariat.
We don't print money I tried to offer an explanation of that a couple of posts ago.
The government issues new money when it spends - money is used to buy products and services that we know as the state.
And then there is Q/E which is what people think of printing money but that money just buys bonds back for the BoE. and the purchaser gets their money back with interest.
No new money swilling around. Just a balance sheet entry.
wbo
Steve – thats not an analogy at all, on any level.
If you get a mortgage from a bank do you think they have a big pile of pound coins somewhere, or notes, and that your mortgage comes out of that pile? Tip. They don’t . They have a big ledger of money they have, mooney they owe, and money owed to them. The only actual money they carry is enough to conduct day to day business, everything else is potential.
Are you actually trying to imply I'm so thick as to think they have coins and notes or are you just being disingenuous?
WTF happens to that ledger? (hint there is a 200 page document linked earlier in the thread)
Only 3% of all money is coins and notes for reference.
Because there’s an absolute belief they can control inflation with interest rates despite evidence to the contrary.
Without wanting to be a tin-hatted conspiracist about it, I reckon the core driver behind the global effort to return to a pre-2008 economic landscape is that in the wake of 2008 and covid, the establishment elites have realised that their con-trick of pretending there is limited money in the world and that there is a limit on what governments can do is collapsing. If we don't quickly revert to what we had before 2008 then people will begin to demand the things they have been denied for the past 40 years and start voting accordingly. They're trying to rebuild the illusion that govt finances are like a households.
Yeah it's about making us 'pay' for it in all senses possible.
If we don’t quickly revert to what we had before 2008 then people will begin to demand the things they have been denied for the past 40 years and start voting accordingly.
I suspect demographics is a huge part of that.
This is a really interesting lecture about the origins of Q/E.
Honest.
the establishment elites have realised that their con-trick of pretending there is limited money in the world and that there is a limit on what governments can do is collapsing.
I think I would suggest that the predominately right wing governments that have been in charge since 2008 have had it shown to them in letters 20 feet tall that their belief in the twin policies of limited government size and reliance of the ability of the private sector has been demonstrated to be wrong. Rather than admit this, they seem to believe that we're just not doing it hard enough.