How about the fact that this bail out is on national debt that has gone from 500billion to 2.3 trillion, since the Conservatives have come to power. OK the sums may not be correct but still, this looks like bail now, pay later.

JeZ

The national debt doesn’t get paid down like you think.

The national debt is just a record of government spending not yet taxed back (it includes private savings, NS&I as well as bonds.) Stuff that shouldn’t be returned back unless you want people to lose their savings?

40% of the national debt is owned by the BoE.

If the national debt decreases then you remove money from the economy.

It’s not a debt at all – it’s a matched record of all spending made by the government. It’s function is to balance the spending by the government by draining reserves from the private sector by bond issuance (bonds that are purchased by earlier government money creation.)

The national debt is part of normal government spending and given the government doesn’t operate like a household can never be a burden on more spending.

If you are the currency issuer a debt is in your own currency is not a problem.

It’s barrier to giving support to the people Labour are supposed to help.

They can afford it. Repeat.

She’s asking the question now, as there has always been the ‘magic money tree’ throwaway by tories, the support will still happen, the tories are in the position of not being able to back down, Truss has stated last week she had a plan, this is the plan, if they suddenly stop if because of Rachel Reeves then Labour can say ‘well it couldn’t have been a good plan if they abandoned it at the first query’.

She’s asking the question now, as there has always been the ‘magic money tree’ throwaway by tories, the support will still happen, the tories are in the position of not being able to back down, Truss has stated last week she had a plan, this is the plan, if they suddenly stop if because of Rachel Reeves then Labour can say ‘well it couldn’t have been a good plan if they abandoned it at the first query’.

All Labour have to do is deal with the reality of government spending. Stop making things up about spending!

That’s it.

Not create a false restriction based on balancing the books.

Rachel Reeves was a bloody banker and BoE classical economist which side is a she really on?

Attack the plan don’t attack the funds to pay for it. It works against Labour.

This debate was sign-posted weeks ago.

I will absolutely object to any pay-for arguments. They’re based on a falsehood.

It may be a fairly effective line of attack right now, as a lot of typically Conservative voters seem to think that Labour is profligate and reckless with the country’s finances. Chipping away at the confidence those voters have in the Tories’ ability to manage the economy may get them thinking more carefully about their vote, so they either don’t vote or in some cases may even vote for Labour if they’re making what they feel to be reassuring noises about spending.

On the other hand while it may (emphasis on may) be a good tactic now it seems like a line that could well come back to bit Labour in the future, if they ever try to change the narrative on government spending towards what Rone advocates.

Thinking – she could take the position it’s not actually enough?

I’d be happy with that.

Rone:

The national debt doesn’t get paid down like you think.

The national debt is just a record of government spending not yet taxed back (it includes private savings, NS&I as well as bonds.) Stuff that shouldn’t be returned back unless you want people to lose their savings?

I’m not an economist but I do know we have to pay interest on this debt and the debt isn’t just the BoE. So it does effect us in the future and the interest payments takes money away from the public purse that could be invested in services. Again I still don’t think this is wise and again we are still being played by the energy markets and paying more based on speculation.

In all of this the government still hasn’t a longer term plan but maybe because some of the government revenues are based on fuel prices they are in their own conflict. Personally I see the best option in this is to be more self reliant as a household and I’m in a good position to do this.

JeZ

Don’t mention gilts Jez! You’ll fire Rone up and we won’t hear the end of it…

While I don’t pretend for a second to understand economics of countries if it were true that a government that can print its own money and never has to repay it why doesn’t every country with their own currency just print off all the money they will ever need? Surely you end up devaluing your currency & cause inflation?

Kelvin:

Don’t mention gilts Jez! You’ll fire Rone up and we won’t hear the end of it…

Funny you should say that, I did think about mentioning them as I did study economics at University as a unit on strangely an engineering degree (don’t go there), but thought I’d better not as it always stirs up contention.

JeZ

Well you clearly can’t just give everyone in the country £10MM and solve everything immediately but you certainly can use £100 Billion in times such as energy crisis as it would cost the country more than £100 billion if you didn’t

Indeed. The cost of not spending is too easily overlooked (’till the **** hits the fan).

as I did study economics at University

Economics is not a science. Markets change, government policy changes, world events happen. What you learnt in economics is only useful in a historical context and probably won’t be applicable today.

Good gob, I had Laidler and Parkin, monetarists who advised the Pinochet govt (result? 6000% inflation)

Markets change, government policy changes, world events happen.

True. Day one of any Economics course. Anyway, gilts, still a thing, yeah? So his point about debt not just being internal to the government/BofE is still current.

Funnelling money into the profits of energy producers is my big fear. It’s an unnecessary price for us all to pay to keep warm this winter, tax that money back, properly, a real windfall tax not a tiny percentage with tax breaks for increasing future fossil fuel extraction/reliance as Sunak gave us. I think we’re at risk of “being played” by the energy sector and this government as well.

PMQs… Starmer going hard on “excess” oil and gas company profits… rightly.

Kelvin:

PMQs… Starmer going hard on “excess” oil and gas company profits… rightly.

He also asked about the payment, so to did Ian Blackford. It’s a joke these profits. I also heard that it was questioned why EDF advertise 100% renewable electricity generation and increasing prices when it has no relationship to Gas or such like…

JeZ

Don’t mention gilts Jez! You’ll fire Rone up and we won’t hear the end of it…

Cheers! 😁

I only have to repeat myself because people keep talking as though the tax payer is the limit on spending.

When that stops I can stop.

I also heard that it was questioned why EDF advertise 100% renewable electricity generation and increasing prices when it has no relationship to Gas or such like…

On that question (wasn’t Starmer), the answer is that gas and oil don’t cost any more to extract either. It’s not the cost of production that’s the problem. There is no reason why higher prices, and higher profits, should go to the gas producers while artificially holding down the price for renewables. Energy is energy.

So, all the opposition parties pointed out where the “help” as regards energy prices is heading…. straight into the profits of energy companies. This is the start. There’s months of this to come. Will they push Truss into a real windfall tax on energy producers? She sounds set on not doing so… it’s public support verses protecting the profitability of oil and gas companies… which does she value most?

While I don’t pretend for a second to understand economics of countries if it were true that a government that can print its own money and never has to repay it why doesn’t every country with their own currency just print off all the money they will ever need? Surely you end up devaluing your currency & cause inflation?

Countries with central banks issue new money every time the government spend.

It’s how it works. For several decades. US. New Zealand. Aus. Canada all do it.

As long as the resources and labour is there to take up the spend you’re good.

Printing money is the wrong terminology.

There is Government spending and there is Q/E. Q/E is getting confused in this process – and is getting referred to as printing money.

Q/E is not MMT by the way.

Q/E is buying back bonds with BoE issued money. But not the same as government spending. But can be used to offset deficit spending as in covid.

I’m not an economist but I do know we have to pay interest on this debt and the debt isn’t just the BoE. So it does effect us in the future and the interest payments takes money away from the public purse that could be invested in services. Again I still don’t think this is wise and again we are still being played by the energy markets and paying more based on speculation.

All you need to grasp is the government is the currency issuer – it can always meet its obligations.

There isn’t a limited number of £££.

Limits are inflation from to much spending dealt with via taxation which deletes £££.

Gilts are still in demand.

It may be a fairly effective line of attack right now, as a lot of typically Conservative voters seem to think that Labour is profligate and reckless with the country’s finances. Chipping away at the confidence those voters have in the Tories’ ability to manage the economy may get them thinking more carefully about their vote, so they either don’t vote or in some cases may even vote for Labour if they’re making what they feel to be reassuring noises about spending

This is a thing – but my point is the Tories always get away with spending whatever they want and Labour shackle themselves, and like in the 2017 manifesto – which was fully costed – people still criticised the numbers.

Labour simply don’t push back enough.

And that idiot Liam Byrne said there was no money left at the end of the last Labour government. Which was a joke but backfired badly

Labour absolutely need to speak in a different narrative.

Long term sort of the problems with greedy companies – short term get people’s bills paid.

Neither Labour not the Tories will do much to push against the market that I can see currently. Yet.

Windfall taxes are a drop in the ocean and not a solution. But the wealthy and profits do need taxing at a higher rate.

@rone

You keep making these statements but people, like me, don’t get it – maybe I’m just too thick but I read what you write and it doesn’t make sense, often it doesn’t even seem to me to bare a resemblance to the question you’re are answering.

So if “All you need to grasp is the government is the currency issuer – it can always meet its obligations. There isn’t a limited number of £££.” is true then why can’t they issue say £20 Trillion and we can all have a great life?

I’m really not trying to be an arse but there must be some point at which it all falls down.

I’m really not trying to be an arse but there must be some point at which it all falls down

Because you’re working on the principle that money is finite. It’s all you’ve ever known. And to a household it is.

We operate a system where our government spends first and taxes later.

To spend it does so via an obligation with the BoE. Everytime.

You’re not thick it takes a lot of rewiring you’re understanding of how things work!

But then it’s simple.

Government put money into the economy – real money. Commercial banks make loans that have to be paid back (under license of the BoE).

So if you control the money supply you own the means to control how it’s spent.

Think about this spending has to come before taxation – or where did you get your money from to pay your taxes?

Governments can create more money. But if they create too much, then it becomes less valuable.

If people have too much money, then they can pay more for other things that are of restricted supply (which is most things – food, oil, cars etc) so then everyone needs a pay rise to pay for it – which is ok, cos everyone has lots of pounds, so then they can all afford to pay more, so prices go up again. The problem with that is that if you have money in your bank or even your pocket the same number of pounds becomes worth less. So people who hold lots of your currency in bank accounts don’t want it any more, so they sell it, and that means whilst you have lots of pounds, they don’t buy much. So the government needs to create even more pounds to pay everyone, and so it goes on.

All money these days* is based on trust. You want pounds because pounds people see them as valuable because they know they can exchange them for things with other people who also think they are valuable. They don’t physically exist at any point.

So they could put those trillions into the economy but choose not to.

So why do they choose not?

true then why can’t they issue say £20 Trillion and we can all have a great life?

Simply because the spending has to be matched against something that society needs and can deliver with available resources.

What you are suggesting would be inflationary.

Let’s say there was a bridge needed near your house – a big one. The government spends the money to create it – the money is spent on the resources available and the cash moves into the private sector. The economy takes up the slack as the money doesn’t enter straight into the wider economy all at the same time.

Your town gets its bridge and the government generate wealth and something positive for the community.

The problem is Governments believe money comes from the private sector and generates wealth and this is the only way to deliver a project efficiently.

One problem, the private sector won’t select the most needy project but the most profitable one.

So they could put those trillions into the economy but choose not to.

So why do they choose no

Because there has to be the resources available to absorb the money floating around.

That’s why you pick the project first and then finance it.

What you are suggesting is helicopter money and that is not the same as identifying a project that can be funded by government.

(Oh and political will!)

Are we doing the Chicken and Egg thing again? I mean, it’s true, but it’s just about timing. Thinking of it as borrowing isn’t really any different. Spend it now… take tax in future to pay for that “borrowing”.

So that’s were we are… create money to help with energy prices… and then choose how to get that money back (or destroy it if you prefer the unintuitive language of MMT)… through future bills, or taxing the profits that energy companies are making from us during this energy crisis. I think it should be the second, predominately or entirely. But I didn’t used to work for Shell and the Institute of Economic Affairs though. Unlike our PM. Truss will do everything she can to make sure the oil and gas companies keep the profits they make out of this energy crisis, and increase our future reliance on the fossil fuels they extract. It’ll take the public, and opposition MPs, to expose and try and change that. Starmer and Blackford have gone in hard from the first PMQs. It’s only the start though… it’s going to be a long winter of the public vs fossil fuel giants.. and the public don’t have the upper hand… they don’t have their person in the top job of government.

Are we doing the Chicken and Egg thing again? I mean, it’s true, but it’s just about timing. Thinking of it as borrowing isn’t really any different. Spend it now… tax take in future to pay that “borrowing”. So that’s were we are… create money to help with energy prices… and then chose how to get that money back… through future bills or taxing the profits that energy companies are making from us during this energy crisis. I

We are doing more than that we are explaining how you can’t just give government money away without a project that demands it.

Also Kelvin I know you tire of this (I mean you don’t have to contribute but I appreciate you do.) But a lot of people still think taxation comes first!

You get it – many others don’t – it’s worth the repitition.

So that’s were we are… create money to help with energy prices… and then choose how to get that money back (or destroy it if you prefer the unintuitive language of MMT)

Create money and destroy(deleted?) money is not unintuitive.

The money doesn’t come back. It’s deleted from an overdraft and not used to pay for anything.

Leaving a deficit (or surplus).

So it would appear we’re back to the 1980s with tax and spend labour vs tax cutting tories. Seems to me that’s the wrong argument to be having in a world with climate change and dysfunctioning capitalism but it at least might force Starmer to pick a side and set out clearly what he’s about. He seemed to do that in PMQs but now needs to back it up with some policies which will directly help working people. The danger of course is that he now has an opponent who isn’t shy of spelling out what she believes in as opposed to Johnson’s dissembling. It’ll probably come down to which one has the most confidence in their position and belief in themselves, and that doesn’t bode well for Starmer or the labour party.

A simple way I’ve created myself to analyse this is that the private sector/wealthy hoard resources/money leaving less for the rest of society. (One of the great failings of capitalism.)

That becomes a hole that needs to be plugged by new government money. Or where else does the money come from?

Taxation exists to limit that happening. You tax the rich to stop them hoarding it the government can spend less if necessary.

The danger of course is that he now has an opponent who isn’t shy of spelling out what she believes in as opposed to Johnson’s dissembling.

He picked her up on “trickledown economics”… perhaps clearer language from the new PM will help Starmer properly pick her up on it, and counter it. No more Less nailing jelly to a plate.

I never watch PMQs but was thinking of giving this a go – should I bother?

Did Truss really mention the laffer curve? FFS.

The Tories actually gave up lowering corp tax because they didn’t get any more ‘revenue’ a few years ago.

That’s the laffer curve which is based on a rich person’s fantasy.

Probably not.

I never watch PMQs but was thinking of giving this a go – should I bother?

No. I can sum it up in the following:

Truss: We’ll cut taxes to help business

Starmer: We’re the party of working people.

Like I said, back to the 80s. The main difference is that while Starmer makes that claim, there’s little evidence of it in policy apart from a fairly insignificant windfall tax. He’s got a lot of work to do to convince voters that he means what he says.

Yeah.

It’s appears to be that old style debate with the Tories doing whatever it takes to survive.

@rone again.

So, for example, in the case of Boris Johnson’s 40 new hospitals, they are no doubt needed and the Government could create the money to build them, but you would need to have the builders, equipment and raw materials available in the economy to facilitate the build, thus spending the money?