Why does this “we’ve maxed out the credit card” narrative persist?

there is distinction between currency and money. Sometimes I use it interchangeably.  But reality is the currency is enforced. Money is not. But it’s easier to say money when in discussion.

Yeah – unfortunately once you admit there’s a difference between currency [sic] and money generally, and that the state has a monopoly only on production of legal tender (which is a narrow concept), and realise the private sector creates 3-5 times as much money as the state, then this neat, inexorable conclusion falls apart:

Then ask yourself where does the private sector get money? Well yeah – totally simple logic that the only people tasked with issuing currency is the government via the BoE.  Because legally no other person can create currency. So it follows the private sector can’t create it.

…and the proposition that the government has a magic wand but just won’t use it because they’re not galaxy brain enough evaporates.

It’s an easy line to feed to the proles like us who don’t understand national and international economics (which, lets face it, is most people).

It’s a useful line for Government to use to explain why they haven’t done anything, why taxes need to be increased, why investment has slowed/stopped. Whether it’s entirely accurate is immaterial, the subtext does its purpose in a manner that most people understand.

and realise the private sector creates 3-5 times as much money as the state, then this neat, inexorable conclusion falls apart:

surely it does not create money – its creates stuff or value that can be exchanged for money?

surely it does not create money – its creates stuff or value that can be exchanged for money?

Banks, building societies, moneylenders of all stripes are (apart from government-owned ones, obviously) are all private sector. So too are the private companies that issue highly tradeable “commercial paper” (short term debt instruments) that are part of the broader money supply.

https://www.ecb.europa.eu/stats/money_credit_banking/monetary_aggregates/html/hist_content.en.html

States also (intentionally or accidentally) compete with each other in issuance and supply of both physical money and finance denominated in the state’s currency. Some states have simply given up the fight and have adopted others’ currencies: Kosovo, Montenegro, El Salvador. Others allow foreign currency as legal tender or accept it for official functions: Tanzania. Retail banking and borrowing in foreign currency can be common among ordinary people eg in Hungary before the GFC there were loads of EUR-denominated domestic mortgages.

So the whole proposition that a state has a monopoly on money – or even currency – and can pretty much call the shots is just nonsense.

If you print too much money you devalue your currency.

If you devalue your currency it makes paying back the debt you owe more expensive.

A good indicator of ability to pay debt is debt as a % of GDP. The UK is not close to being maxed out. Japan is over 200%, Greece just under. The UK is at 100.75, in a
better position than the US, Singapore, Italy and Spain. If you are not credit worthy, debt is expensive and it is harder to make use of. Used correctly it is a powerful tool.

Read about Argentina or Greece for examples closer than Zimbabwe. When a country is really in trouble it just dips into its citizens bank accounts!

IMO BOE do a pretty decent job. Read the Financial Times or even high school economics textbook and you will get more than the average social media channel video.

Money is valuable because it’s scarce. Sometimes that scarcity is real (e.g. gold) sometimes manufactured e.g. bitcoin.

Isn’t Bitcoin more or less a glorified Ponzi scheme? I’m sure I’ve read so from a number of sources.

A good indicator of ability to pay debt is debt as a % of GDP. The UK is not close to being maxed out. Japan is over 200%, Greece just under. The UK is at 100.75, in a better position than the US, Singapore, Italy and Spain. If you are not credit worthy, debt is expensive and it is harder to make use of. Used correctly it is a powerful tool.

What currency is the debt in? Japanese public debt is in yen, which means that the government can print money to pay off the debt (not saying that’s a good plan, but it is possible.) U.S. public debt is in U.S. dollars. Other countries typically have to borrow U.S. dollars which means that they can’t just print money to pay off the debt.

Paying debt in sovereign states that operate fiat is a non-issue. It simply rolls over (simple version.) from an accountancy view.

Of course as the poster above says ‘debt’ accrued in a foreign currency is a problem. But we’re not really taking about that here.

Besides it doesn’t really get paid down. Five surpluses in 50 years? (USA 4 times in 50 years) Surpluses are anomalies in western governments. And contractions follow.

We really do need to undo what ‘debt’ and ‘borrowing’ mean if you want to get close to understanding how things really work.

Just think of government spending as balance sheet accounting.  Spending on one side for the public, and a positive balance on the non-governmental side to match.

It’s nothing more than that.

Of course the larger economy is much more than that – but spending is the engine that creates growth and serves public purpose.

Twaddle about running out of money is the bit in the middle that is a myth.

Labour are currently getting it utterly wrong and are doubling down on a brainless understanding of public spending. Lucy Powell claiming they’ve now looked under the bonnet and found it to be worse than thought.

Ahem. At which point in opposition did you not know the government can spend what it wants to? (Within the bounds of inflationary pressure from too much money being spent on the wrong things.)

Get used to it as I see nothing about Labour that are going to change this mindset.

Twaddle about running out of money is the bit in the middle that is a myth.

It’s true the government can’t run out of money. Unfortunately, that money might be valueless. Pass me another million reichsmark note, the dog’s shat on the lawn again!

At which point in opposition did you not know the government can spend what it wants to? (Within the bounds of inflationary pressure from too much money being spent on the wrong things.)

So, you recognise that there are limits to govts have to work to? What’s wrong then, with Reeves saying that they can’t spend until the economy grows to a size that is capable of using it?

…and there was never an answer given!

It’s an excuse (the credit card thing) for inaction and political choices that favour specific interest groups and generally not the majority.

I see you Ms Reeves, you’re no better than Mr Hunt and you’re squandering a precious resource (a massive majority) through timidity.

by the way, it’s ironic given the subject of this thread that the etymology of word economy is Greek; comes from two words oikos – House and nemein – to manage.