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Money is flowing (or now gushing) from the poor to the rich exactly as people seem to want.
Do they? Who are you hanging around with?
Have things changed that much since March 7?
https://pollingreport.uk/articles/labour-maintains-economy-lead-going-into-budget-week
To make matters worse for the Conservatives, 70% of the public don't think their policies will improve the economy in the long term as 71% think they've done a bad job handling the cost of living. Labour policies are also favoured over Conservative ones on taxation (34% - 21%), poverty/inequality (41% - 12%), reducing the cost of living (36% - 17%), unemployment (34% - 19%), and pensions (26% - 17%).
Do they? Who are you hanging around with?
People that believe in magic money tree's and government debt not being real money or needing to be repaid.
I don't if they have changed, all that matters is the next election and a lot of people with return to form and vote Tory. Hopefully not enough of them though.
I'll happily accept being poorer, it's one or two less weekends away each year for me.
It's the poor bastards for whom being poorer means "adequately fed" or "hungry" that need societies protection.
People that believe in magic money tree’s and government debt not being real money or needing to be repaid.
That's not what you said. You said that people seem to want money to flow from the poor to the rich.
Whatever people's misunderstanding of debt, thanks in no small way to the bollocks spouted by David Cameron, George Osborne, Vince Cable, and Danny Alexander, I have seen no evidence that people want money to flow from the poor to the rich.
Which is presumably why the Tories and the LibDems came out with this absurd nonsense "we're all in this together". They needed to convince voters that the wealthy would also be suffering.
People that believe in magic money tree’s and government debt not being real money or needing to be repaid.
How far we've come.
Always shows total lack of understanding of government finances with this sort of comment.
Following my previous post I reckon it's time for this quote:
We are not here in this world to find elegant solutions, pregnant with initiative, or to serve the ways and l modes of profitable progress. No, we are here to provide for all those who are weaker and hungrier, more battered and crippled than ourselves. That is our only certain good and great purpose on earth, and if you ask me about those insoluble economic problems that may arise if the top is deprived of their initiative, I would answer 'To hell with them.' The top is greedy and mean and will always find a way to take care of themselves. They always do.
Michael Foot
Apologies, you took it down to an adhomien level and beat me with experience.
I've provided plenty of info - you can challenge it if you want.
I believe that we are about to see a very significant shift in the logjam that is British politics.
Much as I would like to agree I see no real evidence that this is going to happen. The labour party under Starmer clearly isn't going to bring the change we need. Much like Sunak is doing now Starmer will run a steady ship, and benefit from a significant honeymoon as the likes of Binners et al bask in the misplaced relief of the tories not being in power, releasing Starmer from any expectations of actually doing anything different.
For a couple of years he'll have the easiest job in the country. Then when people realise he hasn't done anything they won't be looking to support more radical left-leaning voices in the labour party, they'll be switching back to the tories or Nigel Farage. We're basically just following the US down the route of impotent and cowardly centrist govt in the form of Obama/Biden and increasingly deranged culture war radicals on the right preventing any form of progressive change.
I seriously think the only thing that will bring any fundamental change is an economic collapse such as happened in Argentina, Iceland or Greece. It's going to take something on the scale of people losing their life savings and pensions to wake them up to the reality of the kleptocracy we live in.
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
<script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
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.
Even without MMT you could have easily argued that government should have made that decision.
I'm debating with people that don't think MMT is real Kelvin.
As I see it, you can either run society for the benefit of capitalism (the Tories), or capitalism for the benefit of society (Labour I would hope).
If the second idea doesn't get a decent chance periodically then the people in power are setting themselves up for a revolutionary change, which will not be televised.
Once again MMT is not an opinion.
do all economists agree with it? I there any proof? Or is it like all other economic theories just that - a theory?
Of course its an opinion. It might be one shared by many and with persuasive argument for it but it remains an opinion
I think possibly the point stevextc is trying to make, albeit rather unclearly, is that printing a huge amount of money could cause inflation.
I would agree it's a theoretical possibility and may happen in some circumstances. Back in 2008, the era of massive quantitative easing, I was concerned about this, being primarily a prudent saver (some would say, being fortunate in my situation). I wasn't pleased to hear that people who had stupidly and greedily lost billions were going to be bailed out by new money that would in principle dilute my own savings.
However, the QE happened, to the tune of many billions, (trillions?). And the inflation....didn't happen. I'm better off now (in real terms) than I was then, even though none of the QE money was thrown in my direction. The last year or two might have put a bit of a dent in that, but that's another story and not caused by anyone printing money.
I may have been naive and uneducated at the time (after decades of being told "money doesn't grow on trees"), but at least I learnt something from watching how events turned out.
No it's not an economic theory. The theory in the title implies a description rather than a theory.
And no, some economists still believe we borrow from the private sector.
Some left-leaning ones too.
BoE data shows that to be bullshit. I don't know how you can argue with COVID spending being directly funded by the BoE. Proof - the government spent 350BN of money to support COVID without any private money. It's all there on the balance sheet.
It's an accurate description of the way a currency issuing government spends.
Not an economic theory like the laffer curve.
But let's face it economists still argue the toss on Brexit too.
Of course its an opinion.
It's a very useful model. And not one worth arguing about... we know governments spend money before they "raise" it... it's announced every budget in the UK. But ultimately it still matters WHAT the government spends money on, and WHO they let extract and keep that money. The how much will continue to be the same old story... lots of nonsense about balanced budgets while finding endless funding for whatever is the priority of the government, and cutting where it doesn't matter to them... which in the case of many politicians is anything that can't be used to funnel money upwards it seems.
[ EDIT : it also matter who they tax, and how much ... although talk of "tax and spend" upsets the new MMT recruits no end ... so "spend and tax" it is ... just don't let them talk as if it's "spend and spend" without being challenged ]
Of course its an opinion. It might be one shared by many and with persuasive argument for it but it remains an opinion
Which bit of MMT is an opinion?
It’s a very useful model. And not one worth arguing about… we know governments spend money before they “raise” it. But ultimately it still matters WHAT the government spends money on, and WHO
Kelvin - the reason people/MPs cite not to do good things for society is more often than not - we can't afford it.
MMT eradicates that argument. So you have to be prepared to explain it.
Look at this thread for many examples.
theory
A set of statements or principles devised to explain a group of facts or phenomena, especially one that has been repeatedly tested or is widely accepted and can be used to make predictions about natural phenomena.
So its an economic theory and your opinion it is right is just that. an opinion
glad to have cleared that up
MMT stands for Modern Monetary THEORY
So its an economic theory and your opinion it is right is just that. an opinion
glad to have cleared that up
You're having a go because of the word Theory in the title?
It's not an economic theory.
It's a description. It got saddled with that title 25+ years ago.
So what? Just read it as description.
MMT stands for Modern Monetary THEORY
A theory is a system of explanations that ties together a whole bunch of facts. It not only explains those facts, but predicts what you ought to find from other observations and experiments.
That's the common understanding of Theory in this context.
Glad we cleared that up again Tjagain.
the reason people/MPs cite not to do good things for society is more often than not – we can’t afford it
When very often we can't afford not to do it! And still we don't do it. And then pay the price. For decades. We're paying the price now. All that money "saved" not transitioning at speed away from fossil fuels... we're paying the price of that short sightedness. All the money "saved" not paying into the EU budgets... we're paying the price of that. All the money "saved" cutting education budgets... we're paying the price of that. All the money "saved" doing away with contigenancy in the NHS and shutting down epidemic preparedness... boy we paid for that. The "cost" of all these "savings" is hitting us hard.. and it's barely started... the biggies are only starting to bite.
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.
The energy crisis in the UK isn't supply related, it's price structure related, That's why we're still in it and others aren't, but that's an aside. UK unemployment has continued to decrease, but hey, keep going. Does raising rates not signal to the orthodoxy (as perhaps you and Liz Truss would view them) that there's a hand on the tiller?
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.
Can you prove it's not doing that by sacrificing short term pain to stop/ameliorate something worse in the future?
Governments enable markets not the other way around.
It can and does work both ways.
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?
There're plenty of examples of this in history, India, Venezuela, Argentina. What happens when people aren't willing to buy government bonds at low rates due to risk? We raise the rates, yes? How far can you take this? Has ANYONE really pushed the bounds of MMT? Do you really want us to be first? With this group in charge?
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.
I've really not, but I'm trying to fix the problem, not treat the symptoms. His salary is irrelevant, his experience and expertise are relevant. He's suggesting a path that WILL help, maybe not in 6 months, but a little longer certainly it's better than the track we're on.
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.
See, I don't think it would, because MMT places responsibility with politicians and they're almost as short term thinkers as you seem to be. 10 years ago we were emerging from one financial crisis, energy was cheap, climate change seemed to barely register in the public consciousness, we were finally out of Iraq, Russia hadn't invaded Crimea and the Arab spring had just ended. No one was thinking about energy. Well - Japan was. You'd have ended up with £200bn on HS2. Money well spent.
Its not proven or accepted by all economists is it? that makes it a theory
Can you prove it is right? No you cannot. Does every economist agree? No they do not
I only dip in and out because i do not know enough economics to debate it but even then I have seen you contradict yourself
I understand you are wedded to this theory but that it all it is. Evolution is a theory even tho its almost universally accepted - thats because you cannot prove it MMT is far from universally accepted.
Use for favourite seach engine and you will find plenty of critiques from highly qualified economists
Unless and until that is addressed we are just pouring more money to the rich.
So your solution to the problem of money being transferred from the poor to the rich is to stop all government spending and abolish money? I admire your radicalism, but it's actually much simpler than that. All we have to do is tax the rich and give that money to the poor in the form of public services, infrastructure, tax reliefs etc.
Steve you're very mixed up on this. I totally agree that we have a huge problem with income and wealth inequality. But that's got nothing to do with how money is created, govt borrowing or trade balances. It's got everything to do with the nature of capitalism and specific govt policy which favours the rich over everyone else. You're conflating two separate issues and drawing the wrong conclusion.
There’re plenty of examples of this in history, India, Venezuela, Argentina. What happens when people aren’t willing to buy government bonds at low rates due to risk? We raise the rates, yes? How far can you take this? Has ANYONE really pushed the bounds of MMT? Do you really want us to be first? With this group in charge?
Not going to happen.
Bonds are not central to the spending of government money. It happens afterwards as a policy decision that they are not compelled to take - to drain money out of the private sector.
You don't need to push the bounds of MMT + it's a process that happens every day without issue for the last 40 years. Yet again do you really understand MMT? And what it is?
There’re plenty of examples of this in history, India, Venezuela, Argentina.
And the examples are usually debt denominated in a foreign currency.
We don't have that problem. We are sovereign in terms of spending.
The energy crisis in the UK isn’t supply related, it’s price structure related, That’s why we’re still in it and others aren’t, but that’s an aside
I call bullshit on that. Price structure is a feature of supply and demand.
We barely produce any of our own energy - that in itself is an energy crisis.
10 years ago we were emerging from one financial crisis, energy was cheap, climate change
The irony of emerging from a crisis which was funded with new money creation in a debate about how MMT doesn't work.
The irony of emerging from a crisis which was funded with new money creation in a debate about how MMT doesn’t work.
😂
I often wonder where all the MMT-critics think the money came from to bail out the banks? The Iron Bank of Braavos presumably?
I understand you are wedded to this theory but that it all it is. Evolution is a theory even tho its almost universally accepted – thats because you cannot prove it MMT is far from universally accepted.
Use for favourite seach engine and you will find plenty of critiques from highly qualified economists
Critique of what?
The counter model is probably monetarism. But that's not really a description of government spending. More a way of controlling money I guess.
And it blissfully ignores the massive COVID spending.
I will throw it back to you -MMT described the funding on COVID support - how else was it funded?
You seem keen on disproving it - so show me.
Some people are just hell bent on not accepting it appears, or as usually the case don't understand it themselves.
https://gimms.org.uk/2021/02/21/an-accounting-model-of-the-uk-exchequer/
This is the only fully resourced description of how the BoE finances government spending that I know.
It's extremely detailed.
Read it and see if you agree?
I think possibly the point stevextc is trying to make, albeit rather unclearly, is that printing a huge amount of money could cause inflation.
It's one option.. or thing that might happen as a way the system will rebalance if you are a net importer.
The overall point is there is no such thing as free food/energy etc. at some point it has to be paid for. (On a national scale, I'm not saying you can't forage and make your own birch oil)
The real point is something will happen at some point to balance. To take an example or the Icelandic govt would just have printed a load of money...
In a way it reminds me of a YTer vanlife guy who's convinced using electric heating charged off the alternator in his van is FREE ... just because you don't see where the leak is doesn't mean there isn't a leak.
In this case there is an absolutely huge leak where the system simply siphons this "free money" off to the superrich where it becomes money they use to buy stuff either in the UK or not... but it's real to the extent they can buy stuff with it.
Tell me how raising interest rates changes a supply side driven energy issue?
Energy is predominately traded in USD
We need to make sure that we kept parity between the GBP and USD
Once the Federal Reserve increased their rates we had to follow, otherwise there would have been big exodus of funds to the US seeking higher rates of returns on secure bonds.
You'll notice the correlation between lowering wholesale energy prices and the improvement in the exchange rate.
Energy is predominately traded in USD
We need to make sure that we kept parity between the GBP and USD
Again hence the need for spending on our energy infrastructure.
The government can always subsidise energy as it did.
Keeping parity between the USD and GBP is not a done deal by governments. There is way too many factors on currency speculation to believe we control that.
For instance at the moment dollar strength is regressing as traders move into riskier assets.
And given the GBP/USD has dropped for the best part of 15 years or more I'd say there's no parity.
[ EDIT : it also matter who they tax, and how much … although talk of “tax and spend” upsets the new MMT recruits no end … so “spend and tax” it is … just don’t let them talk as if it’s “spend and spend” without being challenged
That's just flippant.
The sequence is important. Otherwise that would confirm taxes fund spending which is a central tenant to MMT.
And no one who understands MMT says spend and spend.
When Starmer gets his position and he says we can't afford to do the things that you would like Kelvin I hope you remember MMTs value in explaining why we can Kelvin.
The order is important. But it is what already happens. We have spending policy and taxation policy, and the government spends and then recovers tax. That is what already happens. The whole “balance” of tax and spend still matters though, and MMT covers that. Berating politicians when they talk about the choices they want to make on our behalf because they don’t talk MMT (because they want people to understand them) doesn’t get us anywhere. We can talk of investment, and then using taxation to ensure that doesn’t get taken and kept by the rich… that’s plain speaking. For example investing heavily in the energy production, storage and distribution of the future… while also reassuring that tax loop holes will be closed and excess profits reigned on to prevent that investment just making the richest far richer. When talking about spending, also address taxation…
Of course it is only fair to accept that quite possibly we are living beyond our means both persoally and nationally. I know so many people who owe tens of thousands purely because of luxuries such as new cars, holidays, whopping great tellies and phones that cost them many hundreds of quid. We as a society have become used to things we haven't earned. We cannot have a decent health service if we don't pay for it yet we then expect even more from it. A national minimum wage should not allow for this. Nor should benefits. Your luxuries are your own responsibility.
There are so many people struggling to live but I do wonder, but of course can't prove or even attempt to, just how many people hitting the food banks are making poor decisions?
We, as a country, demand so much and, compared to what we actually need, expect.
To blame one part of the governemnt is just childish. Labour can't fix this. All they will do is make a few greedy sods happy by taking from one sector of society to give it to those most noisy. Supported by those who have no clue and experience of life. And in a way that will be even more unfair as they will penalise those who work hardest and most profitably (in a wide way) and more to the point prop up those who fail to contribute to the national exchequer.
For most of us, accepting being poorer is no big deal, maybe we should actually live by our mouths and be a bit more socially aware.
Those of use riding around on a couple of grands worth of MTB, travelling to ride it etc are not in any honest way able to comment as if we can afford to do that we have money to spare.
MMT is just Keynesian economics on Steroids.. it's a theory, not a set of facts. I'm actually sympathetic to a lot of it's ideas, but there are limits to how far you can push it otherwise even a comparatively strong economy like the UK can end up in a mess like Venezuela et al (tho' to a lesser degree).
How far you can push depends on a lot on political policy, and the sympathy of the markets that impact currency valuations, inflation rate etc. to that polocy. The government has made a series of really bad policy calls since 2008, leaving the UK economy weaker and less competitive. Labour won't be able to fix that in 10 minutes but at least they can change direction, and start to address the underinvestment that's made the UK poorer than it should be.
At the other end of the spectrum is Steve who's veering dangerously close to the 'real money' of the gold standard. While a few people on the internet might think that's a good idea, stagnation, increased inequality, and a lot of other inevitable nasty side effects of it mean it's real nonsense, and then you'll really get to see Marx's theories up close. Real world economies are NOT like a household budget. As long as you can maintain growth you'll get some inflation, and historic debt can be shrunken...