“British Tory MP, the bumbling Jacob Rees-Mogg blew the cover on a major mainstream macroeconomic myth yesterday.
He appeared on Sky News and said among other things the following (thanks Jeffrey for the sound file):
If you look at the borrowing of the state at the moment, total borrowing, excluding the quantitative easing of 875 billion pounds, which is owed by the government to the government, so if you net that off, we under 60 per cent of GDP, I think that is a perfectly sustainable level.
He was trying to justify the proposed tax cuts that one of the leadership candidates has promised if she becomes the next British Prime Minister.
But several points are relevant:
1. The actual QE purchases by the Bank of England between March 2009 and 2021 were £895 billion (
Source).
This was split into £875 billion of UK government bonds and the remainder spent on UK corporate bonds.
So he was right in the numbers – government owing government.
2. The very fact that he is now adopting my ‘left pocket/right pocket’ approach indicates he doesn’t believe that the Bank of England is an independent entity from government.
This trashes the mainstream claims to the contrary that have been used to depoliticise macroeconomic policy making in the neoliberal era.
The holdings of government debt by the Bank of England is truly the government owing itself. It is a total charade.
3. The Bank of England could write that debt off immediately and no-one would be any the wiser!
Jacob Rees-Mogg is effectively admitting that the Bank’s public debt holdings don’t count.
4. Apart from that admission, the rest of his logic is unsound – all public debt issued in pounds sterling by the British government (the currency-issuer) is sustainable”