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By how much should the Bank of England increase interest rates in a traditional monetarist economy

Discussion in 'off topic' started by lawrence001, Aug 3, 2022.

  1. klfrs

    klfrs chill out

    Sorry @ks.234 I mangled my reply and deleted it, your reply crossed erasure.
    Didn't realise that was the one. But true, as I didn't understand heroic money creation is a part of MMT.

    Do you remember outcome of BoE getting excessively happy with the magic money printing press post gfc/2008?
    Do you mean I haven't stated my position?
     
  2. ks.234

    ks.234 pfm Member

    Another good point, though if the Job Guarantee supplied well qualified care workers in sufficient numbers, there wouldn’t be as many people not being able to work because that have to care for people that monetarism would throw on the scrap heap.

    People who care for relatives, including school children, should be much better recognised
     
    Sue Pertwee-Tyr likes this.
  3. ks.234

    ks.234 pfm Member

    There you go, no understanding but a language that expresses an unwillingness to understand
    I have just answered that very question

    Apologies, yes that is what I meant
     
  4. ks.234

    ks.234 pfm Member

    Apologies, just seen your apology.

    Where were we?
     
  5. klfrs

    klfrs chill out

    Thanks and gracious of you, but the confusion was caused by me. Sorry!

    I was giving a nod to a disadvantage of money creation.

    My position on MMT is conscientious objector, and general economics beyond personal finance agnostic.
     
  6. ks.234

    ks.234 pfm Member

    Sorry, don’t understand, what is the disadvantage of money creation? Are you suggesting a moneyless economy?

    But you have objected, quite vociferously I might say, against MMT advocates, so it only seems reasonable to ask what that objection is
     
  7. ks.234

    ks.234 pfm Member

    For every post pointing out the fact that government cannot run out of the thing it produces, and that taxes do not therefore have a functional role in money creation, there has been 10 more angrily arguing against it. Well, making arsey comments about the poster anyway.

    Given all the anger directed against the notion that taxes do not fund our government spending, I am curious why there isn’t a flood of people now coming forward to support the monetarist idea that taxes do fund government spending
     
    IanW and Sue Pertwee-Tyr like this.
  8. Jim Audiomisc

    Jim Audiomisc pfm Member

    Yes. It is point I've become *very* aware of. I was fortunate in being able to take early retirement on a good pension scheme's insurance policy. Then became more able to also care for my wife. Many people aren't so fortunate. So I can really appreciate the situations related-carers get dropped into if they weren't lucky beforehand.

    The problem is that successive (Tory) goverments have refused to face up to this as it might mean their well-off funders had to help rather than cream profits from those who can afford to pay for the care they need. This has also been a 'hidden face' of the problems that then drag down the NHS as well. Scandle that has hidden in plain sight for decades.
     
    Sue Pertwee-Tyr likes this.
  9. Jim Audiomisc

    Jim Audiomisc pfm Member

    We can but hope that mere reality is now being noticed by more people. Just a shame that the < 0.5% of the population who get to vote on the trivial matter of who our next dimwit shark PM may be aren't amongst them!
     
  10. Jim Audiomisc

    Jim Audiomisc pfm Member

    BTW it is well worth (re-)reading Galbraith at the moment. A lot of what he wrote is still depressingly relevant now.
     
  11. ks.234

    ks.234 pfm Member

    Agree, yes the problems are in plain sight but they haven’t been hidden at all. The problems are caused by monetarism, and looking for a solution within monetarism is looking in the wrong place. The most wrong place there is.
     
  12. ks.234

    ks.234 pfm Member

    It isn’t just dim witted Tories though. There has been a massive amount of anger on pfm directed at the idea that there is an alternative to monetarism. In fact among the more open minds to an alternative have belonged to Tories. Faith in monetarism seems widespread
     
  13. Sue Pertwee-Tyr

    Sue Pertwee-Tyr neither here nor there

    I guess the ‘problem’ in peoples’ minds might be down to one of the three purposes of money:
    a store of value; a medium of exchange; and, a unit of account.

    If a sovereign government can just create money any time it wants, where does the value bit derive from?
     
  14. Jim Audiomisc

    Jim Audiomisc pfm Member

    In essence, 'money' is a religion. It works when people 'believe in it'. i.e. you put money in the bank to spend later because you have some confidence that when you want to use it the 'seller' will happily accept it. Faith is vital. Provided people have that faith you can generate more.

    The key therefore is *how* this 'new money' gets injected, and what it does. cf the "New Deal" pre/during WW2 for a classic partial example. The point is to raise employment by producing new things that people need and which make the economic and social situation better all round. They get paid to create what they then have to money to buy.

    Sometimes that means 'improvements' are created which lower the 'cost' of things or raise their 'quality' and thus enable other employment, pay, absence-of-illness, etc improvements. 'Investment' can be by Government... if they have a clue and don't assume their 'rich mates' will do it for them.

    This is all quite different from fiddling with tax rates that usually just shifts more bits of coloured paper (promises) into the (often offshore tax-evading) accounts of a wealthy few, etc. Ditto for various 'schemes' 'privatisations; etc that the current economic mantras deploy... which don't work as promised.
     
  15. ks.234

    ks.234 pfm Member

    Yes, agree with out of that. I would say that money gets it value from the fact that we need it, rather than a faith in it. The value of money is too important to be left up to faith!

    Absolutely agree about “Investment”. Why is only government spending on the NHS et al that is described with negative words like “debt”, “borrowing”, “giving a bill to our children”, etc, while spending into government approved spending that goes to big business is described in positive words like “investment”?
     
  16. Sue Pertwee-Tyr

    Sue Pertwee-Tyr neither here nor there

    Indeed. Why is spending on ‘defence’ rarely cut back? It is, after all, largely a response to perceived or hypothetical threat, whereas spending on health is a response to a real and actual threat.
     
    IanW and droodzilla like this.
  17. PaulMB

    PaulMB pfm Member

    Maybe because it is so obvious that taxes do fund state spending.
     
  18. ks.234

    ks.234 pfm Member

    IIRC defence spending has been cut, but if we look at the US with fewer public services in the first place and an even more aggressive application of monetarist principles, then less spending does reveal itself in military spending.

    However, if there is a need, a need for defence, for the NHS, to tackle climate change, that spending is not necessarily inflationary as monetarism claims
     
  19. PaulMB

    PaulMB pfm Member

    Exactly. And a government can decide to temporarily create a budget deficit to increase spending, but thus increasing the National Debt, to give the "flywheel" of the economy an extra shove. But this can only be a temporary measure.
     
  20. ks.234

    ks.234 pfm Member

    Please explain how taxes are functionally necessary to fund spending on, for example, the NHS
     

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