Le Baron
Unbiased advice at reasonable rates
Then why is she saying things that are drivel? I went to a fine economics institute as well. So what? I also went to another institution after that. The BoE makes statements that completely contradict what she says, so was she wearing ear-plugs when there or something? The 'economists disagree' is an oft-wheeled-out quote, but what does it mean? That there are no matters of observable fact regarding operational functions in a monetary economy? If so what is anyone saying at all? There's this naive view that the central core of policy as it has been delivered since 1976 is a natural law and the disagreements are about the cake icing. This is wrong.
The objectives for an economy are shared (e.g. that no-one would say: we want mass unemployment or no growth), but the route to the objectives relies either upon alignment to observed facts or ideology. This is something than can be discovered. Reeves is making entry-level errors, pretty much in line with the same rubbish I was taught at university. She thinks (says) the UK government 'borrows' the currency it issues. Bizarre that, like the local baker borrowing back the bread he sold to his customers just in case he needs more of it to sell to his other customers.
and borrowing from whom, in what way? The answer to this is seldom thought through. "Bond sales!" So that a government that can issue currency would need to go cap in hand rather than just to it's own central bank computer and credit the bank accounts it needs to make payments it needs to make. Isn't that a bit absurd?
Bonds/treasuries/gilts are merely a mechanism for something the central banks do, but don't need to do. Used to drain reserves, as I already said before, to meet the overnight interbank interest rate. But nowadays the CB (the Fed in the US case. BoE for UK) pays the interest on reserve balances now and doesn't even rely on treasuries for this.
What we are left with are bonds which are special kinds of money (an asset swap) that only rich people can hold - as an alternative to being taxed - and which form a non-defaulting base for all the stock market shenanigans Labour heroes supposedly frown upon. Which does end in actual human misery, but not for bond holders. This is a problem. Especially when they are not even necessary. Excess money can be eliminated.
If we wind our way back to the birth of monetarism, its chief architects started their theorising prior to 1970; the mid-60s. So it began under the gold-standard system. After 1971 and the abandonment of that standard the monetarist line barely changes, apart from a new element: fear of fiat issue. Remember that its adherents were largely followers of Hayek and Murray Rothbard of the Austrian school. So they already had ideological slants toward: hatred of socialism, small states as a rule, money supply control etc.
After 1971 )abandonement of gold standard) they were faced with the notion of fiat issue and supposed, for some reason, that all governments would simply go mad and just issue money at will into infinity. What you find in the theory as it crystallised in the 70s is the notion of using some sort of impediment or brake to 'match' whatever deficit a government might need to employ; since they lacked the argument of the fact of resources as a natural limit, for many reasons. And the notion of 'debt' as something hanging as a warning over any spending was posited. Friedman et al were perfectly aware that bonds no longer worked in the same way as the past (likely also aware that tax is a mere credit cancelling mechanism), but the notion of spending 'matched' by bond sales, also referred to as 'borrowing, posited as 'national debt' has a psychological function. It certainly doesn't have the function implied in the name.
Have you just ignored all the econ discussed here because you thought it was just that trivial 'disagreement'?
