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The Fight for the NHS/MMT economics

Discussion in 'off topic' started by ks.234, Oct 26, 2021.

  1. Le Baron

    Le Baron Unbiased advice at reasonable rates

    Just to address that directly above. Money transactions don't 'stabilise' the money supply. The idea of 'stabilising' or limiting or controlling the money supply' is a fiction. The BOE and the govt has no real control over supply levels (though it does have power of its issue/destruction. Read well, that is not a contradiction). Money supply control is a monetarist tenet, ideological. It is behind all of the current misconceptions of how monetary operations work and the reason they kept on all the charade of gilt sales 'debt'.

    There's something further up about MMT placing government at the centre of the economy with emphasised power. It's not MMT doing that, in a sovereign monetary system it is just a fact. The question seems pointless. If you decide to have some other authority issuing a money of account, then that authority has monetary/fiscal control. MMT is describing it, not prescribing it. An idea that somehow you 'deregulate' the money system is nonsensical.

    Let's also make a distinction between money used by users as economic actors (and all its transactions) and government as an issue-by-spending entity. There's no debate that spending on social goods by government is for the most part discretionary. I say 'most part' because obviously there is the question of resources that can be mobilised and their natural limit. However since that is not even in question, it is a question of will and priorities, not a financial question. Sovereign governments don't have 'financial concerns'.

    Nice to see the seed has grown.
     
    Sue Pertwee-Tyr likes this.
  2. ks.234

    ks.234 pfm Member

    Welcome back
     
  3. Super Bigote

    Super Bigote pfm Member

    Nice to see a Terrot.
     
  4. ks.234

    ks.234 pfm Member

    [​IMG]

    We know that government can make money available when it sees fit.

    To deny proper funding of the NHS is a deliberate choice.

    This government is running down the NHS for political reasons, the consequences will be paid by poorer health outcomes for patients and poorer mental health for NHS staff

    Any government that decides to make this happen is immoral.
     
    Snufkin likes this.
  5. Heckyman

    Heckyman pfm Member

    How would running down the NHS be a vote winner at the next election?
     
  6. Snufkin

    Snufkin pfm Member

    Because us Brits have a long record of voting against our own best interests. Back in the 60’s Johnny Speight created a wonderful sitcom based on just that premise.
     
    ks.234 and Heckyman like this.
  7. ks.234

    ks.234 pfm Member

    I didn’t say if it would be a vote winner. I said the NHS is being run down.

    Are you saying that the NHS is NOT being run down?
     
  8. Heckyman

    Heckyman pfm Member

    No!

    You said run down “for political reasons”. I am just trying to understand what you think those reasons are.

    Perhaps Snufkin already answered, although I’d add it’s not so much voting against “our” best interests as the perverse enjoyment of punishing other members of “our” society who are not in our particular clique (for whatever reason).
     
  9. Enfield boy

    Enfield boy pfm Member

    The political reasons being crooks can make more money out of a rigged, privatised system than one free at the point of use, run by the state for the benefit of the public. But I guess you knew that already.
     
  10. Jim Audiomisc

    Jim Audiomisc pfm Member

    The 'reason' is perhaps the one that has driven Government policy for decades now WRT the NHS. That it means they can 'privatise by stealth' under the claim "The NHS doesn't work as things are, it need the 'better' methods provided by outsourcing, PFIs (under various names)." That means staff quit as NHS employees, for example, because the NHS pay is limited and set conditions are poor. But some can then come back as 'contracted out' workers now employed by corporations that the NHS pays for for because Government allow that. The company creams off profits, some of which goes to the relevant MPs, their party, etc. Similary, the NHS contact out work to private hospitals, etc, because they are required to get the treatments done but Government prevent them from having the resources to do the work in-house. Add in that Government now 'loans' money to NHS trusts, and charges interest, all rolled over as a rising debt burden for the NHS but used by Government as a 'credit' to take off Public Debt!

    Its a racket, we and the NHS lose out. The leeches bribe the Tories (inc. ones like T.B. Liar) as a part of the fun in response to getting things this way.

    The 'political' mantra is : private good, state bad.
     
    ks.234 likes this.
  11. ks.234

    ks.234 pfm Member

    Monetarism is ideologically opposed to public spending which sits nicely with the Tory political ideology that sees privatisation as good and social provision as bad.

    The myth that government spending has to be paid for by the taxpayer is part of that ideology. It says that the electorate will have to pay for any government spending. It says that if the electorate dares to vote for increased public spending, it will be presented with a hefty bill.

    By putting a charge on social improvement Tory Monetarism is fundamentally undemocratic.

    As @Jim Audiomisc says, the Tories are running down the NHS by underfunding it and justifying it with a massive lie about the purpose of tax. If voters want improvements to the NHS without being presented with the hefty bill, privatisation is the only option.

    But the truth is that government can fund every need the NHS has without any cost to that taxpayer, which is why defunding the NHS is a political choice. A political choice hiding behind a big lie.
     
  12. Heckyman

    Heckyman pfm Member

    Thanks, and agree that like many other things, it’s a racket, increasingly run for private interests rather than the common good.

    But in the above scenario wouldn’t they be increasing spending, so that even more money can be syphoned away? Especially if said spending needn’t be paid for?
     
  13. ks.234

    ks.234 pfm Member

    They are increasing spending, but not to public services!
     
  14. Dave***t

    Dave***t Revolutionary relativist

    I had to go back a way for this thread, but it seemed the right place.

    I have a question for those who understand macroeconomics better than I do: what can someone mean when they say 'interest payments on national debt' (or substitute government borrowing instead of national debt, or similar phrases)?

    I appreciate that the deficit, often described as borrowing in the media, is not actually borrowing in the sense commentators often wish the public to think they mean.

    I have even got as far as somewhat dimly understanding that the deficit is actually money left in the economy - a very different matter to the way it's presented by what Wren-Lewis would call mediamacro.

    But I come rather unstuck when I try to get my head around what the phenomenon described as government borrowing actually is, and therefore what's going on when for e.g. a politician refers to £x being spent on a national kind of interest payments or 'servicing government debt' - which I have heard expressed in concrete amounts of £ per year.

    Borrowing in the conventional sense doesn't apply at the national level. Ok, got that. The government spends money into existence. Got that too. That's why inflation is so central, and why so long as things such as inflation remain steady, you can actually do some pretty spendy things without it being too much of a problem. Yep, still with you.

    But then it gets murky for me...

    In the process often called borrowing, in fact the government issues (sells) bonds (what?) which (I think) means they effectively promise to pay people who buy the bonds more than those people paid for the bonds at some future point (that just sounds weird), with the expectation being that inflation (or growth or something) will likely cover the difference, and so the process gets money coming in but doesn't cost anything in the end (because of some kind of money-as-emergent-property of the economy? magic?).

    That mess of understanding is made somewhat worse by the fact that it leaves open an intelligible thing that could be (disingenuously) described as interest payments (or debt servicing) - the shortfall which is left as a government liability if the increased promised repayment amount versus the bond purchase value is not inflated away (or whatever).

    Can anyone who understands this a bit more clearly (be bothered to) explain things in a baby steps sort of way? Or perhaps point to a *really clear* explanation for people who are making an effort, but who are easily confused?
     
    Sue Pertwee-Tyr likes this.
  15. ks.234

    ks.234 pfm Member

    I’ll have a go, but please remember I am coming from a non economist background. First of all take a quick look at post from @Le Baron here Labour Leader: Keir Starmer VII. Then take a long one!

    Second, remember you are asking some difficult questions for a non specialist, so the only way in, or at least the only way in that I, as someone who only does pictures and so does not do numbers, have found, is baby steps and starting from basics.

    The basics are, that government issues it’s own currency and cannot therefore run out of the thing it issues. It can’t. If it cannot run out of currency, how can it need either tax or borrowing to spend? It can’t. Money comes from government issuing it, not from tax or borrowing.

    The only ‘need’ for tax or borrowing is to balance the books. It is an accounting need, not a functional need in itself. The need to balance the books might’ve made sense when the money that was issued was tied the value of gold, or seashells, or a foreign currency, but since we left seashells and gold behind sometime ago and have been not tied to a foreign current in a contractual manner for decades, then our government currency comes solely from the issuer, government issues what in needs to spend, it is literally spent into existence.

    There is a treasury rule that says the books must be balanced, but in the early rounds of the Tory Leadership contest, Jeremy Hunt talked about changing treasury rules to suit private business investment, so it is definitely changeable to suit public investment in the NHS or anything else.

    I have found it beneficial to come at how money really works from an historical angle rather than an economic one and found Money For Nothing: The South Sea Bubble and the Invention of Modern Capitalism by Thomas Levenson useful. It takes us back to the original (1664?) Bank of England created to buy up Williams’s national debt so that it could sell on that debt as an asset. The consequent buying up of that “debt” has proved so profitable for some that despite any number of economic collapses since the South Sea Bubble, that it is still going strong and is still the foundation of banking today.

    Direct answers are difficult, but I hope I have stimulated a question or two?
     
  16. Sue Pertwee-Tyr

    Sue Pertwee-Tyr neither here nor there

    The conventional response to ks' answer, above, is to ask what happens to the value of the currency if the government decides not to 'balance the books' either by taxation or borrowing. My understanding is that profligate spending without any serious balancing is likely to depress the value of the currency on the international markets, leading to inflation due to the cost of imports (including energy) rising. But that reasonable spending without balancing - eg where the spending can be seen as investment in something so the value persists - shouldn't result in a depressing of the value of the currency.

    But my question is: given that markets are capricious things - we've seen how sentiment can trigger a run on stuff, or a bear market - has anybody told The Market this? In other words, it doesn't really matter what MMT says about spending, if The Market believes the spending is unwise because it isn't balanced by taxation and/or borrowing, then The Market might tank the currency, because sentiment. And that's without the manipulators, or malign foreign states making mischief at our expense

    In other words, if you want MMT to prevail, you first have to persuade the market makers that it is a valid alternative.
     
  17. Le Baron

    Le Baron Unbiased advice at reasonable rates

    'National debt' is not debt at all. It is a misnomer. Leave that aside for a moment though. Interest payments on this 'debt' are the small, fixed interest payments paid on a bond/gilt.

    The deficit is merely the amount used in spending beyond what is taken in taxation...but wait!! This does not mean that there wasn't enough tax taken to 'fund' any spending; it means that more fiscal resource is flowing from the government sector to the private/domestic sector. By 'government sector' I don't mean the 'public sector', but the government as an element in the economy divided into two sectors. Our observation will be: the net saving of the private/domestic sector (you, me, Jim's hardware,) equals the governments' overall deficit at any period. Which means our private saving equals 'the deficit'. And as a point of identity logic that whenever the government runs a 'surplus' we run a deficit.

    Have a look at the post ks.234 pointed to, but also a quick run-down here...it's convoluted but I'll go through it. Initial observation: bond issue isn't a necessity. It is a chosen mechanism and also one retained from a different sort of economy, the gold standard system abolished in 1971. So what they did at one time is not what they do now.

    So taking the fact that the sovereign currency issuer isn't currency constrained, why sell 'debt'? Bonds/treasuries are sold as a triggered mechanism whenever it's considered that there are excess reserves in the banking system, often as a result of deficit injection. Banks don't like to hold excess reserves and to meet its overnight interest rate target (a policy choice it puts above zero) the central bank must either pay interest directly on the reserves or employ an interest-paying 'debt instrument' which it can use to set a base 'floor' to hold the rates from falling below their policy target. These are sold as bonds, an interest-earning alternative to holding reserves. Interest-earning assets.

    The point to note is that this doesn't 'finance a deficit', it is in fact the reverse, it is a way of managing the effects of a fiscal injection from a fiat deficit and manage the target interest rate, this latter being a monetary policy choice. To reduce/manage the stock of currency in the non-government sector. Offering interest-paying IOUs. Just note that such a government 'IOU' is not a debt like you or I or a business would have; it is something the government can meet in the blink of an eye. In reality this is just debiting/crediting an account at the central bank.

    The bond payment is fixed. It never changes. When the bonds are sold on secondary markets or packaged with other things the new purchaser may be offered a higher/lower rate on that according to interest rate changes, but the fixed interest payment the government pays is always the same. And more importantly it can always meet it, because it's not very large anyway.
     
  18. Le Baron

    Le Baron Unbiased advice at reasonable rates

    Markets can't 'tank' a currency. Did the international markets 'tank' the Dollar or Pound or Euro in 2008? No, they merely tanked themselves as limited users. Spending is not directed to 'balance' it is directed to 'purchasing', as you mention at the end of your first paragraph. So 'profligate' is when excess money is issued to no purchasing end. The cost of imports has nothing to do with the causes of inflation.
    The value of the currency is dependent on the need to acquire and hold that currency - so if payments of any form, tax, purchasing, are required in that currency, then people desire to hold it and it has value. In any case the mechanisms for managing this exist in an automatic and elastic fashion (where it currently fails it is deliberate policy). There is no way a government can manage a target of private spending decisions, so responsible fiscal 'balance' exists by targeting net spending to achieve 'full-employment' in relation to the non-government sector's spending decisions. And completely irrespective of the so-called 'business cycle' which is a response, not a driving cause.

    The government doesn't 'borrow'. Eliminate this idea from the equation.
     
  19. ks.234

    ks.234 pfm Member

    Any profligate spending will cause economic shocks. If you direct government spending to the creation a new Billionaire a day from Covid spending, (here) then in a balance sheet economic world, someone somewhere has to have less.
    MMT does not allow profligate spending anymore that any other economic model, indeed, it recognises the need to control inflation even more and proposes more economic tools to control it than monetarism does.
    We’ve had currency fluctuations with Monetrarism. Monetarism is about control of money supply to tackle inflation. It doesn’t work.

    Yes, unfortunately that appears true. If different economic models are like different laptops with different software and hardware, then the hardware is all the economic institutions that make up the markets and a new software that turns economic coding on it’s head will will not run on old hardware.
    That is indeed the big question. But if we want an economy based on moral outcomes, an economy based on social justice, and economy that can tackle climate change, we need to find a way.

    Maybe the first step is to realise that current economy really does not work.
     
  20. laughingboy

    laughingboy pfm Member

    Another non-economist, here. I'll give it a go. I'll explain in the conventional, gold-standard based language, with occasional comments to show that I don't agree with all of its reasoning.

    The government issues bonds, what are these? Bonds are just promises, or legal agreements. From the government side, they are promises to pay whoever purchases the bond. From the purchaser's point of view, they are investment opportunities or savings vehicles - a chance to turn cash into cash plus interest.

    How does government know that it will be able to pay the bondholder the interest it has promised? There are at least three things at play here (maybe more).

    First, in creating the bond and swapping it for money/credit, the government is not creating money, it is just getting hold of money from the private sector. But the government can spend the money it has got hold of into the economy, turning relatively inactive money (savings) into active money, growing the economy. The government can expect that people will spend the money, that economic activity will follow and that taxes will be due on that economic activity.

    Second, the government knows that because money is being created all the time via the banking system (which creates money when it makes loans) and the economy is growing, there is likely to be a bit of inflation. So, the government knows that the value of the money it has to pay in bondholders' interest is likely to be partly eroded by inflation.

    Thirdly, the government hopes that the growth in the economy means that its currency remains in demand as a savings/investment vehicle on the international markets. If this is the case, exchange rates will be good, which makes it easier for the government's economy to get hold of more real goods/assets/services, again bolstering the strength of the economy and making it easy to repay. Spending => activity => taxes, again.

    Of course, if the government owns its own currency it can always issue more money to pay the interest (though this rarely happens). Or the government can issue more bonds to get hold of money to pay the interest. In the conventional (probably wrong) account of the money system, the government needs to ensure that willing buyers for bonds do not dry up. Otherwise, (ignoring the fact that the government owns the currency, and therefore could just issue money out of thin air) in the conventional account, the government would be forced to default on its interest payments to bondholders, and there would be a currency crisis.
     
    Last edited: Jul 18, 2022
    ks.234 likes this.

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