UK National Debt

[PhilofCas]

‘That’s not just bollocks, it’s hyperbolics’

(If M&S did bollocks..)

 

[ks.234]

I think Marchbanks was suggesting your categorisation of Truss as hyperbolic in the sense of exaggeration.

It isn’t possible to exaggerate Truss’s towering economic genius.

 

[ks.234]

Interesting article in the ft today linked to this paper. I'll just link the paper directly as the ft is behind a paywall.

https://www.cambridge.org/core/jour...nd-the-state/33EE76D8B70FB954A03BF1124B79AA5C

To quote from the introduction:

Even though monetary sovereignty remains an important reference point in both academic discourse and international politics, it has throughout the past decades repeatedly been declared dead (Strange Reference Strange1996; Cohen Reference Cohen1998). There are good reasons for this. Creeping dollarization subjects states across the world to monetary and financial decisions made in the United States (Cohen Reference Cohen2015; Fritz, de Paula, and Prates Reference Fritz, de Paula and Prates2018). Local financial systems depend increasingly on globally active megabanks, asset managers, and hedge funds (Braun Reference Braun2022; Naqvi Reference Naqvi2019). Governments face global bond markets and the realpolitik of the IMF and the World Bank (Roos Reference Roos2019). Regulators and supervisors across the globe struggle with cryptocurrencies, stable coins, and shadow banking instruments (Fama, Fumagalli, and Lucarelli Reference Fama, Fumagalli and Lucarelli2019; Viñuela, Sapena, and Wandosell Reference Viñuela, Sapena and Wandosell2020). Meanwhile, even local banks in low-income countries seek to comply with some version of the standards set at Basel’s Bank for International Settlements (Jones Reference Jones2020). Lacking the ability to control money within their borders, states have increasing difficulties raising taxes and funding critical expenditures (Binder Reference Binder2019; Palan, Murphy, and Chavagneux Reference Palan, Murphy and Chavagneux2013; Zucman Reference Zucman2015). In what sense, if any, can states still be described as monetary sovereigns? (Pistor Reference Pistor2017; cf. Zimmermann Reference Zimmermann2013)

Interesting article, but not sure what it says to the thread topic.

 

[Mullardman]

Slight aside..
I'm just watching 'War Factories' S1 E1, on the Yesterday channel. It makes much of the effect of corruption and cronyism, mixed with right wing ideology, in internally crippling the Nazi economy.
The parallels with the Tory approach to public spending, contracting and ultimately ruining our production and infrastructure and economy, are obvious and staggering.
Just saying.

 

[lawrence001]

Interesting article, but not sure what it says to the thread topic.

It's about how governments fund their national debt. Is that not part of the discussion?

 

[Heckyman]

Truss and Kwarteng say the National Debt is not important. Or more accurately, it's only important in the medium term (by which time someone else will be picking up the tab when it's discovered that their tax cuts were not self-financing).

 

[ks.234]

Truss and Kwarteng say the National Debt is not important. Or more accurately, it's only important in the medium term (by which time someone else will be picking up the tab when it's discovered that their tax cuts were not self-financing).

What “tab”? Government debt is just government borrowing from itself. See Richard Murphy above.

 

[Heckyman]

What “tab”?

The energy subsidy "tab", for example. Someone, somewhere will be paying a price for it sooner or later. Probably us and/or our children.

 

[andrew]

Remember being little and listening to grown-ups smoking cigars and talking about stuff while you played on the floor with Airfix? That's how I feel reading all of this. I shall read the PDF and see what happens to my head
Andrew

 

[ks.234]

Remember being little and listening to grown-ups smoking cigars and talking about stuff while you played on the floor with Airfix? That's how I feel reading all of this. I shall read the PDF and see what happens to my head
Andrew

This can seem difficult especially in the detail. But in broad terms the concepts are quite simple. First of all, on the topic of this thread, the national debt was created in 1694 when a group of city traders decided to purchase William III’s war debts and then formed the Bank of England to operate it. Why did a group of city investors decide to purchase a debt? It was not out of the goodness of their hearts, it was because they could sell what they had bought as investments. Today it is still the case that the national “debt” is made up of investments, bond, gilts and government securities and other savings. All of these investments are important to the smooth running of a modern economy so paying them off would be detrimental.

Second, the thing that makes investing in government bonds so attractive is that government will always pay up. Our Government as a currency issuer, can never run out of the thing it needs to meet it’s liabilities.

And finally, because our government is it’s own currency issuer and cannot therefore run out of the thing it issues, then it is government spending that funds our public services, not our taxes. Taxes play no role in funding public spending.

Try the Richard Murphy blog above https://pinkfishmedia.net/forum/threads/uk-national-debt.269935/page-8#post-4791824.

 

[Dozey]

But investing in Government bonds has not been attractive for some time. I don't see it becoming attractive again in the near future either.

 

[sean99]

Truss and Kwarteng say the National Debt is not important. Or more accurately, it's only important in the medium term (by which time someone else will be picking up the tab when it's discovered that their tax cuts were not self-financing).

This has been the playbook of the right since I can remember:

1) Deficits don't matter unless
a) The opposition is in power
b) We need to strangle the welfare state
2) Tax cuts are self financing (they never are), so even if the deficit mattered, which it probably doesn't (their words) there won't be a deficit.

The result has been a ballooning deficit coupled with a collapsing welfare state, and an explosion in inequality.

Apparently Truss and Kwarteng think that the electorate will continue to fall for this nonsense, and unfortunately, they're probably right.

 

[andrew]

This can seem difficult especially in the detail. But in broad terms the concepts are quite simple. First of all, on the topic of this thread, the national debt was created in 1694 when a group of city traders decided to purchase William III’s war debts and then formed the Bank of England to operate it. Why did a group of city investors decide to purchase a debt? It was not out of the goodness of their hearts, it was because they could sell what they had bought as investments. Today it is still the case that the national “debt” is made up of investments, bond, gilts and government securities and other savings. All of these investments are important to the smooth running of a modern economy so paying them off would be detrimental.

Second, the thing that makes investing in government bonds so attractive is that government will always pay up. Our Government as a currency issuer, can never run out of the thing it needs to meet it’s liabilities.

And finally, because our government is it’s own currency issuer and cannot therefore run out of the thing it issues, then it is government spending that funds our public services, not our taxes. Taxes play no role in funding public spending.

Try the Richard Murphy blog above https://pinkfishmedia.net/forum/threads/uk-national-debt.269935/page-8#post-4791824.

Thanks! I've downloaded Richard's PDF.. I 'get' your second and third paragraphs above, and have always believed that the government is able to command whatever resources it sees fit to, but people always make the 'how will it be paid for?' argument. 'Because it makes its own money' always feels like a simplistic response, and I can't actually back any of that up with any sort of proper economic argument. Anyway, I'm enjoying looking into this...

 

[ks.234]

Thanks! I've downloaded Richard's PDF.. I 'get' your second and third paragraphs above, and have always believed that the government is able to command whatever resources it sees fit to, but people always make the 'how will it be paid for?' argument. 'Because it makes its own money' always feels like a simplistic response, and I can't actually back any of that up with any sort of proper economic argument. Anyway, I'm enjoying looking into this...

I know exactly want you mean. I am not an economist and for years upthread ‘how will it be paid for line’ hasn’t made sense, but, like you, I haven’t been able to back it up. Stephanie Kelton is an excellent communicator on these ideas

 

[Spraggons Den]

No, you are mistaken here. In criticising ‘abacus economics’ Truss is showing a depth and breadth of understanding on an epic scale. She is an economic goddess. She is doing no less than opening up the narrow path to the sunlit uplands of deficit spending. She is saying that we don’t need taxes or borrowing to fund spending if we don’t want them to. We can just let the columns not add up for a while.

Liz Truss is the most enlightened economist of our time

Just wow, now your bigging up Thatcher clone Truss having waxed lyrical over Mogg earlier in the week.

Given your recent conversion to hating the EU, one can only imagine the next object of your admiration is going to be Farage.

Strange days.

 

[Heckyman]

Apparently Truss and Kwarteng think that the electorate will continue to fall for this nonsense, and unfortunately, they're probably right.

Indeed. In Truss' first PMQs, she criticised Labour for being the party of "Tax and Spend", whilst in the same breath pledging to outspend Labour whilst also reducing taxes.

Seems the Magic Money Tree theory has truly gone mainstream and Truss is happily playing to the gallery.

 

[ks.234]

This has been the playbook of the right since I can remember:

1) Deficits don't matter unless
a) The opposition is in power
b) We need to strangle the welfare state
2) Tax cuts are self financing (they never are), so even if the deficit mattered, which it probably doesn't (their words) there won't be a deficit.

The result has been a ballooning deficit coupled with a collapsing welfare state, and an explosion in inequality.

Apparently Truss and Kwarteng think that the electorate will continue to fall for this nonsense, and unfortunately, they're probably right.

The problem is that Labour does not have a coherent alternative.

 

[ks.234]

Just wow, now your bigging up Thatcher clone Truss having waxed lyrical over Mogg earlier in the week.

Given your recent conversion to hating the EU, one can only imagine the next object of your admiration is going to be Farage.

Strange days.

While it is touching that you seek out my opinion across several threads, you have sadly failed to understand or engage with anything I have actually said. To say that I have waxed lyrical over JRM is just plain wrong and neither have I said anything about hating the EU.

On Truss, any fool, well, almost any fool, could see that my comments about her were sarcasm and as to your imaginings about Farage, we can see that what you imagine bears no relationship to reality or anything actually said or written.

 

[Jim Audiomisc]

It's highly misleading. Especially for the UK. In what way will interest payments be a 'burden'? Upon whom? Before during and after the government pay it from the central bank computer. All the bonds sold have a small fixed payment and what are interest rates at right now? Not very much and they like cutting them, not raising them..

This assumes that "the market" will accept 'bonds' with such terms set by UK Gov. Given a choice they may well decide not to if the interest paid is low and inflation is higher. We may well be in a market where such attempts by Uk Gov are declined and any borrowing is under terms the *market* chooses.

The Energy Crisis means that current (vague but insane) UK Gov policy will lead to a huge open-ended need for a great deal of 'borrowing' and put us all on the 'never never'. For a time of high World prices that may go on for much longer than a year. The basic problem is the shortage of gas compared with the needed demand. Thus if we pay a lot for it, others may also bid up and the price rises further. Meaning more borrowing, etc. The energy largely isn't 'optional' like deciding not to buy a new car until next year.

Also, the World Price for gas is set in USD, not Sterling. So if the above ensues the Pound will fall against the Dollar, etc.

In general, outwith essentially consumable prices hiked as an Act of War, I'd tend to agree with you. But the problem here is ultra-high prices engineered as an Act of War against *many* countries, not just the UK.

Our basic error isn't monetary/fiscal policy, etc. It is the stubborn failure to invest in UK sources of wind/etc energy so we ceased to be so heavily dependent on a *finite* consumable from sources we largely don't control. Alas, now see the wisdom of the Sainted Spike Millugner the well known typing error when he said: "Excuse the mess, we've got the Conservatives in." Which in modern terms sadly incudes the Blair-Brown interval as well as all else from Thatcher onwards to now.

 

[Spraggons Den]

While it is touching that you seek out my opinion across several threads, you have sadly failed to understand or engage with anything I have actually said. To say that I have waxed lyrical over JRM is just plain wrong and neither have I said anything about hating the EU.

On Truss, any fool, well, almost any fool, could see that my comments about her were sarcasm and as to your imaginings about Farage, we can see that what you imagine bears no relationship to reality or anything actually said or written.

I thought that you thought the EU was a bastion of neoliberal economics and the denier of countries from their sovereign currency and the endless possibilities afforded by having your own money and you're so concerned by this that you would vote for brexit had the country not already done so in 2016?