We will soon see just how ‘pragmatic’ Sunak really is. A good introduction to MMT style thinking. - Politics Forum.org | PoFo

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We will soon see just how ‘pragmatic’ Sunak really is ---
Tuesday, October 5, 2021 bill Britain, Climate change, Coronavirus, Fiscal Statements, UK Economy, with 6 Comments so far.
This is 1st part of Bill's blog on Tuesday.
I added the parts in brackets, =[ ], for clarity.
At present, Britain is still in the throes of a global pandemic that has devastated the nation. Last week, at Brighton, the key economic spokespersons for the TLP or the Tory-lite Party (short form, British Labour Party) told the voters of Britain why they should remain in opposition. They were sterling performances by the leader and shadow chancellor. Clarifying for all, the fact that the Party hasn’t learned much at all about their recent history. A history that has seen them lose 4 national elections in a row and in the face of one of the worst British governments in history (and that is really saying something), the TLP’s electoral fortunes continue to wallow in loss-making percentiles. Then we had the Tory version outlined by the actual chancellor on Monday. Taking advantage of the political space the TLP has given them to reinstate all the religious nonsense about the immorality of public debt and the rest of the stuff that cultists (mainstream economists) dish up.

The current chancellor gave his keynote speech to the Tory conference in Manchester on Monday..

Now, I know all about semantics.

The Speech was an exercise in basic denial.

The Chancellor started and finished trying to reinstate the fiscal-sky-is-falling-in narrative which seems to run counter to his claim that:

"We will do whatever it ta"

Well whatever it takes will not allow for any of the fiscal changes he foreshadowed.

The Chancellor said that “we need to fix our public finances”:

[He continued, "]I’m a pragmatist, I care about what works, not about the purity of any dogma. I believe in fiscal responsibility. Just borrowing more money and stacking up bills that future generations have to pay is not just economically irresponsible — it is immoral.

Because, because, because, it’s not the state’s money, it’s your money.["]

The semanticist would tell us that the immorality lies in Sunak lying about the capacities of the British government as the monopoly issuer of the [Pound] sterling.

Lying is [in fact] immoral.

But, of course, when religion [Bill is pointing out that MS Econ. is like a religion] enters the fray, lying is par for the course.

If Sunak is really a pragmatist then he will be sorely disappointed in himself over the next few years because he will have to violate his [own] concept of fiscal responsibility.

There is no way he can honour a later statement he made during the Speech that “I will do whatever I can to protect peoples’ livelihoods”, and [also] set about cutting the fiscal deficit in any significant way.

But let’s clear a few things up first.
. . . 1. The government’s fiscal balance is not a motor car [that may need to be 'fixed']. The latter sometimes require repair when a component ages and falters. There is no sense to be made of applying the metaphor to a fiscal balance. One doesn’t ‘fix’ that balance. One doesn’t ‘repair’ it.
. . . It is what it is and should never be a target in itself for action.

In a modern monetary economy, the currency-issuing government should be targeting things that matter – like protecting “peoples’ livelihoods”, and [as a result] letting the fiscal balance be whatever is required to achieve that aim, conditional on what the non-government sector is doing with respect to spending and saving decisions.
. . . Currently, that means the fiscal deficit has to be continuously large in Britain.
. . . Not forever, but any notion of a fiscal surplus or balance is nonsensical and the pragmatist would soon see the unemployed bodies piling up and be forced to do something about it.

. . . 2. The future generations choose whatever public debt levels and tax structures that they will live with. The baby boomers didn’t [and can't] impose any particular tax structure on our children. Once they get to voting age they can express their preferences accordingly.
. . . What we have left them with is massive deteriorating natural environment, the ‘gig’ economy where their future prospects are damaged, a housing market that will preclude all but the ‘rich’ kids from fully participating, run-down educational institutions, health services that are underfunded, public transport systems that continually fail, and all the rest of it.
. . . That is the burden that this “we need to fix our public finances” mentality has wrought for our children, and for us, and for the planet.

. . . 3. Sunak claimed [that] the ‘national debt’ at nearly 100 per cent of GDP was problematic.

If he really believed that [that is true and is a big problem] he could easily authorise the Treasury to stop issuing it, and then sending a memo to the Bank of England requiring them to purchase the outstanding debt and writing it down to zero. [This would amount to paying off the UK national debt with money created by the central bank, BoE, out of thin air.]


Note that, Bill, I, and all MMTers are NOT claiming that there is no constraint on Gov. spending! We just assert that the only constraint is the labor and resources that the nation can get its hands on.

. . . This is exactly the situation the US was in in WWII. It sent millions of men and a few women into the Army and Navy. And it need to make mountains of weapons, ships, and other stuff to fight the war. It brought millions of women into the factories and shipyards to make the ships, weapons, and other stuff it needed. However, it could NOT make all it wanted, it had to choose what to make within the limit of the resources and labor it had. In fact, as I proved here with a link to an official Fed. Res. Bank report, the law was changed in WWII to let the Fed. buy Gov. bonds directly from the Treasury Dept. to fund the way effort. I read somewhere that the Fed. did buy about half the war bonds sold. It was a secret because the Gov. wanted the people to think they were helping the war effort by buying war bonds.

Many of you can't yet grok the idea that nations like the US, UK, NZ, Canada, Aust., Japan, etc. issue their own currency, and so they can have their central bank create vast amounts of their currency out of thin air. However, this may have negative consequences. But, this doesn't mean that the nations can't do it.
. . . Therefore there are 3 or 4 things that such nations can do with their national debt ---
. a] They can roll it over forever, adding to it without limit, and control the interest rate by having the central bank buy its bonds directly when the bond market tries to demand higher interest rates.
. b] They can pay it off like Bill suggested with newly created currency. They can do this all at once or as the bonds come due over the next decades.
. c] They can muddle along like they are doing now living with high unemployment and failing to address ACC with enough spending power to get the problem fixed.
. d] Note that: the option that you may think is possible is actually totally impossible. That is to raise taxes and cut spending to have the Gov. have a surplus (collect more currency out of the private econ. than it spends into the private econ.), and to use the currency to pay off the national debt over decades as the bonds come due. This is impossible because the national debt is like "The Hotel California", in that you can check in, but you can never check out. Why? Because, removing trillions of the nation's currency from the private economy will cause a depression. Therefore, one of the 3 above options will always be chosen as the lesser evil.

Link to it ==> http://bilbo.economicoutlook.net/blog/?p=48444

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