Budget

Sorry, Monica. I get carried away. I do like a bit of a discussion

But I do think that anyone should be able to have a basic understanding of how money 'works' as the economy is quite fundamental to politics and 'austerity' is destroying our country.

maizie I didn't draw these definitions up, nor have I any power to change them.

I am also not a monitary specialist. I worked at the practical end providing commercial and market intelligence to managers in industry. A bit like asking a Cardiologist questions about orthopaedic problems.

Interesting, MOnica and somewhat at odds with the Dickens quote.

1) Print more money
2) Quantitative easing – the electronic creation of money by Central Banks.

Aren't these two essentially the same thing? If by 'printing money' you mean issuing the physical medium of cash and coin which, despite our increasingly cashless society (enabled by electronic transfers) is still needed for some buying and selling transactions, isn't this just backed by the electronic balance held by the BOE?

3) Increased bank lending – banks lending higher % of their deposits.

But even Adam Smith, way back in the 18thC recognised that banks don't lend from their deposits. that in fact they lend far more than they hold in deposits in the expectation that their depositors won't all demand that their deposits are returned to them on the same day? When they did the consequent run on the bank actually led to bank failure because the bank didn't have enough money to repay their creditors. Wasn't that a big problem in the 2008 financial crisis, illiquidity.

4) Central Bank purchasing bonds from private individuals which can be spent.

I don't quite follow this. It's the government, via the BOE which creates bonds. If they buy them back doesn't that extinguish the 'money', not add to the supply? Or are you meaning that the former bondholders then have money to spend in the economy?

I can see that extending the period of the bond makes available for a longer period the money which the government would have had to expend in redeeming them at term.

However, the point I have been trying to make in all this is that the supply of money is not finite as is implied by the commonly held (and encouraged by governments) belief that a national economy is the same as a household economy. That governments can (with certain constraints) create as much money as they wish. With the result that so long as there are the resources available to be purchased with that money (goods and services) putting extra money into the economy is not a problem. (Adam Smith recognised this, too; he said it was only a problem if the money supply exceeded what was available to buy)

Of course, I know that it is more complex than this, but I'm only trying to get across one simple point about the national economy.

Post away as much as you like, nonnie, I'm not stopping you.

MaizieThese are the main ways of increasing money supply:

1) Print more money
2) Quantitative easing – the electronic creation of money by Central Banks.
3) Increased bank lending – banks lending higher % of their deposits.
4) Central Bank purchasing bonds from private individuals which can be spent.

For more detail go to: www.economicshelp.org/blog/1143/economics/increasing-money-supply/

Petty Maizie designed to show your superiority or to stop me from posting?

There is no reason to think that a rebranded version of Benn’s failed project would do any better.

There's no particular reason to think that it would do as badly, though. There is such a thing as learning from experience.

Nice quote from Dickens, but surely, Monica you know that a national economy is not the same as a household economy?

You've ignored my question on the source of money. As you are an economist I'd really like to know your take on this. In 1972 I was earning £12 a week. The same job now would pay very much more than that. The working population has also expanded hugely since then. Where has the extra money to pay them come from?

I quote Mr Micawber: Annual income twenty pounds, annual expenditure nineteen pounds nineteen shillings and six pence, result happiness. Annual income twenty pounds, annual expenditure twenty pounds nought shillings and six pence, result misery.

Yes, we needed to reduce expenditure, but whether the Conservatives went the right way about it, is a quite separate question.

As for Labour's National Investment Bank, We have been there once already and it was a failure. In the 1970s Tony Wedgwood Benn's National Enterprise Board spent money on all kinds of failing companies and industries like British Leyland and British leather. Meanwhile other industries not affected by Benns favourite project flourished. Nothing the National Enterprise Board invested in went well.

There is no reason to think that a rebranded version of Benn’s failed project would do any better. It would just spend taxpayer’s money on projects run by those with political connections, creating futureless jobs in Labour seats.

As I have said many times. I have no time for either of the major parties and have never voted for either.

I do hope the UN is not just picking on the UK.

Why are supposedly mature elderly people using the language of children?

Haven't opened the link but I do hope the UN is not just picking on the UK. What about Italy? What about the poverty of the Calais migrants, including children?

If we leave the EU there will be even less money to help the poor, the sick, the disabled etc.

A United Nations special investigator is launching a two-week inquiry into rising levels of poverty and hardship across the UK, saying he hopes the government is ready for proper dialogue over the human consequences of austerity cuts.

Philip Alston, the UN’s special rapporteur on extreme poverty and human rights, is to embark on a tour of some of the UK’s poorest town and cities on Monday, visiting food banks and community groups and meeting MPs, government officials, academics and families in hardship.

Alston, who has a reputation as a fearless, plain-speaking critic, will gather evidence on the impact of universal credit, welfare changes, local government cuts, and rising living costs before publishing an interim report on his findings before he leaves the UK in mid-November.

Evidence to UN highlights extreme poverty in UK. “I think the UK is at a crossroads, partly because of Brexit, and partly because of the comments made by the prime minister and the chancellor in terms of austerity [being over],” he said. “My hope is that there is a real possibility for a dialogue about future policy direction.”

www.theguardian.com/business/2018/nov/05/un-rapporteur-philip-alston-uk-austerity

It is very hard for new businesses to get money from commercial sources until they have a proven track record

That's why the evil Labour Party propose setting up a National Investment Bank.

Money supply is not a fixed amount but, like employment expands to meet demand.

What I am trying to focus on is how it expands; what is the source of 'money'.

Do you agree with the 'austerity' policy, MOnica?

It is very hard for new businesses to get money from commercial sources until they have a proven track record

Almost impossible with a good track record either M0nica the truth is that banks don’t really want small businesses on their books and very rarely lend without huge securities.

* Maizie* money circulates. Most businesses get the money to expand from increases in turnover. Many new businesses start with the entrepreneurs own savings or a small loan from friends, family or the bank. It is very hard for new businesses to get money from commercial sources until they have a proven track record. Money supply is not a fixed amount but, like employment expands to meet demand.

As an economist, I base my views not on just one economist but on a broad education in economics, a career in business as an economist and a continued interest in the subject.

I appreciate that you believe what you say but I don't agree and don't think we will ever agree.

Fair enough, Nonnie. I'm only basing my view on what I've been reading on the subject of economics over the past few years.

I'd be interested to know which economists you base your view on.

Higher employment, more people have more money to spend, global markets doing well

Is that an explanation of where the money comes from, newnanny? If so, what drives higher employment? Where does the money come from which enables established businesses to employ more workers or new ones to start up?

why don't they just combine income tax and NI, then we would all have a better picture and possibly save a little on the cost of admin?

Because then you would be able to see that the public have been conned. Give it with one hand in raising the tax free bands and take it away with the other by raising NI contributions.

Just remembered also there was 1/3 cut to small businesses on high street to encourage small local shops not to close that will benefit us all.

My youngest son is paid £1 above the minimum wage and he is pleased his employer has told him he will keep his wage at £1 above minimum and he will also benefit from being able to earn more before paying tax. He is happy with that. 32 million people would also benefit from this. My dh will benefit from higher threshold going up so will pay less higher rate tax so he is also pleased even though will pay more NIC. I genuinely think Hammond really did try to give a bit back to all in employment and to things people care about also like NHS, potholes, internet for rural areas, air ambulance to get some money, duty on fuel frozen again on fuel to help drivers and schools got an extra boost with one off payment and additional money for defense, also counter terrorism. He has not got unlimited money and has to keep some for Brexit issues. I think I would have struggled to do much better to be honest. You can't please everyone but I think there will be a lot of people who think that budget is ok. If you could do better what would you have done?

Granny23 why don't they just combine income tax and NI, then we would all have a better picture and possibly save a little on the cost of admin?

Nonnie I believe you are right that they did not include the NI contributions in their calculations. As '' The Resolution Foundation is an independent British think tank established in 2005. Its stated aim is to improve the standard of living of low- and middle-income families.'' it would not suit their Agenda to include this give with one hand and take with the other' aspect of the Budget.

So hard these days to find unbiased reporting of FACTS. Who has the time to seek out and compare reports from all sources? Even Government statements are subject to spin.

Granny23 did the Resolution Foundation include the increase in NI contributions in their calculations?

Does anyone know how income tax thresholds have changed over the years? Has the higher rate threshold increased more or less than the lower rate threshold? This may have influenced the Chancellor.

Maizie I appreciate that you believe what you say but I don't agree and don't think we will ever agree. It reminds me of someone who genuinely believed it when she told me that if the government wanted more money they could easily invest in the stock market to get it. These theories are fine as theories but it would be good to have examples of anywhere they have actually worked.

''Philip Hammond’s budget, which was billed as marking an end to austerity, will actually benefit rich families 14 times more than the poor, new analysis has revealed.

The Resolution Foundation crunched the numbers on the latest budget finding almost half of the income tax are set to go to the top ten per cent of households.

Households in the top cohort will gain £410 from income tax and benefits changes announced yesterday, whereas those in the poorest ten per cent will gain just £30.

Today the Chancellor admitted higher earners will “get a bit more” after putting much of the focus in parliament on a promise to raise the tax-free personal allowance in Income Tax – which hands £130 a year to any worker earning over £12,500 from April.

But he also followed through on a pledge to hike the 40p tax rate threshold from £46,350 to £50,000, meaning the richest 13 per cent of Brits will be able to earn much more before they start paying higher tax – gaining £860 a year.

Resolution Foundation director Torsten Bell warned the Budget “spelt an easing rather than an end to austerity”.

He added: “Income tax cuts announced yesterday will overwhelmingly benefit richer households, with almost half of the long term gains going to the top ten per cent of households.''

So, absolutely Zero, Zilch for me as I am already below the tax threshold.

The other thing that really concerns me is the minimum wage for under 25s, when I think that at that age I had worked for 8.9 years, paying tax & NI, completing my 'apprenticeship' after 3 and thereafter on a full pay with seniority top ups. Married, saved like mad, had given up work to have DD1 and with DD2 on the way. Now a 25 y/o can legally be paid less than £4 an hour, leaving their parents obliged to support them financially while they are fully fledged adults. Shocking.

Higher employment, more people have more money to spend, global markets doing well. Our go government pays more in interest servicing our borrowing than whole of education budget. Having huge deficit is not good and we need to pay it down so more to spend on public services.