US & UK are poor societies with some very rich people.

The fact that spending precedes tax receipts does not mean that they don’t fund it. The spending is predicated on anticipated receipts.

Maizie All government new money is backed by government bonds on which interest is paid and will be until they are redeemed at sometime in the future they are repaid. However, it has to be done carefully and with planning and doing so effects our currency exchange rate, especially with the dollar.

If just printing money willy nilly could get us out of trouble then we would have the answer to all the worlds ills. There would be no poverty in Africa, each country would just wind up its printing plant and start running off currency notes. No more DEC appeals, like the current one to help flood devastated Pakistan. Imran Khan would just have air freighted in a couple of tonnes of security paper and would be printing the money needed to pay for the aid he needed.

At one point we were on the Gold Standard, we could not print more notes than we had gold stashed in the bank.. When we came off the Gold Standard, all new notes had to be backed by Government stocks.

As said before, you get owt for nowt. Every new note that runs off the presses has to be backed by something.

Since everyone is flapping their academic qualifications around. My first degree was in economics and I worked as a business economist through nearly all my working life.

Well said MOnica, I have always found your posts to be sensible and informative.

^Money in the modern economy is just a special form
of IOU, or in the language of economic accounts, a financial
asset.^

^Money is a social institution that provides a solution to
the problem of a lack of trust.(5) It is useful in exchange
because it is a special kind of IOU: in particular, money in
the modern economy is an IOU that everyone in the
economy trusts. Because everyone trusts in money, they
are happy to accept it in exchange for goods and services —
it can become universally acceptable as the medium of
exchange^

^Since 1931, Bank of England money has been fiat money.
Fiat or ‘paper’ money is money that is not convertible to
any other asset (such as gold or other commodities).^

Because fiat money is accepted by everyone in the economy as the medium of exchange, although the Bank of England is in debt to the holder of its money, that debt can only be repaid in more fiat money. The Bank of England promises to honour its debt by exchanging banknotes, including those no longer in use, for others of the same value forever. For example, even after its withdrawal on 30 April 2014, the £50 note featuring
^Sir John Houblon will still be swapped by the Bank for the
newer £50 note, which features Matthew Boulton and
James Watt.^

Why do people use it?

Fiat money offers advantages over linking money to gold when it comes to managing the economy. With fiat money, changes in the demand for money by the public can be matched by changes in the amount of money available to them. When the amount of money is linked to a commodity, such as gold, this places a limit on how much money there can be, since there is a limit to how much gold can be mined. And that limit is often not appropriate for the smooth functioning of the economy

Oh, dammit. I pressed 'send' instead of 'preview'.

That very poorly formatted post is solely extracts from the BoE quarterly bulletin that I keep begging people to read. It explains the concept of 'fiat money', shows that 'money' has no physical reality, and that money can be created at will by the government via the BoE and commercial banks. It says nothing about new notes being backed by government stocks.

Perhaps you'd like to read it for yourself

www.bankofengland.co.uk/-/media/boe/files/quarterly-bulletin/2014/quarterly-bulletin-2014-q1.pdf

Although there are advantages to using fiat money for the economy as a whole, these may not be realised unless individuals decide they want to use it in exchange. And, if banknotes are not directly convertible into a real good of some kind, what makes them universally acceptable in exchange? One answer is that the trusted medium of exchange just emerges over time as a result of a social or historical convention

The bonds purchased by the BoE for QE are held by the BoE which is owned by the government (though nominally independent). So do you think that the BoE actually pays itself interest on those bonds? Double entry bookeeping demands that it shows interest payments on them them, but, come on, do you believe that it actually happens?

These bonds make up a substantial portion of government so called 'debt'. About a third. 'Debt' that is never going to be repaid, or need to be repaid.

Barmeyoldbat

Well said MOnica, I have always found your posts to be sensible and informative.

You might find the Bank of England Quarterly Bulletin even more sensible and informative...

Yes Maisie I will have a read but I always understood it as Monica stated, that’s what my dad taught me.

Barmeyoldbat

Yes Maisie I will have a read but I always understood it as Monica stated, that’s what my dad taught me.

Thanks.

Mollygo "Your divine right to reign has me puzzled. Do you think that if there was no RF, they would immediately give up all their sources of income, land etc. and that money would immediately flow to the poorest in the land?
Or would it be, as we all do that they hang on to what they’ve got in order to run their homes, (Giving up second or even third homes to support the poor would be a touchy subject on GN.) Or to support those they employ? (Giving up having a cleaner -another touchy point.) The poverty and the need for food banks is appalling and it affects some members of my family. I don’t have a solution"

I have no solution either, but I don't believe removing incentive to work hard and own (say) a second or third home is the answer. If a second home is given up how does that impact the poor? If a cleaner is not paid good wage for a job well done, how is that a good thing for the cleaner?

GrannyGravy13

I am all for a safety net for those who are unable to work for whatever reason. I think that is what all societies should provide.

Just fed up with the continuous threads, berating the rich and blaming them for all the worlds ills.

Yes. Unable, truly unable to work, for any reason - there should be a safety net.

Peoples choices matter as well. I'm not inclined to support our children's poor choices. We tell them to choose wisely.

Dinahmo

Norah Some of the wealthy people that you quoted have a lot of expertise at their disposal to help them hold onto their assets. The following is a link to an article written following the death of the 6th Duke of Westminster back in 2016. Most of the Grosvenor family assets are held in a number of trusts.
The personal assets of the 6th duke (£600 million) were inherited by his wife and so exempt from taxation although her children will have to pay tax when they inherit, unless yet another trust is formed. If that happened there would be tax to pay but not as much as would be payable under the normal IHT rules

www.theguardian.com/business/2017/nov/07/duke-of-westminster-offshore-firms-wealth-paradise-papers

I believe he gives generously.

If all his assets were taxed how does that help anyone else? Specifically how do poor people benefit from his assets being taxed at higher rate?

Duke of Westminster donates £12.5m to NHS coronavirus fighthttps://www.theguardian.com › money › apr › duke-of-...

www.ox.ac.uk/news/2022-02-02-positive-impact-funding-research-mental-health

Norah

GrannyGravy13

I am all for a safety net for those who are unable to work for whatever reason. I think that is what all societies should provide.

Just fed up with the continuous threads, berating the rich and blaming them for all the worlds ills.

Yes. Unable, truly unable to work, for any reason - there should be a safety net.

Peoples choices matter as well. I'm not inclined to support our children's poor choices. We tell them to choose wisely.

The whole point of taking the decisions about benefits out of the hands of people like you was 1) Everyone paid into it and 2) People like you don't get to decide who is deserving and who is underserving.

So. Norah what is a poor choice? Please give me an example

M0nica

Maizie All government new money is backed by government bonds on which interest is paid and will be until they are redeemed at sometime in the future they are repaid. However, it has to be done carefully and with planning and doing so effects our currency exchange rate, especially with the dollar.

If just printing money willy nilly could get us out of trouble then we would have the answer to all the worlds ills. There would be no poverty in Africa, each country would just wind up its printing plant and start running off currency notes. No more DEC appeals, like the current one to help flood devastated Pakistan. Imran Khan would just have air freighted in a couple of tonnes of security paper and would be printing the money needed to pay for the aid he needed.

At one point we were on the Gold Standard, we could not print more notes than we had gold stashed in the bank.. When we came off the Gold Standard, all new notes had to be backed by Government stocks.

As said before, you get owt for nowt. Every new note that runs off the presses has to be backed by something.

Since everyone is flapping their academic qualifications around. My first degree was in economics and I worked as a business economist through nearly all my working life.

I think this is a good and true explanation from Monica and is what I was taught.
Printing money willy nilly does not end well.

‘People like you’ Daisy? What a nasty thing to say.

maddyone

GrannyGravy13

How do you propose to redistribute the wealthy folks earned income?

Confiscate a percentage of their bank balance and hold a lottery for the poorest in society to see who gets a bit?

There are people in the UK who earn outrageous sums of money. I read about someone who earns six million pounds a year recently, and he gets a bonus too. Nobody can actually earn that amount of money, it’s obscene. At least he’ll pay at least half of it in tax.

If we’re talking obscene levels of pay, what about Premier League footballers?

Sorry Maisie had a look at your link, followed by a discussion with Mr B who referred to hhis book on the subject and has said basically Monica is right, as was my dad.

Germanshepherdsmum

‘People like you’ Daisy? What a nasty thing to say.

Why is it nasty? The benefits system is universal and designed to take the decision out of the hands of the ordinary public, especially those who used their judgement, not the person's need, to make them. It was to do away with the concept of the deserving and the underserving poor. There was an example of such judgemental views in the posts to which I replied. If anything is nasty, it's the sense of superiority which makes people think they can make such judgements.

We turned to a system that unjudgementally works out the eligibility, not whether we like people or thought them to be behaving appropriately. There was a reason for that. It seems there is a need to be alert for those reasons returning.

Barmeyoldbat

Sorry Maisie had a look at your link, followed by a discussion with Mr B who referred to hhis book on the subject and has said basically Monica is right, as was my dad.

How old is your learning and your book. Have you worked academically in the economics field in recent years? Economy is a concept and concepts change. Have yours or those you are consulting?

Barmeyoldbat

Sorry Maisie had a look at your link, followed by a discussion with Mr B who referred to hhis book on the subject and has said basically Monica is right, as was my dad.

What were MOnica and your dad right about?

DaisyAnne, you are nasty, as far as I know you need know qualifications to come on GN,. Mr B is in the field of economics and my dad was an academic in that area, me I am just a simple soul who reads a great deal and can understand points are view., not that I have to justify myself to you. The simple concept is, you can’t just print endless streams of money when you need it, that would devalue it, you can borrow but have to pay back if you don’t then you lose your credit rating and when you need to borrow again interest is charged at a higher rate. Factors like Boris announcing he wasn’t going to pay the EU their divorce settlement would also have put us in a bad place. This is my simple understanding of it and one that I think is correct. So…… I will say no more about your nasty post because I will get banned.

The simple concept is, you can’t just print endless streams of money when you need it, that would devalue it, you can borrow but have to pay back if you don’t then you lose your credit rating and when you need to borrow again interest is charged at a higher rate.

But the simple concept is, as illustrated in the pieces from the BoE bulletin, that I posted earlier, that you can.

We don't borrow money from other countries, we sell bonds , in sterling, to anyone who will purchase them, and the bonds are bought because the purchasers know that they will be repaid. They know we will not default on the debt because we can issue our own currency. The purchasers are people or institutions looking for a safe investment and a guaranteed income from the interest. This has been happening for centuries.

The BoE has been quietly issuing money for decades to ensure that there is enough money in the economy (just as it says in the article). Why do you think that, despite population increases over the years, and increased prices and wages, there is still enough money in the economy to cover it all? It isn't because we've earned it from overseas trade (indeed, have we ever had a trade surplus? More exports than imports?) That's what the BoE Monetary Committee does. It not only controls interest rates, it decides how much new money is to be put into the economy.

Inflation is devaluation. That's why the BoE focusses on keeping it to a low level. That's why taxation exists, to mop up excess money in the economy so that inflation is kept under control. Except that inflation has more than one cause and our current bout is nothing to do with the 'too much money chasing too few goods' cause; it's because the cost of what we buy has, for various reasons, increased. No amount of interest rate increases are going to stop that.

I'm sorry that people don't even believe the Bank of England when it tells it like it is. What hope do I have...?

You have hope Maize, you have now added to my understanding, thank you for putting your post so nicely. I think somehow you and Monica are both on the same track but saying it differently.

Barmeyoldbat

DaisyAnne, you are nasty, as far as I know you need know qualifications to come on GN,. Mr B is in the field of economics and my dad was an academic in that area, me I am just a simple soul who reads a great deal and can understand points are view., not that I have to justify myself to you. The simple concept is, you can’t just print endless streams of money when you need it, that would devalue it, you can borrow but have to pay back if you don’t then you lose your credit rating and when you need to borrow again interest is charged at a higher rate. Factors like Boris announcing he wasn’t going to pay the EU their divorce settlement would also have put us in a bad place. This is my simple understanding of it and one that I think is correct. So…… I will say no more about your nasty post because I will get banned.

I don't understand why asking if your information is up to date, is "nasty" so I have asked GNHQ to let me know if it is and if so, why.

You were quoting people's qualifications. I just picked up on their dates of learning - possibly some 50 or 60 years ago on a site like this. One thing that does change is the world's view of economics. It really did seem reasonable to ask. I didn't expect a personal attack from a simple question.

Barmeyoldbat

So. Norah what is a poor choice? Please give me an example

When our children were saving to buy first homes I'd have thought coffees out, nails, expensive clothing, vacations were poor choices. I can think of more if you like.