Another Benefit of Brexit?

Do you? I wonder why you think that.

Because you keep on dismissing the idea that state spending through money creation has any economic benefit.

If you can’t see that borrowing or printing money has devalued Sterling there is no point arguing.
As public spending has increased as % of GDP over the last 50yrs sterling has devalued in proportion

In 1970 UK debt was around 50% of GDP £1 = $2.6
Now UK Debt is around 100% of GDP £1 = $1.2

That’s what happens when you borrow more.

MaizieD

^Do you? I wonder why you think that.^

Because you keep on dismissing the idea that state spending through money creation has any economic benefit.

MaizieD I can see your point about state spending with an economic benefit. Do you think in order to reduce inflation, we need to return to a Fiat system?
Also if Theresa May and others were able to print £900 billion, why stop at this figure? What is limiting the amount that is printed?
Why is anyone having to work is another thought.
With apologies…..

Yes but the goods for the public sector to buy won't be available in quantity unless there is sufficient investment in the private sector and many goods bought in the UK come from China where taxation during manufacturing stages goes to their Treasury, not ours.

Katie59

If you can’t see that borrowing or printing money has devalued Sterling there is no point arguing.
As public spending has increased as % of GDP over the last 50yrs sterling has devalued in proportion

In 1970 UK debt was around 50% of GDP £1 = $2.6
Now UK Debt is around 100% of GDP £1 = $1.2

That’s what happens when you borrow more.

This exchange rate also applies to anything we import- chemicals, medicines, raw materials, etc, etc, etc. So all those things now cost much more.

Fleurpepper

Katie59

If you can’t see that borrowing or printing money has devalued Sterling there is no point arguing.
As public spending has increased as % of GDP over the last 50yrs sterling has devalued in proportion

In 1970 UK debt was around 50% of GDP £1 = $2.6
Now UK Debt is around 100% of GDP £1 = $1.2

That’s what happens when you borrow more.

This exchange rate also applies to anything we import- chemicals, medicines, raw materials, etc, etc, etc. So all those things now cost much more.

That’s the problem we are importing so much of what we need instead of using home produced resources and production, the so called service economy has not brought prosperity.

MaizieD

^Do you? I wonder why you think that.^

Because you keep on dismissing the idea that state spending through money creation has any economic benefit.

Ah. I don't think I have said quite that. I have not said "the state cannot create economic benefits", but it is very hit-and-miss. How much of your "economic benefits" has the state managed to "create" for most communities in the last 12 years?

I agree that I am not a statist. But, as so often, you seem to think there are only two ways of thinking. I am not keen on a state-run country with shades of the height of communism or the obliterating ham-fistedness of the far right. The State is an amorphous non-sentient block of power, often completely separated from communities. You vote, then you wait to see just how much damage can be done to your community in five years, and then you vote again. There is little sense of agency.

However, I believe that all over the county, when exercising power as an elected and representative group, we should and can invest in our community in a way that the majority need and want, and that this will bring relevant economic benefits.

ronib

MaizieD

Do you? I wonder why you think that.

Because you keep on dismissing the idea that state spending through money creation has any economic benefit.

MaizieD I can see your point about state spending with an economic benefit. Do you think in order to reduce inflation, we need to return to a Fiat system?
Also if Theresa May and others were able to print £900 billion, why stop at this figure? What is limiting the amount that is printed?
Why is anyone having to work is another thought.
With apologies…..

Do you know what a 'Fiat system actually is, ronib?

The thing that limits the amount that can be 'printed' is the resources available for the money to be spent on. There is no point in increasing the supply of money if t can't be spent. That just leads to demand led inflation; too much money chasing too few goods.

MaizieD fiat system… something not to do withs but the gold reserves. Churchill went along with it but Gordon Brown stopped it? Right?

Seems to me that the Nhs could become a bottomless pit ? Plus how about paying public servants a living wage etc? We could print to pay for this?

With cars… typo

MaizieD forget about the fiat system I shall try to work it out.

The NHS always has been a bottomless pit because demand has always been unlimited, with ever more technical advances possible, now we are restricted by waiting times, will you die before your turn comes.

The FIAT system is the way exchange rates are determined.
International Investors look at how well governed a country is and how much it produces, by doing that they have the confidence to invest, prior to that it was the amount of Gold was held in the national bank that provided security.

A nation with a stable government, a lot of natural resources and/or productive capacity has a strong currency, those with unstable governments that produce little have weak currencies.

The UKs use of natural resources and productive capacity has declined in recent decades, while the demand for social improvement has increased. Political decisions to borrow/print money for social improvement has meant the value of sterling has fallen.

Katie59

The FIAT system is the way exchange rates are determined.
International Investors look at how well governed a country is and how much it produces, by doing that they have the confidence to invest, prior to that it was the amount of Gold was held in the national bank that provided security.

A nation with a stable government, a lot of natural resources and/or productive capacity has a strong currency, those with unstable governments that produce little have weak currencies.

The UKs use of natural resources and productive capacity has declined in recent decades, while the demand for social improvement has increased. Political decisions to borrow/print money for social improvement has meant the value of sterling has fallen.

The FIAT system is the way exchange rates are determined.

Katie59. Where are you getting this from? A link to your source of information would be helpful.

Because I'm really struggling to find any decent authoritative source that confirms what you are saying.

Likewise your attempt to claim that the %age of 'national debt' to GDP is the cause of a poor £ to $ exchange rate.

Since the abandonment of the gold standard and the Bretton Woods agreement we have had a floating currency. Its exchange value is set by supply and demand on the foreign exchange market. The forex market not only has traders who wish to buy sterling in order to buy British goods and services, which must be paid for in sterling, but also has traders who are interested only in speculating on the price of sterling. Have a look at the chart on this page which gives the historic £/$ exchange rates. One of the low points of the rate was in the mid 1980s when George Soros made $billions by shorting the £. Nothing at all to do with the national debt, pure speculation.

The reason the £ is low now is because we're not exporting much, there's no great competition for our currency; we don't have much to export. Brexit has lost us export trade in goods and services and we haven't made good that loss elsewhere.

www.macrotrends.net/2549/pound-dollar-exchange-rate-historical-chart

I'd also point out that the 'national debt' is vastly overstated now because it includes the £900billion of QE since 2008, which is owed to no-one as it is money created by the BoE (which is owned by the state) in order to create liquidity in the banking system. . The state can't owe money to itself and the state can always pay its debt because it can create the money to do so. There is no drop in institutions and investors willing to buy our 'debt' because they know it is a safe investment. In fact, as my recent experiment on the Premium Bonds thread showed, people who own our 'debt' aren't terribly keen to have it repaid to them because it is their savings and investments...

ronib

MaizieD fiat system… something not to do withs but the gold reserves. Churchill went along with it but Gordon Brown stopped it? Right?

Seems to me that the Nhs could become a bottomless pit ? Plus how about paying public servants a living wage etc? We could print to pay for this?

What is wrong with the government investing in public services and creating a demand for goods and services from the private sector? Isn't that what growth in the economy all about; creating demand and enabling businesses to respond to and profit from that demand. They can't do that if there is no money available with which to pay them.

The NHS isn't a bottomless pit, it's a creator of demand for goods and services from the private sector. It's up to the UK private sector to respond and to compete with foreign suppliers to provide those goods and services.

MaizieD thanks for your input. I was clumsy in the way I referred to public services. I think one of your earlier posts referred only to goods so I should have said do you mean goods and services?
Also MMT is still difficult to understand because there’s an inference that the population can just not work and the government prints money. I am sure this isn’t correct in theoretical terms?

It's up to the UK private sector to respond and to compete with foreign suppliers to provide those goods and services.

And one way that they will respond is to borrow money from the banks in order to invest in increasing their the production of goods and services. Bank loans are all newly created money, banks do this under licence from the BoE. The created money is destroyed when the businesses repay the loan. They don't have to look to foreign investment to expand...

Katie59

Fleurpepper

Katie59

If you can’t see that borrowing or printing money has devalued Sterling there is no point arguing.
As public spending has increased as % of GDP over the last 50yrs sterling has devalued in proportion

In 1970 UK debt was around 50% of GDP £1 = $2.6
Now UK Debt is around 100% of GDP £1 = $1.2

That’s what happens when you borrow more.

This exchange rate also applies to anything we import- chemicals, medicines, raw materials, etc, etc, etc. So all those things now cost much more.

That’s the problem we are importing so much of what we need instead of using home produced resources and production, the so called service economy has not brought prosperity.

Katie we just have to import many things, because we do not have those materials in the UK. Be it chemicals, raw materials, medicines, and so so much more. And we have voluntarily SOLD so many of our essential utilities/energy to foreign countries, and now have to re-import back, paying in Sterling at very low values.

Maizie- your mention of the Gold Standard had me in stitches. Yes, I know, it is not funny. But this came to mind ...

www.youtube.com/watch?v=LS37SNYjg8w

women know your limits!!!

I love this spoof by Harry Enfield- because she could have been me, in our early days of OH's professional life, and those dreadful compulsory 'dinner parties'- where as a young wife, I was told after dinner that it was time to 'go and powder our noses' (not in the modern sense), and leave the men to have 'proper conversations! 1975! Hated dinner parties even since, and with this particular 'funny handshake' people.

And decided that very evening, that as soon as youngest at school, I would go to Uni and begin my own professional career.

In the meantime, she explains the situation well as regards to growth, small businesses and many sectors

www.facebook.com/groups/1586336064998120/permalink/3151228191842225/

www.macrotrends.net/2549/pound-dollar-exchange-rate-historical-chart

For once Maisie we agree this chart shows the decline in Sterling by an average of 2% per year over 50years which coincides with the increase in borrowing as % of GDP. The value of any currency is indeed established by financial markets who analyze each governments competence and economic prospects - (they were not impressed by Brexit and Sterling slumped).

Speculation does affect exchange rates Soros and others are an example, recently there was a lot of speculating during the Brexit debacle and more with the Truss disaster. When the speculators have had their feasting frenzy the real value of the currency returns as it has now.

I’m not interested in economic theories only results, maybe Keynes theories work with productive manufacturing economy, they certainly have not been successful with the service economy the UK has become.
A manufacturing economy pays its labour force who in turn spend their wages, paying tax on some of it (not all) month to month, in addition they have created a product to sell to customers at home and overseas.
A service economy does not have a product to sell other than within the spending of the consumers usual spending. A factory workers spending pattern is the same as service worker, but creates additional value as well.

👀 becoming less true though.

For once Maisie we agree this chart shows the decline in Sterling by an average of 2% per year over 50years which coincides with the increase in borrowing as % of GDP.

Correlation, Katie59, is not causation.

The value of the pound has dropped over the centuries. Perhaps you should try living on the median 1950s income, or the median 1850s. The 'national debt' has nothing to do with it. The 'national debt' says nothing at all about a country's ability to produce. It just says that people are saving with NSI, or investing in bonds.

On this page is a chart of British 'national debt' since the late 17th C. called 'Public Net Debt' Now tell me that a huge national debt causes devaluation of the pound

www.ukpublicspending.co.uk/debt_history

You don't seem to have told me where your explanation of the Fiat system comes from. I'd be extremely pleased to know.

Heseltine was again brilliant yesterday talking to Tice and Oakeshott

youtu.be/6WZ1jsU-BxM

Fleurpepper

Heseltine was again brilliant yesterday talking to Tice and Oakeshott

youtu.be/6WZ1jsU-BxM

What was that on?