A vision for the future.

Whitewavemark2

It isn’t my opinion🙂.

It just is.

It is coming from the extreme left. They are pushing the case for viewing the start of a circular process at the point of printing/creating currency.

I don't know how many people do or don't agree, but I'm happy to believe that the start of an economic process, to me and to many other people, will be being assured you have the money or the collateral or have legal commitments that you will have one or the other, before you commit to a process. To me that is where it starts and nothing anything I have read, here or elsewhere has convinced me differently.

You cannot put your signature on something that say "I promised to pay" unless you have something to pay it with. This is my opinion. I simply don't agree that what you are saying "just is" is the truth that implies.

Climate betrayal

Labour admitted they will not cancel the new North Sea oil and gas drilling licences that Rishi Sunak has given to multinational companies – many of which have given work to his wife’s family business.

Both Conservatives & Labour support 100 new oil & gas licences in the North Sea.

DAR so who were the extreme left economists that developed this idea? I am at the moment getting to grips with MMT and trying to see how it has developed from Keynesian economics. I understand that MMT was developed in one of the American universities?

The idea (I’m not completely convinced yet that it is a theory) is that government spending is funded by what in effect is money creation, and has been developed as a result of what the economists argue is what actually happens.

So put very simply

The state has the draws down money from the BoE - (for accounting purposes this is debited to what is known as the consolidated fund) the money is then deposited (credited) into the various spending departments bank accounts and thus used as necessarily/planned.
All this money finds it’s way into society at large, but
is then brought back into the system (otherwise we would have inflation, if not hyperinflation) through three means. Taxation, public debt (in the form of bond issuance and cash reserves.

So from this perspective Money is an abstract and unlimited unit of account.

The only power that can define this unit is the state, and this power derives from the states ability to tax that unit.
So tax then drives the demand for currency rather than raising funds for the state to spend.

There is a lot more ( even more to learn) but I hope you can agree that rather than coming from an extreme position, it is in fact nothing more than a description of the actuality of the way things are.

I do have questions but I hope to get these answered as I plod my way through the material.

I’m hoping that maizie will put me right if I’ve made any boo boos

Just as an aside. One thing that I think helps explain this form of state funding is that the states needs to know that the funds are there when needed. So this is why it must rely on money creation and not tax receipts, bond issuance etc as neither are a reliable source.

That’s my version, so I’m probably wrong.

Good Maisie knows and explains about how the economy works, there is no need for austerity we know it does not work. So we have to ask ourselves why Labour our next probable government is following the Conservative austerity way. And not canceling the 100 new gas and oil drilling licences. The Green Party would and they would tax the richest 1% this is what this country needs.

DAR so who were the extreme left economists that developed this idea?

Where did I say that, Whitewave?

Grany

Good Maisie knows and explains about how the economy works, there is no need for austerity we know it does not work. So we have to ask ourselves why Labour our next probable government is following the Conservative austerity way. And not canceling the 100 new gas and oil drilling licences. The Green Party would and they would tax the richest 1% this is what this country needs.

Are going to vote Tory, if the Labour Party don't give you what you want, Grany?

DaisyAnneReturns

^DAR so who were the extreme left economists that developed this idea?^

Where did I say that, Whitewave?

I am sorry I have clearly misunderstood. So when you say it is coming from the extreme left do you mean that it is the extreme left that supports the idea of MMT.

I’m not sure that is correct - who on the extreme left supports MMT? I suppose really I’m not sure what you mean by extreme left.

Given that it is merely a description of the actuality of state funding why are you arguing that it is coming from the extreme left? Surely it is left right and central? It is neutral - simply a description?

“They didn't 'cost 4%'. ' The 4% is the annual interest paid on them by the Treasury, they are called '4% gilts'.
Though to tell the truth, I'm not altogether sure where you have got this 4% figure from. Can you clarify?”

The interest the government is paying on new bonds is “costing” us 4%+ interest, yesterday it was 4.5% on a 10 yr bond
So why are they selling bonds that carry only 1 or 2% interest and if held by BoE cost 0% interest

Grany

Good Maisie knows and explains about how the economy works, there is no need for austerity we know it does not work. So we have to ask ourselves why Labour our next probable government is following the Conservative austerity way. And not canceling the 100 new gas and oil drilling licences. The Green Party would and they would tax the richest 1% this is what this country needs.

Many in Westminster don’t have a clue how the economy works Truss proved that, the whole monetary system depends on confidence - will you repay the loan.

The BoE can create new money (QE) if it creates too much it causes inflation, confidence falls, the currency loose value and imports cost more.

The extreme left wing want to spend more on social improvement that WILL reduce the value of sterling

People keep talking about the extreme left wing and I haven’t a clue who they are?

I think you are confusing the gilts' interest rate, which is fixed for the term of the gilt (unless it specifically an index linked gilt) with its 'yield', which is a completely different thing.

This is a good explanation of bonds:

www.cmcmarkets.com/en/trading-guides/what-are-government-bonds

And this explains yields (which are expressed as a percentage, but are not the same as the interest rate)

www.economicshelp.org/blog/5604/economics/uk-bond-yields-explained/

It is not a "Given".

I'm happy to accept that that is how you perceive it but you only have to put "Modern Monetary Theory" into Google and you get far more people who disagree with this theory than agree with it. I cannot believe that meets many people's definition of "a given".

I accept that this could change with more knowledge. But, it seems, we don't have enough to convince these people, who are experts in their field, that those proposing this have got it right. Nor has it yet changed anything in particular about how the experts in this field look at our economy.

I understand that you do not agree with what I'm saying and that's fine, but you really have to accept the I have the right to say it and to suggest to others on here, that MMT is far from acceptable to a majority of economists and has got a long way to go before the hard-left/far-left (from where I'm standing) are able to push it onto our view, or a governments view, of economics.

My post was in reply to Whitewave's Given that it is merely a description of the actuality of state funding

A link to another Richard Murphy article pondering why the BoE might sell QE bonds at a discount he uses the word “malevolent.”

www.taxresearch.org.uk/Blog/2023/07/28/why-is-the-bank-of-england-selling-bonds-at-a-loss-when-it-does-not-need-to-do-so/

dar ok leave out the “given” .

It isn’t how I perceive it😄😄.

And after I’ve finished getting to grips with MMT , I will then look at the critiques of it. That is how it works!
I agree with some if what you are saying for example MMT proponents have yet to convince mainstream economists.

Where I entirely disagree with your is you assertion that it is the extreme left that support it.

I don’t think you know what you mean by that assertion, however if I’m wrong I would still be very interested in what/who are the extreme left who support MMT?

I used the term “extreme left”, “hard left” of you prefer do they support MMT? I have no idea, what l am pretty sure of is that they would borrow/create a large amount for social improvement. Investors are not at all interested in the comfort of the population, they want to see a steady growth of the economy, if they can’t see that the currency value will fall.

Whitewavemark2

dar ok leave out the “given” .

It isn’t how I perceive it😄😄.

And after I’ve finished getting to grips with MMT , I will then look at the critiques of it. That is how it works!
I agree with some if what you are saying for example MMT proponents have yet to convince mainstream economists.

Where I entirely disagree with your is you assertion that it is the extreme left that support it.

I don’t think you know what you mean by that assertion, however if I’m wrong I would still be very interested in what/who are the extreme left who support MMT?

But why do you think it's up to you to decide my view, Whitewave? You are perfectly welcome to your own perspective, but why should you define mine?

Katie59

I used the term “extreme left”, “hard left” of you prefer do they support MMT? I have no idea, what l am pretty sure of is that they would borrow/create a large amount for social improvement. Investors are not at all interested in the comfort of the population, they want to see a steady growth of the economy, if they can’t see that the currency value will fall.

Problem is, at the moment, Katie59, that there is a great reluctance among possible 'investors' to invest in the UK. By 'investors', I don't mean those who speculate in the financial markets for the sole purpose of increasing their wealth through the buying and selling of shares and gilts, or by shorting, or any other financial device that will increase their wealth, I mean people who are prepared to invest in businesses in the UK. And the reason that they are not prepared to invest in UK businesses is that they see no prospect of businesses making a sufficient profit because they don't see potential consumers of their goods and services having enough spare cash to buy them.

Wages are failing to increase in real terms, inflation is eating spare cash and savings which are being used to purchase the very basics of life, such as fuel and food, and the increases in interest rates are further reducing the amount of spare cash available by increasing loan repayments.

The only prospect of improving the economy would be from state investment, improved spending on infrastructure, on the NHS (which is a very significant contributor to GDP) and on public sector wages, would stimulate growth by making more money available to be spent in the private sector.

As I persistently point out, the money for state investment doesn't have to be borrowed, nor does it come from taxation because taxation doesn't fund spending.

We know that it doesn't have to be borrowed because we have had some £900 billion of QE money 'created' over the past 14 years. With absolutely no adverse effect on the value of the currency. Heavens, the injection of QE money just after the Brexit vote supported the value of the pound, which dropped like a stone on the announcement of the result.

The key to promoting growth would be targeting the state investment to where it would produce the most economic activity. It needs to go to the part of the population, and state enterprises , where it is most likely to be spent into the economy, not to the already wealthy (as Tusses proposed tax cuts for the wealthy) because they don't spend extra money into the economy. Trickle Down is a completely debunked idea.

Of course, this is a simplification but the underlying principle is that investment should go where it stimulates economic activity.

I agree with some if what you are saying for example MMT proponents have yet to convince mainstream economists.

I'm sure we all recognise that there are different schools of economic thought and that, on the whole, none of them convince each others proponents of their validity. Keynesians aren't convinced by monetarists, etc...

If mainstream economists aren't convinced by MMT they need to produce critiques of the foundational element of MMT, which is the description of how national finances are conducted. I've not found any critique of the 'Self Financing State' paper, and it's not for want of trying.

Actually, I don't really care if some economists, politicians or journalists aren't 'convinced' by MMT.

I think it's more important that voters know the truth about how the nation's finances work so they can judge parties' policies on their merits rather than on their cost.

“The key to promoting growth would be targeting the state investment to where it would produce the most economic activity. It needs to go to the part of the population, and state enterprises , where it is most likely to be spent into the economy, not to the already wealthy (as Tusses proposed tax cuts for the wealthy) because they don't spend extra money into the economy. Trickle Down is a completely debunked idea”

That statement I agree with, cutting taxes for the rich isn’t going to help, promote growth, the finance market did not believe the proposals that Truss was making. However Sunak while making small investments that may lead to growth is not really committed and as far as I have heard nor is Starmer. The direction seems to me “batten down the hatches”, it’s going to get tough.

The wildcard is Ukraine what happens if NATO gets dragged into a wider conflict, they seem to be making little progress against the Russians. It will probably take 10 times the effort to win the war, if we continue to support Ukraine to that extent all bets are off, it will affect the economy.

I think, Maisie, there actually have been enough scholarly papers showing flaws in the theory for people generally to see that it is neither accepted by the mainstream, nor proposed as a way forward by any possible future government. You say you "don't care" that it hasn't yet passed their tests but others will use this as a benchmark for its view of Economics, and its usefulness.

You say I think it's more important that voters know the truth about how the nation's finances work but this is your truth (and others) not "the" truth. In a world where some people convinced themselves of misleading "facts" regarding the leaving the EU, and others believe the Johnson/Trump are truthful men looking out for their interests, I find I am wary of the evangelical offering us new truths.

Grany

Climate betrayal

Labour admitted they will not cancel the new North Sea oil and gas drilling licences that Rishi Sunak has given to multinational companies – many of which have given work to his wife’s family business.

Both Conservatives & Labour support 100 new oil & gas licences in the North Sea.

So will it be Reclaim UK, Grany?