A vision for the future.

A Special Report on Tony Blair Inc

m.youtube.com/watch?v=HX7TlBRvg9I

We seem to be drawing closer in our thinking, Katie59

'Magic Money Tree' is more than just 'unfortunate', it's a very stupid way to describe a form of money creation that has been going on for centuries. but I suppose it's been rhetorically useful for the naysayers...

Magic Money Tree is rather an unfortunate term, it is true that governments with their own currency can create/borrow money according to needs. In practice it is not unlimited because too much will cause inflation and/or devalue the currency.

Grantanow

It seems to me that politicians who espouse MMT are keen to imply that governments can spend money they don't have without adverse consequences in order to convince voters to vote for them, whether they are of the Left or Right. Does the acronym stand for Magic Money Tree?

That is not what MMT 'says' at all, Grantanow

Who are the politicians of whom you speak? The only politician I know of who understands MMT is Labour's Clive Lewis, who is not exactly high profile or influential.

It seems to me that politicians who espouse MMT are keen to imply that governments can spend money they don't have without adverse consequences in order to convince voters to vote for them, whether they are of the Left or Right. Does the acronym stand for Magic Money Tree?

Maisie. You believe you are right and, therefore, I must be wrong.

Not only do you believe this, but apparently, you and others are prepared to keep challenging my right to my opinion until I agree with your theory.

I'm trying to keep some balance by mentioning that some people don't agree with this theory. Some, who believe this is the answer to everyone's prayers, seem to think a counter-opinion may not be held or voiced. It seems I must be converted.

Good luck to MMT and all who believe. If it improves the future of this country, it will be brilliant. But, currently, I do not think, or believe, that this is the case and will probably continue to say so.

The Household Economy is not relevant because households cannot create their own money (other than by working). The rest is pretty similar you can borrow money if the lender trusts you to repay it, the interest rate varies according to the risk.

A state cannot create unlimited amounts of money or lenders demand higher interest or refuse to lend, in a way QE tries to buck the market and avoid paying interest. That’s fine until conditions change and the value of those bonds fall which cancels out the whole operation.

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.

Give us some links to them then, DAR. You are clearly much better at searching than I am.

Mind you, I only want academic papers which disprove the research result reported in the Self Financing State. I'm not interested in critques of any other aspects of MMT because I can find them for myself.

^ 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.^

Perhaps you should start by reading the paper yourself and apply some critical thought to it instead of shutting your mind and trawling the internet for repetitions of the 'household economy' myth to confirm your biases.

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?

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.

“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.

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.

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.

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.

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?

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.

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?

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/

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

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.

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/

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

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

“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

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?