Never here Keir?

Historically money was created as a token, an IOU to trade goods and pay wages.
Today banks supply it in large quantities under supervision of a central bank, in our case the BoE. Any concept that money is limitless is entirely misplaced,

David, you still haven’t addressed the fundamental question.

Which is ‘What is the source of a nation’s money?’

It’s no good mansplaining bonds to me, I know all about bonds.

But money is needed to purchase bonds and it doesn’t grow on trees, nor can it be found lying around the countryside for anyone to pick up and use. No one has a money printing machine in their garage (unless they are a criminal) It’s like a river, it has a SOURCE, it starts somewhere. Who starts it off?

Thank you, Rosie51.

I tried to make it simple, but although the basic principles of how money works in the economy are simple, following ‘schools’ of economic thought can seriously influence the way that money is used and who gets the most benefit from it. That’s the complex bit…

The “neo liberal” economics are the cause of the rich getting richer, while we borrow to get the stuff and services we want “today” rather than wait until we can afford, that will continue

It’s our choice, we elect polititians that promise things we cant afford

MaizieD Thank you for your reply and explanation to my post (and not least for not taking offence to a genuine question) I'm not sure I fully understand it in its entirety, but I will reread again and attempt to understand. I do appreciate you taking the time to try to explain.

“All I've been saying is that a national budget is not like a household budget because a government can do the one thing that a household can't do. It can create its own money.”

NO, the UK government uses tax revenues plus borrowing, mostly selling bonds etc to fund spending, they have added to that QE which is around 40% of borrowing and is treated a borrowing for comparative purposes.

Bonds are just like a fixed term loan interest is paid, say 5% then at the end, typically 10 yrs you pay the loan back. Or more likely a second loan is taken to pay the first back.

If you want to call that “creating“ money fine, you can do it while your credit is good, I can do that, I offer an asset as security, the bank gives me cash. The difference is that mostly we all pay our loans back the government rarely does that.

While polititians borrow more year on year, they are increasing inequality because only the wealthy have the money to lend us, lifestyle we have is based on borrowing from rich. The government could borrow to expand the economy but very little has been for decades

Most western states, including the US (who owe 125% of GDP) have the same problem

What I truly don't understand is why MaizieD having claimed all the answers to our financial problems, no recent government has yet been able to adopt her approved methods (I do realise she didn't invent them, but she just promotes them). And no, I'm not being sarcastic. What makes successive governments of various rosette colours unable to appreciate MaizieD's and others' truth?

For those of us that do try to balance the household budget MaizieD's posts can appear to be dismissive (to the point of insult) of that principle.

I'll start with this because I have never intended to be dismissive of anyone's own household budgeting. Of course we budget in our households or we go into debt if we overspend.

All I've been saying is that a national budget is not like a household budget because a government can do the one thing that a household can't do. It can create its own money.

What makes governments unable to appreciate 'others' truth' is a mixture of factors; factors that are quite compelling.

A key factor is that the US adopted what is known as neoliberal economic theory in the 1980s and the UK followed suit. Naturally only economists trained in this theory would be given positions of economic power, so equally naturally would be economists would be trained on neoliberal theory because they wouldn't get work if they didn't subscribe to it.

The US dominated institutions such as the IMF and the World Bank, so neoliberalism was spread to other countries as they wouldn't get financial help if they didn't implement its practices. And neoliberal practice was practically the complete opposite of the Keynesianism which had been common since the 1930s.

Keynes advocated aiming for full employment, government spending to beat recession (which worked splendidly under Roosevelt after the stock market crash in the late 1920s) state regulation of markets, control of capital and high taxation of the wealthy to prevent them accumulating a high proportion of the nation's money and leaving the rest of its citizens, if not in poverty then certainly poorer.

Neoliberal theory said that markets would work to ensure a fair distribution of wealth if they were not interfered with by the state. It also said that state spending worked against private enterprise and the markets because it gave them less opportunity to invest and grow their businesses, 'crowding out'.

Part of this was ideologically based because Hayek, who was the originator of current neoliberal theory was brought up under a communist regime and he was totally opposed to state control because communist states controlled every aspect of the economy and didn't allow for any private enterprise whatsoever. He said it led to 'serfdom'.

Hayek did clash with Keynes, who didn't agree with most of what Hayek proposed. Keynes was in favour of the mixed economy which the post WW2 government implemented, though, as he died in 1946. He was familiar with the Beveridge report of course which was published in 1942.

We have to remember that Keynes is held to be one of the greatest economists of the 20th century and not dismiss him as unimportant.

Another interesting factor is the political power of 'folk' understanding of economics. The 'taxes pay for state spending' story is so very well embedded in the public consciousness that politicians conform to it as they can lose voters by proposing policies which don't conform to the current orthodoxy; they just get rubbished by the media and by economists who do conform.

It does strike me sometimes that being an economist who doesn't conform, or being supporters of such economists is like being an early Christian evangelist.

A third factor is that current neoliberal economics works hugely in favour of the wealthy. As they are either in positions of power, or are able to influence those in power (political donations, anyone?) they work hard to maintain the status quo.

I could go on but this is far too long already. It's not an easy topic to condense.

I can do a part 2 if anyone is interested.

In theory there is no limit to the amount of money a state can issue. In practice it is controlled by minimum lending rate plus whatever additional margin the banks decide to add for any particular loan. Minimum lending rate is decided by the BOE according to health of the economy in particular inflation rate.

The bank itself has to deposit part of the loan as security with BOE incase it becomes insolvent, the bank does get paid interest on that deposit. (Currently 5%)

That is separate to government spending, to fund that the BOE issues bonds and other securities, uses QE and the commercial bank deposits if receipts from taxation etc aren’t enough. Successive governments havn’t had policies that have funded spending so borrowing has steadily increased to £2.4 Trillion plus the interest cost of which is £100 billion each year.

It’s a stable system, unlike the pre 2008 free for all which the smart economists got badly wrong, the main problem is that most governments spend more each year.

All that is probably going to be dismissed a mansplaining but you did ask

“But all I'm asking you to do is to explain how you think out money is issued, as you didn't seem to understand the point I made, about 'borrowing'. Which isn't a theory, it's an empirically proven fact.”

You are going to have to restate your point how money is issued then I can reply.

Nothing to do with this thread but didn’t want to start a new thread about it but currently watching a programme about the tube which said if Blair hadn’t won the election the Conservatives were going to privatise it. Don’t remember that at all but thank goodness it didn’t happen.

What I truly don't understand is why MaizieD having claimed all the answers to our financial problems, no recent government has yet been able to adopt her approved methods (I do realise she didn't invent them, but she just promotes them). And no, I'm not being sarcastic. What makes successive governments of various rosette colours unable to appreciate MaizieD's and others' truth? For those of us that do try to balance the household budget MaizieD's posts can appear to be dismissive (to the point of insult) of that principle.

On the original post, don't let Starmer ever tell me I should limit my once a year flight to physically be in contact with my son and his family in the interests of climate change because I won't be responsible for my response. Even within the UK I manage to limit my travel footprint by use of zoom, teams etc.

I think you’d have to define ‘social mobility’, or what you think social mobility ’is’. I think it’s a concept that’s hard to get a handle on.

Is it moving up or down the ‘class’ system? Or is it cultural? Or is it a measure of ability to acquire more money and possessions?

For example, if you were brought up in a ‘middle class’ environment but are now very poor, have you experienced downward social mobility?

I don’t know if economics is responsible for increased social immobility - as an aside. It’s certainly happening and seems to have accelerated over the last 20 years.
Isn’t it deliberate social policy though?

David49

“No, I didn't say I disagree, I just asked you to explain what you said.”

You talk in riddles Monica,

You probably think know a lot about econonomic theories but clearly know little about how it works in the real world, or how many government fail to apply policies that work

I'm not MOnica and I do think that I'm well aware of how the current economic theories work in the real world. Which is very much in favour of the wealthy and very much to the detriment of 'ordinary' people.

But all I'm asking you to do is to explain how you think out money is issued, as you didn't seem to understand the point I made, about 'borrowing'. Which isn't a theory, it's an empirically proven fact.

“No, I didn't say I disagree, I just asked you to explain what you said.”

You talk in riddles Monica,

You probably think know a lot about econonomic theories but clearly know little about how it works in the real world, or how many government fail to apply policies that work

His inheritance was not good, whether that was economy, services or just the level of disillusionment amongst the general public.

I agree.

But I have seen other leaders being able to turn that thing around.
[cant quite remember specifically who they were].

He hasnt.

I have probably said this before but there is a small part of me that feels sorry for him. His inheritance was not good, whether that was economy, services or just the level of disillusionment amongst the general public. But to counter that you need a vision, a belief system, and I don't think he has that.

He is doing terribly badly in the polls.

uk.news.yahoo.com/worrying-numbers-keir-starmer-voters-103145171.html

I voted Labour nearly all my adult life but never would again.
I feel so disloyal to my late Dad who was Labour through and through.

sazz1

One of my friends is a lifelong Labour voter so I rarely discuss politics with her as I'm more towards the right. She defended Kier up until 2 months ago when she told me he was no good and neither was his party. I've come to the conclusion that it's now because many of his proposed policies will directly affect her and her adult family. First they came for the Jews comes to mind.

Which specific policies will affect her and her adult family, sazzl:? Did she say or was it just a general statement?

David49

MaizieD

David49

“So what limits the state issuance of money?”

The BOE minimum lending rate and the risk that banks are willing to take lending to businesses and consumers
Low interest rates encourage spending/investment at risk of inflation, High interest the opposite controlling inflation

“Inflation targets set by the Bank of England?”

No, the government sets the target the BOE tries to achieve it and has to explain why it can’t, the Monetary Policy Committee decide whether to raise or lower lending rate to control inflation.

I'm not sure how these connect with and limit the state issuance of money, David.

Can you explain?

Ok if you don’t agree what do you think controls the state issuing money.

No, I didn't say I disagree, I just asked you to explain what you said.

^ I've come to the conclusion that it's now because many of his proposed policies will directly affect her and her adult family.^

Almost definitely so!!

One of my friends is a lifelong Labour voter so I rarely discuss politics with her as I'm more towards the right. She defended Kier up until 2 months ago when she told me he was no good and neither was his party. I've come to the conclusion that it's now because many of his proposed policies will directly affect her and her adult family. First they came for the Jews comes to mind.

MaizieD

David49

“So what limits the state issuance of money?”

The BOE minimum lending rate and the risk that banks are willing to take lending to businesses and consumers
Low interest rates encourage spending/investment at risk of inflation, High interest the opposite controlling inflation

“Inflation targets set by the Bank of England?”

No, the government sets the target the BOE tries to achieve it and has to explain why it can’t, the Monetary Policy Committee decide whether to raise or lower lending rate to control inflation.

I'm not sure how these connect with and limit the state issuance of money, David.

Can you explain?

Ok if you don’t agree what do you think controls the state issuing money.

David49

“So what limits the state issuance of money?”

The BOE minimum lending rate and the risk that banks are willing to take lending to businesses and consumers
Low interest rates encourage spending/investment at risk of inflation, High interest the opposite controlling inflation

“Inflation targets set by the Bank of England?”

No, the government sets the target the BOE tries to achieve it and has to explain why it can’t, the Monetary Policy Committee decide whether to raise or lower lending rate to control inflation.

I'm not sure how these connect with and limit the state issuance of money, David.

Can you explain?

He’d make a good Foreign minister away from the UK. Seriously. Not a good leader, never has been but he seems to do ok on the international stage.