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Ken Mathieson's avatar

Well David, where to start?

1. While Fiat currency can indeed be printed, by far the bulk of it is NOT printed: it is created by simple debit & credit bookkeeping either by the BoE on instruction by the Treasury (i.e. the UK Government in the person of the Chancellor of the Exchequer) in order to prevent a shutdown of the economy (i.e. Quantitative Easing during Covid lockdowns or to prevent the commercial banks going bust as in 2008), or by Commercial Banks authorised by Government licence to issue loans. In all cases it’s the UK Gov which ‘promises to pay the bearer’ and not the BoE and commercial banks. Why don’t you read it yourself? Here’s the link to current governance documents: https://www.bankofengland.co.uk/-/media/boe/files/about/legislation/boe-charter.pdf

2. You should really broaden your understanding of how economics – macro and micro – function. Stephanie Kelton’s book as mentioned by Leah is first-class, is written in layman’s language and, although it analyses the topics from an American perspective, these can easily be translated into their UK equivalents. You can get the paperback from Amazon for under a tenner.

3. Another useful learning arena is Prof Richard Murphy’s blog site taxresearch.org.uk or his various other outputs via YouTube, Twitter/X etc. The blogsite is particularly useful as all readers are invited to contribute to debates, ask questions etc. There you can learn how the UK economy works, how Gov policies affect the economy, how MMT functions, the impact of Westminster on Scottish politics and the Scottish economy etc, etc.

4. You state that “When inflation grows at 5% this means that a government has printed 5% more currency than the economy grew.” It’s not a direct correlation: recent inflation in the UK has occurred on part simply because the BoE has kept the Bank rate artificially high at 5.25 from August 2023 to August 2024 and now sits at 5%. This has pushed up the cost of mortgages and rentals which have contributed to inflation. Control of the Bank Rate is the only tool the BoE has to control inflation, which in turn is the only macro-economic power it has, although that too could be changed by the Chancellor removing the BoE’s monopoly.

5. The word “Borrowing” is used as a useful tool in the long-running obfuscation of what really happens in the economy. Once you’ve grasped the fact that the UK Gov effectively runs an overdraft at the BoE (which it owns), the use of the word “borrowing” is how it chooses to disguise the fact that it is simply “borrowing” from itself and the various debits and credits cancel each other out in the Whole of Government Accounts. It doesn’t mean going cap in hand to the City of London or the World Bank. The analogy I use to explain this is: My lawn is growing fast and badly needs cut. I google ‘gardeners in my area’ and the cheapest wants £200 to cut it. I decide to cut it myself, but then, having read about fiscal management in the mainstream press, I wonder if I’ll have to pay myself £200 and, if so, how do I do it? Do I have to transfer £200 from my left trouser pocket to the right trouser pocket and, if so, will I sleep any better knowing that I’m no longer in debt? Obviously it’s bleeding nonsense, but then so is the insistence of Government and the media about “how do we pay for Government expenditure?”

6. You state re QE “What happened in 2008 was a travesty. Those banks should have been allowed to fail, but the answer to one wrong is not another wrong.” Think about the alternative: The commercial banks all go bust causing mass bankruptcy across all sectors (private, public and Gov’t) of the economy – no food, no jobs, no income, no access to personal savings. The UK, particularly under the Tories and Blair, has never managed adequate regulation of key services and it’s the same today, but intervention and QE prevented complete meltdown, AND it didn’t cause any inflation.

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Tally's avatar

I didn’t know there was an English Labour Party . I’ve been demanding they form one for decades . Same with libdems and Tories who steadfastly describe themselves as British MPs and studiously avoid even saying the word England . Of course they are afraid of an English Parliament and that is the reason they avoid all talk of England

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