But actually, a country’s whole economy can grow more money if it needs to. Since 2009 the Bank of England has created £453bn of new electronic money to buy debt from the private sector using a mechanism called quantitative easing. Yes, you read that right: the Bank of England has created £453,000,000,000 of new money in the last eight years. Turns out the magic money tree is pretty big.
The issue isn’t whether we can grow money or not (we can – that’s just a fact), it’s where the money goes once it’s been grown. And the problem is that it doesn’t go to nurses, teachers or the public services they work for. It goes to institutions such as banks.
Nope, it didn’t go to the banks. They were net short of gilts when QE started. They’re now net long. The one group of people that QE absolutely didn’t go to are the banks.
The nurse in the BBC debate was highlighting a problem that exists across the whole economy: real wages haven’t increased for more than a decade, and this has meant more people have been relying on credit cards, with personal debt now higher than it was before the 2008 crash.
That personal debt number is casuistry verging on a lie. Note the emphasis on “real” wages there. As a real number, adjusted for either inflation or as % ge of GDP household debt is well below those previous peaks.
And back to that magic money tree. The reason we don’t invent money to spend upon nurses is because that’s not QE, that’s monetisation of spending and is highly inflationary. Zimbabwe and Venezuela here we come time…..