And all because governments will refuse to do what they could all do – which is spend more, using borrowed funds (created by banks, and at very, very low interest rates as was done, for example in World War 2 when we also faced crisis)
Interest rates went up from the 30s during WWII and then fell again after WWII.
Annoyingly your link doesn’t work because you can’t link to Measuring Worth results, I’m afraid. You’ll have to screenshot the page, then upload the picture.
Does this prove anything though? For a start it should be real interest rates (made hard though because of wartime controls) and it really depends on what they WOULD have been without govt intervention.
I do wish Murphy would make up his mind whether he wants government to borrow more or print more. He has also advocated fiscal expansion through money printing. I suppose it is possible to do both? We would of course be hammered for this in the bond markets AND the currency markets. At the same time.
Frances: you are assuming Murphy has a mind to make up. That is not obvious.
He has conveniently forgotten that, as I understand it, all investments in US $ denominated stocks were nationalised in order to obtain $ to pay for some of our purchases.
I don’t get RM’s comment about *banks* creating money to lend to the government. Does he really mean that, or does he mean the BOE doing it?
Surely he understands the difference between central bank reserves (the monetary base) and broad money (money which can be “created” by the banking system)?
JustAnotherTaxpayer
I think RM may be confusing securities purchase with primary lending. Securities purchase is settled delivery-versus-payment, which means the buyer doesn’t get the securities until they have coughed up real money. This is utterly unlike lending, where banks can lend in the (temporary) absence of reserves, and the accounting entries for that lending create a balancing deposit which inflates broad money. Outright securities purchase cannot possibly inflate broad money. Lending out those securities does, though…but that’s another story.
He could I suppose have an alternative idea, namely that the BoE buys gilts using money created from thin air. This is correct (QE), except that the BoE can’t buy gilts directly from government – it isn’t allowed to bid in a primary auction. BoE can only buy gilts already in circulation.