I am finally back in the UK with time to notice the budget. And one of the most notable things about it was Philip Hammond’s discussion of the national debt. He claimed, as do the Office for National Statistics, that our national debt is now about 85% of GDP. That, he and they say, is about £1,764 billion.
Except that is simly not true. Near enough £435 billion worth of the UK’s national debt, which is supposedly owing by the government, is owed to the Bank of England, which is owned by the government. So the government owes itself. And debt you owe yourself is not debt at all. That’s because paying it off makes no difference to your well-being. You are in exactly the same overall state with the rest of the world as you were before you paid it if you do that. So the debt does not actually exist. That is the only obvious logical consequence of that fact.
In other words UK national debt is near enough £1,329 billion. Tht is 64% of GDP. Which is, in national debt terms, neither here nor there and certainly poses none of the threats to the UK economy that Hammond claims the national debt does.
On alternate days we’re told that the national debt is money that the government has pumped into the economy. We’re also told that if there’s too much money in the economy – which might happen if government pumps too much in – then MMT tells us that it should be taxed out again.
QE is indeed government pumping more money into the economy. A quick glance at the M0 or M1 aggregates will show that that QE debt is exactly that.
So, if that inflation ever does turn up – something rather essential to the basic MMT claims about inflation and tax that it will – then it will need to be taxed back out of the economy.
If QE is real debt, the national debt is the 1.7 trillion, then taxes at some point must rise to pay it back. If it’s not real debt but MMT is true then taxes must rise to cut the inflation from it not being paid back.
Ritchie’s claims of definitions change the real world how?
Not that national debt of £1,764 billion is a threat to well-being either. That is unless private wealth is a threat to well-being. Because the national debt is simply national savings because it represents the amount that people want to save with the government. It’s no more than people putting money on deposit in the safest account available in the UK economy. And what is so terrible about that?
If the government had the 1.7 trillion on tap then nothing would be wrong. It doesn’t – all it has is the future tax revenue it can gain from the population. If we all desire to save less with he government then what happens? Taxes must rise to pay us all back. For we do all agree that if we voluntarily save with the government then we’re equally at liberty to voluntarily dissave with he government, no?