Someone who likes MMT really should grasp this

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?

9 thoughts on “Someone who likes MMT really should grasp this”

  1. ” He claimed, as do the Office for National Statistics,” – Murphy really, *really* isn’t happy when ONS insists on producing statidstics that are neither lies nor damned lies.

  2. If we all desire to save less with he government then what happens? Taxes must rise to pay us all back.

    Or better – the government can spend a whole lot less and let us spend it ourselves more efficiently instead..

    And you need quotes in above. Well, no you don’t, as it’s obvious which is Spud’s bollocks, but it would save us from making an effort…

  3. If in his time as an accountant he had to fill out ONS forms for clients etc then a deep and abiding hatred for them is understandable.
    They used to have a bar in the building if memory serves, though that would be 30 years ago and likely no longer allowed

  4. Of course the potato talks about a conspiracy to hide the facts about debt. Tinfoil hat time.

    Anyway i thought his reasoning was that government spending paid for itself through taxes etc – sometimes more than the spending but thats bad because that would be deflationary. The conclusion that i have come to is that this debt is completely illusory- it doesn’t exist because of mmt.
    Secondly because deflation is bad we need to make sure that there is a tax gap because if there wasn’t then taxes would exceed spending.
    As a consequence of this we need to reduce the effectiveness of hmrc by closing tax offices otherwise we end up with deflation because as you know civil servants are hardworking paragons of virtue who will strive 24/7 to collect every penny due, so culling them is our best defence against deflation.
    This is what he’s arguing for isn’t it – less tax??

  5. I’ve contacted the potato to ask for a big loan off him so i can buy a nice new car. When it comes to repaying him i’ll tell him to fuck off – the increased taxes that i’ll pay should amply reimburse him per his logic.

    Awaits his reply with interest (or not)

  6. Even the TJN are bogeymen now!

    Richard Murphy says:
    October 31 2018 at 10:00 am
    I agree that the tax justice movement just does not get this

    There is a mighty conspiracy to keep the status quo

  7. It’s a well known fact that the left always turns upon itself – all that hate has to be directed somewhere . Combine that with the potatoes overpreening ego and ability to fall out with an empty room, it’s surprising that it’s taken this long.

  8. What a load of bollocks, if QE is just free money then why not just print load more money and throw it at anything we fancy, that fictitious money you are on about it has been spendt on real things you know . The problem with National debt is the same as any other debt , it costs a lot to maintain and the facility may be withdrawn and you have not got the money for anything else
    Why you should think it makes any difference that the country owes UK pepes the money escapes me , what are you suggesting we do in the event of a bond strike , refuse to honour bonds ?

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