But what you would find if you turned up at the Bank of England and met the cashier and asked for your £20 was that they’d just give you another £20 note.

So there has to be something else that makes this promise valuable.

And there is. The value in the promise is that it is the government – which has owned the Bank of England since 1946 – that is really making it.

That’s important because the government has the ability to make good on the promise it is making.

There is one simple reason for that. It’s because many of us, most of the time, are in debt to the government. We owe it tax. And the only thing they’ll accept in payment is the money that they happen to make – the pound in your electronic bank account.

Wrong on three entirely different levels. As we know the BoE only makes about 3% of the “money” floating around. The vast majority is created by banks in the form of credit. And yes, you can pay HMRC with credit as produced by the banking system.

Secondly, It is not necessary to pay tax with UK money of any type. HMRC will entirely happily take euros from you, a form of money which the UK government does not produce. It is also possible to pay in artworks and so on. Even old notebooks – I’m told that a substantial part of the inheritance tax due on Tony Benn’s estate was paid in the form of his old papers.

And, to reach the Tre Professori thirdly, if it is that we can pay tax in it which means money maintains its value then why do we have inflation? For government always is willing to take its money as our tax payments. But sometimes money loses its value all the same. Thus it cannot be the government’s willingness to take it which is the sole determinant of value.

Oh, and as a corollary to that, some monies – say Bitcoin, or dollars in Russia – cannot be used to pay taxes and yet they have value.

It ain’t all in the state, nothing outside the state, you know?

As to what does give money it’s value it’s the belief in the willingness of the next person down the line to ascribe value to that money. That’s all.




I am really interested to hear. If this is to be done I want to do it in a way that works.

He doesn’t actually mean that in the slightest. For the above critique won’t appear there, will it?

20 thoughts on “Nope. Wrong.”

  1. Money is that which the chap you are buying from will accept in return for whatever it is he’s providing you with.

    On wet Sundays in childhood we’d play card games with cowrie shells as money, or we’d play Monopoly. The difference was that cowrie shells really had been used as money Once Upon A Time.

  2. “they’d just give you another £20 note”

    Or two tens, or four fives. In rural Ireland (in Euros, of course) they would offer you two nines and a two, or two eights and a four, or two sevens and a six.

  3. Imagine a contemporary Pimlico, or a town like my own declaring itself a country. Plenty of countries are smaller than plenty of Cities in the UK so its plausible enough. Now let us say its council was unable to finance public investment. It could borrow from its citizens or from neighbouring towns. The only advantage of the latter would be that it could more easily refuse to pay its citizens back. Such a government could never borrow at all. Lets say it simply prints the money…. but is this an alternative to borrowing ?
    The only way investing printed money could possibly be a net gain after inflation is if the investment ( if for example a bridge or better road ) increased the size of the economy at the same rate as the increased availability of promissory notes. The government in this context is acting only as functional expression of collective societal will. Functions such as irrigating ,connecting defending and so on created the institution in the first place and it is no more mysterious today.All it has done is borrow from the future

    So there are only really ,kinds of borrowing, and the answer, once we understand this, is simple. It may be a good idea depending on what you spent the borrowing on. If it is to train yourself to provide a valuable service, good idea. If it is finance sitting around doing nothing ..very very bad idea.
    Can you pay it back plus additional gain or will it be a worse hole than you are in already.

    So that is it simples ,as theys say ,earn or borrow.

    If you want to eat pork you can hunt pig or borrow from your neighbour`s meat stock. Either way you eat today. Pretending you have pig, drawing a picture of pig promising pig or incanting sacred pig making formulas ….aint a pig.

  4. Imagine an alternative to SATs and GCSE, the student is given a Spud blog post and has to find as many errors and non sequiturs as possible in a given length of time. It would be cheap, objective and it would sort out the mentally able from the duds

  5. I’m told that a substantial part of the inheritance tax due on Tony Benn’s estate was paid in the form of his old papers.

    Presumably this is on the basis of a calculated bet that someone will eventually pay actual, spendable money for the turgid scribblings. You can’t buy a tank or support the disabled with windy drafts of commie guff.

    A friend of a friend gifted some chocolate for her birthday. In order to stop her husband scoffing it, he hollowed out a charity shop acquired hardback copy of Benn’s Free at Last and presented the nibbles within, knowing it wouldn’t be touched with a long, boat-manoeuvring implement. Some residual value as a joke, then, but swamped by the labour costs.

  6. Imagine if the HMRC refused to accept pounds as payment of taxes and instead accepted a different, new, currency called ‘guilders’.

    And imagine that the government paid all benefits and public sector wages in the new currency. How long before pound sterling becomes worthless.

    If you can’t use it to pay taxes. It really is worthless

  7. Money – in the sense of a medium of exchange that could be used as a store of wealth – predated taxes because it predated government.
    MMT is wrong

  8. Here’s a hypothesis: the key factor that the authorities give to ‘their’ currency is its non-forgeability. Howeversofar its fakeable its value is diminished, and in so far as faking it isn’t punished by the authorities its really only worth the metal or the paper, or electron volt value.

  9. FFS apparently spud has managed to get £4k from his begging operation.

    Defies belief that there are that many stupid people.

    That’s more money from begging than the average person in the uk gets from a month’s hard work.

  10. The Meissen Bison

    Andrew C: spud has managed to get £4k from his begging operation

    I think we’re were kicking this around here the other day. Yes, it is truly bewildering but then Un sot trouve toujours un plus sot qui l’admire, meaning that even the tuber is admired by the fawning über-tuber.

    One can be confident that there won’t be that many repeat purchases so while with luck the average UK bod can earn the same in subsequent months, Capt. Potato will be lucky to get a trouser button.

  11. “..Secondly, It is not necessary to pay tax with UK money of any type..”

    I’m not sure about this. Under specialist circumstances other things have bee accepted as payment, but they all requited to be valued in UK money terms. So it is necessary to pay tax in something that can be converted to UK money.

    Bequests – paintings and the like – from establishment figures are usually a little trick undertaken by the establishment to avoid soaking the inheritors, who will also be establishment figures. Or to satisfy other government departments who would prefer that an Estate not be broken up. But these are surely exceptional cases, where the rules are broken for one-off reasons. If I wanted to pay my tax bill with my diary, I’d be invited to sell it myself and provide HMRC with cash…

  12. Bitcoin cannot be used to pay taxes, Bitcoin is not worthless. QED.

    True, it’s certainly not worthless. But its worth is still largely reliant on its ability to be converted into established fiat currency that can be exchanged in the wider world. Casino chips likewise have value in their limited role but if you couldn’t finally cash them out into “folding”, they’d be fully worthless.

  13. I read it as Spud has £4 k of pledges over time. So, if his little thing asks if you’d like to pay £x per month, he’s adding up 12 months of that. I think. So, perhaps £300 a month? If I’ve read it right?

  14. Yes the dodgy looking payment app allowed you to pledge without putting in any payment details So it woluld be interesting what his cash receipts were

  15. £4k a year won’t keep Ritchie in the lifestyle to which he has become accustomed! I wonder which way he will jump now.

  16. @Andrew C

    The £4k came from you via state employees putting it on expenses as ‘essential research’

    Won’t be long before Charity Commission approves him as a charity

  17. @ummmmm

    So it’s possible to pledge without entering payment details?

    So someone could pledge £100 a month. Get Spud excited, not fill in payment details and imagine spud’s sad little face when nothing arrives?

    Who would be so cruel?

  18. Money came before government, so cannot require the latter to give it value – gold, silver, and perhaps bitcoin would be serviceable monies and have nothing to do with government.

    But the guilder argument is also right. The reason why any particular fiat currency, e.g. sterling, is acceptable as money is ultimately that a coercive state will accept it in payment.

  19. Also force of law? All (credit) money is ultimately represented by someone else’s debt. Rule of law ensures that that debt will be repaid.

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