Spudda, the grand exponent of Modern Monetary Theory, doesn’t in fact understand money. The PAC report on more cash floating around:
But now the Public Accounts Committee has noticed that money is disappearing in the UK. As they have observed in a report issued this morning, no one knows where UK notes and coin are and what they are being used for
The shadow economy remains a real threat to the UK’s ability to deliver fiscal stability. It undermines honest businesses. It creates cultures of mistrust. It harms social cohesion. All of those are big issues. The Bank of England needs to take them seriously.
As if to prove there are credible politicians in the U.K., the Public Accounts Committee has done good work here. I welcome it’s findings and recommendations. The Bank of England must be required to act.
And you’d think that one of the leading economic thinkers of our day – and Master of MMT – would actually understand money. As someone who never did become a professor at a British university might be able to point out:
So, to basic economics. The price of money has changed. You know that, right? You now know more than the people who aim to account the country, the PAC.
Interest rates – the price of money – have fallen. Back 15 years you could get 5% by exchanging cash for bonds, or savings accounts and the like. So, incentives matter. People would, when they had some spare cash, pop it into some interest bearing investment or hidey hole. Now interest rates are nothing. Lend to the government and they might actually be charging you. Cash now pays a better interest rate – nothing is better than minus – than many of those former hidey holes and absolutely no homes for cash equivalent savings make it worth the while bothering.
So, the hidey hole is now the back of the sofa.
This is just obvious. Change the price of cash as against near cash equivalents and the demand for cash and near cash equivalents changes. Anyone who doesn’t get this shouldn’t be allowed anywhere near the public finances let alone the PAC.
Why is it that the Tre Professore is so damned ignorant?