just recall when Northern Rock failed in 2007. There was the first run on a bank in the UK for 160 years.
…
That is literally how all money is made. One lender, the bank. One borrower, the customer.
It cannot be just the one bank otherwise there never would have been the run on Northern Rock.
It has to be the banking system as a whole, not just the one bank….that’s how one bit of it can run out of money, because one bit of it cannot create money.
This is simply gorgeous:
Tax also does something else. By reducing what we can spend it restricts the size of the private sector economy to guarantee that the resources that we need for the collective good that the public sector delivers are available. Tax makes space for things like education.
He would, of course, deny there is anything like crowding out. Then he insists that the purpose of tax is crowding out. Sigh.
So, as a matter of fact a government like that of the UK that has its own currency and central bank has to run a deficit. It’s the only way it can keep the money supply going. Which is why almost all governments do run deficits in the modern era.
And please don’t quote Germany to me as an exception to this because it, of course, has not got its own currency. It uses the euro, and the eurozone as a whole runs a deficit, meaning that the rule still holds.
OK – Singapore.
And this is equally gorgeous:
This gives the clue as to another weird thing about this supposed national debt. It really isn’t debt at all. Yes, you read that right. The national debt isn’t debt at all.
That’s because, as is apparent from the description I have given, the so-called national debt is just made up of money that the government has spent into the economy of our country that it has, for its own good reasons, decided to not to tax back as yet.
So it’s our debt to the government then, some amount of tax that we’ll get charged in the future. Which is, of course, just what we’ve all been saying all the time. The national debt is going to be paid by taxing us some more in the future.
Sigh.
I’m starting to understand how this person could write a book called The Joy of Tax. Has he ever met a tax he didn’t like? It’s like Tax is the cure for all that ails us.
Didn’t Germany manage to run a surplus when it did have its own currency? Back in the 80s? Before they took over East Germany of course.
It’s like a caveman confronting an IPad – he simply doesn’t understand even basic details of finance and economics – inadvertently hilarious
Jim
The Germans tried to ameliorate the reunification with a NEW tax. the Solidaritaetszuschlag which was levied at 7.5% and was introduced as a temporary measure to help Germany over the initial bump. Still there 30 years after, I believe. Also the Germans broke the golden rule of taxation; it is possible to be taxed twice on the same income. A German friend who lives in Austria has to pay Austrian AND German tax on his German state pension, this is quite a common occurrence nowadays apparently and came in about 10 years ago.
First run on a bank in 160. He’s, if you ignore the Baings failure in 1995 and the London and County failure in 1973. Prat.
Bank runs? Pah! In Hong Kong we have runs on cakes, cutlery sets, and wedding dresses.
It cannot be just the one bank otherwise there never would have been the run on Northern Rock.
It has to be the banking system as a whole, not just the one bank….that’s how one bit of it can run out of money, because one bit of it cannot create money.
It’s not clear what you are trying to say there but no individual bank can sustain its liquidity when depositors are withdrawing their funds and moneymarket deposits aren’t available to take their place.
The circumstances were unusual of course with Northern Rock having being offering 125% mortgage finance linked with credit card accounts backed by interbank deposits and Alisdair Darling being inept as a newly-appointed chancellor.
The building societies demutualised in order to play outside their league and it hasn’t ended well.
Perhaps, to pick up from Alex, Captain Potato has forgotten Slater Walker, Johnson Matthey Bankers and BCCI?
His twitter feed reads like a long suicide note. How is it possible for anyone to take this man seriously?
@ Alex
There was *not* a run on Barings nor on London & County.
OTOH Northern Rock did not fail – it wasn’t bust and it took a whole box of Kleenex tissues of lies to pretend that it had been in order to retrospectively “justify” Darling’s stealing Northern Rock from its shareholders. [I read the accountant’s report, so I know. One item was the cost of a report about Northern Rock commissioned by the Treasury for its own use from Americans which he categorised as being a liability of Northern Rock!!!]