[Politics] Liz Truss **RESIGNS 20/10/2022**

[pb21]

Not true. taxation doesn’t fund government expenditure nor does the uk have to borrow anything as the issuer of its own sovereign currency.

Yea

So, how do we repay it, both the debt and the interest due?

 

[sparkie]

Can we jog on from Martian Growth Theory and focus back on the Truss bus? At all?

Yes, this.

Astonishing that a Corbyn shill who never posts about football like [MENTION=38012]BenGarfield[/MENTION] has derailed a thread about possibly the most incompetent Prime Minister ever - and her a Libertarian wing Tory surrounded by fascists.

Presumably he prefers her to Starmer.

We seem to be in a timewarp where these posts are again relevant.

Lol.

 

[nicko31]

So, how do we repay it, both the debt and the interest due?

Ignore the troll...

 

[beorhthelm]

Not true. taxation doesn’t fund government expenditure nor does the uk have to borrow anything as the issuer of its own sovereign currency.

Yea

there's a lot of gilts issued and being repaid that says you are wrong. still havent explained why pricing is different between countries if we dont need them at all.

 

[Thunder Bolt]

You seem to have forgotten the champagne reception with the hedge fund managers hours after he crashed the pound

reception
/rɪˈsɛpʃ(ə)n/

noun
definition
a formal social occasion held to welcome someone or to celebrate an event.
"a wedding reception"

Kwasi Kwarteng ‘met hedge fund managers for champagne reception hours after mini-Budget’

Financiers allegedly boasted chancellor was a ‘useful idiot’ after drinks reception

https://www.independent.co.uk/news/uk/politics/kwasi-kwarteng-hedge-fund-managers-pound-crisis-b2190756.html

Private Eye are saying he has been a paid political advisor since 2010 at £20K a month, to Crispin Odey. It is now blatant.

[tweet]1579607791311867904[/tweet]

 

[sparkie]

Private Eye are saying he has been a paid political advisor since 2010 at £20K a month, to Crispin Odey. It is now blatant.

[tweet]1579607791311867904[/tweet]

Murky.


Has the Chancellor even attempted to explain himself ?

 

[BenGarfield]

So, how do we repay it, both the debt and the interest due?

As discussed before on this thread it’s not a debt in the conventional sense. “Debt” in the form of bonds is more like a savings account at the Bank of England. The government creates the money by using key strokes on a computer. When tax is paid into the government accounts the records are erased and the money effectively destroyed. New money is created whenever the government spends and is not linked to tax receipts

 

[pb21]

As discussed before on this thread it’s not a debt in the conventional sense. “Debt” in the form of bonds is more like a savings account at the Bank of England. The government creates the money by using key strokes on a computer. When tax is paid into the government accounts the records are erased and the money effectively destroyed. New money is created whenever the government spends and is not linked to tax receipts

We owe £s. As I understand it we can get the £s we owe by taxing, borrowing more or by making new £s up n a computer, as you suggest. I am not sure the later is very sustainable on the value of a £.

 

[Half Time Pies]

there's a lot of gilts issued and being repaid that says you are wrong. still havent explained why pricing is different between countries if we dont need them at all.

There's a lot of misrepresentation of MMT on this thread. MMT simply points out they way things really work, which is different from the traditional view. Where suggestions are made by some economists (or people on football forums!) of policy choices that could occur as a result of this understanding, this moves in to the realm of politics and isn't MMT.

So whilst MMT suggest that in theory Bonds are not required, most rational people would understand the value of them as a risk free store of wealth. Nobody can provide security for savings better that the government because it cannot default on its debt, and If a government wants to provide a secure mechanism for people to save, and there is a demand for that facility, then it makes perfect sense to bond issuance to be a function of government. Frankly the prospect for our pensions and the stability of the financial system if this facility wasn't in place would be frightening!

Ive also seen some misguided comments around taxation. MMT says that a government isn't constrained by the availability of taxation funds in order to spend, money can always be created by the central bank on demand. However this new money can create excess inflation and a government has to tax to withdraw money from circulation, this is the primary fiscal purpose of tax as well as other significant social social purposes. We see taxation being used in this way all the time for example with stamp duty which has regularly used to take the accelerator on or off in the housing market. We also see the government regularly use tax breaks to incentivise certain sectors of the economy to produce more and to encourage certain consumer behaviours.

The point about taxation giving the currency of the government value and primacy is a valid one, but isn't the only reason for taxation which is what some people have been saying on this thread. It's why bitcoin will never be the primary currency in countries like the UK or US as at some point they need to be converted back to pounds or dollars in order to pay taxes.

For those that are interested a short and concise summary of MMT can be found here http://moslereconomics.com/mmt-white-paper/

 

[KZNSeagull]

Private Eye are saying he has been a paid political advisor since 2010 at £20K a month, to Crispin Odey. It is now blatant.

[tweet]1579607791311867904[/tweet]

Private Eye are saying he has been a paid political advisor since 2010 at £20K a month, to Crispin Odey. It is now blatant.

[tweet]1579607791311867904[/tweet]

The Private Eye story isn't as clear as that tweet makes out: "On becoming an MP in 2010, he kept up his financial interests with a £20k side number for providing 'political advice' to Odey Asset Management".

Doesn't say per month nor that he still provides this service. I don't think there is any mention of this in the latest issue - I am certain that if he was still providing this service, it would be obvious (or perhaps they haven't proved it yet). There is this story though:

https://www.private-eye.co.uk/sections.php?section_link=news&issue=1574&GUID=448

 

[beorhthelm]

So whilst MMT suggest that in theory Bonds are not required, most rational people would understand the value of them as a risk free store of wealth. Nobody can provide security for savings better that the government because it cannot default on its debt, and If a government wants to provide a secure mechanism for people to save, and there is a demand for that facility, then it makes perfect sense to bond issuance to be a function of government. Frankly the prospect for our pensions and the stability of the financial system if this facility wasn't in place would be frightening!

nice of you to have a go rather than ignore like others. the problem is 2yr, 10yr, 30yr, US, UK, German, Greek, Japan, etc all have different pricing. if they were soley for the purpose of providing "secure" savings, why wouldnt they all be the same price? or even exist, a single bond per country would suffice? the fact a UK 10yr cost less/yields more than a US 30yr means there is different risk. no one believes the bonds are simple risk free savings. then we go to Eurozone with relatively wild ranges for the same denomination, and then even higher rates for south american (sovereign) currencies.

and all this is tangentally related to topic, as our government has poured some petrol on a fire, a fire already well alight. we're facing problem on bonds across all countries, that means they cant go throwing promises around without care. too loose monetary and fiscal policies.

 

[sparkie]

[Tweet]1579803242850287617[/Tweet]

 

[Half Time Pies]

nice of you to have a go rather than ignore like others. the problem is 2yr, 10yr, 30yr, US, UK, German, Greek, Japan, etc all have different pricing. if they were soley for the purpose of providing "secure" savings, why wouldnt they all be the same price? or even exist, a single bond per country would suffice? the fact a UK 10yr cost less/yields more than a US 30yr means there is different risk. no one believes the bonds are simple risk free savings. then we go to Eurozone with relatively wild ranges for the same denomination, and then even higher rates for south american (sovereign) currencies.

and all this is tangentally related to topic, as our government has poured some petrol on a fire, a fire already well alight. we're facing problem on bonds across all countries, that means they cant go throwing promises around without care. too loose monetary and fiscal policies.

Bond prices in the main are affected by the prevailing rate of interest. If the value of the income falls below the base rate, or is projected to fall below the base rate, then the bond becomes less attractive. Bonds being risk free (in monetary sovereign countries I might add) is a concept thats accepted within finance, most investment decisions are made using the "risk free rate' as a baseline which is the yield that you would earn if you were to invest in a Treasury bond matching your investment duration.

 

[BenGarfield]

nice of you to have a go rather than ignore like others. the problem is 2yr, 10yr, 30yr, US, UK, German, Greek, Japan, etc all have different pricing. if they were soley for the purpose of providing "secure" savings, why wouldnt they all be the same price? or even exist, a single bond per country would suffice? the fact a UK 10yr cost less/yields more than a US 30yr means there is different risk. no one believes the bonds are simple risk free savings. then we go to Eurozone with relatively wild ranges for the same denomination, and then even higher rates for south american (sovereign) currencies.

and all this is tangentally related to topic, as our government has poured some petrol on a fire, a fire already well alight. we're facing problem on bonds across all countries, that means they cant go throwing promises around without care. too loose monetary and fiscal policies.

Not tangental at all if fundamental understanding of the way the real economy works is wrong!

 

[beorhthelm]

Bond prices in the main are affected by the prevailing rate of interest. If the value of the income falls below the base rate, or is projected to fall below the base rate, then the bond becomes less attractive. Bonds being risk free (in monetary sovereign countries I might add) is a concept thats accepted within finance, most investment decisions are made using the "risk free rate' as a baseline which is the yield that you would earn if you were to invest in a Treasury bond matching your investment duration.

tell that to holders of various south american sovereign bonds. the notion that MMT only applies to sovereign countries and not Eurozone continues to baffle me, when all countries live in a global market. such an obvious flaw just waved away.

 

[Half Time Pies]

tell that to holders of various south american sovereign bonds. the notion that MMT only applies to sovereign countries and not Eurozone continues to baffle me, when all countries live in a global market. such an obvious flaw just waved away.

This isn't an obvious flaw, I can't think of a single country in South America that is monetary sovereign, which is why countries like Argentina default on debt because the the majority of the debt is denominated in foreign currencies.

When Greece abandoned its national currency, the drachma, in 2001 and adopted the euro it gave up its monetary sovereignty. It no longer was able to print its own currency to pay its debts. Then when it racked up huge debts with German, French and British banks, and couldn't afford the repayments, there was a problem!

 

[Audax]

£5bn purchased from the £65bn allocated. suggests there's far less dsyfunction than the press would imply, the BoE is simply being ready if there is further problems.

Believe that figure is now very outdated. They spent a bundle this morning on inflation-linked bonds, and at massive interest rates.

There's starting to be predictions that the entire mini-budget might be the next Truss u-turn, because they just can't see how it can funded in a way that will stabilise the markets.

 

[sparkie]

Is it possible for the mini-budget to be reversed without the Chancellor being sacked / resigning ?

How could he carry on and have any market credibility ?

 

[beorhthelm]

This isn't an obvious flaw, I can't think of a single country in South America that is monetary sovereign, which is why countries like Argentina default on debt because the the majority of the debt is denominated in foreign currencies.

When Greece abandoned its national currency, the drachma, in 2001 and adopted the euro it gave up its monetary sovereignty. It no longer was able to print its own currency to pay its debts. Then when it racked up huge debts with German, French and British banks, and couldn't afford the repayments, there was a problem!

why isnt Argentina monetary sovereign? it has a central bank, its own currency, set own rates. what other undeclared criteria are needed?

Greece adopted the euro 1st Jan 2001. on 31st Dec 2000 it had its national currency and monetary sovereignty. so overnight its debt needed to be monetised into the non-MMT economic model? along with trillions across eurozone.

here's an interesting thought experiment, if Scotland leaves UK and they agree to a join a monetary union with England, do we cease to be using MMT?

 

[Half Time Pies]

why isnt Argentina monetary sovereign? it has a central bank, its own currency, set own rates. what other undeclared criteria are needed?

Greece adopted the euro 1st Jan 2001. on 31st Dec 2000 it had its national currency and monetary sovereignty. so overnight its debt needed to be monetised into the non-MMT economic model? along with trillions across eurozone.

here's an interesting thought experiment, if Scotland leaves UK and they agree to a join a monetary union with England, do we cease to be using MMT?

As I understand it Argentina has always had huge problems with inflation (and at times a relatively worthless peso) this has led to a reliance on foreign currency and particularly the dollar. As soon as that happens a country no longer is monetary sovereign.

In terms of your thought experiment, as soon as a sovereign country shares a central bank then (from a MMT perspective) it gives up its monetary sovereignty. I think most MMT economists would probably therefore advise Scotland to adopt its own currency, and have its own central bank, if it were to become independent.