[Politics] Next Gov: Where will the money come from?

[BenGarfield]

This is very much an opinion piece. The only examples I can think of where a government tried to 'print money' their way out of trouble were the Weimar republic and the Collor and Franco governments in Brazil. That went well. Arguably, Hitler also went full Viv Nicholson, spend, spend, spending to build roads and infrastructure. However I have been told there were downsides to the Nazi regime.

So it seems very hit and miss to spend one's way out of trouble. And if it were that simple, we'd all be doing it. Unless you think the Tories are too evil and labour too stupid to print money to spend on the NHS, schools and infrastructure.

It isn't quite the same thing of course but I feel a bit like I did when I was at school and we had a visit from some young men with long hair who told us our lives, our happiness, our prospects and our acne would all improve if we gave ourselves to Jesus.

This is not an opinion piece about what should happen, but a description of how the Treasury works now and has done for years. The government always spends by "printing" money, then destroying money by taxation. The paper is a descriptive analysis based on thorough research on the workings of The Treasury by Wilson et al in their very detailed

"An Accounting Model of the UK Exchequer – 2nd edition" (https://gimms.org.uk/2021/02/21/an-accounting-model-of-the-uk-exchequer/)​

Its not hit and miss to spend yourself out of trouble provided that the real resources are available - there is no other way.

 

[beorhthelm]

This is not an opinion piece about what should happen, but a description of how the Treasury works now and has done for years. The government always spends by "printing" money, then destroying money by taxation. The paper is a descriptive analysis based on thorough research on the workings of The Treasury by Wilson et al in their very detailed

"An Accounting Model of the UK Exchequer – 2nd edition" (https://gimms.org.uk/2021/02/21/an-accounting-model-of-the-uk-exchequer/)​

Its not hit and miss to spend yourself out of trouble provided that the real resources are available - there is no other way.

how do we measure the resources available? through money, measured with the monetry supply M0, M1 etc. how do we expand that? through economic growth (conventional practice) or printing money (happens, usually with negative consequences). if we accept MMT, we have an infinite money supply, money is worth less, prices rise and we have inherent inflation. or we accept conventional economic reality, as used by every single country and central bank in the world.

we've gone over the accounting model before, it's a mechanical description of booking keeping that can apply to any form of monetry policy, since the accounts and laws referenced go back to gold standard. it just hand waves and claims "if MMT this proves MMT".

 

[Harry Wilson's tackle]

This is not an opinion piece about what should happen, but a description of how the Treasury works now and has done for years. The government always spends by "printing" money, then destroying money by taxation. The paper is a descriptive analysis based on thorough research on the workings of The Treasury by Wilson et al in their very detailed

"An Accounting Model of the UK Exchequer – 2nd edition" (https://gimms.org.uk/2021/02/21/an-accounting-model-of-the-uk-exchequer/)​

Its not hit and miss to spend yourself out of trouble provided that the real resources are available - there is no other way.

You have only responded to a tiny part of my post.

As I said, if it is this easy, why doesn't it happen?

 

[WATFORD zero]

Isn't there a term for when the whole world believes one thing and only a very few people realise that the whole world is being lied to and know the actual truth

 

[abc]

In what way ignorant? Do you believe tax funds government expenditure? If so, why?

Yes.
Because government expenditure is funded by taxes.

 

[The Antikythera Mechanism]

Bloody hell, I’m not surprised that I got a shit grade at A-Level Economics.

 

[abc]

The church may seem an easy target and you single out the CofE, who beyond Sunday services run many primary schools.

Many churches are also very active in their communities, from running food banks (yes we shouldn't need them), to running homeless shelters and drop ins etc, even visiting elderly people on their own, my widowed grandmother, when she was alive, used to go to this free church lunch club for the elderly in Seaford, once a week and she loved it, all voluntary/charitable stuff, many do a power of good in local communities beyond the spiritual stuff.

And if you do churches you must do mosques and other faiths and that's a recipe for vote lovers.

Far better to target carbon industry and tax loophole, tax dodgers from commercial behemoths like amazon

C of E schools are largely publicly funded with a small contribution (usually to capital projects) from the church to allow them to maintain their religious bias.

I agree, all religions and faiths should be treated the same way.

The Community aspect is, I agree, important but the C of E (I am only using them as an example because I know a fair bit about them and their accounts are freely available) are ostensibly a business - albeit far more profitable and with far larger assets than any normal business. All businesses are expected to pay tax. Many engage in Community projects and if there is a cost then this can be offset against tax. Hundreds of thousands of people volunteer but have to pay tax on their earnings. Why should a religious organisation be treated differently? Furthermore, with assets of over £12 billion and an annual income in the multi millions, its not as if the C of E couldn't afford to pay tax and do the 'voluntary/charitable stuff' that other tax payers do.

Target other industries, tax dodgers etc as well of course but that doesn't mean the church shouldn't be targeted too, surely?

 

[Me Atome]

I hope Rachel Reeves reads all this stuff from you learned gentlemen before she gets to no11. I'd hate for her to miss out on all your wisdom.

 

[Harry Wilson's tackle]

Isn't there a term for when the whole world believes one thing and only a very few 'in the know' people realise that the whole world is being lied to and know the truth

NSC?

 

[CheeseRolls]

Just had a quick flick through this thread, checked in every pothole and no one is supporting increasing fuel duty, despite it having been frozen since 2011. Can understand why no one wants to go there, but at the same time, things could be fixed and if it is so expensive already why are so many people driving around in personal armoured tanks?

 

[Me Atome]

Just had a quick flick through this thread, checked in every pothole and no one is supporting increasing fuel duty, despite it having been frozen since 2011. Can understand why no one wants to go there, but at the same time, things could be fixed and if it is so expensive already why are so many people driving around in personal armoured tanks?

You do have a point there. If fuel is too expensive why are our roads packed all the weekend with people going somewhere just because they want to. (And of course many necessary journeys too.)

 

[abc]

I hope Rachel Reeves reads all this stuff from you learned gentlemen before she gets to no11. I'd hate for her to miss out on all your wisdom.

She will be delighted to learn from BenGarfield that she doesn't actually need to raise any tax at all because that doesn't fund government expenditure!

 

[CheeseRolls]

You do have a point there. If fuel is too expensive why are our roads packed all the weekend with people going somewhere just because they want to. (And of course many necessary journeys too.)

Seems a bit blunt when you put it like that. However I do think there are benefits in encouraging people to look at more fuel efficient vehicles. If people want to drive around in vehicles getting 20-25 mpg it is their choice, but I think it is also fair to ask them to pay a little more for the privelege.

 

[Sid and the Sharknados]

I think the government should kill everybody and then redistribute their possessions amongst the more needy.

 

[Baldseagull]

Its not a theory you "have a go at". Its a theory that explains the functionings of our economy right now. Its politically neutraI and can be used by politicians of any persuation. I doubt if Lynn Truss has any more of clue about MMT than I suspect you do.

We have tangled over this before, I accept that the theory exists, and you can look at a functioning economy and describe it in the way MMT does, but when the theory is tested by trying to do what the theory suggests is possible, such as printing as much money as you want and spending it, it fails. It is a theory that has been proven to be false. Like many other theories, it may work up to a point, but it fails if you take it to the extremes. Newtons theory of Gravity is not how gravity actually works, but it has practical use, I don't see a practical use for MMT, it belongs in the bin.

 

[CheeseRolls]

There is a decent explanation of MMT here if anyone is interested. https://www.taxresearch.org.uk/Blog/wp-content/uploads/2023/04/Modern-monetary-theory-v2a.pdf

In summary governments are free to spend what they want and this is not dependent upon borrowing, where they are the sole issuer of a currency and that currency is used as the single means of payment within an economy.

Increasing the money supply through government expenditure (if you accept the model) can be inflationary. Governments then control inflation through taxation. Taxation neither pays for government services nor reduces borrowing, it merely reduces the supply of money within the economy.

Low inflation and low interest rates are described as desirable outcomes. The author justifies low interest rates, as high rates tend to redistribute wealth from the have not to the have plenties. I can't see any specific justification here for low inflation and I suspect that this is more due to it being aligned to traditional economic theory, rather than anything special within the MMT model.

 

[Mellor 3 Ward 4]

why are our roads packed all the weekend with people going somewhere just because they want to.

Because our Public Transport is so poor.

 

[Lenny Rider]

Aside from the taxiation issue which bizarrley could go a long way to being sorted with a simple, fair and transparent tax system.

My worry is history repeating itself, with another Labour landlslide, its the 27th anniversary today of Blairs first win, with the huge influx of new MP's, in 1997 I had great expectations, with a young family of 2 and a 48 grand mortgage, of Blair, who I thought was going to change all of our lives for the better, and closer to home my then mukka Ivor Caplin.

Niether of them really delivered and Ivor C, once he got to the Westminster trough and tasted the water, became a completely different person and was effectively asked to leave Parliament.

Will many of the latest Labour MP intake be corrupted in the same way?

 

[CheeseRolls]

Aside from the taxiation issue which bizarrley could go a long way to being sorted with a simple, fair and transparent tax system.

My worry is history repeating itself, with another Labour landlslide, its the 27th anniversary today of Blairs first win, with the huge influx of new MP's, in 1997 I had great expectations, with a young family of 2 and a 48 grand mortgage, of Blair, who I thought was going to change all of our lives for the better, and closer to home my then mukka Ivor Caplin.

Niether of them really delivered and Ivor C, once he got to the Westminster trough and tasted the water, became a completely different person and was effectively asked to leave Parliament.

Will many of the latest Labour MP intake be corrupted in the same way?

Where is it you think that bears defecate?

It seems a strange thing to be worrying about now, given the numbers suspended, lost the whip or forced to resign in the current parliament and certainly not all of them are from the governing party.

 

[beorhthelm]

There is a decent explanation of MMT here if anyone is interested. https://www.taxresearch.org.uk/Blog/wp-content/uploads/2023/04/Modern-monetary-theory-v2a.pdf

In summary governments are free to spend what they want and this is not dependent upon borrowing, where they are the sole issuer of a currency and that currency is used as the single means of payment within an economy.

Increasing the money supply through government expenditure (if you accept the model) can be inflationary. Governments then control inflation through taxation. Taxation neither pays for government services nor reduces borrowing, it merely reduces the supply of money within the economy.

Low inflation and low interest rates are described as desirable outcomes. The author justifies low interest rates, as high rates tend to redistribute wealth from the have not to the have plenties. I can't see any specific justification here for low inflation and I suspect that this is more due to it being aligned to traditional economic theory, rather than anything special within the MMT model.

well it's an explaination how Murphy and others would like it to work. there's a glaring flaw, complete omission of the Treasury in the process of spending, claiming the central bank does this (curiously avoids refering to Bank of England even once), then saying the central bank advances the funds (another name for lending). it pretends the bond markets dont exist, begging the question why was Liz Truss budget such a problem for them? the other major question for MMT proponents is, if tax controls inflation why have we been raising interest rates instead of raising taxes?

which brings us back to reality and our thread question. if MMT were valid, we'd still have to ask the question where should we apply taxes? see MMT doesn't solve anything.