Here’s another good article from Rick at Flip Chart Fairy Tales about the spending cuts being proposed by the UK government in order to eliminate the deficit. He questions the feasibility of the scale of the cuts. Many of us also question the idea that any cuts are necessary, and what mechanism will replace the cyclical flows of money through the economy that will be lost as a result of the cuts. The government’s proposals amount to a reduction in the quality of life and suppression of an already anaemic economy. With a general election only a few months away one wonders why the opposition parties aren’t grasping the opportunity to promote policies that would allow us to fund better public services and stimulate the wider economy without the burden of debt. Monetary reform, negative interest, universal basic income: just three ideas that could do the job. There are plenty more out there for anyone who’s willing to go and look. We don’t have to struggle along within the constraints of the current system. We can change it. All we need is some political leadership. Hello? Is there anybody out there?

3 thoughts on “

  1. Matthew,

    The thrust of Tim Worstall’s article is that changing to a system where the state (government, central bank, whatever) creates and destroys our money supply will result in rampant inflation because the state is profligate/incompetent/corrupt (take your pick) and so will print money incontinently.

    He doesn’t consider the problems of our current system where private businesses (banks) create and destroy money for their own profit (seignorage, interest, fees, leveraged deals) which leads to wide, unplanned and uncontrollable fluctuations in the money supply (Tim gives such an example in his article) which in turn is what drives the boom-bust cycles that cause so many problems.

    Somehow the bogeyman of inflation doesn’t apply in this case because the money that’s created by the banks comes with an equal amount of debt. But money is money. If you flood the market with it (as was happening prior to the crash in 2007/08) people will spend spend spend regardless of the monthly repayments. If we take the MMT approach then taxation does exactly the same job as money destruction on repayment of principal.

    Tim and his like come into this discussion with their ideological dislike for state control of anything front and centre. The social and environmental damage that results from our system of money-as-debt are less important to them than the idea that money is something that we should work for and government should stay the hell out of our way while we’re doing it.

    Positive Money, MMT, and people like myself are interested in making money work better for everyone, including productive, profit-seeking businesses. Curtailing the power of the banks is merely a consequence of this, not a primary objective. Likewise, granting power to the state to create money willy-nilly is not something that any of us want to do. Zimbabwe is an extreme example of a venal, corrupt government (which the likes of Tim love to cite) but the same tendency can present itself in any political system.

    PM proposes that money creation is kept separate from government. MMT is less clear on how we might control the tendency of government to create-and-spend. My proposals keep government out of the process entirely but encourages us to fund government cashflow through interest-free lending.

    Don’t let the fear of inflation put you off the idea of financial reform. It’s a distraction.

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