I suspect this one is for the geeks, and is a chart of how public spending has changed in the last year, issued by the Office for National Statistics this morning:
So, what's happening?
First, total taxes are down 31%.
Second, government spend is up almost exactly 50%.
The difference is £45.5 billion. Which as I have already noted this morning, was entirely funded by the Bank of England.
And what cost most of the £29.3bn of spend? Subsidies to keep business going of £18.4 billion were the biggest cost. Followed by buying additional goods and services - I guess mainly for the NHS - which cost £5.6 billion. That was most of it.
This, of course will change. There is mass unemployment to come. Subsidies will fall then and the cost of benefits will increase.
And taxes will also rise at the time - it is hoped - because much of the decline in revenue results from deferral arrangements.
But I am going to repeat what I have already said this morning: the entire cost of this is being covered by the Bank of England. That's it. When the question is asked 'who is going to pay for this?' just say 'The Bank of England is, using new money created for the purpose'. Because that's the reality of the situation.
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YES WE CAN! (afford the increase in public spending).
But the next headline in the FT is that Debt/GDP now exceeds 100%…… irrelevant (and untrue). A financial newspaper ought to know better.
And no one will pick up my line
IFS and Resolution Foundation both on the 100% debt line this morning
Utterly economically illiterate
Illiterate, indeed.
Often, FT BTL comment is informed and ‘calls out’ nonsense in stories…… but in this case it is about 5 to 1 predicting the UK as the new Weimar. That is depressing.
I haven’t looked
Is it really that bad?
I despair
Letter now submitted to FT
The Guardian doesn’t want to be left out: https://www.theguardian.com/business/2020/jun/19/uk-debt-is-bigger-than-economy-for-first-time-since-1963-coronavirus
UK joins US, Italy & Japan with debt higher than income and in April UK had to borrow “to balance the books.”
Deeply annoying…
Two asymptomatic pandemics on the loose in the UK the latest being the very recent Corvid-19 one the other dating from 1971 when Richard Nixon abandoned the dollar conversion to gold “disease” but hardly anybody realised they were now fiat free!
http://bilbo.economicoutlook.net/blog/?p=45106
So true
Can anyone predict where this imbalance of borrowing vs income leads?
I am familiar with Modern Monetary principles which government financials are NOT like households ie Governments can write themselves a cheque.
It leads to more QE right now
But as I said yesterday, that’s going to end because banks have no use for the money they get
So it has to lead to Green QE in due course
I feel a blog coming on…
But not now
I note that Local Government Net Borrowing has increased by £3bn (to £2.9bn).
Scotland, a country soon to suffer “the worst economy in the world”, has an annual limit of £600m imposed on its borrowing power. When used, this is real borrowing, rather than the fictional kind.
At the same time, we pay about £3bn to the UK Treasury in interest for the privilege of “funding” the UK debt, which is not really debt. I wonder if Scotland’s “debt interest” payment will increase due to the fictional increase in UK debt?
Probably
Hopefully one day the general public will realise that money is only limited by politics and capacity, although I suspect that will be in spite of the politicians and education system, not because of.
One point (and it is my bugbear). When you say benefits will be cut, people think that is reasonable because you’re being gifted something that is not really required.
The correct word should be Welfare (capitalised).
Cutting someone’s Welfare is very different to cutting someone’s benefits!
Agreed
The UK continues to elect politicians who are piss poor at systems thinking. Even in Newtonian mechanical terms let alone modern day cybernetic software terms they can’t envisage in their heads a set of cogs some going backwards, some forwards, or some clockwise others anti-clockwise, and all moving continuously at the same time.
The cogs going forward are the government and private banks creating money – the cogs going backward are the government redeeming that money mainly through taxation, “sterilising” its activity through gilts offerings, repayment of bank loans plus interest with profits some of which are also being subject to “sterilisation” investment not to mention all bank loans when spent into the economy are subject to taxation redemption.
Dammit: they can’t even imagine a debit has a credit
Can I just ask? The economics editors/correspondents in the media – when talking about govt. funding, debt etc., do they say what they say because that is what they believe? Or do they actually know what goes on but report the myth?
I will be interested to read the response from the FT.
Craig
They believe the ONS – but the data is not accounting data at all and is wrong in accounting and economic terms
The narrative is about power. For the government to admit the truth about debt and deficits would be to hand some of their power over to the general populace who might begin to think that, you know what, we can afford a decent non-privatised NHS, a decent public transport system, decent housing, and my god, a Green New Deal to tackle the most urgent issue facing the whole of human kind.
And those think tanks and newspapers that go along with the deception are complicit in preventing the people from knowing the truth and ensuring that power remains with politicians and those whose wealth depends on maintaining the deception.
I’ve tried very hard to be a geek because I think that they see important things earlier than most but I’ve failed miserably I think.
🙂