QE all over again

[Nimrod103]

If everything is hunky dory in the UK economy, as represented by the GDP per capita curve over the last 20 years, why do we need the highest tax levels since WW2 (https://www.lbc.co.uk/news/brits-face-b ... wo-budget/)? It doesn't make sense.

Obvious innit? Because we've had a useless economically incompetent party in charge for the last 13 of those 20 years! They've borrowed ridiculous amounts to fund their "austerity" policies.


GS

I don't follow.
Had they not borrowed ridiculous amounts to fund their "austerity" policies, would we not have had to undergo austerity?
Did we undergo austerity? I must have missed it.

[XFool]

The increase in the population is well known. Official increase of over 8 million in the last 20 years. The unaccounted figure is by definition unknown but going by the general collapse of everything in the UK, another 4 million or more unaccounted for seems quite possible.

Please do 100 lines: "Correlation is not causation, correlation is not causation..."

[Tedx]

Richard Murphy over on Tax Research.org.uk covers a way of running an economy without government bonds, QE and all that.

https://www.taxresearch.org.uk/Blog/202 ... ary-entry/


MMT suggests that a government spends the currency that it wants to be used to make settlement of the taxes owing to it into the economy with the active assistance and support of its central bank when undertaking its routine spending, for the purposes of which expenditure the central bank provides all the money required by way of loans meaning that neither tax revenues or third party government borrowing are required to fund that spending although they might be for other purposes.

In more detail, it is suggested that the core assumptions of MMT are:

That a government that has its own central bank and currency, which currency is internationally acceptable, need neither tax nor borrow before spending because its entire government expenditure can be funded by new money creation by its central bank acting on its behalf, with the government then being indebted to its central bank for the sum expended.
A government that borrows in this way from its own central bank need never repay the debt it owes to its central bank because that debt represents the money supply of the jurisdiction for which it is responsible and that money supply must, therefore, be maintained if the level of economic activity in that jurisdiction is to be sustained.
The primary role of taxation in the funding cycle of such a government is to control the inflation that might be caused by the excessive creation of new money by that government when fulfilling its expenditure plans.
The secondary role of tax in the government's funding cycle is to provide the government-created currency of a jurisdiction with value in exchange. That happens because if the tax owing to a government can only be settled using the currency that government creates those transacting in that economy who are likely to have tax liabilities arising as a result will not be able to afford the exchange risk arising from trading in any other currency.
Once these roles of taxation have been fulfilled the additional role of taxation for a government is as a tool for the delivery of its economic, social, regulatory and inequality agendas. The design of taxes for this purpose is, however, never intended to have a revenue-raising function to enable government expenditure to take place, that expenditure having already been funded by the central bank of the jurisdiction on the government's behalf.
A government in the situation described need not balance its expenditure and taxation income. In most situations that balance would, in fact, be undesirable. If the government has a growing economy and modest but controlled inflation within that economy, then the expansion of its money supply is essential, and that expansion of the money supply is best delivered by the running of government deficits. Such deficits represent a shortfall of tax receipts compared to government expenditure. This policy should be preferred to increasing the scale of private sector borrowing within the economy, which is the alternative source of new money creation.
A government in the situation described need never borrow from financial markets. That is because the government can always borrow instead from its own central bank. It has no dependency on financial markets as a consequence.
A government in the situation described may, however, wish to offer a savings banking facility to those in the jurisdiction for which it is responsible who wish to save in the currency that the government in question has created. It does so in its capacity as a borrower of last resort. This deposit-taking does not represent government borrowing: it is a banking arrangement. Even if the funds deposited with the government are then used to clear the apparent overdraft advanced by the central bank to the government the status of these deposits as a third-party bank or savings facility is not changed: the central bank can always guarantee the repayment of the deposits in question by the creation of new money, which is precisely why the government is able to offer this borrower of last resort facility.
A government in this position does not need to use interest rates to control inflation. It can instead use the following mechanisms to control:
Varying tax rates over one or more taxes to tackle the cause of the inflation being suffered. New taxes may be required to assist this process.
Varying the scale of the deficit.
Credit controls to limit commercial bank lending.
A government in this position could seek to run a low effective interest rate policy within its economy to firstly minimise interest obligations to those to whom it provides banking facilities; secondly to provide the best possible environment for investment by lowering the cost of capital; and thirdly to minimise the upward reallocation of resources within the society for which it is responsible as a result of interest paid, thereby reducing inequality, which goals in combination have the best chance of delivering overall economic prosperity.
A government in this position can have a policy of full employment, knowing that until that point is reached, there will be under-used resources within that economy for which they are responsible, meaning that inflation will not be stimulated as a result so long as the resources put to use are those currently unemployed, whether they be people, physical assets, or intellectual property. This policy could include the provision of a job guarantee for all those seeking work within the economy who are unable to secure it, but any such policy must reflect the individual circumstances of the job seeker and be consistent with the overall delivery of social security within the jurisdiction for which the government is responsible, and cannot as such be a critical component within the economic policy of the government in question.

[XFool]

...That'll go down on here like a lead balloon.

[Tedx]

...That'll go down on here like a lead balloon.

Oh yes

[Nimrod103]

Did we undergo austerity? I must have missed it.

Ah. Somebody who has no reason to ever call on the services of any public service: Libraries, NHS, Police...

Oh, Lucky Man!

Libraries are a thing of the past in the internet age. They will all eventually go the way of Blockbuster video.

Surely, austerity means a reduction in budgets? I don’t think government spending has gone down, has it? Especially not on the NHS.

[swill453]

The increase in the population is well known. Official increase of over 8 million in the last 20 years. The unaccounted figure is by definition unknown but going by the general collapse of everything in the UK, another 4 million or more unaccounted for seems quite possible.

Please do 100 lines: "Correlation is not causation, correlation is not causation..."

Everyone that confuses correlation with causation will die...

Scott.

[dealtn]

Richard Murphy over on Tax Research.org.uk covers a way of running an economy without government bonds, QE and all that.

https://www.taxresearch.org.uk/Blog/202 ... ary-entry/

Anyone that thought the brief reign of Liz Truss and Kwasi Kwarteng wasn't interesting enough might enjoy such an experiment. For the majority that thought the chaos this brought to the FX and interest rate markets was unhelpful such a transition to MMT would be disastrous.

Any MMT enthusiatsts care to spell out in practice how such a transition would work?

[Tedx]

Richard Murphy over on Tax Research.org.uk covers a way of running an economy without government bonds, QE and all that.

https://www.taxresearch.org.uk/Blog/202 ... ary-entry/

Anyone that thought the brief reign of Liz Truss and Kwasi Kwarteng wasn't interesting enough might enjoy such an experiment. For the majority that thought the chaos this brought to the FX and interest rate markets was unhelpful such a transition to MMT would be disastrous.

Any MMT enthusiatsts care to spell out in practice how such a transition would work?

I'd be very surprised if a way to transition hasn't been thought of. I shall do some research and endeavour to answer your question.

But from what you're saying, it's not possible to use MMT (in the UK at least) primarily because the transition would Be too difficult.

Other than that though.....?

[Ashfordian]

We've just done QE for the private sector to the tune of £400bn. We called it pandemic spending but it amounts to the same thing.

We've got to stop kicking the can down the road, and face up the fact that economic cycles happen. And if we keep trying to prevent them we are going to get the mother of all corrections, rather than series of slightly painful ones.

All we have done it brought forward spending and handicapped our future.

[XFool]

Please do 100 lines: "Correlation is not causation, correlation is not causation..."

Everyone that confuses correlation with causation will die...

[Gone]

My apologies for using humour on a TLF thread...

[funduffer]

Richard Murphy over on Tax Research.org.uk covers a way of running an economy without government bonds, QE and all that.

https://www.taxresearch.org.uk/Blog/202 ... ary-entry/


MMT suggests that a government spends the currency that it wants to be used to make settlement of the taxes owing to it into the economy with the active assistance and support of its central bank when undertaking its routine spending, for the purposes of which expenditure the central bank provides all the money required by way of loans meaning that neither tax revenues or third party government borrowing are required to fund that spending although they might be for other purposes.

In more detail, it is suggested that the core assumptions of MMT are:

That a government that has its own central bank and currency, which currency is internationally acceptable, need neither tax nor borrow before spending because its entire government expenditure can be funded by new money creation by its central bank acting on its behalf, with the government then being indebted to its central bank for the sum expended.
A government that borrows in this way from its own central bank need never repay the debt it owes to its central bank because that debt represents the money supply of the jurisdiction for which it is responsible and that money supply must, therefore, be maintained if the level of economic activity in that jurisdiction is to be sustained.
The primary role of taxation in the funding cycle of such a government is to control the inflation that might be caused by the excessive creation of new money by that government when fulfilling its expenditure plans.
The secondary role of tax in the government's funding cycle is to provide the government-created currency of a jurisdiction with value in exchange. That happens because if the tax owing to a government can only be settled using the currency that government creates those transacting in that economy who are likely to have tax liabilities arising as a result will not be able to afford the exchange risk arising from trading in any other currency.
Once these roles of taxation have been fulfilled the additional role of taxation for a government is as a tool for the delivery of its economic, social, regulatory and inequality agendas. The design of taxes for this purpose is, however, never intended to have a revenue-raising function to enable government expenditure to take place, that expenditure having already been funded by the central bank of the jurisdiction on the government's behalf.
A government in the situation described need not balance its expenditure and taxation income. In most situations that balance would, in fact, be undesirable. If the government has a growing economy and modest but controlled inflation within that economy, then the expansion of its money supply is essential, and that expansion of the money supply is best delivered by the running of government deficits. Such deficits represent a shortfall of tax receipts compared to government expenditure. This policy should be preferred to increasing the scale of private sector borrowing within the economy, which is the alternative source of new money creation.
A government in the situation described need never borrow from financial markets. That is because the government can always borrow instead from its own central bank. It has no dependency on financial markets as a consequence.
A government in the situation described may, however, wish to offer a savings banking facility to those in the jurisdiction for which it is responsible who wish to save in the currency that the government in question has created. It does so in its capacity as a borrower of last resort. This deposit-taking does not represent government borrowing: it is a banking arrangement. Even if the funds deposited with the government are then used to clear the apparent overdraft advanced by the central bank to the government the status of these deposits as a third-party bank or savings facility is not changed: the central bank can always guarantee the repayment of the deposits in question by the creation of new money, which is precisely why the government is able to offer this borrower of last resort facility.
A government in this position does not need to use interest rates to control inflation. It can instead use the following mechanisms to control:
Varying tax rates over one or more taxes to tackle the cause of the inflation being suffered. New taxes may be required to assist this process.
Varying the scale of the deficit.
Credit controls to limit commercial bank lending.
A government in this position could seek to run a low effective interest rate policy within its economy to firstly minimise interest obligations to those to whom it provides banking facilities; secondly to provide the best possible environment for investment by lowering the cost of capital; and thirdly to minimise the upward reallocation of resources within the society for which it is responsible as a result of interest paid, thereby reducing inequality, which goals in combination have the best chance of delivering overall economic prosperity.
A government in this position can have a policy of full employment, knowing that until that point is reached, there will be under-used resources within that economy for which they are responsible, meaning that inflation will not be stimulated as a result so long as the resources put to use are those currently unemployed, whether they be people, physical assets, or intellectual property. This policy could include the provision of a job guarantee for all those seeking work within the economy who are unable to secure it, but any such policy must reflect the individual circumstances of the job seeker and be consistent with the overall delivery of social security within the jurisdiction for which the government is responsible, and cannot as such be a critical component within the economic policy of the government in question.

MMT = Modern Monetary Theory, or Magic Money Tree? Discuss!

FD

[1nvest]

The other thing I clocked this morning on Laura Kuenssberg was the panel members continued and even accelerated requests for significantly more expenditure on the NHS. Waiting lists apparently will not fall without significantly more money, this is getting scary.

Too much wastage, a typical public sector example. £200K/year unaccountable hospital managers for instance. £200Bn/year to service a 65 million population NHS budget = £3K/year per capita. If individuals were each paying that, £13,200/year per typical 2.4 children family unit, you might expect a better service than a one week+ to see a GP waiting time or a 4+ hour wait on a good day A&E time. Or a bunch of workers complaining about having to rely on food-banks when on a £30K/year+ wage, whilst other private sector workers have to struggle by on less.

Doctors had their pay doubled some years back to the extent that many GP's simply opted to reduce to half weeks following that. A unproductive mistake. Complaining that their pay hasn't maintained purchase power since then is just a reflection of that mistake being unwound. NHS nurses should spend some time in private care for a example of how better being on the public sector payroll is.

Not that I opine the NHS should be moved to private only, collective insurance has massive advantages, especially for those that come to be major beneficiaries from that.

[Tara]

The other thing I clocked this morning on Laura Kuenssberg was the panel members continued and even accelerated requests for significantly more expenditure on the NHS. Waiting lists apparently will not fall without significantly more money, this is getting scary.

Too much wastage, a typical public sector example. £200K/year unaccountable hospital managers for instance. £200Bn/year to service a 65 million population NHS budget = £3K/year per capita. If individuals were each paying that, £13,200/year per typical 2.4 children family unit, you might expect a better service than a one week+ to see a GP waiting time or a 4+ hour wait on a good day A&E time. Or a bunch of workers complaining about having to rely on food-banks when on a £30K/year+ wage, whilst other private sector workers have to struggle by on less.

Doctors had their pay doubled some years back to the extent that many GP's simply opted to reduce to half weeks following that. A unproductive mistake. Complaining that their pay hasn't maintained purchase power since then is just a reflection of that mistake being unwound. NHS nurses should spend some time in private care for a example of how better being on the public sector payroll is.

Not that I opine the NHS should be moved to private only, collective insurance has massive advantages, especially for those that come to be major beneficiaries from that.

The NHS is no longer really fit for purpose. As you say, doctors had their pay doubled a few years ago and now they are back for more. The BMA know that they can basically hold the country and the Government to ransom at any time they want as the NHS is basically the national religion in the UK and no one is allowed to say a harsh word against it.

The only reason that people worship it and clap for it of course is because it is completely free for people to use it. So long as there is no out of pocket charge for people to use the NHS, the British people will see the NHS as worthy of “worship”, and they will see all of the doctors as “heroes”, and all of the nurses as “angels”.

Start charging for a GP visit, as they do in Ireland for example, and the British people would probably start rioting in the streets. Nothing else would bring them out on the streets, but a basic charge to see a GP will probably do it.

[1nvest]

Too much wastage, a typical public sector example. £200K/year unaccountable hospital managers for instance. £200Bn/year to service a 65 million population NHS budget = £3K/year per capita. If individuals were each paying that, £13,200/year per typical 2.4 children family unit, you might expect a better service than a one week+ to see a GP waiting time or a 4+ hour wait on a good day A&E time. Or a bunch of workers complaining about having to rely on food-banks when on a £30K/year+ wage, whilst other private sector workers have to struggle by on less.

Doctors had their pay doubled some years back to the extent that many GP's simply opted to reduce to half weeks following that. A unproductive mistake. Complaining that their pay hasn't maintained purchase power since then is just a reflection of that mistake being unwound. NHS nurses should spend some time in private care for a example of how better being on the public sector payroll is.

Not that I opine the NHS should be moved to private only, collective insurance has massive advantages, especially for those that come to be major beneficiaries from that.

The NHS is no longer really fit for purpose. As you say, doctors had their pay doubled a few years ago and now they are back for more. The BMA know that they can basically hold the country and the Government to ransom at any time they want as the NHS is basically the national religion in the UK and no one is allowed to say a harsh word against it.

The only reason that people worship it and clap for it of course is because it is completely free for people to use it. So long as there is no out of pocket charge for people to use the NHS, the British people will see the NHS as worthy of “worship”, and they will see all of the doctors as “heroes”, and all of the nurses as “angels”.

Start charging for a GP visit, as they do in Ireland for example, and the British people would probably start rioting in the streets. Nothing else would bring them out on the streets, but a basic charge to see a GP will probably do it.

But is/has been slipped in via stealth. An appointment maybe if you phone up and win the lottery in the pre 8am call-in to maybe get a appointment that day, or a two or three week booked appointment by which time the issues may have faded anyway ... or £80 for a local private GP appointment at a date/time of your choosing.

Such transitions occur 'naturally', where you wake up one day to wonder how did we get to this point/state. Paper (plastic) currency for instance will one day just have been faded out to leave a traceable record of where all of your money comes in and is spent (digital currency). Driven by 'public preference' - directed by intent such as fewer ATM's available, incentives to use digital rather than paper ...etc, and then once transitioned over recover the cost by levying unavoidable fees/taxes (5% per digital transaction/whatever). The state has already transitioned to where each individual has detailed records kept of their movements (street cams/mobile phone location), habits/issues (browser history) and next is all transactions. No different to a open prison where your money is just a loan, not actually yours. More recently banks have been put under pressure to report all suspicious financial activities, with increasing penalties, which drives banks to report all transactions in order to cover their backs, such that the state gets to see/maintain all records of all transactions, fed to them by the banks. Most don't care, as typically they'll consider themselves as doing nothing illegal and so 'have nothing to worry about', however the down the road implications are significant. States at times will impose punitive taxation, paramount to confiscation, and the easier that becomes the more its inclined to be employed. Labour for a lifetime to scrimp and save, only to have the state say thanks very much for all of your efforts - that solely served it rather than the individual. Increasingly the state considers people to be valueless entities just to be managed.

[Tara]

The NHS is no longer really fit for purpose. As you say, doctors had their pay doubled a few years ago and now they are back for more. The BMA know that they can basically hold the country and the Government to ransom at any time they want as the NHS is basically the national religion in the UK and no one is allowed to say a harsh word against it.

The only reason that people worship it and clap for it of course is because it is completely free for people to use it. So long as there is no out of pocket charge for people to use the NHS, the British people will see the NHS as worthy of “worship”, and they will see all of the doctors as “heroes”, and all of the nurses as “angels”.

Start charging for a GP visit, as they do in Ireland for example, and the British people would probably start rioting in the streets. Nothing else would bring them out on the streets, but a basic charge to see a GP will probably do it.

But is/has been slipped in via stealth. An appointment maybe if you phone up and win the lottery in the pre 8am call-in to maybe get a appointment that day, or a two or three week booked appointment by which time the issues may have faded anyway ... or £80 for a local private GP appointment at a date/time of your choosing.

Such transitions occur 'naturally', where you wake up one day to wonder how did we get to this point/state. Paper (plastic) currency for instance will one day just have been faded out to leave a traceable record of where all of your money comes in and is spent (digital currency). Driven by 'public preference' - directed by intent such as fewer ATM's available, incentives to use digital rather than paper ...etc, and then once transitioned over recover the cost by levying unavoidable fees/taxes (5% per digital transaction/whatever). The state has already transitioned to where each individual has detailed records kept of their movements (street cams/mobile phone location), habits/issues (browser history) and next is all transactions. No different to a open prison where your money is just a loan, not actually yours. More recently banks have been put under pressure to report all suspicious financial activities, with increasing penalties, which drives banks to report all transactions in order to cover their backs, such that the state gets to see/maintain all records of all transactions, fed to them by the banks. Most don't care, as typically they'll consider themselves as doing nothing illegal and so 'have nothing to worry about', however the down the road implications are significant. States at times will impose punitive taxation, paramount to confiscation, and the easier that becomes the more its inclined to be employed. Labour for a lifetime to scrimp and save, only to have the state say thanks very much for all of your efforts - that solely served it rather than the individual. Increasingly the state considers people to be valueless entities just to be managed.

So what is the solution to this “open prison”, constant surveillance, CBDC, and increasing control by the state? Is there anything that people can do to stop it? Or do we just have to accept all of the WEF totalitarian plans and the bugs?

[88V8]

Start charging for a GP visit, as they do in Ireland for example, and the British people would probably start rioting in the streets. Nothing else would bring them out on the streets, but a basic charge to see a GP will probably do it.

But is/has been slipped in via stealth. An appointment maybe if you phone up and win the lottery in the pre 8am call-in to maybe get a appointment that day, or a two or three week booked appointment by which time the issues may have faded anyway ... or £80 for a local private GP appointment at a date/time of your choosing.

I did look into moving over to the private GP... it's tempting... but it's not only the appointment fee - £125 rather than your bargain £80, and that's only for health trivia not major stuff - or alternatively the £165 monthly fee, it's the charges for everything from blood tests to scans to prescriptions depending on the plan, charges often hidden in the reassuring verbiage.

Most people have not a clue what a bargain the NHS is. Me, I think some things should be chargeable, anything related to 'lifestyle' eg fatties, smoking drinking drugs.
Easy to say when none of that would apply to me....

Anyway, won't happen, so the taxpayer will just have to keep stumping up to fill the bottomless pit.

V8

[servodude]

But is/has been slipped in via stealth. An appointment maybe if you phone up and win the lottery in the pre 8am call-in to maybe get a appointment that day, or a two or three week booked appointment by which time the issues may have faded anyway ... or £80 for a local private GP appointment at a date/time of your choosing.

I did look into moving over to the private GP... it's tempting... but it's not only the appointment fee - £125 rather than your bargain £80, and that's only for health trivia not major stuff - or alternatively the £165 monthly fee, it's the charges for everything from blood tests to scans to prescriptions depending on the plan, charges often hidden in the reassuring verbiage.

Most people have not a clue what a bargain the NHS is. Me, I think some things should be chargeable, anything related to 'lifestyle' eg fatties, smoking drinking drugs.
Easy to say when none of that would apply to me....

Anyway, won't happen, so the taxpayer will just have to keep stumping up to fill the bottomless pit.

V8

Not strictly bottomless - it's mostly the old and unfit cohort that are the problem.
it's basically the baby boomer bump passing through the snake of the system; given the demographic distribution you just need to wait and they'll stop being a problem soon enough.

[Nimrod103]

I did look into moving over to the private GP... it's tempting... but it's not only the appointment fee - £125 rather than your bargain £80, and that's only for health trivia not major stuff - or alternatively the £165 monthly fee, it's the charges for everything from blood tests to scans to prescriptions depending on the plan, charges often hidden in the reassuring verbiage.

Most people have not a clue what a bargain the NHS is. Me, I think some things should be chargeable, anything related to 'lifestyle' eg fatties, smoking drinking drugs.
Easy to say when none of that would apply to me....

Anyway, won't happen, so the taxpayer will just have to keep stumping up to fill the bottomless pit.

V8

Not strictly bottomless - it's mostly the old and unfit cohort that are the problem.
it's basically the baby boomer bump passing through the snake of the system; given the demographic distribution you just need to wait and they'll stop being a problem soon enough.

The "boomer" UK population maximum is currently aged 57 (or thereabouts, https://www.ons.gov.uk/peoplepopulation ... 2020-01-08), reducing to a minimum at currenly 46 years of age, with another peak at currently 32 years old which is the highest peak of all. The difference between the number of 57 year olds and 46 year olds is 500,000.
The difference between the "boomers" bulge and the following dip is probably only a couple of million, or two years immigration at current rates. It also suggests we should be preparing for the all time high boom of current 32 year olds, for when they age, retire, get sick etc.

[Charlottesquare]

But is/has been slipped in via stealth. An appointment maybe if you phone up and win the lottery in the pre 8am call-in to maybe get a appointment that day, or a two or three week booked appointment by which time the issues may have faded anyway ... or £80 for a local private GP appointment at a date/time of your choosing.

I did look into moving over to the private GP... it's tempting... but it's not only the appointment fee - £125 rather than your bargain £80, and that's only for health trivia not major stuff - or alternatively the £165 monthly fee, it's the charges for everything from blood tests to scans to prescriptions depending on the plan, charges often hidden in the reassuring verbiage.

Most people have not a clue what a bargain the NHS is. Me, I think some things should be chargeable, anything related to 'lifestyle' eg fatties, smoking drinking drugs.
Easy to say when none of that would apply to me....

Anyway, won't happen, so the taxpayer will just have to keep stumping up to fill the bottomless pit.

V8

You could always extend it and make people with stupid children pay more for their education.