No, the UK will not go bankrupt. EVER – The Critique Archives

Peter Oborne: As economically-illiterate as OSborne?

Peter Oborne: As economically-illiterate as OSborne?

The mere title of this article contains an important lesson for those who listen too long to the illiterate rantings of the right-wingers currently running the government. Here’s Martin Odoni to explain why:

[Peter] Oborne writes [in the Daily Telegraph]:

The national debt continues to spiral out of control. We are closer to insolvency today than we were in 2010, when Mr Osborne took over control of Britain’s finances. Our debt will soon surge beyond £1.5 trillion – a prodigious sum which is not far off twice the level the Tories inherited from Labour. Public spending has fallen by a remarkably small amount over the past five years.”

Well, the excerpt is correct from the third sentence onwards, but before that, Oborne is completely wrong.

Firstly, in the sense he means, the National Debt is not ‘out-of-control’ as such. It is higher than is politically healthy, and it is certainly going up without a pause, but it needs to be recognised that near enough every penny that was owed in 2010 was paid ages ago, without any difficulty.

Almost all of the Debt in the current accumulation has been borrowed since the Coalition came to power. The reason the total keeps going up is because the Government keeps borrowing more than it pays off. But the critical aspect is, the Bank Of England does keep paying back the creditors, automatically and with no difficulty, and no matter which party is in power.

Even if there were no tax receipts coming in at all, that would still happen, because the Bank Of England issues the sterling currency that the Debt is made up of.

It is in fact a process that has nothing directly to do with the Chancellor of the Exchequer at all, and continues unabated no matter what policies he chooses to enact, and no matter how high or low tax-receipts are. (This is the main reason why it was probably for the best that the UK did not join the European single currency.)

This is not to say that there would be no undesirable consequences to spending without taxation – it would undoubtedly have an inflationary effect – but the notion of the Debt becoming so big that it becomes impossible to keep making the repayments is an example of projecting household economics onto national economics.

It is a common mistake, especially among Thatcherites, who continue to believe the late Margaret Thatcher’s nonsense about how managing the public finances is the same as “good housekeeping”. It is also worth keeping in mind that a) inflation happens anyway, b) ‘quantitative easing’ is a frequent and routine Treasury tactic, only for some utterly known reason it is almost never deployed for funding anything other than the banking sector, and c) under certain very strict conditions, especially with a responsive Minimum Wage, a modicum of inflation can be a good thing, as it is harder for the rich to keep hoarding wealth when they have to keep spending more and more in order to keep their day-to-day lives in the same condition.

If that has excited your curiosity, visit The Critique Archives for the rest.

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7 thoughts on “No, the UK will not go bankrupt. EVER – The Critique Archives

    1. Mike Sivier Post author

      Not even then.
      And who says TTIP is going to happen with ISDS in its current form, anyway?

  1. Mr.Angry

    I recall a tory toff saying benefit claimants have no idea how to budget / manage their benefit payment, wonder how he would explain Gideon’s management of funds !!!!!!!!

  2. Jeffery Davies

    The poor pay their taxes the rich seem to not like
    to one bit paying it into offshore accounts yet its the
    tax payers monies he’s giving away to their mates you
    or I haven’t that debt but the government’s debt who robbed
    us all isnt life strange when its a national debt because they
    robbed all the monies for their mates yes a very funny thing
    that the ninty nine percent havent woken up to tgat fact they
    dont owe and throw the lot out jeff3

  3. Michelle Thomasson

    Debt’s imprisonment is a sleight of mind as it is created electronically out of negative numbers that are loaned to us – the majority of which comes from the private banking system. Odd that there is plenty of money to be found for useless things like Trident.

    If folks don’t want to believe this then how about this: “Last week, something remarkable happened. The Bank of England let the cat out of the bag. In a paper called “Money Creation in the Modern Economy“, co-authored by three economists from the Bank’s Monetary Analysis Directorate, they stated outright that most common assumptions of how banking works are simply wrong, and that the kind of populist, heterodox positions more ordinarily associated with groups such as Occupy Wall Street are correct. In doing so, they have effectively thrown the entire theoretical basis for austerity out of the window.”

    This article was written by David Graeber some months back for the Journal Social Europe, apologies cant cut and paste the link as just on my phone at the moment but can do in separate comment. Btw there was a discussion in parliament a few weeks back about the whole notion of money creation – first time its been discussed in 170 years with some push by the NGO Positive Money, not many MPs turned up for such an important debate but Michael Meacher had some very well reasoned arguments, I can imagine the money creators would have been monitoring such a discussion…

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