Is the UK government bankrupt? No, but is it even examining all its options?
Is the UK government bankrupt? That’s the question in Gary Stevenson’s latest video clip, in which he explains the dilemma facing Keir Starmer and Rachel Reeves in a wonderfully clear manner.
Take a look:
So, for much of the time, governments manage to achieve an apparent magic trick of paying no interest on their debts, because economic growth and inflation cancel out the amount of interest that they have to pay.
But that isn’t happening now, because growth is down and so is inflation (because the Bank of England wants it that way), but debt interest is rising massively because the markets are saying (rightly or wrongly, it doesn’t matter) that they can’t be sure the government will be able to honour those debts.
The government isn’t bankrupt; it can’t ever be, because it controls the Bank of England and can just Quantitatively Ease its way out, as has happened before. The Bank has no option but to obey.
But before they go to that length, Starmer and Reeves will probably agree to make cuts to their policy platform – and that means deepening austerity (which never went away, remember; government departments are still labouring on budgets that are hugely reduced in comparison with 2010).
I wonder why nobody mentions all the bonds the Bank of England is apparently selling because it has unilaterally decided to pursue a police of quantitative tightening – it’s taking back the money it created for the then-Tory government during Covid.
Because the markets are already saturated with bonds – and they’re selling them because of uncertainty about the government – this means the bonds have to be sold cheap, with high interest rates on them – and that pushes up the general UK interest rate.
So why doesn’t Reeves invoke the Bank of England Act 1998 and tell the Bank to stop selling these bonds because it is not in the national interest to do so at this time?
I’ve been waiting for an answer to this. I may be waiting for some time to come.
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Circling the drain.
You can’t get a wealth tax because God-King Charles won’t allow it. (Ha has to be “consulted” on all bills that affect his interests,)
You can’t legalise and tax marijuana because the Daily Mail doesn’t like that.
There’s almost no infrastructure left to sell off.
Oh WAIT! The ROADS! Very soon I predict that the roads will be sold off and privatised. The excuse will be falling revenue from fuel tax. Soon, you’ll be driving your vehicle on NCP roads and parking it in an NCP car park. Just wait.