Category Archives: Debt

The ‘magic money tree’/’maxed-out national credit card’ LIES

Liars: both David Cameron and (now) Keir Starmer have voiced the falsehood that the UK has credit limits imposed elsewhere – it doesn’t. There IS a magic money tree, though – despite their claims to the contrary; it’s called the Bank of England. You won’t find this mentioned by the mainstream media, though – instead you have to come to Vox Political, Another Angry Voice, and Mainly Macro (among others).

Simon Wren-Lewis, over at Mainly Macro, has written a scathing critique of politicians like Keir Starmer and Rachel Reeves, who are copying the Tories by saying there is no “magic money tree” and that the government has “maxed-out the national credit cards”.

For clarity: there is a magic money tree. It’s called the Bank of England.

And it is impossible to max-out the national credit cards with the amount of debt the UK currently has.

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Professor Wren-Lewis explains:

Keir Starmer, in commenting on the recent Budget, said “Britain in recession, the national credit card maxed out, and despite the measures today, the highest tax burden for 70 years”. The analogy of maxing out the nation’s credit card has been repeated by other Shadow ministers. Rachel Reeves, Shadow Chancellor, has joined many Conservative ministers in saying there is no ‘magic money tree’.

Anyone who knows any macroeconomics understands that these analogies are false. The nation does not have a credit card with an externally imposed credit limit that it can ‘max out’, and the UK government does have a magic money tree because it can create money.

Imagine, for example, if we forced politicians to be more precise. Rather than claiming that the government had ‘run out of money’ and ‘maxed out its credit card’, they would instead have to say that the government had almost hit their self-imposed borrowing limits.

Rather than saying you couldn’t promise to spend this or reduce that tax because there is no magic money tree, politicians instead would need to say that the government could create more money or borrow more, but that would add to aggregate demand which would risk higher inflation and so force the Bank of England to raise interest rates.

Why do politicians say there is no money tree at their disposal? Because they don’t like telling the truth, which is that they don’t want to break their fiscal rule, or they don’t want the additional spending or tax cut adding to aggregate demand and leading the central bank to raise interest rates. That is a trade-off where many voters might take a different view, so it is much easier for them to say there is no money. It is a way of disguising a political choice, and not being honest about these choices.

So ‘there is no magic money tree’ is normally said by Chancellors or Prime Ministers who want an easy excuse for not spending money or cutting taxes. It is a straightforward deception to give politicians an easier life, and therefore it is difficult to defend its use.

The phrase ‘maxing out the nation’s credit card’ is more often used by politicians attacking the borrowing record of others. Yet it too suggests politicians have less choice than they actually have. In this case it perpetuates the idea that governments can only borrow so much, and that they are currently hitting that limit.

This is nonsense. There is a limit to how much UK governments can borrow, but it is way above levels of debt ever historically recorded. (Debt was 2.7 times GDP after WWII.) [1] But it sounds more dramatic to say a government has maxed out its credit card than to say it is leaving insufficient headroom to meet its own fiscal rules.

The use of these false analogies probably wouldn’t matter too much if we had an informed and informing media that was quick to correct these attempts to mislead. Unfortunately the complete opposite is the case. Because much of the media views macroeconomics as too complex and boring for its viewers, it laps up these incorrect attempts to relate fiscal policy to household budgets.

Sometimes this media environment gives politicians little choice but to follow. But that is not the case with phrases like ‘no magic money tree’ and ‘maxing out the nation’s credit card’. No one is forcing politicians to use these phrases. Instead it is their own choice to do so. If they know they are false analogies that just mislead the public they shouldn’t use them. If they don’t know that they are false, I’m afraid that is even worse.

So, when Keir Starmer said those words in response to Jeremy Hunt’s Budget, somebody in BBC/ITV/Sky News or the newspapers should have immediately called them out as lies.

But they didn’t.

This means the media are misinforming the electorate. This in turn means that most of the voting population, at the next general election, will be basing their decision on false information.

That is inexcusable. There should probably be a law against it. But there isn’t, because the law-makers benefit from the falsehoods.


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Jeremy Hunt misled us about the National Debt

Jeremy Hunt’s last Budget looks set to go down in history as the biggest pack of lies ever told by a politician in one statement.

It’s hard to know where to start picking at his hour-long stream of nonsense, but here’s one item the BBC has teased out, on the national debt. I refer you to “head of statistics” Robert Cuffe:

In his Budget statement, the Chancellor said that the UK’s debt was “falling in line with our fiscal rules”.

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The government’s rules only require that it falls once in the next five years: between 2028 and 2029.

In other years of the forecast, debt is not set to fall – it will rise three times and hold flat once.

The UK’s debt is forecast to be higher five years from now.

People will have heard him say that the National Debt is falling when in fact it isn’t.

Possibly the worst aspect of this is that it doesn’t really matter. It would be a worry if the UK was unable to pay interest on the debt, or it spiralled out of control, causing an inflation crisis. But the recent increase in inflation had nothing to do with government debt.

The UK’s current problems arise from what the government has been doing with the money it has been spending, that has caused the debt – giving it to very rich friends of the Tory Party, in return for nothing at all, meaning that they have had the wherewithal to buy the nation’s assets – businesses and property – pricing the rest of us out of our own market.

Hunt didn’t have a word to say about all that because it suits him to hide the fact that deliberate government actions have made most of us worse-off.


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There is more money in the UK economy than ever before. Who’s got it?

Money, money, money: Rishi Sunak says there’s hardly any available for public services but there is more of it in the UK economy than ever before – more than three times as much as when the Tories came into office in 2010. Why doesn’t he use some of that, rather than leaving it in the hands of people who didn’t deserve to be given it in the first place?

Who is hoarding all the cash?

There is currently around £2.7 trillion washing around the UK economy somewhere. It’s not debt, as your mainstream Establishment politicians keep telling you, because the system needs to have money in order to work. It’s the blood that keeps the body alive; the oil that keeps the engine working. This Writer demonstrated as much in a previous article.

In a population of 68 million people, £2.7 trillion comes out as around £40,000 per person – easily enough for us to be able to pay for top-level public services and have enough left over to treat ourselves.

But we are constantly being told – most recently by Keir Starmer – that there is not enough money to provide the public services that we need; to re-nationalise our national utilities that are mostly making profit for firms owned by foreign governments, to restore our rotting water and sewage network that greedy private shareholders have allowed to fall into ruin while they took our bill payments for themselves, to invest in environmentally-friendly power and technology, to provide cheap housing… the list goes on and on.

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So where is all the cash? It must have gone somewhere, right?

The answer is that it has been given to extremely rich people who don’t need it, mostly (for example, in the case of the Covid-19 PPE scandals) in return for goods and/or services that didn’t actually work.

If you believe people like Gary Stevenson (and I tend to), these people have then hoarded that wealth, using it only to buy assets – property or businesses, in order to make them too expensive for the rest of us to be able to afford.

These things may then be rented or sold back to us at a price so high that we need to go into debt (think how much a mortgage costs these days) and spend the rest of our lives trying to pay the money back to them, with interest, so they can sit back on their fat backsides, eating lotus or whatever it is the idle rich do.

Remember: the inflated prices they ask us to pay are entirely arbitrary. They don’t have to charge us the Earth for anything because they are already rich and don’t need the cash to support them; a far lower price would be enough for them to get by.

So (again) if that’s where the cash has gone and what it is doing there, why is this happening?

The answer can only be: to keep the rest of us down. By denying us properly-funded public services, they force us to pay for expensive private schemes that don’t work because of profiteering, and this keeps us poor. Because we are poor, we have to work like slaves to try to make ends meet.

And this is the logical conclusion of all the neoliberal politics of the last 40-50 years: the creation of a new slave state, toiling in the dirt to keep a tiny group of elite citizens in absolute luxury.

Am I mistaken?

If you think so, then ask yourself: Where is my £40,000?


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There is NO ‘national debt’. Politicians like Keir Starmer are SCAREMONGERING

Keir Starmer and money: he doesn’t understand how it works but he wants us to put him in charge of the UK’s economy. How insane would we have to be to do that? Oh, and Rishi Sunak doesn’t know how it works either.

Let’s try to put this ridiculous nonsense about us having to pay back a mythical “national debt” to rest, if we can.

This Writer has been trying to work out a better way to describe it for a long time – practically since it became a political football during the run-up to the 2010 election, in fact – and I have learned a lot about the way the UK’s money system works in that time.

Here’s how it works:

All UK money is created as demanded by the government. It asks the Bank of England, which it owns, to create the sums it needs in order to fund its political projects and policies and puts that money into the economy.

(And in order to prevent inflation, as more and more money is pumped into the system – and also to validate Sterling (the Pound) as a currency – the government takes money back out of the system in taxes.)

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Without the money the government creates, the economy would not work – unless we all went back to bartering one set of goods for another, but this is not as good a system as using a currency.

So we could say that money is the lifeblood of the economy – it invigorates the system and keeps it alive.

Taking that comparison further: we don’t say we owe our heart a debt of blood because it pumps eight pints of it around our bodies, without which we couldn’t survive, do we?

And if we give blood, for medical purposes, we don’t expect to have to pay our heart back in some extraordinary way; our bodies just make more of it.

So it seems strange to consider all the money the Bank is told to create for the economy as being debt; it is something else, for which I have yet to find a good pithy name.

As such, it seems to This Writer that governments should work out how much they need to have in the economy at any given time, in order to achieve their aims, and remove that from any notion of debt. This would then give them a better idea of how much to tax out of the system at any time. There are other indicators available to show who it should be taxed from.

It seems to me that this (possibly naive) model is endorsed by the economist Richard Murphy in his new – long – ‘X’ thread about why Keir Starmer’s twaddle about the “national credit card” is ridiculous.

Read:

Here’s the bit that corroborates what I was thinking:

So the national debt is actually the money that makes the economy work. That’s not a debt – it’s an assset!

He continues:

Now he’s getting into why the “maxed-out credit card” story is daft.

Here comes the punchline: why are Labour and the Tories making such a fuss about a so-called debt that doesn’t actually exist? Read on:

So there you have it.

There is no national debt.

The money created by the government, through the Bank of England, is what energises the economy (we can see that demonstrated by the fact that there has been practically no growth in the years since David Cameron and George Osborne imposed austerity on us).

Political parties talk about a fictional national debt and a fictional national credit card to make us believe that, as a nation, we cannot afford the public services and assets that we need. This is a lie.

The conclusion?

Political parties that tell this lie do not deserve our vote and there should be no Labour, Conservative, Liberal Democrat or SNP MPs in the House of Commons after the next general election – unless they change their tune radically.


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After 5,000 days of Tory rule, they’ve increased YOUR national debt MASSIVELY

Where has all the money gone?

That’s the question from Carol Vorderman, and she’s echoing economist Gary Stevenson who has been saying much the same thing for many months now.

Here’s her analysis, as posted on ‘X’ (formerly Twitter):

As she demonstrates, David Cameron came into office claiming (wrongly) that the national debt of £770 billion and deficits run by Gordon Brown’s previous ‘New Labour’ administration were unsustainable and had to be brought down, for the good of us all.

“We’re all in it together,” remember?

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Instead, he and his successors – Theresa May, Boris Johnson, Liz Truss and now Rishi Sunak – have spent public money at a record-breaking rate, increasing the debt to more than three times as much as in 2010.

Bear in mind that it had taken hundreds of years for the debt to reach £770 billion. The Tories then tripled it in just 13 years.

They have been spendthrifts on a scale never before seen in the UK.

And they have nothing to show for it.

The standard of living for the vast majority of people has plummeted.

Public services have been starved of resources and neglected.

The National Health Service has been starved of staff and hived off to private companies whose work is substandard and poor value for money.

The economy has stagnated and wages – apart from those paid to MPs and top executives – are now worth a fraction of what they were in 2010.

If the last nearly-14 years of Tory rule had been a business transaction – we had paid for them to provide a service – then we would be within our consumer right to demand our money back.

But it doesn’t work like that.

Government, it seems, is the greatest con trick of them all because we lose our money legally.

This is an election year, though. We have an opportunity to make a big change.

But the media are telling us the only choices are the Conservatives, who will break the national bank even more than they have done already, or Keir Starmer’s New New Labour, that is promising to do the same.

For all our sakes, we – the voters – have to change our thinking and make the change that the self-interested, snouts-in-the-trough political swine in both those parties can’t handle.

We have to get rid of them all and vote for somebody else.

Elections used to be about looking at what every candidate in your constituency was offering and voting for the one whose package most closely corresponded to what you thought you needed.

When did they start being about voting tribally for the team that told you they represented you when – if you actually bothered to check – they really didn’t?

When did we stop voting in our own interest and start voting in theirs?

If you vote for Rishi Sunak’s team this year; if you vote for Keir Starmer’s team this year; even if you vote for Ed Davey’s team this year, you will be voting to enrich the members of their parties and will achieve nothing for yourself or your family.

Carry on voting tribally for the same gangs and you will ensure that you, your children, and their children, are progressively impoverished and enslaved by the people who are recommending themselves to you now, for their own enrichment and self-aggrandizement.

That is their plan. And it has been working spectacularly well for the last 13 and a half years.

When are you going to break that pattern, stop harming yourself and do what needs to be done?

It’s time to change. Do it before it’s too late.


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Cost of living: UK households face £17,200 of debt by 2026

Is this the ultimate failure of the so-called ‘Party of Financial Responsibility’?

Instead of creating conditions in which everybody should be able to manage their own finances in relative ease, instead the Conservatives have dumped the average family into a predicted £17,200 of debt by 2026.

Here’s The Big Issue:

People across the UK will face a record level of debt in the coming years, with the average household expected to owe nearly £17,200 by 2026, according to new analysis.

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The Trades Union Congress (TUC) has warned of a “debt time bomb” as households are set to face a £1,400 rise in credit card and loan debt in 2024. This is an increase of 11% on 2023.

Paul Nowak, the general secretary of the TUC, said: “Every month the Tories stay in office the more families will be pushed into debt. This party of out-of-touch millionaires is more focussed on clinging to power than on growing our economy and getting living standards rising again.”

TUC analysis found that over the course of the next parliament, unsecured debt is set to rocket by £6,000 on average per family.  That includes debt from credit cards, loans and purchase hire agreements, while excluding mortgages and student loans.

“If something doesn’t change, real wages won’t recover to their 2008 levels until 2028,” Nowak added. “These 13 years of economic stagnation have left working people brutally exposed to the cost of living crisis. We cannot afford a Tory government for one day longer.”

It gets worse:

These are shocking figures, but they don’t tell the wider story of the consequences of this debt. Recent research from the Money and Mental Health Policy Institute found that around half of people facing debt have had suicidal thoughts in the last 20 months.

Rob, who spoke to The Big Issue about his experiences of debt and the impact it had on his mental health, said: “It’s the sense of shame that I’m not better at doing this stuff. A sense of being out of control and not being able to manage. There’s the inability to ask for help, because a man my age who had just had a very successful career should be able to manage.”

The TUC estimates that the average worker would now be £14,800 a year better off if their pay had kept up with pre-crisis real wage growth trends since 2008.

Nowak told The Big Issue: “There’s a sense that people are just at the end of their tether. They’ve been working flat-out through the pandemic and beyond, workloads ever-increasing, resources perpetually on the decline, and they’re being asked to do more for less. They’ve hit a breaking point.”

The union body says the sharp spike in debt, along with stagnant living standards, will “more than wipe out” any gains from the chancellor Jeremy Hunt’s cut to national insurance tax.

Source: Cost of living: UK households face £17,200 of debt by 2026


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Did Sunak ‘undermine trust’ with false claim he cut public debt? Judge for yourself

Rishi Sunak: he said his government had reduced the national debt but this is not true. It hasn’t happened yet – and may not happen at all, even in the way that was actually predicted.

Rishi Sunak is in trouble again – with the UK Statistics Authority, this time – for being unable to talk straight.

(In all honesty, if the UK had wanted “straight-talking, honest politics”, voters would have elected Jeremy Corbyn prime minister in 2019 – right?)

Here’s the story. Keep it handy for when you’re preparing to vote in the next general election:

The head of the UK’s official statistics watchdog has challenged Rishi Sunak over his claim to have reduced public debt, saying the prime minister’s definition of this was so specific and limited that it risked being misleading for voters.

Sir Robert Chote, the chair of the UK Statistics Authority (UKSA), said Sunak’s claims last month “may have undermined trust in the government’s use of statistics and quantitative analysis in this area”.

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Writing to Sarah Olney, the Liberal Democrats’ Treasury spokesperson, Chote said the Office for Statistics Regulation, the UKSA’s regulatory arm, would “work with the prime minister’s office to ensure further statements on debt levels adhere to our guidance on intelligent transparency”.

Olney raised the issue with Chote’s office after Sunak said “debt is falling” in a No 10 social media video posted on 7 November, the day of the king’s speech, and then said “we have indeed reduced debt” during prime minister’s questions on 22 November, the day of the autumn statement.

Downing Street told the UKSA that both claims referenced forecasts by the Office for Budget Responsibility that net debt would be falling as a proportion of GDP during the final year of the five-year forecast, in the context of the autumn statement meaning 2027-28.

In both cases this was mainly happening due to changes to the OBR’s fiscal projections, with government decisions on tax and spending actually making debt higher.

Chote’s letter noted that while it was fair to use debt as a proportion of GDP rather than absolute numbers, the “average person in the street” would most likely have taken Sunak’s statement to mean that debt was already dropping and that government decisions had helped do this – “neither of which is the case”.

“This has clearly been a source of confusion and may have undermined trust in the government’s use of statistics and quantitative analysis in this area,” he wrote.

“Members of the public cannot be expected to understand the minutiae of public finance statistics and the precise combination of definitional choices that might need to be made for a particular claim to be true.”

The gist is that if Gross Domestic Product – the amount of money created by the whole of the UK – increases by 2027-28, then the national debt will be reduced as a proportion of that money.

It will not be reduced – in real terms – in any way.

And in any case, Sunak was claiming to have achieved a reduction in public debt – now. That hasn’t happened at all:

So Sunak was lying – wasn’t he?

Source: Sunak challenged by watchdog over claim to have cut public debt | Rishi Sunak | The Guardian


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Is the Bank of England trying to force the UK into austerity? Why?

The Bank of England: don’t believe its claims about inflation.

If the Bank is trying to force the government into austerity by selling government debt at a loss, isn’t that political interference?

And isn’t anyone – of any political organisation – going to ask the obvious questions about it?


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Rishi Sunak hasn’t only failed to beat inflation – his other pledges are broken as well

Rishi Sunak and his priorities: he hasn’t achieved a single one.

Yesterday (Wednesday, June 21, 2023) was not a good day to be Rishi Sunak.

Neither was Monday – but that’s another story.

We knew he failed on inflation because it’s the big headline.

But what about his other targets?

The UK’s debt pile, meanwhile, reached more than 100 per cent of economic output for the first time since 1961 as government borrowing more than doubled in May, according to official figures.

So it did:

It shows up the lie in George Osborne’s evidence to the Covid Inquiry this week, too: Osborne claimed he had needed to repair the “seriously impaired public finances”.

He said: “If we had not had a clear plan to put the public finances on a sustainable path then Britain might have experienced a fiscal crisis, we would not have had the fiscal space to deal with the coronavirus pandemic when it hit,” he said.

But when he became Chancellor in May 2010, the UK’s national debt stood at £1.03 trillion. He promised to eliminate it altogether (which is kindergarten economics; the debt is merely a yardstick of private investment in the UK’s economy) – and today’s figures show the extent of his massive failure.

Okay, how about the small boat Channel crossings?

On Sunday, it was revealed that more than 1,100 people had arrived on small boats in the past three days.

The cumulative number of arrivals in 2023 now stands at a provisional total of 10,472, according to the latest data from the Home Office.

We already know NHS waiting lists are not falling (because health service funding is being siphoned off by private health firms as profit?) and intelligent commentators say the Bank of England’s expected response to the inflation figures will stifle economic growth by sucking all the spare money out of the system.

This is what happens when you let Conservatives get their hands on the workings of government: they clown around like the idiots they are until everything breaks down.

Source: Sunak’s five pledges lie in tatters ahead of next election


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Here’s some important information about government debt

These facts about government debt are well worth watching:

That’s right – more than nine-tenths of the government’s borrowing is from itself.

So when you hear a Tory saying how important it is to balance the books, keep that in mind.

Because it isn’t all that important at all.

And you already know you should ignore anyone compring a nation’s finances to those of a household, right?


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