...I think they've [Labour Party] made the biggest financial mess that any government's ever made in this country for a very long time, and Socialist governments traditionally do make a financial mess. They always run out of other people's money. It's quite a characteristic of them. They then start to nationalise everything, and people just do not like more and more nationalisation, and they're now trying to control everything by other means. They're progressively reducing the choice available to ordinary people....Read it at Margaret Thatcher Foundatio
Margaret Thatcher — TV Interview for Thames TV This Week
1976 Feb 5
Turns out that Thatcherism was based on her misunderstanding of modern money that led her to mistake the currency issuer for just another currency user that needs revenue to fund expenses or service borrowing costs.
BTW, this the source of the gone-viral quote attributed to Mrs. Thatcher, "The problem with socialism is that eventually you run out of other people's money".
15 comments:
Wynne Godley once described Thatcherism/Monetarism as "a gigantic con trick" in The Guardian. His attacks on Mrs Thatcher cost him his job at Cambridge.
Btw this is funny. You use phrases to your purpose. For some arguments you may claim that the GBP was not a "sovereign currency" and in others you make this "user/issuer" argument.
"His attacks on Mrs Thatcher cost him his job at Cambridge."
I was not aware of that detail.
"Btw this is funny. You use phrases to your purpose. For some arguments you may claim that the GBP was not a "sovereign currency" and in others you make this "user/issuer" argument."
Really? Me? When?
Over the past several hundred years, GB as been on gold specie, gold bullion, bi-metal and and fiat standards in different periods. The UK was was running fiat when Thatcher was PM as far as I am aware, and the BoE was nationalized in 1946.
The problem with Thacherism is that it's supporters end up with all the money.
Tom,
I have seen it too often claiming that Britain's currency was fixed bla bla bla during the period.. well not that straightforward .. there was a time it was floating and then there were other kinds of arrangements with Europeans about fixing etc.
So did taxes fund the British government or not :)
Ramanan,
This last comment of yours is unusually sloppy for you. Or, does that smiley face indicate sarcasm? :)
JK,
When the question is raised about Britain having a balance of payments problem in the 70s, one is told around here that it was not as per MMT etc.
MMTers tend to say that a government with a sovereign currency "does not borrow", "taxes do not fund anything" but for other types of setups notions such as "taxes fund" are valid.
So, for Britain in the 1970s, did taxes fund the government expenditure or not?
I am speaking the same language used here.
Ramanan,
"cost him his job at Cambridge"
Might have been the best thing ever to happen to him?
"They always run out of other people's money."
Sounds like something CNBCs Rick Santelli would say.
Should have said lost funding for his CEPG, not his place in Cambridge.
"…for other types of setups notions such as "taxes fund" are valid.…"
Examples?
Ramanan don't be bitter because your technicalities annoyances please.
As we know money finances spending when it needs to (when the oligarchs want) and it doesn't when it favours the people.
Technicalities don't matter. USA has financed 2 wars in 10 years using printed dollars. Right or wrong?
Economists ivory towers are boring and useless.
Rmanan" I have seen it too often claiming that Britain's currency was fixed bla bla bla during the period.. well not that straightforward .. there was a time it was floating and then there were other kinds of arrangements with Europeans about fixing etc. So did taxes fund the British government or not :)"
I am no expert in this and stand to be corrected, but it seems to me that govt only funds itself with taxes when it cannot issue its own currency. I would not say that taxes are necessary to fund govt when there are restrictions imposed by say, fixed rates of convertibility, if the govt is the currency issuer, only that the govt does not issue currency freely, meaning that it has less policy space in doing so.
If there is no function performed in modern economices by the central bank as creditor and Treasury as debtor in the accounting sense, or govt does not issue currency directly through its Treasury, they to get funds it has to get them from the private sector, where money is created by create, or under gold or silver specie, has to obtain gold/silver and gold/silver is not nationalize, or at least govt does owns sufficient mines.
When the question is raised about Britain having a balance of payments problem in the 70s, one is told around here that it was not as per MMT etc.
MMTers tend to say that a government with a sovereign currency "does not borrow", "taxes do not fund anything" but for other types of setups notions such as "taxes fund" are valid.
So, for Britain in the 1970s, did taxes fund the government expenditure or not?
I see it as an exchange rate problem instead. Currency sovereigns can run into problems with price stability (inflation and deflation) domestically and exchange rate (devaluation and unwanted appreciation) externally. Doesn't mean they are forced to tax or borrow operationally, although politicians and public may be confused about this.
What this means is that even under the best of circumstances, e.g., full currency sovereignty, there are operational constraints on policy. But the constraint is not "affordability," it's a management issue.
Stphanie Kelton posted this file from the UK national archives on her twitter account yesterday when discussing what happened during the late 70's in the UK, it's about the discussions with the IMF.
http://filestore.nationalarchives.gov.uk/pdfs/small/cab-129-193-cp-76-111-1.pdf
Did you hear about Greece leaving the euro zone? I think this is a big mistake if this will happen. Business bankruptcies, market turmoil and political backlash will turn out on this event.
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