The quality of debate in the 2017 UK General election has been generally terrible. The Tories have been trying to push the “There’s no such thing as a Magic Money Tree” line, and falling straight into the “Don’t think of a pink elephant” problem.
This line is known in economic and political circles as The Noble Lie. The Magic Money Tree does exist. They all know it does. When there is a bank to bail out, does anybody ask where the money is coming from? When there is a nuclear missile system that needs building? How about when a foreign nation needs bombing?
Like the elephant in the room The Tree cannot be mentioned, because then the electorate might start asking awkward questions about public services — perhaps we should have some? — and taxation — are we overtaxed for the size of government we have, given that we still have people without work?...Modern Money Matters
The Magic Money Tree Exists
Neil Wilson
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10 comments:
"... given that we still have people without work?..." Neil Wilson
Again the endless conflation of work (good) with wage slavery (not good). Instead, Neil should say "... given that we still have people without an adequate income and/or other resources to lead full lives? Unjustly so? ..."
Well, justice is coming with or without Neil and in the future those deemed worthy (e.g. not promoters of injustice?) will sit under his vine and under his fig tree, with no one to make them afraid, for the mouth of the Lord of hosts has spoken. Micah 4:4
If only the left could cotton on to it, it would wipe the Tories out. Of course they could use the system to lower taxes instead, except their banker friends would be against public money creation, so they would be snookered.
Neil and Kaivey, like you two I've been screaming my guts out every time I hear the self-serving lie about the magic money tree. I got into an argument the other day with some damn Daily Mail reading dunce who kept repeating this magic money tree line as if this was the height of his enlightenment, with Theresa May and Amber Rudd as his gurus. Like Neil, when I then asked, well, how did hundreds of billions of pounds magically appear in 2008 and 2009 when the financial sector was bailed out? No reply, of course, but the usual gibberish about living within our means and the idiocy of subsidising single mothers, layabouts, black lesbian support groups and all the other demented nonsense that passes for economic and political analysis.
Thursday night could well turn out to be a real humdinger! Beer and crisps! What else can an Englishman want? Other than the ugly sneering Tory faces of Andrew Neil et al peering at you for hours on end, that is.
"They all know it [The Magic Money Tree] does [exist]."
No, they don't. They simply don't. Or they do and think that printing money is heavy inflationary. That's what real world evidence tell us every single day.
Agreed with André, they have a huge cognitive wall in their heads that impedes comprehension. They also think the private sector provides the munnie, and it should be that way.
Andre and Ignacio, how then did they suddenly come to the conclusion that creating hundreds of billions of pounds to bailout the financial sector when they instinctively knew it was dangerous and likely to ruin the economy?
Leaving aside the MMT analysis in which this is nothing more than an asset swap, in THEIR models this is inflationary and dangerously so. The question then is, why did they insist on a ruinous policy? And furthermore, given that they now know that there is now no question that the magic money tree exists, why don't they use it? Surely it's because they don't want to use it for social ends, merely bankster bailouts. They don't want to let people know that money is never the issue because people will rightly demand that the money channels resources to education, health, housing, clean energy, transportation and all the other things that make their lives more pleasant, and not towards subsidising the financial sector at the best of times and bailouts at the worst of times, engineering an economy of gigantic debts, a parasitic property market and social services that are stretched to the limit and slowly being privatized. They knew before the crash, and if they didn't then they surely know now.
John, the simplest explanation for me is they do it because TINA in their minds (in case of bailouts). And politicians always will take the easy route and exchange joy today for pain tomorrow if necessary (so even if they think it would be inflationary they would rather take the risk than get blamed for the collapse of capitalism or something like that).
In case of other, good, stuff, they won't allow the genie out, because it's risky all things considered in their mental models about how the system works, there is no scenario of TINA (we may come to a point when they consider having some sort of JG/BIG is TINA and then will implement it, but we are a long way to that).
There are a lot of mantras regarding monetary financing and a lot of politicians truly believe them and have to behave as "adults" (paradoxically). Yes, some of they may now, but keep the opinions to themselves, the population is true believer of "government as household" analogy and they exploit that to get elected.
Also, as I said, they believe that financing has to come from the private sector (because capitalism, markets, "freedom" blah blah), somehow (even if the state has the power to create currency), that's why most money entering the system is via credit and they have ero problems with it.
John, I agree with Ignacio when he says the following: "so even if they think it would be inflationary they would rather take the risk than get blamed for the collapse of capitalism or something like that".
The ones that know anything about "money printing" think that it is inflationary but was worth the risk at that time.
But I bet that 99% of politicians and economists don't even know that money was printed out of nowhere. These 99% politicians and economists do believe that it was taxpayer money. They believe that money is like gold - it can't be simply created of nowhere. They don't acknowledge money printing.
Of course, I don't know exactly if the percentage is 99%. But it would actually be easy to do some academic work to measure how most public figures understand the monetary world through their speeches and written material...
Of course, I don't know exactly if the percentage is 99%. But it would actually be easy to do some academic work to measure how most public figures understand the monetary world through their speeches and written material...
True or false test.
T or F — Banks create money simply by issuing loans, which results in a credit to the borrower's account.
T or F — Government creates money simply by issuing tax credits to non-government, which results in credits to non-government bank accounts.
T
and
T
Of course banks could create far less money safely IF their liabilities wrt the non-bank private sector were genuine liabilities and not largely a sham as they currently are.
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