Gower Initiative for Modern Monetary Studies — The markets are not in charge, sovereign currency-issuing governments are

With human survival on the line the message needs to be loud, clear and repeated ad nauseam:

• The spending of a government like the UK which is a sovereign currency issuer is not constrained by its ability to collect tax. In other words, it is not like a household budget which needs income before it can spend. Whilst it is a good idea to review global corporate tax rules as a mechanism to redistribute wealth and resources more fairly Christine Lagarde’s claim that doing so will allow governments to spend on public services is just a part of the same orthodox narrative which prevails and is incorrect.
• A government which is a sovereign currency issuer like the UK cannot run out of ‘fiscal fire power’. The IMF’s claim that the public debt is so large as to constrain future spending to deal with future recessions is quite simply a falsehood. What will constrain the spending of any government, however, are the resources it has at its disposal. Its public policy choices define their distribution, how they will be used and in whose interests. A government’s economic record must be judged, not on its monetary discipline, but whether it served public purpose and created economic and social well-being. There is no other measurement.
• A currency-issuing government like the UK doesn’t have to issue debt in order to cover its deficit and the bond markets can never bankrupt such a nation. When the government sells bonds, it can always service those liabilities provided they are denominated in its own currency. As Professor Bill Mitchell says, ‘The bond markets are supplicants not a source of spending capacity’.

The Gower Initiative for Modern Monetary Studies

The markets are not in charge, sovereign currency-issuing governments are