Ben Wray — The magic money tree is real: Treasury confirms taxes are not needed to fund government spending

A LETTER from the Economic Secretary of the Treasury has confirmed that the government does not need to raise money from taxation to fund government spending, leading to advocates of increased public investment to declare “the magic money tree exists, as a matter of fact”....

The argument goes that the government can only spend what it has raised in taxation, with any additional financing having to be raised through debt from financial markets which subsequently has to be repaid. Former Prime Minister Margaret Thatcher famously said “The government has no money of its own. It’s all your money.”

But Treasury secretary John Glen’s 18 July reply to Peter May, a Modern Monetary Theory (MMT) advocate who had written to his MP Ben Bradshaw last year to inquire of the Chancellor as to where money came from, was in contrast to Thatcher’s position.

Glen answered: “While it is theoretically possible for monetary authorities to finance fiscal deficits through the creation of money, allowing governments to increase spending or reduce taxation, without raising corresponding financing from the private sector, there is a risk that money financing could rapidly undermine the stability of inflation expectations.”...

Common Space
The magic money tree is real: Treasury confirms taxes are not needed to fund government spending

Ben Wray

Ellie Mae O'Hagan — Is there a magic money tree? Yes children, there is. But that’s the wrong question

The real question is why are we not using the money tree for public purpose rather than special interests.

Does anyone who has witnessed the pomp and circumstance of the Queen’s Jubilee, the funnelling of public money into Syrian airstrikes, or the systematic cutting of taxes for the rich really think we’re not paying nurses properly because we simply don’t have the money? Absolutely not: we don’t pay nurses properly because the government makes a choice not to.…

But the magic money tree is not a just daft expression in terms of how governments spend public money, it’s also misleading in terms of how the economy works as a whole. Since 2008, we’ve been encouraged to see the economy like a household budget: if households spend too much money, they need to cut down on living costs so they don’t get into too much debt. To that end, the magic money tree says that if we spend too much money, we can’t just simply grow more.
But actually, a country’s whole economy can grow more money if it needs to....
Growing money is possible because an economy is nothing like a household budget....

Get this coleen* a soapbox! And a megaphone.

The Guardian
Is there a magic money tree? Yes children, there is. But that’s the wrong question
Ellie Mae O'Hagan

* Gaelic cailín, diminutive of caile, girl, from Old Irish. — Free Dictionary