The New Economic Perspectives’ video clip on the Government budget, Deficits and Debt presented below (produced for educational purposes), debunks the myths that politicians tell their populations to justify ‘austerity’. In the case of the clip, it starts with 3 full minutes of American politicians misinforming the electorate. An identical montage aimed at the UK electorate could undoubtably just feature George Osborne’s utterances from his forthcoming Autumn statement scheduled for this Thursday (5th December 2013).
However, the reality is that all economists know that the deficit and debt mythologies are not true and ‘have long known that the idea of balancing budgets over the cycle is a bit like a fairy story we tell to frighten the kids’. Economists, and Central bankers like Mervyn King, Ben Bernanke, Alan Greenspan, all know that:
The UK government can never ‘run out’ of money;
The UK government can never be forced to default;
The UK government can never be forced to miss a payment;
The UK government is never subject to the whim of ‘bond vigilantes’.
In fact, the St Louis Federal Reserve, from the heart of Western capitalism in the US confirms the same for the US dollar (and any other nation that creates its own currency) :
‘As sole manufacturers of dollars whose debt is denominated in the dollar, the US government can never become insolvent ie. unable to pay its bills. In this sense, the government is not dependent on credit markets to remain operational. Moreover, there will always be a market for US government debt at home because the US government has the only means of creating risk-free dollar-denominated assets.’
Paul Samuelson, ‘father of modern economics’ and Nobel Prize winner, suggested the reason for perpetuating the mythologies in a 1995 interview:
“I think there is an element of truth in the view that the superstition that the budget must be balanced at all times [is necessary]. Once it is debunked [that] takes away one of the bulwarks that every society must have against expenditure out of control. There must be discipline in the allocation of resources or you will have anarchistic chaos and inefficiency. And one of the functions of old fashioned religion was to scare people by sometimes what might be regarded as myths into behaving in a way that the long-run civilized life requires. We have taken away a belief in the intrinsic necessity of balancing the budget if not in every year, [then] in every short period of time. If Prime Minister Gladstone came back to life he would say ‘uh, oh what you have done’ and James Buchanan argues in those terms. I have to say that I see merit in that view.”
It may be that politicians fear the ‘anarchic’ demands of the electorate were the public to understand that the UK economy is not like a household and can never be bankrupt. However, these distortions of reality have been carried to a new pitch by George Osborne and the Coalition government:
The scale of the Coalition government’s intended austerity measures are on a scale never seen in modern Britain. What is planned here will dwarf anything that was undertaken by Thatcher in the 1980s. There is already massive unemployment in the public sector….Massive unemployment and lower wages mean lower tax receipts, and even bigger budget deficits and debt loads…It is now clear that the austerity policy in the UK is not a matter of economic necessity but of political choice… It is obvious that the cuts of this scale are about much more than just deficit reduction… The cuts are part of an agenda to transfer services from the public sector to the private sector. The pretence of ‘there is no alternative’ is a means for the Conservative project to radically transform the state.
http://www.globalresearch.ca/uk-economy-falls-into-double-dip-recession/5313842
It would be just as well to remember this week, when listening to George Osborne and Danny Alexander, that Keynes said:
’Capitalism is the extraordinary belief that the nastiest of men, for the nastiest of reasons, will somehow work for the benefit of us all.’
New Economic Perspectives on the Government Budget, Deficits, and Debt
Published on Nov 28, 2013
The video clip features the following speakers, in order of appearance:
L. RANDALL WRAY
Professor, Economics, University of Missouri-Kansas City
Senior Scholar, Levy Economics Institute
Author, Understanding Modern Money, Modern Money Theory
http://www.economonitor.com/lrwray/
STEPHANIE KELTON
Professor, Economics, and Chair of the Department of Economics, University of Missouri-Kansas City
http://stephaniekelton.com/
WARREN MOSLER
President, financial services firm Valance Co. Inc.
Author, Soft Currency Economics, The Seven Deadly Innocent Frauds of Economic Policy
http://moslereconomics.com/
For More Information:
University of Missouiti-Kansas City, Economics Blog:
New Economic Perspectives
http://neweconomicperspectives.org/
The Modern Money Network
http://www.modernmoneynetwork.org/
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A ghost of evil are any where, but never will win again. A iron Lady in England was a smart women, but Liberals start destroy all. I was read will take a control of illegals, that is a very good point, not alike here in USA where liberals won flood with illegals. Is was prove where a Country who not control invader illegals a economy be will fail.
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I’m not sure about the “must know to be untrue” bit. It’s difficult to be 100% sure what is going on in the brains of politicians and their advisors, so this is psychology, not economics.
My hunch is that while most of those politicians and advisors if pressed will admit that a monetarily sovereign country cannot go bust. But EMOTIONALLY, they don’t really believe it. It’s a bit like doing a parachute jump for the first time: your intellect tells you one thing, while your emotions scream something totally different.
Moreover, there are any number of articles produced by the IMF, OECD and Harvard economists which SERIOUSLY SUBSCRIBE to the balanced budget myth.
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Thank you for nuancing my assertions. Zoe Williams wrote a piece in the Guardian questioning which Conservative politicians knew what the Treasury was doing and which ones were blindly accepting the government spin. My point was/is that all politicians ‘should’ know that it is untrue. Some may indeed be ill-informed but some others know only too well that the deficit myth is, as Bill Mitchell says, ‘a big Con’.
I imagine that the same may be true of economists but as “The Inside Job’ indicated, the Chicago school annexing of University departments and the corporate/financial funding arrangements, does cast a question mark over at some of the research analysis.
However, I really like your parachute analogy which has the ring of truth about it.
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Reblogged this on HUMAN RIGHTS & THE SIEGE OF BRITAIN POLITICAL JOURNAL.
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To err is human, to blame it on somebody else shows management potential.
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I must say I’m not sure whether to agree with Ralph! Mosler and Galbraithe talk about Innocent frauds. Innocent? Really?
It seems hard to believe. But, on the other hand, politicians and most economic pundits on TV certainly look like they believe what they say.
Logically, they must be either incompetent or dishonest. Which is worse?
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I have problem with the ‘innocent’ bit too. I suppose the truth is some are innocent-incompetent and others competent-dishonest. One of the vulnerabilities of having so much narcissism amongst our politicians/journalists is their susceptibility to flattery from the more anti-social types from the financial sector. Both Thatcher and Nigel Lawson complained about their City of London advisors having deregulated in favour of finance rather than, as the shop-keeper’s daughter wanted, in favour of SMEs and individuals.
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A national debt we are told is not a deficit, which England has had for 300 years without any trouble at all.
But another national debt myth is never mentioned in any left wing blog, who believe the myth that those over 50 are wealthy.
Even the Pensioners Convention believe that the ring fenced National Insurance Fund has been emptied to pay off the national debt and for general expenditure by government, which legally cannot be done as it is not a tax.
https://you.38degrees.org.uk/petitions/state-pension-at-60-now
The 12 per cent compulsory contributions plus your boss’s contributions over a lifetime in work, has gone into a National Insurance Fund that has been full for decades, not needing a top up from tax.
Half of women work in the public sector, losing two thirds of the jobs, mostly basic grades and by the means of early retirement from 50, more recently 55 on a low works pensions, on average only £2,800 per year (2013 the year women began loss of state pension payout).
Housewives, widows, divorcees, low waged men and women and those with less than 10 years NI credit history, all end up nil state pension for life from 2016.
https://you.38degrees.org.uk/petitions/state-pension-at-60-now
The state pension payout can be made if stay in your job or retire.
Women MPs kept pension payout at 60 from 2012.
So not one penny has been saved in tax or towards Austerity by the rise in retirement age.
But youth jobs lost in the ghost town high street as it is the over 50s who shop in town centres the most.
A lot more than the so far 530,000 women who lost state pension payout from 2013 is being lost to Labour as voters, as those women are coming off the electoral roll. Because numberless millions of women lose all state pension for life as well from the raised retirement age for the 1950s Baby Boomer generation born from 1953 to 1965, and then onwards forever however young you are now. The state pension is being withered away by the Flat Rate Pension, that is not more, but less or none state pension for life for millions.
You might care to share, please, the petition on your personal and Labour and TUSC social media, so that you may inform women especially (even bigger losers under Austerity than men) that Labour or TUSC would bring back state pension at 60 for women and revoke both Pension Bill and Flat Rate Pension.
https://you.38degrees.org.uk/petitions/state-pension-at-60-now
However many signatures the petition gets, it will not change the Coalition, but it might bring votes to Labour and TUSC by informing the electorate being lost as voters to all other parties. Thank you.
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‘As sole manufacturers of dollars whose debt is denominated in the dollar, the US government can never become insolvent ie. unable to pay its bills. In this sense, the government is not dependent on credit markets to remain operational. Moreover, there will always be a market for US government debt at home because the US government has the only means of creating risk-free dollar-denominated assets.’…….
Which indicates why Saddam had to go and why the US does not like the Euro. Saddam wanted to trade oil in Euros and that very act threatened the entire US economy and its house of cards national debt.
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Reblogged this on Britain Isn't Eating.
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