EVERYTHING YOU EVER WANTED TO KNOW ABOUT HOW OUR MONEY SYSTEM WORKS BUT WERE AFRAID TO ASK

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EVERYTHING YOU EVER WANTED TO KNOW ABOUT HOW OUR MONEY SYSTEM WORKS BUT WERE AFRAID TO ASK

by Prue Plumridge

At a time of great political and economic uncertainty you may be scratching your head and asking what on earth has this article to do with you as you’ve enough trouble just keeping your job and your finances in order let alone worrying about getting the government deficit down and paying the national debt back! What a temptation it is to shake our heads and defer to the experts who, we believe, must know better. The subject of economics might seem a little tricky but the basic concepts are simpler to understand than you might think at first glance and, rather than being a dull and arcane subject, it has everything to do with your life and your well-being.

So let’s start with a short economics quiz. No cheating now just answer the following questions with a yes or no without peaking further down for the solutions.

  • The state money system operates like our own household budgets
  • Government spending relies on taxation and borrowing
  • The government needs to reduce the deficit, balance the books and save for the future
  • The government must learn to live within its means
  • The government has to cut public services like the NHS, education or welfare because we can no longer afford to pay for them

If you answered YES to all of those questions you might be surprised to learn that you have fallen into the mainstream trap. This is what mainstream economists and politicians want YOU to believe. But what if everything you ever thought you knew about how the money system works wasn’t actually true but was being used to justify an ideology which includes austerity and cutting the public services we all rely on?

Well that’s exactly the case! YOU have been deceived.

WHAT YOU NEED TO KNOW:

  • The UK government issues the currency out of thin air via keystrokes on a computer – yes really! Banks create money out of thin air too when a customer takes out a loan but that debt must be repaid with interest.

 

 

  • The UK government is not like a household or a business where its finances are concerned
  • When the UK government spends it creates money by crediting the reserves of commercial banks held at the central bank – the Bank of England. A monetarily sovereign government like the UK can never run out of money and can always meet its liabilities as long as they are designated in the local currency, in this case our British pounds
  • The government as the currency issuer spends money into existence and doesn’t need to tax or borrow on the markets to fund its expenditure. Think about it:
    • What sense would it make for the government to borrow money it had issued in the first place?
    • How can the government spend tax before it has received it? Your tax obligations can only be paid once the government has issued the money and it is deducted at source by the taxman from your salary. (And just to shock you a little bit more do you know what happens to your tax? It gets extinguished from existence.

So, tax is not funding government expenditure. We have just been conditioned to believe it does.

  • Tax does, however, have a number of specific functions which include:
    • Ensuring that the economy does not exceed its productive capacity and lead to inflation – taxing more if the economy starts to overheat and taxing less if it is slowing down.
    • Enabling wealth to be distributed more equitably. So, yes, the rich SHOULD pay the tax they owe but not because it is funding healthcare, education or public services. It does not.
  • If our expenditure exceeds our income we will be in debt and it may cause us financial concern. However, a government deficit is far from being the bogeyman it is presented as by experts and politicians. (Just to be clear a government deficit is difference between tax received and the amount government spends and the national debt is the accumulation of those deficits). Deficits are, in fact, normal and necessary. They represent YOUR income. The politicians won’t tell you this (perhaps they don’t know) but in historical terms governments have run fiscal deficits for most of the time and have hardly ever run balanced budgets. Indeed, when it has happened they have occurred just before economic downturns. Think about that. What conclusions might you draw?
  • Budget surpluses are not the equivalent of saving to fund future government expenditure no matter what the politicians tell you. As the currency user you can save for that holiday you’ve always wanted but this does not apply to a sovereign government which is the currency issuer, cannot run out of money and can spend when it chooses. When a government chooses to pursue a public surplus what it actually means is removing wealth from the non-government sector -in other words you and me, the currency users. When that happens poverty and private debt increases instead. And that is exactly what has happened.
  • When you borrow money from the bank you have to repay the debt with interest. If you don’t the debt collector will be round pretty sharpish. This does not apply to a monetary sovereign government which cannot go bankrupt so the debt collectors won’t be knocking on the door of the treasury ready to haul off its assets any time soon.
  • Government funds public services like the NHS through creating money not by borrowing or taxing to pay for it.

But won’t ‘printing’ money create inflation I hear you gasp. After all you’ve heard about all about hyperinflation in Germany and Zimbabwe and politicians keep telling us all about the evils of ‘printing’ money and hyperinflation. As with everything there are caveats – nobody is suggesting for a moment that a government could carry on spending ad infinitum. Money may be infinite but resources are not.

The UK government may not be constrained financially but it is limited by availability of real resources – people, skills, technology, equipment, infrastructure, natural resources and ecological constraints. It is NEVER constrained by money.

We often hear journalists and politicians talk about a government’s financial credibility suggesting that an increase in the debt or deficit is an indicator that a government cannot be trusted to manage the economy effectively. However, this is the wrong measure of effectiveness. We should judge a government on the economic choices it made and whether it advanced public purpose. Did it create the necessary infrastructure to sustain a healthy economy? Did it invest in the health of the nation, in education, transport, food and farming security, renewable energy infrastructure or research and development? Did it ensure that citizens were protected in the event of illness, unemployment and disability or provide good pensions? Did it pursue full employment policies? Did it spend enough during economic downturns and offer a job guarantee for all those who wanted to work? And lastly did it use the available resources in the most effective way possible for the benefit of all?

If the answer to any of these questions is no then a government has failed to deliver in its primary purpose as a servant of the people. “The Government is us”.

Remember, a good government is one which:

  • deficit spends enough in relation to the prevailing economic conditions.
  • makes choices aimed at ensuring the well-being of the many and not just the few using the available resources as effectively and equitably as possible.

So, when people ask you as they invariably will ‘‘can we afford it’ the answer is yes.  The government creates the money and when it spends it benefits the private, non-government sector. In economic parlance, a government deficit equals a private sector surplus.

In short, spending equals income to someone – you, me, public service employees, pensioners, sick and disabled people receiving benefits all of whom will spend that money in the local or national economy not to mention businesses who will invest if they are confident in the government’s handling of the economy.

While we focus on the question of whether we can afford it in money terms we are ignoring the more important question of what the consequences are for the health and economic well-being of the nation if governments don’t spend adequately.  Austerity and cuts to public services have been presented as a financial necessity (however erroneous that argument is) and yet at the same time this government has had no problem at all with magicking up money from thin air to purchase weapons, fight wars, repair the Royal Estate, hand out tax breaks to the already wealthy or give public money to private corporations to run public services. It turns out the government is a real handy cash cow for the corporate sector.

Economic well-being depends not on money but governments making good choices which benefit us all and, given the record of the Conservatives over the last seven years, this is the question that should be on our lips not can we afford it.

 

Credits to:

https://era-blog.com/2016/12/05/paying-for-public-services-in-a-monetary-sovereign-state/

https://www.thepileus.com/economics/jeremy-corbyn-does-not-need-to-borrow-to-pay-for-his-policies/

https://www.thepileus.com/economics/labours-economic-alternative-to-neoliberalism/

http://bilbo.economicoutlook.net/blog/?p=25961

https://www.theguardian.com/commentisfree/video/2015/feb/04/another-economic-crash-is-coming-how-did-this-happen-video

https://www.theguardian.com/money/2017/apr/08/consumer-debt-loans-credit-cards-bank-of-england

 

 

 

 

 

 

How to get rid of a democratically elected leader

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How to get rid of a democratically elected leader – advice for rebel MPs

First and most importantly, play the long game. Don’t jump in with some half-baked scheme like a mass resignation… and particularly don’t do it if you haven’t a plan as to what to do if the leader refuses to step down.

Why not?

One, the membership is going to know that you have absolutely no respect for them … or for democracy.

Two, you will look very silly when you find yourself trying to justify your behaviour.

Three, you are dependent on the goodwill of your activists to get re-elected.

However, if you unfortunately do find yourselves forced into another leadership contest, whatever you do, don’t try to stop the leader being on the ballot paper by legal or any other means! And don’t expel or exclude members from voting on spurious grounds.   These are a total godsend for baking in and increasing your unwanted leader’s mandate.

Of course, it is all to the good if you succeed in disgusting some members into resigning from the party but there is also the danger that more will be disgusted into backing the leader.

Over and above all this, there are two predictable consequences.

The first is who is going to be stupid enough to put themselves up against the leader in these circumstances? It is bound to be a second rate candidate who will be an embarrassment and will justifiably entrench the view of the leader as the best choice.

Secondly, resigning from the shadow cabinet leaves the space for the leader to appoint his supporters, and allow the ‘wrong’ sort of new-intake MPs to gain valuable experience of ministerial office for the future.

 

Finally, don’t choose a moment when the government is on its knees. You really don’t want anyone to be able to accuse you of putting your own interests before the good of the country.   Even worse, you don’t want to be accused of trying to destroy the party rather than let the democratically leader lead.

 

So if that’s the wrong way, what is a more successful strategy?

 

First of all, if you stand back and analyse the problem dispassionately, you will see that there are only two routes to deposing the leader.

One is to induce him to stand down by bullying, misrepresenting, maligning, vilifying, denigrating, disparaging and smearing him and his team. You need to pick on everything and anything… be outraged, constantly outraged … magnify and blame the leader however ludicrous the suggestion.   All the isms are good… sexism, racism, being anti-Jewish people … and don’t forget to smear his supporters with the same. Accuse the leader of having created a personality cult, a mob that frightens women MPs with their threats of violence or worse. Meanwhile, keep on antagonizing the membership – if they object (however passively) you can get them expelled or suspended. Ditto CLPs who vote in officers who are supportive of the leader. These can be shut down for any number of reasons with the help of existing councilors and MPs.

By the way, don’t forget to smear the membership as being looney-entryists who don’t do any work and are deviously trying to make the party unelectable.

Brilliant if you can use all your contacts with sympathetic members of the mainstream media to get them to jump on the bandwagon.   This will of course be made all the easier by the natural inclination of the government’s supporters. The real humdinger is to get previously loyal supporters to turn on the leader.

However, there is a most important caveat. Do not let your chosen successor or his/her potential shadow cabinet members get pulled into this attack programme. They must keep their hands clean.

It is imperative to triangulate the ‘attack’ team with the ‘future leaders’ team.  The first team should be the shock troops who will create the space in which the leader is wounded, undermined and discredited.

The second team must be more consensual and tonally emollient.  As conflict flares, this group should move incrementally into the space opened up by the first group’s assault. They need to be pained about the disunity and the abrasive nature of the debate, but will acknowledge the need for it.

If asked about the leader, the ‘future leaders’ need to say how much they like and respect the leader but with great sadness, they cannot believe that he is up to the job. Again, this has greatest impact when it comes from well-known previous supporters of the leader.

But I said that there are two routes. The second is a real headache in terms of deposing a leader who won’t resign… and that is what to do about the majority of party members who support the leader.

You need to acknowledge that you are not going to convince them overnight that they were wrong. Be patient because over time, with the national campaign you are mounting, the atmosphere in the party will become increasingly acrimonious at branch and constituency levels.

Above all remember that the members are unlikely to accept a replacement for the leader, until it is demonstrated to the party members that he is unelectable.

But you can surely arrange that. Your press briefings and outrage will have made it clear to the electorate that it is not a party worth voting for, so numbers should plummet in the Opinion polling… and it should be little problem to utilise those local party members and constituency officers who backed the ‘mainstream’ candidate in the leadership contest. They are frequently those in positions of power, know their way around the rule book and procedure and can run rings around the new naïve membership.

Make sure that for local elections and (most importantly) by-elections, the candidates that are adopted, are as anti to the leadership and his policies as possible. Doubly humiliate the membership by getting them to work for the election of candidates who will do their best to bring down the leadership.

Either which way, this is a great strategy. If the election is won, it is in spite of the leader and if it’s lost, it’s the leader’s fault. It will be even better, if the successful new Mayor, MP etc can publicly snub the leader… superb anti-leader publicity and inviting the membership to feel really stupid for having backed the candidate.

So in summary, the job is to undermine and discredit the leader at all times, regardless of how mindless and unjustified the attacks but remember to keep the chosen successor away from the fray. On no account, acknowledge any successes that the leader may have. In fact, ignore him. Talk in public as if he does not exist, deny that he has any policies and suggest that the party is not opposing the government.

With regard to the membership… well they really don’t matter apart from turning them off voting for the leader. The more disillusioned, the angrier and the more disempowered they feel, the better. You want them to either turn against the leadership or leave.

Then as soon as you’ve got the party back, make sure that such a situation can never, ever, ever happen again.

A final warning, consider how you feel about the deputy leader. If the leader steps down, the deputy leader could argue that they are the legitimate leader. It’s what happens in the US when the President is assassinated and you don’t want to jump out of the frying pan into the fire.

 

Interesting links:

Oliver Tickell wrote way back in November 2015:

To understand is to resist

The first thing is for us all to understand what is going on. The rush to attack and denounce Corbyn is not based on anything he said. After all, what’s to disagree with?

It is not a sign that a debate is taking place in the Labour Party. The ferocity and intensity of the attacks is, on the contrary, intended precisely to prevent rational debate and forestall any reasonable discussion of the issues.

The purpose is simple. It is to brand Corbyn a softie, a cissy, an ex-hippy peacenik, unfit to rule, weak on defence, a risk to national security, a left-wing corduroy-jacketed beardie scarcely fit to serve as a humanities lecturer in third rate ex-Polytechnic University.

It is above all to present him as, and render him, unelectable – a man who can only lead Labour to abject failure in any future general election. And so convince the great mass of the Labour Party to turn against their failed left-wing champion and elect in his place an ‘heir to Blair’. Someone more like … David Cameron?

So first, understand. Second, don’t fall for it. Third, resist.

http://www.theecologist.org/blogs_and_comments/commentators/2986318/shooting_to_kill_corbyn_the_coup_is_on.html

 

 

(Personal disclaimer: The blogger is a Jeremy Corbyn supporter and will continue to support him and his policies until such time as he freely decides to step down.)

A Tale of Two Deaths – NHS and Private Health Care

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Some years ago, two good friends died within a few months of each other … M (female aged 63) in the plush surroundings of the private wing of a London Hospital…. the other, P (male aged 56) in a NHS hospital in the Wirral.   Their personal circumstances could not have been more different.   M had a very comfortable, successful professional life whereas P was one of Thatcher’s casualties, consigned to the benefits scrap heap and unemployed since the 1980s.

I’m write now, because the manner of each of their deaths offer such a vivid picture of why we need to fight for the reinstatement of the NHS and a National Care Service… why privatization and financialisation of our health needs lead to the two tier contradiction of too much for those who can pay and too little for those who can’t.

M became increasingly ill with ‘a mystery’ illness only a few months before her death.   Eventually, she was admitted onto the private wing of a vast NHS hospital, in one of the wealthiest areas in central London. When I visited, I waited on leather bound settees, in a plush carpeted area decorated with original art works on the wall and filtered coffee on tap.

I have no doubt that M received state of the art medical treatment in her palatial room, with magnificent views over the London skyline.   However, when I last saw her, she was desperately phoning her husband to get onto the private health insurer because they had refused to fund the treatment that her consultant wanted to prescribe.

This was only two weeks before her death. She lay prone in her bed, with oxygen feeding into her nose. Her skin colour perfectly matched that of her white sheets. But, nevertheless, she was forced into worrying about the funding for her treatment because it was above that which the private insurer could authorize and ‘their special committee would not be able to consider the claim until after the weekend’.

I watched on, as she tried to explain over the phone to her husband that he needed to make the health insurer understand the urgency of the situation. Her desperate husband asked if they couldn’t just pay for the treatment outright. ‘No’ explained M. ‘The consultant says that any additional payments would invalidate the insurance plan and the insurers would then withdraw all payments for the hospital room and her care’.

I cannot describe my horror at the situation.

 

In contrast, P received the most extraordinary surgery and expert care in his NHS hospital without any financial limitation.   Through a freak accident, he had managed to dislocate his shoulder and somehow ruptured his oesophagus… I never got a very clear picture of how. Nevertheless, many weeks after 3 hours of surgery and a 3’ long incision spiraling around his torso, he had ‘recovered’ sufficiently to be sent home.

P lived alone, had had major surgery and yet there was no aftercare… no follow up. An extremely elderly neighbour (without a car) did a bit of shopping for him and that seemed to be it.

P was a highly intelligent, well-read socialist… a friend, made online.   We never actually met… so I cannot give the details as to why he did not receive help from social services or health checks from his GP… but I know that I made him contact the doctor after a few weeks when he confessed that he couldn’t eat and whenever he drank anything, it burned his whole insides!  That was the first time that he’d seen a doctor since leaving hospital.

Unfortunately, his oesphagus had split again and he was re-admitted to hospital for more expensive surgery. He lingered on for a few weeks before finally succumbing to a lung infection from which he eventually died.

I am not for a moment suggesting that either of these two deaths resulted from medical negligence.

But sumptuous surroundings are no compensation for the additional nightmare of exceeding your insurance policy’s spending limits…

And, there is little point in state of the art surgery if there is no aftercare in the community.

Under the Tories (with the help of the LDs in coalition) we are inexorably moving towards the two tier system of the US even though they spend more per capita on health and have worse outcomes.

The truth is that when there is a profit motive, the rich are over-investigated, and the poor are under-treated.

Stuart Hall despaired, in 2012:

“How can millions of people have benefited from the NHS and not be on the streets to defend it? Come on. The NHS is one of the most humanitarian acts that has ever been undertaken in peace time. The principle that someone shouldn’t profit from someone else’s ill health has been lost. If someone says an American health company will run the NHS efficiently, nobody can think of the principle to refute that. The guiding principles have been lost.”  https://www.theguardian.com/theguardian/2012/feb/11/saturday-interview-stuart-hall

 

Today’s demonstration may be later than he wanted but the many thousands turning out to march today must have pleased Stuart Hall.

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The Labour Party under Jeremy Corbyn pledges:

‘We will end health service privatisation and bring services into a secure, publicly-provided NHS. We will integrate the NHS and social care for older and disabled people, funding dignity across the board and ensure parity for mental health services.’

http://www.jeremyforlabour.com/pledges

The only question is what sort of health service will we be left with after 10y of Tory asset-stripping?

 

Why the hell doesn’t Corbyn put the bell around the cat’s neck?

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‘Why the hell doesn’t Corbyn put the bell around the cat’s neck?’

Cryptic?

No. It’s the Aesop’s fable that springs to mind when I read the various Princess and Princeling (elected or not) posturings and complaints about Corbyn and Copeland:

The mice call a conference to try to decide on how to stop the cat catching and eating them. One ‘princeling’, or it might have been a ‘princess’, got up and announced that the solution was to put a bell on the cat. At first, the other mice were all pleased and excited to have a solution. Then someone asked ‘How are we going to put a bell on the cat?’ ‘Oh’ said the prince/essy mouse ‘If you’re not going to listen to my advice, I’m off’. And with that, she/he flounced off.

Like all the rest of the mice, I’m left wondering if I’ve missed something … but no. That really is the sum of it.

In fact, there is another fairy story which fits … The Emperor’s New Clothes.

 There are two fraudsters who manage to persuade the Emperor that they have tailored him a magnificent set of clothes which only the intelligent can see.

The Emperor doesn’t want to admit that he can’t see a thing. So he pays the men a huge amount of gold and wears his new ‘clothes’ in a procession down the High Street. The people, suitably primed that they must be stupid if they can’t see the wonderful clothes, ‘ooo’ and ‘argh’ about the magnificent appearance of their King.

All that is except for one little boy who shouts out that the King is as naked as the day he was born.

No-one ever says what happened to the little boy. I guess that he was pilloried by the combined weight of the press and BBC… and by right wing MPs of all political parties. The entire weight of the establishment would have come down on the little boy’s head.

And the people in the crowd?  Well, I imagine that like all groups of people, they won’t all have thought the same thing.

Some will have persuaded themselves that they really could see the non-existent robes. Others will be more cautious and want to give the fraudsters the benefit of the doubt.  Another group will have seen exactly what is happening but won’t want to be pilloried like the little boy and decide that it’s better just to play along with the fraud because it’s too difficult to go against the establishment.

 Then there will be those who see the fraud as good thing… good for them that is.

However, there is a final group. These will be those brave and honourable souls who will gather around the little boy, standing up against the fraudsters regardless of the jeers of the press and public.  Those who realise that it is better to see the world as it really is rather than as they fear or want it to be… because it is only by recognizing the lies, the frauds and the sleights of hand that they will be able to fashion a better world which works for ordinary people and not the vested interests of the establishment and global finance.

It speaks volumes that there is more reality to be found in the words of Conservative journalists like Peter Oborne or in the comment threads on ConHome than there is from a majority of the PLP.

I will finish with an except from a Danny Finkelstein article about Jeremy Corbyn and his supporters:

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