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

Quote

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

 

 

 

 

 

 

International Labour Day 

Quote

On International Labour Day, it is time to show solidarity with neighbours and workers across the globe. 

This was produced on reclaimed cardboard from the Occupy movement in the US, and was displayed in Tate Modern.


On Labour Day, we remember injustice that the government produce and have control of the money, yet do not share it fairly. It goes to the banks and to the rich 1%. These are the wealth extractors. The true wealth is created by workers, and resources from the earth. The government are elected to serve the people but they fail in their responsibility to share wealth with all citizens, creating poverty, and that is why we need a Labour government. 
We deserve and demand a fair society in which no person or town is left behind. We have a wonderful opportunity to overturn this injustice. Everyone who can should register their vote, and help to make history on June 8th.
Let’s take this opportunity.

 Vote Labour.

‘I don’t care who does the electing as long as I get to choose the candidates’

Quote

The actual quote is ‘‘I don’t care who does the electing as long as I get to do the nominating’ (Boss Tweed) … which is actually more to the point in the LP.

Think about it and it’s obvious – there is never just one election. There’s the one that we all know about and can vote in … and the one before where the candidates are chosen. The small numbers of people who determine the candidates are the gatekeepers and it doesn’t matter how good the franchise in the total electorate if the candidates are all out of the same box.

This isn’t a new problem. The rioting in Hong Kong 2014 (and since) was because the people were only offered a ‘democratic choice’ between those candidates chosen by the Chinese government.

In the US, they have primaries to choose the Democratic and Republican candidates who will contest the presidential election… but in reality only those candidates who are fantastically rich like Trump or funded by a small number of the mega-rich will make it as far as the primaries (hence Boss Tweeds’ quote). Bernie Sanders was the notable exception in not being beholden to large donors or Wall Street … and not coming from the 0.01%.

With legal limits on donations, there is nothing like the same big money problem in the UK… although there is much to be written about donors making it into the Lords and doubtless a great deal more, shrouded in secrecy. We also know that there are corporate and wealthy individual donors* from outside of the LP who are funding anti-Corbyn groups…

However, the Labour Party has a much more immediate, home grown, internal problem with gatekeepers, which has really come to the fore with the unexpected election of Jeremy Corbyn as leader.

Currently, the LP is a bit like a toasted sandwich. The top and the bottom are on the same page… democratic socialists. But the squidgy layers in the middle are the branch/constituency officers, councilors, LP staffers, MEPs and MPs who largely pre-date the Corbyn surge and are various shades of social democrats … the so-called soft left, Labour First and Progress aka the ABCs (the anyone but Corbyn brigade).

But significantly, it is the squidgy bits (and not the grassroots) that constitute the gatekeepers as to who can stand as a candidate.

Unsurprisingly, the ABCs choose candidates who share their social democrat politics and are invariably anti-Corbyn (eg Stoke Central, Oldham, Copeland and so-on)…

In other words, they choose candidates who do not represent the 61% of grassroots members who voted for Jeremy Corbyn… and the result is that the social democratic squidgies maintain their presence in positions of power.

Clearly by so doing, they put the majority of the grassroots in a hugely difficult position. Do they actively campaign for a right wing candidate, unrepresentative of the leadership or the grassroots, because ‘anyone from Labour is better than a Tory’**? Or do they reject the squidgies’ choice and lose a Labour seat? (The election of Sadiq Khan as London Mayor is a perfect example of the conundrum).

Given this state of affairs, anger is mounting to new heights as the ABC gatekeepers try to block democratic socialists from becoming branch/CLP officers or from standing as parliamentary or council candidates.

For many, this is the final straw on top of the last 22 months of coups, expulsions, suspensions, false allegations, tricks and sleights of hand by the ABCs. The stories are legion from packing selection meetings, excluding the full membership from voting, suspensions on spurious grounds and other techniques from the playlist provided by ‘The Hammer of the Left” (John Goulding’s book about ridding the LP of militant and excluding Tony Benn supporters).

It’s no surprise then that formal challenges are beginning to be mounted, and given the lack of support from the squidgy regional and national bodies, these are including legal ones.

For example, last month, eighteen pro-Corbyn members in Ealing LP were given unconvincing reasons as to why they were not considered as suitable to stand in selections for next year’s borough elections. This scale of rejection at this stage in the election cycle is unprecedented. And as a result, left wingers in Ealing CLP have decided to take legal action. (Donations gratefully received).

http://www.standard.co.uk/news/politics/jeremy-corbyn-supporters-crowdfund-legal-battle-to-challenge-labour-party-selections-a3514421.html

 

In Newham, there is an appeal to the national LP and their MPs to investigate the 2016 Mayoral ballot and the suspension of dissenting members. This is backed up by a 38 degrees petition. https://you.38degrees.org.uk/petitions/justice-for-newham-s-left?bucket&source=facebook-share-button&time=1492379140

Now, it needs to understood that these are not isolated examples of the squidgy bit blocking toasty Corbyn supporters. These are just Corbyn-supporting members (like the majority of the membership) not feeling that they have any other choice. The grassroots left can’t even appeal to the regional or national bodies because those bodies are also overwhelmingly dominated and controlled by the squidgy layer.

Of course, this internal mismatch all started with the unexpected election of Jeremy Corbyn.

Cast your mind back to June 2015. The Left were in despair because there was a choice of three pretty much identikit and non-descript candidates. It was so uniform and uninspiring that non-Corbyn supporting MPs were persuaded to make up the numbers to nominate Jeremy in an attempt to make the whole process look a bit more democratic.

In other words by default, the PLP gatekeeping process broke down… and to the ABC’s horror, Jeremy was elected by an overwhelming majority of the grassroots. (The Right has done nothing but try and depose him ever since – using not so much fair as foul means).

The issue boils down to whether the LP is a democratic organization representing its grassroots membership or whether the LP is actually its elected representatives… and of course, taking note that the LP’s elected MPs and councilors have all been successful in being passed by the gatekeepers.

Why is this particularly relevant now?

It’s because we are in a bit of an impasse. The ABCs say that Jeremy Corbyn is unelectable in 2020. However, this view is hardly convincing when it is clear that they will fight tooth and nail to make it impossible for another more ‘plausible’ but similarly leftwing candidate to replace Corbyn. The most obvious way out of the impasse is for the number of nominations required from sitting MPs to be lowered (although in my view, nominations should be abolished completely)

This is the purpose of the so-called McDonnell proposal scheduled for LP conference in September. The argument is that by lowering the ‘gate’ to 5% of MPs, left wing MPs would not be excluded from standing for the leadership of the LP.

How are they ‘fighting tooth and nail’?

One is by proposing an amendment to reverse the leadership voting away from OMOV and back to the old system in which the MPs, the Trade Unions and the membership each have a third of the vote.

Another is by trying to pack the conference with anti-Corbyn delegates to vote against the McDonnell amendment …

And yet another is to try and make sure that their candidates re-elected onto the Conference Arrangements Committee and the National Constitutional Committee.

So this is but another version of the gatekeeping… by engineering to pack conference with anti-Corbyn delegates, the ABCs hope to ensure that amendments contrary to the views of the Corbyn-supporting majority of the membership are carried.  This can well happen because this is exactly what occurred at last year’s conference.

To be clear these tricks have been used over and over again, reaching their zenith, under the command and control tactics of New Labour. They are profoundly undemocratic in both spirit and structure and the very future of the LP is at stake unless it can be reformed and reconstituted. Needless to say, they also underpin the parachuting of candidates***, like Tristram Hunt, into safe Labour parliamentary seats but that’s a topic for another day.

For now, the imperative is to make sure that we send representative delegates to conference, preferably mandated to vote for the McDonnell resolution and to vote for these grassroots candidates to the CAC and NCC.

Unfortunately, we seem to be fighting for a Labour Party against a core of people such as Blair and Mandelson, who would rather that the LP was dead than red.  In fact, Tony Blair is said to be intending to create a new ‘centre’ SDP2 party and announce it just before the 2020 GE.  I think that says it all.

The LP needs to be less of a toasted sandwich and for the whole membership to gain a proper respect for democracy and fair play.

 

* Gossip is that Lord Sainsbury is transferring his thousands away from Progress to Tony Blair’s new party.

**New Labour managed to lose 5m voters by 2005 but were still returned to gov’t because the blairites relied on there being nowhere else for the Left to go.

***In fact, with Constituency by-elections, there are two sets of gate-keepers, and arguably three. Three members of the NEC draw up a short-list, from which the CLP can choose a PPC (Prospective Parliamentary Candidate) .. So, whoever chooses which NEC members will vet the short-list has a tremendous impact on the final choice of PPC. This is the mechanism by which Blairite candidates like Tristam Hunt were parachuted into safe seats like Stoke Central, regardless of their lack of local roots.

How Blairites rigging 2017 conference delegates – are they doing it to YOUR CLP?

 

How to get rid of a democratically elected leader

Quote

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.)