Has The UK Run Out of Money - Is The Government Broke?
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- Опубликовано: 1 июн 2024
- A look at how much a government can borrow? Why it depends on several factors, and is UK debt sustainable?
00:00 Intro
00:39 How Does UK compare?
2:42 Who Buys UK debt?
5:07 Debt in a Recession
6:34 Higher Debt Higher Yields?
8:37 The Truss Budget
10:35 Debt interest payments
11:35 Problem of Debt
13:12 Is the UK broke?
14:26 UK fiscal rules?
15:20 Printing Money
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If interested, more detail on the fascinating Truss/Kwarteng Experiement and why it failed. ruclips.net/video/5WT4KjwraGE/видео.html
For some it was a resounding success. Can you do an explainer on that?
And the economic implications of myriad asset management firms buying up property across the UK.
It failed because Andrew Bailey doesn't seem to think his responsibility to ensure price stability includes UK Gilts
He burned through £60 billion propping up gilts! How is he supposed to stop foreign governments & asset managers selling their positions? 🤔 @@mk91-vz1oj
The UK has run out of decent politicians that is a fact.
I'm not so sure, as there are many, and they are not allowed in politics. I'd say Great British politics is under siege by Marxist(Capitalist Communist) conundrum politicking, that even the DPRK dropped in 2012 under Kim Jong Il. The reason DPRK dropped Marxism is they said it's too difficult to uphold, and consider they often place 2nd, or above, in the Math Olympics, it's quite the statement. Even China is finding it super difficult to create an image that portrays Marxism as being anything other than drab and soul destroying.
Unfortunately this is worldwide issue. Only clowns and populists get elected.
George Galloway?
Long ago.
@Mnemonithe the mother of all parliamentarians. cCarrier
It's not just the "debt" that should be focused on - it's the cost of servicing that debt.
Currently we spend more money servicing debt than we spend on public education so that's a big problem.
But, no, the most important thing is not the cost of servicing the debt but finding people to lend you the money. Once a country runs out of creditors, it finds itself in Zimbabwe's, Venezuela's, Lebanon's, Sri Lanka's or even North Korea's position. The UK is running out of creditors, which means that sooner or later we will have to default on our debts which means over night we will have to sack tens of thousands of police officers, teachers, nurses, etc and significantly cut the money we spend on welfare payments and government services because there will literally be no money. That's what they're doing in Argentina right now. Alternatively, we can inflate our way into keeping the lights on, so that you have to spend all your monthly wages today because next month your monthly wage won't be enough to pay for English breakfast. That's the situation in Zimbabwe, Venezuela and Germany in the 1920s.
February '24, £8.9 BILLION borrowed and over £2.6 TRILLION NATIONAL DEBT at 2.5% annual interest and the usurper Prime Minister comes on video and tells us how WELL the country is doing to get his votes at the coming election.
Yes we are BROKE AND BROKEN as a country, just what the WEF wants.
It's not a problem, a sovereign currency issuer like the UK could pay off the entire debt tomorrow, without causing inflation. The reason they don't is because safe assets denominated in pounds are a great investment for pension funds and provide a method for foreign governments to own UK assets without succeeding control of real assets.
@@garethhumphries4039 The interest rate on the debt is a very real problem, you're giving UBI to people who already have money in proportion to how much they have. If we want the participation rate to go up, stopping doing that might be a good start.
@@garethhumphries4039 If that were true, the UK would pay it off tomorrow and save enough money to double the education budget. If the UK could just print money and not have any problems, it could cut taxes or increase spending on services and everyone would win. Money does not grow on trees, no matter how many socialists and failed Greek finance ministers tell you it does.
Yes debt was very high in the 50's but we were a world leading country in manufacturing. We now have an economy based on consumerism and services.
February '24, £8.9 BILLION borrowed and over £2.6 TRILLION NATIONAL DEBT at 2.5% annual interest and the usurper Prime Minister comes on video and tells us how WELL the country is doing to get his votes at the coming election.
Yes we are BROKE AND BROKEN as a country, just what the WEF wants.
Success in Industry demands not just engineering excellence, but real leadership, the sort this country lacks. A lot of acquisitive money grubbers don't equate to overall prosperity..
Manufacturing of the kind we had in the 50s is less profitable than it was then, there are types of manufacture that are profitable but it is not consumer manufacture, it is support manufacture.
The UK also had much less wealth inequality in the 50 -70's. And the rich paid tax
Agreed, Good Comment.
The average PAYE worker gets hammered with more and more taxes year on year.
It isn't our fault.
Genuinely sick of seeing the government pi55ing away our taxes on stuff that doesn't benefit US in any way, then telling us we need austerity.
No, Labour won't be better either.
But we keep voting the same sh!t into power, Tories/Labour as George Galloway correctly said “opposite cheeks of the same arse”
There's plenty of money for Ukraine! 😉
The system is screwed, these bunch always counted on the capital owners for their business, but now they won't do anything because jobs don't mean a livable earning for many
Are you not happy paying for boomer politician wages, boomer pensions, Israel's war efforts and a dilapidated NHS?
The only reason the incumbents want the gig is to feather their nest.
You forgot that Sunak when Chancellor was warned by the treasury to insure against interest rate rises and maturity dates on Bonds and didn't take the advice. This cost the UK tax payer 11 billion.
49-day PM Truss cost us £40Billion and brex5h!t continues to cost us 4% of GDP.
@@actuallypaulstanley the biggest challenge facing the UK is not leaving the EU but the slide in productivity. The EU's global relevance is pretty limited with the rise of China and India.
@@garybird8646
Yes, leaving our biggest nearest trading partners in the EU did wonders for many small businesses.
Not.
@@RoofLight00 as long as your small business is okay I'll be alright being 10k pa worse off due to the stability and growth pact.
Fascinating. I’m 75 and have lived through most of that. But I’ve never lived in a period when the fabric of the the country was so run down. A small elite is making huge amounts of money. Nowhere in your analysis do you mention that. Nor do you mention tax rates for the more well off were much higher in the 60’s.
Sadly it's just not possible to tax the very wealthy like it was in the 60's. Right now you can move to Dubai and become a resident for tax purposes and pay zero tax, and the process takes only 2 weeks.... Putting a punitive tax on the wealthy might appease the far left but getting rid of our wealth creators will leave the country far worse off.
In the 1960's and indeed 1970'd there were capital controls which meant you could not simply take money out of the UK. You even had to pre book your foreign currency in the form of travellers cheques if you were going abroad. and you might not even get all you asked for!
Impose capital controls now and you could watch the UK descend into Zimbabwe in weeks if not days as all foreign business supplying the UK stopped supply.
@@ridethelakesyou can, the wealthy are wealthy because they own assets, moving a company is hard, moving land is impossible. The only way they would be able to maintain their income from the assets while avoiding UK tax is through tax havens that the UK allows. Close the tax loopholes, suddenly they can't move their wealth.
@@M9dq76it wouldn't, because the UK still has a large market and as long as it is profitable it still makes sense to trade, even if you are making less profit. Finding a market of 70+ million alternative consumers in addition to the markets you currently export to is generally difficult, particularly for large companies with high consumer saturation.
@@garethhumphries4039 They don't need to move the company. Sure the company will pay corporation tax in the UK, but then a Dubai resident can receive income in the form of dividends from that UK company tax free. The British don't 'allow' tax havens, they have no choice. Although it does have its own tax havens such as Cayman, British Virgin Islands etc, they could certainly close those.
You can print money, you can't print wealth.
February '24, £8.9 BILLION borrowed and over £2.6 TRILLION NATIONAL DEBT at 2.5% annual interest and the usurper Prime Minister comes on video and tells us how WELL the country is doing to get his votes at the coming election.
Yes we are BROKE AND BROKEN as a country, just what the WEF wants.
agreed
Correct. The wealth stays the same but just has more cash to buy it so the price goes up. And as forseen by trader Gary Stevenson this ”printed money” mostly ended up with the rich who continued to earn from their assets during covid.
How can tax keep going up and services keep going down. I’ve had enough and left
The Welfare State is the problem, just take “Our inactivity rate in the UK is 21.95%. In Iceland it is 13% and in the Netherlands it is 14%,” the Chancellor said last week, referring to the share of working age adults who are neither in work nor looking for a job. We have created a society of people who don't want to work or contribute.
Angela Merkal told the World in 2012 “If Europe today accounts for just over 7 per cent of the world’s population, produces around 25 per cent of global GDP and has to finance 50 per cent of global social spending, then it’s obvious that it will have to work very hard to maintain its prosperity and way of life,” Ms Merkel said in the interview.
“All of us have to stop spending more than we earn every year.”
This is the UK and EUs biggest problem
@@garyb455 Wild guess here but l imagine you have never tried living on state benefits. Or perhaps you imagine there is no welfare state in Iceland or the Netherlands? Or maybe you have got the wrong end of the stick: perhaps this is something to do with our comparatively poor levels of public health? If you compare obesity levels for example the UK is the 55th most obese nation, Iceland 74 th and Netherlands 129th. Life expectancy Iceland is ranked 20th, Netherlands 24th and UK 30th highest.
Presumably you have left for a typical European country where there are no personal allowances and EVERYTHING you earn is taxed?
I know it's gross! I can't leave due to family circumstances but I absolutely refuse to lift a finger to help the government that have destroyed the country especially where income tax is concerned!!!
Billions wasted on boat people
Great video! One thing to keep in mind is that the UK government is spectacularly bad at investing and building infrastructure. HS2 is just one example, but it also does not invest in the North, Northern Ireland, a reliable train infrastructure, nationwide broadband, smart meters, an electricity grid that can actually cope with electric cars becoming the mainstream, and so on. If the UK government borrowed, built and delivered these things ... the UK would be in much better shape.
All Uk govt borrowing goes into funding pensions, MP wages and insane policies like "eat out to help out" and lockdowns.
There was also a consistent failure to capitalize on EU funding for capital projects since it had to be a) additional and b) required 50% matching. Since we left the EU investment in the regions has collapsed
😢😢
They aren't incompetent, they are destroying the country on purpose. the only agenda they are succesful in pushing is the kalergi plan.
0:44 Ireland’s “GDP” is totally skewed due to the amount of tax dodging multinationals it has on its soil and is totally unrepresentative of the dire Social and economic circumstances the country is actually in.
Ireland is fully compliant with the latest OECD tax recondations.
It also has a budget surplus.
Had we been tax dodging we would not have gone bust in 2008 and required international loans nor would we have been paying 15% to borrow when.tje going rate was 1%.
In conclusion, I opine your post is bollpxollogy.
@@williampatrickfagan7590Ireland is like when you get out of bed in the morning with a "morning wood" - yes your girlfriend thinks it looks good but it's not real!
nice one William. Eli Lilly just invested .5 Billion in manufacturing in Ireland. Hopefully that moaner rinnin can get a good job there.
Yea we’ve got horrible problems like full employment and government surpluses. Eek what will our economy do
@@williampatrickfagan7590Irelands central’s bank doesn’t use GDP because it’s so skewed. They use GNI
Keep up the good work. This is a goldmine for me.
Trickle-down economics posits that by incentivizing the wealthiest members of society with tax breaks and other economic advantages, the resulting wealth accumulation will eventually “trickle down” to benefit the broader population. However, in practice, this theory often leads to disproportionate wealth concentration among the affluent, leaving the majority with minimal tangible benefits. In analogy, it’s akin to pouring treacle at the top of the socioeconomic hierarchy, with the hope that its sweetness will permeate downward. Yet, more often than not, the lower tiers are left with mere traces of sweetness, while the bulk remains concentrated at the top, failing to effectively address systemic economic inequalities.
Decreasing corporate tax isn't necessarily a bad thing, it's pretty easy for British businesses to pay little to no corporate tax anyways through the Isle of Man. If you decrease corporate taxes but have more efficient taxes like RGCT, LVT, etc then it might be a good thing. I definitely don't trust crooked politicians to have the people in mind however.
mere traces? We felt nothing!
If the Tories ran a trickle down Sundae, the common man on the average wage would be a dried husk of sponge at the bottom. The average wage should be enough to buy an average house, with average groceries, with an average car, etc etc etc.
Instead the average man /woman is usually one big surprise bill away from defaulting on rent / mortgage. While the govt can get away with an increasingly higher debt to gdp, the average person needs to work and work and work for less and less and less
Its Trickle up now
Suck-up economics more like.
Too many immigrants!
Not enough spent on universities, Schools, housing and Frail Care..
And NHS!
I love your clear and without fuss explanations. Thank you !
Another great video mate! Thanks for keeping us on top of things really enjoy your videos as said before 👏 cheers
I don't think any of our so called Politicians understand the value of Solvency Ratios or the implementation of Lean Six Sigma, designed to reduce waste. Large Companies use it. Why can't a Government? If you attend a Party in the Commons Wine and Food is on Tap free. I would love to see an Audit Report.
WTF are you talking about? This is a macroeconomics channel. If you want to see an ‘audit report’ go see the Public Accounts Committee reports, numerous National Audit reports etc.
It's not how much owe it's who you borrowed the money from that counts.
Germany has a high level of debt. Its saving grace is that it always borrows from itself.
Being a Creditor Nation (and once the world's largest) Japanese debt is a different type of debt when comparing it to the UK, albeit more volatile since it relies on the intrest repayments for it's neighbouring countries such as Thailand.
In fact, the economies of both Germany and Japan are very similar for historical reasons since both lost the war and both lack a sense of humour. Seriously though, both specialise in Vendor Credit, which is hardly mentioned by economists nowadays. Both export large amounts of machinery in return for things apart from just interest alone.
When I was in Jamaica, there was a lot of excitement for Germany had promised 200 Mercedes buses in return for a large chunk of real estate in the *Parish of Hanover on Jamaica's North Coast.
In the 1970s, the UK accepted a full shipment of oranges from Morocco in exchange for three Land Rovers.
Both Germany and **Japan's middle-classes have an awful lot of savings, too. Thus, both their treasuries issue bonds, which are snapped up by locals.
The UK is king when it comes to international offshore banking.
With Jersey, the Isle of Man and Gibraltar on this side of the Atlantic and ***Bermuda, The Cayman islands, and The Virgin Islands on the other side.
In fact, the USA borrows 20% of it debt from these UK overseas territories annually via the neighbouring USVI.
The UK also has a card up it's sleeve in that it has access to the many sovereign wealth funds and "principalities" that lie within the Arabian Peninsula. Nations such as Kuwait, Bahrain, and even Saudi Arabia were created by the UK after the collapse if the Ottoman Empire. When, at that time, many of these nations were not known to possess any mineral wealth whatsoever.
Such nations, including Brunei, are still loyal to the UK when it comes to financial loans and are willing to charge ridiculously low rates of interest and even defer repayments.
The UK has been bankrupt for a very long time.
Here's an old adage:
Debts grow mouldy, but they never go away.
*As an additional form of repayment, the Jamaican government gave Germany the exclusive rights to the wreckage of 'La Nina', one of the three ships that Columbus used to settle in Jamaica's Discovery Bay where he and his crew bade residence for nearly two years.
**the Japanese Post office held the world's largest pool of "sovereign" wealth, which was valued at 14 trillion USDs.
***Bermuda and the USVI - the latter of which was purchased from Denmark and known as the Golden Island, made their enormous wealth from supplying both Confederacy and Unionist armies, arms and munitions during the American Civil War.
Verbose, but debt is debt. You borrow from tomorrow ... and tomorrow never forgets.
What is the answer then in your opinion outside the arab point you made?
Is the UK still paying back it’s war debt to the USA whilst Germany didn’t have pay Russia but you would have thought that all that technology in the Tizard Trunk that was given to the USA would of been a major bill for them
@@Then.72Russia benefitted greatly from the transfer of technology, expertise and knowhow after the annexation of the former East Germany.
Britain's repayments to the US mainly consisted of giving up overseas territories such as the Pacific Island of Guam. It also allowed America unlimited access to the resources many former territories that were previously under Ottoman rule. ie the first ever American oil well capped outside of the US was granted licenses from the British. I think it was Azerbaijan.
@@glenfordburrell1076 Jet powered VTOL and Chobham armour was given to the USA plus EMKITS which is now EMALS etc ! Is this a part of the repayment because being just involved in a world war is nothing like being IN the actual Warzone
I'd like to know what the money was spent on becasue I cannot see anything tangible from it. And no, COVID bounce back loans do not count.
bank bailout interest
Corruption
It's in the bank accounts of the 1%.
is that you gordon brown ?@@BLUEMONDAY99
The Welfare State is the problem, just take “Our inactivity rate in the UK is 21.95%. In Iceland it is 13% and in the Netherlands it is 14%,” the Chancellor said last week, referring to the share of working age adults who are neither in work nor looking for a job. We have created a society of people who don't want to work or contribute.
Angela Merkal told the World in 2012 “If Europe today accounts for just over 7 per cent of the world’s population, produces around 25 per cent of global GDP and has to finance 50 per cent of global social spending, then it’s obvious that it will have to work very hard to maintain its prosperity and way of life,” Ms Merkel said in the interview.
“All of us have to stop spending more than we earn every year.”
This is the UK and EUs biggest problem
Love your videos.
Love your work, sir
Economic investigator Frank G Melbourne Australia is still following this content cheers Frank ❤
Very interesting analysis..
A closer look at your graph comparing government borrowing and the savings rate shows that changes in savings slightly lags movements in government borrowing.
Thank you !
Very good summary of the UK debt situation with lots of explanation of government debt in general, thank you!
One thing i miss though - so many data, so much information and not a word about the elephant in the room (no, not Brexit this time 😂). I mean the role of unfunded liabilities, which in the UK are proportionally higher than in similar economies because of the extreme centralization of everything: the British all eggs in one basket syndrome....
Parliament is one big sink hole
I think this is true. HMRC are coming down hard on small medium businesses to take in as much tax as possible..
With the Bank of England (BOE) buying a huge chunk of government debt via quantitative easing (QE), by 2014 Chancellor George Osborne reached an agreement with the BOE whereby, as I understand, interest paid to the BOE on bonds bought under QE would be remitted back to the Treasury after the BOE had deducted administrative costs. In effect, QE debt was interest-free. When people talk of interest paid by the government to service debt it is never made clear if it is the gross amount paid by the Treasury or the net amount after the BOE remitted payments back to the Treasury. I'd be pleased if a video clarified the cost of QE to the Treasury.
He say, “after a decade of creating money…” he means printing Monopoly money not backed by sweat labour or product weakening the hard earned pounds in our pockets. USURIOUS USURY BY THE USURIOUS!!!
All pounds are monopoly pounds, that's what it means to have a fiat currency, it had been like that since the end of Bretton woods in the 70s
@@garethhumphries4039 it has been like that since we accepted usury! Let’s all focus on the word USURY!
IMHO, it's all down to the housing crisis . The replacement of council housing with private landlords and the subsequent commoditisation of property , has led to millions dependent on housing benefit and income support due to in work poverty.
The debt itself is less of a problem than the lack of growth.
Some people run on high debt levels all the time, but that's because they have enough regular and reliable income to service that debt.
Extending this credit card analogy, the UK is borrowing more just to spend on its 'basics' because its 'income' ie taxation is consistently falling short of covering those costs ie its deficit as opposed to its debt.
Consequently the cost of serving the interest payments, effectively dead money, on its growing debt is steadily forming an ever larger part of its expenditure and consuming ever more of its productive output.
Arguably some of the best economics channels I've seen. Really would like to hear your take on other parts of the world.
Low interest rates are not sustainable whatever the debt is, because they lead to inefficient resource allocation. Suppressing them is how our economies are actually being destroyed. Interest rates keep asset prices within a range relative to their output, making only businesses that produce a return higher than the rate of interest viable. Thinking you can set it to what you want to for the purposes of government debt instead of to allow efficient resource allocation to happen is a mistake.
Interest rates have risen. These debts are unsustainable.
February '24, £8.9 BILLION borrowed and over £2.6 TRILLION NATIONAL DEBT at 2.5% annual interest and the usurper Prime Minister comes on video and tells us how WELL the country is doing to get his votes at the coming election.
Yes we are BROKE AND BROKEN as a country, just what the WEF wants.
Why doesn’t parliament call in the French loan? France hasn’t paid a penny to Treasury on its sovereign debt since 1931.
That a country can have a large debt in relation to GDP presupposes constant growth. Without growth, the debt cannot be repaid. The problem today is growth. Countries in economic stagnation have a hard time.
February '24, £8.9 BILLION borrowed and over £2.6 TRILLION NATIONAL DEBT at 2.5% annual interest and the usurper Prime Minister comes on video and tells us how WELL the country is doing to get his votes at the coming election.
Yes we are BROKE AND BROKEN as a country, just what the WEF wants.
Agree and the root cause of this stagnation? Resource depletion our economies run on the provision of cheap energy (oil gas etc). As that declines and costs more and more then resultant growth declines too
It would pay dividends to understand nature of the money. As the old credit theory of money says, money is debt.
Because money is debt, so called "borrowing" creates new money. Government debt is best thought as that part of the money supply that is publicly issued. That is why economic stimulus works; government is expanding money supply by issuing new money to the economy. Clearly we need public debt in the system, and adequate amounts of it.
The spectacular QE and half a trillion quid in borrowing for covid makes the Truss/Kwarteng fiasco look like a child's walk in the park.
Look at the gold price in £ versus $.
How is Ireland's percentage so small? I know the gdp number is very different from the real number in Ireland due to multinationals reporting there, but the percentage was a lot higher not so long ago
50% debt to GDP in 2010. I thought the tories austerity was meant to overcome this, but looking at your graphic makes me think that failed?!
In case anyone missed the first dozen times he mentioned it: Matt Goodwin has a Substack.
You know, in the long term this could be seen as a good thing. Germany with their war debt had to pay it back quickly by maximizing production, which allowed them to generate an income. We could do the same. I hear theres a company that can potentially make materials out of literally anything, I think it's called mattershift in the US. maybe our science industry could use that. Of course this will only be useful if we do have a debt crisis.
The markets behaved the way Sunak told them to. Wrecking the economy was the objective. Truss is just a tool.
Mwahahahahahah - the New World Order strikes again...
February '24, £8.9 BILLION borrowed and over £2.6 TRILLION NATIONAL DEBT at 2.5% annual interest and the usurper Prime Minister comes on video and tells us how WELL the country is doing to get his votes at the coming election.
Yes we are BROKE AND BROKEN as a country, just what the WEF wants.
@@Vroomfondle1066 Maybe, but it's the same situation even without that spin on it.
@@Vroomfondle1066 What is the purpose of this elusive "New World Order"? How wrecking the enconomy of the UK serves the interests of that "New World Order"?
the UK govt cannot run out of the £ sterling. Its impossible , legislation means that the uk govt taxes and borrows. Borrowing is a gold std hangover, to prevent swapping all your cash for claims on gold . Borrowing , if you speak to any central banker they will tell you that its monetary policy, i.e. When The govt spends , this creates additional reserves in the banking system, the CB is targeting a specific bank rate (rate at which reserves are lent by banks to each other ). if there are too many reserves in the system this drives the bank rate towards 0 (excess liquidity), so the central bank has to drain liquidity, this is done via borrowing, i.e. Gilts are exchanged for reserves (int bearing instruments for non interest bearing instruments), this pushes the bank rate back towards its target (drains liquidity). this used to be the case before banks lobbied for int to be paid on reserves as they were awash with them post 2008 and were earning no interest for holding them. So now banks get int on reserves and int on gilts. As they now get int on reserves there is no need to issue gilts other than to offer wealthy people with safe govt assets. its rendered obsolete
Finally someone who understands
It's just state accounting, that is all the Monetary Base is. 'Fiat' has no intrinsic value. 'Printing' is just Overt Monetary Financing (OMF) as soon as you see the word 'printing' you know macroeconomic training is not part of the conversation. (OMF) is not inflationary. If the economy was at full capacity of productive need, then yes, as it would be surplus to requirement. With the UK economy that is severely restricted this is not a problem, and would aid growth. Taxation is no longer a prerequisite for government expenditure. It hasn't been since 1971. This is all political choice, nothing to do with macroeconomics.
@@maria8809ttt Another person who understands
Everything we veiw, is through the narrow lens of the Capitalist Neoliberal Doctrine policies. The Global Morden Monetary Framework has a much larger scope of polacies available. A book I would recommend is called Reclaiming the State by Mitchell & Fazi. That's what people say they want to do. It is written by one of the world's leading heterodox macro economists. He explaines the the Global Monetary System that is already implemented and working 7 days a week, 24 hours a day. The framework is neither left or right. It only becomes politically leaning when policy is applied to the framework. There were changes to the framework in 1971 when gold convertibilty of currency ended, and permanent Fiat replaced the Gold Standard. Free floating exchange rate also ment that a government no longer had to be bound by its balance sheet. The book is written like a macroeconomic story about how we got here and how to obtain public good growth going forward. MMT stands for Morden Monetary (as in Fiat) and Theory (as in accademic theory such as music theory) Not as in unproven. It is the manuscript of the global currencies. You could think of policies as the notes on that manuscript. @@mk91-vz1oj
My field of study is macroeconomics at a govermental level.
The governments net worth is negative and foreign exchange reserves are on a downward trend.
So, what was all that Austerity for?
There probably is plenty of scope under MMT for the UK to print money for investment. As was said in the video, inflation is a constraint but at present most of the inflation is a supply sided source rather than a demand sided one. Stephanie Kelton's book "The Deficit Myth" is well worth reading. She was a key part of Biden's economic task force that used MMT to create $1.9 trillion for the covid period including investment. The US, UK and Japan can do this as they have their own sovereign currency but other countries like Greece don't. Some countries such as Argentina do but have to borrow in a foreign currency such as USD so are less able to use MMT.
Finally someone who's read something useful on the topic
The danger I see with MMT is it is entirely focused on the supply side and yet for it to work properly the demand side needs tighter control (and simply taxing doesn’t do this) we then go down the rabbit hole of CBDCs and everything (social credit scores carbon credit allowances etc) that goes with them
@@jasonaris5316 No. The danger that needs to be controlled with MMT is demand side inflation. In the UK one of the biggest problems is the many years of under investment and the knock on effect of poor productivity. This is an area where MMT could be quite effective as the money created could be used in major capital investment projects. It would increase spending within the economy relating to the projects but it is often protracted with longer term benefits so is unlikely to create an inflationary surge and any increase would be monitored and controlled by the Bank of England through interest rates and the government through other options.
@@jasonaris5316 Despite the $1.9 trillion in the US , their inflation levels have been lower than that in the UK. The latest figures show a rate of 3.1% with only about 0.75% being demand sided.
I worked out the amount of TAX I was paying, true TAX. It was around 50%+ and thats on 30K a year. Income TAX, NI, VAT, fuel duty, council tax, alcohol tax, energy tax etc. Do the sums, have a go. Thats not even adding parking tax we all pay from time to time.
I put the figures on Spread sheet some years ago Total tax estimates 60 per cent or more. Some years ago I was made redundant so I started to look for a job. After doing the tax sums I decided it was better to drawdown pension rather than work to pay more in taxes. Now I sight see, wake up later learn how cook and other hobbies.
Where did the funds for QE come from? And for the response to Covid?
look for the short animated video here titled 'money is debt'. you will never see the world the same again.
Literally out of thin air.
out of thin air, that was the whole point of "covid" - to deliver the death blow to fiat currencies and bring in CBDC's by 2030.
Government dept very low in mid 2000s , who was in power the Reckless Labour Party . Government dept now very high who’s in power the fiscally sound Tory Party?
One of the best explanations of why the Truss Kwarteng reign was so ruinous.
The making of commitments for future Government spending seems to know no limits!
The denial of the negative 4 - 5% impact of Brexit on GDP and reduced tax revenue, the triple lock on pension increases, the additional hours and lowering of age qualification for funded child care are just three examples. Where will the money come from without economic growth?
As usual, misses the point on the Truss budget. The pound crashed because hours earlier the Fed had hiked rates 0.75% in one move. Most currencies mirrored GBPs crash against USD. It was an opportunistic move to blame the falling pound on that budget. Did Truss crash the Yen and the Euro? If not why did they move in an identical way to GBP on that day?
5:20 All BIG Economics are now in Recession ( US , China , Japan , Germany , UK , AU , Canada , etc) but some people instead of saving try to invest in more risk assets as they think inflation going to eat my savings anyway !
This topic is very significant going forward for the UK and sterling (and US, Japan, and Argentina).
Low interests with high debt is sustainable.
High interest and high debt is not sustainable and leads to hyperinflation.
The Welfare State is the problem, just take “Our inactivity rate in the UK is 21.95%. In Iceland it is 13% and in the Netherlands it is 14%,” the Chancellor said last week, referring to the share of working age adults who are neither in work nor looking for a job. We have created a society of people who don't want to work or contribute.
Angela Merkal told the World in 2012 “If Europe today accounts for just over 7 per cent of the world’s population, produces around 25 per cent of global GDP and has to finance 50 per cent of global social spending, then it’s obvious that it will have to work very hard to maintain its prosperity and way of life,” Ms Merkel said in the interview.
“All of us have to stop spending more than we earn every year.”
This is the UK and EUs biggest problem
Low interest rates are not sustainable whatever the debt is, because they lead to inefficient resource allocation.
Both are sustainable, it depends on other economic factors. Additionally, interest rates are state controlled, they don't need to be high, also the government could pay off the debt tomorrow if it wanted to. Also, you have to remember that most of that interest is going to pensions, which could be released into the economy in a number of ways and produce growth, it depends on a range of economic factors.
@@garethhumphries4039 No they don't need to be high, but by holding them near zero as we did for along time, we made it so they will have to go higher than they would have needed to go had we never lowered them so much in the first place. To reduce the gap between asset prices and their output. Real economic output is not increasing but decreasing on a per capita basis. Central banks and the state can only maintain control of interest rates when the supply chain is healthy, but if their lowering of the interest rates causes there to be insufficient supply due to inefficient resource allocation, they lose the ability to maintain low rates as living standards keep going down, caused by the supply chain not being able to keep up with demand/ there being less and less real goods in the economy.
@@garethhumphries4039 No they don't need to be high, but by holding them near zero as we did for along time, we made it so they will now have to go higher than they would have needed to go had we never lowered them so much in the first place.
Couldn't the government just borrow more money to build more houses on a mass scale (and not rely on the private sector)? It would make a great return on servicing and paying off the debt. You could better regulate rental and property prices meaning people would have more disposable income to spend in the economy, better productivity, an increase in the birth rate. You could even build green houses to better regulate energy costs and sell any surplus to other countries?
Keynesian principles were refuted long ago. Politicians of course still love Keynes. That tells you all you need to know. Inflating away debt is Government sanctioned THEFT my friend. I am sure you agree.
No they weren't.
@@Vroomfondle1066 Yes, they were. Indeed, Kane's ideas about the government's role in stimulating market decisions, liquidity, and money were correct to a degree when the theory at the time was that the government should undertake massive austerity during downturns.
The problem is that his theories predicted stagflation to be an impossibility(which we know now that it isn't). The government and some of his supporters took his ideas too far, saying the government should always stimulate the market.
It was proven by the 70s stagflation disaster. It's mostly used by folks who want endless gov spending, ignoring how it messes with the markets.
@@Vroomfondle1066 Yes they were dummy.
Who refuted Keynes? Not you cos you have no idea what you are talking about
@@jontalbot1 Hayek a nobel prize winner, Even turgot who lived more than 100 years prior proved keynes wrong, because he showed how interest rates cannot be suppressed without causing inefficient resource allocation.
The Uk has a low debt to GDP ratio, amongst countries with a sovereign currency.
The problem the UK has is since 2010 focus was on short term neglecting the need's of the long term. The problem is long term is now here and instead of looking forward to the next 14 years we once again thinking short term in the now and next few years.
The idea needing to balance the books in the short term is a myth put on by the spin machine of the Conservative's. Why would individuals invest when the government refuses to do so?
Too many taking out of the pot, millions at the bottom do not pay tax.
@@KILKennyLaDa9898-js2nrthe pot is a lie, there is no pot
Window guidance originated as a way for the Japanese government to finance Japanese rebuilding efforts during the early stages of the Japanese economic miracle. Under the Bank of Japan Law of 1958, the Ministry of Finance took control over the Bank of Japan's administration, embedding Japanese government fiscal goals into the Bank of Japan's instruments and allowing for greater flexibility in the regulation of the money supply.
During Hayato Ikeda's income doubling plan during the 1960s, the Bank of Japan was given "full control" of the monetary instruments in the economy and was fully responsible for the swings in the business cycle during the 1960s to 1970s period.
This, combined with strict capital controls suppressing the private sector's ability to issue corporate bonds, gave the Bank of Japan a substantial amount of influence in the bond market.
If we'd had Tejvan's videos in recent history, we'd likely be wealthier as a Nation. I hope poiticians are watching what we the electorate are learning here. 'Education, education, education.'
Government debt is not like borrowing from a rich uncle at a low rate of interest. It's like borrowing from your poor children and grandchildren at a market rate. The vast majority of tax is paid by the working classes and middle classes, with the highest proportion of tax to income being in the range of those earning £16-25k p.a. The money we borrowed during world war 2 was paid off by the boomers, Gen X and Millenials and was finally paid off in 2006. The money were are borrowing now to pay for our enormous welfare system, our foreign aid, and subsidising of business, our incarceration of the most British people ever (mostly for non-violent crimes), etc, etc will either be paid by Gen Z, and their children, and their children and their children (which is a problem because the high cost of living partly caused by unprecedented levels of taxation means that we are having so many children that our population is due to collapse completely by the end of the century).
Borrowing and spending during a depression may make the recession better in the short term, but artificially inflates the economy causing inflation so the cost of living is higher after the inflation. It also creates bubbles which distort the economy, and when you try and cut the extra government subsidies off after the recession you either cause the bubble to burst or political pressure means you keep up the free money. The current recession we are facing is largely caused by the government ending the insane amounts of free money they were throwing around during Covid which mostly went to rich people.
Keynesianism (artificially inflating GDP by spending money, often on useless things like public monuments or international sports competitions), 'quantative easing' (i.e. printing money and giving it to the rich), modern monetary policy (i.e. the belief that money grows on trees and debt doesn't matter), and getting into debt is inflationary to the cost of living, makes the unborn generations pay for the greed of their ancestors, bankrupts nations and creates demographic collapse as people don't have kids, and transfers wealth from the poor to the rich via taxation, asset booms and household debt. Periodically, we learn this, like in the 1980s and 1990s, and then we forget it again. But we have the highest ever taxes, the highest ever peace time debt, and the most stagnant economy we've ever had. Time to return to the free market economics of the 19th century before we become not Argentina or Greece, but Zimbabwe and Venezeula because a huge economic depression and currency collapse is coming any time in the next decade.
They are stealing our money basically and giving it to their mates
Printing money doesn't cause inflation, spending large amounts of money in ways that do not lead to a comparable rise in goods and services causes inflation, it doesn't matter where that money comes from whether that is the government, a foreign government or private institutions. Also, it isnt private saving that causes government deficits to rise, it is government deficits that cause savings to rise, the government spends money into existence, so more money created leads to more savings, you can't save money that doesn't exist, the graph you displayed shows this too. Correspondingly, surplus government bugets causes private savings to decrease. Furthermore, when the deficit decreases as a proportion of Gdp it causes economic stress on the economy since over time the monetary supply is smaller proportionally to the size of the economy leading to trading friction where productive capacity is unable to be properly utilised due to a lack of currency. Additionally, the government does not need to borrow to spend, it is the money issuer so debt is meaningless to it, bonds are issued not to cover spending but to support interest rates, they are not a required feature of our system in order to maintain deficit budgets. A final point is that the UK cannot unwillingly default on its debt unlike countries like Greece, because we have a sovereign currency, the UK government can always fund its obligations.
The UK government cannot "run out of money"
Can you do a video on China and how reshoring is impacting manufacturing and how the aging population is going to impact future growth? That would be interesting
The Welfare State is the problem, just take “Our inactivity rate in the UK is 21.95%. In Iceland it is 13% and in the Netherlands it is 14%,” the Chancellor said last week, referring to the share of working age adults who are neither in work nor looking for a job. We have created a society of people who don't want to work or contribute.
Angela Merkal told the World in 2012 “If Europe today accounts for just over 7 per cent of the world’s population, produces around 25 per cent of global GDP and has to finance 50 per cent of global social spending, then it’s obvious that it will have to work very hard to maintain its prosperity and way of life,” Ms Merkel said in the interview.
“All of us have to stop spending more than we earn every year.”
This is the UK and EUs biggest problem
welfare state and mass immigration, but middle class ponces blame it on brexit and never even dare to mention covid & especially not the medicines which have disabled millions of people and caused the spike in disability benefit
Not yet but soon would be going same way as Birmingham Rochdale etc
I disagree with the extended family argument.
More importantly, I'd like to know where that money has gone....
Can a UBI indefinitely for the poor ease the load for the majority of citizens in the U.K.?
Or investing in the poor a huge cost?🤔
The debt to GDP ratio is currently around 100%. When it reaches 130% then the country and its currency are bankrupt. 51 countries out of 52 defaulted when they reached 130%. It’s not great but we have a bit further to go.
How do you explain Japan having 263% debt?
The Japanese people have a lot of savings
The UK government cannot run out of money in the same way individuals or businesses can.
Governments that issue their own currency, like the UK, can always create more money to meet their financial obligations.
This concept is supported by Modern Monetary Theory (MMT), which argues that countries with sovereign currencies can never truly run out of money.
Sovereign states also cannot go bankrupt in the same way that ordinary people can.
You are about to learn a very hard lesson.
I knew there would be one pedant with the "governments can never run out of money" remark, casually ignoring the fact that:
-"creating" more money results in devaluation, that is not good for most citizens though politicians don't mind
-the state of public infrastructure such as roads and that of the NHS already point to a nation that doesn't have the money for important matters
@@pritapp788it only results in devaluation when there isn't a corresponding increase in goods and services, it is about how the money is spent, not about the printing itself. For example, public funded childcare, it is more efficient economically to have professionals looking after larger groups of children and the parents working in their fields, where they are most productive, than having one staying at home to look after an only child.
Secondly, the reason the UK isn't spending more on health and infrastructure is a political choice, the UK is close to it's peak of economic output, we are more productive than even during empire or the post war boom, the figures speak for themselves. The question why is money not being spent on certain things, rather than do we have the economy to spend on these things, we do, the figures prove that.
❤@@garethhumphries4039
Imagine the UK would be in a group of allies that could jump in if shit hits the fan.
I’ll raise you £14 billion for Hinckley Point C nuclear reactor.
And then £33 billion saving Nat West Bank.
And then £37 billion on the failed Test and Trace programme.
And then £99 billion on HS2.
£37 billion on test and trace as one example…. Jesus.. we could have put a man on the moon ourselves for less.
It was about as ineffective as a crepe hammock.
And all d covid scandals
@@seany8787 it was 100% effective in its plan to bankrupt the UK. i'm not sure how people at this point can't tell the government is deliberately destroying the UK economy
That depends on how much money the city of London moved offshore. Their coming for the crown jewels. Maybe sell Windsor to Disney? Certainly the vacuum cleaner man Sir Suck Alot has a small fortune in Singapore.
Japan went through a long period of Stagflation in the 90's, though!
But Japan always still had a trade and capital surplus with the rest of the world, just as china does even many times bigger. That's a huge difference compared to the UK and US which are deeply in the hole on everything. They'll collapse.
Why would the UK run out of money, are tax payers not paying taxes? The Gov't makes a good £1 trillion in taxes, VAT and fines per a year. As for debt, it is just money going into banks, stock market and other financial institutions. It is called the transfer of wealth from the public to the private, the money is there.
The UK has defaulted on its debt before. In 1934 the UK stopped servicing it's ww1 debt. £4 billion debt owed to the USA. equivalent of £359 billion today
But that was before the pound was fiat, the same constraints no longer apply.
We will make a new digital currency can call it digitalisation , Eureka
20% hit across the board like 1970'
Best they can is try to inflate the debt away, which is what they tried to do… but BofE has issues lots of linkers?
We need V to become a reality.
Apparently th UK has defaulted on its debt in the past, to the USA.
Actually UK has run out of the looted wealth it amassed from all over the world.
People of UK never worked, rather they went out to establish colonies and loot.
With colonies gone, nothing is left. Suits and serves you British well.
The UK has been broked some decades ago and the government has been propped up by borrowing. Just look at the debt levels. Politicians spending are based on political ideology to win votes and didn't care about implications. For the political elites, money grow on trees and they are either spending our money or borrowing on our behalf to spend now but we still have to pay. 😢
No Harold Wilson would win by Landslide victory over Tories in 1966 UK general election yes Thomas. 96 majority. 364 Labour MP"s. Awesome.
Countries in the top ten tend not to run out of money 💰.
Why they have bail-ins: take the depositors money if things get two crook... a legalised scam
@@davidlindburg1921 The EU has 100,000€ guarantees on each bank account. Not sure about Strine banks 🤔.
Dont feel alone US is $35 trillion in debt yet has more billionaires than ever.
And those billionaires pull the strings.
You say the BoE bought a lot of gilts from the banks during QE so the BoE now owns a lot of govt debt. That is true. But they bought the govt debt with money they invented and the banks deposited the money they received for their gilts into deposits at the BoE. The BoE now owes the banks this money. Really one type of govt debt has been replaced with BoE debt to the banks. And the BoE is now paying much higher interest rates than the Treasury would have done with these gilts. So the Treasury is compensating the BoE for the now relatively very high interest rates which have to be paid on the banks deposits held in the BoE. Really the debt is still all there even though the BoE has bought all these gilts. One thing I am not sure about is whether the debt of the BoE to the banks is included in the total govt debt or whether it has been fudged out because the debt is now of the BoE and not the Treasury.
Yes, but rememember all these rules are controlled by the BoE and government. If they want, they can stop paying interest on bank reserves. If they want, the BoE can buy up all the bonds with created money and pay the interest to the treasury. If they want, they can set the interest rate to 0%. Starving the UK of money/investment suits the wants of our asset stripping elites nicely.
@@Vroomfondle1066 Well of course they make the rules. And set the priorities. That is the point I was making. They decided to pay their buddy friends the bankers tens of billions a year and there is not a whimper from anyone. But they decide to use triple lock and all the a*%%%%%es say iit is too much we can't afford it .
Austerity was a political decision. It’s what the Neoliberals do,whether Conservative or Labour.
Also the term “borrowing” is further used here but is a misnomer. Only bonds involve borrowing.
Most money is created out of nothing. The Bank of England Q1 2014 Quarterly Bulletin explains how almost all money is now created out of nothing by private commercial banks as “loans” or “borrowing” but it’s private bank credits with interest paid back using private bank credits created the same way thus private debt must go up.
Loans create deposits although they’re not loans but money creation.
Who gets to create and benefit from the money creation process is vital to society.
Public seigniorage has not been mentioned. This has been largely lost since WW2.
Public debt is the mirror image of private wealth.
I could go on but this partial Keynesian/ Classical presentation only describes but doesn’t explain nor indicate the proper role of democratic government in the fair running of a society with what should be its own money supply.
The power of the private US Federal Bank system is to blame.
The uk ran out of money ages ago. The uk owes trillions.
Whilst the Tories mismanagement of the UK economy has been an absolute travesty nevertheless every labour government in my lifetime has run out of money
In particular I’m drawn to the healthy budget surplus bequeathed by Ken Clarke to Blair’s government in 1997. Even Derek Scott, Blair’s economics advisor conceded that Brown’s economic inheritance in 1997 was better than that of any previous chancellor in living history.
In 2001 Brown forecast he would borrow £12 Billion over the next 6 years.In the event he borrowed £112 Billion, almost 10 times his forecast. Brown’s time as Chancellor has rightly been judged by his mismanagement of the public’s finances and his failure to achieve value for money for his vast increases in public spending. This was despite the stable monetary framework he inherited and whilst we’re at it let’s not forget his disastrous sale of the UK’s gold reserves.
In particular,Labour’s mismanagement of the NHS reversed the productivity achievements in the early 1990’s and successive governments have been unable to rectify the position since.
After 2000 the government went on a huge spending spree , much of which went on inflating the government’s payroll .Quango’s took off after the 1997 election when they began to be used as a method of public administration and the incumbent government appointed their political allies as the heads of these bodies with full discretion to appoint individuals of their choice to these political bodies. This was when the public purse lost control of the public finances and it has failed to recover ever since .
The apparent aim was to enable senior civil servants to offload the practical issue of public service provision to the private sector and public agencies thus allowing for a reduction in department resources. However this never materialised and we now find ourselves in the precarious position of having a bloated state consuming an increasing proportion of our ever diminishing resources- what an almighty cock-up! Little wonder the UK taxpayer is taxed from cradle to grave as a hugely expensive non-productive body has to be financed by the productive sector .
A further consequence of Brown’s actions was unfunded pension liabilities which have ballooned and is now becoming an unaffordable and unsustainable bill for our children, grandchildren and ourselves. This is where we should be having a public debate NOT about the triple lock for state pensions.
Many people go to jail for unfunded liabilities but Brown’s attitude was to keep them off the government’s books and PRETEND the problem didn’t exist . He single handedly passed onto this and future generations the bills of an unreformed public sector, a growing pensions crisis and an increasing tax burden
Successive governments including the Tories have been lamentable in their approach to reforming our public services , taking on vested interests and outdated/failed dogma and for that they should all be crucified which would be very apt at this time of year.
However, let’s not forget that the architects of our current failings were designed and implemented by the Blair/Brown Labour axis of evil and we can only pray that an elected Labour government would see this as the opportunity to right all the wrongs committed under Labour’s last stint of governance. I won’t be holding my breath !!!
Labour is as much a busted flush as it was in 1979. Socialism in the knacker's yard.
As you rightly point out, 2010 was miles away from the excellent Tory legacy of 1997 when the books balanced and budget surpluses in the billions.
Brown also raided billions from the private pensions sector and diverted it into the catastrophic Working Tax Credits which subsidised employers
and acted as a carrot to work only 16 hours max. and claim uncosted, unfunded in-work benefits. The root cause of today's low growth and productivity.
The infamous Thursday edition of The Guardian which was packed with mainly non-jobs in the public sector.....lots of ''Outreach Co-Ordinators''.
One million ''jobs'' added by New Labour - The Client State. Pre-'97, pledged to tackle ''poverty'' but it ushered in Benefits Britain and colossal welfare
dependency. Essentially,...benefits/jobs 4 U....votes for Us.
PM Wilson also did the same from 1964, one million jobs added to the public sector. By 1976, UK bankrupt and off to the IMF.
Unfunded public sector pension liabilities are in the trillions.
Starting at the top end, these need to be heavily taxed. Current recipients are living in a false, la-la land of milk and honey.
If they get in, Labour will have no intention of implementing crucial and vital reforms.
But by ignoring the unfolding calamity, I think they will be confronted by one crisis after another. Revenues cannot meet welfare/public demands.
The conservatives seemed in the past to be the ones to faff about this wanting to blame the Labour Party or scaremongering that it would have high borrowing. What we need is intelligent fair government run by non self interested parties.
Greed and corruption
👍👏👏
Hmmmmm... I'm not an economist but...
Wealth tax, stop inequality 🤟
Let's not forget a Debt Jubilee! Steve Keen - Garry Stevenson - Richard Murphy.
Please no more tax, unless it's a corporation tax for the Amazons of the world
It certainly looks broke. The U.K. now reminds me of Belgium in the 1980. I don’t see how the U.K. can improve infrastructure and the NHS in the next decade. With some people being on 8 year waiting lists for NHS procedures, you could argue it has already collapsed.
But there’s hope. Belgium, and in particular Flanders, is now one of the wealthiest areas in the world. All you need is good government. We have the Tories.
How did Belgium turn it around?
Shame Blair decided to import the third world.
They just need to seize the royal assets as I understand it
The personal fortune of the RF is 380 million GBP. It's basically what the UK spends in 30 minutes.