All because the government owns a bank…

I was musing on what a mess the weirdos and misfits have made, before listening to an interesting interview with Steve Keen on the MMT Podcast with Patricia Pino & Christian Reilly.

There were lots of the usual conclusions which will be familiar to readers of this blog but I did enjoy the idea that the Coronavirus affected economy is now going into intensive care with an induced coma.

A very good analogy, it seemed to me.

I much appreciated the idea that (supposed) efficiency along with austerity, is leanness, meanness – and ultimate stupidity.

Quite so!

Steve thought that the idea of imports being a cost while exports were a liability a nutty idea (as do I) – even when it became rather controversial.

In order to maximise reliability we need to minimise or shorten supply chains – and in that context the EU is good as a trade block – simply because they are close. (And yes, although Steve admitted he voted to leave – this was on financial, basically, Euro, grounds – rather than for trade. Of course in voting the way he did he completely overlooked that the UK is not in the Euro, which I confess I find very strange.)

And ‘just in time’ is fine domestically and within the EU , because, as Steve admitted, the EU are next door.

I’d further suggest that when supply lines are long, it has to be realised that just in time is never just in case! Health Service Protection Equipment springs to mind…

While the sum of all assets and liabilities in the country is necessarily zero, the government is the only body in the country to be able to operate with negative equity. We should, I’d suggest, rather like that, because usually most, if not all of the ‘assets’ are with us, the people. The negative equity is with our government, who – of course – don’t need to worry because they actually print the currency.

And this is all because the government owns their central bank.


  1. Ian Stevenson -

    the advantage of remaining in the EU for trade is that it is ‘frictionless’ . Mrs May demanded that, while not being a member. An impossible situation and she was soon told that in no uncertain terms. Even a zero tariff free trade deal would involve extra costs probably equal to the saving of not making contributions.
    We had a large say is setting standards and specifications which are used even outside the EU. A real loss of influence.

    1. Peter May -

      Agreed. And trade disruption is important – and indeed expensive- to companies.

  2. Jamie Walton -

    Hi Peter, just a quick question seeking clarification:

    When you say:

    “While the sum of all assets and liabilities in the country is necessarily zero …”

    do you mean only all *financial* assets?

    It would seem to me that real assets such as soil, water, food, people, knowledge, art, etc. don’t have corresponding liabilities attached to them. Am I missing something here?

    1. Peter May -

      No you’re right, I’m talking about financial assets.
      Real assets are just that, I’d suggest. There are no liabilities necessarily involved – although too much or too little water or too much/little soil can be a distinct problem they are not man made, as finance is, so don’t sum to zero!

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