Forgive us our debts…

The extract below is from Fran Boait, Executive Director of Positive Money. I also should mention that she is the unfortunately defeated Labour candidate for Gloucester. We thus have no person in Parliament as far as I can tell, who thinks about money in terms other than ‘can we afford it’?

Some would argue that PoMo doesn’t understand money either – as indeed have I on many previous occasions – but they are getting much better and although the video performance below is not ideal and the emphasis is, objectively quite rightly, on the disastrous effect of private debt – when what the media want to know about is what they consider (without any actual evidence) to be the disastrous effect of public debt. The politicians and mainstream economists all think that government debt is more important than private debt, when the reverse is true.

Government debt is of course, when it is not owed to the state owned central bank, usually an asset for most of those that elect the government.

That idea of who exactly government debt is owed to is what, I would suggest, Fran should have majored on. She didn’t because, quite rightly, she thought that private debt was way more dangerous. Unfortunately she was trying to teach the mainstream media to run, before they can even walk.

To this straw in the media wind must be added an excellent article by Aditya Chakrabortty entitled ‘Right now, the only thing staving off a collapse in the social order is the state’ where there is lots of incisive comment that is worth reading, but on the current subject he writes:

The government is borrowing historic amounts to bail out households and prop up companies and those loans are being swallowed by another arm of the state, the central bank. This is the same strategy as we saw after the crash of 2008 ­– only this time moving much faster and at far greater scale.

Quite.

We owe this debt to ourselves – which is really no debt at all.

And that is how we are going to pay for it.

Comments

  1. B Gray -

    What is lost on many people is that all money is a form of debt, in that whenever money is created there is both an asset and offsetting debt. If the government isn’t assuming debt by creating money, then the banks will create money by having households and businesses assume that debt.

    The problem with private debt creation is it is unsustainable and actually creates no net financial wealth, as the sum of assets and liabilities = 0. What is does do, is transfer assets from the borrowing sector to the lending, or financial sector, in the form of interest payments.

    This is the real intent of austerity; that is to create a false narrative in which public debt is viewed as a crisis, leading to drastic cuts in public spending. This out of necessity moves money creation into the private sector in order to siphon off the economic surplus and transfer it to the 1%, further consolidating their wealth, power, and political influence.

    1. Peter May -

      Incisive comment – with which I wholeheartedly agree – thank you.
      I do so wish many more would get this….

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