I’ve previously suggested that I think it unlikely a realistic progressive reform agenda will succeed before there is a proper understanding of where money comes from.
So when someone says something like ‘we cannot afford it, we cannot spend like that – the government doesn’t have enough money…. ‘ what do you say?
This is my suggestion. It uses the government as a household analogy but tries to differentiate it, because I think people will have a better initial response to the usual agreement this entails. So here goes:
Who is in charge of your household expenditure? Is it you, or your partner or a joint effort?
(Response is one of the three).
Well I’m sure you (both) know that you need to be careful that you must match income and expenditure as far as possible – otherwise you’ll need to borrow, and borrowing isn’t usually at very afforable rates especially if you look to max out the credit card. It is often a problem, I’m sure you’d agree.
The government is similar – except in one very important respect, which is, I suspect, different from your household and certainly, mine:
Our government owns a bank. If you take out a fiver – I’ll get one out – it says ‘Bank of England’ on it. That is money issued by the Bank of England which is a bank wholly owned by the government. Only it can print money that you and I use.
So the government is a household that owns a bank. The government’s bank, because it issues money, never needs to borrow, but in order to safeguard (mostly) private pension investments it can choose to. In fact currently it borrows for an interest rate that is less than inflation. Everyone really likes lending to the government because it, as we’ve acknowledged, creates money, so it can never actually run out of it.
That is unlike any household I know.
There may or may not be a response to this but if there is, it will usually be:
Ah yes, but what about inflation? If the government creates too much money we end up like Zimbabwe.
Next up, I’m going to try to summarise a short doorstep response to this, too..
If anyone has spotted any major flaws so far, I’d love to hear them!