Reply To: State Funding and Modern Monetary Theory

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Mr Shigemitsu

Raskolnikov, it absolutely applies to our times!

1) The BoE was nationalised in 1946, and is owned by the Treasury Solicitor. It has some operational “independence, though this is largely illusory – being mostly restricted to setting interest rates to stay within the inflation target – and was only implemented by the coward Gordon Brown in 1997, in order to pacify the markets when he became Chancellor, following pure neoliberal dictat.
The Chancellor is the one who actually sets the target inflation rate, and has been responsible for dictating the amount of QE, for example.

Considering the Consolidated, or Whole of Govt, Accounts, there is no essential division between the BoE and the Treasury, just that some accounting conventions, include some as a result of EU legislation, attempt to create a separation between them – but this is also pure neo-liberalism, and intended to hamstring governments from directly meeting their citizens’ needs, by kowtowing to market forces. Its suits banks and Tory politicians to let us believe that we, and they, are the sole sources of money, not the government.

2) Private banks just create *credit* (horizontal, or low-powered money), which, needing to be repaid (at interest), nets to zero – so there are no new financial assets created. Only Govt spending (vertical, or high-powered money) is the sole creator of new financial assets for the private sector.

Yes, I am a huge fan of MMT – as should anyone else be who cares to see through the economic guff we are constantly brainwashed with in order to preserve the neo-liberal status quo.