Don’t let the black hole debt doomsters suck us in with their lies. Enough is enough.

“What is a debt, anyway? A debt is just the perversion of a promise. It is a promise corrupted by both math and violence.”

David Graeber, Debt: The First 5,000 Years

The upside-down clown world continues. But it’s no laughing matter. In its move this week to raise interest rates yet again, the Bank of England is virtually ensuring the recession it is predicting, and guaranteeing a rise in unemployment, with all its painful consequences.

Aside from the central bank choosing to ignore the root causes of these inflationary pressures, its aim to restore control of its inflation targets and regain its credibility on the markets is literally condemning people, as if they are unavoidable collateral damage, to more uncertainty, pain and poverty, as businesses put off investment, cut back their inventories and let go of their staff to cut costs. It creates a vicious downward spiral as uncertainty drives people to stop spending, or to save if they can, which in turn removes spending power from the economy. The paradox of thrift in action.

As Thomas Fazi, co-author of Reclaiming the State tweeted: ‘Arsonist warns that fire will get worse as he proceeds to throw gasoline on the fire.’ Trying to control inflation that has its roots in external supply issues over which the central bank has little, or no control, is like Canute trying to stop the incoming tide. Furthermore, while throwing people under the bus, nothing is done to address the profiteering and price gouging by energy and other companies taking shameless advantage of the crisis.

At the same time as adding to inflation, as the cost of borrowing increases, the big investors will pocket free government money, in the great government borrowing scam that is fake debt, and all part of the illusion. And those lucky enough to have personal savings will be better off, that is, if rises in mortgages, energy and food don’t cancel them out. For those who face rising prices and no job, it is a case of the haves benefiting and the have-nots paying the price.

What we are witnessing here is the weaponization of inflation. To put working people in the firing line and view them as dispensable to meet arbitrary monetary policy targets or drive down wages is a grotesque misuse of power.

Inflation - The Gower Initiative for Modern Money Studies

The inflation rate is a measure of how quickly the cost of living or a typical household is increasing across a year.

As Philip Inman noted in an article in the Guardian on Saturday, ‘Last week it became clear that interest rates have not been raised to tackle inflation generated by the high price of energy on global markets. The main reason is to create a recession that will put 500,000 people in the dole queue and thus undermine those who demand higher wages.’

It will certainly add to the coming pain of Austerity 2.0 which is on its way, if we are to believe the Chancellor Jeremy Hunt and the new Prime Minister Rishi Sunak.

Sunak, who was elected a couple of weeks ago with no public mandate for what will surely come next, was clear in his speech outside Number 10.

Whilst he claims compassion has been at the heart of his action, the writing it seems is on the wall. He noted that ‘difficult decisions’ would be needed to regain economic stability and avoid any escalation in borrowing. Seeking to distance himself from his predecessor, Liz Truss, whose downfall arose as a result of promises to cut taxes and increase borrowing to grow the economy, (remember the borrowing that isn’t borrowing), he said he would not ‘leave the next generation … with a debt to settle that we were too weak to pay ourselves.’

What will his words mean? Whilst we will have to wait until November 17^th to understand the full impact of the plan for Austerity 2.0, it will be based on the false narrative of how the government spends. As the government, the media and institutions focus on the imaginary black hole, which is apparently the size of the universe, as if it will have to be fixed or filled through cuts or tax increases, the real black hole is largely ignored, as if there were no connection between government spending policies and the breakdown of public services or a disintegrating society. If only we could balance those books, we could address these real challenges and save the planet before it’s too late. That is the line that is spun to justify spending cuts or tax increases. Jam tomorrow, maybe, possibly, probably never.

We are still living under the shadow of decades of monetary and economic orthodoxy, coupled with the austerity imposed by the Conservatives in 2010, after the Global Financial Crash. An austerity that impoverished every aspect of our lives and has left the country with a scarcely recognisable public service sector, a welfare system which demonises its users and is not fit for purpose, (unless of course, the intention was to keep people under control in a state of penury).

The media sings to the austerity hymnbook with endless debt doom-mongering, seemingly with the intention of assisting the justification for the next round of pain and suffering. As Larry Elliott did this week in the Guardian, we are treated to explanations as to what has led to the ‘deterioration in the public finances’, as if it is something that must be fixed before we can afford to spend on public purpose. There is no alternative, the economic pundits opine.

Instead of talking about the real cost of another round of austerity to people who bore the brunt of the previous one, and to our public sector, which is crumbling before our very eyes, they discuss the need for fiscal discipline. The media aiding and abetting a cruel system which has done so much damage already. Household budget accounting rules!

In an article in the Guardian this week, Polly Toynbee, on the one hand decries the government’s economic record, and then on the other exhorts her readers to remember that public deficits will have to be repaid. Government should not protect pensioners at the expense of children’s education she suggested, as if there is a finite pot of money to be divvied out, or that the DWP budget would have to lose out to pay for an increased education budget. Robbing Peter to pay Paul is not how the government finances work!

While Toynbee mithers about public deficits and future burdens, in another article penned by John Harris, in the same paper that lives to mislead its readers, quite rightly noting the signs of unsustainable societal decay, his solution is to ‘embrace a very different approach’, meaning to increase taxes. So much for a ‘different approach!’ There are many reasons for tax but paying for government spending is not one of them.

It is not just journalists who promote the household budget version of government spending. Charities, (whose existence are, after all, a failure of government policy), are consistent in their calls for taxing the rich to address the cost-of-living crisis. The Stop the Squeeze campaign which is a coalition of charities and campaign groups has warned that deep cuts to public spending would only make things much worse as the cost of living rises and living standards collapse. Whilst one cannot deny the truth of that statement, it is regrettable that they are formulated in the predictable ‘how we pay for it’ narrative of taxing the rich.

In a country where the government is the currency issuer and doesn’t have to tax or borrow to spend, our children’s education does not have to come at the expense of pensioners. Hunger is avoidable and public services and other infrastructure is affordable.

There is no fiscal constraint and whatever is achievable is affordable. Societal decay is a political choice, not a monetary one, and UK citizens have been at the sharp end of that for a decade and more.

A responsible government, assuming it serves its citizens and not the corporate body, has a duty to ensure through its spending and tax policies, that any future deficits won’t be those related to an impoverished society because it failed to plan and invest in education, training, and new technologies, so that the nation is as productive as it can be. At the same time, young and old deserve consideration as equals in society. Not the vile habit the government and others display in pitting one group against another to create division and resentment.

Therefore, the question is never ‘is there enough money’, but what do we want to do and how do we share the real resources that will be needed to ensure that those objectives can be achieved? A responsible government would be there to make those decisions and target its spending accordingly.

As Malcolm Reavell from MMT Scotland reiterated in a tweet this week, challenging the notion that deficit spending is something to fear:

‘There’s no black hole. See this chart? The government deficit is our surplus. That ‘black hole’ is the money in the economy that’s allowing it to function. Reducing the government deficit reduces our savings and incomes. Recession and austerity are political choices not economic ones’

 

So, when they tell us that there is no alternative to filling, through tax increases or public sector cuts, what is actually a non-existent black hole, or that we must not leave a tax burden for future generations, we should never forget that after the second world war there was no lack of money to create the NHS, the welfare state, and invest in public housing, or that money was no object to bail out the banks in 2008, or fix the private pensions gilt debacle a few weeks ago. As usual, the Central Bank at the behest of the government, came racing to the rescue of the markets, in this case, the pensions industry which had gambled pension funds in risky investments, and was forced to come begging for a bailout when it faced collapse. Another case of ‘too important to fail’, and begs the question why doesn’t the government use its currency powers to fund good public pensions instead? As they say, socialism for the rich and capitalism for the poor.

There are no ‘yawning gaps’ that can’t be plugged with an accurate understanding of how the government spends, and what the real constraints are.  And yet the scam continues, and the consequences will be extreme.

As Thomas Fazi put it in an article on Unherd:

[Sunak’s] ‘plan for austerity is based on an illusion.’

 

“On the one hand, he is expected to address the numerous economic problems afflicting Britain — the highest inflation rate in 40 years, an energy and cost-of-living crisis, a slow-motion housing market crash, strained public services, and growing industrial and civil unrest — while simultaneously boosting investment and economic growth. On the other, he’s expected to do all this while “restoring the confidence of the markets” by “fixing the country’s finances” — that is, reducing the government deficit and debt through higher taxes and/or spending.’

They are a contradiction in terms, which surely will be exposed once again if Austerity 2.0 becomes a reality.

As we watch like powerless observers, the NHS, social care sector and local authorities deprived of adequate funding over more than a decade are falling into decay, we face the endgame for the public and social infrastructure which underpins society and keeps the economy functioning, on the false grounds of monetary scarcity.

The current crisis is being used by the government to fulfil its aim of shrinking the role of the state in public provision whilst pouring public money into private profit. As our public sector is starved of central government funds to fill the black hole in their finances, caused by central government policy and spending decisions, they have no option, as the currency user, to cut their expenditure. Whereas, the government, as the currency issuer, has no such constraint or black hole, and has a choice. The only constraints it faces are those of real resources and decisions about how they are distributed in society – private or public sector.

Even if Government has ceded its power to the markets and the dictate of global corporations, it is the controller. It has the power of the public purse for better or worse depending on its ideological preferences. And that is what it boils down to in the end.  Political choice. An economic system which is currently depriving citizens of sufficient wherewithal to live good lives whilst stuffing vast riches into the hands of ever fewer people.

However, with a better understanding of how the government spends we can reject the Telegraph when it claims that the government finances are on ‘a knife edge’, or the World Bank’s assertion that ‘it is too expensive for governments to help everyone with their soaring energy bills’, or that the ‘debt will take decades to pay off’. Thus, armed with such knowledge, the people can assert their democratic power and demand better. That’s where we have to start if we are not to fail.

We are at a crossroads in history. As Umair Haque noted this week in an article:

‘The most profitable activities in end stage capitalism are all ultra-intense forms of destruction; of the planet, of life on it, of democracy and its values of equality, truth, freedom, of economies, wholesale, by way of inequality and immobility.

This is where we are currently. But ends and beginnings are just part of the journey along the road that humanity has trod in the past and is currently walking. We don’t have to choose the status quo, we can reject it and strike out for a different narrative that respects and values our place on this pale, blue dot which gives us life. Understanding monetary reality offers an opportunity to create that new beginning for ourselves and those who will come after us. Whether we do so, hangs in the balance.

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