Sunak vs Truss: Debt, Inflation and Levelling Up

The Conservative leadership contenders ask:  When does the Covid-induced public debt start to get paid off? What about inflation if we reduce taxes to ease household finances? How do you achieve levelling up?

A FT letter writer Mark Hofman in August 2020  said that in the example of Japan which has had huge public debt levels for a long time:

     'government bonds held on the balance sheet of the Bank of Japan are effectively the Japanese government owing the bond debt to itself...so why not put a line through those entries on each side of the balance sheet? The level of debt would be reduced without the        taxpayer having to pay anybody anything, and with nobody being poorer.' 

If there is a possibility of inflation due to this he says it can be resolved by raising the reserve requirements of commercial banks at the central bank (in the UK's case - the Bank of England). He asks: Why consider the conventional way of paying off this debt with taxes for generations, when there is a better way?

Beware of suggestions that governments are like households and must not spend beyond their income.  Householders are not like that as they cannot create their own money whereas sovereign govenments, with careful monetary control can do so safely, as Hofman describes. 

On levelling up:  Change how tax is raised by levying a small annual charge on the value of all land, including the value of the land footprint of all homes. At the same time any tax raised in this way would be allowed against a personal income tax liability. For many homeowers the total charge would not change. 

Benefits would accrue:

• House price rises - now with a land value levy - would slow or fall and homes become gradually more affordable since speculation would be damped down and a steadier market would encourage first time buyers. 
• Homes would become less attractive for pure investment rather than for living in personally. Recent governments just subsidise new buyers which raises the price of homes and brings developers more profit. The crazy price boom continues.
  
• More homes would be built as development would be encouraged - for example a house with a large plot would be built on to share the land value levy over new, extra homes. Or an extension to create a separate rentable flat. New homes would be built to low carbon standards. Countryside would be preserved.
• Renters would be helped as the land charge would be on the landlord. Landlords would be anxious to have their property occupied at lower rents rather than keep homes empty waiting for increased rent.
  

Levelling up at a stroke, for many. Those who are land rich and income poor, thus short of cash, would be allowed to defer payment until they sell the home. 

The young would be able to consider buying and homeownership would increase. Older people in large homes would be nudged into downsizing. The increasing wealth divide between homeowners and renters would ease.

For the common good we need such monetary and taxation policies. Which candiate, or party, will grasp these choice fruits?  

Posted by THE FREE LUNCH - FAIRNESS WITH FREEDOM Charles Bazlinton

             

Another Tory policy? Basic Income (without Government Debt)

Shock! Horror! The Tories have stolen Labour's public spending policies. Chancellor Rishi Sunak has started to undo the austerity that his own party imposed for a decade which, as Headley Stone  wrote (FT letter 15 Feb) 'has brought the UK's public services to its knees' . 

Commenting on the budget in the FT on 11 March,  Martin Wolf wrote: 'It makes sense for the government to borrow to spend, especially on investment. I have been arguing this for a decade. The decision to cut investment right after the financial crisis was a classic bit of Treasury idiocy. Now ...with employment high ...no longer the ideal time....But it is still a risk worth running provided the money is well spent which one has to doubt, given the hurry.' 

What is it about our party politics that had George Osborne, a Tory chancellor imposing harsh measures for a long time to the detriment of the common good and now has a successor from the very same party determined to undo it?  Left-leaning polices have now become the centre ground but have been cleverly captured by the politicians of the old right. At long last, new enabling fiscal policy that for so long has been proscribed, will be relaxed, but if Mr Wolf is right not with the best timing.  Incidentally the investment will benefit bankers and large funds as the money will be borrowed from them. It need not be that way, as sovereign governments can create money debt free.      

The huge impact of Covid-19 on the economy and on households will surely need 'helicopter money' for every citizen and the news is that President Trump is planning to 'send out cheques to every American within two weeks' to achieve a boost. There are people calling for such a measure in the UK. A UK petition is running with an ambitious plan to set a basic income at £1000 per month, sign here: Basic Income .   This: QE for the People  explains how it would work without raising new government debt.  

What may well be started as an emergency measure to plug depleting household budgets by a free handout, needs to become a standard fact of life for every citizen. Everyone needs sheltering from the whirlwind caused by Covid-19 and the usual rollercoaster of flip-flopping politicians who play with our livelihoods through shortsighted policies.     


Posted by Charles Bazlinton author The Free Lunch - Fairness with Freedom £3   

Brexit is done. Get Fairness Started

The boring and brilliant 'Get Brexit Done' tag did it for the Tories with Brexit voters gifting the election to the Tories with an extraordinary 80 seat majority for Boris Johnson as Prime Minister. Labour's diligently crafted policies were ignored in the face of the big issue that triggered the winning votes.  Some long established Labour constituencies switched to the Tories. Is this a sea-change or a one-off blip? In five years time will Labour voters revert? Or will Labour fade away as a major party?  For the new Tory administration pressure must be on to do whatever will retain the old Labour seats in an election by 2024. 

Young people voted heavily for Labour in 2017, and also this time; with Remain not being a big enough issue for enough of them to abandon ship for the pro-EU Lib-Dems or Greens. Of these,  full-time students voted massively for Labour with x3 times as many as voted for Conservative. Their manifesto pledge to abolish tuition fees and bring back maintenance grants obviously did it for Labour. The Tories would be advised to do something similar and neutralise the appeal of Labour for students. After all there will be added students next time and some older Tory votes may just not be - both trends will endanger the Tories. How about a lifetime grant for education with created money as proposed by Prof Richard Werner? 

Home renters tended to vote Labour, and owners Conservative. This aligns with the age bias generally, with older people voting Tory. The disparity of home ownership between age groups continues to grow for all income groups. This despite the Conservative Help-to-Buy schemes which become Help-to-Bonuses for house developers . If a carefully designed land value tax scheme gradually replaced income tax, property prices would adjust and affordability of ownership return for the younger, lower earners, and even homeowners might see the fairness of getting their family on the housing ladder as they did for themselves decades ago See this blog Jan 30, 2018.  Does it matter that the home-owning dream is dying in the UK? Are Conservatives still the party of the home owning democracy?  Does this growing unfairness bother them?

The new government is being given advice about spending £billions on infrastructure in the midlands where their new ex-Labour voters live.  The lead time for these is many years and is not a particularly personal vote winner - so why not borrow a Labour proposal and pilot a Universal Basic Income scheme to tackle enduring poverty? What better and fairly quick way to capture and keep voters voting for you? Fairness, particularly for young, poor voters. Use UBI as a basis for Universal Credit reform. 

Incidentally, if spending £billions on infrastructure the Bank of England agrees that it is possible to create money for public spending interest-free and debt-free (no tax cost) and George Osborne (remember him?) agreed too but didn't bother, or dare, to use this monetary tool for the common good.     

And what about promoting local banks to supply credit where needed - locally? Labour were going to do so based on the Post Office network. Dr Plamen Ivanov, a leading proponent of economic benefit through local banks, argues the local case from a new study of the origin of the Bank of England. 

Is the Tory victory to be compared with Benjamin Disraeli stealing Gladstone's Liberal policy of extending the voting franchise in 1867? Not quite in the same way. Brexit as an issue will fade, bringing other election issues. If the Tories come up with 'borrowed,' policies Boris may do a full Disraeli, next time. But don't forget that in 1868 the Tories lost the next election even after 'Dishing the Whigs' having added new voters.             

Posted by Charles Bazlinton:  Author of The Free Lunch - Fairness with Freedom. Also: Promoter of Local Community Banks.  

Election 2019. Debt-free public funding: broadband, water, energy. Public debt mountains not needed....

The Labour party has said it will bring utility companies into public ownership:
         We will bring rail, mail, water and energy into public ownership to end the great privatisation  rip-off and save you money on your fares and bills. We will deliver full-fibre broadband free to everybody in every home in our country...
See: Labour Manifesto p7 . Subsequent reported statements say that they will issue government bonds to do so - that is: borrow money and pay interest on the new debt.  

Lord Vallance of Tummel (ex-BT Chair) writes in The Times 19 Nov 2019 that the reason BT was privatised was to access sufficient capital for technological transition to digital. He states that telecoms ranked lower than the NHS, police, defence etc. in the annual  spending round and says there is no reason to believe that these priorities would change if BT came back to public ownership. He clearly does not realise what a government of a sovereign state with its own independent currency can do, to provide tax-free, debt-free funds.  Free money can be issued for non-inflationary productive investment such as developing broadband, railways, etc. No borrowing from banks is needed at all, Lord Vallance. No queues. No begging bowls. Just careful management of how the money is handled. 

As Prof Richard Werner wrote back in 2010, specifically on broadband investment:
Government Money
        One principle in monetary economics is that money creation used for productive purposes is not  inflationary. It is therefore possible to finance the Broadband Initiative with the creation of government money, without anyone incurring any costs or debts, and without any interest burden. From an economics perspective this is indeed the most efficient way to fund such productive government expenditure  

George Osborne, Chancellor of the Exchequer, concurred with that same view through a Treasury briefing document in 2013 (see para: 3.34), that money creation can be carried out to finance fiscal deficits, thus:

      ' It is theoretically possible for monetary authorities to finance fiscal deficits through the creation of money. This would allow governments to increase spending or reduce  taxation without raising corresponding finance from the private sector.'  

All the main parties are into spending much more government money than in the austerity days. But none of them mention money creation as a tool for financing public needs. Instead there are scare stories about public debt mountains and more tax. But if pension funds had their utility assets bought up through debt-free funding (no debt mountain-building) they could invest the cash in productive industry and commerce - Hey! there's a new capitalist idea for financial wizards to think on. A resurgence of new and newly capitalised businesses to fund our pensions? 

To prevent a property market boom through the cash released from re-nationalisations, the Labour idea of land value tax on commercial property would be a wise move. (Labour Manifesto p50).     

Posted by Charles Bazlinton. Author: The Free Lunch - Fairness with Freedom   

Rev Michael Curry & that Harry/Meghan address. What's not to like about Fairness with Freedom?

Rev Michael Curry might have flung a door open for over a billion people on 19th May 2018 through his talk at the royal Harry/Meghan wedding. The intriguing possibility that society might be transformed through following 'love your neighbour as yourself' - 'the good of the other, for the wellbeing of the world, for us' unexpectedly showed up on a hot sunny Saturday in, of all places, an English royal palace. The setting was gilded with centuries of privilege. His inspirational words were like a honeyed dream which we do not need to wake up from because they are grounded in a deep reality - at least for those who want to be  awake to the possibilities. And the media is still echoing the Michael Curry impact. The root of the love the Reverend spoke of is in the unconditional love of God for the world as encapsulated by what Jesus achieved and by 'love of neighbour' and its guidelines from Moses for running a society - which Jesus gave his full backing to. 

The book The Free Lunch - Fairness with Freedom has the same theme. Anyone challenged by Michael Curry to reform society - by setting new standards for fairness and for freedom for more of us than can afford freedom now, should read it.

'Love your neighbour as yourself', is not just about giving more to charity. The issue is too demanding for that. What is needed is for the creative efforts of everyone to be channelled fairly to everyone, as all are given more freedom to be themselves. Charity was only a backstop under Moses' principles and most modern national welfare is effectively  institutionalised charity which is becoming far too big to be affordable. We should move towards a scenario  where there is less neediness to be solved by patronising donations. What is essential is a fundamental citizen-based fairness combined with a new freedom for all. 

The key for this is not an unfeeling set of rules. What is needed is feeling. How would you feel under the circumstances of the 'other'? Love your neighbour as yourself.  Fortunately the tide seems to be turning slowly, Tear Fund  a noteworthy charity is pressing for such reforms as The Free Lunch advocates. 

The Bank of England acknowledges the principles of monetary reform advocated by Huber and Robertson  (see page 44 The Free Lunch) and Prof Richard Werner, which would lift a financial burden from every citizen. Archbishop Welby is on the hunt for comprehensive economic justice which 'love your neighbour ideas' ideas would start to meet: Welby's Wishlist for Fairness  

'Love your neighbour as yourself' is not a mere comedic catchphrase, it's origins are philosophically founded in ancient, human, spiritual wisdom and has possibilities that would transform fairness for society and extend treasured freedoms to all, rather than just for the currently privileged. To follow such a paradigm would not only benefit the poorer with material benefit but would be doing the rich a spiritual favour, because as Jesus said: 'How hard it is for the rich to enter the kingdom of God'.  

A wedding. An enjoyable coming-together of two people, family and friends, and a Bishop who trumpeted an old idea to a global audience. Beyond the select wedding crowd in St George's Chapel, Windsor Castle, his 'love as fire' theme could just catch on for the common good, anywhere.

The Free Lunch - Fairness with Freedom  UK £3 (post free). 

Welby's Wish List for fairness. A new mandate from the IPPR rooted in the common good.

The IPPR (Institute for Public Policy Research) has published its interim report 'Time for Change: A New Vision for the British Economy'. Archbishop Justin Welby is leading the publicity with an FT article 'What sort of British economy do we want for our children?' [Digital title: British society deserves an economy rooted in the common good']. He continues the May/Corbyn themes (our last blogpost):
Theresa May, PM: 'We will make Britain a country that works not for a privileged few but for every one of us.'
Jeremy Corbyn, Opposition Leader: 'For the many, not the few'.

Welby calls for comprehensive economic justice - socially, regionally, generationally, environmentally - and from the IPPR report highlights his priorities: the need for reform of the education system; a fairer tax system; decarbonisation; improvements in public and private pay and the expansion of the housing stock. He believes most people want a system working in the service of human flourishing and the common good and asks why are we hearing 'Why are so many people so poor when others are so rich?' and 'Why are young people going to be poorer than their parents? 

An interesting aspect of the report is its criticism of recent economic policy.
We have experimented with bold monetary policy, but are constrained by pre-Keynesian fiscal orthodoxy. It points out the significant cuts in public spending due to government austerity programmes and says that austerity has not worked well. It suggests that monetary policy has been majored upon but helpful fiscal policy has been neglected. It wants government-initiated investment for growth and monetary policy to be coordinated to redress this, with the Bank of England advising on the integration of monetary and fiscal policy. Personal note: Ask a high official at the Bank (as I have done) if it would be possible to  invest in an industry by creating money in the QE manner - at no interest and no repayment - and they will affirm that it can be done. The IPPR obviously thinks so too and wants a change. It wants the hands of the Bank untied so that it can join in to help the economy in new ways. 

Most items on the Welby Wish List could benefit from ideas promoted on this blog over the years. Some of these are indeed mentioned in the report, which is a strong vindication of the views of book The Free Lunch- Fairness with Freedom. Such as: Education reform using monetary policy to fund education grants (Prof. Richard Werner); improving pay by  universal basic income ; a fairer taxation system which also helps the expansion of the housing stock through the incentive for development through a new land value tax .

Under the final heading (IPPR p81-83) 'Inequality and public purpose'  the report challenges the way we have measured success over the last 50 years and includes: 
'..inequality is largely a result of the ability of economically powerful groups in society to extract ‘rents’ or incomes beyond those earned by their economic contribution'. 
This gets to the heart of the matter in the way of the principles of The Free Lunch. In the vital matter of banking  (IPPR p80):
 'new insights into how the banking system creates money in modern economies, and therefore the role and limits of government or central bank monetary policy'.
The IPPR needs to look further into Richard Werner's New Paradigm in Macroeconomics who is arguably the first modern economist to have this insight. 

A banking problem from the report shows how only 5% of UK bank lending goes for businesses (15% in the Eurozone) with most going to land and property lending:
'The bulk of real estate loans and mortgages do not increase the productive capacity of the economy or contribute to growth; instead their primary effect is to drive up asset prices'.

To redress the bank lending imbalance the IPPR wants regional banks with 'geographically bounded  mandates to support the local economy' . 
It is happening already! The Hampshire Community Bank is likely to be the UK's first such regional bank and it is designed to that pattern. Additionally, being owned by a charitable foundation it will use its profits for the common good in its area and not for the high staff salaries and bonuses so roundly criticised in the IPPR report and by Archbishop Welby. Hampshire Community Bank in its whole ethos, aims to change banking for the better. Banking for the common good.  The bank, whilst not open for business yet, is currently in its licence application stage under the Bank of England's PRA. Such distinctive banks are needed across the UK. These new banks will play one part in a greater fairness for all.

With political parties broadly united over the fairness theme, and with the IPPR's excellent report spelling out some telling home truths over broad areas of economic life, the prospects that something serious for fairness will be done, are good.

Posted  by Charles Bazlinton. Author : The Free Lunch - Fairness with Freedom.  Director: Local First CIC which is promoting Hampshire Community Bank.

Magnificent words from both Corbyn and May

As half expected, (see the late May blog: 'Election Surprises?' ) we got an eye-opener of a result on June 8th. Teresa May had made an unexpected election decision on 18th April to grasp an apparently unassailable majority given the Tory's stonking poll lead of 17%. It melted away over the campaign to 4%. Her main campaign thrust was to belittle the Labour leader in comparison with the (look at me) - 'strong and stable leadership' mantra. This had the reverse effect and Labour steadily eroded the poll lead with Jeremy Corbyn, the unexpected election star, running a campaign theme: 'For the many, not the few'. Throughout he was refreshingly policy-oriented and non-personal. May actually won - in a very weakened state - and she could remain the leader for some time given the further damage that a self-indulgent Tory leadership challenge could bring to the party.

The 2010 election gave us the Tory/Lib-Dem coalition but an outcome of that alliance was the trashing of the Lib-Dems by the Tories in the 2015 election. A factor is likely to have been their breaking of a pledge not to increase student university fees. The Labour 2017 manifesto included the promise to abolish the fees and is believed to have been one factor in the Labour resurgence. 

It is strange that the Tories who deem themselves to be the UK's natural ruling party have been so deaf as to where political activity is now coming from. The extraordinary Labour party membership rise from 201,000 in 2015 to 517,000 in 2017 is a startling indicator and should have warned. The Lib-Dem's figures rose from 61,000 to 82,000. The last Tory numbers are for 2013 (150,000) and if they are getting better why aren't we told? For a insight of how the Tory's see themselves see Prospect magazine one month prior to the election . Written by Geoffrey Wheatcroft with the expectation that June 8th would bring the Tory party  'its greatest modern triumph', the result is a caution against such hubris. Best leave such comments until after the event.

Austerity is not the only policy

'Austerity' was strangely absent from the election hustings. Perhaps the electorate finally understood that, as this blog has been saying for some years, austerity as preached by George Osborne was mainly a stick to beat Labour with and counterprodutive for the country, as it inhibited investment in infrastructure investment and, anyway did not prevent government debt growing.   As Nicholas Macpherson (FT17 June 2017) has it: 'Osborne's great trick was to talk tough while implementing a pragmatic programme'. The lost time for productive investment means that the UK is lagging in economic performance. Paying for the expenditure could be by government borrowing; or, by creating the money without creating debt and without interest as explained in the Bank of England paper issued by George Osborne in 2013 - CM 8588  ,  see paras 3.34 & 3.35.  The Coalition Government knew that this beneficial monetary tool was available and didn't use it. What sort of blindness is that?

Student fees - one solution

Paul Johnson in The Times (10 July 2017) A birthday present that could solve the university tuition fees dilemma suggests that every young person reaching age 21 receives a gift of £10,000 which would help anyone, student or not. There is sharp divide in opportunities and wealth between young and old and this idea would address some of that unfairness. An idea aligned with Free Lunch principles. See this for a similar suggestion from Prof Richard Werner - a lifetime education grant funded by monetary finance.

When Mrs May became Prime Minister she uttered some 'Magnificent Words' (Blog 6 Aug 2016) :

 ...We will make Britain a country that works not for a privileged few but for every one of us'

Jeremy Corbyn's Labour Manifesto for 2017 is titled almost identically:

'For the many, not the few'  

With such an aim in common, we ought to expect plenty of agreement.... 

With electoral opinion finely balanced resulting in a precariously balanced parliament there is a great opportunity for MPs to work cooperatively at the problems of our day. It will improve their image if they look like ordinary, reasonable people. Will they? 

Posted by Charles Bazlinton. Author: The Free Lunch - Fairness with Freedom 

8 June 2017 Election Surprises?

Party manifestos, according to Free Lunch principles, should tackle the monopolistic tendencies arising in society.  The moral basis for this is from common threads found in biblical, enlightenment and liberal values and concern human rights, equality and freedom. As the political parties ply for our votes in June how do they measure up to the implied 'fairness with freedom' ? 

The core aim of The Free Lunch - Fairness with Freedom is the common good. The book suggests ways to move towards a society where each citizen is a beneficiary of the resources of nature and those arising from community-inspired schemes. The book is anti-monopoly and what is termed rent-seeking: meaning the hunt for gain sought by monopolists. Extreme disparities of wealth and poverty are the outcome in a society where control of monopolies is lax. Enlightened politics will reduce rent-seeking outcomes. 

• How are the current political parties matching up with the aims of reformers who desire the sharing of monopoly resources via a universal income for all?  
• What do they prescribe to redress the unfairness of the land monopoly: For example what about the land value gains of home owners compared with none for renters?
• What about the resource of further education now being charged for through student fees when it used to be provided free as a common provision from the public purse?
• What about the huge credit-creating monopoly of banking which neglects small business loans as too small and unprofitable to bother with? 
• What about the ability of government to create its own money to fund public expenses for public services, safely and without inflation?
• What about extending the voting franchise to younger people?

It is natural to want monopoly rights. It makes for an easy life. Owners of homes share in the land monopoly through the valuable nest-egg that builds up over the decades associated with the underlying land value of their home.  Fred Harrison points out that:

'... owners of high-value homes are able to recoup what they pay in taxes through rising property prices. ...enjoy tax-free use of schools and hospitals... Low income earners and families that rent their homes...carry the cost of the infrastructure investments and public services that enhance the value of the homes of the rich.' 

How fair is that? What do our political gurus recommend about this particular inequality which creates a constant welfare burden?  

Universal Basic Income (Citizen's Income / Citizen's Royalty)

• The only party wanting to introduce this is the Green Party.  They would create a pilot to test the idea. 

The land monopoly: home owning or renting

• Labour and the Liberal Democrats both mention land value tax as a tax reform measure. This would retrieve the gains accruing to the land values in property prices for the public purse and allow lower taxes on income and goods or as a substitute for council tax.  
• The Greens and Labour would introduce rent controls. This would be a protection for renters as a useful half-way measure until a full land value taxation scheme was implemented payable by landlords.
• The Tory manifesto policy for care in later life was to be paid from a home sale without limit above a £100k house value. The enforced U-turn, in days, shows the political danger of taking land value gains. Whilst not having the universality of land value tax for all land, the idea that property gains should fund the care is a reasonable quid pro quo, but to have to individually account for each care package and each property is probably a bureaucratic path best not travelled, besides introducing a variable charge/cost (aka 'taxation') for every case.      
• Bedroom tax aboliton (now a liablity of council house renters)  is proposed by the Greens, Labour, the Lib-Dems and UKIP.

Student tuition fees  

• The Greens, Labour and UKIP plan to abolish student tuition fees and would introduce maintenance grants (UKIP for poor students). 
• The Lib-Dems, the original champions of the abolition of tuition fees who reneged to their great downfall after being in coalition, propose bursaries for nurses and grants for poor students.
• The Tory proposal is: forgive loan repayments for teachers; provide access to grants for technology students & 'financial support that offers value for money'. This one looks 'interesting' with the news that student debt interest rates will rise from 4.6% to 6.1% this year. Andrew Greenwood (FT letter 19 April) wonders why the Swedish model is not followed with the cost of student loans as per the cost of government borrowing at 0.34%?     

Voting age to 16 

• The Green Party, Labour, the Lib-Dems and UKIP all want this. 

Local Banks 

• Labour will get the Post Office to establish a Post Bank with full banking services in every community. They also propose regional development banks. 
• The Lib-Dems will 'Require the major banks to fund the creation of a local banking sector dedicated to meeting the needs of local SMEs'. 
• The Tories propose British Business Bank branches in several major cities for SME lending needs.

Monetary reform  No parties make any suggestion about using government money creation powers to fund some public expenses. Instead the arguments are about balancing the books for borrowing, taxing and spending. Labour suggests borrowing for extra infrastructure investment because interest rates are so low - it is bound to pay off. But no one makes the case for creating the money as an extension of the QE creation process to pay for such expense without debt or interest to repay to banks. 

Lord Turner is an exponent of this e.g. deficit financing (Book: Between Debt and The Devil) as is Prof Richard Werner e.g. broadband investment.  There is no reason why just as quantitative easing is used to create money to buy back government debt or to buy commercial bonds, that it could not be used to nationalise the water companies (a Labour Party idea but bought through bonds) or to fund general government spending. The Monetary Policy Committee of the Bank of England would need to take note of any money supply implications and outcomes and act as necessary to prevent adverse economic effects - as they do now with QE. Student education could be a modern case for debt free, interest free government money creation. No more student tuition fees.  This would be a monetary reform which only hurt the big banks.  Where are the far sighted politicians to start controlling this monopoly power? 

With the early solid Tory lead appearing to slip the contest may be more open than we ever thought. World wide electors surprise us. Will June 2017 UK be yet another one? 

Posted by Charles Bazlinton author The Free Lunch - Fairness with Freedom. Director of Local First CIC 'Promoting Local Banks' 

Michael Hudson reviews James Galbraith's: 'Welcome to the Poisoned Chalice'

Michael Hudson in a review of James Galbraith’s new book: 'Welcome to the Poisoned Chalice’ says of current solutions to the post-financial crisis world that: 

‘financial interests override sovereign  self-determination  and national referendums on economic and social policy…[and] impose austerity and force privatisation selloffs that are basically foreclosures on indebted economies. Galbraith rightly calls this financial colonialism.’

Real-world economics review issue 76 carries the review.

It points out that resolutions to the current situation have been available since the 1920s. The book covers the economic traumas that the Greek nation is going through.  The prospect is that similar measures across the Eurozone will turn it into a dead zone along the lines of Latvia’s... 

‘disastrous ‘’success’’ story involving drastic emigration and declining after-tax wages’.

The solutions imposed through bond holders involve widening fiscal deficits, with countries being forced to sell off their land and mineral rights, public buildings, electric utilities, phone and communications systems, et al, at distress prices.

The problem is that the EU’S central bank (ECB) does not finance deficit spending to revive employment and economic growth. Additionally the German constitution imposes austerity by blocking funding of other countries budget deficits (except for quantitative easing to save bankers).  The 2010 bailout by banks is likened to the unpayably high German reparations imposed in the 1920s. The hope of the lenders is that deep austerity and privatisation will enable the repayments, when what is really needed is bad debt writeoffs and an expansionary fiscal policy.  

Lord Turner back at ECOBATE 2011 spoke on 'managing credit creation to deliver social optimality' See this Blog link.  

And (same blog) Chris Giles of the FT in 2013 has: 'Turner defends permanent printing of money'.

In the You-Tube film 'Debt-Free and Interest-Free money' Richard Werner exposes the false notion that debt alone is the only solution for government expenditure:  'The government can spend money into circulation, money it has issued'.

Galbraith's book highlights the rule in Europe by the dictats of finance and banking favouring right wing governments, along with opposition to any left wing alternatives to austerity. They won in Greece.

The UK has a different Conservative government from 3 months ago that looks to be setting policy ideals derived from left, right and centre. How radical will its economic changes prove to be? Chancellor Philip Hammond is soon to make an Autumn Statement on the economy. Does he realise the powers he has to invest for the common good without increasing debt? 

Bank of England and its own cartoon

The Resolution Foundation has published this image using Bank of England statements and data over the past 7 years: 



It shows how the BoE expected its bank rate to rise following the date of its forecasts over the years, according to the reading of the economic runes at the time. Clearly the Bank does not know what is happening as it wiggles various monetary levers, squeezes prudential brakes and holds enigmatic press conferences. Yet it still continues to issue rising interest rate forecasts just as it has since the credit crisis of 2008 when rates dropped off a cliff and resolutely stayed there. 
  
This simple graph is as funny as an artist's cartoon. It combines a hilarious reminder of nearly a decade of economic forecasting with a pathetic illustration that the Old Lady of Threadneedle Street is the Emperor Who Has No Clothes. 

One symptom of the above very low interest rates is galloping house prices which is a likely herald of another general economic crisis ahead bringing renewed financial difficulties for many. Will the Bank or the Chancellor, or both...or enough other people ...anybody! please!... summon humility and call for a general discussion of what to do next?  Time is short and we should not wait for the crisis to hit. Anyone reading The Free Lunch blogs will be aware there are eminent people whose untried ideas deserve examination. For example: Lord Turner, Prof Richard Werner, Prof Steve Keen, Lord Skidelsky, Fred Harrison, Richard Spencer,  Prof Mariana Mazzucato, Prof Michael Hudson, Ann Pettifor and many other distinguished champions of economics for the common good.    

Fiscal Charter: Wisdom, Irrelevant Nonsense or a Cunning Plan?

John McDonnell gets a blasting from the FT ('Labour left floundering over economic policy') for Labour's chaotic policy turnabout but gives helpful hints of what might have been if  JM had been better informed.

George Osborne made an attempt this week to bind every future government to its Fiscal Charter (balanced budgets).  As the FT points out the Brits do not do such things.  'Declaratory laws' have no place and besides Mr Osborne himself rubbished a Labour attempt at the very same thing in Labour's 2010 Fiscal Responsibility Bill: 'vacuous and irrelevant' he said then. What's different with yours now, George?  The FT says that John McDonnell's description of the Fiscal Charter as a 'stunt' is accurate, being just another trap for Labour to encounter. All this works for the Osborne austerity view whilst the public are generally oblivious to the truth that the government's accounts are not the same as household's accounts as Lord Turner said recently :
'...the very essence of the insight of macroeconomics is that governments and states are not the sum of households. In the personal household economy, books have to be balanced, but the state economy is different.'

It is not that George Osborne himself does not understand an alternative to austerity such as the Quantatitive Easing for the People that Jeremy Corbyn now wants. Back is 2013 he quite understood that austerity is not the only way:
 ' It is theoretically possible for monetary authorities to finance fiscal deficits through the creation of money. This would allow governments to increase spending or reduce taxation without raising corresponding finance from the private sector.'  
So we have a party following a Chancellor with an 'austerity' policy that seem merely set up to wrong-foot the opposition regardless of the damage it might cause to our economy or the possibilities it might exclude.

Mr Osborne is probably knowingly stretching his apparent belief in the austerity imperative as long as it discomforts Labour. Sooner or later he will decide, as the FT suggests, that a political judgement must be made rather than an economic necessity followed and his outlook will change - even with a cunning plan? Perhaps he will then begin to monetise the deficit as Lord Turner suggested in 2013. This might then 'achieve' his Fiscal Charter rules because creating government money that does not need to be paid back would be excluded from the deficit calculations!

Meanwhile we are being led on a false trail of needless hardship where the benefits of deficit financing are being ignored. Perhaps some Tories will be bold enough to develop insight? Or will Labour actually get their act together? The debate must be opened out and not delayed just for the benefit of the Conservative political purpose of annihilating Labour.