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April 21, 2017



yep. that's the problem of the UK's mid-Atlantic politics. The taxation of the USA with the public services of northern Europe.

I might add, however, that FOM (and birth-rate) gives us an increase in population of 16M over 35 years, which is 25%. If you increase the population by roughly the population of the Netherlands, that would, one might think, need us to build roughly the infrastructure of the Netherlands. Here's a helpful list of hospitals. https://en.wikipedia.org/wiki/List_of_hospitals_in_the_Netherlands. that's quite a lot of hospitals we are going to have to build in the next few decades.



is the correct link

Luis Enrique

should he have asked: if the government is going to claim there is no more money for schools and hospitals, ought they not also be claiming there is no more money for aid?

Ralph Musgrave

I have no objection to spending more on the NHS. However Chris’s argument that borrowers can currently profit at the expense of lenders because the real or inflation adjusted rate of interest is negative is not actually an argument for government borrowing to spend more on hospitals.

Reason is that a change in interest rates has no influence on the RELATIVE MERITS of borrowing to build hospitals as compared to the merits of borrowing to build private houses. To illustrate, if there was a sufficiently large outbreak of Greenspan’s “irrational exuberance” tomorrow, the Bank of England might substantially raise interest rates to compensate. That would not have any effect on the relative merits of public as compared to private investment.


Usual simplistic twaddle.

If the Govt decided to go on a further borrowing binge, interest rates would rise as the markets lost faith in the rational actions of the UK Govt.

Then it would not be a free hit, but a huge long-term cost. Once we have long-term gilts issued, we are forever at the mercy of the bond markets.

Indeed, we are in a terrible long term position currently. The answer is to cut foreign aid too of course - the logic of the answer above is faulty at least you got that bit right.

But the markets regulate themselves and in life there is no such thing as a free lunch, of course, you believe in the magic money tree - quelle surprise.


Of course! Cut foreign aid! Cut services for the poor! Twaddle and stupidity all around. Why not cut spending on defense? Or in the case of the UK, all the egregious spending on the aristocracy? Why not raise taxes?

Instead of the stupid "there's not enough money for this tiny expenditure because we want to lavish it all on the rich" mind set, how about we do some real analysis. Let's look at the ROI on building enough hospitals, schools and other projects in terms of increased well-being and health. Of course, if you like to think that it would be better by far to have decreased health and well being in the middle and lower classes, you need to state this as a premise. For instance: all money spent in health care except for big insurance plans for the wealthy is a waste, since poor people just are basically obnoxious and if they die off, all the better. All money spent on roads that don't lead to manors is wasted because poor and middle class people can figure out how to dodge potholes. Etc etc.

Of course, to say this out loud is "not done". So it is said between the lines while the rich mouth piously about the poor always being with us blah blah blah


Money is never an issue as you well know. In any discussion the response to how do you pay for it is to say ‘by parliament authorizing us spending the money’ and then bridge onto real resource discussions.

In the private school debate I would be asking whether private schools should exist in a time of teacher shortages. Why should the rich be able to reserve teachers for their own children when so many other schools are suffering a major shortage?

Chris needs to decide his position on private healthcare. Because if it is the resources the NHS require are tied up on the private healthcare system. Why should the rich be able to reserve medical resources for themselves because they have money ahead of other citizens who have a real medical need?

Even in real terms we’re in a bind. The Tories have spent the seed corn and we need to reduce supply capacity to get the training system up to the level we require to supply new people into the Health Service. Maybe design custom jobs for retired doctors?

We can’t have a policy of taking medical resources from the rest of the world where there are serious problems with e.g. malaria. They need them more than we do.

MMT is what is, not what might be:



As has happened in Japan, CityUnslicker.....

"in life there is no such thing as a free lunch"

Well very few Gilts are held directly by Households. The vast majority is held by financial intermediaries and overseas entities.

What is the public purpose of having these middlemen in the process? What is the public purpose of paying a state income to overseas entities? What is the public purpose of the trading market?

Because Gilts pay an income and are negotiable, they add to the total income available to the private sector, which means - naturally - that the price of other income producing assets is less.

When the Bank of England withdrew Gilts from the market via QE, leaving in place the alternative Bank Reserves, the price of other assets went up.

So because more income is paid on Gilts than on the alternative Bank reserves, the price of private assets is lower than it otherwise would be.

A simple pension savings plan at National Savings, along the lines of the Guaranteed Income Bonds and Indexed Linked Savings Certificates, would solve the problem permanently, would be limited to individuals, and would allow them to manage their risk profile as they approach retirement (they would sell out of risky assets and transfer the money to National Savings).

Since it would be only available to individuals and there is no need to pay middlemen, it is clearly far more efficient than the current Gilt issuing system.

Looks like a free lunch to me.


Government intervention into private markets IS a serious matter and must be justified with a proper cost-benefit analysis.

The ‘cottage industry firms’ that characterise the public debt industry use resources for public debt issuance, trading, financial engineering, sales, management, systems technology, accounting, legal, and other related support functions.

These activities engage some of the brightest graduates from our educational system and the high salaries on offer lure them away from other areas such as scientific and social research, medicine, and engineering.

On balance, public debt markets appear to serve minor functions at best and the interest rate support can be achieved simply via the central bank maintainng current support rate policy without negative financial consequences.

The public debt markets add less value to national prosperity than their opportunity costs. A proper cost-benefit analysis would conclude that the market is a free lunch and should be terminated.


Interesting. I recently took part in a hustings where my Tory county council rival said that the interest on our debt cost 25% of government spending, I wonder what the actual figure is? Whatever the answer, a lot of people believe the Humphrys version.

Of course if I win I will be faced with a halved central grant and a council that had sold it's assets. What can a leftie do at local government level under current circumstances?


Sure, we could raise taxes or borrow a bit more. But that is an arse-about-face way of solving the problem. If you find yourself perpetually short of money the best solution is go get a better job. The UK has a lower GDP/head than our main competitors, we don't earn enough money. Fix that and you fix the tax and NHS funding problem.

Now we have known this for decades but whatever is necessary to improve matters has not been done. So what must change, we must become a bit more German or a bit more Dutch or a bit more French or a bit more Danish or even a bit more American (maybe not). Therein lies the problem, we have never been able to decide to knuckle down and develop a proper organised social democratic state like our European counterparts but neither have we chosen to adopt the economic free-for-all that is the American model. We have stayed stuck in the middle going nowhere.

The Brexiteers will take us toward the American model which will be very nice if you are young, attractive, rich and live in London. But not so hot if you are middle aged and live in Middlesbrough or anywhere else for that matter. And there we have it, June 8th will probably decide nothing and certainly do nothing towards the real problem - we don't earn enough money.


You illustrate the kind of trouble people get into when they think financing is important but ROI is not.


I'm sure you know this, but Humphreys was only doing his job by asking this. The BBC gets letters all the time saying "why didn't your interviewer push X harder on Y?". He'll inevitably bring up the point about taxing more or borrowing more at another time if the subject being made does claim that there isn't enough money.

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