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November 09, 2017


Ralph Musgrave

Agree basically. However it's very questionable whether "government must borrow more to invest". Milton Friedman and Warren Mosler advocated no government borrowing at all. I debunked the main arguments for government borrowing here:



«given our supine media»

Who pays the media chooses the tunes. If "hoi polloi" believe that they can get media that inform them in their interest while being paid by those who have quite different interests, too bad for them.


Agree absolutely.

Is there an error, referring to an index linked interest rate of "less than one per cent of GDP". Don't you just mean "one per cent" ?


Did he/they fail? Not so say uninformed voters as dickhead Tories count their wavering majorities. Introduced as new thinking; under softly spoken, careful, considerate questioning (as extended to all R4 guests as we know) he stated Labour caused a deficit which Conservatives have brought down to 'normal' levels and so we can invest again. It's not funny, but you have to laugh or you cry.... Anyway, the nice Mr Boles wouldn't even be getting a hearing on the subject of investment levels if a new Labour Movement wasn't tossing the truth around all over the place.

Its selective austerity, concerned only with the means of controlling ongoing labour and labour pension costs, not real austerity that's at play here. Which is tantamount to encouraging falls in productivity is it not?


good summary


"In 2009-10 – when PSNB hit 9.9% of GDP – longer-term index-linked gilt yields were at then-record lows of under one per cent of GDP. Such low borrowing rates tell us that “people out there” were not worried about the government’s creditworthiness. "

Bollocks. Try doing it all again without the BoE piling into the gilt market with its QE bucket of freshly created cash, buying everything in sight. Then see what interest rate the market was demanding.

mike berry

Jim - In a recessionary environment where would the un-invested savings and the surpluses being hoarded by the corporate sector have gone if not into government bonds?

As Richard Koo argued:

Except for certain countries in the Eurozone which will be discussed below, there is no reason why a government should face financing problems during a balance sheet recession. The amount of money it must borrow and spend to avert a deflationary spiral is exactly equal to the un-borrowed and un-invested savings in the private sector...that is sitting somewhere in the financial system. With very few viable borrowers left in the private sector, fund managers who must invest in fixed income assets without foreign exchange risk have no choice but to lend to the government, which is the last borrower standing. Although deficit hawks pushing for fiscal consolidation often talk about 'bond market vigilantes', the fact that 10-year bond yields in the U.S. and U.K. today are only around 2 percent—unthinkably low given fiscal deficits of nearly ten percent of GDP— indicates that bond market participants are aware of the nature and dynamics of balance sheet recessions (Koo 2011: 27-28)

Koo, R. C. (2011) The world in balance sheet recession: Causes, cure, and politics. Real World Economics Review.58, 19–37.


"In a recessionary environment where would the un-invested savings and the surpluses being hoarded by the corporate sector have gone if not into government bonds?"

Why was QE necessary then? If there was a wall of money all desperate to buy Government Debt, why did the BoE need to print £375bn and spend it on gilts to force yields down? Surely they just needed to issue the gilts and the market would have lapped them up?


" . . . weak demand and weak expected demand might have deterred firms from investing and innovating."

Was investment 'deterred'?

“The depth of the crisis was reached in the spring and summer of 2009, and we now have the initial estimates for the economy for the same period in 2015. GDP as a whole increased by £100bn over the period, after allowing for inflation, a rise of nearly 13 per cent. Companies spent an additional £32bn on new investment in 2015 compared to the same period six years ago. In percentage terms, this was by far the fastest growing sector of the economy, up by 26 per cent. By contrast, consumer spending grew by only 10 per cent, less than the economy as a whole. It has been an investment-led recovery, with the role of public spending negligible. “

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