But with every day bringing improbably large new spending pledges to help workers and businesses get through the crisis, how can the government possibly afford to foot the bill?
This is a completely wrong perspective to take on the issue. Your government, like the US, is a sovereign currency issuer and only accepts debt denominated in the currency it can create on-demand. This means it can always “afford” anything that is for sale and priced in that currency. Its currency is self-funding and not dependent upon revenue. Its debt only offers a secure depository for savings from its deficits that allow a store of value from its commerce. Your nation’s choice to not adopt the Euro allows it much more flexibility in meeting challenges like this.
Let’s recap. The government is giving billions away to workers and businesses. It’s paying for this by borrowing money from lenders. And the lender at the front of the queue is… its old frenemy on the other side of our two-government economy, the Bank of England, the old lady of Threadneedle Street herself.
See above concerning borrowing from lenders. Also, the money must exist prior to borrowing, so borrowing to increase the money supply is not even possible. In speaking with economists on your side of the pond it becomes obvious that the Bank of England is just your version of the Federal Reserve here.
The usual problem with countries that print money, as Weimar Germany found out in the 1920s and Zimbabwe much more recently, is hyperinflation. If too much printed money chases too few actual goods, prices start to spiral out of control.
Your logic here is close but missed the mark by thaaaat much. (Sorry, couldn’t resist an old American TV reference). Just reverse the cause and effect here and you’ll get it right. Hyperinflation is always the result of resource shortages and the increase in the money supply follows in an attempt to allow the people to purchase necessities. Similar results are often seen with currencies that are pinned to other currencies or countries that borrow in currencies they cannot create or control.
The Weimar Republic was forced to pay restitution for WWI in gold, British Pounds, and Francs when all of its productive capacity was destroyed. Bankrupting the Republic was largely the cause of the rise of fascism and the birth of the Third Reich.
Zimbabwe booted foreign landowners and gave the land to the revolutionary soldiers. This caused it to become dependent on imports for food when it had once been touted as the “breadbasket of Africa” and other countries were not anxious to trust its currency given the rampant corruption in the government.
We have to watch for similar reactions to the coronavirus if supply lines become threatened, but as long as we can maintain sufficient supplies of essentials, either via production or government intervention/imports the money created to purchase them will not cause serious inflation. Both the US and Britain used rationing and price controls in WWII when all of their productive capacity was devoted to defeating Germany, so we are not without tools if taxation can’t level the field sufficiently to avoid bidding up costs.
Has the extra Sterling been absorbed into rising house prices and a bullish stock market? Have companies hoarded cash over a decade when they’ve struggled to invest?
Both of our nations have succumbed to neoliberalism. We had Reagan and you had Thatcher, but their purposes were the same. They denied any benefit to the people from their federal government and started the grand lie of taxation funding their respective governments. If the people were convinced that “they” funded their government they could easily be recruited to cheerleader their own economic demise, especially if an “other” was handy to blame their misfortune on. In America, it was the imaginary welfare queen who was said to be raking in a fortune from the government’s largess at the expense of the hard-working taxpayers.
It was an easy sell considering it resonated with how the people interact with their currencies as “users” who must obtain the currency via their labor prior to spending. It also allowed the opposition parties in both countries to become corrupted by deep-pocket interests that were more than willing to bribe them to abandon the people and hand over their birthright share of productivity to market capitalists promising jobs.
Holding the economy together is undeniably the right thing to do right now.
This is very true, however, the oligarchs never allow a good disaster to go to waste and they have to be constantly watched like petulant children who will eat all of the ice cream before everyone else even starts supper if allowed. They will buy back the stock of their own companies to boost the share value and executive bonuses and will run up the price of essential goods if we let them. One only needs to look at America’s drug prices to prove their intent.
Their political toadies will lament the ills of socialism at the slightest suggestion that the people’s government offers them even basic protections or necessities of life. Your meager safety net is far more than is available here, so look to the US to see your future.
Never give up your NHS and insist it is fully funded regardless of any shortcomings it may have, especially now. I can see your leaders subjecting it to the death of 1000 cuts to make room for a private market to capture it. Many Americans who face getting this new virus are hoping they don’t recover due to the inevitable massive bill they can expect from our healthcare system.
Who gains — and who loses. However it turns out, the world will never look the same again.
The people will have to be willing to burn it all down, even after suffering the ravages of this virus, if they expect to not lose ground. We should set out sights a bit higher than “the same”, considering that the status quo wasn’t all that great. This crisis could be the opening the people need if they can organize.
