The following is from a recent BBC article, the link for which can be found here: http://www.bbc.co.uk/news/uk-politics-40265875
“Former chancellor George Osborne has urged the government not to change its economic strategy after being left without a Commons majority. Mr Osborne’s newspaper editorial said a so-called “end to austerity” would lead to a ‘loss of economic credibility’.
Earlier Michael Gove, the new environment secretary, said ministers had to listen to public concern about how services are funded.
Mr Osborne, who implemented deep spending cuts during his six years in the Treasury, abandoned his bid to restore government finances to a surplus by 2020 shortly before leaving office.
His deficit reduction targets have been relaxed by his successor Philip Hammond.
An editorial in the London Evening Standard, which he edits, said: ‘Talk of ‘an end to austerity’ is code for ‘we’re going to allow the deficit to rise, and we don’t care’.”
I shall skip my usual line-by-line critique and begin here, because, finally, a politician says something that is honest and it makes the news!
The end of austerity does mean that we’re going to allow the deficit to rise, and we don’t care. And that is totally honest, because nobody in Britain should care if it rises. The UK Government is what we call ‘monetarily sovereign’. Osborne knows this as well, but he doesn’t want you to know that he knows. It has the exclusive, monopoly authority to issue British pounds. Actual pounds come from nowhere else. When the UK Government spends, it is literally spending pounds into existence to ‘pay for’ programmes.
You see, when it comes to government spending, it is always a question of real resources. Real resources are the stuff that allows a nation to produce things like food, clothing, housing, pens, paper, computers, cars, etc. So, what we are talking about when we discuss the question of real resources is are there enough workers, enough steel, enough food, enough hospitals, enough medicines, enough cars, enough of everything except ‘money’. The real resources are the things that matter; they are the things that we need or want which we then use pounds to buy, and the capacity to produce goods and services from those real resources is what dictates how many pounds the government can deficit spend. If the government deficit spends too little, then real resources will lay idle and go to waste. If it persistently deficit spends too much, then inflation is possible. Pounds are merely a voucher that the government manufactures to purchase goods and services created by the private sector. After the government has purchased the goods with its own pounds, then the pounds enter the private sector and we use them to also purchase goods and services for ourselves because the UK Government taxes us.
Because the government taxes and declares a punishment for not paying the tax, people are then forced to obtain pounds. They do that by selling their goods and services to the UK Government and the government then manufactures the pounds to pay for them. By being the sole, exclusive issuer of the Pound Sterling, the UK Government always ensures that it can purchase whatever it needs to function as government in perpetuity without fear of going ‘broke’. This is the entire point of both the tax and the British pound – to provision the UK Government with goods and services and to drive the demand for the pound.
Try to understand – a national government is set up with the intention of being durable, lasting into the ages. It has to be durable, otherwise the nation will no longer exist. Therefore, the responsibility falls upon the UK Government to find a way to obtain what it needs to survive throughout the ages. There are two ways the government can do this:
1.) It can simply walk into the private sector and take what it needs by force, or
2.) It can operate a monetary economy. It lays a tax payable in the government’s own currency (The Pound Sterling) and declares a harsh punishment for not doing so, which then causes the private sector to sell the government goods, services and labour in order to obtain the pounds necessary to pay the tax. Two things now happen:
1.) As long as the UK Government can enforce its tax collections, the private sector will demand pounds. Because the tax drives the demand for pounds, the UK Government can now purchase anything that it needs to function as government in perpetuity as long as it is for sale in Pounds Sterling.
2.) Since the private sector demands pounds to pay the tax and accepts the government’s pounds as payment for goods and services, wide-spread acceptance of British pounds is achieved and so the production of and the buying and selling of goods and services will take place in the private sector priced in Pounds Sterling.
So why then does the government tax if it does not need revenue to spend? Good question.
First, let me sate clearly that in today’s fiat currency regime, the target of government spending operations has to be reaching the real ability of the economy to produce goods and services, and to maintain that level, otherwise unemployment and recessions will be inevitable. Fiat changes things completely. Since there are no gold reserves to defend, there is nothing for the government to limit the amount of currency in circulation to, except for the limit of the economy to produce. Thus, the government no longer taxes or borrows to fund spending since they serve no real financial purpose in a fiat system. While it is true that the government does tax and does issue gilts, it is also true that the pounds collected from taxation exit the economy and the pounds collected from bond sales are not spent. Today, Gilts are issued by the government for the purpose of establishing and maintaining a particular interest rate. The pounds used to purchase gilts are moved to securities accounts that are held at the Bank of England, and remain there earning interest. So then, why tax at all is usually the question from many people at this point.
First, as we’ve discussed, UK Government taxation drives the demand for the pound. Second, in a fiat regime, taxation reduces the spending power of the private sector. Let us assume that the UK has reached the limit of the economy’s production capacity and further government spending has pushed past this limit and is creating inflationary pressures. By increasing taxes, the UK Government removes pounds circulation by destroying them, thus, decreasing the number of pounds available that consumers can spend. As the currency in circulation drops, consumers slow their spending and inflationary pressures drop.
Third, in a fiat regime, UK Government taxation is used to alter behavior. Smoking is a good example. Taxing cigarettes would raise the price of cigarettes to the point that, hopefully, some people either cannot afford them anymore or simply refuse to pay the high price. As a result, the number of smokers drops in the UK. The goal of the tax, then, would be to reduce smoking. Consider also small nations with congested roadways. The nation might consider placing a very high tax on car purchases, in order to discourage people from buying cars and to encourage them to seek alternate forms of transportation. Denmark did exactly this, levying a 180% tax on car registration. As a result, people ride bicycles or use public transportation and congestion is reduced. The purpose of the tax isn’t to fund healthcare and welfare spending, but to modify the population’s behavior.
Fourth, UK Government taxation unemploys labor. When the government raises taxes, this reduces consumer spending power. When consumers contract their spending, business loses income and, as a result, business lays off workers. The UK Government can now buy the unemployed labor and use it for public projects. In other words, taxation allows the government to provision itself with workers.
Fifth, taxation by the UK Government creates better equity. By targeting large tax increases at the opulent (the extremely rich), while reducing taxes on working class citizens, the government destroys the wealth built up by the rich in terms of pounds while leaving more pounds in the hands of everyone else, and the result is better equity among the populace.
So, that is the answer to “why tax at all”. When it comes to government spending, taxation doesn’t mean revenue; it means what it’s supposed to mean: “a burden”. When the populace complies, the UK Government achieves its economic and social goals. The question, then, for national tax policy within a fiat currency regime is, “What kind of society do the people want?” and then once the voters speak, the government aims its spending and tax policies towards creating and maintaining that kind of society. If the economic and social agenda is persistent involuntary unemployment, underemployment, low wages, poverty, recession, high crime rates, vast income inequality, costly university education, expensive private healthcare and crumbling infrastructure, then the UK Government will continue to maintain its current fiscal stance of austerity. If the economic and social agenda is persistent full employment, price stability, decent wages, low crime, better equity, tuition-free university education, universal healthcare and a modernised, functional infrastructure, then the government will alter its fiscal stance and expand its deficit towards those goals.
In summary, British pounds are manufactured by the UK Government when it spends to access the nation’s real resources, and then the pounds are used by individuals in the private sector to access those real resources for their own use. This is called a modern monetary economy and the UK Government alone commands both the pound and the economy. So, are there enough real resources for the UK Government to spend pounds into existence for the NHS, schools, benefits and other public purpose initiatives? The answer is yes. There always has been enough.
So, the question of ‘enough money’ is entirely irrelevant to the UK Government, therefore making Osborne’s call not to change course on austerity to be a murderous demand. Strong words? I think not.
If there is idle capacity, why would you wish to leave it idle? Consider medicine for a moment. If there are enough doctors, nurses, hospitals and medicines to ensure the healthcare needs of everyone in the UK, why would you want the UK Government to restrict the supply of pounds to the point that only some of the population can obtain healthcare?
Consider unemployment. If there is a fully-functioning production infrastructure in place which can produce enough goods and services for everyone in the nation, and there is also an infrastructure that needs attention, and there are literally millions of jobs that could be created which would result in much needed community betterment, why would you want the UK Government to restrict the supply of pounds to the point that only some of the population can obtain satisfactory work? The UK Government is the sole entity that both creates all unemployment in the UK and the only entity that can eliminate unemployment, which it does through deficit spending. Until it spends to abolish unemployment, then unemployment will remain. Some of those who are willing and able to work will not be able to find adequate work, because they are forced by mindless austerity policies to look for jobs that aren’t there.
Consider benefits. If there are enough goods and services produced to meet everyone’s basic living requirements, a needless austerity policy that declares the terminally ill, the disabled and invalids ‘fit for work’ when the UK Government has an infinite supply of pounds on hand to spend and can easily afford to ensure the least fortunate in our nation can live a life of human dignity is what, exactly?
Consider food as well. If there is enough food produced to feed everyone in the UK, why would you want the UK Government to restrict the supply of pounds to the point that only some of the population can purchase food? Food banks are a completely unnecessary thing in the United Kingdom and so is starvation and hunger. Were the UK Government allowed to do its job properly as a currency-issuer, food banks would be pointless.
Consider police, fire brigades and public safety regulations. If there are enough police officers, firemen, and regulators, along with the knowledge, equipment and technology available to ensure the safety of the entire populace, why would you want the UK Government to restrict the supply of pounds to the point that crime rises pointlessly in communities, or perhaps a fire occurs in an apartment tower somewhere and several people needlessly die from something that could have been easily preventable?
I wish to be very clear here: Austerity has absolutely nothing to do with the financial health of the UK Government. Austerity is 100% politics – murderous politics – and the decision to inflict austerity upon the population is purely a political decision, not an economic necessity. It has everything to do with shifting the focus of the government’s fiscal policy towards the business and financial interests, and rich friends who pay the Tories to promote austerity, and away from everything that benefits the people as a whole.
The previous seven years of Tory austerity were a complete sham; a fraud. Osborne’s demand not to change course on austerity is a complete sham; a fraud, a murderous demand. George Osborne says we shouldn’t change course on austerity lest we lose our ‘economic credibility’. Austerity is a loss of economic credibility, which is a major reason why Theresa May’s snap election failed miserably. Yet, Osborne continues to fear monger anyway, attempting to scare you in to slitting your own throats pointlessly for the benefit of his wealthy benefactors. Which wealthy benefactors, you ask?
Glad you asked.
I present to you the man who demands that the working class and poor continue to suffer under the brutal hand of needless austerity, direct from the House of Commons Register of Members’ Financial Interests, Mr George Osborne himself:
Osborne, Mr George (Tatton)
1. Employment and earnings
Payment of £69,992 expected from The Securities Industry and Financial Markets Association (SIFMA), 1101 New York Avenue, 8th Floor, NW Washington DC 20005, in return for a speech. Hours: 1.5 hrs in total, on 27 September and 18 October 2016. Travel and accommodation also provided. (Registered 25 October 2016)
Expected payment of £28,454.40 for a speech on 17 October 2016 from the Hoover Institution, Stanford University, Stanford CA94305, USA. Accommodation also provided. Hours: 3 hrs. (Registered 26 October 2016)
Payments of £81,174 and £60,578 expected from JP Morgan, 270 Park Avenue, New York USA, for giving two speeches, on 4 and 5 October 2016. Hours: 7 hrs in total. Travel and accommodation also provided. (Registered 02 November 2016)
Speaking engagements via the Washington Speakers’ Bureau, 1663 Prince Street, Alexandria, VA 22314:
Payment of £80,240.16 expected from Palmex Derivatives, 125 Old Broad Street, 25th Floor, London EC2N 1AR for a speech in New York on 27 October 2016. Hours: 2 hrs. Travel and accommodation also provided. (Registered 16 November 2016)
Payment of £85,396.24 expected from Citi, 33 Canada Square, London E14 5LB, for giving two speeches on 17 November 2016. Transport also provided. Hours: 3 hrs. (Registered 28 November 2016)
Payment of £34,109.14 expected from Black Rock Financial Inc, 40 East 52nd St, New York NY 10022, for giving a speech on 15 November 2016. Travel and accommodation also provided. Hours: 1 hr. (Registered 28 November 2016)
Payment of £68,125.35 expected from Centerbridge Partners LP, 375 Park Avenue 12, New York NY 10152, for giving a speech on 10 November 2016. Travel and accommodation also provided. Hours: 2 hrs. (Registered 28 November 2016)
Payment of £51,328.50 expected from Aberdeen Asset Management, Bow Bells House, 1 Bread St, London EC4M 9HH for giving a speech on 22 November 2016. Travel also provided. Hours: 1 hr. (Registered 15 December 2016)
Payment of £68,493.15 expected from ITP Publishing Ltd, ITP Building #14, Dubai Media City, PO Box 500024, Dubai, UAE, for giving a speech on 28 November 2016. Flights, accommodation and transfers also provided. Hours: 3 hrs. (Registered 15 December 2016)
Payment of £51,829.26 expected from HSBC, 8 Canada Square, Level 42, London E14 5HQ, for giving a speech on 18 January 2017. Accommodation and travel also provided. Hours: 2 hrs. (Registered 06 February 2017)
Payment of £40,567 expected from St James’s Wealth Management, St James’s Place house, 1 Tetbury Road, Cirencester GL7 1FP, for giving a speech on 27 January 2017. Hours: 3 hrs. (Registered 06 February 2017)
Payment of £51,082 expected from VOKA (Flanders Chamber of Commerce and Industry) Markgravestraat 12 Antwerpen 2000, Belgium, for giving a speech on 7 February 2017. Hours: 3.5 hrs. (Registered 23 February 2017)
Payment of £15,081 expected from Lloyds Bank International Ltd, 25 Gresham St, London EC2V 7HN for giving a speech on 6 February 2017. Hours: 3 hrs. The fee will be donated to a charity in my constituency. (Registered 23 February 2017)
Payment of £51,842 expected from People FZ LLC, C19 Penthouse Office, 502A, TwoFour54 Building, No4, Khalifa Park, Abu Dhabi, UAE 769413, for a speech to the New York University, Abu Dhabi on 4 March 2017. Hours: 2.5 hrs. (Registered 24 March 2017)
Payment of £51,754 expected from The Magyar Nemzeti Bank (the Hungarian Central Bank), Szabadsag ter 9., Budapest, 1054 Hungary, for giving two speeches, on 1 and 2 March 2017. Hours: 7 hrs. (Registered 24 March 2017)
Payment of £51,540 expected from Insight Investment, 160 Queen Victoria Street, London EC4V 4LA, for giving a speech on 17 March 2017. Hours: 2 hrs. (Registered 10 April 2017)
Payment of £67,552 expected from Nomura Holdings, Inc., 1-9-1, Nihonbashi, Chuo, Tokyo, Japan, for giving a speech on 27 March 2017. Hours: 7 hrs. (Registered 27 April 2017)
Payment of £68,225 expected from HSBC, 1 Queen’s Road Central, Central, Hong Kong for giving a speech on 6 April 2017. Hours: 5 hrs. (Registered 27 April 2017)
Payment of £65,901 expected from Price Waterhouse Coopers, One Spencer Dock, North Wall Quay, North Wall, Dublin1, Ireland, for giving a speech. Hours: 7 hrs. (Registered 27 April 2017)
From 1 February 2017, adviser on the global economy to The Blackrock Investment Institute, Drapers Gardens, 12 Throgmorton Avenue, London EC2N 2DL. I expect to be paid £162,500 a quarter in return for a quarterly commitment of 12 days. I also expect to receive registrable equity in BlackRock in the future. I consulted ACoBA about this role. (Registered 23 February 2017)
3. Gifts, benefits and hospitality from UK sources
Name of donor: Countywide Developments Ltd
Address of donor: 15 Hockley Court, Stratford Road, Solihull B94 6NW
Amount of donation or nature and value if donation in kind: for a member of staff and myself, helicopter and car transport to Ripon North Conservatives’ Summer Reception, value £8,023.08
Date received: 14 July 2016
Date accepted: 14 July 2016
Donor status: company, registration 02865543
(Registered 11 August 2016)
4. Visits outside the UK
Name of donor: Chicago Council on Global Affairs
Address of donor: Two Prudential Plaza, 180N Stetson Ave, Suite 1400, Chicago IL 60601
Estimate of the probable value (or amount of any donation): flights, hotel and transfers to a value of £6,829.55
Destination of visit: Chicago
Dates of visit: 21-22 September 2016
Purpose of visit: to speak at the Louis B Susman Distinguished Lecture on Transatlantic Relations.
(Registered 13 October 2016)
Name of donor: Weekend with Charlie Rose (TB Group Inc)
Address of donor: 136 East 64th St, 3F, New York NY 10065
Estimate of the probable value (or amount of any donation): flight and accommodation to a value of £4,753.62
Destination of visit: Aspen, USA
Dates of visit: 23-25 September 2016
Purpose of visit: to attend an international conference.
(Registered 13 October 2016)
Name of donor: Michael R Bloomberg
Address of donor: 19 East 79th Street, New York 10075 USA
Estimate of the probable value (or amount of any donation): travel, accommodation and dinner for myself and my wife, value £4,086.65
Destination of visit: Paris, France
Dates of visit: 14-15 October 2016
Purpose of visit: to attend a dinner for Michael R Bloomberg
(Registered 04 November 2016)
Name of donor: Franco-British Colloque
Address of donor: Station House, Station Approach, East Horsley, KT24 6QX
Estimate of the probable value (or amount of any donation): transfers and accommodation with a value of £700
Destination of visit: Versailles, France
Dates of visit: 26-27 January 2017
Purpose of visit: To attend the Franco-British Colloque.
(Registered 06 February 2017)
Name of donor: American Enterprise Institute
Address of donor: 1789 Massachusetts Avenue, NW Washington, DC, USA
Estimate of the probable value (or amount of any donation): flights, transfers, accommodation and meals to a value of £6,454
Destination of visit: Sea Island, Georgia, USA
Date(s) of visit: 9-11 March 2017
Purpose of visit: Attendance at the AEI World Forum conference.
(Registered 03 April 2017)
6. Land and property portfolio:
(i) value over £100,000 and/or (ii) giving rental income of over £10,000 a year
Until 31 August 2016, residential property in London: (i) and (ii). (Registered 21 July 2011; updated 13 October 2016)
7. (ii) Other shareholdings, valued at more than £70,000
Osborne and Little Group Ltd, a family business manufacturing and retailing fabrics and wallpapers. (Updated 18 October 2012)
From 30 January 2017 until 19 January 2018, Kissinger Fellow at the McCain Institute, 1777 F St NW, Washington DC 20006.The Institute provides me with £120,212 (USD £150,000) to meet stipend costs and the costs of travel, accommodation and research support associated with this fellowship. (Registered 23 February 2017)
House of Commons Register of Members’ Financial Interests: https://www.publications.parliament.uk/pa/cm/cmregmem/170502/osborne_george.htm