3. Dec, 2017


Let me be clear.

This senior Bank of England official and former Goldman Sachs banker has no idea what he is talking about.

None at all.

He thinks the UK Government will lack 'fiscal space' to respond to an economic shock if it doesn't cut its net spending now.

He is unaware that net spending now has no implications at all for the ability of the UK Government to spend in the future.

Net spending is limited by the availability of real resources and the associated potential for spending to have inflationary consequences.

For a monetary sovereign government, there is no purely financial constraint.

He is apparently unaware of this.

You reduce your fiscal space by giving up your monetary sovereignty, like Greece, or for that matter, like Venezuela. The UK will not do this.

His reference to Venezuela is particularly misleading, as he must surely be aware of the historical factors which have contributed towards Venezuela's current crisis, including Chavez's 'Mugabe-moment' of a decade ago, with its devastating consequences for aggregate supply.

This is a quote from the senior Bank of England official:

"As a financial practitioner for well over 30 years, uncertainty is no surprise to me – for example, when I started in finance Venezuela was a AAA credit! Let me remind you of the definition of a AAA rating: ‘An obligor […] has extremely strong capacity to meet its financial commitments.’ Venezuela is now in default.”

He spent well over 30 years as a financial practitioner not understanding macroeconomics.

If you destroy the supply-side of your economy, which in the case of Venezuela is the same thing as destroying the oil sector without having anything to replace it, then you WILL get a crisis.

This is utterly irrelevant to UK fiscal policy.

His own chart demonstrates that the so-called 'national debt' has been far higher in the past.

If you understand MMT, you will know that the debt of a monetary sovereign government, denominated in its own currency, is not a debt in the conventional sense of the term at all.

You will read the Business Insider article, and will have only one question in your mind.

Does this Bank of England official and former Goldman Sachs banker really understand so little about the monetary system for which the Bank of England acts as the central banker, or is he being misleading for some other reason?

His statements are so very misleading as to make me depressed about the level of ignorance holding us all back from addressing the economic, social and ecological problems we ought to be dealing with.

These people are just flat-earthers.

LONDON – A senior official at the Bank of England has voiced concerns about the possibly negative…