British group-think

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In the U.K. all MPs repeat the lies. (It’s the same in the USA.) Conservatives, Labour, Scottish Nationalists, Liberal Democrats, Democratic Unionists, Sinn Fein, Plaid Cymru, Social Democrats, Ulster Unionists, Greens, UKIP – all of them want deficit reduction (i.e. austerity) although some of them claim to be anti-austerity.

This happens because they are owned by the rich, and because they indulge in group-think. They are all terrified of being labeled “deficit deniers.”

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A politician most submits to group-think when his party holds a majority in parliament. For example, reader “Coolslim” notes that on 14 Oct 2015 the House of Commons passed George Osborne’s “Charter for Budget Responsibility” by a vote of 320 to 258.

Osborne’s “Fiscal Charter” would require the U.K. government to run a budget surplus.

Everyone knows that this would be catastrophic, and indeed Osborne himself admitted it in January 2010, four months before he became the finance minister.

Speaking to Labour MPs in parliament, Osborne said, “Let us remember what one of the economists whom Prime Minister Gordon Brown himself appointed to the Monetary Policy Committee has said about this bill. Willem Buiter said: ‘Fiscal responsibility acts are instruments of the fiscally irresponsible to con the public.'”(Willem Buiter is now the Chief Economist at Citigroup.)

Indeed.

But when George Osborne became the Finance Minister in May 2010, he adopted group-think. Osborne started pushing for his “Fiscal Charter,” even though he admitted that it was (and is)  a monstrosity to con the public.

Most people know how group-think works, and yet most people obey it anyway. That is why cartoons about lemmings amuse us. They reveal the truth.

 

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So the reason why politicians want more austerity is that it widens the gap between the rich and the rest, and because politicians have nothing to offer you except a “national debt crisis,” and because politicians exhibit group-think.

The House of Lords has not passed Osborne’s “Fiscal Charter,” and I don’t think they will, for two reasons …

[1] The House of Lords knows that it is extremely unlikely that the U.K. government would actually bring about a surplus, even with Osborne’s “Fiscal Charter.” Therefore Osborne’s “Fiscal Charter” would give ammunition to Labour, who would say, “See? The Tories demand a surplus, but they refuse to create one! They’re liars!”

[2] British politicians, like American politicians, want the freedom to create money out of thin air when they wish. (In the U.K. and Canada, this creating of money out of thin air is called “borrowing and investing.”) Thus, UK politicians demand a budget surplus, but they back off when it threatens to become a reality.

Even The Economist magazine, a pro-austerity rag, opposes Osborne’s “Fiscal Charter” for these reasons.

I oppose it because it’s evil. Social programs run by the federal government help everyone by putting money into the economy. When people around you have more money to spend, it makes your own life more prosperous and secure. It reduces crime in your neighborhood. It reduces child abuse, substance abuse, domestic violence, and general misery. It makes people calmer, more reasonable, more gregarious, and more energetic (not lazier).

Osborne hates this. He wants you to be in hell (literally) with him in charge. The Osbornes of the world don’t want to punish only the poor, and people of color. They want to punish everyone who is not wealthy.

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John McDonnell is the shadow finance minister in the Labour Party. At first McDonnell supported Osborne’s “Fiscal Charter,” because McDonnell was terrified of being called a “deficit denier.” McDonnell later decided that supporting extreme austerity might not help the (fake) image of the Labour Party as “anti-austerity.” Therefore McDonnell reversed himself on 25 Sep 2015, nineteen days before the House of Commons voted to approve Osborne’s “Fiscal Charter.”

I have yet to find a single British blog or media outlet that speaks the truth about government finances. The U.K. Guardian is typical…

For Mr. Osborne, the fiscal charter is important. He’s always thought that instability in the public finances was one of the great curses of the UK economy, arguing that high public debt both makes the economy vulnerable to shocks, and squeezes out spending through debt interest payments. Obviously, he’s right.

Obviously he’s wrong and a LIAR. Osborne says the purpose of austerity is to “pay down the national debt.” And yet, after nearly six years of increasing austerity, the U.K. “national debt” has almost doubled, and it keeps growing. Not because the U.K. government borrows its spending money (it doesn’t) but because the amount of deposits at the Bank of England keeps growing.

Why do they keep growing? When you buy a British Treasury security (which is called a “gilt”) you deposit money at the Bank of England. In depositing money, you lend it to the Bank of England. Hence the misleading term “national debt.” However the British government does not use your deposits for its spending money. The British government creates its spending money out of thin air. When your “guilt” matures, the Bank of England gives your money back to you, plus interest. The Bank creates the interest money out of thin air.  Most buyers of “gilts” (which tend to be banks) receive their “gilt” money, plus the interest, and they use it to buy still more  “gilts.” That’s why deposits keep growing.

Therefore, etch this into your brain…

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This truth is concealed by every British politician and media outlet. And so far, reader “Coolslim” is the only person I have encountered from the U.K. who understands these simple facts.

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4 Responses to British group-think

  1. coolslim says:

    Yes, debt hysteria seems to have gotten even worse over the past few years. I wonder whether people will ever realise that money is limitless and created out of thin air, how will the media react in that scenario?

    Anyway, Corbyn calls himself ‘left wing’ and everyone naively assumes this means he is on the side of the poor. Unfortunately, ‘left wing’ is simply a polite euphemism for ‘I want to reduce the deficit by raising taxes’.

    What frustrates me is that there are so many obvious clues to suggest that the media is deceiving people about money.

    Quantitative Easing essentially showed that the government can purchase anything it likes without requiring tax. About 1/4 of the UK national debt is on the balance sheet of the Bank of England, doesn’t this make anyone stop and ask themselves what is really going on?

    Not to mention the disastrous impact of austerity in Eurozone nations.

    Liked by 1 person

  2. netbacker says:

    Once again, excellent post.

    Like

  3. There are growing numbers and the Bank of England has published on how Modern Money works, so there is hope in the MMT desert of the UK and even in the EU.

    Like

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