Just now I “biffed”

In the world of skiing, motorcycle racing, or skateboarding, the colloquial expression “to biff” means to fall down hard. Visualize a person’s face slamming into the ground; the sound of the impact combining with his suddenly exhaled breath to create a “biff” sound. This is why a racer or skateboarder sometimes says, “I was doing great, but I biffed at the last turn.”

Perhaps the expression originated in comic books.

Anyway I often “biff” when I read articles about economics. That is, I think the writer may be on to something, but then the writer suddenly screws up. “Damn!”

The item below is an example. In one paragraph the first three sentences are okay, but then…BIFF!

It’s a popular myth that government debt is a bad thing. And it’s a dangerous myth that we have reached the limit of government debt that we can afford and that any new government spending must be paid for with taxation. It’s a fact that the UK government does not need to issue debt. In the modern era of money the Bank of England can create any amount of money that the government requires without having to borrow or tax a penny of the sum in question. That is because all money is created out of thin air when banks lend money, including when the Bank of England lends directly to the Treasury.

No. The Bank of England does not lend to the British Treasury. This writer suffers from acute EBS (Ellen Brown Syndrome); an incurable mental condition that makes people think all money is created by banks as loans.

According to the EBS delusion, the U.K. government borrows its spending money from the Bank of England, and presumably must pay it back…uh…someday. Or something.

In reality, banks do indeed create new money when they make loans, but the U.S. and U.K. governments likewise create money when they spend. And they spend by simply instructing banks to credit accounts (i.e. to change the numbers in bank accounts). This involves banks, but no borrowing.

The writer also says that “all money is debt.” That is true, but not all debts involve loans.

For every credit there is a debt, and for every debt there is a credit. If I have a dollar in my hand, then I have a claim (i.e. a credit) to one dollar’s worth of “full faith and credit of the United States.” Who is in debt to me? Everyone who thinks my dollar is worth a dollar. That is, everyone who agrees to “owe” me their recognition of my claim to a credit of one dollar. No loan is involved.

When you leave your coat in a cloakroom in exchange for a token, the token is a credit for your coat. It signifies that you have a claim to that coat, and that the cloakroom is in “debt” to you for one coat. That is, the cloakroom agrees to honor your claim (i.e. your credit) for your coat.

This is not mere sophistry. The refusal to properly understand the concepts of “credit” and “debt” is one reason why people insist on believing the lie that the U.S. and U.K. governments are “broke,” and therefore we cannot have Universal Medicare, etc.

Think of a credit as a claim. A debt is an agreement to honor a claim. If you lend me a dollar, then you have a claim to that dollar. You have a credit for the dollar. I am “in debt” to you, meaning I owe you a recognition of your claim to the dollar. But even when a dollar is not lent to me, it is still a credit, and therefore entails a debt, but not in the sense of a loan.

Because the writer is confused, he contradicts himself. First he says the U.K. government borrows its spending money from the Bank of England. Then he says,

“Whatever happens, the UK government will always be able to repay its debts, because it can always electronically create the cash to do so. It has that right. No one else has it in the same way. And creating that money is effectively costless: it happens simply by entering data into a computer.”

Correct, but how does this entail loans from the Bank of England? It doesn’t.

Then the author proceeds to wade deeper and deeper into meaningless gibberish that is not worth untangling.

No wonder the average person doesn’t care about economics.

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