“Government Doesn’t Have to Borrow to Spend”

Here’s one of the Tories’ popular myths debunked. You know how Gidiot and the rest of the wrecking crew talk about having to “borrow” money to spend on all manner of things? Well, it’s bunkum, just like this idea that social security spending will cause an exponential rise in the level of national debt. For all their talk of fiscal responsibility and superior economic practices, the Conservatives are grossly irresponsible and reckless with the public finances. The only reason they cut public spending is crush those beneath them who rely on public services. They claim that no one should have to be “addicted to the state” and they sell off nationally owned assets to their chums who own the hedge fund companies. In short, they’re a bunch of crooks but you knew that already.

alittleecon

FACT: The Government doesn’t need to borrow to pay for it’s spending.

Despite this fact, the prevailing view is the exact opposite i.e. if the government doesn’t collect enough taxes, by necessity, it must cover its spending shortfall through borrowing. Most people think this is obviously true. Nevertheless, it is a myth. Don’t just take my word for it though. Here’s economist James K Galbraith explaining further*:

“In the modern world, when the Treasury writes you a check, your bank credits your account. That’s how money creation works. The Treasury then issues bonds to absorb that money. Banks like this because bonds pay more interest than reserves. But there is nothing economically necessary about the bonds. This is obvious since the Bank of England (BoE) buys back many of them, leaving the public with the cash it would have had in the first place.

Could the Treasury skip…

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