Thread by @socialistfire

@dogslife080888 @omega469 @RTWRich @conditionred7 Sure it's a really important subject that the vast majority of us totally misunderstand, because we've been lied to our entire lives.
More than happy to engage with anyone on this...

@dogslife080888 @omega469 @RTWRich @conditionred7 So the first thing to learn is what *sovereign* cash is.
Any government that controls its own currency has sovereign cash.
The UK government do (£)
Eurozone governments do not (€)
Local governments do not

@dogslife080888 @omega469 @RTWRich @conditionred7 If you have sovereign cash then you can (i.e. it's possible, we'll come to the should / shouldn't later)
create infinite amounts of cash.

Straight away that exposes the Tory lie behind austerity, that they cannot afford to pay for things.

@dogslife080888 @omega469 @RTWRich @conditionred7 A government can afford *anything* that is available in their own sovereign currency (because they have the power to create as much cash as they want).

Greece for example were forced by the EU into austerity as they could not create € so had to balance the books.

@dogslife080888 @omega469 @RTWRich @conditionred7 Governments are limited by resources.

So for eg UK government can afford 1 billion nurses technically but of course there aren't 1 billion available people to do the job.
So it's not about affordability but how you deploy resources available to you.
Cash just a tool to do that.

@dogslife080888 @omega469 @RTWRich @conditionred7 National Debt is not a debt in the way that most people understand it.

If you or I go to the bank&borrow £1,000 a loan account is created (-£1,000) & £1,000 credited to your current account.
No extra money created £1,000-£1,000=£0.

You then repay,let's say 10*(£100+£1interest).

@dogslife080888 @omega469 @RTWRich @conditionred7 Even though no extra cash was created there's £1,000 in circulation (in your current account or being spent).
Each repayment *destroys* the extra cash by wiping £100 off the loan account until that returns to £0.

The bank make £10 profit.

@dogslife080888 @omega469 @RTWRich @conditionred7 So governments have a Central Bank (which they control). In our case the Bank of England.
When parliament passes a government's budget (let's say £1bn) the Bank of England is authorised to send £1bn to the Treasury.

@dogslife080888 @omega469 @RTWRich @conditionred7 Then the government's loan account ("National Debt") is increased by -£1bn & their current account credited with £1bn.

Unlike a private loan like we'd get there's no obligation for government to pay itself back National Debt&it would make no sense to do so...

@dogslife080888 @omega469 @RTWRich @conditionred7 ...as that's the money in circulation in the economy.
So that's the next lie, about placing the burden of national debt onto future generations.

So tax...

@dogslife080888 @omega469 @RTWRich @conditionred7 The phrase "tax return" exists for a reason, because taxes returned cash to the crown (as was back in the day).

Tax is effectively the loan repayment on national debt but importantly NOT because national debt needs to be repaid.

Taxes serve 3 purposes...

@dogslife080888 @RTWRich @conditionred7 They:
1.influence behaviour e.g.discouraging smoking
2.change distribution of wealth i.e.targetting particular groups

But main reason is controlling inflation:

3.Taxes remove surplus cash.Without tax&endless government spending we'd have endless inflation.

@dogslife080888 @RTWRich @conditionred7 Of course if you're going to go after surplus cash in the system you can either do something like raise VAT which hits the poorest hardest (do they hold the surplus?) or you can tax wealth...this is the political choice.

@dogslife080888 @RTWRich @conditionred7 Austerity is effective at controlling inflation but has nasty social implications i.e. causing more deaths in this country than Covid.

It was never a necessity as we were told by Tories & New Labour (+Lib Dems & all major parties) because we couldn't afford nurses&fire stations.

@dogslife080888 @RTWRich @conditionred7 The best analogy I've come up with is a sink...
The sink is the economy.
Cash in circulation is the water in the bowl.
Public spending is the tap (with infinite water available)
Tax is water going down the plug hole...

@dogslife080888 @RTWRich @conditionred7 We DO NOT collect the dirty waste water to supply the taps...just as we taxes don't fund public spending.

There is no warehouse in Whitehall collecting a big mountain of coins and bank notes ready for the Chancellor to spend.

@dogslife080888 @RTWRich @conditionred7 If we put the plug in plughole (see Liz Truss' economically incompetent low tax plan)&leave the taps running,the sink will overflow(rampant inflation).

If we turn off taps(austerity)we won't be able to wash hands(society will stop functioning&people die prematurely in poverty).

@dogslife080888 @RTWRich @conditionred7 That's the basics...there are loads of extensions/applications to understanding this,which would help every single social justice campaign if only people would take a moment to understand it...but most don't.
I'll give a couple...

@dogslife080888 @RTWRich @conditionred7 1."Bullshit Jobs"&benefits as we can afford to pay all citizens to do *something*,why not pay us to do something useful for society?
Many jobs do nowt useful besides transferring wealth from masses into profit for The Few.
Nurses,firefighters,street cleaners provide something tho

@dogslife080888 @RTWRich @conditionred7 Protecting wealth inequality relies on low pay of course,which relies on unemployment to drive down what pay people will accept.
*THIS* is the scandal behind benefits that we pay people to do nothing,not because they're lazy&feckless but to keep pay low.

@dogslife080888 @RTWRich @conditionred7 The unemployed=deliberately untapped resources that could be deployed to contribute to good of society.
Demonise gvmt,not those in receipt of benefits.
Liberal gvmt providing poverty level benefits,but keeping people unemployed,are what you could call compassionate conservatives.

@dogslife080888 @RTWRich @conditionred7 2.Government borrowing.Aside from free borrowing from our own central bank,with this economic lie in place,a government that is minded to do so (one that represents the holders of wealth for eg)would be free to borrow money off the wealthy&repay with interest (free profit).

@dogslife080888 @RTWRich @conditionred7 What this is, is privatising government spending in effect.
Just as when you privatise rail the trains run in the same way,with the same employees but you introduce government subsidy&profit for shareholders (for no benefit other than private profit) gvmt borrowing does the same.

@dogslife080888 @RTWRich @conditionred7 I've leave it at that for now.
Does it make sense?
Any Qs?
Blows your mind a bit?
I'm not a trained economist (I don't need to be&neither do you reading this),I'm just an interested firefighter. I think the boring/complex narrative of economics is to stop people paying attention.

@dogslife080888 @RTWRich @conditionred7 In all my years of talking about this in many places nobody has been able to challenge a single thing I've said.

Let's face it,twitter isn't exactly shy at shouting people down who are talking crap.

Problem is communicating boring old economics to masses who don't wanna know.

@dogslife080888 @RTWRich @conditionred7 Right on cue 👇

https://twitter.com/omega469/status/1584225095031324672?t=e23rP7BUk9Tt_b3Tx4yzKw&s=19