Britain Has The Same Power

Paul Knaggs writes:

Donald Trump announced yesterday that he is directing Fannie Mae and Freddie Mac to purchase $200 billion in mortgage bonds. The goal, he claims, is to drive down mortgage rates and restore housing affordability ahead of November’s midterm elections. Within hours, mortgage markets reacted. Bill Pulte, director of the Federal Housing Finance Agency, confirmed his office would execute the plan. Stock prices moved. Yields shifted.

Here is what nobody in polite circles will say: Trump is not “finding” $200 billion. He is authorising it. The money will exist because a sovereign state with its own currency has decided it should exist. This is not fiscal conservatism. This is not balanced budgets. This is raw monetary sovereignty deployed for political advantage.

And it works. Not because Trump understands Modern Monetary Theory (he almost certainly does not), but because the operational reality of sovereign currency makes it work regardless of what anyone believes about it. The United States issues dollars. It cannot run out of dollars. When it wants to intervene in housing markets or bail out banks or fund wars, it does so by creating the money required. The infrastructure already exists. The political will is all that matters.

The £22bn ‘Headroom’ Lie: How Fiscal Rules Keep Britain Poor

Britain operates under precisely the same monetary system. We issue our own currency. We have our own central bank. We face the same constraints as America: real resources, not nominal money. What we can afford is determined by available labour, materials, skills, and productive capacity. Not by how much we “borrowed” last year or how much we might “owe” to future generations.

Yet Rachel Reeves has spent the past months prostrate before what she calls her “ironclad” fiscal rules. She raised £26 billion in taxes in her November budget. She speaks constantly of “headroom” (currently £22 billion, barely enough to withstand a modest economic shock) and treats the bond market as if it were her commanding officer. She cannot reform the NHS properly. She cannot build the homes Britain needs. She cannot fund the energy transition at the scale required. Not because Britain lacks the resources. But because the rules she has written for herself forbid it.

Those rules are voluntary. They are self-imposed. They can be changed tomorrow if she wishes. But she will not change them, because changing them would require admitting that the entire edifice of British austerity since 2010 rested on a lie.

The Lie That Binds

The lie is simple: governments must tax or borrow before they can spend. This is true for households. It is true for businesses. It is true for local councils. It is not true for sovereign states that issue their own currencies. When the Treasury wants to spend, the Bank of England credits the relevant accounts. Money is created. When the Treasury collects taxes, money is destroyed. Taxes create demand for the currency and remove excess purchasing power from the economy. They do not “fund” anything.

Trump’s mortgage bond purchase proves the point. He is not waiting for tax receipts. He is not waiting for bond auctions. He is not checking whether America can “afford” this. He is simply doing it. The money will appear because the state has monetary sovereignty and chooses to use it.

The difference is purpose. Trump is deploying monetary sovereignty to prop up asset prices, smooth markets, and win elections. Modern Monetary Theory, properly understood, argues that the same power should be used to build real economic capacity: housing supply, public services, infrastructure, skills, energy. Not to enrich bondholders or inflate property values, but to serve the public interest.

Britain has the same power. We simply refuse to use it.

Rachel Reeves’ ‘Ironclad’ Rules Are a Political Choice, Not Economic Law

This refusal serves specific interests. A permanently underfunded state weakens labour, fragments solidarity, and turns citizens into supplicants competing for scarce resources. When people believe their government is broke, they accept cuts to disability benefits, they accept crumbling hospitals, they accept the managed decline of their communities. They blame immigrants, they blame the workshy, they blame anyone except the people who designed the scarcity in the first place.

Meanwhile, the wealthy face no such constraints. Quantitative easing created hundreds of billions for asset purchases after 2008, inflating property and equity values while wages stagnated. Covid support for businesses materialised overnight. Military budgets expand without parliamentary scrutiny. Somehow, money always exists when the right people ask for it.

Reeves’ fiscal rules do not protect economic stability. They protect elite interests by ruling out the scale of public investment that would genuinely transform Britain’s productive capacity. They treat public spending as inherently dangerous while private speculation runs wild. They insist Britain “cannot afford” social housing while luxury developments sprout like weeds. This is not economics. It is ideology dressed up as necessity.

Trump Proves Money is Political. Britain’s Austerity is a Policy, Not a Necessity

The genuine limit on government spending is not debt or deficits or bond vigilantes. It is inflation. If government spending exceeds the economy’s ability to respond with real goods and services, prices rise. That is the constraint. Not imaginary limits on how much a currency issuer can create, but actual limits on what the economy can produce.

Britain has vast underutilised capacity. Unemployment and underemployment. Crumbling infrastructure crying out for investment. An NHS starved of resources despite desperate need. Energy systems requiring urgent transformation. Millions of people who could work on these projects, if someone would organise and fund them. The resources exist. The need exists. What is missing is permission from people who prefer that the work never happens.

Trump’s $200 billion mortgage bond purchase will not revolutionise American housing. It will marginally lower mortgage rates while potentially inflating property prices further. It is a political gesture, not an economic transformation. But it demonstrates something Britain urgently needs to understand: sovereign governments are not households. They do not face the same constraints. And when they act as if they do, they are choosing to impose those constraints for political reasons.

Britain’s Real Constraint Isn’t Money, It’s Political Will

The tragedy is not that Britain “cannot afford” decent public services. It is that we have convinced ourselves we cannot, despite overwhelming evidence that monetary sovereignty works differently than politicians claim. Every time the government creates money for purposes that serve the wealthy, from bank bailouts to QE to corporate subsidies, it proves the point. Money is always available. The question is: for whom?

Rachel Reeves understands this. She is not stupid. She knows the Bank of England can credit accounts. She knows government spending precedes taxation. She knows Britain cannot “run out” of pounds. But admitting this publicly would destroy the political narrative that has justified austerity, privatisation, and the managed impoverishment of working-class Britain for 15 years.

So she maintains the fiction. She speaks of balancing books and fiscal responsibility and iron-clad rules. And while she speaks, Trump shows the world exactly how monetary sovereignty actually operates. Not through careful budgeting. Not through living within imaginary means. But through the simple exercise of sovereign power to create money when political circumstances demand it.

The difference is not economic. America and Britain operate identical monetary systems. The difference is political. One country uses its sovereignty. The other pretends it does not have any.

That is not responsible governance. That is a choice to keep Britain poor while pretending the decision was forced upon us by economic necessity.

The Class Politics of Scarcity

It’s the class politics of scarcity. A permanently underfunded state weakens labour, fragments solidarity, and turns communities into individual consumers begging for appointments like medieval peasants asking the lord for a favour.

And until British politicians stop lying about how government spending works, working-class communities will continue paying the price for elite priorities dressed up as fiscal prudence.

When a government claims it cannot afford to house its people or fund its hospitals while simultaneously finding hundreds of billions for whatever the City demands, believe your eyes, not their excuses.

When your government tells you there’s no money for housing or hospitals but always finds billions for bankers and bombs, they’re not confused about economics. They’re counting on you staying confused about it.