Fresh Thinking, Indeed

For the Labour nomination at Gorton and Denton, although it may yet be an all-women shortlist, there is growing talk of Jonathan Ashworth. I have known him a long time, but I have not seen him for most of it, and the world is no longer that of the Political Secretary to Harriet Harman. For example, Nigel Farage wants a Brexiteer as the next Governor of the Bank of England. Yet even that is missing the point.

Without a manifesto commitment, Tony Blair and Gordon Brown immediately surrendered democratic political control of monetary policy. The Liberal Democrats forced the creation of the Office of Budget Responsibility. The Conservatives created the short-lived Economic Advisory Council out of thin air, and Rachel Reeves reconstituted a Council of Economic Advisers with at least one of the same people on it. Yet on none of those occasions have the salaries of the First Lord of the Treasury, of all other Treasury Ministers, and of all senior Treasury civil servants been halved, as they should have been.

The issuing of currency is an act of the State, which is literally the creator of all money. It says so on the banknotes. As a sovereign state with its own free-floating, fiat currency, the United Kingdom has as much of that currency as it chooses to issue to itself, with readily available fiscal and monetary means of controlling any inflationary effect, means that therefore need to be under democratic political control, since the responsibility of the Government is to give that currency its value while ensuring the supply of goods and services to be purchased in it. Alongside his adoption of Bernie Sanders’s cap on credit card interest, Donald Trump has begun the end of the anti-democratic era of central bank “independence”. No one is all bad.

It is impossible for the currency-issuing State to run out of money. Money “lent” to the Treasury by the Bank of England is money “lent” to the State by the State; such “debt” will never be called in, much less will bailiffs be sent round. Call this “the Magic Money Tree” if you will. There is no comparison between running the economy and managing a household budget, or even a business. There is no “national credit card” to “max out”. “Fiscal headroom” is only the gap between the Government’s tax and spending plans and what would be allowed under the fiscal rules that it sets for itself and changes frequently.

That is what both fiscal policy and monetary policy are for: to give the currency its value by controlling inflation to a politically chosen extent while discouraging certain politically chosen forms of behaviour, and while encouraging others, including economic equality, which is fundamental to social cohesion and thus to patriotism. There is no debt. It is an accounting trick. The Treasury, which is the State, has issued bonds to the Bank of England, which is the State. Even if those bonds were held by anyone else, then the State could simply issue itself with enough of its own free-floating, fiat currency to redeem them. Taxation is not where the State’s money comes from. Nothing is “unaffordable”, every recession is discretionary on the part of the Government, and there is no such thing as “taxpayers’ money”. Say it again that there is no debt. There is no debt. There is no debt.

These facts may be heard twice-weekly on The Mother of All Talk Shows, and millions do. To be the next Member of Parliament for Gorton and Denton, George Galloway has endorsed Councillor Shahbaz Sarwar of Longsight, a ward of the constituency.