Registered On: May 8, 2017
From the article above:
‘MMT on the other hand comes closer to understanding the true situation, which has become an open secret amongst financial market participants: the money lent from central banks to the government will never be paid back, and is thus not “really” a debt, but pure monetisation.
These two very different diagnoses come with different prognoses. If government debt is “real” and must be repaid, then one can understand the argument that sufficient belt tightening is needed. This logic can be used to justify anything from the refusal to extend furlough to voting against free school meals for the poorest in our society in the middle of the worst recession since the Second World War.
The problem with this logic is that it is not borne out by the evidence. Whilst the government’s debt does technically exist, in reality it will never be repaid. This is supported both by history – not a penny of the loans taken out after the Global Financial Crisis have been repaid over a decade later – and by financial markets, who are willing to lend to the government for ten years at an interest rate of just 0.38%.
To pretend that there is an urgent need to pay the debt back either now or in the near future is simply untrue. At best, it is dishonesty. At worst, it is an incompetent misunderstanding of how the economy currently works.’