State debt and money printing

Time was when I and many other economic commentators would have rightly warned that a country cannot take on too much debt as it has to pay the interest and pay it back one day. It needs to live within its means. I would also have confirmed that any attempt to simply print more money to spend in the public sector or to use to buy up the debt would lead to high inflation, and would come to create a deep recession as hyper inflation undermines normal activity.

There are plenty of examples from history and current economies to show what goes wrong if a government tries to borrow and print its way out of economic troubles. Call it the Weimar model, from 1920s Germany, or the Zimbabwe model from that country in the first decade of this century. Or call it the Venezuela model, still living through the disastrous consequences of borrowing and spending too much in the public sector and trying to print its way out of the debts. A government that prided itself on generous handouts to the poor ended up leaving the poor hungry and roaming supermarkets with little food. Hyperinflation set in. That clears the shelves of goods, drives imports sky high in price as the currency plunges, and undermines investment and business. Venezuela, the country with the world’s largest oil reserves has been unable to pump much oil, as the oil wells go without maintenance and the transport fails.

But today I need to report that the Euro area, the USA and the UK have embarked this year on a major programme of expanding state debt, and their Central banks have printed a large amount of new money, politely called Quantitative easing. Indeed, to save the world economy the Fed created an extra $3trillion this spring. We should be grateful, as it was needed.

I will call this the Japanese model. For 30 years now since her huge credit crunch and asset price crash, Japan has followed a policy of greatly expanding its public debt, and buying in large quantities of it with money created by its Central Bank. State debt in Japan is now around a remarkable 250% of GDP. It stands at 1,328,000,000,000,000 yen. Despite this Japan suffers from practically no inflation, output is fairly stable, investment continues and the currency is behaving well against others.

So far the actions taken by the USA, UK and the Euro area during the pandemic have shown that we can at least temporarily follow the Japanese model. We should not ,however, assume we will be able to do this indefinitely or will need to do what Japan has done for some 30 years. We cannot assume our economies will remain immune to inflation, that our currencies will remain relatively stable against others, were we to persevere with too much debt and too much money printing.

It has been possible to do it so far because the anti CV19 measures were such a big hit to demand and incomes, that it needed an equally large offset from borrowing more and creating more money. There was no shortage of goods for the money to buy, apart from a few specials like PPE which duly shot up in price. The UK has decided it can afford to expand state debt above 100% of GDP, and has set out on a course of creating an additional £450 billion of new money, on top of the £445bn of QE money inherited from previous governments and the banking crisis. This should be fine, and gives the UK a crucial breathing space to make the unusual and large expenditures caused by the CV 19 response.In effect this newly created money will pay for the excessive one off costs of the pandemic policies. It would be best to assume that as we recover we need to bring the special measures to a well timed end. Too fast and we are back to recession. Too slow and we are on to inflation.

The UK state through the Bank of England will own well over 40% of the large state debt it is building up. The Treasury pays interest to the Bank and the Bank sends it back as a dividend to its government owner. This is why I am less concerned than many about the level of debt. This view is reinforced by the way so far the UK can borrow large sums at near zero interest, removing the normal pressures and constraints on borrowing more.

Confidence remains a precious flower. The government must seek value in all this extra spending, and have plans to get back to something more normal in good time. The Japan model works for Japan, but Japan usually has a balance of payments surplus, an ageing population with a savings habit and years of experience of no price rises. The US and UK with large trade deficits and a history of more inflation are only temporarily able to follow the Japanese model.

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211 Comments

  1. Peter Wood
    Posted November 25, 2020 at 5:32 am | Permalink

    FAR TOO RELAXED

    The UK has:

    1. A balance of payments deficit
    2. A budget deficit, even before the pandemic, and it looks structural
    3. A profligate Conservative government, wasting and spending money on vanity projects
    4. An aging overtaxed population, whose main asset is the family home
    5. An over-borrowed population

    Guess what happens when the rest of the world decides £ is no longer a safe currency….

    • Polly
      Posted November 25, 2020 at 7:28 am | Permalink

      Exactly, complacency on steroids !

      Polly

      • Wil Pretty
        Posted November 25, 2020 at 7:56 am | Permalink

        The country needs to recover its manufacturing base that it lost to the EU, so it can reverse the balance of payments slide.
        Regrettably this will not be possible all the time the country continues to follow its dash for energy inefficiency.

        • Mike Wilson
          Posted November 25, 2020 at 3:58 pm | Permalink

          Surely we lost most of our manufacturing base to Asia – China in particular.

      • Peter
        Posted November 25, 2020 at 9:21 am | Permalink

        Desperately trying to put a good spin on a very bad state of affairs.

        None of this would have been necessary if the government had not panicked and then closed down so much of our daily economic activity.

      • Hope
        Posted November 25, 2020 at 9:22 am | Permalink

        JR, Paragraph six needs to be corrected. It should read Govt. Policy not Covid measures to excuse your govts decisions and deflect responsibility from its self destructing measures to destroy economy, business and jobs. Shameful propaganda.

        Policy decisions made by people Not inanimate objects.

        • Simeon
          Posted November 25, 2020 at 11:58 am | Permalink

          Quite right. The virus is not serious in the grand scheme of things, but the response is catastrophic. But this has been obvious for some time now, yet nothing changes…

        • Caterpillar
          Posted November 25, 2020 at 3:50 pm | Permalink

          +1

    • oldtimer
      Posted November 25, 2020 at 8:08 am | Permalink

      My thoughts too.

      The spending to combat C-19 is analogous to war debt. It should be ring fenced and treated as such. For the rest the task for the Chancellor is to ensure that spending, taxes and incentives are directed at restoring a functioning, self sustaining economic model for the UK. At the moment it does not exist and, judging by the words uttered by many MPs, they are clueless about how this might be achieved. ( Unfortunately Johnson must be counted among their number given his addiction to expensive energy.) Let us hope that Sunak understands these things better and is able to inject some economic sanity into the measures he is to announce today and in his budget next year. Sadly I must admit my hopes are not high.

      • turboterrier
        Posted November 25, 2020 at 11:20 am | Permalink

        Oldtimer

        Hope’s not high?

        Is anybody’s?

        • Lynn Atkinson
          Posted November 25, 2020 at 12:39 pm | Permalink

          No.

    • Lifelogic
      Posted November 25, 2020 at 9:01 am | Permalink

      Plus we have Queen Carrie and King Boris pushing absurd expensive green crap and impractical and expensive cars on to the nation and even preventing many people working or travelling with a pointless lockdown.

      Plus an NHS that has essentially given up in many areas.

      • fedupsoutherner
        Posted November 25, 2020 at 11:06 am | Permalink

        Just attended my GP practice and normally there are 2 nurses and 3 GP’s working. There was myself for a blood test (in and out like I had the plague) and one other person in with the other nurse and the rest of the place was empty. No other cars in the car park. Pathetic.

    • Fred H
      Posted November 25, 2020 at 10:26 am | Permalink

      and a preoccupation with importing cars, white goods, tech devices.

      • Simeon
        Posted November 25, 2020 at 11:59 am | Permalink

        Otherwise known as spending beyond our means. It is axiomatic that you don’t get something for nothing. There is always a price to be paid. Sonething about ecery action having an equal and opposite reaction…

    • Richard1
      Posted November 25, 2020 at 3:35 pm | Permalink

      Nothing would boost support for rejoining the EU, inc the eurozone, like a real sterling crisis. This is one of a number of very major threats which should mean Conservative MPs are relentless in insisting on rational and economically competitive policies on the govt.

  2. Mick
    Posted November 25, 2020 at 6:18 am | Permalink

    Off topic
    https://www.dailymail.co.uk/news/article-8984041/President-elect-Joe-Biden-demands-no-guarded-border-island-Ireland.html
    President-elect Joe Biden has said he does not want to see a guarded border between Ireland and the UK.
    Who the hell does he think he is, if the forces of evil raises its ugly head and uses Southern Ireland as a safe retreat I hope we erect guard posts along the border, so keep your nose out Biden and if you don’t want borders start by ripping them down between America and Mexico and Canada

    • Stred
      Posted November 25, 2020 at 7:45 am | Permalink

      Biden understands little. His remarks should be addressed to Brussels.

    • Martin in Cardiff
      Posted November 25, 2020 at 8:34 am | Permalink

      Who does he think he is?

      He’s the person who can withhold a trade deal if he doesn’t like Tory England’s conduct, that’s who.

      Just as can the European Union..

      • Lynn Atkinson
        Posted November 25, 2020 at 12:41 pm | Permalink

        We don’t need trade deals. We trade profitably with the USA without one now. Wish we had the same relationship with the EU.

      • Edward2
        Posted November 25, 2020 at 12:57 pm | Permalink

        We seem over decades to sell lots to America and America sells lots to us.
        Without Biden’s trade deal.

        Politicians get in the way of customers at their peril

      • Mike Wilson
        Posted November 25, 2020 at 4:01 pm | Permalink

        He’s the person who can withhold a trade deal if he doesn’t like Tory England’s conduct, that’s who.

        Couldn’t care less.

    • beresford
      Posted November 25, 2020 at 9:16 am | Permalink

      And yet it is the Gardai who are patrolling the border and stopping cars as part of covid checks, without a word of protest from Sleepy Joe. We should ignore him, as he would ignore us if we told him what to do with America’s borders. BTW for those who don’t know there is nothing in the Good Friday Agreement about customs checks, only (British) military installations.

    • agricola
      Posted November 25, 2020 at 12:00 pm | Permalink

      My experience of the USA is that the majority of citizens don’t know what is happening in the next door state, nor do they want to know. Leave their shores and the majority don’t know where it is. If Bidens utterances I have read are true then he doesn’t have much of a clue either. I hope he surrounds himself with internationally informed people rather than the politically motivated. He has the potential to do much harm to UK/USA relations and cooperation at many levels. On the plus side he will only be around for four years.

      • Mike Wilson
        Posted November 25, 2020 at 4:02 pm | Permalink

        On the plus side he will only be around for four years.

        Mind you, he is 78. And Trump will be back next time.

      • Martin in Cardiff
        Posted November 25, 2020 at 7:34 pm | Permalink

        My experience of the UK is that the majority of citizens don’t know what is happening in the next door state either.

        • Edward2
          Posted November 25, 2020 at 8:55 pm | Permalink

          What do you mean?
          The UK has no states.
          Neither does Europe.

        • a-tracy
          Posted November 26, 2020 at 11:14 am | Permalink

          But Martin we all pay the BBC as the UK public service broadcaster to keep us informed, they featured Sturgeon’s Scottish broadcast every time for months on end. We hear the Scottish represenatives more than we hear from MPs in the North West and I think it’s fair to say I know more about what is happening in Glasgow than I know about what is happening in Manchester or Stoke.

  3. Mark B
    Posted November 25, 2020 at 6:20 am | Permalink

    Good morning

    Your last paragraph is the most telling, Sir John. When one reads it, apples and oranges spring to mind.

    The USA is in a far better position than the UK as the US dollar is the reserve currency. It also benefits from a strong tech and manufacturing base with cheap energy and low social care expenses. Compared to the UK, which has none of those things, it is in a leaner and fitter state.

    I never believe the government headline inflation figures as they do not take into account real costs such as Council Tax, which always seems to be running at, or higher, than inflation. If this and other items were properly included then inflation would be higher and economic measures such as interest rate rises made. This would in turn have an economic impact.

    The consumption of additional money is offset by the high levels of MASS IMMIGRATION the government is prepared to accept. Its actions are purely designed to keep the plates spinning at the expense of everything else.

    We are, undoubtedly, all becoming poorer.

    • Mark B
      Posted November 25, 2020 at 6:20 am | Permalink

      Mark B

      • Narrow Shoulders
        Posted November 25, 2020 at 8:09 am | Permalink

        not difficult to guess

        Spot on post though

        • Mike Wilson
          Posted November 25, 2020 at 4:05 pm | Permalink

          But it is not a ‘spot on’ post. Interest rates are used to combat inflation when the inflation is caused by excess demand or reduced supply. We have neither and are unlikely to. The nature of world trade seems to keep supply and demand in harness. Many of the goods we buy have been getting cheaper in real terms for decades – offset by rises in the costs of goods made here and of services provided here.

          All other things being equal, there is no pressure to raise interest rates. Nor is there likely to be for the forseeable (10 to 20 years) future.

          • Narrow Shoulders
            Posted November 26, 2020 at 8:00 am | Permalink

            Many posts today mention high asset prices, the asset that most people aspire to is housing.

            Mortgages of 6x earnings (with two earners) are now required. That looks like inflation to me Mike. Driven by demand, where did that demand come from, it is not the indigenous birth rate.

            Low interest rates, as you write, have not dampened that inflation and printing money has increased it further.

            So as I have written elsewhere in this blog, goods and service inflation has not been affected by printing (overly) but asset prices have. The one asset price that affects most is driven by immigration so Mark B has a point.

      • formula57
        Posted November 25, 2020 at 9:52 am | Permalink

        We knew!

    • Simeon
      Posted November 25, 2020 at 10:21 am | Permalink

      Simeon says:

      The US Dollar is indeed the reserve currency, and the US has benefited hugely from this. But this means that the US has even more to lose when the extent of the debasement of the currency can no longer be ignored. Peter Schiff explains this more eloquently and entertainingly than I ever could. But of course, as and when the US Dollar collapses – as it will, unless the entire global economy is a conspiracy – then the consequences for the whole world, not least the UK, will be dire. (How terrifying that a catastrophic economic collapse is preferable to the alternative, namely a global conspiracy that not only would involve the western world but China too. I still cannot bring myself to believe that such a conspiracy is abroad – but my resistance is waning…)

      You are right to say that the US is better placed in broad economic terms however. Given how bad things are there, and how they continue to worsen – no doubt at even greater pace if/when Biden is confirmed – it is obvious there is absolutely no room or place for the complacency exhibited by our kind host, speaking about a country bereft of even these compensations.

      And you are also right to be sceptical about state-authored inflation figures (or any figures or statistics emanating from that dark, dark place). And right again to mention the role of mass immigration in this gerrymandered economy.

      But as right as you are about these things, direct democracy still isn’t the answer 😉

  4. DOM
    Posted November 25, 2020 at 6:32 am | Permalink

    It costs a considerable sum to finance the population’s total State dependency and then even more to finance that continued policy of dependency, control and monitoring. The road to Marxism is a costly one in both fiscal and human terms

    Both main parties have succeeded in destroying all that Thatcher had created

    I know the future for the UK is a future we won’t want to visit

    Let’s hope for all of our sakes that the British voter wakes up from its Tory-Labour dependency before they destroy our nation, our minds and our freedoms

    • JoolsB
      Posted November 25, 2020 at 8:25 am | Permalink

      +1

    • Simeon
      Posted November 25, 2020 at 10:31 am | Permalink

      It’s going to require one helluva wake-up call. But one might be just round the corner… I think though there is little cause for optimism as to the results of an awakening in such circumstances.

      • Martin in Cardiff
        Posted November 25, 2020 at 7:36 pm | Permalink
        • Mike Wilson
          Posted November 25, 2020 at 8:06 pm | Permalink

          All we need to do is act the arse like the French so they have similar queues on their side and, suddenly, the issues will go away. They export a lot of stuff to us. If their lorries are held up the french transport industry will bring Paris to a standstill in 5 minutes and reality will prevail. Alas, we won’t act the arse like the French and it will all be one way (stationary) traffic.

          • Narrow Shoulders
            Posted November 26, 2020 at 8:03 am | Permalink

            And here lies the problem with our engagement with the EU over 40 years. We are a country of rule takes which means we can not have a level playing field with countries that don’t

          • a-tracy
            Posted November 26, 2020 at 11:08 am | Permalink

            Mike, we would have to have reciprocal action. Our politicians need to be brave enough to deal with this instead of doing their usual lily-livered capitulation and hand wringing. Clog up the importing wagons at the same time on the French side is the only solution.

        • Edward2
          Posted November 25, 2020 at 8:56 pm | Permalink

          Ah the Guardian again.

        • Simeon
          Posted November 25, 2020 at 9:14 pm | Permalink

          Any impact from a botched BRINO will be a mere ripple when set against a collapse in confidence in the US dollar.

  5. M P B
    Posted November 25, 2020 at 7:01 am | Permalink

    A concisely written blog explaining the current rationale for printing money, in effect the major economic zones are all holding hands and jumping together with the elastic bands of the Central Banks and BIS holding the experiment together, particularly through exchange rates.
    And £ sterling is able to participate as a major world player, despite Brexit! And what does our independence from the Euro bring, immediate monetary action from a sovereign government, needed now for our economy and citizens.

    Compare this to the EU insistence on attaching political conditions in parallel to Soviet style bureaucratic delay.

    Scotland should take note as it benefits from UK Government decisiveness and learn from Poland and Hungary who recognise Soviet style communism when they see it.

  6. Leslie Singleton
    Posted November 25, 2020 at 7:19 am | Permalink

    Dear Sir John–Back in the day in an American bank I had a minor role (in what was called International Loan Committee) in approving loans made by our Tokyo Branch. It was a mystery to us how the analysis pages in the loan presentation sheets invariably (and I would bet it is still the same) showed the Japanese borrowers with debt-to-worths many multiples of what we would even begin to consider for a ‘Western’ Borrower (US, UK, Germany). We never got close to understanding how this could be but to be fair our Tokyo Branch didn’t seem to have loans go bad.

  7. Dave Andrews
    Posted November 25, 2020 at 7:21 am | Permalink

    “The UK has decided it can afford to expand state debt above 100% of GDP”
    The Maastricht treaty limits state debt to 60% of GDP. Bang goes our chances of re-joining the EU.

    • Lynn Atkinson
      Posted November 25, 2020 at 9:19 am | Permalink

      Oh good! Worth every penny of debt then!

    • IanT
      Posted November 25, 2020 at 10:25 am | Permalink

      That sounds one of the few positives in this situation….

    • fedupsoutherner
      Posted November 25, 2020 at 11:09 am | Permalink

      Can’t rejoin the EU? Oh, joy of joys. Fantastic news.

    • Mockbeggar
      Posted November 25, 2020 at 12:57 pm | Permalink

      Dave,
      What’s the position in France, Spain and Italy?

    • Jiminyjim
      Posted November 25, 2020 at 2:11 pm | Permalink

      If only that were true, Dave Andrews! In fact, I think you’ll find that there is plenty of proof that when the ‘rules’ get in the way, the EU simply ignore the rules. Read up on the admission of Greece. It’s what’s known as a ‘rules-based organisation’.

  8. Martin in Cardiff
    Posted November 25, 2020 at 7:21 am | Permalink

    I agree with the main points of John’s post.

    However, “inflation” has been kept low by being very choosy about the entities against which it is measured, especially helped by natural price falls in the costs of automated manufactured goods.

    If real property were included and other assets, then we are indeed into hyper-inflation territory.

    • Narrow Shoulders
      Posted November 25, 2020 at 8:13 am | Permalink

      Quite, money creation (in all it forms whether the banks print the money and loan it for interest or the BOE prints it) ends up in the hands of those who can purchase assets not those who spend it on day to day living.

      This is why Universal Income will not work as those things that we all have to buy will increase in price as we will all have more money to spend.

      Unfortunately printing money concentrates the funds in the hands of a few but at least the little people won’t be taxed to pay for it if printed by government rather than banks.

      • Simeon
        Posted November 25, 2020 at 12:02 pm | Permalink

        This is only true if prices for everyday items don’t go up. But they will…

    • miami.mode
      Posted November 25, 2020 at 10:35 am | Permalink

      Agreed, smoke and mirrors, and as usual the poorer members of society suffer whilst the wealthier can prosper.

    • Edward2
      Posted November 25, 2020 at 1:00 pm | Permalink

      Cheap imports from places like China and lots of cheap imported labour keeps inflation down.

      Property inflation if added to the RPI wouldn’t give us hyperinflation.

    • IanT
      Posted November 25, 2020 at 1:26 pm | Permalink

      I agree with you too Martin (?!)

      But you forgot to mention the importation of cheap labour from Europe and the fact that manufacturing has been shipped out to China and the Far East. At the moment they are willing to accept our IOUs but that won’t last forever – especially as standards of living rises in those places.

      Money printing is leading to asset inflation that will just acerbate the situation when the bubble finally pops. There is no Magic Money Tree, just a very real deep hole that we keep on digging (and I don’t mean the Covid related spending).

      • Lynn Atkinson
        Posted November 25, 2020 at 5:35 pm | Permalink

        Labour from the EU is not cheap for the UK – cheap for the user maybe, but they don’t pay the whole cost, that’s why it’s cheap for them.

    • Mike Wilson
      Posted November 25, 2020 at 4:11 pm | Permalink

      If real property were included and other assets, then we are indeed into hyper-inflation territory.

      I am as anti high house prices as the next man. One of my sons has a £380k mortgage on which he pays 1.99% interest. In the late 1980s (as an example), I had a £58k mortgage with an interest rate of anything from 10% to 15%. Interest rates went up and down like a yo-yo in the 1970s, 80s and 90s. One advantage to the environment today is that at least interest rates are now stable. Given that they are stable it is about time 25 year fixed rate mortgages came back.

  9. Roy Grainger
    Posted November 25, 2020 at 7:22 am | Permalink

    Just a minor point but I think the QE *has* created inflation, but only in bond and share prices which both have risen significantly. It makes little sense that the stockmarkets of UK/USA are near record highs given the dismal state of public finances – so the QE is disproportionately benfiting people like me whose income derives from investments rather than (say) the pub owners who the government is deliberately bankrupting.

    • Narrow Shoulders
      Posted November 25, 2020 at 8:15 am | Permalink

      Quite, as always follow the money

    • matthu
      Posted November 25, 2020 at 9:12 am | Permalink

      So more of a bubble than inflation? How are inflated asset prices benefiting you?
      Those who are benefiting are surely those able to borrow at very low interest rates.

    • formula57
      Posted November 25, 2020 at 10:21 am | Permalink

      That point is very valid but major, not minor. Asset bubbles have been blown beyond all reason such that price discovery has become impossible as risk evaluation has been obscured. This will not end well.

    • Simeon
      Posted November 25, 2020 at 10:26 am | Permalink

      Until the stockmarket bubble bursts. At which point investors (and pension holders, who are not so much effectively as actually investors) will be in solidarity with the bankrupted landlords. So quite a major point to make really!

    • Mike Wilson
      Posted November 25, 2020 at 4:12 pm | Permalink

      It makes little sense that the stockmarkets of UK/USA are near record highs

      The FTSE is nowhere near its record high. 1500 points off it.

    • Edmund Hirst
      Posted November 25, 2020 at 5:10 pm | Permalink

      Usa stock markets at record levels, yes, but the FTSE miles off: January 2000 6930. Today 6390.

      • Mike Wilson
        Posted November 25, 2020 at 8:00 pm | Permalink

        Relatively recently the FTSE reached 7500. Look at it now.

  10. Caterpillar
    Posted November 25, 2020 at 7:23 am | Permalink

    1.UK inflation would have been above target if it were not for the temporary VAT cuts.
    2. Negative real interest rates in the UK act as a tax on the smaller, prudent saver (including the elderly). They cannot / are not diversified to access a real return in the asset classes that are inflated. This is an ethical question on whether wealth should be redistributed away from that group/those behaviours, it is also an economic question as that group’s demand is known to decrease.
    3. Some USA debt and regulation could depend on the Georgia Senate run offs. If USA brings in more regulations to slow its recovery then perhaps its rates will stay low, but if the recovery isn’t stopped by new regs and/or state Governor lockdowns, then USA yields and interest rates will recover.
    4. Japan is not a reference model. It has been running a current account surplus indicating that it can supply more than it demands (whilst GDP per capita grew in 20 of the last 25 years).
    5. Sunak has normalised a very dangerous (for the U.K.) printing model (it is unstable, it hides the control of resource allocation decisions more than taxing does, any political party can claim it can do anything).

    • Rachel Chandler
      Posted November 25, 2020 at 10:18 am | Permalink

      This government has spent the last 9 months ruining our economy and society unable to lead us through a difficult but unexceptional health crisis. Vast sums of money have been wasted on schemes that were ill-conceived and bound to fail. We remain in the grip of Covid madness, when we should be getting back to normal and worrying about how we are going to deal with all the collateral damage caused by the lockdown. Printing money without a clear recovery plan is not the answer. The public-private divide is growing. We don’t have the tax base to pay for all the public services people expect (and the government promises). How will we deal with all the social unrest caused by mass unemployment? The future looks very grim indeed.

      • Caterpillar
        Posted November 25, 2020 at 3:48 pm | Permalink

        +1 for argument

        (-1 for how I feel)

    • Mike Wilson
      Posted November 25, 2020 at 4:13 pm | Permalink

      I cannot see why people expect money put in the safety of a bank to attract a rate of interest above inflation. If there is no risk, why the expectation of a high return?

      • Caterpillar
        Posted November 25, 2020 at 9:38 pm | Permalink

        The concept is that they have given up consumption today so that their buying power does not direct resources to produce consumer goods/services. This allows freed up economic resources to be directed (by private sector or Govt) towards investment to grow productive capacity.

        Over a short timescale this may fail if there is a shock and unemployed resources take time to shift to other uses. If it continues for decades (which it has and will) then this suggests either,

        (i) a hidden wealth tax, or

        (ii) the whole basis of organising economic theory around scarcity is no longer applicable – if there isn’t scarcity then consumption does not have to be given up for investment to occur. Under such a situation current theory, measurements, trade, policy and application throughout much of the world is fundamentally wrong.

  11. Ian Wragg
    Posted November 25, 2020 at 7:24 am | Permalink

    Sunak is spending like a lunatic. When things stabilise and interest rates rise as they surely will the cost of servicing the debt will bankrupt us.
    It is the next generation that will suffer.
    I see the pretend negotiations are still going on as the deadline draws near. Why doesn’t Parliament do something.

    • Polly
      Posted November 25, 2020 at 7:34 am | Permalink

      Because they are largely immune from inflation.

      The UK public sector is protected from inflation so until there’s no food, why would MPs worry about anything?

      Two tier UK means lots of tears UK.

      Polly

      • Everhopeful
        Posted November 25, 2020 at 8:57 am | Permalink

        Might be because they are intent on a no money economy.
        Based on assets ( having been stripped from us!).
        See Delingpole’s latest vid.

    • Nigl
      Posted November 25, 2020 at 8:18 am | Permalink

      Yes. The only issue for me is that the ‘unlimited state credit card’ does not provide an efficiency brake.

      Infrastructure costs are eye wateringly high compared with other countries. Rail projects in France, Germany and Sweden are many times less costly than in the U.K. allegedly it is because our country is very ‘complex’. Try telling that to the Dutch.

      We are 33 ex 35 of major countries with super fast broadband. Boris’s dropped off Zoom call from No 10 was a major embarrassment. Across the public sector, outdated uncoordinated IT systems hamper performance albeit there are real centres of excellence.

      Once it is a state project consultants fees go to ludicrous levels and even some street planters in a South London council. Even if they cost a grand to knock up I would be surprised yet came in umpteen times more than that.

      You would not allow such extravagance when you were a CEO yet it is endemic in the public sector. Obviously not their money.

      I know I am wasting my breath but efficiency purchasing, both training and measurement, should be mandatory.

    • Stred
      Posted November 25, 2020 at 8:22 am | Permalink

      Why is the NHS buying the American vaccines which cost up to ten times as much as the non profit Oxford vaccine, which is also much easier to store and transport. It has only been delayed by weeks because of an unfortunate reaction which was shown to be caused by something else. It also does not use RNA alone but a more conventional approach which is less likely to have long term reactions. Surely the boffins working with the NHS must know this, or was it a political decision to use the expensive vaccine first?

      • Lynn Atkinson
        Posted November 25, 2020 at 12:50 pm | Permalink

        The non-profit Oxford is just for the 3rd world. The 1st world will pay mega prices to make up for that ‘largess’. That is the arrangement for AIDS treatments and others too. We pay for their medication. But it’s Greece that has no medication! Maybe they should officially be re-classified as 3rd world, they are in reality. Thanks Mutti.

      • IanT
        Posted November 25, 2020 at 1:29 pm | Permalink

        I think they wanted to cover their bets – just think of the outcry if Oxford had failed and we had no orders placed with other (usable) suppliers.

        Hindsight is a wonderful thing.

    • Simeon
      Posted November 25, 2020 at 10:28 am | Permalink

      The next generations (plural!) will suffer, but there will also be plenty of suffering for present generations too. So at least there will be a degree of fairness…

    • glen cullen
      Posted November 25, 2020 at 10:32 am | Permalink

      Sunak isn’t a lunatic he’s just new labour

      • Lynn Atkinson
        Posted November 25, 2020 at 12:51 pm | Permalink

        Or even old Labour.

    • Mike Wilson
      Posted November 25, 2020 at 4:18 pm | Permalink

      When things stabilise and interest rates rise as they surely will t

      But they won’t rise. Ask yourself this question: ‘Who benefits from interest rates rising?’

      Governments? There is now so much state and consumer debt that any significant rise in interest rates is going to be ruinous. It won’t cause recession. We’d be way past that into the depths of depression. Tax revenues will collapse and the social fabric will disintegrate leading to the rise of extreme political parties.

  12. Simeon
    Posted November 25, 2020 at 7:39 am | Permalink

    Where to begin with this?

    You suggest that following the Japanese model is viable, though only for a short time. This, because, as you recognise, we (and the US, more importantly, but we’ll come back to that) are in a very different situation (balance of payments deficit, massive private debt). You also note ‘confidence remains a precious flower’. Yes indeed. There are reasons to believe Japan, because of its broader economic strength, is ‘good’ for its debt. If necessary, for example, it could choose to raise taxes, rebalancing public debt and private savings. Where is the justification for having confidence that the UK (or even the US) is good for their debt when both public and private sectors are so heavily indebted?

    The answer is, almost entirely, near-zero interest rates. However, these conditions cannot be relied upon to continue indefinitely – though even if they could, this is hardly a good thing as it entails sluggish growth, ever-increasing debt piles, and the continued widening of the prosperity gap, which increasingy looks like a chasm. I notice you didn’t mention that at least the first two of these applies to Japan. Surely you are not going to claim that Japan has been an economic success story these past three decades?

    Reading justifications for money-printing, there is always the assumption, implied or explicitly stated, that significant economic growth is necessary for the wheeze to work. Hilariously, it is usually suggested that government stimulus through money printing will somehow magically result in said growth! Yes, in theory, investment can increase productivity. But it is no guarantee of growth, and when government is doing the investing, the prospects of growth fall theough the floor. The suggestion that our feeble-minded politicians might turn out to be entrepreneurial prodigies is risible.

    This past decade has in fact seen inflation, but in asset and commodity prices. Stock markets are bubbles. How can they be at, or close to, all-time highs when the real economy is in the toilet? And how is it a good thing when it reinforces appalling inequalities in wealth? I’m not a socialist, but real capitalism is not supposed to produce such outcomes. Rather, these are the result of crony capitalism, where governments and big business work hand in glove (some would say conspire) to further their shared interest of shoring up their positions. (This is also one reason why I will not be going anywhere near any of these vaccines, produced by governments and big businesses to serve the interests of government and big business.)

    The global economy has been grotesquely warped by massive state intervention, and is now manipulated through nominally independent central banks to preserve the status quo. The dynamism, and therefore sporadic volatility, bringing about the creative destruction of failing businesses and industries that are then replaced with emergent enterprises better placed to develop and grow, necessary for a healthy, capitalist economy is, simply, absent. Instead, we have economic sclerosis.

    The supposed all-conquering power of central banks, particularly, and ultimately, the US Fed, is the confidence trick. There is also an element of ‘too-big-to-fail’. Creditors are always reluctant to admit that the debt they hold is bad, and admitting that US debt is bad would have seismic consequences that cannot be precisely defined. The US, and by extension the globe (and certainly the UK, which is in the same boat as the US), is at the mercy of this bluff being called, and of this debt being called in. You, are along with most other economic commentators, and certainly politicians, are either in denial or being deliberately dishonest. Or you just don’t understand. Whatever, the people are woefully served, and it is likely the poorest of us that will suffer most, even if there are vested interests with alot to lose from the ending of this corrupt economy.

    In the end, Sir John, it is these vested interests that you are serving, not your electors, and people like them.

    • Simeon
      Posted November 25, 2020 at 9:15 pm | Permalink

      No argument then… 😉

  13. rose
    Posted November 25, 2020 at 7:43 am | Permalink

    PS has something gone wrong with the site? I can’t see commenters’ names any more.

  14. Peter Grimes
    Posted November 25, 2020 at 7:47 am | Permalink

    Whether we like it or not the excess borrowing due to the threat of COVID 19 was necessary.

    It bears no comparison to the c£600 billion spaffed up the wall by Brown in 1997-2010 to buy support and cripple the country by granting ever more ‘entitlement’ to benefits.

    • Lynn Atkinson
      Posted November 25, 2020 at 12:52 pm | Permalink

      Brown chose not to treat the last bad flu outbreak – more deaths than this one – as an existential problem. Who would have thought that we would view the Brown era with a golden glow?

      • Mike Wilson
        Posted November 25, 2020 at 4:19 pm | Permalink

        Who would have thought that we would view the Brown era with a golden glow?

        I view it as a disaster with a massive rise in consumer debt and house prices – sowing the seeds for the 2008 crash and the massive increases in debt since.

      • Narrow Shoulders
        Posted November 25, 2020 at 7:14 pm | Permalink

        Gordon Brown was able to say “go and get vaccinated” to the young and the old, he was able to say “go and get some tamiflu and stay at home for a few days” to anyone who got swine flu and there was a reasonable ability to estimate how many deaths and hospitalisations there would be. Plus he was Labour so he did not have to worry about saving the NHS it was already safe from all his investment.

        Apples and Pears despite the atrocious response from this administration.

  15. John Halom
    Posted November 25, 2020 at 7:53 am | Permalink

    Yes Mr Redwood, your government is ruining the country. Exploding debt whilst destroying our ability to pay it back. Ruining lives through medical failures and mental illness. For sheer criminal negligence, stupidity or just plain criminality this government is the worst in history.

    • Lynn Atkinson
      Posted November 25, 2020 at 12:53 pm | Permalink

      No JRs Government.

  16. Richard1
    Posted November 25, 2020 at 8:02 am | Permalink

    (We are all anonymous again this am)

    Japan also has a relatively low state-GDP and tax-GDP ratio. On both measures Japan is at the competitive end of OECD rankings. We in the U.K. and especially much of the eurozone, are towards the uncompetitive end. The govt must not kill the prospects of recovery with anti-investment anti-innovation tax rises.

  17. Narrow Shoulders
    Posted November 25, 2020 at 8:02 am | Permalink

    Print it all – do not tax me or my children to pay for this madness or indeed your other giveaways.

    The money will exist whether it is borrowed or printed and will have its inflationary (stealing) effect, reducing the debt but reducing my savings. This will not change whether printed or borrowed but at least my taxes won’t rise to pay it back while banks charge interest.

    Our government does need to consider how, when demand returns outside stocks, shares and properties which are at record highs, they will reduce the money that is in the system to avoid silly inflation and further reduce the value of savings.

    Maybe now is the time for individuals to borrow massively instead of save.

    • Narrow Shoulders
      Posted November 25, 2020 at 8:04 am | Permalink

      Dominic Frisbee’s book “Daylight robbery” is well worth a read on the topic of inflation, money creation and tax.

      He had an interesting interview on Geoff Norcott’s podcast “What most people think”

  18. Sakara Gold
    Posted November 25, 2020 at 8:03 am | Permalink

    Its a gargantuan Ponzi scheme. I could not think of a better description than what I have read above. We are set for an inevitable hyperinflationary depression.

    Gold is on sale for Christmas just now, as sterling is strong vs the US dollar. Everybody should own some unallocated physical bullion – just in case.

    • Mike Wilson
      Posted November 25, 2020 at 4:25 pm | Permalink

      Everybody should own some unallocated physical bullion – just in case.

      What use is it when gangs are roaming the streets nicking your food?

  19. Everhopeful
    Posted November 25, 2020 at 8:22 am | Permalink

    Yes but aren’t all those old economics redundant now?
    From 2008 money has been counterfeited for some to buy assets.
    Do we now see why? Is it that the Great Reset involves an economy based entirely on assets …owned by the ruling class?
    Hence no money..so it just doesn’t matter how much in debt any country gets because it will all be wiped out. Like magic.
    Neo feudalism ahoy!

    • Everhopeful
      Posted November 25, 2020 at 8:54 am | Permalink

      Everhopeful

  20. Bryan Harris
    Posted November 25, 2020 at 8:25 am | Permalink

    From: Bryan Harris.
    It is still not, and has never been, a good idea to print money and continually extend our debt.

    The questions we should be asking is:

    – Who ultimately owns that external debt?

    – What power do our debt owners have over UK government policy?

    The national debt of all western countries has been growing for several decades – Apart from poor management, you really have to wonder how this was allowed to continue…. Is it that the NWO requires us to be bankrupt, and owned?

    Reply We own over 40% of the state debt!

    • Bryan Harris
      Posted November 25, 2020 at 11:04 am | Permalink

      JR – Thanks for the reply – But who owns the rest, and what power do they have over the UK?

    • Simeon
      Posted November 25, 2020 at 11:54 am | Permalink

      Reply to reply

      And climbing – because no one else wants it!! Central banks are having to hoover up sovereign debts because there is no market. In this context, the supposed strength of owning your own debt is exposed as the nonsense it is.

      The only possible advantage to this state of affairs is that a country that owns its own debt is not going to be invaded by a creditor taking back their money. Indeed, such a country is unlikely to be invaded at all, because there is nothing in it of value to attract potential invaders! Are you seriously suggesting this is a win? Hey, we can make handsome savings on national defense because… there is nothing worth defending!

    • Dennis
      Posted November 25, 2020 at 12:20 pm | Permalink

      Reply to reply – ‘We own own 40% of the debt’ – I note you don’t mention who owns 59.x% % of the debt which was the point of the poster. You as bad as all the other MPs who squeeze out of really answering questions.

      Reply The rest of the debt is mainly owned by UK Pension funds, insurance funds and individuals through their portfolios, and banks.

    • Bryan Harris
      Posted November 25, 2020 at 4:01 pm | Permalink

      That’s interesting then, considering that the UK is so keen to retain the best possible international credit rating — especially if we do not borrow using this mechanism.

      I get now that the debt is not owed to foreign banks, which is what I’d assumed — Still that is a lot of debt to hold in our institutions – What happens to them if the UK cannot pay up at the end of the term?

  21. Sakara Gold
    Posted November 25, 2020 at 8:27 am | Permalink

    Its a gargantuan Ponzi scheme. I could not think of a better description than what I have read above. We are set for an inevitable hyperinflationary depression.

    Gold is on sale for Christmas just now, as sterling is strong vs the US dollar. Everybody should own some unallocated physical bullion – just in case.

    Sakara

    • Simeon
      Posted November 25, 2020 at 11:55 am | Permalink

      +1

  22. Nivek
    Posted November 25, 2020 at 8:27 am | Permalink

    “We cannot assume our economies will remain immune to inflation (emphasis here and below added).

    Just a reminder of what you wrote on this site five years ago:
    “The advocates of QE are now able to claim that there has been no great general inflation so far as a result of their money printing…. There has been, however, a major inflation in the prices of assets, led by bonds but including London home prices. This brings with it social and financial consequences.”
    (Source: “Who is rich? The distorting problems caused by very high London home prices”, 29/11/2015)

    – Nivek

    Reply Yes, past QE did cause asset price inflation., This time round so far in the UK shares are lower than prior to the crisis, many commercial properties lower, with some increase in house prices. There has been a large deflation.

  23. Andy
    Posted November 25, 2020 at 8:39 am | Permalink

    It has been important to look after those who have been ordered not to work during the pandemic. Even so, those people have taken only 80% of their salaries. Many self-employed people have got nothing.

    Meanwhile the pension handouts continue unaffected to the richest demographic in the country. They carry on economically unaffected as chances for the young are destroyed to save the lives of the old.

    This must be put right immediate. End the triple lock and immediately reduce state pensions to just 80% of their usual amount. This will save billions. Then further reduce state pensions by 20% per year until they are gone. The elderly must also be charged a premium for the extra use they make of the health service. £500 a month for over 65s. Rising to £1000 a month for over 80s. And social care should only be provided by the state when all assets have been disposed of and gone. Yes, you should sell your house to pay for your care. Inheritance tax lowered – kicks in at £100,000.

    For too long we have let this generation get away with thieving from us. It must end.

    Andy

    • Richard1
      Posted November 25, 2020 at 3:26 pm | Permalink

      Wonderful to read – any chance you could get Starmer to put this in his 24 manifesto? That’ll do the trick for us for another 5 years.

      I agree on the triple lock though.

    • Edward2
      Posted November 25, 2020 at 4:16 pm | Permalink

      Living on a State pension does not make you part of the richest demographic.
      Is there any political party anywhere that has the policies you desire?

      PS Inciting hatred of a specific group is against the law.

    • Fred H
      Posted November 25, 2020 at 4:24 pm | Permalink

      Yes it should end, most would want to see the end of your childish, spiteful vitriol.

    • Glenn Vaughan
      Posted November 25, 2020 at 5:46 pm | Permalink

      Oh dear. Further proof that the messenger clearly suffered a very troubled childhood and hasn’t forgotten or forgiven. Hence his vitriolic attack on pensioners of his parent’s generation.

      • graham1946
        Posted November 26, 2020 at 2:23 pm | Permalink

        Yep, I’ve said than several times as he informed us he doesn’t talk to his mum because she voted for Brexit. How shallow can you get?

    • Walt
      Posted November 25, 2020 at 6:00 pm | Permalink

      Andy. I paid National Insurance Contributions for about 49 years. The state benefit system is a pay-as-you-go scheme: it may be unwise but that’s what it was and is. My contributions and those of my cohort provided funding, at least notionally, for the benefits of the recipients of the state welfare system throughout my working life, including people who had paid nothing in to that system. That’s ok, it’s what the government promised them and it’s part of a civilized society. So, now I have reached state pension age and receive a basic state pension that has been degraded a number of times from that promised to my generation. Such is life. Why do you think it appropriate to totally deprive me of the state pension for which I paid? How will that example encourage today’s contributors to pay their contributions, if they see you so keen to deprive earlier contributors?
      As for selling my house to pay for social care if I need it: that’s ok.
      As for Inheritance Tax: your suggestion is generous; I would be content with a de minimis exemption to spare everyone the bother of reporting small sums, e.g. £10k, and tax everything else. Better get the rate right though: too much and the wealthy will flee the country and there will be less for all who remain.
      You see, I believe in keeping promises. And I and my generation are not all thieves. Temperance please.

      • Mike Wilson
        Posted November 25, 2020 at 8:11 pm | Permalink

        According to the twerp whose post you are responding too, the state pension is a hand-out. The bloke’s an idiot. He seems unable to grasp what you, I and many others have pointed out to him about how the state pension is funded. I paid NI contributions between the age of 17 and 65 – so just the 48 years.

        • graham1946
          Posted November 26, 2020 at 2:27 pm | Permalink

          The state sees it as a handout as well. They call it a ‘benefit’ which it bloody well is not. I have written to the Dept Work and Pensions saying this because benefits are not taxed so I would like my pension tax back. A great big zero of a reply of course. Governments are just a joke and make work for insiders.

    • Norman
      Posted November 25, 2020 at 7:43 pm | Permalink

      Dear Andy, do you have living parents? Were you treated badly as a child? Why are you so bitter towards their generation? What about ‘honouring your father and your mother,’ that you yourself may ‘live long in the land?’ You appear not to realize that you’re actually hurting yourself – please don’t. There’s a better way for you , I’m sure.

  24. Everhopeful
    Posted November 25, 2020 at 8:54 am | Permalink

    Everhopeful

  25. Lifelogic
    Posted November 25, 2020 at 8:56 am | Permalink

    Indeed. Alas they are not only spending but spending on pointless or even damaging things. Getting very poor (if any) value indeed.

    Confidence remains a precious flower – indeed it does. So why is this government stamping on it from every direction?

    We need – cheap reliable energy but get expensive 10 points green lunacy, we need easy hire and fire but get ever more complications, we need lower taxes and a much smaller state but we get tax increases and huge tax complexity, threats of further tax increases and a state pissing money down the drain all over the place on nonsense and even corruption. We need fewer parasitic jobs (rather than parasitic job creation schemes a government speciality) and we need the lockdown to be lifted now.

    We should also stop funding with “loans” fairly worthless degrees about 75% of them are. More should be learning on the job with day release or night schools.

    • fedupsoutherner
      Posted November 25, 2020 at 11:16 am | Permalink

      Great post L/L. Just why are they spending so much on cycle lanes and wasting money on HS2 and this drive to bring in EV’s earlier? Haven’t we got better things to spend it on like free sanitary products for all as Sturgeon has? What a joke.

    • Bob Dixon
      Posted November 25, 2020 at 12:08 pm | Permalink

      You missed out Quango’s.

      Scrap them all so that the minister and his civils servants can then report to the Commons & face the music

      • Mike Wilson
        Posted November 25, 2020 at 8:13 pm | Permalink

        Scrap them all so that the minister and his civils servants can then report to the Commons & face the music

        Too late. David ‘the bonfire’ Cameron already got rid of all of them.

      • John Waugh
        Posted November 25, 2020 at 9:18 pm | Permalink

        the music could be for a new dance –
        the squash-a-quango tango .

  26. SecretPeople
    Posted November 25, 2020 at 9:01 am | Permalink

    I agree with all you’ve written, and acknowledge the part about the relationship between the Treasury and the Bank of England. However, the largesse currently being expended on vanity projects grates with the general public who are living with constant uncertainty, many of whom have lost their businesses. The impression is of rich people insulated from life’s hardships, never having had to manage a budget in their lives or understood what it is like to do without, maxing out the nation’s credit card on shiny baubles on which the public would never prioritise spending in a million years.

    • Bob Dixon
      Posted November 25, 2020 at 12:05 pm | Permalink

      The credit cards you refer to must be those passed out to our MP’s

  27. fedupsoutherner
    Posted November 25, 2020 at 9:05 am | Permalink

    which ever government had been in power during this crisis the economy would still have been in trouble. I find it amazing that at a time when the UK is supposed to be so broke Scotland can afford to fund free sanitary products for all. One has to ask do they really need any more money for their social fund?

    • turboterrier
      Posted November 25, 2020 at 11:09 am | Permalink

      +1
      Has it ever been appreciated?

    • Bob Dixon
      Posted November 25, 2020 at 12:03 pm | Permalink

      The rest of the UK are paying Scotlands Bills.

      Roll on devolution

  28. agricola
    Posted November 25, 2020 at 9:15 am | Permalink

    As I have said in the past I know little of state economics, and I would be very wary of anyone who says they do and has all the answers. Covid 19 has affected the whole free world and more and of a consequence their economies, requiring drastic steps to ensure physical and economic survival. I would suggest that the steps that have been taken , if taken by all nations, will ensure financial equilibrium or balance. If all nations slowly extract themselves at the same pace then I suspect all will be well. Bit like a large orchestra playing the same tune at the same tempo. Short of a magic bullet it is the best I can offer on the subject.

    • Lynn Atkinson
      Posted November 25, 2020 at 12:57 pm | Permalink

      There is a thing called political economy. Macro-economics. JR is very well versed. So are many on this site to post seldom, but when they do, it has the ring of authority.

  29. Walt
    Posted November 25, 2020 at 9:17 am | Permalink

    One of the things that Sajid Javid did in his brief chancellorship was to authorise the ONS to go against the decision of the former National Statistician Jil Matheson and to change one of the formuale in the RPI so that in future it will rise by about 1% p.a. less that it did before the change. That indicates both government fear of inflation and a willingness effectively to defraud those people who have bought from insurance companies pension annuities linked to the RPI. Chancellor Sunak is due to announce today the date from which that change will take effect; unless he has discovered in Number 11 a previously misplaced moral compass.

  30. Lynn Atkinson
    Posted November 25, 2020 at 9:25 am | Permalink

    The government made a political decision to shut down most of the private sector economy while ‘defending’ the income of the state sector. This was not an economic necessity, it was a political choice.

    Business people who had created balanced gearing, in good faith, have been left high and dry. The private sector cannot, like the state sector, go on strike.

    The Government must shoulder the financial responsibility for the destruction they caused. There must be debt forgiveness for that sector they attacked. It will offset the secure and increasing incomes of the state sector.

    • Everhopeful
      Posted November 25, 2020 at 11:57 am | Permalink

      It was “divide and rule” one of the nastier government games.
      And look! It worked!!

    • Everhopeful
      Posted November 25, 2020 at 12:01 pm | Permalink

      “Divide and conquer”.
      One of the government’s nastier little games.
      And look! It worked!!

    • ukretired123
      Posted November 25, 2020 at 2:33 pm | Permalink

      Well said! And bleating Civil Servants getting air time too.

  31. formula57
    Posted November 25, 2020 at 9:30 am | Permalink

    “The government must seek value in all this extra spending…” – a fond hope in the face of its HS2 extravagance perhaps?

  32. ChrisS
    Posted November 25, 2020 at 9:31 am | Permalink

    Boris should write to Mr Biden on behalf of the British government and confirm that the United Kingdom will NEVER erect any form of physical border in Ireland. The letter should be published and a copy sent to every member of Congress and the Senate.

    It will therefore not be the United Kingdom that breaks the Good Friday Agreement.
    If there is going to be any form of border, it will be one erected by the EU and any adverse consequences will be their responsibility..

    • fedupsoutherner
      Posted November 25, 2020 at 10:53 am | Permalink

      Great post whoever you are.

    • Lifelogic
      Posted November 25, 2020 at 12:15 pm | Permalink

      +1

    • Bitterend
      Posted November 25, 2020 at 12:19 pm | Permalink

      That’s not the way the other side see it- if UK creates the conditions where it is necessary for the EU or Ireland to erect a border then UK is culpable. The division of Ireland is UKs creation and responsibility- peace on the island lies with abiding with the Good Friday agreement including WA protocols. When Biden was a young man he toured Ireland and saw up close the watchtowers with the helicopters flying over the small villages and it created a lasting impression on him.

      • ChrisS
        Posted November 25, 2020 at 11:45 pm | Permalink

        They can look at it any way they damn well like, but it will still be Brussels that erects the border, if they dare.

        If instead the people of NI vote to throw their lot in with the South, then we would have no objection. May be Brussels will think taking over our annual £10bn subsidy to NI will be worth doing to “save” their precious Single Market. Eire certainly can’t afford it !

        Watch the Irish run a mile when politicians in NI propose a referendum on the subject.

  33. Lester Cynic Beedell
    Posted November 25, 2020 at 10:04 am | Permalink

    I’m currently reading 1984 and it’s frightening when you see Big Brother Boris on the big screen issuing diktats, it was meant to be a work of fiction not an instruction manual 😳😳

    Lester Cynic Beedell

    • Fred H
      Posted November 25, 2020 at 11:07 am | Permalink

      It certainly wasn’t meant as a work of fiction when written by Eric Blair, that and Animal Farm, were his vision, dystopian of course, of the future. The ‘noble’ cause to go and fight in the Spanish Civil War sadly revealed to him the way the leaders initially motivational, rapidly became as bad, or worse than the original transgressors!

    • Everhopeful
      Posted November 25, 2020 at 11:54 am | Permalink

      I read that at school and it terrified me.
      But I always consoled myself with the belief that it couldn’t happen here.
      Silly, silly me!

      • Fred H
        Posted November 25, 2020 at 4:22 pm | Permalink

        So who do you see as the pigs? And is Big Brother who you think? – – will rebels get to love him?

        • Fred H
          Posted November 25, 2020 at 8:09 pm | Permalink

          and in N.Korea the people are permanently hungry, but are re-educated to believe it is due to the West’s threats. The message is that Dear Leader will surmount the difficulties and take them to the promised land. Military displays and visionary but empty towns encourage the masses to continue the hardship. Identifying the pigs is not hard, and Big Brother seems to be genuinely loved, more so as time goes by.

    • Bryan Harris
      Posted November 25, 2020 at 2:58 pm | Permalink

      Truth is sometimes far worse than even the most horrible of written words

  34. Lifelogic
    Posted November 25, 2020 at 10:17 am | Permalink

    What is needed is more weath creation.

    What the goverment is doing (with borrowing & QE and then generally pissing this money down the drain on lunacies like expensive unreliable energy, HS2, almost certainly corrupt NHS supply contracts, moon shots, pointless OTT testing, the second lockdown, tax increases on like the 90% cut in entrepreneurs relief Sunak gave us is destroying wealth and killing the wealth creating sector.

    • Dennis
      Posted November 25, 2020 at 12:32 pm | Permalink

      Wealth creation comes from the environment. Have you calculated how much environment you need to use to get the amount of wealth you want?
      I’m not saying all couldn’t be well but have you done the calculation? Not easy.

    • Lifelogic
      Posted November 25, 2020 at 2:10 pm | Permalink

      So they have cut overseas aid from 0.7% and set a new lower 0.5% figure in law. Why have a legal figure at all? It is moronic and leads to idiotic spending and waste. In some years, months higher spending might be justified other years less may be justified. It should be looked at week by week or month by month. A shame they have not cut the climate alarmist lunacy, Hinckley C, the spending on the many worthless degrees, HS2 and the the other idiotic endless waste.

    • Mike Wilson
      Posted November 25, 2020 at 9:05 pm | Permalink

      How do you create wealth?

  35. Bryan Harris
    Posted November 25, 2020 at 10:17 am | Permalink

    We heard from Gove yesterday that the lockdown will continue until at least after Easter…..But that’s OK because the government have graciously saved Christmas for us.

    So what have to look forward to? We know that the government has no real options up their sleeves, and we have been informed:
    that everybody would need 3 shots of the vaccine, minimum;
    that it will not cure a person of CV-19 – It will merely make it less damaging;
    even after being vaccinated we will still be told to isolate and wear masks;
    the media informed us the vaccine will not be optional.

    From vaccine manufacturers / watchers we learn that those taking part in controlled tests, (only the healthy), suffer initial reactions – including horrendous headaches.

    Will the government ensure that the full details of clinical testing are available for analysis before they are imposed upon us?

    You really have to wonder if all of this is worthwhile or will ever end…. I’d rather die than live continually under lockdown, deprived of everything that makes life worthwhile, from here on out. BUT, that’s the NEW NORMAL – the great RESET is under way.

  36. villaking
    Posted November 25, 2020 at 10:26 am | Permalink

    Sir John, your stance on this largesse amuses me, it seems inconsistent with your stance on Labour’s proposed (and much more modest) spending plans at the last election. Perhaps you might also comment on why, if money is so cheap and easy, Johnson wants to breach another law, promise and manifesto commitment by cutting overseas aid to 0.5% of GDP?

    Reply Entirely consistent. This is only possible and necessary because 10% to 20% of GDP was taken out by the cv 19 measures.

    • Simeon
      Posted November 25, 2020 at 12:12 pm | Permalink

      Reply to reply

      Necessary AND possible? Are you suggesting that if it weren’t necessary it wouldn’t be possible? Or to put it another way, are you suggesting that a healthier economy can’t take advantage of zero interest rates, but a sick economy is perfectly capable? … Seriously?

      You can argue it’s necessary (though I disagree) but for goodness sake, don’t suggest an economic disaster suddenly makes it possible – unless you’re going to give full disclosure and admit that it entails an enormous cost that we cannot realistically pay. The point villaking is making is that this government is as loose with taxpayer’s money as Labour. The idea that Conservatives are less awful than Labour (aka your ONLY selling point) is simply false. You support and represent a socialist party. How the Thatcherite has fallen…

      • Simeon
        Posted November 25, 2020 at 12:14 pm | Permalink

        PS I confess I’m posting prolifically, but in my defense my very long original contribution is – quite understandably, no hard feelings – held up in moderation. You are the victim of your own particularly juicy diary entry Sir John…

  37. Fred H
    Posted November 25, 2020 at 10:28 am | Permalink

    Does Boris think the longer we pretend there is discussion, the easier the population will accept the mother of all climbdowns dressed as a deal?

    • fedupsoutherner
      Posted November 25, 2020 at 11:19 am | Permalink

      Fred. Indeed I am afraid we as a nation are going to be made to look weak and stupid. How bloody dare Boris!

      • Lifelogic
        Posted November 25, 2020 at 12:14 pm | Permalink

        +1 he is clearly going to go for a very bad deal.

      • Dennis
        Posted November 25, 2020 at 12:50 pm | Permalink

        Oh, I thought it is well known that we are weak and stupid. A poodle to the USA, stupid ‘negotiations’ with the EU, expensive useless vanity projects costing billions, withholding a sovereign country’s gold assets which needs them to feed their citizens, declaring some bloke as president of a country who has never been elected, a corrupt judicial system (look at the Assange ‘trial’ shenanigans and his treatment and the UK’s complicity with the corrupt Equador government etc., etc., etc….)

      • Martin in Cardiff
        Posted November 25, 2020 at 7:42 pm | Permalink

        You – yes, you – did that on 23/06/16.

        • Fred H
          Posted November 25, 2020 at 8:02 pm | Permalink

          you don’t see a difference between meek kow-towing and resigning? Oh. dear!

    • beresford
      Posted November 25, 2020 at 11:41 am | Permalink

      It will be an ‘interesting’ few weeks. Leaving the EU is incompatible with the Great Reset that Boris is pursuing, and events may be happening too quickly for him. He has adopted a Micawberish delay policy in the hope that ‘something will turn up’, but he is running out of road. Shortly he will have to go to Parliament and either present a BRINO deal or try to get the ban on further extension overturned. If as we hope there is a massive Tory rebellion it may provide impetus to tackle the other New World Order diktats, such as rolling lockdowns and Open Borders.

      • Sime
        Posted November 25, 2020 at 12:24 pm | Permalink

        A vain hope. Given the pandemic narrative, the people would never forgive the Tories if some of their number ‘played games’ over Brexit. I remember, as I’m sure does our kind host, The Sun printing a rogues gallery of Tory MPs that voted against Theresa May’s – yes, that Theresa May – deal at the third time of asking. The fact is that in the mind of the British electorate – abstract thing though that is – Boris is Brexit, and what he says goes. If he BRINOs now, then BRINO is Brexit. If he extends in order to BRINO later, the people will trust him. Many of this parish will be outraged, but they are the minority. Perosnally, I’m past outrage. Been there and done that. I’m despondently accepting.

        • Simeon
          Posted November 25, 2020 at 12:24 pm | Permalink

          Where is the rest of my name?

        • Lynn Atkinson
          Posted November 25, 2020 at 5:25 pm | Permalink

          I disagree strongly. If Boris BRINOs, especially after his response in PMQs today. Boris is toast. We know what Brexit means.

          • Simeon
            Posted November 25, 2020 at 7:38 pm | Permalink

            We know, but does the general public? I don’t even think the vast majority of MPs know what Brexit actually means, so why would the man in the street?

      • rb
        Posted November 25, 2020 at 2:30 pm | Permalink

        UK Freedom of Information request – no proof sarscov2 exists.

  38. Kenneth
    Posted November 25, 2020 at 10:34 am | Permalink

    Meanwhile China has been buying up precious metal mines.

    If and when fiat collapses and countries refuse to accept dollar payments, China, with real-life assets, may be calling all the shots.

    • Dennis
      Posted November 25, 2020 at 12:58 pm | Permalink

      Yes, I wonder long long before the renminbi will become the reserve currency. Will China then go about forcing sanctions on countries by blocking their accounts? This is an act of war of course so it won’t happen to the USA, well for some time perhaps but to the UK, why not?

      • Lynn Atkinson
        Posted November 25, 2020 at 5:23 pm | Permalink

        If Democracy is overwhelmed by the ‘machined votes’ and Biden becomes President, China is in charge of the USA from the off.

        • bill brown
          Posted November 27, 2020 at 9:19 am | Permalink

          Lynn Atkinson

          Absolute nonsense with no justification for the argument presented

  39. S Matthews
    Posted November 25, 2020 at 10:52 am | Permalink

    There is a puzzling lack of understanding about why MMT seems to work. If a combination of austerity and CV19 kills demand then it rather difficult to get inflation. After CV19 and a return to normal (not austerity!) then inflation will let rip.

    • Lynn Atkinson
      Posted November 25, 2020 at 1:12 pm | Permalink

      We need State Austerity (that’s what they mean by ‘Austerity’ – note that a drop of at least 20% of private sector wages was not deemed to be austerity) so the money is in the right hands. State sector wages must be cut to 80% of current across the board, including the part-time NHS.
      But Sunak is messing up again spending (as opposed to investing) another £4.5 billion on maintaining the jobless for a bit. Give it to the companies who used to employ them so they can employ them again for God’s Sake. Or better still, forgive SMEs £4.5 billion of debt. We have taken on £50 billion this year because of this bunch of hysterical big girls blouses in Government!

  40. Everhopeful
    Posted November 25, 2020 at 12:04 pm | Permalink

    Website not working.

    • Everhopeful
      Posted November 25, 2020 at 2:16 pm | Permalink

      Ah..working now!

  41. Ex-Tory
    Posted November 25, 2020 at 12:17 pm | Permalink

    3 points to make here:

    1. Interest rates and monetary policy have been on an emergency footing since 2008, so
    you may be optimistic in hoping that this won’t have to last another 18 years.

    2. Inflation can arise from any manner of unforeseen external shocks, in which case I
    don’t see us being able to cope without a dramatic change in economic policy.

    3. Every government since Thatcher has had huge confidence in its ability to spend our
    money better than we can. We won’t recover without cuts in tax and in government
    spending.

    • Lynn Atkinson
      Posted November 25, 2020 at 5:20 pm | Permalink

      The Thatcher Govt increased State spending.

      • Fred H
        Posted November 25, 2020 at 8:00 pm | Permalink

        that in itself is not a major crime. Depends on what the spending plan produces!

  42. Ignoramus
    Posted November 25, 2020 at 12:36 pm | Permalink

    Off topic Sir john but the disgraceful behaviour of the Metropolitan Police outside Parliament, witnessed by Sir Charles Walker, when they dragged a 72 year old woman who was peacefully protesting and put her in a van is an outrage. Sir Charles has raised it in the Commons to the Speaker but there must be action taken to investigate etc ed

  43. acorn
    Posted November 25, 2020 at 12:59 pm | Permalink

    The government matches its net spending flow in a period by issuing new debt, the stock of debt rises. When government bonds are issued to match deficits, the central bank effectively just marks down Treasury reserve accounts and marks up the Treasury securities account.

    Bond sales do not alter the net financial worth in the non-government sector in the first instance, it just changes its form. The debt issuance is a redundant part of the process and a hangover from past currency arrangements (pre 1971). Governments could avoid all the nonsensical commentary about ‘record’ debt levels and the rest of it by abandoning the debt auctions. Bonds are risk free interest paying savings for insurance and pension funds. You could replace the government Bond market with an NS&I Income Bond accounts.

    The BoE doesn’t have any capital to buy anything unless the Treasury gives it the Pounds to do it. But it can issue credit units like any other Bank which it is allowed by licence to call those units Pounds. It has loaned billions to the Asset Purchase Facility that actually buys back the Bonds.

    Redundant means it is not required to accomplish the goals of government spending. The current system of debt-issuance in Britain, Gilt auctions, was introduced in 1987 as part of the so-called Big Bang. The Treasury never has to borrow its own currency from anyone, it is the monopoly creator and issuer of Pounds Sterling; you can’t get them from anywhere else. (HT: Prof Bill Mitchell)

    • Edward2
      Posted November 25, 2020 at 4:18 pm | Permalink

      Is there another economist who thinks like Bill Michell?

  44. Dennis
    Posted November 25, 2020 at 1:02 pm | Permalink

    ‘…..trying to print its way out of the debts.’

    How is this possible? Who in their right mind would lend money without the proviso of being paid back whenever at the value of the money at the time of lending it, plus the interest of course?
    I wouldn’t. Can anyone explain it?

    • Lynn Atkinson
      Posted November 25, 2020 at 5:19 pm | Permalink

      You never get that comfort. All you can do is agree an interest rate you hope will outstrip inflation and tax combined, so that there is some return.

      • Mike Wilson
        Posted November 25, 2020 at 9:09 pm | Permalink

        Around the world people are lending governments money at next to 0% return. Yields on German debt are negative. So, no outstripping of inflation or anything else – just the hope that they will at least get their money back.

  45. Ed M
    Posted November 25, 2020 at 1:45 pm | Permalink

    @Sir John,

    The UK has to start making more more quality high-tech and other things, leading to 1) Higher Skills 2) Higher Wages 3) Higher Productivity / Higher Work Satisfaction 4) Higher Employment 5) Higher Exports 6) Higher sense of patriotism about British Brands 7) And most importantly, high quality services based around quality high-tech and other things.

    And then you can base even more high quality services around these quality brands. IBM used to be primarily a high-quality hardware company building servers. Now it’s primarily a high-quality services company – but with their services based on the strength of their hardware (and software) products.

    Government needs to:

    1) Help in developing Cambridge as Europe’s Silicon Valley (US government played an important role in development of California’s Silicon Valley)
    2) Doing lots of creative things and some financial incentives to bring on the high tech entrepreneurs of the future
    3) Do more to get more kids coding – this is a great way of getting young entrepreneurs into creating new software – which leads to development of hardware – and services based around high tech products

    • Ed M
      Posted November 25, 2020 at 1:50 pm | Permalink

      Lowering taxes isn’t enough. Too much – and it just leads to boom and bust and people selling off UK assets.

      We need to get people more invested in their jobs by helping to create more high quality British Brands that people can really rally behind and get involved with.

      There’s lots of evidence that money is only one important reason for job satisfaction. Actually, enjoying what you do is also key. And key here is being involved in a company that actually makes things (high quality things – not tat).

      Also, we need to look at creating the British BWMs, Mercedes, Audis and so on of the future. This would be HUGE for economy (based on the gist of the arguments laid out here).

      Financial Services is of course important and always will be. But we also have to diversify our economy. And into areas which really raise productivity / exports and so on.

    • Martin in Cardiff
      Posted November 25, 2020 at 5:27 pm | Permalink

      Ed, the last thing that Conservatives want is a highly professionalised, self-confident, high-worth workforce.

      They want terrified people grovelling for crusts.

      Anything else means less power for them, and that, absolutely, is paramount, as the preposterous conduct in the US over the most secure election ever shows graphically.

      • Fred H
        Posted November 25, 2020 at 7:59 pm | Permalink

        I will accept that we now have more people terrified of what Boris is doing, than were terrified of the Corbyn possibility.

      • Edward2
        Posted November 25, 2020 at 9:02 pm | Permalink

        Twaddle.
        Every political party needs to garner votes from a wide cross section of the electorate.
        If a party want to create “a terrified people grovelling for crusts” then they are not going to be elected.

        PS
        At the last election the Conservatives got a huge 80 seat majority.
        The Green and the Lib Dems did badly.
        Labour had their worst result since 1935..

      • Ed M
        Posted November 26, 2020 at 12:01 am | Permalink

        @Martin,

        I’m a Conservative!

        (Albeit of the Edmund Burke / Jane Austen / Winston Churchill variety – of God, Queen, Country and Family).

        And trying to do my tiny bit as the UK, along with The Western World, in general disintegrates. Perhaps, people will find God again when the Western World collapses (God forbid) – the UK, the EU, the USA – all of it (and then remember how it was Traditional Christianity that gave us Venice and Florence and Bach and Mozart and Michelangelo and Shakespeare and Salisbury Cathedral and Parliament and the Quakers and their great companies and Oxford and Sir Isaac Newton and Grammar Schools and Our Judiciary …

        And PEACE, JOY and LOVE (not soppy, wet love – but real, tough love along with soft, affectionate love).

        GOD BLESS OUR GREAT COUNTRY

        • Ed M
          Posted November 26, 2020 at 12:04 am | Permalink

          And if anyone has a fibre of religion in them, PLEASE pray. It’s not just me that thinks the Western World is heading fairly convincingly for the rocks (it DOESN’T have to) – but lots of agnostics and atheists I know / know of think the exact same (albeit for different / similar reasons).

    • forthurst
      Posted November 25, 2020 at 5:54 pm | Permalink

      Cambridge was the home to a company called ARM ltd founded in 1990 ie 30 years ago. Rumour has it that it grew into a technology giant called ARM Holdings plc. Then it was sold off to a Japanese hedge fund with the blessings of the Tory government who believe we are “a trading nation open to the world (to purchase)”. Softbank then sold it to Silicon Valley at a huge profit. Do not expect nitwits with Arts degrees to understand how owning proper science and technology companies as opposed to those created to benefit from the global warming hoax is the key to remaining a First World nation.

  46. Raymond
    Posted November 25, 2020 at 2:04 pm | Permalink

    Japan is very different from the UK specifically in that it is broadly homogeneous rather than a mess. Happily the UK is not at war so I don’t see the need for irresponsible borrowing. The clever ones running the government don’t seem to remember that the cause of inflation is too much money chasing too few goods. Fancy financial shenanigans doesn’t alter the essence. More focus should be on encouraging the productive sectors and away from hand outs while maintaining welfare for the child, elderly and disabled. The Covid-19 performance should end and Theatres re-open.

  47. Steve Reay
    Posted November 25, 2020 at 2:32 pm | Permalink

    Maybe Sir John can explain why the following won ‘t work. Why can’t we globally agree for all countries to forgive the coronavirus debt , and just go back to pre covid debt levels. After all these are extraordinary times needing extraordinary measures, if all countries agree then no country gains an economic advantage.

    Reply Real people and institutions lent the money so they would not agree.

    • Steve Reay
      Posted November 25, 2020 at 4:16 pm | Permalink

      Reply to reply. If central banks took the debt on, and paid those owed the debt, then just maybe ,just maybe it could be done.

      • Mike Wilson
        Posted November 25, 2020 at 9:10 pm | Permalink

        If central banks took the debt on, and paid those owed the debt, then just maybe ,just maybe it could be done.

        That is precisely what QE is.

  48. ian
    Posted November 25, 2020 at 2:38 pm | Permalink

    Gov ongoing fight against deflation and to keep house price going up, you have now been Japanese without the skills of that country and it oversea income along with owning the majority of its debt, to keep blow 100 per cent of GDP for next for years gov spending will have to be the largest in this country history along with assets sales to balance the books.

  49. ed
    Posted November 25, 2020 at 3:05 pm | Permalink

    Slightly off topic, but how many 100’s of billions of pounds is it going to cost to implement Boris’ absurd energy policy. The consequences of this lunacy (why aren’t Conservative MP’s speaking out!!!) will be poverty, unemployment, and despair. Not to mention the thousands of people who will die every winter due to unreliable/unaffordable electricity.

  50. ian
    Posted November 25, 2020 at 3:06 pm | Permalink

    Debt going to 2.7 trillion by 2025 and GDP will have to be 2.430 trillion to meet 90% of debt to GDP as set out by gov which is 430 billion extra than 2 trillion now in GDP, this is only if everything goes to plan and when has that ever happened.

    Reply Sums wrong I fear

  51. ian
    Posted November 25, 2020 at 3:26 pm | Permalink

    Wrong you say, I heard, 400 billion this year, 250 billion next year and 100 billion pounds for every year after that and by 2025 GDP to debt will be 91 per cent.

  52. Mike Wilson
    Posted November 25, 2020 at 3:31 pm | Permalink

    The UK state through the Bank of England will own well over 40% of the large state debt it is building up.

    Difficult to read that and not laugh. Or pull a wry face and say ‘duh?’

    Mr. Redwood – it is interesting to observe you admit that your long-held views on debt and inflation are (or can be wrong). What makes you so certain you are right now? I think we may well be in for our version of Japan over the next 30 years. There is so much debt now – government and consumer alike – that inflation and higher interest rates seem very, very unlikely. If we had inflation and higher interest rates to combat them, anyone who has bought a house in the last 20 years of debt madness would find themselves unable to service their mortgage. This, as in the late 1980s (following a Tory government house price and debt boom), would lead to repossessions and recession. A downward spiral.

    Interesting to see you refer to the £450 billion of QE undertaken by ‘previous governments’. You seem to have missed a word out. ‘Previous TORY governments’. Give credit where it’s due, eh?

    Reply Mainly A Labour government and a Coalition govt

    • Fedupsoutherner
      Posted November 25, 2020 at 10:44 pm | Permalink

      I remember my husband losing his job and losing our home too under Major. Not a happy time.

  53. ian
    Posted November 25, 2020 at 3:52 pm | Permalink

    I was right last time that the deficit would never go below 30 billion pounds, so I would not knock it, going down for long rest while knocking your party right out of the ballpark. All part of the great game.

  54. Caterpillar
    Posted November 25, 2020 at 4:02 pm | Permalink

    Mr Sunak uses the following terminology,

    “Underlying debt – after removing the temporary effect of the Bank of England’s asset purchases”

    What is ‘the temporary effect of’ in this sentence?

  55. ian
    Posted November 25, 2020 at 4:40 pm | Permalink

    If I remember right, the national debt was 1.85 trillion before C19 and not 1.75 as stated now.

  56. hefner
    Posted November 25, 2020 at 5:06 pm | Permalink

    …………………… Japan ……….. UK
    debt…………….$12.2tn……….$3.24tn (public debt only with 1$=0.75£, 1$=109¥)
    external debt..$4.77tn……….$8.48tn (total public and private debt owned to non-residents)
    population. ….126.3m………. 68.0m
    pub.debt/cit….$90,345……..$52,140 (£39,105 per UK citizen, £67,260 per UK tax payer)
    average debt. $3,210………..$40,600 (private debt per citizen, including CC, mortgage)

    Most of Japan’s debt is held in ¥, private debt is small, and a large fraction of total debt is held by Japanese people themselves. This is not the case in the UK where 1./ private debt adds a large amount to the public debt, and 2./ 25 to 30% (depending on the year between 2015 and beginning of 2020) are held in currencies other than £.

    So can the Japanese model be readily be applied to the UK? ‘To be or not to be, that is the question’.

  57. Lindsay McDougall
    Posted November 26, 2020 at 2:29 am | Permalink

    The UK’s mounting State debt and the large contribution to it of QE have been deliberately created in order to finance large amounts of profitless and largely wasteful Government expenditure.

    I challenge Sir John to list all the big forthcoming public sector projects and tell me which will be profitable.

    The result is that the profitable private sector is starved of investment capital. It is the private sector that will need to turn round our balance of payments problems by gaining export markets and substituting for imports.

  58. Ian Jacobs
    Posted November 26, 2020 at 8:23 am | Permalink

    I don’t think it is correct to call it ” the Japanese Model “.
    There was no model, no great plan or system that they followed after 1989/90.

    Their economic situation was ( or became ) unprecedented and there was shock and disbelief that lasted a very long time . They must have believed that the Tokyo real estate was worth more than the whole of California.

    QE had never been tried before – the concept of zero interest rates never contemplated etc so many of the measures were greeted with scepticism not just in Japan but worldwide. Some of the measures they tried worked better than others – and some failed but Japan was having to think on its feet – there was no rule book that they could turn to for tried and tested help.

    Although Japan’s domestic political situation seems stable, and their lifestyle and many of the population enjoy a good quality of life – it may be that one of the long term consequences of their indebtedness and poor outlook is reflected in their very low birth rate. This factor will become more and more significant as the population ages further and there very low immigration attitudes create ever increasing labour shortages .

  59. Kenneth moore
    Posted November 27, 2020 at 1:15 am | Permalink

    A little complacent. Japan is a net exporter and its citizens save much of their income. Why do you believe the Japanese model will work.
    Your governments over reaction to the covid crisis has been shameful. Major destroyed many jobs with his 15% interest rate ERM policy. That is nothing compared to what your government is doing now.

  60. Martin
    Posted November 27, 2020 at 11:16 am | Permalink

    An interesting post. As we are in the middle of a pandemic with economic consequences markets ought to fall instead the opposite is happening as the currencies those shares are denominated plummet in value. What we are seeing is a devaluation of currencies as the currency value of stock markets climb.

    Incidentally did you spot the chancellor’s fly tax hike the other day ? Increasing minimum wage gets more income tax plus more employers’ and employees’ national insurance taxes for the treasury.

  • About John Redwood


    John Redwood won a free place at Kent College, Canterbury, and graduated from Magdalen College Oxford. He is a Distinguished fellow of All Souls, Oxford. A businessman by background, he has set up an investment management business, was both executive and non executive chairman of a quoted industrial PLC, and chaired a manufacturing company with factories in Birmingham, Chicago, India and China. He is the MP for Wokingham, first elected in 1987.

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