Ellis Winningham
(https://twitter.com/elliswinningham/status/1457386872452358147)
Ellis Winningham@elliswinningham
Since I began in 2010, my intent has always been to reach the general public with simple, basic information regarding how the monetary system actually works, in a language they can understand.
Ellis Winningham@elliswinningham
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My purpose is clear: Empower the public to properly do its civic duty at the ballot box and bring about change. Or, said another way: To ensure that the general public becomes immune to mainstream bullshit.
MTM, Moneta-Teoria Modernoa
(https://twitter.com/elliswinningham/status/1457005000513753092)
Ellis Winningham@elliswinningham
Key Points to Understand Regarding Valid Macroeconomics
I. Foundations:
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The United Kingdom is a nation.
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A nation is comprised of all citizens and real resources within the borders of the nation with a supreme govt that was established by society at the head.
(Thred)
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The real resources are the property of the nation.
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The UK govt is the currency-issuing and regulatory authority of the nation called the United Kingdom.
Ellis Winningham@elliswinningham
Ellis Winningham
II. Political and Ideological Concerns
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God did not invent or demand Capitalism.
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There is nothing natural about Capitalism.
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Capitalism is not the product of the universe, nor is it a guiding principle of the universe.
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Capitalism is a man-made thing; an idea of mankind.
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Ellis Winningham
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Capitalism is a choice.
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The UK govt allows entities which we choose to label as ‘private entities’ to access the nation’s real resources and to use them.
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There is nothing intrinsically good, wholesome, righteous, or necessary about the ‘private’ ownership of production.
Ellis Winningham@elliswinningham
III. The Unit of Account and Monetary Instruments
– A monetary instrument requires an issuer, a face value, and a promise from the issuer that it will take back the monetary instrument as payment for something.
Ellis Winningham@elliswinningham
– The liability of the Bank of England (reserves, pound notes) is the supreme monetary instrument in the UK, and it is the only instrument that can settle tax liabilities owed to the state.
Ellis Winningham@elliswinningham
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There is nothing ‘natural’ about the Pound Sterling.
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The Pound Sterling is a man-made thing. It is a unit of account; a unit of measure, owned by the UK govt, that it uses to measure the size of (to price) obligations.
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The UK govt alone issues the Pound Sterling.
Ellis Winningham@elliswinningham
IV. Currency Regimes
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There are fixed and flexible currency regimes.
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In a fixed regime, the govt pegs its currency to something else (gold, silver, another currency) and then determines (fixes) the exchange rate of its currency. The govt may also operate a currency board.
Ellis Winningham@elliswinningham
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In a fixed regime, the govt must promise to exchange its currency on demand for the item pegged to the currency. This is called ‘conversion’.
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The govt must have on hand an adequate supply of the item pegged to its currency in order to perform the exchange.
Ellis Winningham@elliswinningham
– In a fixed regime, the govt must ensure that the supply of the item pegged to its currency is not depleted.
Ellis Winningham@elliswinningham
– The govt must tax/borrow in order to ensure the amount of its currency circulating is consistent with the supply of the item pegged to its currency to maintain the fixed exchange rate.
Ellis Winningham@elliswinningham
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The above six points in Section IV do not apply to the UK govt and the Pound Sterling.
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Today, the UK govt always spends through direct money creation, accomplished by crediting bank accounts. To spend, it marks up bank accounts, and when it taxes, it marks down accounts.
Ellis Winningham@elliswinningham
Ellis Winningham
– It is an operational impossibility for the UK govt to actually spend the proceeds of tax collections, or to spend the proceeds from bond issuance. The “money” used by private entities to pay taxes and acquire bonds came from UK govt spending in prior fiscal years.
Ellis Winningham@elliswinningham
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In other words, all UK govt spending is money creation.
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The concept of ‘printing money’ to fund spending no longer exists.
Ellis Winningham@elliswinningham
– Nations within the EMU (European Currency Union) must tax and borrow to fund their spending because they are, by design of the currency union, required to relinquish their ability to issue their own currencies and to use the Euro which behaves like a foreign currency.
Ellis Winningham@elliswinningham
V. Fundamentals of a Modern Monetary Economy
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The UK govt imposes tax obligations on citizens and businesses.
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The UK govt declares severe penalties for not paying the tax and national tax is payable only in Pound Sterling.
Ellis Winningham@elliswinningham
– Because of the tax and the consequences for not paying the tax, citizens and businesses must do something to obtain GBP. The private sector sells goods and services to the UK govt in exchange for the Pound Sterling.
Ellis Winningham@elliswinningham
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The UK govt spends and chooses the price that it will pay in its own currency for goods and services, thereby setting the price level.
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The UK govt now collects taxes owed.
Ellis Winningham@elliswinningham
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The UK market is the creation of the UK govt.
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Citizens and businesses can accumulate a savings in terms of Pound Sterling if they have remaining funds after taxes are paid.
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Citizens and businesses buy, sell, and perform other transactions with these remaining funds.
Ellis Winningham@elliswinningham
VI. National Taxation: Purposes (Why Tax?)
a. drives the demand for the Pound Sterling.
b. can help reduce spending power to attenuate inflationary pressures.
c. alters society’s behaviour.
d. frees up real resources for the UK government’s use.
Ellis Winningham@elliswinningham
e. withdraws “pounds” from the economy and destroys them.
f. causes unemployment.
Ellis Winningham@elliswinningham
VII: UK Govt Spending and the National “Debt”
a. UK govt spending always comes prior to taxation.
b. UK govt spending is money creation.
Ellis Winningham@elliswinningham
Ellis Winningham
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A UK budget deficit is the difference between the number of pounds created and spent, and the number of pounds collected and destroyed from UK govt spending in prior fiscal years.
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A UK govt budget deficit adds net income to the nation.
Ellis Winningham@elliswinningham
– A UK govt budget surplus withdraws and destroys the net savings of the nation in terms of Pound Sterling, and as such, it destroys wealth in terms of Pound Sterling.
Ellis Winningham@elliswinningham
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The national “debt” is the sum total of all GBP spent into existence by UK govt and added to the nation through deficit spending, minus what the UK govt withdrew in taxation (GBP issued
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GBP destroyed = The National “Debt”).
Ellis Winningham@elliswinningham
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The UK govt’s so-called “debt” is actually the nation’s and the world’s net savings in Pound Sterling.
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The national “debt” is merely savings accounts that pay interest held at the Bank of England.
Ellis Winningham@elliswinningham
VIII. International Trade and Its Effect on UK Govt Spending
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Imports are real benefits, exports are real costs. –
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When a nation imports more than it exports, the nation in question is what we call a ‘net importer’ and this status results in a “current account deficit”.
Ellis Winningham@elliswinningham
– Foreign entities and nations do not finance UK consumers’ purchase of imports. The reverse is true. – The current account deficit exists because foreign entities desire to save in Pound Sterling denominated financial assets.
Ellis Winningham@elliswinningham
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To save in “pounds”, foreign entities sell their production to UK consumers.
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Because a current account deficit exists, GBP flows from UK citizens to foreign entities. And, because of that, the UK govt cannot run a budget surplus, since: (G – T) = (S – I) – (X – M).
Ellis Winningham@elliswinningham
– (G) Govt Spending minus (T )Taxation equals (S) Private Savings minus (I) Private Investment minus (X) Exports minus (M) Imports.
Ellis Winningham@elliswinningham
(G – T) is the Govt Sector and (S – I) – (X – M) is the non-govt sector.
Ellis Winningham@elliswinningham
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The equation states that the exact amount the UK govt spends will be deposited in the non-govt sector.
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The equation states that the exact amount the UK taxes will be withdrawn from the non-govt sector.
Ellis Winningham@elliswinningham
(S – I) is the UK private sector.
(X – M) is the foreign sector.
– Again, GBP flows from the private sector to foreign hands when UK citizens buy imports.
Ellis Winningham@elliswinningham
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If the UK imports more than it exports, GBP flows out of UK consumer hands, thus reducing the spending power of the UK private sector.
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If the UK is a net importer, the UK govt must run perpetual deficits to top up the private sector to replace GBP flowing into foreign hands.
Ellis Winningham@elliswinningham
(G – T) = (S – I) – (X – M) is not subject to opinion. There is no way around it.
Ellis Winningham@elliswinningham
IX, Implications of the Above Key Points
The concept that the UK govt has no money of its own by design and must tax and borrow to fund its spending is an imaginary concept.
Ellis Winningham@elliswinningham
All constraints placed upon UK govt spending are political choices. They are not hard financial constraints.
Ellis Winningham@elliswinningham
The notion that commercial banks are the issuers of the pound and that the UK govt must borrow from commercial banks to spend is an imaginary concept promoted by people who wish to obstruct UK govt spending for full employment and the public purpose.
Ellis Winningham@elliswinningham
The notion that the Bank of England is a private bank, and that the UK govt is at the mercy of the BoE to spend is an imaginary concept promoted by people who wish to obstruct UK govt spending for full employment and the public purpose.
Ellis Winningham@elliswinningham
The notion that the UK govt is at the mercy of bond markets is an imaginary concept promoted by people who wish to obstruct the UK govt from doing its job to spend for full employment and the public purpose.
Ellis Winningham@elliswinningham
The UK govt spends “money” into existence when it wishes to buy something.
Ellis Winningham@elliswinningham
Because the Pound is a free-floating, inconvertible currency, the UK govt has extremely flexible policy options with regard to any problems in its domestic economy.
Ellis Winningham@elliswinningham
The UK govt can always afford to buy anything as long as it is priced for sale in Pound Sterling.
Ellis Winningham@elliswinningham
To put this reality in very simply terms:
1.) If the moon went up for sale priced in Pound Sterling, only the UK govt could afford to purchase it,
Ellis Winningham@elliswinningham
2.) the UK govt will always be the winning bidder at a Sotheby’s auction if it chooses to be the winning bidder, and if the object up for auction is priced in Pound Sterling, and,
Ellis Winningham@elliswinningham
3.) The UK govt can easily deposit £100 trillion in your bank account right now without tax rises or bond issuance.
Ellis Winningham@elliswinningham
The only realistic constraint to UK govt spending is the ability for the domestic economy to respond to that spending with increased output. If the UK govt chooses to spend beyond the domestic economy’s ability to increase output, then inflation can occur from deficit spending.
Ellis Winningham@elliswinningham
Money, in and of itself does not cause inflation. Money creation is not intrinsically inflationary. The act of the UK government “printing” £100 trillion will not result in inflation whatsoever. Spending is what carries an inflation potential.
Ellis Winningham@elliswinningham
It is operationally impossible for the UK govt to pay for the NHS, the military, a tin of baked beans, or anything else with the proceeds collected in UK govt taxes, because the UK govt spends through direct money creation.
Ellis Winningham@elliswinningham
It is operationally impossible for the UK govt to save in Pound Sterling, because it is the only issuer of the Pound Sterling.
Ellis Winningham@elliswinningham
It is operationally impossible for the UK govt to borrow its own currency to fund deficit spending, because the UK govt is the only issuer of the Pound Sterling and as such, it spends through direct money creation.
Ellis Winningham@elliswinningham
No nation, and no person or business on Earth loans the UK government Pound Sterling to spend.
Ellis Winningham@elliswinningham
All problems and failures in the UK economy (The financial crisis of 2008, low wage environments, deflation, private debt expansion, etc.) are the result of errant political decisions as a result of inappropriate macroeconomic policy, and so, are the fault of Parliament.
Ellis Winningham@elliswinningham
The UK govt alone controls the unemployment rate through deficit spending. If the deficit is too low, then unemployment will result. There is nothing ‘natural’ about unemployment.
Ellis Winningham@elliswinningham
There is nothing ‘natural’ about poverty. Poverty exists in the UK exclusively because Parliament wills it to exist. If the budget deficit is too low, the UK govt effectively shorts the economy of much needed “pounds”.
Ellis Winningham@elliswinningham
And so, real resources are left idle, output is lost, production falls below what is necessary to satisfy the needs of the entire population, stable consumption of production is artificially limited, and unemployment and poverty result.
Ellis Winningham@elliswinningham
And finally and most importantly…
Unless Parliament deficit spends for full employment and the public’s well-being and maintains that fiscal stance at all times, then Parliament has failed the people of Britain.
Ellis Winningham@elliswinningham
X: Conclusion
There is no political, social or economic argument that can negate the above.
Tory economics is not real economics, but rather, criminal activity masquerading as valid economics.
Ellis Winningham@elliswinningham
It is criminal activity victimising the British people for the sole purpose of reconfiguring the economy and society to benefit corporations, the financial sector, and the wealthy exclusively.
Ellis Winningham@elliswinningham
To do so, the Tories use the UK govt’s currency-issuing and regulatory authority to direct spending at, and to privatise public services for the financial benefit of, corporations, the financial sector and the wealthy.
Ellis Winningham@elliswinningham
Labour has failed to challenge the fantasy economics of the Tories and will continue to fail the British people until it begins promoting a new economic narrative; one that adheres to the information contained herein.
Thank you. That will be all for today.
