IT is almost 10 years to the day since the then UK Treasury Secretary penned a letter to the incoming Tory government stating “I’m afraid there is no money left”. A decade on, the governor of the Bank Of England, Andrew Bailey, has announced that the UK almost ran out of our own money. So the very head of the institution which digitally manufactures our currency on behalf of HM Treasury is telling us they were failing in their primary role. Perhaps he should consider resigning?

This, however, is just the latest in a series of reports warning about government spending in response to the Covid-19 pandemic. The BBC national debt klaxon has been sounding on a regular basis with reference to the usual archaic economics, which warn of our grandkids facing a tremendous debt burden in the coming years.

Well, the money didn’t “nearly” run out and the only burden our grandkids will face if we stick to this ideology is a dead planet.

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No doubt the narrative Andrew Bailey wants us to to continue to buy into is that the UK must go to private investors to borrow our own currency. The more the nation borrows the higher a return investors will demand, thereby increasing our cost of borrowing. Higher levels of borrowing will “crowd out” the private sector, robbing it of money which could have been invested in businesses.

In the case of a currency-issuing government this narrative is false, and more and more people are calling it out. So how do we fund the aftermath of Covid-19? The same way as we fund illegal wars and bank bailouts and all the other state spending in the economy.

In reality, when the UK Treasury spends, NO money is being taken from the private sector. On the contrary, as sole issuer of sterling, the government, via the Bank Of England, spends by creating money into the economy that never existed before. If the government pays me £1000 in benefits, it creates a new £1000 in an account my bank holds at the Bank of England called a reserve account. My bank also marks up my personal current account by £1000.

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Currency-issuing central banks perform a clearing operation each day to reduce the amount of reserves in the banking system. They do this by offering holders of reserve accounts an interest-bearing alternative called a bond. This way the Bank of England clears the reserves and financial institutions get a guaranteed rate of return for a fixed term, just like we would if we put money into a savings account.

So bonds, in the context of a currency-issuing nation like the UK, are not used for borrowing. Their issuance is optional, which makes the concept of a “national debt” somewhat moot. We have also seen recently that debt accrued can effectively be cancelled simply by swapping bonds back into reserves. This is commonly referred to as quantitative easing.

Money is a human construct. It can be used for our benefit or our detriment. Right now it’s being used for the latter and we are being misled by an overly complicated veil of accounting into thinking there is no alternative. The system can and must be changed so that we can’t be lied to any more by the Andrew Baileys of this world. The planet won’t wait.

Scott Egner

IT is encouraging to find more and more people (eg Wee Ginger Dug, June 23) publicly accepting that Scots are not going to be granted a Section 30 order by Westminster any time soon and that the higher support for independence climbs in the polls, the less likely this becomes. We need to give up this obsession with Section 30 – it’s not going to happen – and remember the quote “no-one gives you freedom – you have to take it!” What are we waiting for?

Peter Swain