HUGH Noble (Letters, November 23) has not got it all wrong but may I recommend that he reads The Deficit Myth by Stephanie Kelton to get it all right?
He is right in saying the UK Government produced this money from nowhere. A country issuing its own currency can instruct its central bank to create the money. It is the government’s money so it does not need to be paid back. The government may choose to raise money by taxing and borrowing, but it does not have to.
What is “borrowing”? Mainly it is the selling of government bonds. There is no shortage of buyers because they are one of the safest investments around and they pay a little interest. Who buys? You and me, if we have national savings or premium bonds. Much more importantly, it is life assurance and pension funds (so, indirectly, us again), retail banks and foreign investors. The last do so partly to have sterling reserves with which to trade for our goods and services. Likewise the UK has foreign currency reserves.
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Hugh is also right in what he described happening in Weimar Germany in 1923. How did that happen? Germany was forced to pay a huge reparations bill (mainly to France) but several of its most productive assets were taken away and the French also sent troops into the Ruhr, one of Germany’s key economic areas. The German government was reluctant to pay, so resorted to printing money and did so beyond what its remaining resources could sustain. Result: hyperinflation.
The UK can print money up to the point that its resources can sustain without significant inflation. At present its human resources are underused because there are many unemployed or underemployed so, until what is called full employment is achieved, it can print money.
Note that this ability applies to countries which issue their own currency. If you use someone else’s currency and borrow in it, you soon run into serious problems.
That is why Andrew Wilson’s recommendation to use sterling for many years, and the SNP’s acceptance of his advice, is not just wrong, but dangerously so.
Andrew M Fraser
Inverness
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