I WASN’T going to mention The Deficit Myth again, but it’s so important when the conventional economics one hears from almost all politicians and media is so wrong.

A recent example was from Tory MSP Dr Sandesh Gulhane, who claimed that we all have a “finite pot” of money. He was correct in the case of you and me, and of the Scottish Government, which has very limited borrowing powers and by law must run a balanced budget. However, there is no such constraint on the UK Government, which has a central bank and controls its currency. Fundamentally, the UK Government through the actions of the Treasury and the Bank of England creates the money for the economy. Furthermore, government spending is not dependent on taxation.

The impasse between the devolved nations and Johnson/Sunak on funding Covid relief is emblematic of the dangers of economic conventional thinking (though it may be more to do with Tory ideology about minimising state actions). They would prefer to see Covid harms escalate, rather than impose necessary restrictions backed by targeted state aid. Of course, they try to justify their stance by reference to the billions already spent and levels of national debt; pseudo economics, when in fact the UK Government can create as much money as it wants, subject to controlling inflation (currently rising due to Brexit/Covid affecting supply chains, which are failing to meet rising demand).

Some of the most important questions that should be posed are: What are the consequences of following the wrong economic thinking? What if austerity is a political, rather than an economic choice? What if the utterances of the Bank of England and virtually all financial commentators are nonsense? Could it be that it is the self-interest of the City and their media pals which stifles a proper understanding of the choices that can and should be made?

If you think these are important questions, may I recommend Richard Murphy’s excellent contribution in his published blog “Money for Nothing and my Tweets for Free” (bit.ly/RichardMurphy).

Roddie Macpherson


CONFUCIUS said: “When words lose their meaning, people lose their freedom.” Most folk naturally fear the idea of indebtedness, and government debt is not generally well understood and is actually mis-named. This is a problem for both democracy and the cause of Scottish independence.

After the 2019 General Election, Lisa Nandy was interviewed on the Andrew Marr Show and she was naturally devastated by the results. However, during the course of that interview, she regaled us with the story of a little old Yorkshire lady who loved the Labour manifesto but didn’t believe we could afford it. I wondered how many Labour voters voted Conservative in 2019 because they have no understanding of government finance? Furthermore, how many voted No in 2014 because they believed Scotland couldn’t “afford” independence?

So, first principles: who issues our currency? The UK Government does, and a monetarily sovereign government spends first and taxes second. Can it run out of money? No. Does it need to “borrow” in its own currency? No. Can it then subsequently spend without negative consequences? Of course it can’t, how the UK Government spends its currency matters a great deal, and we have seen very many bad spending choices since the 2010 coalition.

Government debt has become the latest boogieman, coming closely on the heels of the “war on terror”, and I suspect that many voting patterns skewed because of this fear. Unfortunately, many media outlets help stoke the debt-fear and a particularly nefarious example is the Dharshini David report for the BBC on May 22, 2020, which featured alarm horns and a howling infant for good measure. The message was clear: government debt – be afraid, be very afraid.

But what is this debt and to whom do we owe money? The short answer is ourselves. What is referred to as government debt are gilts/bonds or treasuries and they are, fundamentally, savings accounts which yield interest. They are initially bought from the government by banks and large financial institutions and then sold to pension funds, insurance companies or private investors.

A monetarily sovereign government can always pay the interest on these bonds because it is the monopoly issuer of its own currency, thus it will never default.

Since the gold standard was dropped in 1971, there really is no need for monetarily sovereign governments to issue bonds. A monetarily sovereign government can always create the currency to mobilise and/or create real resources. What matters for a country is its real resources: food, energy, the people, their health and education.

What matters for Scotland is getting a resounding Yes vote and setting up our financial institutions as soon as possible.

Kairin van Sweeden

Modern Money Scotland/Scotonomics