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Uninformed debate on “national government debt” and one informed voice.

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Former Fed chairman Alan Greenspan on the risk of recession
Alan Greenspan

The UK government, like the US government, is Monetarily Sovereign. It has the infinite ability to create its own sovereign currency.

Former Federal Reserve Chairman Alan Greenspan: “A government cannot become insolvent with respect to obligations in its own currency.

“There is nothing to prevent the federal government from creating as much money as it wants and paying it to somebody.

“The United States can pay any debt it has because we can always print the money to do that.”

Other governments have this ability — the UK, Canada, Japan, Australia, the EU (though not its euro-using nations), China, etc.

Not only can they create infinite amounts of their sovereign currency, but they are large enough to assure acceptance of, and demand for, their currencies.

The currencies of the above-named nations are backed by the full faith and credit of those nations, so there always is demand.

(By contrast, if you decided to create and distribute “mybucks” as your sovereign currency, you, too, would be Monetarily Sovereign, but few, if any, people would want it because your full faith and credit do not support a widely used currency.)

Sadly, the leaders of those nations have been paid by the rich to pretend they are not Monetarily Sovereign and that their “debt” is not “sustainable.” The purpose of the bribe: To widen the Gap between the rich and the rest.

In many posts on this blog, I have discussed the facts that:

  1. U.S. “federal debt” is not federal, nor is it debt. It is deposits wholly owned by the depositors.
  2. The U.S. federal government is infinitely able to pay any obligations denominated in dollars, and the federal “debt” is infinitely sustainable.
  3. Creating dollars does not cause inflation. All inflations are caused by scarcities of critical goods and services, most often oil, food, and labor.
  4. Federal deficits are necessary to grow the economy, necessary to prevent recessions and depressions, and necessary to cure recessions.

Lest you believe the U.S. is the only Monetarily Sovereign government that pretends it isn’t Monetarily Sovereign, I give you the following demonstration of economic ignorance from the UK:

UK public sector net debt, often referred to as ‘national debt’, currently stands at just under 100 per cent of GDP.

The UK’s growth outlook remains weak; quantitative easing has significantly increased the sensitivity of the UK’s debt to changes in short-term interest rates; and it is unclear whether the Government’s fiscal rule, as it relates to the national debt, is fit for purpose.

The committee’s inquiry will investigate whether the UK’s national debt is on a sustainable path; if not, what steps are required; and whether the Government’s fiscal rule regarding the national debt is meaningful.

There it is, the “sustainable” lie. Like the Monetarily Sovereign U.S. “debt,” the UK debt is infinitely sustainable.

Call for evidence
The committee is seeking answers to the following questions:

1. What is meant by a “sustainable” national debt? Does the metric of debt as a percentage of GDP adequately capture sustainability?

Answer: No. The “debt”/GDP has no meaning with regard to a Monetarily Sovereign government’s ability to “sustain” its so-called “debt.”

2. The Government’s target is for public sector net debt (excluding the Bank of England) to be falling, as a percentage of GDP, by the fifth year of the OBR’s forecast. How meaningful is this target; and how does it inform an evaluation of the sustainability of our national debt?

Answer: The only way to decrease the “debt”/GDP ratio is to reduce deficit spending, a reduction that has repeatedly caused recessions.

3. How robust are the assumptions used by the Office for Budget Responsibility when forecasting our national debt?

Answer: Since the forecasts are meaningless, the “robustness” question also is meaningless.

4. What implications does the structure of the UK’s national debt have for its short and longer-term funding?

Answer: The debt is the net total of deficit spending, which already has been funded by money creation.

5. What are the market risks created by high levels of public debt; and what factors will influence the market’s appetite for this debt?

Answer: National government deficit spending adds growth dollars to the economy. The real market risks — i.e., recession and depression — come from insufficient deficit spending.

The government does not need to sell deposits into so-called “debt.” So, there is no government need for “market appetite.” The UK government can spend endlessly without selling even one pound of debt securities.

6. If we are to ensure our national debt is sustainable, what might this mean for fiscal policy?

Answer: There is no need to “ensure’ the national debt is sustainable. It is infinitely sustainable. For that reason, paying higher interest on the “debt” is not a burden on the government

Higher rates often can benefit the economy by adding dollars to the private sector, thus increasing GDP.

7. Should the definition of the national debt differentiate between debt incurred for investments (which generate revenue for the Government), and other areas of spending?

Answer: The so-called “national debt” is nothing like private (monetarily non-sovereign) debt. The more “national debt” there is, the healthier the economy.

The UK government has no need for revenue. Even if it didn’t collect a pound in income or taxes, it could continue spending forever.

And then there is this bit of nonsense:

Matthew Lynn
Matthew Lynn

Britain is teetering on the brink of bankruptcy. No one dares admit it
Story by Matthew Lynn

Rishi Sunak came under fire for some Treasury forecasts of tax rises.

The Labour Party droned on about “change” while endlessly repeating some imaginary numbers about “investing” in the NHS and creating “green jobs”. 

Over the course of the election campaign, the main parties have argued furiously about trivialities.

Yet there is an ugly truth lurking behind this election: Britain is far closer to bankruptcy than our political elites are willing to admit. 

This is absolutely false scaremongering. The UK cannot go bankrupt because it cannot run short of money. Period.

Taxes are already at a 70-year high, and yet we are nowhere close to balancing the books.

Every pound of taxes reduces GDP growth. National taxes absolutely should be cut. They do not fund (monetary sovereign) national government spending. (Taxes do fund local — monetarily non-sovereign –government spending.)

If the UK stops running deficits, it will have a depression that will make the Great Depression look like a picnic — a depression that only will be cured by massive deficit spending.

Over the course of this year, we will add another £87 billion, or around 3 per cent of GDP, to the national debt, according to the Office for Budget Responsibility (OBR).

And this is happening at a time when the economy is recovering, and the Government has pushed through a series of punishing tax rises.

Did it occur to the authors that GDP = National + local government spending + Net Exports? An economy recovers because of deficit spending, not in spite of it.

We should be paying back debt at this point in the cycle, not racking up even more.

“Paying back requires either more taxes or less spending, both of which will reduce GDP. It’s simple algebra.

Our debt to GDP ratio is close to 100 per cent, and tripled in the 16 years to 2023, according to the Resolution Foundation, the largest ever increase in peacetime.

We are very near to the 112 per cent level that has just led to the humiliating downgrade of France’s credit rating twice over the past six months.

The UK is Monetarily Sovereign. France is monetarily non-sovereign. Sadly, the authors don’t understand the difference, yet they write about economics. Shameful.

It doesn’t stop there. We are still racking up huge off-balance sheet debts. Such as? There is already £200 billion of outstanding student debt, and that is forecast to rise to over £400 billion by the 2040s.

Again, students are monetarily non-sovereign. The authors confuse the burden of private debt with the economic necessity of national debt, demonstrating unforgivable ignorance by national leaders.

The government should increase its deficits by helping fund students’ debt.

Few believe that graduates will earn enough to pay back their loans in full, especially as our zero-growth economy is hardly creating any new professional jobs to absorb them all.

Government deficit spending could grow the economy and create jobs.

We are on the hook for some £2.6 trillion in “unfunded” public sector pension entitlements.

There are zero “unfunded” public sector pension entitlements. They all are funded by government money creation.

The claim is an attempt to widen the income/wealth/power Gaps between the rich and the rest. The claim is funded by the rich to make themselves richer. The wider the Gaps, the richer are the wealthy.

As the state employs more and more people – we added another 135,000 to the government payroll in the year to September 2023 – that figure will carry on getting larger and larger.

That means 135,000 people receive money that is added to GDP.

We are legally mandated to hit a net zero target which the OBR has calculated could add at least another £300 billion to the government’s costs over three decades.

If a “net zero” target means zero deficits, the UK is headed for a depression. That target is beyond stupid. It is criminal.

In Wales, a staggering 28 per cent of working age people are now on benefits, depending on the state to support them, and the figures are little better in the rest of the country.

If “the state” is the national government, those payments add to GDP and do not cost anyone anything.

And at last, we come to one Britisher who understands Monetary Sovereignty. Delight in reading one informed man’s comments:

Jon Camden | Materials Science and Engineering | University of Notre Dame
Jon Camden


The UK’s national debt is always sustainable.

I’m frankly amazed you have to ask this question. Firstly, a brief explanation as to what the National Debt actually is. The debt is nothing more than a record of all government expenditure into the economy less taxes removed from the economy.

The issuance of Gilts to match the difference between spending and tax is not borrowing and does not provision government. The sale/purchase of Gilts is an Open Market Operation with the purpose of managing interest rates, it is a hangover from the gold standard days.

Gilt sales serve no real purpose other than to provide a safe way for pension funds and other financial institutions to make money.

They also help control interest rates, but the point is correct. They do not provide the government with spending funds.

Not a bad thing in itself but let’s not pretend that our government, that is the monopoly issuer of the pound, needs to borrow pounds that it has already issued.

And what is the mechanism behind this simple fact? Reserves accounts of commercial financial institutions held at the Bank of England solely consist of pounds issued/spent by the government or loaned by the government.

The pounds in the reserve accounts of commercial institutions put there by our government are then used by commercial institutions to purchase Gilts issued by our government! In effect the pounds in the reserve account are transferred to a Gilts account which pays interest.

That’s it. There is no way that in any sense of the word could this be considered as the UK government borrowing.

Next, although we’ve just seen that the National Debt is a mirage and better described as savings, we still insist that we have to pay interest (often described as nothing more than corporate welfare) on the pounds we have issued.

And that is a lot of interest. How sustainable are these interest payments? The answer is infinitely sustainable.

As I’ve already stated the irrefutable fact that the UK government is the monopoly issuer of the pound. The UK government can never involuntarily become bankrupt.

It can never run out of pounds. It can therefore always service its ‘debt’ as long as the debt is in pounds (which of course it is).

You only have to look at the example of Japan to realise that debt to GDP ratios are totally meaningless.

Last time I looked, end of 2023, Japan had a debt to GDP of 263% with low inflation, low interest rates, high levels of employment and excellent public services.

Any debt to GDP target is completely arbitrary and designed to hold down the spending of public money for public purpose, in other words it is politically motivated rather than having any economic basis.

Last, just want to reiterate that the idea that the UK government is dependent on the private sector or market to finance its ‘debt’ is total nonsense.

As I’ve already stated the pounds used by private financial institutions to buy Gilts were already issued by the government but we still have to go through the theatre of pretence by selling Gilts on the primary market.

BoE just used to buy them directly until it was forbidden, but that is entirely self-impose constraint. Now, if
the market loses its appetite for debt the BoE just steps in and buys on the secondary market.

It’s about time the law-makers of our country understood that the UK government is monetarily sovereign. UK government finances are not like a household’s.

The UK government can never go broke, can never run out of money, and can always sustain its debt.

That, however, is not to say there are no limits to government expenditure. UK government expenditure is constrained by the real resources that are available to buy priced in pounds.

Asking how we are going deploy our government’s infinite financial resources to invest to sustain the real economy, mobilise our workforce and the finite resources of our country and, at the same time, sustain
the environment are the real questions we should be asking.

Not worrying about an imaginary problem about how to sustain an imaginary ‘debt’, caused by imaginary ‘borrowing’. 23 January 2024

Thank you, Professor Camden. We can now assure everyone that there is at least one informed, though lonesome, person in England. Is there another?

Oh, wait. I think Camden is an American and a chemist. If that is the case, perhaps it shows that chemists rely on proofs and facts, while economists rely on intuition and hearsay.

So, thank you again, Professor Jon Camden, for your excellent article.

Rodger Malcolm Mitchell

Monetary Sovereignty

Twitter: @rodgermitchell Search #monetarysovereignty
Facebook: Rodger Malcolm Mitchell; MUCK RACK:


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