[EDIT 11/11/13: As pointed out on the Money Saving Expert forum which I provided a link to at the end of this post, I got it wrong about interest rates offered by banks/building societies being based on inflation – there are a number of factors including the base rate set by the Bank of England (although this is partly based on government targets on inflation). The title wasn’t particularly good either in talking about “age discrimination” because it is only rational for lenders to discriminate against older people on the basis that they may die before they have repaid their mortgages. However, Watchdog reported that maximum age limits for mortgages to be repaid had been reduced by 10 years by many lenders after the credit crunch, irrespective of ability to pay back, but failed to explain why (which is what I gave an explanation of in this post). I have had very few views of this post in five days according to the blog statistics facility, despite it being the top item on the blog, possibly due to the bad headline. Laura Kuenssberg on ITV News at lunchtime today reported that 2,384 mortgages have been applied for using Help to Buy (there is a separate one for new build properties – search online if you want details) out of 60,000 in total – a drop in the ocean and certainly not worth risking the housing bubble which there is already evidence of.]
My last two blog items (on MoneyWeek’s “End of Britain” video/letter, discussing a US debt default and consequences for socialist revolution in Britain and it never being necessary to reduce the level of the national debt covered some arguments I’ve been having with a blogger called Martin Odoni (hstorm), who agrees with the analysis of Warren Mosler in his book “The 7 Deadly Innocent Frauds of Economic Policy“. The following is a short review, drawing on some of my economic knowledge as an ex-Marxist, posing some important questions for British economic perspectives and consequences for socialist revolution.
The above graph shows the UK national debt is now much lower than it has been in the 1940s relative to GDP, but the analysis of an “unorthodox post-Keynesian” economist, Warren Mosler in his book “Seven Deadly Innocent Frauds of Economic Policy”, who once stood to be US President shows that a central bank (such as the Bank of England or US Federal Reserve) doesn’t need to pay back the national debt to anybody who has lent money to it even when gilts/bonds mature, because the money remains at the bank in a different account!
I first publish an article by Martin Odoni (hstorm) that I largely agreed with, after having big disagreements in comments of my post on MoneyWeek’s “The End of Britain” video/letter, and then added my own analysis, correcting the odd mistake…
UPDATE (31/10/13): This article is misleading, mainly because Warren Mosler’s analysis does not take inflation seriously (see these 1-star reviews at Amazon). I have now written a review of that book and published it on this blog at https://thatcheroftheleft.wordpress.com/2013/10/31/review-of-warren-moslers-the-7-deadly-innocent-frauds-of-economic-policy-and-prospects-for-socialist-revolution/.