#Budget2014 What Osborne didn’t tell Parliament: critique of new MoneyWeek End of Britain argument – need revolution!

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MoneyWeek, which claims to be “the UK’s best-selling financial magazine” has been predicting “The End of Britain” in a slick and heavily funded advertising campaign, with the main objective of getting new readers and encouraging them to put some of their money in overseas “bolt-holes” (arguably to encourage tax avoidance as well as to guard against loss of investors’ money due to the “inevitable economic and social chaos” they predict in the UK). I wrote a critique of that video/letter on this blog in October 2013 at Is MoneyWeek’s “End of Britain” just fearmongering? What about US debt default? Is socialist revolution on the cards? Their main argument is that government debt is increasing rapidly, despite the “austerity” agenda, even when the interest rates they pay for government bonds (gilts) are around 2%, and that Britain would be “broke” and unable to pay them back if they reached a more normal level of about 5%.

[Incidentally, although “End of Britain” does not refer to the potential break-up of the country if the Scottish people vote “Yes” in the referendum later this year, Scottish National Party (SNP) leader Alex Salmond has recently remade an argument he put in May 2013 that if an independent Scotland was not allowed to share the pound that it would not pay a share of the national debt. This situation itself could exacerbate the crisis of capitalism and is in my view a major reason why virtually the entire political establishment (apart from the SNP of course) is opposed to Scottish independence. Apart from lack of control over interest rates etc., with Scotland not being truly independent if the Bank of England has power over the currency, this is another reason for the Radical Independence Campaign (which is arguing for a “Yes” vote on a much more left-wing basis to strongly argue for an independent currency.]

This blog entry is about a new web page (letter) by MoneyWeek called What Osborne didn’t tell Parliament (its web address looks temporary so do a web search for those words if that link doesn’t work). “The End of Britain” has been widely criticised because it was produced by MoneyWeek’s advertising department, and has biased graphs not adjusted for inflation or GDP, but this new letter is professional, written by financial experts and designed for serious investors. Its points are less controversial and difficult to argue against (with the propaganda against the welfare state omitted for example) although for those who believe in gradual reforms to capitalism to end up with some sort of “socialist” society, with such people often arguing that we are “the seventh richest country in the world” and that austerity is unnecessary, it is a massive wake-up call!

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It will never be necessary to reduce the level of the national debt!

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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/.

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