The Governor of the Bank of England has apparently told the Chancellor of the Exchequer that it is all right for him to abandon his pledge to cut the national debt within five years.
Does that mean the Governor of the Bank of England now accepts that debt can only be cut at the expense of the economy, i.e. that you can not cut debt and grow the economy at one and the same time? Something that many of us have known and been saying for a very long time…
How long will it be before that simple fact is acknowledged at the Treasury?
With 97% of the money in circulation being debt based*, any reduction in the level of debt must mean that there is less money in circulation and therefore less spending power. Less spending power means less demand for goods and services, less employment opportunities, less tax revenue and more unemployment payouts. We should not be blinded by recent falls in the unemployment figures, which fly in the face of the facts and which the Government are unable to explain.
It is all very well to lay the blame on the EU and the global economy as a whole for our failing economy, we need to put our own house in order first, leaving the others to follow.
The only solution that has been promoted, has been Quantitative Easing (QE), i.e. temporary money created by the Bank of England (BofE). A monetary ploy that has failed to worked for America, Japan and has certainly failed to stimulate the British economy.
Until steps are taken to reduce our almost total dependency upon debt, little can be expected to change in the foreseeable future. Had the £375billion QE money been fed into the Government’s BoE account as a credit, then the debt element would have fallen from 97% to 84%, thereby providing a more solid economic base.
Those who are expected to know better clearly do not, so is it not long overdue for them to at least listen to those who do understand how new money is created, how the economy functions and have the ideas to take Britain out of recession?
* In Britain out of a total money supply of £2,165billion (March 2011), only £57billion was not based on debt.