In UK politicians of all persuasions agree that foreign investment I s important to add to the growth of the UK economy. Steve says you have to have foreigners buying into the UK to counter the currency losses from a sizeable balance of trade deficit. But a lot of that investment will see profits being repatriated back overseas. And then there’d the overseas investment in UK bonds and shares. Andy Burnham, the Manchester Mayor who seems to be positioning himself to replace Keir Starmer, has said we need to limit the ownership of UK nbonds to foreign investors, and not be ‘in hock’ to bond markets. Has he got his thinking right? Hosted on Acast. See acast.com/privacy for more information.
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43:19
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43:19
Corbyn’s New Party Needs New Economic Thinking
recent spoke at a meeting of Jeremy Corbyn’s new venture – Your Party. Steve gave a presentation on how governments can spend more without worrying about the deficit, provided it was done sensibly. The argument that the private sector buying up government bonds will crowd out investment in other initiatives is bunkum. The private sector can still borrow for investment, perhaps benefiting from the enhanced infrastructure and trading environment government spending has created. But Phil argues there’s a big education job to be done – the politicians, the electorate and, more significantly, the bond vigilantes, who will see high government spending as a reason to push up bond yields, which will flow through to borrowing costs for everyone. Meanwhile, what chance as Corbyn’s new party got? Is the left divided itself between Corbyn, Galloway, the Greens, Labour and thew LibDems? Is this division creating a pathway for Reform to offer an agenda of low tax, fewer government services and heavily controlled immigration. In other words, Project 2025 transferred to British soil. Hosted on Acast. See acast.com/privacy for more information.
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48:56
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48:56
QE, QT and the control of central banks
During the pandemic central banks had no choice but to buy up government bonds. There were just so many of them being issued. That’s why the UK’s quantitative easing program totalled more than £900 billion during 2020-1. Recently, the bank – like other central banks the world over – are trying to unwind these huge additions to their balance sheet. Recently the Bank of England slowed down the pace at which they sold-off these assets. Why? In part because this process of ‘quantitative tightening’ can reduce the amount of money in circulation. That could slow what little economic growth we have right now. But, Steve says, if these bonds are bought up by banks, it’ll simply mean they replace reserves with zero impact on the economy, except for the interest the banks will earn from those holdings. All this raises the question, why sell now? Or ever? And how much does QE and QT sit alongside or in contrast with government fiscal policy? Don’t they need to be coordinated and, if that’s the case, is there any case for an independent central bank? Hosted on Acast. See acast.com/privacy for more information.
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44:05
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44:05
Does a government deficit help the rich?
You would assume that government spending is largely designed to help those on lower incomes. The NHS was designed to ensure free healthcare for all. The same for public education. And for welfare payments. So, I theory, the more the government spends, the more wealth is transferred to lower incomes.This week Phil and Steve explore the idea that rising government deficits actually help the rich. That’s because the so-called debt is financed by the issuance of bonds, much of which is nought on the secondary market to add to the wealth funds of the richer end of society. They receive dividend payments funded from the government. That’s a case of government money supporting the wealthy.So, is there a way of government money being used to support the less well-off, without helping the rich to get richer? Hosted on Acast. See acast.com/privacy for more information.
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41:05
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41:05
Will Europe every get its mojo back?
After the war the European economy was humming along, with growth rates of 5 percent or more. Now Germany’s forecast to grow by just 0.1 percent. Allowing for population growth and inflation and it’s an economy in decline. Steve says part of the problem is the assumption that rising government debt is bad for the economy – the old neoclassical belief that if the government spends, it crowds out the private sector. They’ve been testing that theory in Europe for a while now, and it isn’t working for them. Yet, politicians have convinced enough people of the principle such that populist right-wing governments are taking more political control across the continent. All the while, Europe has lost its innovation, and its manufacturing capability is in decline. Hence, Phil asks, how can it get its mojo back? Hosted on Acast. See acast.com/privacy for more information.
Economist Steve Keen talks to Phil Dobbie about the failings of the neoclassical economics and how it reflects on society. Hosted on Acast. See acast.com/privacy for more information.
UK