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The UK government has just borrowed £62bn in a month, which is more than it planned for the next year. People are sending out panic signals. They’re suggesting the gov’t has a crisis. But that’s not true. That needs explanation. 1/
First, the government is not having a crisis. It’s carrying on. And doing a great job. We clap the NHS. It’s the private sector that’s having a crisis. It’s that part of the economy that’s lost the money. We need to remember that. 2/
Second, the government is making good the capital lost by the private sector. That’s it’s role. If it did not do it we& #39;d really have meltdown. We don’t want or need meltdown so the government is covering private sector failure. 3/
Third, there is no debt crisis. This year the gov’t has already bought £200bn of gov’t debt back from markets and is expected to do another £100bn soon. That means that right now the government owns at least £575bn of its own debt. 4/
Fourth, if the gov& #39;t owns £575bn of its own debt that means it never has to repay it or pay interest on it. What& #39;s more it means total debt was actually only £1.23trn in March this year, and not the £1.8trhn the gov& #39;t claimed. 5/
Fifth, so gov& #39;t debt - the value of gilts in issue - was only 55% of GDP in March 2020 and not 81% as the government said. 6/
Sixth, it will take exactly £1 trillion of borrowing on that basis to make the debt 100% of GDP. And that won& #39;t happen because there will be more QE before we get anywhere near that. 7/
Seventh, the QE already done also explains how the debt is being bought right now: the gov& #39;t has already injected the money into the financial markets to provide the cash so they can buy this debt. So there will be no debt crisis. 8/
Thanks goodness for the good old magic money tree - otherwise called the Bank of England - that can produce money on demand to keep our economy going as best as possible without anyone having to panic. 9/
Keep calm in other words: the chance that this supposed new debt is a matter of any great economic consequence is close to the square root of diddlysquat. /Ends
