Heroes Not Zombies

When my son was very little, one day he asked for something that was too expensive for us to buy. I told him I didn’t have enough money to be able to buy it and he replied “Just go and get some more from that hole in the wall” (He meant the ATM cash machine)

It was a pretty logical response because he thought that’s where money came from. He didn’t know I had to put it in the bank in the first place.

There’s an old myth that at the end of a rainbow you’ll find a pot of gold. Of course, the catch is that you can never get to the end of the rainbow – it’s always further away.

You’ll have heard a repeat of the old myth about why a government wants to impose austerity measures including cutting back on essential services and depriving the poor of the little they have. It’s called “There is no magic money tree”.

The odd thing about that one is there seems to be an endless supply of money when a government wants to wage a war, or to find billions during a pandemic. So maybe the magic money tree only exists when certain people say it does?

So where does money come from?

A common belief is that it comes from taxation. I’m sure you’ll have heard phrases like “taxpayers money” and “we have to increase taxes to pay for X”.

But if you think about it money doesn’t grow anywhere, and the only people who can create money are the governments which issue the pounds, dollars, yen or whatever.

To pay taxes, the money must have been created by the government and distributed into the economy in the first place. Taxation gathers some of that money back from people to the government.

So when you hear the “how are we going to pay for X?” or “we have to pay for what we spent in the pandemic” remember that the money comes from political decisions. The government decides to create some. Or it doesn’t.

But, wait, that doesn’t mean they can just create as much as they like without limits! The limits are the limits of the resources of the country – the people and the physical resources. As Prof Kelton makes clear in “The Deficit Myth”, the deficits are not enough trained people working at delivering what we all need, deficits in housing, deficits in health care and deficits in education.

People create money. It’s not a natural resource like water, air or food. Just remember who those people are and challenge them if they claim they can’t fund better work, better housing, better education or better health care.