Beware rightwing economic myths such as ‘maxing out the nation’s credit card’ | Letters
Source: Guardian Econ ↗
A reader from the 99% Organisation, Vince Gómez, writes that the central myth Larry Elliott identified – that the state finances itself like a household – is fundamentally wrong. He explains, from his two‑decade experience in bond trading, that every pound the government borrows becomes a financial asset held by households, firms or pension funds, so there is no “black hole” of disappearing money. He notes that the Treasury decides spending, the Bank of England creates the credit, and taxes are collected later, meaning a sovereign that issues its own currency cannot run out of money to meet obligations such as the pension triple lock. Gómez cites John Maynard Keynes, Clement Attlee and even former U.S. Fed chair Alan Greenspan, who in 2005 warned that a government can create as much money as it wishes, with the real issue being whether the economy can produce the real assets needed for those expenditures. He urges Andy Burnham to stop asking “how will we pay for it?” and instead focus on political decisions about care, housing and medicine.
Larry Elliott’s point that Burnham must confront neoliberal “nostrums” is reinforced by another correspondent, Bernie Evans, who adds further myths that must be discarded. Evans highlights the Laffer curve, the concentration of wealth—36.5 % of financial assets owned by the richest 1 %—and the outdated belief in trickle‑down economics. He argues that these ideas underpin resistance to equalising capital‑gains and income tax, imposing wealth taxes and raising income tax within fiscal rules. Evans also points to recent U.S. research showing that most inflation stems from companies protecting profit margins, not from wage growth, challenging the Bank of England’s tendency to blame wage increases for price rises.
Val Bynner, writing from London, thanks Elliott for debunking the belief that the nation cannot “max out its credit card”. She stresses that productive spending is essential for reviving the UK economy and restoring industrial capacity. Bynner reflects on her late husband’s conviction that the country could afford necessary investment, a view she now shares, underscoring the broader public appetite for bold fiscal action once the prevailing right‑wing economic myths are dismantled.
⚡ Effects Interpreter
🌍World Economylow impact
What this means for you
- ▶Imports and exports between big trading partners might feel a direct tug.
- ▶Supply chains stretching across continents may feel a subtle strain.
🏙️Local Economymedium impact
What this means for you
- ▶Everyday costs tend to catch up with economic news a few weeks late.
- ▶Wages and hiring nearby can bend with the wider economy.
🏦Rates & Banksmedium impact
What this means for you
- ▶A change in the cost of money, if it comes, will likely arrive quietly.
- ▶Central banks watch moments like this closely, so keep an eye on savings rates.
❤️Healthlow impact
What this means for you
- ▶Neighbours and families might feel more anxious until the dust settles.
- ▶Looking after mental health is worth it when headlines feel heavy.
💷Wealthmedium impact
What this means for you
- ▶Nest eggs can wobble briefly before finding their footing again.
- ▶Money set aside for the future can afford to sit tight through this.
🏠Housinglow impact
What this means for you
- ▶The property ladder rarely wobbles much from a single piece of news.
- ▶Asking prices in the area might firm up or soften only gradually.
🌍 Effects for your country
The U.S.'s central bank rate currently stands at 3.75%, so a global rates move like this could feed through to local borrowing costs. The U.S.'s economy is growing at 2.3% with inflation at 3.2%, the backdrop this story's effects play out against locally. Housing-market effects like this are usually felt most where mortgage rates track the U.S.'s own central bank rate closely. With the U.S.'s unemployment at 4.4%, personal-finance effects like this land on a labour market that is currently fairly stable. Health-system effects are harder to localise from economic indicators alone — the real impact in the U.S. depends more on local healthcare capacity than the figures above.
The UK's central bank rate currently stands at 3.75%, so a global rates move like this could feed through to local borrowing costs. The UK's economy is growing at 0.8% with inflation at 3.2%, the backdrop this story's effects play out against locally. Housing-market effects like this are usually felt most where mortgage rates track the UK's own central bank rate closely. With the UK's unemployment at 5.6%, personal-finance effects like this land on a labour market that is currently fairly stable. Health-system effects are harder to localise from economic indicators alone — the real impact in the UK depends more on local healthcare capacity than the figures above.
France's central bank rate currently stands at 2%, so a global rates move like this could feed through to local borrowing costs. France's economy is growing at 0.9% with inflation at 1.8%, the backdrop this story's effects play out against locally. Housing-market effects like this are usually felt most where mortgage rates track France's own central bank rate closely. With France's unemployment at 7.9%, personal-finance effects like this land on a labour market that is already under strain. Health-system effects are harder to localise from economic indicators alone — the real impact in France depends more on local healthcare capacity than the figures above.
Romania's central bank rate currently stands at 6.5%, so a global rates move like this could feed through to local borrowing costs. Romania's economy is growing at 0.7% with inflation at 7.8%, the backdrop this story's effects play out against locally. Housing-market effects like this are usually felt most where mortgage rates track Romania's own central bank rate closely. With Romania's unemployment at 6%, personal-finance effects like this land on a labour market that is currently fairly stable. Health-system effects are harder to localise from economic indicators alone — the real impact in Romania depends more on local healthcare capacity than the figures above.
The UAE's central bank rate currently stands at 3.65%, so a global rates move like this could feed through to local borrowing costs. The UAE's economy is growing at 3.1% with inflation at 2.5%, the backdrop this story's effects play out against locally. Housing-market effects like this are usually felt most where mortgage rates track the UAE's own central bank rate closely. Health-system effects are harder to localise from economic indicators alone — the real impact in the UAE depends more on local healthcare capacity than the figures above.