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Sunday, 21 May 2017 - 9:05pm

Published by Matthew Davidson on Sun, 21/05/2017 - 9:05pm in

This fortnight, I have been mostly not reading, exceptions follow:

  • ALL RIGHT, ALL RIGHT, ALL RIGHT — Ed, of Gin and Tacos fame: This is a generation of kids so numb to seeing videos of police beating, tasering, shooting, and otherwise applying the power of the state to unarmed and almost inevitably black or Hispanic men that they legitimately could not understand why a video of cops beating up a black guy (who *didn't even die* for pete's sake!) was shocking enough to cause a widespread breakdown of public order. Now we get a new video every week – sometimes every few days – to the point that the name of the person on the receiving end is forgotten almost immediately. There are too many "Video of black guy being shot or beaten" videos for even interested parties to keep them all straight.
  • Do we want house prices up or down? — Richard Denniss in the AFR: Most politicians are adamant that they want petrol, fresh food and health insurance to be less expensive. We talk about the price of petrol and the price of milk. We don't talk about "petrol affordability" or "bread affordability" let alone create an index of the price of bread divided by median household income. Talking endlessly about "housing affordability" allows politicians to duck the simple question of whether house prices are "too high", "too low" or "just right".

Sunday, 7 May 2017 - 5:51pm

Published by Matthew Davidson on Sun, 07/05/2017 - 5:51pm in

This fortnight, I have been mostly reading:

  • An economy without growth is far from our biggest worry — Ross Gittins for Fairfax: Most economists I know never doubt that a growing economy is what keeps us happy and, should the economy stop growing, it would make us all inconsolable. They can't prove that, of course, but they're as convinced of it as anyone else selling something.
  • Minimum Alcohol Pricing: The Middle Class Sneer at the Unworthy Under-Privileged (Again) — Craig Murray: I cannot find words to express for you my depth of contempt for a measure which – by design – only affects the price of drinks drunk overwhelmingly by the lower socio-economic classes and – horror of horrors – the young! I drank a great deal more at university than I do now, and I consider the pleasures of that time a great boon to my life.
  • The Deep History Behind Trump’s Rise — George Monbiot: Trump, who has no coherent politics, is not a classic neoliberal. But he is the perfect representation of Hayek’s “independent”; the beneficiary of inherited wealth, unconstrained by common morality, whose gross predilections strike a new path that others may follow. The neoliberal think tankers are now swarming round this hollow man, this empty vessel waiting to be filled by those who know what they want.
  • How the village feast paved the way to empires and economics — Brian Hayden, Aeon: Feasts are often very expensive events, sometimes requiring up to 10 years of work and saving. Those who are paying for them expect to obtain some benefit from all their efforts and expenditures. And this is the important part about traditional feasts: those who are invited, and who often receive gifts, are considered obligated to reciprocate the invitation and gifts within a reasonable amount of time. By accepting invitations to feasts, individuals enter into relationships of alliance with the host. Each of them supports the other in political or social conflicts as well as in economic matters. Such support is critical because social and political conflicts are rife in tribal villages, with many accusations of infidelity, theft, sorcery, inheritance irregularities, unpaid bills, ritual transgressions and crop damage from other people’s domestic animals. In order to defend oneself from such accusations and threats of punishment, individuals need strong allies within the community. Feasts are a way to get them.
  • Keynes and Brexit — Robert Skidelsky: [Keynes] would certainly have wanted to keep Britain out of the eurozone. Because, above all, he would have wanted to retain the commitment to full employment. If this was not possible at the European level, and he would have doubted if there was enough theoretical and institutional support for this, then national policy must be free to secure it.
  • It’s the Private Debt, Stupid! — T. Sabri Öncü, Prime Economics Blog: At $152 trillion or 225% of the world gross domestic product, the global debt of the non-financial sector has reached an all-time high in 2015 and two-thirds of this debt, amounting to about $100 trillion, consists of liabilities of the private sector, as the IMF indicated. As I mentioned in my July 2016 EPW article (Öncü 2016), since the Deng–Volcker–Thatcher– Reagan Revolution of 1978–80, the economies polarised between creditors and debtors, the debt burden shifted from the public sector to the private sector through austerity programmes and much of this accumulated private sector debt in almost everywhere around the globe is currently unpayable. […] A global Jubilee is in order.
  • Mandatory De-education Classes — Scarfolk Council:
  • Reinventing work for the future — Frances Coppola: When income is uncertain, but outgoings are certain, constant worry about where the money will come from to pay the bills eats away at the mind, destroying creativity and turning the intellect to porridge. It undermines relationships and erodes happiness. Ultimately, it wrecks physical and mental health. And yet we seem intent upon increasing income insecurity in the name of "efficiency". […] By implementing a universal basic income, we can end the necessity of human drudgery and the wasteful mismatching of people to jobs. We can restore security to the millions who live with uncertainty.

Sunday, 23 April 2017 - 6:56pm

Published by Matthew Davidson on Sun, 23/04/2017 - 6:56pm in

For I-don't-know-how-many weeks, I have been mostly reading:

  • Everyone loves Bernie Sanders. Except, it seems, the Democratic party — Trevor Timm in the Guardian: If you look at the numbers, Bernie Sanders is the most popular politician in America – and it’s not even close. Yet bizarrely, the Democratic party – out of power across the country and increasingly irrelevant – still refuses to embrace him and his message. It’s increasingly clear they do so at their own peril.
  • Who's to blame for rising house prices? We are, actually — Peter Martin: In September 1999 the government halved the headline rate of capital gains tax, making negative gearing suddenly an essential tax strategy. […] The invasion of negative gearers has been followed by an invasion of foreign buyers, who push aside would-be owner-occupiers in exactly the same way. Rather than living in the homes they've bought, they treat them as investments and either leave them empty or rent them out to tenants who would have once had a chance of owning them. The 2011 census found an extraordinary 12 per cent more dwellings than households, some of them not bought to live in, others bought as holiday homes and second homes.
  • Cookies — Saturday Morning Breakfast Cereal:
  • The case for basic income — Chris Dillow: How can we protect workers who lack bargaining power whilst at the same time not stifling new businesses and flexible forms of work? This is where the citizens’ income enters. In giving people an outside income, it empowers them to reject bad jobs. But it also gives them the flexibility to work a few hours as they please. We thus get the best of the gig economy – proper entrepreneurship and flexibility – without the worst: egregious exploitation.
  • The Conversation About Basic Income is a Mess. Here’s How to Make Sense of It. — Charlie Young in Evonomics: UBI is in fact not a single proposal. It’s a field of proposals that’s perhaps better thought of as a philosophical intervention, a new conception of macro-economic and political structure. It’s unusual to argue wholeheartedly against representative government, taxation or universal suffrage, while it is common to disagree on which party should govern, whether taxes should be raised or cut, and particular elements of voting procedure. In the same way, we shouldn’t argue all-out for or against UBI but instead inspect the make-up of each approach to it – that’s where we can find not only meaningful debate, but also possibilities for working out what we might actually want.
  • The Great Divide - The new fat cats in Australia’s universities — Richard Hil and Kristen Lyons at the Ngara Institute: While the lower orders scratch around in precarious employment for what in many instances amounts to a subsistence wage, the privileges enjoyed by many senior managers border on the obscene. It is not unusual to hear of vice chancellors flying first class around the world and staying in high-end hotels, while at home benefiting from subsidised housing and generous superannuation and performance bonuses. Casual employees, on the other hand, are usually denied access to holiday and sick pay, career pathways and, more often than not, an office.
  • The Best Way to Predict the Future is to Issue a Press Release — Audrey Watters: “The best way to predict the future is to invent it,” computer scientist Alan Kay once famously said. I’d wager that the easiest way is just to make stuff up and issue a press release. I mean, really. You don’t even need the pretense of a methodology. Nobody is going to remember what you predicted. Nobody is going to remember if your prediction was right or wrong. Nobody – certainly not the technology press, which is often painfully unaware of any history, near-term or long ago – is going to call you to task.
  • Trump to America: "Giraffes Are Jerks!" — Tom the Dancing Bug by Ruben Bolling at Boing Boing:

Sunday, 19 March 2017 - 6:48pm

Published by Matthew Davidson on Sun, 19/03/2017 - 6:48pm in

This week, and last week, I have been mostly reading:

  • The Old Debt And Entitlement Charade — Dean Baker in the Huffington Post: Why is it, that Social Security and Medicare are linked to debt? These are not the only programs that entail future commitments of resources. […] Many of the government’s largest commitments of future resources do not even appear in the budget. When the government grants a patent or copyright monopoly, it is allowing the holder to effectively tax the public for decades into the future. This is a fact that is little understood because the folks who constantly scold us about the deficit never point it out.
  • Wikipedia is already the world’s ‘Dr Google’ – it’s time for doctors and researchers to make it better — Thomas Shafee in the Conversation makes my day with an article that isn't "Hey, Wikipedia isn't perfect; let's reinvent the wheel!": Health professionals have a duty to improve the accuracy of medical entries in Wikipedia, according to a letter published today in Lancet Global Health, because it’s the first port of call for people all over the world seeking medical information. In our correspondence, a group of international colleagues and I call on medical journals to do more to help experts make Wikipedia more accurate, and for the medical community to make improving its content a top priority.
  • In a highly indebted world, austerity is a permanent state of affairs — Mark Blyth in Aeon: If the country whose debt you hold can have elections, and the public dares to vote against more budget cuts, the European Central Bank will shut down their banking system to make them revisit their choices. That’s what they did to Greece in the summer of 2015. In this world, our present world, creditors will get paid and debtors will get squeezed. Budgets will be cut to make sure that bondholders get their money. And, in a highly indebted world, austerity – introduced as an ‘emergency’ measure to save the economy, to right the fiscal ship – becomes a permanent state of affairs.
  • Meet the Companies Literally Dropping ‘Irish’ Pubs in Cities Across the World — Siobhán Brett in Eater appeals to the Plastic Paddy in me: In the late 1970s, Dublin architecture student Mel McNally and some classmates were tasked with analyzing a piece of local architecture. They decided to make their subject the city’s pubs. A dim view was taken of their proposal, but in the end, the project was such a success that it became a months-long public exhibition. Much of the work went missing in the final days, as McNally tells it, so emotive and sought-after were the drawings and renderings. McNally went on to research the whole of Ireland to establish a definitive playbook of pub varieties, which led to the foundation of a design and manufacturing specialist, the Irish Pub Company [IPC], in 1990. The ambition was to design and build complete interiors of pubs, first domestically, but then for foreign markets, assembling huge shipments of flooring, decorative glass, mirrors, ceiling tiles, light fixtures, furniture, signage, and bric-a-brac, as well as the obvious centerpiece: the bar itself.

Sunday, 5 March 2017 - 11:31am

Published by Matthew Davidson on Sun, 05/03/2017 - 11:31am in

This week, the academic term has properly started, and I have been only reading:

  • In Defense of the Lecture — Miya Tokumitsu at Jacobin: The best lectures draw on careful preparation as well as spontaneous revelation. While speaking to students and gauging their reactions, lecturers come to new conclusions, incorporate them into the lecture, and refine their argument. Lectures impart facts, but they also model argumentation, all the while responding to their audience’s nonverbal cues. Far from being one-sided, lectures are a social occasion.
  • There Is Such a Thing As Society — George Monbiot: It’s unsurprising that social isolation is strongly associated with depression, suicide, anxiety, insomnia, fear and the perception of threat. It’s more surprising to discover the range of physical illnesses it causes or exacerbates. Dementia, high blood pressure, heart disease, strokes, lowered resistance to viruses, even accidents are more common among chronically lonely people. Loneliness has a comparable impact on physical health to smoking 15 cigarettes a day: it appears to raise the risk of early death by 26%. This is partly because it enhances production of the stress hormone cortisol, which suppresses the immune system.
  • Spider Paleontology — xkcd: Spider Paleontology

Sunday, 26 February 2017 - 4:18pm

Published by Matthew Davidson on Sun, 26/02/2017 - 4:18pm in

This week, I have been mostly reading:

  • Why debt really matters, which the IMF failed to say — Richard Murphy: […] the report only looked at who owes the debt. It did not look at who owns the debt, where and how accountable they are for it. This issue is real: it is the concentration in the ownership of debt, partly offshore, that causes so many problems, because debt imposes power. It is not for nothing that the word mortgage means ‘grip of death’. This is a modern form of slavery that consigns many to lives of little choice where compliance with the requirement of unreasonable employers is guaranteed. So it is not debt per se that is the problem: it is the power relationships implicit in it that matter and the IMF needed to address that issue and did not as far as I can see.
  • Two Loaves — J.D. Alt at New Economic Perspectives: In aggregate, then, the money system we’ve established and operate so efficiently only creates money, as it’s needed, to cover the profits of profit-seeking ventures. No money is created for ventures which do not make profits. This dynamic is doubled down on by the fact that we also operate with the institutional insistence that the sovereign government, if it decides to undertake something for the collective good, must pay for for that collective good with “tax dollars”―which are dollars previously created in the profit-earning system. There are two things peculiar about this. First is the implied premise that profit-seeking ventures are inherently good, while not-for-profit ventures are merely optional “niceties” that we can pay for on the side, so to speak. The second is our insistent belief that the money system we have cannot rationally be managed in any other way.
  • Sorting Out the Patent Trolls — Timothy Taylor: Basically, the FTC argues that the "patent assertion entities" can be divided fairly neatly into two "two distinct PAE business models: Portfolio PAEs and Litigation PAEs." The FTC steers away from using the term "patent trolls," which in this report mainly comes up in quotations from other articles buried in the footnotes. But "litigation PAEs" is the category that most people are thinking of when they refer to "patent trolls."
  • The Death of the Autodidact: And the unstoppable rise of the modern meritocrat — Ravi Mangla in the Baffler: The surgeon holding a sharp instrument inches from your arterial wall and the pilot jumping a hunk of metal over roiling waters have a license—a talisman that helps us sleep better at night. But so does your barber and your neighbor’s interior designer and—in Louisiana—your florist. In the majority of cases these requirements are another form of rent-seeking, a way for more established professionals to keep outsiders and upstarts from encroaching on their territory.
  • Metabolism — xkcd:
    Metabolism

Sunday, 19 February 2017 - 5:54pm

Published by Matthew Davidson on Sun, 19/02/2017 - 5:54pm in

This week, I have been mostly reading:

  • Density, sprawl, growth: how Australian cities have changed in the last 30 years — Neil Coffee, Emma Baker, and Jarrod Lange in the Conversation: Melbourne may well be the exemplar for inner-city rebirth. More than any other Australian city it demonstrates the 30-year turnaround from inner-city decline to densification. […] While the turnarounds in Sydney, Brisbane, Adelaide and Perth have been less marked than in Melbourne, they are all no longer “doughnut cities”. This means that where people live in these cities has changed. Australia’s cities are now more densely populated – and we are much more likely to live in inner areas than we were 30 years ago.
  • Too old to work, too young to die — Warwick Smith in the Monthly: Age discrimination is already rife in Australia, with over a quarter of older job seekers reporting being affected by it. When you combine this with the push to lift the Age Pension access age to 70, the rise of contract and casual employment, and the current and projected impact of technology on the demand for skills, the situation for many older workers looks grim. If you’re an older woman, trying to return to the workforce after raising children, then things are going to be particularly hard for you.
  • An optimistic view of worker power — Bill Mitchell: [A] past national Greens leader in Australia told me that it was too politically difficult to challenge the neo-liberal macroeconomic consensus (even if my criticisms of that consensus were valid), it just distracted voters from their main message, which was unambiguously progressive in both the social and environmental context. I pointed out to that leader that by accepting the austerity narrative as the norm for responsible fiscal conduct, even if his party gained office (which it will never do in our two-party system), they would be unable to initiate their progressive social and environmental agenda because they would have hamstrung themselves in a neo-liberal macroeconomics.
  • The best lesson I ever taught — James Page in On Line Opinion: And so the discussion continued for 40 minutes. The issues included the role of religion within education, the nature of scientific fact, the nature of religion and faith, and the role of education itself. I continued to stand at the edge of the classroom, silent, and ready to intervene and perhaps commence the formal lesson. Yet that never happened. At the end of the 40 minutes I thanked the two discussants, and reminded the students of an upcoming assignment.
  • Lack of Demand Is the Economy’s Problem, Not Automation — Dean Baker: From a worker’s standpoint it doesn’t matter if they lose their job because a robot can do it better and cheaper or because a new assembly line only needs half as many workers to produce the same number of cars. In both cases they have lost their job, the specific cause doesn’t affect their economic circumstances. […] We do have a problem of a weak labor market, with employment rates for prime age workers (ages 25-54) still well below their pre-recession levels, but this is a problem of inadequate demand in the economy. There is little reason to believe that if we generated more demand through larger government deficits or smaller trade deficits we would not have more jobs.
  • An Undergraduate’s Question about Economic Policy — Thomas Palley: Neoliberals try to close down the space of political debate and social possibility by excluding all except neoliberal ideas. The tragedy of the past forty years is they have been succeeding. In the academy there is a neoclassical monopoly, and in politics Labor and Social Democratic parties have been captured by the Trojan horse of the Third Way, creating a neoliberal political monopoly.

Sunday, 12 February 2017 - 6:00pm

Published by Matthew Davidson on Sun, 12/02/2017 - 4:00am in

This week, my academic performance has delivered a crushing blow to my self-confidence, so to reassure myself that I'm still capable of abstract thought, I have been mostly reading:

  • Nature is priceless, which is why turning it into ‘natural capital’ is wrong — Bram Büscher and Robert Fletcher: The move from nature to natural capital is problematic because it assumes that different forms of capital - human, financial, natural - can be made equivalent and exchanged. In practice - and despite proponents’s insistence to the contrary - this means that everything must potentially be expressed through a common, quantitative unit: money. But complex, qualitative, heterogeneous natures, as these same proponents acknowledge, can never adequately be represented in quantitative, homogenous money-units. […] Natural capital is therefore inherently anti-ecological and has little to do with giving value to nature, or rendering this value visible. It is the exploitation of nature to inject more value, and seeming legitimacy, into a faltering capitalist growth economy.
  • The true cost of our insanely low Newstart allowance — Peter Martin: This week, at the National Press Club, Social Services Minister Christian Porter dismissed suggestions that it needed to lift the Newstart unemployment benefit of just $264.35 per week. "The fact that people who find it challenging to subsist on Newstart do so for short periods of time might actually speak to the fact that that's one of the design points of the system," he said. The low rate was "working okay because the encouragement is there to move off those payments quickly".
  • Reducing income inequality — Bill Mitchell: […] financial market deregulation provided capital with ‘all its Christmases at once! – it could have a higher profit share and suppress real wages growth and keep profits high by realising the increased sales and productivity improvements. How? The trick was found in the rise of so-called ‘financial engineering’, which pushed ever increasing debt onto the household and corporate sectors. The capitalists found that they could sustain purchasing power and receive a bonus along the way in the form of interest payments. This seemed to be a much better strategy than paying higher real wages.
  • Why credit card interest rates are high — Peter Martin: The best guess as to why most of us don't much care about rates comes from studies that find that alongside the sizeable proportion of the population that pays off its cards on time (and so doesn't care about rates) is a larger group of "deluded optimists" who believe they will pay their cards off on time. They're not concerned about rates either because they falsely believe they won't have to pay them. Psychological tests show the more likely people are to select cards with high rates, the more optimistic they are about all things.
  • The current system of knowledge dissemination isn’t working and Sci-Hub is merely a symptom of the problem — Iván Farías Pelcastre and Flor González Correa in the LSE Impact Blog: Some scholars consider that, by removing barriers to access to knowledge, Sci-Hub is actually promoting the widest possible dissemination and use of academic research for the benefit of the entire scientific community. For instance, Masoud Shahnazar, Iran-based independent literary researcher, states that “we Iranians really owe [Sci-Hub] a lot” for providing access to the materials Iranian scholars require for their research. How researchers are able to access paywalled papers in a country faced with economic sanctions which prevent international payments is one of many questions that the current model cannot effectively answer.
  • Time To Treat Bank CEOs Like Adults — Dean Baker in HuffPo: Regardless of the exact motives, the real question is what will be the consequences for [Wells Fargo CEO John] Stumpf and other top executives. Thus far, he has been forced to stand before a Senate committee and look contrite for four hours. Stumpf stands to make $19 million this year in compensation. That’s almost $5 million for each hour of contrition. Millions of trouble-making high school students must be very jealous.
  • Stupefied: How organisations enshrine collective stupidity and employees are rewarded for checking their brains at the office door — André Spicer in Aeon: One well-known firm that Mats Alvesson and I studied for our book The Stupidity Paradox (2016) said it employed only the best and the brightest. When these smart new recruits arrived in the office, they expected great intellectual challenges. However, they quickly found themselves working long hours on ‘boring’ and ‘pointless’ routine work. After a few years of dull tasks, they hoped that they’d move on to more interesting things. But this did not happen. As they rose through the ranks, these ambitious young consultants realised that what was most important was not coming up with a well-thought-through solution. It was keeping clients happy with impressive PowerPoint shows. Those who did insist on carefully thinking through their client’s problems often found their ideas unwelcome. If they persisted in using their brains, they were often politely told that the office might not be the place for them.

Sunday, 5 February 2017 - 7:20pm

Published by Matthew Davidson on Sun, 05/02/2017 - 7:20pm in

This week, I have been feeling guilty about skipping a month, and mostly reading:

  • Why Do Anything? A Meditation on Procrastination — Costica Bradatan in the New York Times: The drama of procrastination comes from its split nature. Just like the architect from Shiraz, the procrastinator is smitten by the perfect picture of that which is yet to be born; he falls under the spell of all that purity and splendor. What he is beholding is something whole, uncorrupted by time, untainted by the workings of a messed-up world. At the same time, though, the procrastinator is fully aware that all that has to go. No sooner does he get a glimpse of the perfection that precedes actualization than he is doomed to become part of the actualization process himself, to be the one who defaces the ideal and brings into the world a precarious copy, unlike the architect who saves it by burning the plans.
  • China’s Army of Global Homebuyers Is Suddenly Short on Cash — Bloomberg News: Less than a month after China announced fresh curbs on overseas payments, anecdotal reports from realtors, homeowners and developers suggest the restrictions are already weighing on the world’s biggest real estate buying spree. […] “If it’s too difficult, I’m out,’’ said Mr. Zheng, 66, a retired civil servant in Shanghai who declined to give his first name to avoid attracting regulatory scrutiny. He may abandon a 2.4 million yuan ($348,903) home purchase in western Melbourne, even after shelling out a 300,000 yuan deposit last August. He’s due to make another big payment next month. [Tick… tick… tick…]
  • Why Trump's Staff Is Lying — Tyler Cowen, Bloomberg View: By requiring subordinates to speak untruths, a leader can undercut their independent standing, including their standing with the public, with the media and with other members of the administration. That makes those individuals grow more dependent on the leader and less likely to mount independent rebellions against the structure of command. Promoting such chains of lies is a classic tactic when a leader distrusts his subordinates and expects to continue to distrust them in the future. Another reason for promoting lying is what economists sometimes call loyalty filters. If you want to ascertain if someone is truly loyal to you, ask them to do something outrageous or stupid. If they balk, then you know right away they aren’t fully with you.
  • The Private Debt Crisis — Richard Vague: When too high, private debt becomes a drag on economic growth. It chips away at the margin of growth trends. Though different researchers cite different levels, a growing body of research suggests that when private debt enters the range of 100 to 150 percent of GDP, it impedes economic growth. When private debt is high, consumers and businesses have to divert an increased portion of their income to paying interest and principal on that debt—and they spend and invest less as a result. That’s a very real part of what’s weighing on economic growth. After private debt reaches these high levels, it suppresses demand.

Sunday, 8 January 2017 - 3:03pm

Published by Matthew Davidson on Sun, 08/01/2017 - 3:03pm in

This week, I have been plagued by self-doubt and mostly reading:

  • Overt Monetary Financing – again — Bill Mitchell: From the perspective of Modern Monetary Theory (MMT), a helicopter drop is equivalent to an increase in the fiscal deficit in the sense that new financial assets are created and the net worth of the non-government sector increases. It occurs when the government uses its currency-issuing capacity (linking treasury spending to central bank operations) without matching its deficit spending with debt-issues to the non-government sector. So the central bank adds some numbers to the treasury’s bank account to match its spending plans and in return may be given treasury bonds to an equivalent value. Instead of selling debt to the private sector, the treasury simply sells it to the central bank, which then creates new funds in return. This accounting smokescreen is, of course, unnecessary. The central bank doesn’t need the offsetting asset (government debt) given that it creates the currency ‘out of thin air’. So the swapping of public debt for account credits is just an accounting convention.
  • We are not and never will be dependent on bond markets — Richard Murphy: […] no government need issue gilts at all. It has only been EU law that has required the UK to do so in recent years. It is that law which has prevented the government simply issuing new money instead at any time. […] far from investors doing the government a favour by investing in gilts the government does savers an enormous favour by letting them place funds on effective deposit at guaranteed fixed rates with the only deposit taker who will never default because they can always print more money to make sure that they will not do so. The government could, in effect, entirely avoid paying this interest but for the essential role that the government wants its bonds to play in certain key financial markets, such as the repo and pension sectors.

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