Tuesday, 19 March 2013

Balancing the budget and the magic money tree

Roahld Dahl is one of the worlds most celebrated authors of books for children; his books are renowned as funny and original. A fact often forgotten by adults who leave Dahl behind in their childhood is that he is a bitingly accurate satirist. The following excerpt from Charlie and the Great Glass Elevator is testament to this. To set the scene, Willy Wonka, Charlie and the bucket family are in space flying towards the International Space Station, the world does not know that this strange space craft is Wonka’s Glass Elevator and think that an alien ship is about to make contact:

In his study in the White House sat Lancelot R. Gilligrass, President of the United States of America, the most powerful man on Earth. In this moment of crisis, all his most important advisers had been summoned urgently to his presence, and there they all were now, following closely on the giant television screen every move made by this dangerous-looking glass capsule and its eight desperate-looking astronauts. The entire Cabinet was present. The Chief of the Army was there, together with four other generals. There was the Chief of the Navy and the Chief of the Air Force and a sword-swallower from Afghanistan, who was the President's best friend. There was the President's Chief Financial Adviser, who was standing in the middle of the room trying to balance the budget on top of his head, but it kept falling off.

I of course mention this today because Osborne is to deliver his budget tomorrow. Osborne famously believes in “balancing the budget”. The notion of balancing the books for a national economy is spurious at best and deceitful at worst. Like many other concepts in national politics it is a purely political construct. In overseeing the economy of a nation with a sovereign currency Osborne as the ability to both set rates of taxation and to create money. This can be explained by MMT; no not a Magic Money Tree but Modern Monetary Theory. A theory of economics that I would like to explore further in the future.

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