Economic Impact Of Coronavirus.

[morganist]

I had a report published at the Treasury Select Committee Economic Impact Of Coronavirus Inquiry. You can view the report for free at the link below.

You will have to scroll down to the report, the details are below.

EIC0912 - Economic impact of coronavirus
Witnesses Mr Peter James Rhys Morgan (Maroeconomist at PJR Morgan)
Committees Treasury Committee

The link to the report is below.

https://committees.parliament.uk/wo...navirus/publications/written-evidence/?page=3

 

[Turveyd]

Good job we can solve all the worlds issues, by playing around the pension fund.

WW3 no problem, just tweak the pensions.

 

[morganist]

Good job we can solve all the worlds issues, by playing around the pension fund.

WW3 no problem, just tweak the pensions.

There is a central banking economic control technique called Qualitative Easing, which can increase economic growth by changing the composition of the assets on a central banks balance sheet. There is a missed opportunity to make pension fund investments more effective at stimulating economic growth by changing their composition, this can be achieved easily and can even make the pension investments more stable and provide a stronger return. This is a huge opportunity for the economy to grow, which in turn can reduce the government debt as a percentage of GDP preventing the need to increase taxation to repay the debt.

 

[Turveyd]

There is a central banking economic control technique called Qualitative Easing, which can increase economic growth by changing the composition of the assets on a central banks balance sheet. There is a missed opportunity to make pension fund investments more effective at stimulating economic growth by changing their composition, this can be achieved easily and can even make the pension investments more stable and provide a stronger return. This is a huge opportunity for the economy to grow, which in turn can reduce the government debt as a percentage of GDP preventing the need to increase taxation to repay the debt.

Do you ever give any none pension related economic advice?

 

[morganist]

Do you ever give any none pension related economic advice?

Yes Plenty, it is just changing the way people pay into their pensions is the easiest and least consequential way to control an economy and encourage economic growth. I have another area of economics that I have developed that uses taxation exemptions for secondary or additional occupations to generate further growth in the economy. I also work on taxation efficiencies and new product development, which in itself can generate further economic growth.

 

[piezoe]

There is a central banking economic control technique called Qualitative Easing, which can increase economic growth by changing the composition of the assets on a central banks balance sheet. There is a missed opportunity to make pension fund investments more effective at stimulating economic growth by changing their composition, this can be achieved easily and can even make the pension investments more stable and provide a stronger return. This is a huge opportunity for the economy to grow, which in turn can reduce the government debt as a percentage of GDP preventing the need to increase taxation to repay the debt.

You are still struggling with the idea that government finances are somehow like personal finances. They are not of course. And what's called government "debt" in a fiat money regime has nothing in common with private debt. Government debt, when it is properly managed -- which is the key -- never has to be paid off, nor should it be. Government "debt" in a fiat money regime is simply the net balance of money created and spent into the private sector minus the money removed from the private sector by taxation. Governments that generate sovereign currency out of their nations productivity can not, by definition, go bankrupt. They can only mis- or properly- manage money. It would be better if we stopped calling it "debt," which it is not, and started calling it the net deficit. And even there we need a better word to avoid misunderstandings among the public.

A better term would be "net money creation," and that might be best defined as the money created beyond what is supported by net GDP growth plus the need for private savings and investment. Defined that way, the net money created would, ideally, average over two-decade long periods, mostly reasonable positive values relative to the size of an economy, occasionally dip toward smaller positive values for brief periods, and then return to more reasonable positive values. Naturally, as an economy matures, "net money creation" would be expected to decline somewhat in growth rate.

 

[piezoe]

I wish to make a slight correction on what I wrote above. What I called "net money creation" might perhaps be better defined as simply the same as what we now call the deficit. Then the deficit minus the net sum of money creation consistent with GDP growth plus that desired for public savings would represent excess money creation. Here I am strictly referring to what may be termed outside money, and not money created via credit, which is inside money.

 

[morganist]

I wish to make a slight correction on what I wrote above. What I called "net money creation" might perhaps be better defined as simply the same as what we now call the deficit. Then the deficit minus the net sum of money creation consistent with GDP growth plus that desired for public savings would represent excess money creation. Here I am strictly referring to what may be termed outside money, and not money created via credit, which is inside money.

Your statements makes me think you have not read the report. You also seems to think economic growth is purely about money in circulation and not about producing more goods and output. My point is you can outgrow the government debt by increasing economic growth at a greater rate than borrowing, which will shrink the government debt as a percentage of GDP without having to repay anything. However there has to be an equivalent increase in goods and services within the economy to make the increase in the money supply worth anything, otherwise you just get inflation.

In terms of your position of good management of the government debt, if inflation increases the interest on Index Linked Gilts rises and the government debt spirals out of control. The same is true if the interest rate increases because the Treasury Gilt interest rate has to compete with the interest rate so the coupon payments will rise if the interest rate grows too much. In the United Kingdom over the last decade the pension saving rate and pension reform have been implemented to control inflation instead of increasing the interest rate. This saves lots of money by stopping the cost of the government debt interest payments from rising.

The agenda behind the report was to explain how the United Kingdom has become more vulnerable to an increase in inflation and the interest rate due to the increase in the size of the government debt. If either inflation or the interest rate rise with the new 100% plus of GDP government debt the interest payments will spiral out of control. This can be managed by using pension saving, which is cheaper and less consequential than either monetary or fiscal policies. The other aspect of the report is the ability to stimulate economic growth by using pension economic control instead of monetary or fiscal policies that have become constrained.

There is massive opportunity to make billions of pounds of saving per annum through using pension economic control by prevent the government debt interest payments from rising. There is also the opportunity to make billions of pounds of additional economic growth per annun by using pension economic control, in particular by using monthly pension economic control rather than the interest rate and by the introduction of 'Pension Fund Easing' which has previously not been utilised. With the higher government debt monetary and fiscal policies have become more expensive, less effective and more damaging than before the pandemic.

 

[piezoe]

You also seems to think economic growth is purely about money in circulation and not about producing more goods and output. My point is you can outgrow the government debt by increasing economic growth at a greater rate than borrowing, which will shrink the government debt as a percentage of GDP without having to repay anything. However there has to be an equivalent increase in goods and services within the economy to make the increase in the money supply worth anything, otherwise you just get inflation.

No, I don't think " economic growth is purely about money in circulation" and no economist would make that claim. That would be ridiculous.

Other than the mischaracterization of what I think, I can almost agree with what you've written in the above paragraph which I quoted. However there is still a key misunderstanding on your part. I suggest you start calling the government debt the "deficit". That will help you keep your thinking clear. The concept of debt, as you personally know it, does not exist for a government that is the source of it's own sovereign, fiat currency. Instead you should think in terms of the amount of money created by government and spent into the economy minus the amount of money taxed back out of the economy. That difference , if it is positive, is the deficit. If it's negative it is the surplus. The government's difficult job if to balance the deficits and surpluses against the need for money in the economy. Your conception of "shrink[ing] the 'government debt' as a percentage of GDP without having to repay anything" is stemming from a misconception that the government has debt. The government, yours and mine, does not have debt.* It has deficits. The deficits can be too small or two large depending on how well they balance with the needs of the economy.

By growing GDP without increasing the deficit proportionally one can reduce excess deficit. The government can also do this with a correctly focused tax increase. And a third way of doing this temporarily also exists. And that is by substituting Treasury liabilities for excess outside money, i.e., selling sovereign bonds. These three methods are not perfect equivalents however.

Your confusion partly stems from your belief that governments borrow deficits by selling bonds. Although this does have the appearance of borrowing, it is actually something quite different. Think of sovereign bond selling into the private sector as the temporary sidetracking of excess money in the economy by substituting future treasury liabilities, and you will be on the right track. Thus sovereign bonds are a tools of Central Banks. They also serve the important purpose of being an interest paying temporary store of money that otherwise would lose buying power due to inflation.

___________________
*I am aware that politicians regularly refer to "government debt" . They have no better understanding of fiat money than you.

 

[morganist]

No, I don't think " economic growth is purely about money in circulation" and no economist would make that claim. That would be ridiculous.

Other than the mischaracterization of what I think, I can almost agree with what you've written in the above paragraph which I quoted. However there is still a key misunderstanding on your part. I suggest you start calling the government debt the "deficit". That will help you keep your thinking clear. The concept of debt, as you personally know it, does not exist for a government that is the source of it's own sovereign, fiat currency. Instead you should think in terms of the amount of money created by government and spent into the economy minus the amount of money taxed back out of the economy. That difference , if it is positive, is the deficit. If it's negative it is the surplus. The government's difficult job if to balance the deficits and surpluses against the need for money in the economy. Your conception of "shrink[ing] the 'government debt' as a percentage of GDP without having to repay anything" is stemming from a misconception that the government has debt. The government, yours and mine, does not have debt.* It has deficits. The deficits can be too small or two large depending on how well they balance with the needs of the economy.

By growing GDP without increasing the deficit proportionally one can reduce excess deficit. The government can also do this with a correctly focused tax increase. And a third way of doing this temporarily also exists. And that is by substituting Treasury liabilities for excess outside money, i.e., selling sovereign bonds. These three methods are not perfect equivalents however.

Your confusion partly stems from your belief that governments borrow deficits by selling bonds. Although this does have the appearance of borrowing, it is actually something quite different. Think of sovereign bond selling into the private sector as the temporary sidetracking of excess money in the economy by substituting future treasury liabilities, and you will be on the right track. Thus sovereign bonds are a tools of Central Banks. They also serve the important purpose of being an interest paying temporary store of money that otherwise would lose buying power due to inflation.

___________________
*I am aware that politicians regularly refer to "government debt" . They have no better understanding of fiat money than you.

I think you have made a massive mistake in what your view of money or currency is. You seem to think it is something that a government can issue that is backed by tax receipts, rather than a commodity in its own right that is traded on an exchange. Your view of fiat money is the value is based on the issuance of the government and the future taxation income and that there is some kind of balance between these two key factors. The reality is the money or currency is a commodity and the supply is limited to maintain its value on the internationally traded Forex Exchange, it also has to maintain its value in domestic trades when used to purchase goods. The increase in the issuance of the money supply is not merely a case of issuing more money and balancing its value through taxation changes or monetary policy, but one of managing the supply of an internationally traded commodity which reacts to various market forces.

In terms of your comments above, even following your position on what money or currency is or what government debt or the deficit is, my suggestion of outgrowing the government debt or deficit to shrink it as a percentage of GDP is still a good strategy. Also my methodology of using pension reform and pension fund easing is also a good way of implementing the high economic growth strategy because both monetary and fiscal policy are constrained. When pension reform is introduced especially pension fund easing little changes apart from the composition of the assets held on an investment portfolio and in most cases it makes the investment portfolio more secure. If pension economic control is used the government can still take in the same rate of revenue and not have to reduce interest rates further (assuming they can). This means it can keep government spending at the same rate and maintain government services. Pension economic control is the painless option.