{"id":3096,"date":"2021-09-22T16:29:00","date_gmt":"2021-09-22T15:29:00","guid":{"rendered":"https:\/\/backup.act.stringerhj.co.uk\/oldsite\/?p=3096"},"modified":"2021-10-18T19:25:40","modified_gmt":"2021-10-18T18:25:40","slug":"why-is-climate-and-nature-getting-the-short-straw-with-government-spending-2","status":"publish","type":"post","link":"https:\/\/backup.act.stringerhj.co.uk\/oldsite\/index.php\/2021\/09\/22\/why-is-climate-and-nature-getting-the-short-straw-with-government-spending-2\/","title":{"rendered":"Why are climate and nature getting the short straw with government spending?"},"content":{"rendered":"\n

2. The banks, the government, and that Money Tree<\/p>\n\n\n\n

Back in the late 1970s, after qualifying as an accountant, I went to work for a large city practice. I was told by those who had experience of them that, if I valued my will to live, I should avoid bank audits. Whilst training I had seen hundreds of clients\u2019 bank statements, for all types of account, and so felt I knew all I needed to know about banking.\u00a0\u00a0<\/p>\n\n\n\n

\"\"<\/figure><\/div>\n\n\n\n

Up until recently I believed the conventional wisdom that, when my bank lent me \u00a3500 to start my own practice back in 1981, it could only do so because it was backed up by the money sitting in the accounts of other customers. <\/p>\n\n\n\n

I received the first bank statements for my business loan and current accounts, seeing \u00a3500 credited to the latter and debited to the former, but even as a wizard bookkeeper, I never appreciated that this was the end of the story, one credit, one debit, nobody else was involved.<\/p>\n\n\n\n

Last year I watched a 2014 video on the Bank of England\u2019s website explaining that 97% of the money available to us in the economy is created by what I describe above. In other words, my bank created that \u00a3500 out of thin air and I spent it out into the economy. Then, when I finally repaid the \u00a3500 loan, the money was effectively destroyed.\u00a0<\/p>\n\n\n\n

Along with the video there was a debate in Parliament about this money creation and it turns out that, in a poll, 90% of MPs had no idea that it worked like this. Like me, they believed banks were constrained by the amount held in customers\u2019 accounts.\u00a0<\/p>\n\n\n\n

My retired auditor\u2019s brain then dug deeper and I learned that as well as high street banks being\u00a0 licenced by the Bank of England (BoE) to create this new money it too has a similar role in relation to government spending. So when the government tells the BoE to pay the NHS \u00a34bn, the bank credits the NHS\u2019s bank account with \u00a34bn and debits the Treasury\u2019s overdraft account with \u00a34bn. That\u2019s it, nothing else.<\/p>\n\n\n\n

The surprise was that this overdraft is created anew every day, the BoE doesn\u2019t turn to the Treasury and say, \u201chold on there\u2019s only \u00a33bn of taxpayers\u2019 money sitting in your account\u201d, it just spends the \u00a34bn into existence on overdraft, rather than loan.<\/p>\n\n\n\n

So, the Government instructs the BoE to create money for its own spending and commercial banks create the rest whenever they lend to anyone. <\/p>\n\n\n\n

The above view on government spending reflects a new way of looking at how governments, like the UK, who issue their own currency, control the money flowing around their economies. There are several threads but, in general, it\u2019s known as \u201cModern Monetary Theory\u201d (MMT) and this is explored further in the following pieces.<\/p>\n\n\n\n

1. Introduction<\/a><\/p>\n\n\n\n

2. The banks, the government and that Money Tree<\/p>\n\n\n\n

3. The mythical government purse<\/a><\/p>\n\n\n\n

4. Government \u201cborrowing\u201d<\/a><\/p>\n\n\n\n

5. So what is Quantitative Easing (QE)?<\/a><\/p>\n\n\n\n

6. Further reading<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

2. The banks, the government, and that Money Tree Back in the late 1970s, after qualifying as an accountant, I went to work for a large city practice. I was told by those who had experience of them that, if I valued my will to live, I should avoid bank audits. Whilst training I had […]<\/p>\n","protected":false},"author":9,"featured_media":3101,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_bbp_topic_count":0,"_bbp_reply_count":0,"_bbp_total_topic_count":0,"_bbp_total_reply_count":0,"_bbp_voice_count":0,"_bbp_anonymous_reply_count":0,"_bbp_topic_count_hidden":0,"_bbp_reply_count_hidden":0,"_bbp_forum_subforum_count":0,"footnotes":""},"categories":[63],"tags":[],"class_list":["post-3096","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-economy-and-business"],"yoast_head":"\nWhy are climate and nature getting the short straw with government spending? - Action on Climate in Teignbridge (ACT)<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/backup.act.stringerhj.co.uk\/oldsite\/index.php\/2021\/09\/22\/why-is-climate-and-nature-getting-the-short-straw-with-government-spending-2\/\" \/>\n<meta property=\"og:locale\" content=\"en_GB\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Why are climate and nature getting the short straw with government spending? - Action on Climate in Teignbridge (ACT)\" \/>\n<meta property=\"og:description\" content=\"2. The banks, the government, and that Money Tree Back in the late 1970s, after qualifying as an accountant, I went to work for a large city practice. I was told by those who had experience of them that, if I valued my will to live, I should avoid bank audits. 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