Big Scary Numbers: Like the UK National Debt is £2,228,300,000,000

This was a claim recently on John Redwood’s blog:

One commentator made the point that this was on the high side of the true number, I think correctly, but I must admit that even the true number looks scary enough if there’s no understanding of what the National Debt actually is. So the true number isn’t really the point. Except, in words, John Redwood is claiming it to be £2.23 trillion – just in case anyone may think we don’t know what that number means.

The intelligent way to understand National Debt is to consider that it is also a store of financial assets of those who hold those assets in £ sterling. The more assets the better in some ways! But these financial assets have to match up with real assets which aren’t at all the same thing. If they don’t we can have inflationary or deflationary problems in the economy.

The underlying motivation for the use of big scary numbers is to promote the idea of economic austerity as a solution for Britain’s economic problems. If that’s what the Conservative Party wants, why don’t they advocate joining the Euro? The UK then would soon have double digit unemployment just like in most countries of the Eurozone.

The fact that it hasn’t is because the British government has its own sovereign currency. It can be much more flexible than Spain or France in its fiscal and monetary policies. That should be the key reason for wanting out of the EU. IMO.

There may have been mistakes made in the name of Keynes in the past but he’s still head and shoulders above any other 20th century economist. It makes no sense at all to throw out the baby with the bathwater and reject Keynes entirely whatever political perspective one may hold.

Besides Keynes, the economic strategists in any political party might want to look up people like Lerner, Minsky and even Milton Friedman in his early works. He somehow, over the course of his career, managed to dis-understand what he once had understood very well.

In the modern era Keynesian thinking has moved on to Post Keynesian thinking which seeks to improve on the genius of Keynes. This process is often likened to standing on the shoulders of a giant. I’d recommend economists like Bill Mitchell, Stephanie Kelton, Randall Wray, Warren Mosler, and Steve Keen. They offer a much more optimistic alternative to the economics of austerity which clearly does not work anyway. If it did Greece and the Eurozone would be in marvellous shape!

One response to “Big Scary Numbers: Like the UK National Debt is £2,228,300,000,000

  1. Good post Peter. The figures look scary because neo-libs like to fuel the fear of ‘living beyond our means’ or ‘credit card limit’, ‘budget blow-out’ and perhaps the most insidious of all; ‘intergenerational debt’. All are hoaxes designed to further the agenda of moving even more wealth to the wealthy in the vain hope of the ‘trickle down effect’ which a New Zealand politician recently accurately summed up as ‘the rich pissing on the poor.’

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