This is almost Murphyesque in its joy

No, really, we do think this is joyous:

This imposes real constraints on public spending. But the idea of a funding crisis is overblown.

For one thing, investor demand for government debt remains resilient, and the yields – the rates government pays to borrow money when issuing bonds – are less than they were through most of the New Labour era. If the government wanted to improve living standards, it could increase taxes and borrow to invest in local government, public housing and public transport. To try to limit the impact of an adverse bond market reaction, a supportive Bank of England could use its own balance sheet to buy up government debt itself. By increasing the demand for government bonds, yields overall could be contained.

We could borrow lots and lots of money by selling bonds as long as we didn’t sell any bonds to anyone and therefore didn’t borrow any money. You know, we’ll just print the money instead.

This is of course true which is what does make it so joyous. It is entirely possible to finance spending by printing money - the monetisation of fiscal policy. Done in moderation it can sometimes work as well for a given definition of “work”. But it does carry certain dangers, as Weimar, Zimbabwe, Venezuela et al have shown.

But that’s all complicated public policy stuff. We just do love the main assertion there. We could borrow lots of money by issuing bonds as long as we don’t actually ask anyone to buy the bonds and so lend us money. Forget Lewis Carroll here that’s getting into Richard Murphy territory.

Tim Worstall