Christopher Gasson’s article (“The people’s money tree”, 2 July) raises some important points about the deficit financing that this Conservative government has been engaging in. However, he neglects one inconvenient truth that few economists are willing to acknowledge.
Yes, financial assets and house prices have – apart from a liquidity shock in March 2020 – continued to grow in nominal terms, but how does central bank balance sheet expansion contribute to this? Quantitative easing is the Bank of England creating base money and swapping that base money for an asset – in this case a gilt.
With central banks around the developed world simultaneously engaging in deficit financing, one might argue that what appears to be a rise in the value of these financial assets is actually a fall in the fiat currency denominator. As Keynes famously stated, “there is no subtler, no surer means of overturning the existing basis of society than to debauch the currency”.
I was interested to read Stephen Bush’s interview with Andy Burnham (Cover Story, 2 July): it pointed out something Labour should consider as part of its future strategy. It is a paradox that this government was elected on the boast of taking back power from the EU, yet within the UK it seeks to centralise power in Westminster. A progressive government should ensure that decisions are taken close to the people they affect. It is also time to consider a replacement for the House of Lords: perhaps a senate composed of representatives from the different regions of the UK, answering some of the concerns of the nationalists who feel their interests have been neglected.
In her review of Michael Pollan’s latest book (“Natural highs and lows”, 30 June) Sophie McBain unwittingly perpetuates the stereotype of “the permanently sozzled intellectuals of the Middle Ages”. The “small beer” of the Middle Ages had less than 3 per cent alcohol, and was typically drunk with a meal or simply for its calories. The process of boiling water was widely known at the time, as was the necessity of seeking clean water – which was by most accounts plentiful and often the centrepiece of a town or village.
Less is more
The answer to “From over the border” in last week’s NS Word Game (2 July) is “Scottish”. That speaks louder than all the carefully worded articles on an independent Scotland.
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This article appears in the 07 Jul 2021 issue of the New Statesman, The baby bust