Larry Elliot of the Guardian needs to study MMT.

Larry Elliot tries to put in a good word for the recently announced Starmer bonds. That’s in a Guardian article entitled “Keir Starmer’s recovery bonds….”

Elliot’s justificaton for the bonds is that “The thinking behind them is that only a fraction of the excess savings built up during the pandemic will be spent so the rest could be doing something more useful than sitting in bank accounts.” 

The flaw in that argument is that the fact of some group of people hoarding money and doing nothing with it does not stop government and central bank creating any amount of money they want and spending it, provided (as pointed out by MMT) the amount printed and spent is not so much as to cause excess inflation. 

Moreover, as Elliot rightly says, if the above “hoarders” are to the induced to lend to government, then the rate of interest will need to be above that currently offered on government bonds. But that will tend to raise interest rates generally. I don’t see mortgagors being too thrilled at the rate of interest they have to pay on their mortgages being raised.