Martin Wolf claims “We can only cut debt by borrowing”.

In an article in the Financial Times with the above title, Martin Wolf claims that the currently excessive unemployment is partially “paradox of thrift” unemployment. The solution, as he rightly points out, is for government to supply households with more cash so that households no longer feel poor, or no longer feel they have cash flow problems.

Unfortunately Wolf claims this additional cash can only come from extra government borrowing. That claim is implicit in the title of the article and is spelled out in more detail in the last four paras.

Well as Mugabwe has worked out, governments can simply print money: there is no need for additional government debt. Governments can either physically print money (i.e. produce extra dollar bills, pound notes, etc) or they can do the same thing with book keeping entries, or with cheque books, etc.


Stop press – Martin Wolf moves closer to Modern Monetary Theory (MMT).

A few days after the above article (published on 26th Sept), another one (1st Oct) by Wolf suggests stimulus should take the form of a National Insurance contribution cut, funded by the government borrowing from the Bank of England. Well the latter is plain old money printing, assuming the bank does not sell the relevant bonds on the open market. See in particular the final three paragraphs of the article.

Now that is all very similar to Warren Mosler’s proposed payroll tax cut funded by new money. (National Insurance contribution in the U.K. is a payroll tax supposed to fund social security.)