Hello all
I’m a newcomer here. I’m writing an article about money that supports our knowledge and views and I have a couple of questions so I’d be grateful for your thoughts and clarification.
Does the bank fractional reserve system that operates in the UK differ in any significant way to how it operates in the USA? My understanding is that the two systems function almost identically. Is that correct?
Can the total money supply be less than the total government, company, personal and bank debts? My understanding is that UK indebtedness comprises:
Government National Debt £1,000 billion*1
Personal Household Debt £1,500 billion
Company Debt £500 billion
Interbank Debt £1,000 billion
Total Debt £4,000 billion
*1 March 2010 = £1,000.4 million
My confusion stems from the reported difference between the value of the money supply that is reported to be £2,500 billion and the total debt figure that is £4,000 billion. As we know MONEY = DEBT so how does this difference arise? Is the value of the money supply misreported (most likely) or has the debt been revalued to reflect the diminished value of assets that support it? Revaluation of that scale appears, at least on the face of it, unlikely.
The extent of indebtedness is mind-boggling. It’s equivalent to every man, woman and child in the UK carrying a little under £65,000 debt each.
Another point of academic interest, which has become the subject of major political “BS” is what has given rise to the deficit in public expenditure accounts. The facts are these: In the five years prior to the financial crash, exchequer receipts from taxation rose at an average rate year on year of 6.8% per annum (HMRC statistics). In the two years following the crash, they fell by 2.7% and 9.6% respectively. The public expenditure deficit is circa £160 billion. Had the growth in exchequer receipts been sustained at its prior five-year run-rate then the deficit would have been reduced by £117 billion giving a net deficit approximately equivalent to £43 billion. £43 billion is roughly the same amount as the deficit before the “crash”.
My point is that to attribute the increased deficit to the failure of the previous government or a public sector run out of control is a complete fallacy. The failure is in the financial system, nothing more, nothing less. It’s an ideological red herring that provides government with an opportunity to justify its raison d’être by focusing on that over which it has power, the establishment of budgets, since it cannot exert influence or power over the cause of the problem that is international economic failure of our monetary and financial systems.
Thanks for your help. I’ll keep you informed on the progress of my article but for the time being, I’m working on verifying my facts and assumptions…just as one would using the scientific method!
Best wishes,
Geoff