If there’s one question a politician fears being asked, it is this one. After announcing a decision to undertake a bold new and expensive development project, the question always arises, “How are you going to pay for it?”
It shouldn’t be a horror moment for politicians, but it is, and the reason is simple. They are afraid to be caught out. Such is the millstone they have tied themselves to, over the years, trying to discredit their opposition, or portray themselves as fiscally responsible. In the process, they have shot themselves in the foot because they don’t understand how sovereign money works.
Therefore, in the interests of common sense and as a means of bringing an end to the foolishness that is endemic within this charade we call our parliamentary system, here is a prepared script for politicians to study which should help them to manage the, “How are you going to pay for it,” all fearing, all threatening, career ending, monster question, when being interviewed by a journalist.
Beginning of interview:
Journalist: And how are you going to pay for it?
Politician: We will pay for it the same way we have always paid for it. By crediting the bank account of the recipient.
Journalist: But how can you do that if there is no money in your account?
Politician: We create the money. There is always money in our account.
Journalist: Until you run out of it, or have to borrow, you mean.
Politician: No, we don’t need to borrow money, we create it. We can’t ever run out of it.
Journalist: But how is that possible?
Politician: We use computers, just like you do. Do you use internet banking?
Journalist: Yes, but I can only do that if I have money in my account.
Politician: That’s right, because you are the currency user. The government is the currency issuer.
Journalist: But you still must have the money.
Politician: No, we don’t. What part of, “we are the currency issuer,” don’t you understand?
Journalist: I’m confused. Are you saying a government doesn’t need to raise revenue to spend?
Politician: I understand your confusion. It sounds a bit fishy, but a sovereign government who issues its own currency doesn’t need to raise revenue to spend.
Journalist: But you need taxation revenue to spend?
Politician: Not for spending we don’t.
Journalist: I don’t get it. You seem to be advocating printing limitless amounts of money. Isn’t that what Mugabe did?
Politician: No, it’s not what I am advocating, and it’s not what Mugabe did. Firstly, we don’t print money anymore. It’s all done via electronic interbank transfers. Secondly, Mugabe wrecked his country’s economy by systematically destroying its resources, not by spending.
Journalist: What about Argentina?
Politician: Argentina foolishly borrowed foreign currency and then wasted it.
Journalist: Venezuela then?
Politician: Sheer incompetence, again, by using another country’s currency.
Journalist: But if we just create money what’s stopping us from doing the same as they did?
Politician: We don’t ‘just create money.’ It’s not about the money, it’s about how we use it. If we use it to engage our workforce and produce meaningful goods and services, the kind of things people here and overseas want to buy, we strengthen our economy, unlike those countries you mention, who failed to use their natural resources, and failed to use their own currency.
Journalist: But surely there is a limit to what we can spend?
Politician: There are always limits, but they are resource related limits, not money limits. We can’t spend if there’s nothing to buy. We must produce before we can buy. So, logically, we must issue the money to get our workforce into jobs and manufacture things we need to live and to prosper.
Journalist: All this seems to contradict any need for the government to produce an annual budget that shows how much they will spend, how much they expect to receive in taxation, how much they need to borrow, to make up the difference, that sort of thing.
Politician: Yes, it does seem that way, but that’s a political choice. We do that to keep the accountants happy and to have you believe that running a government is the same as running a household or a company. It isn’t. Households and companies are different. They can’t create money. They can only use money. Only sovereign governments can create money. But keeping books that show spending versus revenue, makes it easier for us to say we can’t afford it and stuff like that. God help us! We can’t have you think we can work miracles.
Journalist: Then why bother with taxation?
Politician: That’s a great question. We do need to tax, but you are confused enough already. We’ll leave that for another day. There is a limit to what you can absorb in one sitting. Best we schedule another interview where we can cover that issue separately.
End of interview.
Don’t be surprised if, after the interview, the journalist returns to the office and pens tomorrow morning’s headline, “Politician says government is money machine, Taxation unnecessary. Hyperinflation imminent.”