How disillusioned Labour supporters can fight back against Starmer and Reeves
Using Ravel to teach your friends how the monetary system actually works
This began as a blog post, and has turned into a book. It shows how to use the monetary modelling and data analysis tool Ravel to prove that Reeves’s "stability rule" will achieve the exact opposite of her intentions. Rather than promoting economic growth in the UK, the "stability rule" will stifle it.
The 4,000 pensioners that, according to UK Labour's own research, are likely to die because of the abolition of the winter fuel payment, will die in vain.
The ultimate cause of this madness is not UK Labour itself, nor even Starmer and Reeves, but the mainstream models of the monetary system which assert, falsely, that a government must avoid spending more than it takes back in taxation.
As well as being supported by economic theory, this idea appeals to people’s “common sense”.
If a household spends more than it earns, it must borrow money in order to cover the gap. It can do this for a while, racking up debt on which it must pay interest. If the debt gets too high, then interest payments can consume all of household income, leaving nothing for consumption. It’s prudent, in this situation, to cut back on spending, and if possible, to spend less than income so that some of the debt can be repaid.
Ipso facto, a government that continually spends more than it takes back in taxation will end up in the same situation. Therefore, a responsible government must avoid running deficits, and should sometimes spend less than it earns in taxation—as Reeves intends doing, to the tune of roughly £10 billion per year between 2027 and 2030—so that it can reduce its debt level.
Why is this common sense idea wrong? For the same reason that the “common sense” idea that the Earth is the centre of the Universe is wrong.
Look up at the sky and you will see that the Sun, Moon and stars rotate around the Earth. Therefore, the Earth must be the centre of the Universe!
Um, no: what we see is the product of the Earth spinning on its axis as it rotates the Sun.
The wrong idea that the Earth is the centre of the Universe survived for millennia, until the invention of the telescope. We need a telescope for the monetary system as well, and that telescope is Ravel.
In place of glass lenses, Ravel has the double-entry bookkeeping tool that I named a “Godley Table”. In this book, I show how to use this tool to show how most people, and mainstream economic theory, thinks the monetary system works. Households save; firms and governments borrow from households; government borrowing “crowds out” borrowing by firms, which reduces the rate of economic growth. A government that continually spends more than it taxes will ultimately face a crisis.
This model is as wrong as the Earth-centric model of the Universe. Firms and governments do not borrow from households. Instead, firms borrow from banks, and governments sell bonds to banks. With a few simple edits, you can convert this false model into a more realistic one, and the feared crisis disappears.
This book will teach you how to use Ravel to persuade your family, friends and work colleagues that the government can and should spend more than it takes back in taxation, because that is an essential step in creating “fiat” money.
If you want to help end the madness of a Labour Government freezing pensioners for “the common good”, please download this book, download Ravel as well, and use Ravel to teach others why Reeves’s and Starmer’s policies are dangerously misguided.