In his recent budget speech, British finance minister Rishi Sunak continued to spread dangerous fiscal myths about the alleged ‘strains’ faced by the UK’s public finances and the government’s need to ‘balance its books’.
In this article I explain why such claims are completely unfounded. As a currency-issuing government, the UK government can, and indeed does, simply create the money it needs out of thin air (effectively self-financing itself). Hence, it can always make good on any promise to repay bondholders, without the need to raise taxes (or cut back spending, for that matter) to ‘pay back’ the public debt, as Sunak implies.
Thomas Fazi 