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A Hidden Road To Recovery? What Was That Magic Money Tree?

A big question how to make money online hangs over the background as lockdown measures are eased, Guest Posting workers return to work and retailers reopen their doors.

How will we pay for this all?

It is of course the expensive policies that were put in place to support the UK’s economy after the Covid-19 pandemic. These include the furlough system, grants for small businesses, bounceback loans and payments made by self-employed individuals.

It is a conventional belief that in order to tackle the massive debt pile which has grown over the past months, either taxes or public spending must be significantly increased.

The Observer has published, for instance, an article on July 11, 2020 by David Gauke. The title of the piece was ‘Tax increases and reductions are only ways to pay Covid-19.

Gauke wrote that “Once the economic shock is over, the government must fill the gap by increasing taxes or cutting spending.”

The BBC published an article entitled ‘Coronavirus 2020: How much it will cost the UK.’ It concluded that, “The deficit is forcing the government to choose between increasing borrowings, raising taxes, and cutting spending.”

Conventional wisdom, however, is often incomplete, or completely wrong. It used to be conventional wisdom, for instance, that the Sun and not Earth was the central point of our solar system.

Unreliable conventional wisdom is once again surfacing in relation to the recovery post-Covid-19.

How to Make Money… Quite Literally

Remember that the money we use is an artificial construct.

The human society has created all these currencies, whether it is the Pound, Euro, Dollar, or any other currency, to help facilitate trade of valuable goods and services.

The Royal Mint prints the notes and coins.

The truth is, this only applies to an extremely small percentage.

Commercial banks (e.g. HSBC NatWest Santander are all commercial banks that offer loans to their clients.

The Bank of England published a bulletin in 2014 entitled Money Creation in the Modern Economy. It stated it very clearly. Their exact words were:

How does money get made? The majority of money today is in bank deposits. They are created primarily by commercial banks lending money. Each time a bank creates a new deposit, this is how they produce more money. This is a different description than the one found in many economics textbooks.