TIMING is everything. A month from the UK Budget day, understanding "fiscal space" and made-up terms like "fiscal black holes" has never been more critical.

As Labour politicians continually search for a variety of ways to say “no pain, no gain”, they continue to tighten the screw of austerity. The message since coming to office has not changed: “The Tories left a mess and a ‘black hole’, public finances have nevre been in such a state, and it is up to Labour to save us all! Oh, you must to do your part, but only if you are poor." I think that about sums it up.

Austerity is a political choice

As we have been writing for over a year in this newsletter, the UK Government, as the issuer of the UK pound, can never run out of money. They can afford whatever is priced in pounds. There is never a problem finding the money. This leads to a natural and painful conclusion: Continuing austerity policies is a political choice.

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Of course we are not alone in banging the drum for MMT, and it is encouraging to see Modern Monetary Theory getting some traction in the UK. On October 3, 250 people will attend a sold-out screening of the Modern Monetary Theory film Finding The Money at University College London. I will chair the panel that follows the screening, which will include Zack Polanski, the deputy leader of the Green Party in England and Wales.

The film received its UK debut at our event in Leith the day before the start of our Festival of Economics in March. So, six months on, why is there this level of interest?

Let's be honest. The film's central topic, the monetary operations of a sovereign nation (the US), is hardly blockbuster stuff. It’s not the normal content that sells out theatres. However, the process of money creation is only a canvas on which the rest of the film is painted. The packed theatres are a testament to the storytelling ability of the film’s producer, Maren Poitres.

The general public's interest in MMT (an up until recently very obscure fringe school of economics) can be traced back to the release of Stephanie Kelton's New York Times Best-Selling book The Deficit Myth, published in 2020. Its success marked a step change in interest in MMT.

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Since the book's release and Stephanie’s many public appearances (with the totally bizarre lack of engagement from the UK media) MMT has become mainstream. Well, in the sense that every single mainstream economist has at least made a statement about it. Here is one such exchange on X as James Galbraith explains MMT to the neoclassical economist Kenneth Rogoff, one of the "fathers of austerity".

The growing interest in MMT is not because more people have become interested in "monetary operations" per se; but an understanding of MMT has enabled people to see behind the curtain of how money is actually created.

When you understand that neither taxes nor bonds fund government expenditures for countries that create their own currency, the full range of available policy choices becomes apparent. This is the true power of using the descriptive MMT lens.

This shift in the Overton window makes a big difference and will, for example, enable people to better judge the decisions the current Labour Government will make at the end of the month.

Budget day looks very different when you understand how the Government actually finds the money (it creates it with a few keystrokes). The mainstream still doesn’t get MMT and clings to the strawman description of it. But they find it harder to hide "the money question", as Kelton calls it in Finding The Money. That question is: If monetary sovereign governments create currency, why can’t we have good public services and infrastructure and solve the ecological crisis?

Clinging to false analogies, mainstream politicians and economists find it harder to defend conventional wisdom.

Finding the money

Once people realise that "finding the money" is easy in nations that issue the currency they use, they can see that certain policy choices - like cutting welfare or paying high interest rates on government debt - are policy choices, not economic necessities. The more people are exposed to MMT, the more governments get hot under the collar.

This week's great news is that Maren Poitras's Finding The Money is now available to stream on Vimeo in the UK. The film website has all of the details.

The film includes some truly jaw-dropping interviews with mainstream economists who clearly do not understand the monetary system. It would be funny if it weren’t so serious. This misunderstanding leads to austerity.

If you can hold off streaming the film until 8pm on Friday, why not watch the film as part of our Watch Party on X? Join us by following Scotonomics and using the hashtag #FindingTheMoneyUK. As timing is everything, the panel discussion following the showing in London will be available to everyone on our YouTube channel well before Budget day.

The mistakes Labour will make at the next Budget will be even clearer after watching the film.