An artificial construct.

The government peddles the narrative, which Labour and other parties go along with, that the country's finances are akin to household finances. But the truth is the country cannot go bust and there is no national credit card.

We are money users, the government are money issuers (creators) and owns its own bank. The BoE is only in essence independent on paper. The government own it and the treasury holds all of its assets.

We cannot create money to pay our debt but the government can. The ability of the government to create money isn't unlimited. Creating too much will fuel inflation and overheat the economy. But the scope is very large before that happens.

Government borrowing actually pays for government expenditure. Tax is to control inflation and maintain social balance. Austerity is a political choice. The current "black hole" is also part of the narrative. For instance the calculation of the "black hole" is, among other things, based on assumptions the chancellor himself controls and has set. If instead of using the assumption we will "pay it back" over 5 yrs he say changes that to 10 the "black hole" shrinks massively.

The household narrative is one way to look at government finance; another is MMT (Modern Money Theory) , some of which I have illustrated here.

I took a step back from the government financial/ economic narrative to look at it through MMT.

What if we take a further step back? The arguments between the household finance narrative and MMT are part of a bigger picture.

The financial system/economy are, as they would say in The Matrix, an artificial construct. They are man made. As such we have full control over them. With enough collective will we can do as we please with them. We could end poverty and hunger. Tackle climate change etc. 

Two reasons we don't - Power and control. 

Just my crazy thoughts on a small piece of this crazy world.