The chancellor has borrowed an unprecedented amount of money. Who is lending it to him, and where did they get it?
Sean Boyle, London

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Much of it is coming from the Bank of England (BoE) – in effect it’s printing money. This is not as bad as it seems as money has been “destroyed” by the actions necessary to address the pandemic and it is the role of government to replace it. If you want to understand this better, may I recommend The Deficit Myth by Stephanie Kelton, which explains the basis for Modern Monetary Theory. It does not mean that governments can print money regardless but it does explain how the abandonment of fixed exchange rates pegged to the gold standard has changed everything. After reading it you will understand why the UK joining the euro was a really, really, bad idea. Forlornehope

The answer is really very easy. In the last year it has been the BoE. Using quantitative easing the bank has bought, in real terms, almost all the net debt issued by the government to pay for the coronavirus crisis. The crisis has cost £400bn. Quantitative easing might turn out to be a little more or less than that in the past year. So, in other words, the government has borrowed from its own bank. And for the record, it had to do that because as data makes clear, everyone else in the economy has been saving. That’s what happens when most people cut their spending. Saving reduces the money supply by taking money out of circulation. The government had to make good that shortfall to keep the economy going. This is not rocket science, but almost no one in the Treasury and almost no politician seems to understand that this is the case. That lack of understanding is the biggest economic problem that we face. Richard Murphy, Cambridgeshire

We are the authors of a 200-page study entitled An Accounting Model of the UK Exchequer, which explores how UK government spending works in great depth. In the UK, the Crown,


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