Moonshot moonshine: Boris Johnson’s magic money tree is growing out of control

This week, we learned in a leaked government document approved by Boris Johnson that the cost of an ongoing “Moonshot” programme aimed at testing everybody in the UK for coronavirus would be £100 billion ($130 billion).

As a point of reference, the entire cost of the eleven-year-long US Apollo space programme, which culminated in the first Moon landing on July 20, 1969, was $25.4bn, equivalent to $152bn in today’s money. The United States has five times the population of the UK. Its GDP is seven times larger. And the Apollo programme was one of America’s biggest and most historic scientific and engineering achievements.

On a per capita basis, the cost of putting US astronauts on the Moon was (allowing for inflation and a rising US population) something like $450. By contrast, the projected cost per head of finding out who has and who has not contracted Covid-19 in the UK will come to more like $1,900.

Things cost what they cost, and always assuming the testing makes sense there can be no short-changing the British people when it comes to keeping them alive and well. But as the Daleks used to say in Doctor Who, this does not compute.

Where will this massive pot of Moonshot money come from, and if it is available now, where was it last year and during the ten years before that? In the run-up to the coronavirus crisis, Britain was just starting to emerge from a full decade of austerity, in which, in order to keep the national debt from “spiralling out of control,” every departmental budget, bar none, was systematically cut. Since then, the Tories have become like 1960s Pools winners. It’s spend, spend, spend, with no end in sight.

So will the Moonshot be funded by moonshine?

According to the Institute for Fiscal Studies, reporting in May, the Government needed to borrow £200bn more this year than it had previously anticipated to cope with the health crisis and its associated economic dislocation. And that was before the Prime Minister got his Moonshot onto the launchpad. The result is likely to be a debt-to-GDP ratio running close to 100 per cent, up from the 2019 level of around 83 per cent.

It is obviously the case that national governments have to borrow large sums of money on a regular basis. They take out loans by the shipload and repay them, with interest, over the subsequent 30 years, during which time they continue to borrow, in part to repay previous loans. The pattern is that there is always more owing than repaid, with the total volume of debt increasing over the years. Left and Right both understand this.

The trick (the hope) is that the cost of borrowing will be more than offset by the positive impact of the cash injection. The bet, especially now, with interest rates at an historic low, is that the loan will end up paying for itself.

It’s cake and eat it all over again. You got it, you sell it, you still got it.

Governments don’t borrow in the way that individuals do. “Lend us a tenner and I’ll get it back to you at the end of the week” is not the template employed by HM Treasury. Government bonds – gilts – are the established means of exchange, with the results visible only in digital form on the Governor of the Bank of England’s computer screen.

Among millennials, there are two widely-held views. The first is that money does not exist. It is a concept, not a reality (though in that case, why are we not all rich?). The other is that, contrary to the assurances given by the Cameron and May governments, there is in fact a magic money tree, indeed a forest of such trees, controlled by “the markets”.

These trees, once shaken, deliver cash on demand. They are always ready to be harvested. At no point do the markets say, “Sorry, mate, but we’re clean out. The Italians took our last billion and that’s it until next year”.

The reality is that there are mega-banks and hedge funds and sovereign wealth funds, as well, these days, as multi-billionaires like Amazon’s Jeff Bezos, who between them supply the money that makes the world go round.

But does this not suggest that governments and, more importantly, the bulk of their citizens are only in charge of a small portion of the world’s wealth and that in fact, as was always claimed by Marx (kept in readies by his rich pal Engels), it is the likes of Bezos and his pals who are the actual masters of the universe?

Rishi Sunak will not be calling up David Solomon, the chairman and CEO of Goldman Sachs, to ask if he can borrow a hundred billion dollars until Friday. Instead, Sunak and his colleagues, via the Bank and the City of London, will be inviting “the markets” to subscribe to yet another tranche of gilts, priced at this, with a coupon at that and a maturity date set for some time after his retirement.

But that’s how the system works. It will go on forever, or until the Sun explodes five billion years from now, at which point – and not before then – all bets will be forgiven.

The good news, even if it seems to defy common sense, is that there is enough for everybody. Indeed, more than enough. Far from being scraped, the barrel is overflowing with easy credit, at the moment.  The markets are the gift that keeps on giving, for now. If the world needs to borrow ten trillion dollars to make up for the fact that the world is skint, the markets – evidently not of this world – are ready to roll. A hundred billion for the UK? No bother. The same for France? Don’t worry about it. Greece going bankrupt? Take fifteen billion on account.

How fortunate are we that the magic money tree turns out not to be a fairy tale after all?

Yes, but what alternative is there? Desperate times require desperate measures. Isn’t that what they say? There was no magic money tree when Jeremy Corbyn promised a substantial increase in government spending. But that’s because Corbyn was an idiot.

Now, on Boris Johnson’s watch, there is, and it’s ripe with low-hanging fruit. Illusion has become the new reality, in which, as with credit default swaps back in 2008, we seek to rationalise the inexplicable. Either that or we are waking up to the bizarre possibility that the world isn’t borrowing from itself – surely a logical impossibility – but that those extending the rescue and recovery loans we so desperately need live on a different planet.

But we are all lunatics now. Today the Moon, tomorrow Mars, thereafter to infinity and beyond. The fact of the matter is that trillions of dollars have suddenly become available to the world’s governments that previously were deemed not to exist. Not only that, but those tending the charmed forest, situated perhaps in the Sea of Tranquillity, expect to end up with more money than ever. It’s heads they win, tails they win again. They count in billions. Our ISAs are their loose change.

Perhaps the truth is that money really is a deception, practised by financial wizards trained in the dark arts. If so, maybe it’s time the rest of us were let in on the game.