And yes, idiot is idiot

Now let’s look at what that means for a minute. What are the market conditions for PFI, for example? I would suggest that the clearest indicator is that when valuing the future net earnings due from these contracts (which is the only reasonable way in which such value might be determined) the appropriate discount rate to be used should be that implicit in the original PFI contract. After all, that would be reasonable; this is what can be called an ‘arm’s length term’ i.e one set by independent contracting parties that was thought fair.

These discount rates (which effectively set the rate of return in the contract) were often quite high because it was supposed that quite large amounts of risk were transferred to the private sector when these contracts were issued (even though this rarely seems to have been the case in practice). This risk transfer was, after all, the whole reason for PFI and formed the supposed justification for the higher returns payable under this scheme than the equivalent government debt would cost. Given that this risk must still exist, because it would be unreasonable to presume they disappear when the contract was signed , then I think this argument can hold true. And it is this risk factor that should equate why, in a rational market, the higher return on PFI produces a yield that is no more attractive, despite that higher sums apparently earned, than is payable on government bonds, with which John McDonnell is proposing that the contracts be bought out.

Well, no. Because a PFI contract comes in two parts.

Building something and then maintaining it.

The building it is the risky part, once it has been built it’s less risky. That initial discount rate will cover the risks of both parts of the contract.


Err, yes

It’s easy to attack the person and not the idea. I see the right doing it all the time, but I am certain the left is not exempt. And Laura Kuenssberg has suffered. You may not like her. You may not like her opinion. You may not like the BBC. And you can say all three. That’s fair. But as for personal attacks, they’re way out of bounds.

I am not saying I always get everything right: far from it. But when people accuse me (usually but not always from the right) of censoring this blog what they’re actually saying is I keep those who abuse off it. Damned right I do. And I have every intention of continuing to do so.

Keeping the comments which show what an idiot I am off my blog is exactly the same as a BBC reporter needing a bodyguard at a political party conference.

Candidly, it is.

You know? This is why we get government to pay for research

The US transgender activist Riki Wilchins told Today there had been a strong political undercurrent in previous studies, which had been used to restrict transgender people’s access to surgery.

“So when I see one more study that aims to show transgender people really don’t need this or want this, or they are just deluded or suffering from some other kind of psychopathology, I look at it a little bit warily … The problem is not the study itself, it’s the uses to which that study is put,” she said.

Wilchins said a “very small fraction” of people decide to detransition. “I’m not trying to say it’s not a fraught experience for them, or that it should not be studied. But it’s not the first place I would put my money if I wanted to study the problems afflicting transgender people,” she said.

So that what gets studied is not determined by what you would do with your own money.

Sure, I too agree that the world would probably be a better place if there were rather more of it where we spent our money as we wish rather than having the tax leeches doing it for us. But that is still true, that the very argument for government financing is so that your, or my, prejudices and desires don’t influence what is researched.


Should we ban sex robots while we have the chance?
Jenny Kleeman

From our ever popular series, Questions in Guardian headlines we can answer.

If men (and it will be men – even the few male sex dolls produced by Abyss Creations every year are generally shipped to male customers) become used to having sex with synthetic companions that are programmed to meet their most precise specifications, how will they then interact with real women who have the inconvenience of having their own idiosyncrasies and free will?

Perhaps the most important question to ask is why there is a market for sex robots in the first place. Why do some people find the idea of a partner without autonomy so attractive?

Dunno love but if it’s modern men refusing to have sex with modern women then I’d probably start my investigation by asking what is it about modern women driving the refusal?

Interesting Paul most interesting

Until the centre-left learns to break with the logic of neoliberalism, and to construct an economic model that subordinates market forces to human needs, it will continue failing.

People have been trying this for a few centuries now, No one’s found one. Got any ideas?

No, real ideas, how you’re going to replace what markets do, not some cheap rhetoric.

Sadly, this isn’t going to work, is it?

National Grid will be able to tell people the cheapest time to turn on a washing machine up to two days in advance.

New software, developed with conservation charity WWF, breaks the day down into two-hour segments, warning users when energy is at peak demand and informing them when demand is low.

It combines historical data from the grid with weather information from the Met Office to predict times of high and low demand.

The National Grid said it expected energy companies to use the information to produce their own apps encouraging customers to use energy when demand was at its lowest and turn appliances off when there was pressure on the system.

Because it is the balance of supply and demand which matters. And we can’t forecast wind and solar 48 hours ahead…..

Blame Canada!

Chelsea Manning, a former American soldier jailed for leaking troves of classified information, said on Monday that she was banned from entering Canada due to criminal convictions in the United States.

Manning had tried to cross at the official border office at Lacolle, Quebec, on Friday. On Monday, she posted a letter from Canadian immigration officials to her Twitter account that said she was not admitted because she was convicted of offences deemed equivalent to treason in Canada.

“So, I guess Canada has permanently banned me? Denied entry b/c of convictions similar to “treason” offence,” she wrote.

The document said that Manning had committed a crime outside the country that “would equate to an indictable offence, namely treason” in Canada and which carries a maximum sentence of 14 years imprisonment.

Committing a crime elsewhere that would carry a maximum sentence of at least 10 years in Canada is grounds for a person to be denied entry, the document said.

My guess is that he knew this. But hey, gotta keep in the headlines, eh?

A short guide to why there isn’t a useful Magic Money Tree

Simon Carr at the Oldie, among others, seems mystified as to why we can have quantitative easing – which appears to be a magic money tree – and yet not a magic money tree to pay for everything that John McDonnell wants to buy to bribe the electorate. Another way of putting this question is, well then, why won’t Corbynomics, or Peoples’ Quantitative Easing (to use Richard Murphy’s name for this) work then?

One answer being that Richard Murphy is a retired accountant from Wandsworth not an economist. That seems to be insufficient reasoning to some even though McDonnell himself has been distinctly less than complimentary about Murphy’s economic knowledge.

Another possible answer is that this is important so you’d better go find out Carr. After all, as you say, an election could hinge upon this and in a democracy it’s the voters who have to get up to speed on this stuff. It’s our job to understand who is lying to us and who is not. You know, we’re the citizenry making the decision and all that.

At which point, the economics of this in baby steps.

The Magic Money Tree is the idea that the government can just print lots of money and then go and spend it. There’s no financial constraint upon government that is. They don’t have to worry about taxes to fund buying lots of lovely things for us voters. They just get the Bank of England to print more and then everything, but everything, can just be paid for. This is also the central claim of Modern Monetary Theory.

It’s correct. Government can do this. Many governments have done this. Henry VIII did it in Britain. OK, he did it in a slightly different way but it was indeed the same thing, he debased the silver coinage. Which is indeed the same thing, add 50% copper to the silver and you’ve twice as much money which government can then spend. His children spent much of their reigns trying to deal with the effects.

The effect being inflation of course. More money around did not increase the number of things around which could be bought. More shillings and the same number of things just meant that each thing cost more shillings. Inflation in short.

(Interlude – do note that central banks do increase the amount of money around each year. But they only increase it by the amount of more things there are around as well. A growing economy needs more money in exactly the same way that as a restaurant gets busier it needs more plates to put the food upon. But that growth in money should be at the speed the economy is growing itself, no faster)

At around and about the same time Spain also did much the same thing. All that gold and sliver from Latin America flowed into Spain. Spain didn’t have any more land, sheep, people, or anything else as a result, just more gold and silver. Thus prices rose in relation to that more abundant gold and silver. This inflation flowed across Europe.

Other historical episodes include the Weimar inflation, the Hungarian Pengo and in more recent times Zimbabwe – where they kept printing money until the last run of hundred trillion $ bills weren’t worth enough to buy the ink for the next run – and Venezuela.

Government can therefore just print money and go and spend it. This has an effect. Inflation.

Another name for this in the technical jargon is monetisation of fiscal policy. There’s a reason why it’s banned (yes, banned) under the eurozone rules. For we’ve a number of countries and governments all of which share the same currency. Any one of them could print more euros and go and spend them. This would be great for that specific country. They’d get to spend lots without having to tax. But the inflation would be carried by all the countries in the currency bloc, not just the one doing the printing. The incentive therefore would be for everyone to do as much as they could before anyone else did.

This is what actually happened after the break up of the Soviet Union. Each new country had a printing press which produced entirely legal rubles. So they all printed masses and whoo!, didn’t they all have inflation?

So, just printing more money leads to inflation. The more money printed the more the inflation is.

The Modern Monetary Theory answer to this is taxes. If you print lots of money to spend and then spend it then you can tax that extra money back. Which indeed you can. And look what happens then.

You’ve a high spending government which is taxing lots. The end result here is just Old Labour again, high taxes, high spending. More of the economy flows through government and we’re not anywhere different from when Healey was squeaking pips.

The basic idea just isn’t new. The results are predictable – and the way politics works no one will ever tax enough to stop the inflation. Spending is fun, taxing not so much. Which is why it always has led to inflation on a roaring scale.

So what about this quantitative easing then? This is just the same isn’t it? The Bank of England has just invented money and gone out and spent it, hasn’t it?

Yes, but with three little caveats.

The first is that we wanted to create inflation, which we did, so that’s good.

The second is that the BoE didn’t spend it, it’s just sloshing around the markets instead.

The third is that it’s reversible. And if we don’t reverse it then the inflation will come in a roar.

Baby steps, baby steps……but we have several different kinds of money. Various names, base and wide money, or the jargon of M0, M1, M4 and so on, or low powered and high powered, or if you prefer actual money and then credit. M4 is credit, wide money, low powered money, largely, M0 is base, high powered or even just money money.

You’ll have seen the claim around that 95% of all money is just created by the banks when they make a loan. Sorta, ish-ish, true. 95% of credit, or wide money, or low powered money, is created by the banks. 100% of narrow, high powered, money is created by the Bank of England.

The Bank of England creates notes and coins, that M0, (yes, it gets more complex but baby steps). Then we all go and use it, spend it, save, it, stick it in banks, borrow it, lend it, all sorts of things, and the net result of all of this is that wide money measure, M4. The difference between the two is the money multiplier or, in the jargon, V, the velocity of circulation (yes, I know but look, baby steps).

This difference is significant. Before QE the UK’s M0 was of the order of £50 billion. M4 was a couple of £trillion. Not the right numbers but about right, in magnitude at least.

After QE M0 is about £450 billion, M4 is still a couple of trillion.

Note that inflation is determined by M4, not M0. M4 hasn’t grown which is why we’ve not got massive inflation as a result of QE. So, why haven’t we?

Because our entire problem was that V, that velocity of circulation, or the amount of stuff that we did with the money the BoE was creating, fell massively as a result of the financial crisis. This is the central economic analysis of what happened by the way, which is why all the central banks did go and do this QE. And if that V falls, and we’ve the same amount of M0 around, then M4 will fall – and that’s the opposite of inflation, that’s deflation. What happened in the 1930s turning a nasty recession into the Great Depression (yes,that is now the standard analysis, Milton Friedman was right here). So, we print lots of M0, that’s the BoE inventing money in the basement, and we don’t get inflation. which is what actually happened. Great.

But what happens when V recovers? When we all start to borrow and save and move money around like we used to? That old relationship between M0 and M4 will revive and thus M4 will soar (we’ve 10x as much M0 as we used to) and so will inflation.

Which is where the difference between QE and magic money tree is. The BoE quite deliberately did not spend that new money into the real economy. It was used to buy bonds, mostly Treasuries. This lowered interest rates, a little bit, which is nice. But the big thing is that when (OK, if) we get back to normal now we can reverse things. We can sell those bonds, collect that money we created earlier, feed it back into the computers in the basement and cancel it. We thus bring down M0 but not M4 (recall, we think our multiplier between these two is recovering) and thus have we avoided deflation for a time but without creating inflation for the long term. Note that the Federal Reserve, just last week, announced the schedule it will use to do this. There is no mystery to what I am saying, this really is how this system works.

Magic money would be spent into that real economy. We cannot get it back again when inflation starts to arrive. Well, we can, but only at the price of extortionate tax levels. Which, as above, means that using the magic money tree to really spend just means higher taxes a la Old Labour. Not so magic, hunh?

At which point, the difference between quantitative easing and the magic money tree. QE is temporary, reversible, and is a tactic of last resort to prevent deflation and thus a depression. It works but it must, at some point, be reversed. If it isn’t reversed it will cause significant inflation. Two and three digits a year sort of inflation.

The magic money tree is permanent spending of the same invented money, it is not temporary – the effects are permanent – and it is not reversible without stinging tax rates. It is also known as the monetisation of fiscal policy, or the monetisation of spending. And it has everywhere and everywhen been a disaster from the point of view of subsequent inflation. Not inflation of a couple of percent here and there either, but of two and three digits a year sort of inflation.

That is, the effects of just making more money are the same either way, in the end at least. But QE can be reversed to stop it, the magic money tree cannot.

For the end effect of the magic money tree see the Hungarian Pengo.

And now to British politics. John McDonnell’s going to stop spending all that newly invented money to stop the inflation that’s going to arrive in 18 months time. Isn’t he?

Aha, Aha, Aha

This was always one of the goals of People’s QE, which was one of the core pillars of Corbynomics. Two years ago this was at the centre of Corbyn’s appeal when he became party leader. As its author I am delighted to see that it still survives. And I wholeheartedly support this use of it.

When saying so I also note that the Nuffield Trust that said the cost of doing this would be the gross revenues of the contracts is talking utter nonsense: the compensation due is at most for the discounted value of the contracts taking into account the inherent risks within that income stream.

Oh, so net present value, discounting, does in fact work then? The value of a company is the NPV, the value of a contract is the NPV…..gosh, what stump thinking!

From the newspaper:

In response to claims the plan would be prohibitively expensive, a Labour spokesman said: “Shareholders will be compensated in the form of government bonds, exchanged for shares. Parliament will assess the appropriate level of compensation at the point at which contracts are brought back in house”.

So the PFI contracts will be brought back right to where they should be, on the national debt then? Isn’t that going to be wondrous, rather constraining future actions I think, no?

Can we guess who the Sage of Ely is referring to here?

The article noted that the list includes:

Politics and the civil service (the cabinet, Scottish and Welsh devolved administration ministers and the mayors, leaders and CEOs of selected English councils).
Business and professional services (including FTSE 100 CEOs and the heads of law, accountancy, advertising, consulting and publishing firms).
Policing, defence and the judiciary.
Media (editors of newspapers and lifestyle magazines and heads of the TV broadcasters).
Education (vice-chancellors of the 50 top universities).
Sport (premier league managers and heads of sporting bodies).
Arts bodies.
Health (CEOs and chairs of the 50 largest NHS trusts by admissions).
I have to say that I simply do not accept the premise that these are the most powerful people in the country, let alone the elite. It is many years ago that my mentor during my teenage years (although neither he nor I would have recognised the term or that relationship at the time) told me that if I wanted to change the world (and I think he’ perceived, quite correctly, that I did) then I should be a poet. And if not a poet then a writer. The last thing I should be, he said, was a politician. They were invariably, he said, at best the interpreters of other people’s ideas, always destined to fall short of anyone’s hopes in the process. It was the poet who inspired the vision, and that was where the real lay, and not with the administrator.

But the administrator is exactly the type of person that this power list includes. There are the arts administrators, but not the artists. The politicians, but not the political philosophers. The business advisers but not the business people. The editors, but not the columnists.

This is not then the elite of this country. It may be the power brokers. It may be the holders of the purse strings. And I am not surprised by the lack of ethnic diversity in that group. But let’s not confuse these people with the elite. They have a certain sort of power. But not much of the sort that changes things, or leaves legacies; let alone the type that delivers recall of lives well lived.

I don’t dispute we need good administrators. But let’s not confuse them with the elite, please. They’re something quite different.

The people who stare out of the window and invent country by country reporting, they are the elite. The civil society columnists who strive mightily to pass the log of reform past society’s sphincter deserve the very best as that elite.

Of course.

Vermine and trebles are nothing less than what is deserved, no?

Erm yes, I think we know what we call this, don’t we?

The dilemma I have a 23-year-old daughter. Her mother and I split up when she was seven due to her mother’s infidelity. I still see my daughter regularly and she is close to my wife and the two other children we have. My daughter didn’t have a “proper” boyfriend until she was in her late teens. Last week I was informed that her new boyfriend is a little older than her. It transpires he’s 48! He also has a wife and two children who he is preparing to leave to be with my daughter. I am, in equal measures, furious, horrified, embarrassed, ashamed and desperate. This new boyfriend is older than my wife, who is 46. I am 55. My daughter wants me to meet this man, but I am too shocked and angry that a man of his age and with his responsibilities could behave in this manner. How should I handle this? I am too embarrassed to talk to my friends about it.

I think at least that we call this “Daddy issues?”

Oooooh, excellent, so we get to ignore petitions now, do we? allows advertisements by companies as long as they are “about public causes”, so they often take the form of petitions. The advertising revenue also allows them to “give the community an opportunity to provide grassroots support to a petition through promoted petitions”. If I understand this rightly, it means that if you offer them enough money, they’ll use email addresses gathered from genuine grassroots initiatives and will advertise Uber’s petition to as many of their 100 million users as you’d like them to.

Does it still make sense to talk about “public opinion”, a “public outcry” or the “grassroots” in a context where modes of political participation are manufactured as public relations exercises for companies seeking political and legislative advantage?

So, when Greenpeace, FotE, 38 Degrees and all the rest present us with an online petition we can just ignore them then?

That is good to know, thanks!

Shame, Shulzie got smashed

Mrs Merkel’s former coalition partner, the Social Democratic Party (SPD) suffered the worst electoral defeat in its history and immediately announced it would go into opposition.

So what’s it like to face a real electorate after all those years in Brussels then Martin?

The SPD’s decision to return to opposition has limited her options, with a three-way coalition with the pro-business Free Democratic Party (FDP) and the Greens the only obvious option.

The FDP, which returned to parliament with 10.5 per cent after losing all their seats four years ago, have long been seen as Mrs Merkel’s preferred coalition partner.

The Greens, who won 9 per cent, are also seen as a viable partner after moving to a more pragmatic, centrist course in recent years — but they are not natural bedfellows for the FDP.

This is going to be fun. As the only viable alternatives to gain an actual majority are the grand coalition, currently ruled out, with the FDP and then either the Greens or the AfD. Or even more amusingly, Die Linke, the Corbynite left.

Isn’t coalition politics grand? The electorate moves determinedly to the right meaning the Greens must enter government?

Oh dear

Cash savers to suffer bigger squeeze than in the Seventies as inflation outstrips interest rates

The Sage of Ely’s advice that we should all be saving in bonds is looking a little painful right now. And as Snippa has told us, he’s entirely in cash…..

One wonders, one wonders

Pilgrim Slight Return says:
September 23 2017 at 12:38 pm
The chicanery that Uber uses to define itself is enough to convince me of the same thing.

Looking at one of their senior team on TV last night summed up to me what is going on – the company has put the utility of the service to the user before any other consideration – even corporate responsibility.

It’s a narrow minded hyper-individualised service for an increasingly hyper-individualised society as can be seen by the apparent 400,000 people who have gone on line to support them.

Is that spoof mask beginning to slip?


Gerald Tasker says:
September 23 2017 at 12:32 pm
Addison Lee and other minicab firms have the same VAT approach – should they lose their licence too?

Richard Murphy says:
September 23 2017 at 7:06 pm
In my opinion, yes, if that is the case


So the settled law on how this works is a reason to ban people, eh?

Soapy Joe And Spudda would ban Addison Lee

The Senior Lecturer tells us that Uber are very bad people because of VAT:

My objection is to the fact the Uber does not charge VAT by seeking to exploit the gig economy.

I do not believe anyone who uses Uber contracts with their driver. They book and pay through Uber. I think the driver works for Uber. But Uber says they are the agent of the driver who, they claim, contracts with the passenger..

This matter for VAT. I won’t go through all the ramifications. Jolyon Maugham, who has made this an issue, and I discussed it some time ago. He has pursued it, and all credit to him for doing so. The difference between the two contractual positions is that if Uber supplies the service then VAT is charged on the fare. If the driver does, as Uber claims, then the driver charges VAT only if registered. No one can, I suggest, make enough as a Uber driver to require registration. The result is that VAT is almost invariably not paid. And that, in my opinion, is a deliberate market distortions by claiming contracts are not as they appear to the end customer in a way intended to arbitrage the tax system to secure a deliberate competitive advantage the company should not enjoy.

This issue has not been resolved in tax law as yet: it is my suggestion that a wise government would consider legislation on the issue. In the meantime the attitude that it reveals about Uber’s approach to regulation suggests to me that it is not an appropriate organisation to hold a private hire licence in London, not least when, as a matter of fact, it claims it does not provide private hire at all, but its drivers do.

Therefore Addison Lee must also lose its licence:

Where applicable, VAT (where chargeable depending on the individual VAT status of the Fulfilment Partner) may be added to such Charges.

What fucking tax privilege if that’s the way all do it? A black cab driver not going above the VAT registration threshold also does not charge VAT.

Don’t these cretins ever actually check things?

Oh well done!

The first was Moody’s down-rating of the pound because of weaknesses in the government’s finances. I could have made a song and dance of that. I didn’t. Their opinion is obviously well founded. And it just confirms what I have been saying for I do not know how long. There was little to add.

The Senior Lecturer has been saying Britain doesn’t have a government debt problem, doesn’t have enough government debt and anyway QE cancels much of it.

Moody’s said the UK has too much government debt.

Moody’s just confirmed that the Sage of Ely is entirely correct of course.