Tee hee


I fear you have misunderstood those graphs.

The falls are in the value of traded goods and services, not the volume.

You’ll find these falls in value correlate well with the inverse of the dollar strength.

That is, you are looking at exchange rate effects.

Richard Murphy says:
February 22 2017 at 1:51 pm
Nit what the WB says…

Darren says:
February 22 2017 at 1:57 pm
It’s exactly what the WB says. Read the graphs again.

Trade has only “fallen” in terms of dollar values, due to the strength of the dollar. Trade volume is up.

He’s a professor you know….

That Nobel awaits

He’s right: economics cannot forecast something as important as a financial crisis. But what he did not add is why not, which is down to methodology. Economic forecasts are rational mathematical models. And most assume that behaviour tends to the mean: in other words, if there isn’t usually a crisis (and there isn’t) then there won’t be one coming up either.

Of course I simplify. We know that there are crises. We know that they happen on average every seven to eight years, and that means we’re overdue for one. We know that stock market highs, increasing debt and weak economic fundamentals (wage and trade stagnation, both of which look to be on the cards) at the same time suggest fundamental imbalances that can trigger the crash. So just by standing back and using human judgement we can say the chance of there being a crisis in the next five years is very high indeed. But economics can’t say that. Because it isn’t programmed to do so. Which just shows how far from reality it is. And what a useless exercise conventional approaches to economics represent for society as a whole.

So why not incorporate that human judgement into predictions and both make a mint and scoop the Nobel?

Well done Spud, well done Sirrah!

Trade is falling and the UK’s set to make things so much harder for itself

The World Bank published a new survey of world trade yesterday which included this chart

That World Bank report stating that world trade grew 1.9%. Which is a slower growth rate than before but not in fact a fall in trade.

Would you allow the Spud to drive a car when he cannot distinguish between acceleration and speed?

Spud should take note

I like pineapples, just not on pizza. I do not have the power to make laws which forbid people to put pineapples on their pizza. I am glad that I do not hold such power. Presidents should not have unlimited power. I would not want to hold this position if I could pass laws forbidding that which I don´t like. I would not want to live in such a country. For pizzas, I recommend seafood.

Politics is not about forcing people to follow your tastes.

Is it?

My word:

As readers of this blog are well aware, who gets what from economic globalisation is as much a function of the machinations of finance as any relative productive capacity in the strictest physical sense.

The distribution of rewards from economic globalisation appears to be going absolutely as anyone would have predicted.

The highly paid low skill labour has been, at worst, not gaining very much while the lowly paid low skill labour has been making out like gangbusters. The owners of the now more scarce capital have been doing well for themselves.

Given that we don’t think we will ever be adding another couple of billion low paid low skilled workers to the global economy that’s that done with. And given demography we expect the global labour force to be shrinking from here on in. At which point we also expect returns to capital to be lowering, returns to labour to be rising.

Really just absolutely standard stuff and fuck all to do with the machinations of finance.

Yes, it’s glory time again


The Wall Street Journal is heavily paywalled so a synopsis will do: what it is important to realise is that the assets in short supply are, most especially, government bonds. The main reason is that government bonds now play a crucial role in the world’s financial markets as collateral when lending.

This is a relatively new phenomena: until 2008 companies were willing to put massive sums on deposit with banks without requiring security to ensure that they would be repaid. Then the banks failed. As a result what became apparent was that banks’ capacity to repay was dependent upon the whim of the governments who were really underwriting their solvency. The significant growth of what is called the repo market is the consequence. To simplify somewhat, companies do not now deposit money overnight, leaving them as unsecured creditors of the bank. Instead they sell the bank the most secure and financially stable asset they can use (government bonds) with a contract that guarantees them the right to require the asset the next day with the price adjusted for overnight interest.

A cash depositor will sell a bank a security instead? Err, buy perhaps?

And it’s not about companies, here’s the WSJ piece un-paywalled:

The world is running out of safe financial assets. One reason may be regulators’ push to make trading safer.

A scarcity of safe collateral can create bouts of volatility in the markets where investors fund their purchases. Economists also worry that a lack of quality public-sector assets leads the private sector to create less reliable and riskier substitutes.

Global rules increasingly require that investors deposit cash as security, called margin, when they trade with each other. This money is often left at clearinghouses, which are intermediaries that stand between buyers and sellers and step in if one of the parties won’t make good on a transaction. Regulators are trying to give these clearinghouses more heft to make the financial system safer.

The clearinghouses, in turn, have to do something with the cash, and they frequently take it to repurchase, or “repo,” markets , where they lend it out in exchange for high-quality assets such as German bunds or U.S. Treasurys.

That has the effect of vacuuming up safe assets. Paradoxically, cash—at least its electronic form—isn’t ultrasafe: It needs to be left in bank deposits, and even the strongest banks have some risk. Treasurys and bunds don’t.

It’s clearing houses, not companies. And they buy, not sell. And they don’t sell anything to a bank either.


Spud is incredible, isn’t he

The proposal for US corporate tax reform is a disaster in the making. …. Trade war would follow. It would provide no tax relief for interest paid: chaos in financial market would follow.

That’s from the bloke who has actually been insisting this past decade that the interest deductibility at places like Boots is tax abuse and must be done away with.


I wonder how much of this Ritchie and Colin Hines would agree with?

“M.P.’s will be converted from windbags into men of action.”

The Curajus State, check

The government will spend much more money on research and development, with rates of return of “one hundred-fold.”

Oh yes, candidly

Cheap, wage-undercutting foreign imports will not be allowed.

Progressive protectionism

Foreign investment abroad will be eliminated

Capital controls

Inheritance will not be allowed,

100% inheritance tax

The small shopkeeper shall be favored over chain stores,

Localism and local economies.

All citizens, rich and poor, are to have the right to an education up through age 18

Ritchie extends that to PhD but still.

So there’s a certain similarity to Oswald Moseley then.

Stock market valuations being another thing he doesn’t understand

Despite this whole rafts of the stock market are valued not on what extractive industries companies actually do but on what their reserves are.

It’s not in fact true that they are valued on their reserves. Just isn’t.

But there’s a more important point which such a campaigner as the Spud should grasp. The central problem as revealed by Nick Stern is the discount rate. At what interest rate do we discount future events? As Nickyboy pointed out, if we use market interest rates than things which happen decades out have near to no net present value. The damages from a 70 metre sea level rise as Antarctica melts in 2,500 AD have a value of about tuppence today. and that really cannot be quite right thus we should use a lower discount rate to value far into the future events.

But note that when we do value reserves of extraction companies we do not use the lower and Stern approved social discount rate. We use the market interest rate. No, that’s not the yield on gilts either. It’s the stock market rate – something much more akin to 5 or 7%. And if we discount, say, oil reserves at 7% out to 50 years we get a net present value of spit.

That is, anyone who actually understood the climate change argument could not possibly argue that fossil fuel companies face an imminent collapse in valuation because future reserves will be stranded.

But Spud does so argue.


Richard Murphy says:
February 11 2017 at 10:09 am
Right wing libertarianism is an abuse of the idea of Liberty because it is indifferent to the liberty of others

It’s actually the definition that my liberty extends only so far as it does not constrain your.

From a left wing perspective the need to reconcile the absolute reality of conflicting aims is apparent and mechanisms for doing so are recognised to be necessary

Which is why left wing libertarianism is the only true form of the idea because the right wing form is actually an excuse for abuse

Still entirely missing it. Even the Randians agree that where rights conflict a resolution mechanism is needed.

There (might) be a new blog!

What occurred to me is that most of those looking to make a contribution share a characteristic in common. They are able, willing and opinionated writers on issues that matter to a lot of people. I have on occasion used some of their material as blogs. But that is only occasional: I am well aware that, for better or worse, this blog gets its character from the fact that it is my own stream of conciousness. What, though, in that case if those who write here regularly were to create a parallel blog? I would promote it here, with links. I might even, if permitted, write for it on occasion. The aim would, though, be to give others a bigger voice.

What to call it? That’s a detail to be sorted out, although I have some suggestions (well, one, actually).

It would need an editorial team and some people willing to moderate it.

It would require a modest budget to get it going, but I think a little crowd funding could sort that.

A budget. Yep, someone should pay for Carol Wilcox and Ivan Horrocks to write at each other. Why, this could be the start of an entirely new political party!

But it would be essential that editors undertake due diligence on writers: the chance that someone would try to infiltrate would be very high.

Don’t worry, I really wouldn’t bother.

“This is where neoliberalism has got us (amongst many other shite situations):

‘In parts of Croydon, south London, where developers have been given a free-for-all to convert old office towers into residential units however they like, some are just 15 sq m. The idea that you can fit a bedroom, kitchen, eating area and bathroom into 12ft by 14ft is frightening. I was told many years ago by a private developer in London to only buy a three-bed home with a garden, because that’s the one thing families want, and the one thing they were no longer building. Demand would soar because supply was non-existent. I took his advice, and he was right.

Today’s young adults are effectively being told that they must live in ever-smaller homes without gardens. Those in their 20s are already earning less than those in previous generations. They must put off starting a family until later in life. They cannot expect to buy their own home and must rent, instead. They must work until 70 to pick up a pension. And that pension will be less generous than their parents enjoyed.”

Horrocks hasn’t realised that it is the Curajus State insisting upon ever higher housing density.

Next non-Spud comment is inevitably from Wilcox.

Quite, quite, amazing

Tax evasion is incredibly harmful to any country. Tax cheats force honest business to go bust. But it is only honest businesses who invest in new products, services, technology, R&D and, perhaps most important of all, in training for their staff.

Ritchie told us a few years ago that Vodafone was dodging taxes with that deal with Hartnett.

Can’t be bothered to dig it up myself but anyone want to claim that Vodafone doesn’t invest in its mobile networks? Near to the point of consuming capital as it upgrades them?

Disagreement is bullying

It’s been interesting to note the reaction in the comments section. Seemingly orchestrated by Tim Worstall (who seems only able to write about me in the last day or so), many of those who regularly populate his Alt-Right comments section, which is notable for its aggressive offensiveness, have taken to maligning, squealing in their delight at being able to do so and highlighting the fact that I routinely block far-right, usually male, deeply offensive aggressiveness from the comments section of this blog precisely because my belief in fees speech makes it a necessity to do so.

Bullying and freedom cannot co-exist. It is something they have not noticed.

Others have though. I was discussing the phenomena of online aggression with an MEP yesterday. They said online aggression was something they had been forced to get used to as a result of their work, but it made it no less unpleasant. They also wondered if awareness of such aggression put many off standing for office. I think it might. In that case these people’s fight against freedom and liberty may have a deeply undesirable consequence. And that just reinforces my own determination to give them no air time. My deeply libertarian instincts demand that I don’t.

The gift that keeps on giving

Ritchie meets a comments section not moderated by Ritchie:

Paul Rowntree
In reply to Anthony Nordberg
Professor Murphy wrote above:

“If most economists think deficit reduction so important why have we had a national debt almost continuously since 1694 and prospered because of rather than despite it?”

Some students might be reluctant to pay to be taught by a Professor of Practice in International Economy who evidently doesn’t understand the difference between the deficit and the national debt.

2 hours ago
Richard Murphy
logged in via Twitter
In reply to Paul Rowntree
This is extreme pedantry

Deficits created the debt

And if you know anything at all you know deficits have been run in most years since 1694

But that’s a good thing – that’s how the government creates money

And that’s how the government meets the demand for gilts to underpin pensions

We desperately need public sector debt – in fact, more than we have

Just for those who want to know, there’s good argument that at times we might want to have deficit spending. There is no valid one that we need a national debt. It might be useful, sure, but we don’t need one. And the idea that we need more as it approaches 90% of GDP…..again, it might be that economic circumstances mean that we’d like more deficit spending (no, I don’t think so but it is possible) but more debt just to have more debt?


Richard Murphy
logged in via Twitter
In reply to MikeL
The slavery crimes from the fact that changing the terms of this debt after sale is nigh on impossible

Within the state sector it is possible

Debt owed to the state can have its terms changed. Debt owed under a simple contract is slavery.

That makes all mortgages somewhat suspect, no?

He doesn’t even understand what ad hominem means

Richard Murphy
logged in via Twitter
In reply to Martin Audley
Of course I undertasnd the basis for sale

And the massive uncertainties within it which will require a considerable discount because this is not about risk; I stress it is about uncertainty

Since that discount does not appear to be in the government’s accounts now that is a real loss, like it or not, especially when the government clearly can afford to bear the uncertainty

I note you totally ignore the rate differential. Why sell debt that has a positive rate when you have a negative rate? I note your silence

3 hours ago
Martin Audley
In reply to Richard Murphy
Why would you note my silence at the moment you posted your own comment, which by definition must predate my reply?You have a bizarre way of debating – which on your own blog enables you always to have the last word or delete dissenters. You’ll sadly find that does not work here.

Uncertainty (e.g. in the unmeasurable possibility that an asteroid wipes out all these students tonight) applies to the debt whoever owns it. But the downside-uncertainty is removed from the Government by the sale.

The Government is selling debt with a positive rate to free that money now, so that it can be put to immediate use – either to reduce national debt or to initiate new projects. I would have thought someone who’s always calling for new national infrastructure could see that.

2 hours ago
Richard Murphy
logged in via Twitter
In reply to Martin Audley
It would seem you are here to offer ad hominem attacks

I have no time for these and do not engage with those offering them here or anywhere else

2 hours ago
Paul Rowntree
In reply to Richard Murphy
You don’t understand the argumentum ad hominem fallacy. Martin Audley is not questioning your character or motives. He is making a perfectly reasonable point, which you are refusing to answer.