It’s as if he’s never read Keynes

We are twentieth. And ignore Ireland: its GDP data is so distorted by being a tax haven even Walt Disney would dismiss it as incredible.

We are also the slowest growing country in the EU.

That is not a coincidence.

Tax rises? Bring them on, I say. We will all be better off.

It is the deficit – or surplus of course – which is stimulatory or contractionary. For tax is, as MMT says, taking money out of the economy, reducing demand.

So, the MMT man tells us that more tax is going to make us better off.

Hmm.

Oh, and those places which do send more of GDP through government. Are they better off than we are? Hungary? Croatia, Greece?

Interesting concept really

Stock markets are trying a little recovery this morning.

But the question remains as to by how much they are over-valued, since few would really dispute that they are. The answer is, by a long way

Given that around and about half of all market transactions are people buying at the current price I’d suggest that some, around and about you understand, half of all people think the market is currently undervalued. Or at least not over so.

But then I’m not a professor of economics, so what do I know?

Ahahahahahhhhhhhhha

The simple reality is that the premise of the report is wrong. The way to fund £20bn of extra healthcare spending is for the government to create the necessary funding for that purpose. And it can do this at any moment. The fact is that tax does not precede spend. It is always, and inevitably, true that spend precedes tax. In that case the hypothesis that extra tax must be raised before the NHS can be funded is incorrect. What actually happens is that if the government spends an extra £20 billion into the economy, and increases GDP directly as a result (because government spending is part of GDP, because it creates wealth) then the government can, if it so wishes, claim back some, all, or even more of that spend in tax if it so wishes, with the possibility that it might claim back more than is even spent being made possible by multiplier effects, which are quite high in the case of NHS expenditure.

Ritchie’s new theory. We don’t have to tax £20 billion in order to spend £20 billion more on the NHS.

No, no, don;’t be silly, MMT and all that.

Instead we should tax £30 billion extra in order to spend £20 billion on the NHS.

Much, much, better and MOAR TAX, d’ye see?

Idiocracy

What the IPCC delivered on Monday was the most massive warning. We have twelve years to save the planet from global warming. And Shell’s response is to avoid discussion of oil and instead suggest we plant trees without providing the slightest indication of where, who would fund it and why countries will be persuaded that they should do this when deforestation has been the trend throughout human history.

What he did not do is discuss the only obvious solution to this crisis. That is to leave oil in the ground. Of course, he can’t do that. His company is valued on the basis that it can burn all the oil reserves that it claims to have. The only slight problem with that plan is that it burns the planet as well. It is simply not possible for him to admit that controlling climate change and the continued existence of his oil company in anything like its current form are incompatible goals.

But there is a solution to this issue. It comes in three parts.

The first part is to ration oil. It can be done directly, or it can be done indirectly, but either way it needs to be done. So, we can ration flights. And car usage. We could even ration some food stuffs – like meat, in particular. We have, of course, done such things before, and I’m well aware that the immediate response will be that there will be a black market. And I agree, there will be. Which is precisely why each person’s ration could be traded. The person who wants to fly a lot could buy the ration of the person who does not want to fly at all. The person who does not have a car should be able to sell their right to have one. And so on. A meat ration might be tradeable as well. The goal is achieved, and virtue would be rewarded. Indeed, the whole policy could be progressive: the sale of rations could redistribute income to those less well off. Externalities could literally be priced.

The second point to note is that rationing would also increase the price of oil: that is what happens when a product is in short supply, which would have to be the case if fixed quotas for production were imposed, as would have to be the case. In other words, oil company values need not be imperilled by this. But they would be required to invest in clearing up their own past messes.

And third, government revenues need not be imperilled. If the oil price increases, so might government revenue.

Oil companies are not valued on the basis of their reserves. Rather, on their likely level of profits over a forseeable time span. Also, they don’t burn oil, we do. They sell it to us so we can burn it.

Rationing the price of oil will reduce its price, not increase. Oil is notably inelastic to price in its demand over the short and medium terms.

The Tuber manages to get one thing right, the solution is indeed rationing. Which is why William Nordhaus has just been awarded the Nobel for suggesting we ration it with a carbon tax. Something he’s been saying for at least two decades now. But then Nordhaus knows something about economics….

Political perspicacity

And, of course, there was the approval of Brett Kavanaugh. Even if he never committed a crime, that a person so deeply misogynist could be confirmed as a member of the US Supreme Court on the basis of a strictly partisan vote shows a break down in all the norms of decency that underpin representative democracy as the price of loyalty to a party that has lost touch with the most basic of respect for large parts of the population, and women in particular.

What is depressing is that this does not even seem like an accident. It appears very deliberate. And that to me stinks.

But it also suggests something else: it suggests that breakdowns such as this, grim as they are, can and, I think will, be the catalyst for the changes that are coming closer.

Of course I can misread mood, and I am under no illusion about the fact that the Republicans and populists in general have significant support, but what I think will happen is that a moment will arrive when anger will spillover and people will simply declare that they have had enough of being abused.

There is a chance that will be brutally suppressed.

Entirely missing why Trump/Brexit happened, which was “a break down in all the norms of decency that underpin representative democracy as the price of loyalty to a party that has lost touch with the most basic of respect for large parts of the population”. You know, the progressives deriding 90% of the population as hicks and rubes?

Dear Lord, seriously, this person teaches economics?

Third, and for me most tellingly, the article is wrong. Of course most bank loan portfolios are valued at cost. What else would you value them at? They are assets, and very few people choose to repay more than they are lent, in which case cost is the maximum value at which they might be stated in most accounts.

Is he actually that much of an ignorant?

He has, I suppose, heard of the concept if interest? Which is something additional which people pay over and above the amount they borrow. And, if it’s a fixed rate of interest (as would often be true of bonds) then the capital value can indeed rise above cost if interest rates fall.

True, loans tend not to be at fixed rates of interest. But they can certainly be at fixed premia to a floating rate. And if the company’s credit rating improves it may well be that the premium doesn’t change. Producing a loan which should righteously be valued at above cost if we are to gain a true and fair view.

True, that last is somewhat specialist. But the idea that loans can only ever be at cost and no more because people don’t pay back more than what they borrow is just ridiculous.

I’m sympathetic to the idea but…..

In the UK the sense is that the core desire is to dismantle the effect of 1945. The aim appears to be the destruction of the welfare state. The object is to recreate the raw brutality of inter-war Britain where poverty was used as an economic and social weapon of control. It did not work. But that does not matter. Ending the idea that the state should provide any form of safety net or have a role in society would appear to be the goal of the Brexiteers and their libertarian funders.

Rilly? Who is saying this? Who is going to disassemble the welfare state? The closest I’ve seen is people suggesting a universal basic income…..

In the States this message is already easier to deliver because welfare provision never made such progress.

Eh? They’ve near 100 million gaining some form of welfare. What’s he on about?

This may or may not be a good reason

I am often asked why I will not stand for political office. I clearly have some of the attributes that might incline me to do so. And then something comes along to remind me of the sheer ghastliness of politics, which I have known of since the time I was a student.

That ghastliness being why politics and politicians should have more power as in the Curajus State no doubt.

That is the base calculation of politics that I could not abide. I cannot reconcile that baseness with doing the right thing, when in this case what is right is obvious. And as a result I do not wish to participate in the sordid calculations that are a part of the politician’s life, and which seem to be getting more sordid by the day.

Murphism – it’s shite so let’s have more of it.

Worstallism – it’s shite so let’s have less of it.

If only he knew some economics

This chart shows the labour share of GDP (or national income) over more than two centuries……And that long-term downward trend is precisely why Labour has to take radical action now. People are simply not paid enough. And that has to end.

So when people say Labour will destroy the economy by giving people a fair share the simple response is, ‘no they won’t: they’re repairing the damage that’s brought us to our knees’.

Great, OK, the bit of national income that has risen is taxes upon consumption – VAT. So, lower VAT and the labour share will rise again. Over to you Murph.

Entirely wondrous

And this time the prospect of anything positive coming out of that readjustment programme looks remote precisely because last time most sleep-walked into the crisis. This time we have no such excuse.

The trade wars are deliberate.

So too is Brexit.

As are inappropriate interest rate rises.

And a debt boom.

If we’ve a debt boom then interest rates aren’t inappropriate, are they?

Cower Ye Peasants!

Second Rees-Mogg was wrong to say that beating the tax gap meant more tax had to be paid. It might, of course. But I strongly suggest that since tax is primarily a tool of fiscal policy designed to beat inflation above all other goals then revenue maximisation is not the goal of any government. Rather the aim should always be to raise the required amount of tax as equitably as possible to achieve that fiscal goal in ways that achieve the secondary (but vital) goals of redistribution, repricing market failure, reorganising the economy and reinforcing the relationship between the citizen and the state.

That being, I suggest, what the Senior Lecturer thinks is the correct relationship which should be reinforced?

Astonishingly, official and other research data on tax is frequently inaccurate.

So too often is GDP data, which makes tax gap estimation hard.

And even the number of taxpayers is frequently subject to misreporting between data sources.

At its most basic level understanding tax is hard because official statistics seem to be perversely dedicated to ensuring that we cannot know the truth.

And when it comes to tax gaps, there is too little research and even too much denial that the issue is of consequence.

There’s the pitch for the next series of grants.

But it’s an amusing confirmation of Hayek, isn’t it? Which leads to an interesting question. How can the State be Curajus if no bugger knows what is going on?

Cool

Amongst the many things I do not claim to be is a fashion aficionado. If style is your thing then this is probably not the place to be. However, I have been aware since being a teenager that there are some who suggest that the national economic mood can be assessed by the mean skirt length of those who choose to wear them. The shorter the length, the more optimistic the mood is the unsurprising theory.

Sitting in the Eurostar departure area this morning with a sample of hundreds to observe I could not help but notice how much closer to the ankle many hem lengths are when compared to those of recent years. There were exceptions, of course, and I accept the sample is biased. But the portent is not good if the theory holds true.

The federasts – for that is who will be getting onto a train to Brussels early in the morning – are depressed.

Good.

So why doesn’t anyone do this?

Harris’ augment is simple: it is that British politics is not listening to what people really want. And to hear it you have to go – as he does – to the places where it is being said. It is doing what the economist Danny Blanchflower calls ‘going walkabouts’ to ignore the formulas, assumptions and preconceptions and actually observe what is really happening in life.

I have long argued that what people really want in life is enough to live on, to live in community, to have the support of family and friends and to feel that they have a purpose as a result. That’s what my whole book ‘The Courageous State’ is really all about, in a sentence.

And no one is offering these things in British politics right now. There is simply too much flag waving on left and right for most people.

Both Rotherham and Brexit would have been rather different if people had been listening earlier, no?

A focus on housing, education, health, jobs, local services and invetsment in communities is what the British want of their politics. The rest they will tolerate because the political classes want it. But politics has forgotten it is about people’s ordinary lives first.

And possibly not mass immigration and the European Union?

Oh dear, accountant cannot add

How much have we paid? Any figure will be an estimate but there’s an easy way to guess. In the years 1998 to March 2008 the Labour Government borrowed a total of £186bn to keep the government and economy going. They prevented a recession after the dot.com crash of 2000 by doing so. In the ten years from April 2008 to March 2018 the government borrowed £990 billion – or more than five times as much. That almost certainly would not have happened without the crash. It’s a very crude measure but the difference – or about £800 billion is one way of estimating the cost of the crash. Roughly speaking that’s £25,000 a household.

No, that’s not the way to do it. Especially for someone who insists that QE will never be unwound and therefore doesn’t exist….

In the meantime public spending has been slashed.

That’s not actually true. I mean, the man can add up can’t he? Number of pounds being spent is higher or lower than then?

So how does this work then?

1
Jobs in Every Constituency – the promise of the Green New Deal
Posted on September 10 2018

The Green New Deal Group has launched a new report this morning. This is a summary:

Jobs in Every Constituency

A Green New Deal Election Manifesto

Hmm. The unemployment rate is pretty low. The employment to population ratio is at the highest it’s been in how many decades?

And we’re talking about job creation now, are we? Have these people never heard of opportunity costs? Well, given that the Senior Lecturer and Anne Pettifor are their only even described as economists perhaps not…..

Apparently capitalists like depressions

Bob says:
September 5 2018 at 5:37 pm
According to the graph, labour’s share of national income was way higher in the thirties. Presumably leaves out the income of those not employed?

Richard Murphy says:
September 5 2018 at 7:30 pm
Data was not as good then

But this was a depression

Have you noticed how good profits are in a depression?

Whut?

What did Keynes say about the paradox of thrift?

Well, essentially, Keynes told us that in times of recession we must lower the savings rate.

Theresa May has achieved the extraordinary feat of turning UK households into deficit borrowers.

So, recent Tory policy is most Keynesian then, isn’t it?

The only way ou of this being to say well, we’re no longer in recession so we don’t need to lower the savings rate. But then the Senior Lecturer isn’t going to admit that, is he?