Well, yes, quite obviously

When England cannot provide there is no case for a Union
..
Whether Northern Ireland or Scotland realise this first is open to debate: it may be one or other by no more than a length in my opinion. Wales may be a few more lengths behind, but it will come in, albeit third. Whatever the ordering the reason for leaving the Union will be the same. The economic justification, which has always overcome the political and social reasons for separation, will have gone. And on that basis division if the Union becomes inevitable.

Can’t fault the argument myself. If England stops paying for everything then why should the Celts stick around as leeches? What would be the point?

Fascinating

This would be happening without Brexit. The decline in car buying; mobile phone buying and so much more; as well as debt stress, are all real phenomena. What they suggest is that we have an economy that is realising that its practices are unsustainable, come what may. A debt crisis is likely, and with it bank and pension fund stress on very large scale, which could trigger recession in its own right.

Eighth, the risk of the suspension of normal government in the UK is high to deal with post-Brexit chaos.

Apparently car sales back down to the depths of 2007 mean we’re in for fascism in the UK.

Note that 2007 is pre-recession….

It’s not controversial in the slightest

The finding is controversial. The focus of tax justice campaigning has been on tax avoidance for a long time. It requires a change of mindset to think that tax evasion is the bigger issue.

I can think of someone, not a million miles from here, who has been saying that tax evasion, the actual grey economy, is far more of an issue than tax avoidance for some number of years now.

But then if Spudda’s just thought of it then it must be new, eh?

Well done Spuddo

13
The Brexit job losses are beginning to hit

I have a one word comment this morning.

Honda.

I could add I, and just about every other serious economist, was right. But the evidence will still be ignored.

And everyone at Honda is absolutely insistent that the decision has absolutely nothing at all to do with Brexit.

But then Spuddo does know more than anyone who actually has to take decisions, obviously.

The vehemence of his claim is becoming clear

In the first they suggest that there is ‘taxpayer’s money’. I question where they place the apostrophe. And they are, anyway, wrong. They do not understand that a government with its own currency and central bank creates money for the country, and not the other way round. That’s a fundamental flaw.

Well, youse see, if government makes it then it can righteously call as much of it back as it wants. It’s the perfect justification for MOAR TAX isn’t it?

Ritchie made a claim about Singapore

So I thought I would check it:

But Murphy said it would be hard for the UK to replicate the Singapore model. “More than 80% of people live in government-owned housing so it does not need to tax people, it just charges rent.”

I did think that was odd. So I went and asked the Singapore Ministry of Finance:

“The Housing Development Board (HDB) is Singapore’s public housing authority, and its main function is to provide affordable quality housing. HDB does not profit from the provision of public housing. HDB’s public housing programme incurs deficits, which are covered by Government grant, as reflected in HDB’s published financial statements.

In addition, we would like to clarify that vast majority of HDB flats are sold. There are various Government grants to encourage home ownership through public housing. In the Financial Year 2017, the estimated percentage of Singapore residents living in HDB flats is about 80%. Approximately 98% of this group are staying in sold HDB flats. Only about 2% are staying in rental flats.

To answer your question directly: Government funding, from the general budget is provided to HDB to cover its overall deficit.”

That is, Ritchie’s spouting bollocks. Again. Wonder when we’ll see the reverse ferret here. For we’re certainly not going to see an apology, are we?

Seems like a reasonable demand

And third, pension funds must have their own version of a living will. If banks need these then so too do pension funds. The possibility of being dependent upon bailout should be seen as the absolute last resort: the obligation of the company to meet its liabilities as they fall due should be paramount, and if it cannot be met then a charge over the equity in issue of the company that has promoted the scheme should be put in place: no shareholder of that concern should be able to extract value until the obligation to the members has been met.

One that’s largely already met tho’ isn’t it?

This was the damn point

He made an interesting comment. It was that his employer now holds no gilts in its pension fund. It has invested in much riskier corporate debt instead. This, as he put it, was being done in a ‘chase for yield’ and a need to ‘match the liabilities’. In other words, the trustees have abandoned caution in an attempt to match income to their obligations. Short term accounting demands have made them leave prudence behind.

But, as he noted, this explains where the debt is in the UK economy. In 2008 it was on bank balance sheets, and they failed.

This time regulation will have reduced bank exposure so it is on pension fund balance sheets instead.

The aim of QE was to get people out of gilts and into corporate bonds. That’s the damn point.

Sigh.

As is explained to him in the comments:

QE has had the impact of sending investors such as pension funds further down the rate curve, and ultimately into higher rated corporate debt. This is not the trustees ‘abandoning caution’ as you term it, but because of an obligation, mandated by legislation, that certain liabilities need to be matched. (Something that Gilt investments are not able to do because their yields are so low, because of QE).

To which:

So, QE has created risk fir the next financial crisis

As I said it would in 2010

All you have done is confirm that

Well, that and a blasé indifference

Sigh.

That’s the QE that Ritchie says should be our major government funding mechanism with MMT, right?

Suppose so really

Corporations, from large to small, and right across the globe fail to tell us what they are doing and yet expect to enjoy the extraordinary privilege of limited liability, which is (and was proven to be in 2008) a massive risk for all of us. The least they can do is tell us what they’re doing in terms we can all understand. And since we do not know which ones are really creating the risk, I do mean all, without exception need to be reporting in full, and on public record.

I do mean that I want their accounts to be comprehensible. It is absurd that much corporate reporting is now no better than gobbledygook to most users, and that is especially true of the directors and owners of smaller companies who have absurd standards imposed upon them, and are expected to sign accounts that they have little way of knowing are right.

It is true that accounts are difficult to read. Ritchie certainly has problems at times….

It’s astonishing what he doesn’t understand

The claim that economists have lost control is based on the absence of a cost-benefit analysis in the Green New Deal and the fact that carbon pricing is rejected.

Of course, the Economist is wrong. There is a cost-benefit analysis in the Green New Deal: we cannot afford not to do it, whatever it costs.

And carbon pricing does not work. Marco Fante explains why here. The essence is simple though: renewables are cheap enough to ensure that carbon pricing is itself priced out of the market.

So, a carbon tax raises the price of emitting technologies, reducing the relative price of non-emitting.

OK

Our task with climate change is to replace emitting with non-emitting technologies.

‘K.

Renewables are now so cheap that we don’t need a carbon tax to change those relative prices.

Fine.

So, we’re done then, right? Everyone will, from now on, install non-emittive technologies as they’re cheaper and we’ve solved climate change.

So why is Ritchie insisting we still need the Green Leap Forward?

Quite so Professor, quite so

It could be that the UK is heading the world into a downturn: it’s happened before.

It could be Brexit, which is what most commentators outside the UK think.

What it is not is good for the conventional view of the economy.

The conventional view of the economy is that there is a business cycle, Gordon Brown did not abolish it. It’s largely diven by animal spirits, something that uncertainty undermines.

Thus Brexit, uncertainty, lack of animal spirits, well, why not a recession?

That’s actually the conventional view.

And who it is also not good for is those Brexiteers who said that those who suggested Brexit would cause a downturn were wrong. We’ve now got to the point where that prediction can be tested. And those who made it, me included, are being proved right.

No surprise there then. It was glaringly obvious.

Mrs – Ex might be able to correct him on this. A doctor can confidently predict that someone will die. It’s the timescale over which the prediction is made that matters. A century is piss easy and useless. The moment people vote to leave the EU is useful but wrong.

As we know Ritchie invented this

So obviously, it won’t work:

Whatever Alexandria’s Aims Ocasio Cortez’s Green New Deal Won’t Work

Alexandria Ocasio Cortez is to reveal the details of her Green New Deal in the next few days – the one thing we absolutely know about this being that it won’t work. This isn’t a commentary upon climate change nor the desirability of doing something about it. This is just a simple statement of fact about the universe we inhabit. As with the climate the economy is a complex, even chaotic, thing. Plans to substantially reform it therefore don’t work, no matter how egghead the planners nor pure in motive the instigators.

Spuddo

And low interest rates also stop the trickle (or flood) up of wealth: they are rents, after all.

Low interest rates raise the price of higher yielding assets. QE shows that, share prices rose because of QE as Spudder oft complains.

So, low interest rates stop the flood up of wealth, do they? Even though Spudda complains about how low interest rates have raised asset prices?

El Twatto

In an argument with two real economists we get Spuddo saying:

But what that means is three things. First, in Simon and Jonathan’s view economic policy is being run for the sake of economic policy. Its aim is to restore monetary policy. Second, that means the aim is to put bankers back at the heart of economic policy, and not people. And third, the aim is to restore finance as the constraint on activity instead of that limit being the available resources within the economy i.e. the goal of establishing full employment.

If we get to full employment then interest rates will be able to rise to the time value of money. Instead of being artificially suppressed below that as at present.

This is putting bankers at the heart of the economy?

So, not politics then

Among the things Ritchie does know about:

English politics might wait a long time for something like the SNP to come along. Until long after they have gone, maybe.

Single issue party succeeding in English politics?

What’s scary about it is that this suggests that no deal is Labour’s best hope. And I regret to say it, but in party political terms it probably is. As I was told by an influential member of Corbyn’s team in March 2016, Brexit was a Tory fight and Labour just needed to watch it out to win from it.

That was a position grossly negligent in political terms. But nothing has changed as far as I can see. That’s what Labour are doing. It’s a plan predicated on a no deal. And it’s predicated on chaos. And that Labour can win from this. Which is thought to be a price worth paying.

He’s talking about we do it, we don’t, what’s the deal or no deal because Ukip won or lost?

This doesn’t even follow in its own logic

In the first instance MMT says all money is created by either government central banks or other banks acting under state licence.

Second it says that money only has value because the government promises to back it.

Third, it suggests that this backing is evidenced: the requirement that tax be paid in government created money guarantees state created currency a value in exchange, most especially if there is no other currency in circulation in an economy.

And fourth, this necessarily means government spending must come before tax is raised in our macroeconomy or there would be no money created to settle the tax bill. This cannot be issued as semantics: it is fundamental to understanding the role and nature of deficits.

Central banks and or commercial banks create money.

Therefore government spending must come before taxation otherwise there would be no money to collect the taxes in.

Eh?

Which fifthly means government deficits are a necessary and good thing because without them the means to make settlement would not exist in our economy.

But if it’s the banks, central and commercial, which create the money then it would be the absence of banks which would lead to the absence of money.

And sixth, and most important of all, knowing this liberates us to think entirely afresh about fiscal policy, which Portes rightly says is prioritised by MMT over monetary policy, which I would happen to argue is now largely redundant anyway because in a world of low interest rates monetary policy is wholly ineffective, and I believe low interest rates are here to stay.

Low interest rates are a monetary policy.

Sigh.

Ritchie should but Ritchie won’t

Tax reliefs, terrible things, they deprive the government of necessary funds, restrict the good it can do, cause austerity.

And we really shouldn’t be subsidising the consumption of energy now, should we? Not in this world of climate change. In fact, that reduced rate of VAT on energy is part of that $5 trillion we’re said to, globally, use to subsidise fossil fuel consumption. Really, we should stop doing that.

Or maybe we shouldn’t? This being a useful litmus test for those who will try to use these figures. There will indeed be, as there is, shouting about that £4 billion. But that’s as near nothing compared to that £53 billion. So, people who are serious about reducing tax relief so as to reduce austerity – which should they be saying we should do away with? And which will they say we should do away with?

It’s an odd belief really

Where have 70% tax rates worked? In the USA, for a start….

The Spud doesn’t seem to know his history. Nor does the historian:

And here’s the problem. Hauser’s Law. Pretty much whatever anyone does the Federal tax take doesn’t rise above about 20% of GDP. And it’s not true that those high marginal tax rates of the 1950s did much, even anything, to get that tax take up.

There’s a reason why this is true as well. Taxation of incomes isn’t going to get you much more than that.