Ragging on Ritchie

Instead, the required responses have to build resilience in quite different ways. One way to do this would be to provide the support that this inflation would demand for those who are most likely to be impacted by it, who are those on relatively low incomes. So, pensions and benefits would have to be increased in line with inflation, and employers, including those linked to the government, must similarly be expected to deliver pay increases that would deal with any resulting price hikes. We cannot live through another cost-of-living crisis. That mistake cannot be repeated.

Increase pay and benefits, setting off an inflationary spiral.

Well done there Sirrah, well done there.

It is also an alarming hike in rents, which are, however, insufficient to cover the costs of some highly-geared (over-borrowed) landlords who are selling their properties as quickly as they can, so increasing the scale of homelessness and disruption, whilst also removing property from the rental housing stock, at least temporarily. It’s a perfect storm for the councils involved, and it can only get worse since it is the policy of the Bank of England to maintain high interest rates as inflation declines, which can only make rents increasingly unaffordable whilst forcing more landlords out of business.

Did he say all of this when mortgage intertest relief was limited for landlords? When those other tax changes came in which also reduced the supply of rental housing?

Does he say this about his ideas on adding a 15% surcharge to “unearned” income?

Sure, it’s true, higher costs for being a landlord will lead to fewer landlords, that’s obvious. But does he run with this when it’s an argument against something he likes?

In summary: QT need to stop, now. Our financial stability, the decline of inflation and the chance of avoiding recession all depend on it.

QT is the method by which we reduce inflation.

The first thing to say is that the size of a central bank’s balance sheet is almost utterly inconsequential, unless it is too small. All that the size in question indicates is the amount of money that the central bank has created on behalf of the government for whom it acts to support the functioning of the economy for which that government is responsible. Let’s be clear: someone has to create that money.

QE created lots of money. As Spud would agree. We then got inflation – the result of too much money. Which even MMT agrees is possible. Therefore, QT reduces the amount of money, reduces the inflation.

It’s entirely true that MMT suggests increasing taxes in order to reduce the amount of money. Run a bidget surplus (say) and cancel the money that way. But it’s still, at heart, the same thing. Reducing inflation by reducing the amount of money.

“We must stop QT in order to reduce inflation” is simply ignorant. But then Spud…..

But what is true is that wealth is always harmed by inflation. That is the only reason it is an economic priority when seriously disruptive inflation is a virtually unknown economic problem.

Well, two interesting ideas.

The first that wealth – which is rarely in cash, usually and near entirely in assets – is hit by inflation. The assets rise in value, assets are a very good inflation hedge.

The other is that seriously disruptive inflation is a virtually unknown economic problem. Well, outside the places that follow Spud’s economic precepts – so not Venezuela or Zimbabwe – perhaps….

What astonishes is that he manages to get two such entirely contrary to reality statements into only two sentences.

The water industry is bust: it is time that Ofwat said so

Of course, if as Spud says, the English water companiesa re bust then that means that govt owned Welsh and Scottish water are worse than bust.

Because the investment required to bring them up to that held to be acceptable standard is greater, right?

Second, there is no reason for this beyond a pandering to the greed of bankers and the whims of those researchers they fund or are in cahoots with. Banker’s bonuses should be properly described as economic rents – which are the sums extracted by those with economic power in excess of the return that a genuinely free market would pay. So, let’s not pretend that there is economically virtuous about this. These ‘rewards’ are exploitative.

Variable pay is an economic rent? Whut?

Both Spud and I have been paid variable amounts by Forbes. X amount per page view (1 euro cent per I seem to recall) which is very definitely performance related pay, a bonus. It’s also not an economic rent.

What’s happening here is Spud knowing that “economic rent” is a baddie. Spud also thinks that banker bonuses are a bad thing. So, bonuses are an economic rent – tossery, obviously, but also bad logic.

The FT is reporting that the world is facing a rice crisis.

As they note, the price of rice is rising very fast.

That is partly because India has put a ban on the export of some types of rice most commonly bought in developing countries, and placed minimum prices and export tariffs on other types of rice, like basmati, most commonly bought by countries like the UK.

So, what should we do then?

Well, exactly what Spud says we shouldn’t which is have more speculation – yes, futures, options, commodity exchanges! – in rice.

Because some of us recall back when Spud was shrieking – along with the World Development Movement, now Global Justice – over how we really must tax speculation. For the WDM report (as I gleefully pointed out at the time) noted that rice had less speculation than wheat and corn. And also greater price movements from smaller changes in supply and or demand. Which is as standard econmoics would have it too – it’s right there in Adam Smith.

Speculation in futures etc dampens price movements.

So, to solve the problem Ritchie is complaining about we should do the opposite of what Ritchie normally suggests. And how normal is that?

The issue is serious, but only indicative of the problem many millions more face as tax bills escalate due to Sunak’s policy. Frozen tax allowances impact everyone, but will hit those on lowest income hardest. The IFS think they will result in £50 billion of extra tax paid. That is half the sum I have identified in the Taxing Wealth Report, so far. The difference is that most of this will be paid by those in lower pay.

What this means is that whilst tax should be increasing on the wealthy what we are actually getting is tax increases on those already hardest hit by the cost of living crisis. And the Tories do not care.

Back that two decades when I – in my only successful campaign so far – was arguing that we should increases the allowances. That insistence of mine that the personal allowance should be the same as the full year full time minimum wage? You know, that one that did actually happen?

D’ye recall the Great Tuber – and all such associated lefty tossers – insisting that no, no, we couldn’t do that because the biggest beneficiaries of higher tax allowances would be the rich? You do?

Ah, good, means you’ve got a better memory than the Mashed Spud himself does.

As I have long argued, pension funds could be an ideal source of funding for the green transition that we need, but there are conditions attached to that suggestion.

First, the government has to create the investment opportunities.

Second, the opportunity has to have an income stream attached to it (which is not hard: it’s either a rent, or a revenue e.g. from energy, or a lease from a government department).

Third, the opportunity has to be wrapped up in a bond with a government guarantee attached to it, which then reduces the cost.

Fourth, there has to be compulsion. If tax relief on contributions to funds was linked to compulsorily investing 25% of all new funds in new green activity in the UK economy most of that money would flow into government-related activity.

If it’s a government created opportuinity, with a government guarantee, with an income, then why does there need to be compulsion? Surely capitalists would fall over themselves to buy such things?

The great domestic demands of this moment are fourfold.

We need to rebuild from the wreckage of austerity and liberate this country to do all those things that are possible.

We need to rebuild our international relationships, which are in tatters after Brexit.

We need a green transition because our future depends on it.

And we need to rebuild faith in politics so that these things might happen.

….the politicians we have are in fact the thin-necked soy-boy dweebs we all suspect them to be and also that there is no alternative bench of talent to replace them? Not having faith in politics would therefore be reasonable…..

For the bottom ten per cent in the US, life expectancy is about 20 years less than in most other equivalent n countries at just 36 years.

Gun deaths and opiate addiction are the obvious factors making up the difference, but healthcare must also come into it.

There are few health care things which, if you’ve survived childhood, are likely to kill you before you’re 35 or 40. Drugs and guns, yes, but few health care things. That “must” is an incorrect assumption.

We need more taxes from those with wealth: there is no other option available to a future government in need of additional funding

They’re screwing as much out of the general population as can be squeezed out. That is, they’re already run out of other peoples’ money. Thus the hunt for a new source – instead of the obvious why not spend better?

The UK is still heading for recession

What is it, the average economic expansion is 5 years? So if you consistently predict a recession for 5 yars then you might be right in the end?

Inheritance tax is the only tax in the UK that is supposedly charged on wealth.

If reports from opinion pollsters are to be believed, it is also the most hated tax in the UK[1].

Paradoxically, inheritance tax is also one of the taxes that a person is least likely to pay in the UK. In the tax year 2020/21, which is the last for which reliable statistical data is available, just 3.73 per cent of all estates in the UK were subject to an inheritance tax charge

So, who pays inheritance tax? Whoever receives less money as a result of inheritance tax. Who is that? The people who inherit.

So the number of people who pay IHT is not the 4% of estates, it’s the number who inheirt from those estates. Which is a rather larger number, no?

He doesn’t even know what supply side is.

This is, of course, total nonsense whether suggested by Tufton Street or Rachel Reeves. Characterised as ‘supply side reform’, the idea is that profit is a higher good than anything else because markets know how to price for the benefit of society better than the state can ever manage to do by interfering, and so market interests must be allowed to progress unfettered.

Supply side is really, really, simple in concept. Sometimes reforming the way things are supplied will be a good idea. So, let’s find out when and how and then go do that.

That’s it.

Now, the details can get a little trickier. When’s the peak of the Laffer Curve? OK, we don;’ want to go over that because if we do we’ll be limiting the supply of labour. How much control of who builds where should there be? Possibly less than there is no when land with building permission is £1 million a hectare.

But “supply side” sa supply side just says that it’s worth tihning about the supply side.

At the risk of sounding like a broken record, we need a new pro-people economic policy. We have had policy for bankers and big business for forty years now. It has failed. This new policy starts with low interest rates.

And the government needs to spend more, not least on employing more people to provide the essential services that the UK once enjoyed, but now lacks. And they need decent pay.

Then we need to invest more. We have no choice. Not only is the infrastructure of this country worn out due to neoliberal neglect, we also need to become sustainable and we are a long way from that as yet.

As a result we need to accept that the richest in this country will need to pay a lot more tax. If we are to reverse decline that has to happen.

My contribution is the Taxing Wealth Report. It shows that raising the required tax is possible, with ease.

We need more investment therefore we should lower interest rates – reducing the amount of savings done to finance investing – plus nick all the money off people who invest through higher taxation.

Yes, that’ll provide the correct incentives, won’t it?

Note what he doesn’t suggest – that his pensions savings, currently all in cash, be invested in anything….

So interesting that we could find Spud contradicting himself if we bothered to go looking:

We also need to raise taxes on the wealthy for three reasons. The first is that the government needs to spend more as a proportion of GDP in both the short and long term and that will require that the inflationary impact of that spending be removed from the economy by making extra demand on those best able to meet it.

But taxing the wealthy doesn’t reduce inflation. Because it doesn;t reduce comnsumption. Wealthy people maintain their lifestyle by just saving less and keeping consumption constant. As Spud has told us a number of times. Therefore taxing the wealthy doesn;t reduce the inflation stemming from higher government spending.

Second, the folly of austerity is ever more apparent. Osborne, Hammond and others should have been repairing the UK whilst the interest rate sun shone. They did not. They favoured tax cuts instead. The folly of that is now ever more apparent.

Tax as a %ge of GDP is higher now than then. So what sodding tax cuts?

But as important was our reflection on geese. Just a couple of facts are interesting. Pink foots are the archetypal goose for flying in a skein (the V shaped formation, which is, however, usually a bit lopsided). The lead bird is not an alpha, or a male. They just take it in turn to do the hard work, which the leading bird does. They work cooperatively, readily swapping roles, frequently.

And if for any reason a bird needs to drop out of the skein and go to the ground two others group in the skein drop out with it, staying with it until it can return or it is clear it cannot survive. Again, community is apparent.

The conclusion from that discussion was that the Tories have a lot to learn from pink foot geese. They seem to have so much better a sense of society than that party does.

There’s no Commissar, no Fat Controller, no government, just the little platoons getting on with it. You know, very Burkean conservative.

Could it be that it, like the whole neoliberal establishment, views current world decision-making through the lens of neoclassical economics profit and loss, which calculation refuses to take externalities, like pollution, into account? I think it is.

The way that neoclassical economics deals with externalities is with a Pigou Tax. Whihc then neatly deals with the problem. Ritchie’s against a carbon tax because somethingmuttermutter.

He actually knows the solution but then claims it’s ignored…..