Government must therefore set a policy framework that forces the close collaboration of monetary, financial and fiscal policy to induce a sustained rise in credit from our very wounded and risk-averse financial system. The British government, along with other western governments, must replace its redundant inflation target with a target for the growth of the value of the goods and services we produce – the growth of GDP in cash terms. It should say that every instrument of policy – quantitative easing, interest rates, government borrowing, guarantees for new bank lending – will be used to sustain the growth of money GDP by 7% a year for the next five years.

This is NGDP targetting.

Of course, Willy being Willy he doesn\’t understand that this is a direct outgrowth of Friedmanite monetarism.

Nor does he understand that it\’s all about money, the money supply, the monetary stance. None of the rest of his blather about government subsidies and direction of investment is necessary at all.

But then if Willy understood the genesis of his pronouncements, the implications of them, then he wouldn\’t be Willy, would he?

Or should I use the more obvious word?

It is a tradition of redistribution, intervention and socialism equally as compelling as Adam Smith\’s \”invisible hand\” (which, one should remember, was a satirical attack on laissez-faire morality, drawn from Shakespeare\’s Macbeth).

It\’s got bugger all to do with laissez faire morality. It\’s about how the merchant (read, capitalist, for the word had not been invented in Smith\’s time) will, despite the greater profits of the foreign trade, find himself still likely to invest at home.

The most important modern result of which is that even if we have perfect theoretical capital mobility it still isn\’t true that labour bears all of the incidence of corporate taxation.

This is just too good a comment to pass up.

Senior bankers, private equity moguls and hedge fund managers appear cut off from the rest of us. They often pay little or no tax,

Eh?

What is this little or no tax? Is this some distand memory of the hedgie paying less tax than his cleaner? Which is really he pays a lower marginal rate than his cleaner, not less tax?

Romney made a fortune of an estimated $250 million dollars out of financial engineering and private equity, while benefiting from tax breaks, during his business career. He paid a reported 15 per cent tax on his profits – a rate considerably lower than most Americans.

Err, no. He paid and pays the capital gains tax rate on his capital gains. Exactly the same as all other Americans.

Economists say that the super-rich in the United States are now seven times better off than they were 30 years ago. Troublingly, this massive growth of wealth and power has come directly at the expense of ordinary people. Statistics show that the income of the average working male in the United States has flatlined since the 1970s.

Look at that logic. The rich have got richer, the middle have not got richer. So, how is the increase at the top at the expense of the not rich? The only way it could be is if the proceeds of economic growth have been asymmetrically divided. But that\’s not the same as taking stuff off ordinary people, is it?

Further, it\’s not actually true that average male wages have flatlined since the 1970s. It\’s that median household wage incomes have: and that just ain\’t the same thing at all. For households have got smaller (meraning higher incomes per capita) and household compensation has risen strongly. Much of that compensation coming in the form of better health care which, as it is employer provided compensation but not wages does not get included in the wages numbers.

But now we come to a real problem.

Murray exposes how the new United States upper class, which he labels a “cognitive elite”, has developed an hereditary stranglehold over the top professions and management positions. The brightest people tend to marry each other, then ensure that their offspring get to the best schools and universities, with the result that, to quote Murray: “The parents of the upper-middle class now produce a disproportionate number of the smartest children.”

Assortative mating. One of the things that is seriously driving household income inequality is the way in which marriage is increasingly taking place between people with similar education levels, working in similar type jobs. This is a result of the entry of women into the workforce as equals and the subsequent later age of marriage.

Quite simply, time was, marriage came from those around you, the family\’s friends etc. And upon marriage most women became housewives. Now marriage is contracted later, from among those one meets at university or at work. Or in hte social circles associated with work. Graduates thus marry graduates, professionals professionals, non-professionals non-professionals and so on.

Yes, there is an increasing stratification of household incomes, as we get one group over here, of two professional income households and another group over here of two non-professional incomes. Even if one of those incomes might be put on hiatus for some years, or part time. Two 50k plus professional incomes is going to lead to very different household incomes than two 25k median incomes.

Yes, this is a rise in inequality of household incomes. But to stop it you\’ll have to do one of two things. Change who people marry (and good luck with that one). Or return to taxation of households. That is, remove women\’s tax independence. Which should really go down well with the sisters. Not to say, how do you define a household when marriage isn\’t the defining attribute of a household any more?

I say this is a problem: it is if inequality of household income is something you worry about. But I cannot see any solution to this inequality that isn\’t a horrible retrograde step in terms of individual liberty. Men and women should be treated equally by the tax system. Taxed on their incomes/property, not changeably dependent upon who they shag regularly (to the extent that that happens in marriage tee hee). And we certainly don\’t want any system whereby who you can marry (or shag regularly, have children by) is determined in any manner by the State.

So I don\’t think there\’s a solution to that, is there?