In which we examine @RichardJMurphy\’s knowledge of the real world

Not a lot actually.

I explained there are four ways to generate income growth in the UK. One is to increase consumer spending. Another is to stimulate business investment. Then there is extra government spending. Finally there are growing exports. And that’s it.

The trouble is consumer spending is falling as incomes decline.

And companies are not just not investing, they’re saving like mad.

Whilst the government is slashing spending.

And our export markets are collapsing into chaos.

Oh, right. So the recent trade figures:

UK exports surge despite the eurozone crisis

• Trade deficit came in at £7.8bn, down from £8.2bn in July
• Exports rise to £25.5bn

So Ritchie and the real world seem to be at loggerheads.

It\’s not as if surging exports are all that much of a surprise either. We have had quite a large currency depreciation of late. You know, same thing that pulled the UK out of the Depression back in 1932/3?

17 thoughts on “In which we examine @RichardJMurphy\’s knowledge of the real world”

  1. Note how there is absolutely no attention to, or even awareness of, the fact that the purpose of the economy is to produce those goods and sevrices desired by individuals, and that growth is the production of more goods and services per capita.

  2. “The trouble is consumer spending is falling as incomes decline.”

    Stats just in: retail spending was up 5.5% in September.

  3. @Gareth, was going to put down the same thing.

    I find it very sad that so many on the Left appear to actually want the economy to collapse in order to “prove” that the Tories have the wrong economic policy.

  4. To be fair to Murphy, in this context his general delusion is the mainstream one; the very strange idea that you can repair or improve the economy by fiddling with the monetary system. Most people believe that, on the Left and on the Right. It is quite the strangest of misapprehensions, but hardly unique to Mr Murphy.

  5. Sorry that should say ‘to the extent it continues to rise in real and cash terms’.

    When is this site going to get a preview button on the comments?

  6. “very strange idea that you can repair or improve the economy by fiddling with the monetary system”

    Who would have thought that using monetary policy would be sufficient so solve problems in an economy caused by a shortage of money. What’s that? Who? A “Milton Friedman”, you say? He must be some kind of RADICAL COMMIE INTERVENTIONIST. Send him back to Chicago.

  7. In defense of old Murph, I’d say he is right to a degree about all four parts.

    Household incomes are not growing much, retail spending is only a small part of household consumption, the rest is not doing so well. Our export markets *are* collapsing, and the govt *is* trying to constrain fiscal spending growth as much as possible.

    And so the UK GDP stats look freaking awful, and the smart macro guys are saying we need much more radical monetary policy to fix them, and that throwing printed money at the wall and hoping it sticks probably won’t be enough.

    But also that good monetary policy is both sufficient and necessary; Japan has proved that bad monetary policy and running deficits forever doesn’t help.

  8. Gareth, the only thing a money system can do is accurately reflect market values. The more you fiddle with it, the less it does that, and the more dysfunctional the economy becomes. You can’t improve the economy by fiddling with it, you can only cause instability. The worst possible thing you can do is fiddle with the actual cost of (other peoples) money by setting false interest rates. That’s really all we need to know about money.

    There have been lots of fiddling theories. Keynes, Friedman and the monetarists, and so on. None of them work. It’s not particularly a commie thing. They were more about abolishing the money system. It’s a fiddling thing. Any fiddling produces an inferior outcome to not fiddling. Like I said, that’s all anyone really needs to know about the money system. The only correct policy is no policy.

    It’s a bit like religion. Which religion is true? There are lots of religions, and everyone argues about which one is correct. The answer, of course, is none of them. That is all you need to know about religion.

    It’s very simple, money. People fiddling with it is what makes it complicated.

  9. It is true that firms are sitting on a lot of cash, but there are reasons why investment is not happening. The uncertain economic outlook is a part of that. Regulatory uncertainties don’t help, either.

    It can and should be a priority for this government to create a simple, flat, stable tax and regulatory environment for firms. Fat chance of that.

    And people like Murphy, who are aiding and abetting ever new ways of terrorising firms with new and onerous rules and taxes, are a part of the problem here.

  10. So, Ian, what you’re saying is that we need a campaign against economists. I vote that we make an agitprop film, and call it “Fiddlers on the Loose”.

    The coat’s already in hand…

  11. “None of them work”

    On what evidence, Ian? Plenty of countries who have implemented good monetary policy are doing fine. e.g. Sweden, Switzerland, Canada, say. Plenty of countries with catastrophically bad monetary policy are not. e.g. the Eurozone.

    “The only correct policy is no policy”

    There is supply and demand for money. With fiat currency, you have a monopoly controller of supply for base money. It is meaningless to say you can have “no policy”. With no fiat money, maybe. But we do have fiat money in this real world of ours.

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