Pots, kettles and the Glorious Ritchie

Rumour has it that David Cameron has a first in PPE from Oxford. The E stands for economics. However, the only way that’s possible is if he did what all creeps do: read the set texts and never ask a question. Why do I say that? Because there is no sign at all that he actually learned anything from the process.

So sayeth the man with an accounting and economics degree from Southampton, the man who agrees that halfway through the first term he switched off on the economics as it was all obviously rubbish.

So universal debt reduction is a massively bad idea.

So sayeth today the man who said on 16 th September 2011 that:

And second, we can do what else that is really needed: which is massive cross cancellation of debt so that balance sheets of countries and banks are deleveraged all at the same time in an act of mass debt forgiveness – the ultimate Jubilee.

This is also good:

Sixth, you introduce capital controls.

We\’re in the European Union. Free movement of capital, recall? Good luck in rewriting the EU Treaty, which is what would be required.

The other, perhaps even more disturbing, thing about capital controls is that Ritchie doesn\’t seem to understand the most basic point about capital flows. He\’s arguing for capital controls so that Brits don\’t send pots of money elsewhere. Meh, argue that one out as you wish.

But the thing is, Brits don\’t actually send pots of money elsewhere. Not in aggregate they don\’t, for we\’ve been running a trade deficit for the past 30 whatever years. This means that we must (for balance of payments does balance, it\’s an accounting identity, something an accountant who skipped his economics classes should be able to grasp) be running a capital account surplus. As we have been for the past 30 whatever years.

Capital controls will mean foreigners not sending us that lovely money which gets invested in UK business and thus raises productivity and wages.

Paying attention in economics classes is sometimes useful.

24 thoughts on “Pots, kettles and the Glorious Ritchie”

  1. Jesus what a moron he is. It’s the smug tone that really gets me, while he’s propounding his insane and contradictory ideas about whatever has just crossed his tiny brain

  2. I do like the way CMD’s degree is a “rumour”. Whereas Ritchie being a WGCE is established fact, of course.

  3. “the only way that [a 1st] is possible is if he did what all creeps do: read the set texts and never ask a question”

    Perhaps that’s how things were taught at Southampton when Murphy was there (could explain a lot), but Oxford actually likes its students to think.

  4. Cameron is likely to have dropped Economics after the first year like many PPE students do at Oxford (most of the Finals Economics papers, at least in his time, were very heavily maths-based and impenetrable without A level maths and a good head for calculus). From the number of times Vernon Bogdanor gets wheeled out to praise his educational record I’d expect that he did as many Politics papers as he could and the minimum number of Philosophy ones. Again, it might have changed, but a lot of the Politics papers in the PPE course were on political history rather than theory.

    IIRC Norman Lamont was the last (only?) Chancellor to have an economics degree, although I believe he got a Third from Cambridge.

  5. RM is correct that if both private and public sector deleverage at the same time we have recession – which is what Cameron seems to be calling for. I think Cameron’s speechwriters might backtrack on this one pdq.

  6. JustAnotherTaxpayer

    “Capital controls will mean foreigners not sending us that lovely money which gets…”

    mostly lent to the government, surely?

  7. JustAnotherTaxpayer

    “if both private and public sector deleverage at the same time we have recession”

    That is not a causative relationship; it depends on what the recipients of the repaid debts do with the extra (unexpected) receipts of money. They might turn it into final spending and boost GDP.

    In any case, “deleveraging” means to reduce one’s level of indebtedness. The government is not deleveraging. It is increasing its level of debt at a very fast pace. It is leveraging up at a slightly slower pace than was previously planned, is all.

  8. Richie sneaks in an attack on advertising communications too – perhaps he needs to appreciate the role it plays and how it works before calling for it to be banned

  9. I seem to remember the discussion on capital controls within the EU was that it was a right, but not an unfettered right.

    If a country could demonstrate that it needed to introduce capital controls for a limited period and that these capital controls were the ‘least worse’ option to prevent ecomic collapse then these would not be blocked by the EU.

    Capital controls were successfully used by the Malaysian government during the Asian crisis of the 1990’s.

    They are not without their problems and it is difficult to say how badly markets would react to their introduction in the UK, even for a limited time, but we’ve had them in the past (post-WWII until early 1970’s I think).

  10. might the EU not bring in some capital controls of its own accord, once it has put out the current fire (raging inferno)

  11. Dennis the Peasant

    What is truly frightening is that he knows as much about accounting and taxation as he does about economics. Going to or skipping classes don’t seem to have had much to do with Ritchie’s level of competence in matters intellectual.

  12. You couldn’t create another blog just for attacking R, could you? A bit is fun, but several posts a day quickly palls.

  13. Worzel, Arnald,

    I’m not sure that ‘best’ of even ‘#1’ is such as exact science.

    Total Politics for example has decided Mr Murphy to be ‘non-aligned’ and ranked him 73rd in that category [1].

    I’m not sure any of this is very defendable. Mr Murphy has told himself he is not impartial, and that he eschews economics. He is a good blogger in his own way to his own audience, but he is neither ‘non-aligned’ nor an ‘economist’ even by his own admission.

    But it looks a lot better on the fromt cover of a book though.

    [1] http://www.totalpolitics.com/blog/257577/top-15-nonaligned-blogs-2011.thtml

  14. oops. No – Mr Murphy has not “told himself he is not impartial”. Should read “”told us himself he is not impartial”.

  15. JustAnotherTaxpayer

    Bank (or credit card) lending when repaid reduces the money supply – it does not provide “funds” for spending. Private sector deleveraging is therefore deflationary.

    Deleveraging does indeed mean “paying off debt” and I agree that the public sector is not actually doing this at the moment. In fact there is evidence that public spending is rising faster than the rate of private sector deleveraging. So although RM is correct about the impossibility of private and public sector concurrent deleverage, he is wrong to believe that government “cuts” achieve anything other than a small reduction in the rate of increase in spending.

  16. JustAnotherTaxpayer

    “Bank (or credit card) lending when repaid reduces the money supply”

    True, but at the margin if consumers simply deleverage “a bit”, it will merely improve the capital position of the banking sector “a bit”, which might increase their propensity to lend to another sector. True?

    And all of is is assuming the BOE would not offset a deflationary fall in the money supply/spending with more QE, which could/should/might boost spending without requiring an increase in debt.

    That is pretty much what happened in the second half of 2009; M4 was falling, but GDP was growing.

    The fact that the PM cannot say “household debt is too high” without causing all this controversy is kind of pathetic.

  17. Simon: Our Murph hasn’t let ignorance get in the way of self-important opinionating yet. What makes you think he’ll change tack now?

    Frances: People keep saying that you can’t have concurrent deleveraging but I don’t think this quite holds. There’s bond lending as well as bank lending: if a company offers its bondholders equity in exchange for their bonds, then it deleverages cashlessly, doesn’t it? Think about the extreme case: every company converts all its debt into equity. Voila: a perfectly deleveraged corporate sector, without any change in the leverage of the remainder.

  18. Justanothertaxpayer

    Given that banks are being required to increase their ratio of capital to risk weighted assets, I don’t think “a bit” of paid-off lending is going to make them want to lend to someone else, is it?

    QE would offset deflationary effect of debt repayment – if it worked. But as in order for QE to stimulate the domestic economy investors have to actually spend the money instead of parking it in nice safe deposit accounts or buying gold or commodities, it doesn’t work, does it?

    I agree household debt is too high and Cameron should have the guts to say so. But he’s a politician – no way is he going to say anything so depressing.


    Yes, large corporates can deleverage by converting debt to equity, as you say. Smaller businesses and households can’t, of course. They either have to pay it or go bust. Correct me if I’m wrong, but I think most private sector debt is held by households and SMEs?

  19. Frances: Ah, well, I don’t know the proportions involved. Nor am I terribly good at knowing where to look for that specific question, in all honesty. I’ve tried the Blue Book 2010 [1]. Can’t extract SMEs from larger businesses, unfortunately, but I can say the following (from Tables 3.1.9, 4.1.9, and 6.1.9, all in round figures):

    Non-financial corporations have issued £0.5tn in non-equity securities (bonds) and borrowed £1.1tn, mostly from financial institutions or other investors. Financials have issuers £7tn in bonds and borrowed £1.6tn. Households have issued next-to-nothing in bonds (the non-zero coming I think from housing associations and the like), and borrowed £1.4tn.

    As I say, I can’t extract the SME borrowings from the larger corporates, but it’s quite clear that financial corporation bond issues dwarf everything else.

    [1] http://www.ons.gov.uk/ons/rel/naa1-rd/united-kingdom-national-accounts/2010-edition/index.html

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