March 2013

Well, yes and no Mr. Cohen, yes and no

Such complaints are normally dismissed as \”Luddism\”. But just because the 19th-century Luddites were wrong about the original industrial revolution destroying jobs and living standards does not mean that their successors must always be wrong. Sensible economists worry about automated manufacturing replacing factory workers, Google\’s autonomous cars replacing lorry and taxi drivers, and automatic online writing and translation services taking on tasks that only humans have been able to perform since the invention of literacy.

It\’s certainly true that what has always happened in economics does not mean that it will always happen. The prime example of this being the Reverend Malthus. He was absolutely spot on correct for all of human history until the very moment that he sat down to write. He\’s been absolutely wrong since then.

However, there\’s good reason to think that the automation of everything isn\’t going to destroy living standards. Indeed, that it cannot in fact destroy them.

Imagine the end state: machines do everything. Machines make the machines that repair the machines that make machines….and we don\’t need to iterate any further back than that I think.

What happens to living standards here?

Clearly, no one has a job. Machines quite literally do everything. The robots act for us, the software writes the scripts and the machines make the 3D holo machines that we watch them on.

What happens to living standards here? They soar, of course. For the cost of everything tracks back, at some point and some remove, to the income of someone. This isn\’t the labour theory of value, rather the labour theory of income. Buy an apple, a TV, a car or a jetplane ticket: all of that money, those costs, track back, somewhere, to the income of someone. Might be a capital income to the financier of the jetplane, might be to the rivetter, to the farmer who grew the apple that fed the rivetter…..but all of the economy eventually flows back to the income of someone or other.

We\’ve now removed all of that requirement for an income, have we not? And competition will do the rest: all of these products of all these machines will be gobsmackingly cheap. To the point of near free in fact. We might even say that true communism will have arrived at this point.

And if we are surrounded by free goods and services what is our standard of living? It\’s sky high, isn\’t it?

There are those out there who insist that all of the income will inevitably flow to those who own the capital. But again, it\’s competition that will see to that. In our mythical world where machines make machines that make machines, all that is necessary is for three or four people to make a machine that makes a machine that…..and we have competition. Absent collusion among the machine makers (and the open software movement shows well enough that there will always be some refusniks from collusion) we end up with goods and services being priced at around and about their cost of production. Which is spit as we\’ve not got to pay any wages.

And if goods and services don\’t cost anything then what\’s the damn problem?

And think back to the last time this happened. When farming mechanised. Sure, lots of people had to go do something else. But what really happened? Did all the money in farming flow to farmers? No, that isn\’t actually what happened, is it? As production costs fell then competition led to falling food prices. So much so that farmers have been on the public teat ever since: far from their getting all the money they\’ve got to be subsidised to survive.

So, will the capitalists end up with all the money as production mechanises? Nope, given competition, it\’ll end up in the pockets of consumers.

Hurrah etc.


Under the arrangement, depositors in Bank of Cyprus will receive shares in the lender worth 37.5pc of any savings over €100,000, while the rest may never be paid back, according to a statement from the Cypriot central bank.

Of the 62.5pc of uninsured deposits not converted to bank shares, about 40pc will continue to accrue interest but will not be repaid unless the bank does well, while the final 22.5pc will cease to attract interest.

Government figures, including finance minister Michalis Sarris and central bank governor Panicos Demetriades, had previously indicated that depositors in the island\’s largest lender would lose around 40pc of their uninsured savings as part of an 11th hour agreement reached in Brussels in the early hours of Monday.

Meanwhile, account holders in Laiki Bank, the country\’s second largest, stand to lose up to 80pc of their money as the lender is wound down and insured deposits transferred to Bank of Cyprus.

I\’m not really sure how these numbers stack up.

From the original numbers they needed to find €6 billion or so to prop up the banks. There\’s €30 odd billion in accounts over €100,000. Thus the haircut shouldn\’t need to be that large. 20% or so would see it right.

However, those are the numbers for the entire banking system. And now they\’re only resolving the two main banks, the two which are actually bust. And I suppose it\’s possible that the two bust banks were the two retail banks. It\’s the other banks that have been catering to the offshore big hitters with the large deposits. They\’re not bust, they don\’t need resolving, but that\’s also where most of the large deposits are.

That\’s all supposition of course but it does explain the observable facts. And that leads to a very interesting outcome as well.

That means that it wasn\’t Cyprus\’ home for hot Russian money that was the problem. They\’re not the banks that went bust. What did go bust was the plain vanilla domestic banking system. Largely by putting all the depositors cash into Greek Government bonds. And that would be very interesting indeed, wouldn\’t it?

So, does anyone know where one can find the actual figures for deposits? By bank? Can we see how much Laiki and B of Cyprus had in those large offshore deposits? As I say, if the haircuts have to be this large to raise the €6 billion then those large deposits can\’t have been all that large. But is it possible to find out?

Why @RichardJMurphy is in favour of capital controls

The extent of the control over all life that economic control confers is nowhere better illustrated than in the field of foreign exchanges. Nothing would at first seem to affect private life less than a state control of the dealings in foreign exchange, and most people will regard its introduction with complete indifference. Yet the experience of most Continental countries has taught thoughtful people to regard this step as the decisive advance on the path to totalitarianism and the suppression of individual liberty. It is, in fact, the complete delivery of the individual to the tyranny of the state, the final suppression of all means of escape—not merely for the rich but for everybody.

FA Hayek.

Way back when, in fact in the times that Hayek was writing about, my family knew a Wermacht officer who left Germany with his Jewish wife. In order to extract at least some of their wealth from the Nazi system they removed their chrome bumpers on their car and had others cast out of silver.

But for Murphy is is this which is at the centre of his lust for capital controls: \”the complete delivery of the individual to the tyranny of the state\”.

It really is you know.

This is as good a summary of The Courageous State as you\’ll find

In summary my new faith can be understood as follows:

Government allocates capital better than the private sector, and should use interest rates, exchange rates, price fixing, price controls or whatever artifice it deems fit to ensure that capital goes to where it is properly directed.
The alpha and omega of the central bank’s proper role is to finance government spending.
Money belongs to the government, as we have seen properly demonstrated this week in Cyprus.
Property rights, the antediluvian obsession of the market fundamentalists, have been subject to a doctrinal revision “the template” as also shown this week in the eastern Mediterranean.
As a result of this new paradigm, asset prices must rise for the foreseeable future so long as Heli I decrees that the money printers keep printing. How can asset prices fall while the US central bank is printing more than $80bn a month? Even the unreformed Bundesbankers will surely grasp that if the European Central Bank did the same thing, the euro\’s problems would disappear overnight and prosperity would swiftly return to southern Europe, (Really, Germans should not be allowed into politics until they have had a primer indoctrination at either Cambridge or Princeton.)
More money creates more wealth, and more wealth, especially in real estate, creates more jobs—evidence to the contrary in Spain only represents a small setback on this road to happiness. As we all know, a rise in real estate prices leads to a massive increase in productivity, a prerequisite for an increase in the standard of living.
Services or goods provided to the population by the government, borrowing money from the central bank to pay the fellows who produce the goods that nobody needs with money that does not exist, will add tremendously to the GDP. This is a sure sign that the right policy is being pursued.
These goods and services anyway have a higher moral value than the ones produced in the private sector. One should simply compare the \”social usefulness\” (a favorite notion of Lenin and Stalin) of a nurse versus a hedge fund manager to be convinced. I rest my case.

Interesting Guardian logic here

If full-time parenting was that fulfilling, more men would have been doing it

Hmm. If science was that fulfilling then more women would have been doing it.

If being a CEO, judge, entrepreneur, engineer were that fulfilling then more women would have been doing it.

They don\’t therefore obviously none of these things can be that fulfilling.

Good luck with that matey

This is an obvious truth:

\”The last time a French norm was scrapped was in 1789. Ever since, they have only built up,\” the authors said, citing Montesquieu who stated: \”Useless laws weaken essential laws.\”

One of the few arguments that I\’ve made up myself, and which are actually reasonable, is precisely that Montesquieu point. Proving that I can be reasonable but not original. Whether I can be original and reasonable is as yet unknown.

But what does this lead to?

The village of Albaret-Sainte-Marie, southwestern France, population 573 and with an annual budget of 400,000 euros, is required to widen all its pavements \”to allow two wheelchairs to pass each other.\” The mayor pointed out to Le Figaro that the village has no wheelchair-bound residents.

Town hall staff are required to work in the dark if light bulbs blow and specially-trained staff are not on hand to change them.

The place rather needs a bonfire of the bureaucracy. What they\’re actually calling for is:

The key principle we need to bring back is common sense,\” said mayor Michel Thérond.

Good luck with that matey. Not just in France but anywhere in the EU.

Why the UK is indeed different from Cyprus

Couldn’t happen to us, could it? After all, Britain is nothing like Cyprus. Cyprus is a small island, far from the “action”, with contented natives who prefer not to notice as more and more of their wealth is bought up by oligarchically rich foreigners. Our banks don’t cripple themselves with out-of-control lending to those natives, presumably on the back of all those foreign investments. Oh.

The more I analogised, the more the only substantial difference I could see between Cyprus and Britain was the source of my ancient envy: the sun shines there, while it rarely does here.

There is of course a difference. It\’s called the Bank of England.

We have our own central bank, a central bank that can print as much money as it needs to. And will do in fact. For one of the duties of a central bank is to act as lender of last resort. And it was that very threat, that the ECB would stop acting as lender of last resort to the Cypriot banking system, that precipitated the crisis.

As is often said, a country that prints its own currency cannot go bust…..not until they get to Zimbabwe levels of stupidity that is, where they didn\’t have the hard currency for the ink.

If Britain were in the eurozone and were subject to the ECB then yes, it might be something worth worrying about. Outside, no.

The unions link up with the SWP?

Another one of these groups campaigning against cuts in a bloated public sector. What\’s interesting to see though is that we\’ve now got the unions tying up with those apologists for rape from the Socialist Workers\’ Party.

And isn\’t it going to be fun having the SWP and the Communist Party of Britain in the same organisation? The Trots and the Stalinists?

And yes, of course Ritchie approves of this. Gives an insight into where he gets his vacuous ideas from eh?

Tony Benn President, Coalition of Resistance

Len McCluskey General secretary, Unite the Union
Mark Serwotka General secretary, PCS
Christine Blower General secretary, NUT
Michelle Stanistreet General secretary, NUJ
Manuel Cortez General secretary, TSSA
Billy Hayes General secretary, CWU
Bob Crow General secretary, RMT
Mick Whelan General secretary, Aslef
Kevin Courtney Deputy general secretary, NUT
Paul Mackney Former general secretary Natfhe (now UCU)
Vicky Baars NUS union development
Kevin Donnelly Trade Union Council JCC

Caroline Lucas MP
Katy Clark MP
Jeremy Corbyn MP
John McDonnell MP
Murad Qureshi London assembly member
Dawn Butler Former Labour minister for young citizens and youth engagement

Tariq Ali Author
John Pilger Journalist
Ken Loach Filmmaker
Owen Jones Writer
James Meadway Senior economist, New Economics Foundation

Dot Gibson National Pensioners Convention Keep our NHS Public
Merry Cross Disabled People Against the Cuts
John Hendy QC Co-chair, People’s Charter
John Hilary Director, War on Want
Sam Fairbairn National secretary, Coalition of Resistance
Imran Khan Solicitor, co-chair, People’s Charter
Rachael Newton People’s Charter
Romayne Phoenix Chair, Coalition of Resistance
Zita Holbourne Co-chair, Black activists rising against the cuts
Clare Solomon Vice-chair, Coalition of Resistance
Andrew Burgin Vice-chair, Coalition of Resistance
Colin Hampton Co-ordinator, National Unemployed Workers Centres Combine
Anita Wright Secretary, National Association of Women
Joginder Bains Association of Indian Women
Shang Gahonia Indian Workers Association
Carolyn Jones Director, Institute of Employment Rights

Lindsey German Convenor, Stop the War Coalition
Kate Hudson General secretary, CND
Bruce Kent Peace campaigner

Mark Steel Comedian
Lee Hall Playwright
Roger Lloyd Pack Actor
Josie Long Comedian
Iain Banks Author
Arthur Smith Comedian
Roy Bailey Folk singer
Francesca Martinez Comedian
Richard Wilson Actor

John Rees Counterfire editorial board
Natalie Bennett Leader of the Green Party England and Wales
Fred Leplat Socialist Resistance
Robert Griffiths General secretary, Communist Party of Britain
Bill Greenshields Chair, Communist Party of Britain
Richard Bagley Editor, Morning Star

A bit of speculation

I wonder how bad the floods are going to be in Central Europe this year?

Just had news that our engineers cannot sample a site as not only is the snow cover still there, the rocks are actually still iced together. We\’ve got to wait for the snow melt (hmm, 10 days, two weeks?). That\’s OK, doesn\’t actually delay anything important.

However, makes me wonder a bit. Spring flooding isn\’t so much about how much snow melts, it\’s how fast the snow cover melts. And a late spring which moves very quickly to warm up (when it finally does) would, at least I guess it would, lead to the snow melting much faster than usual.

Thus to higher floods.

Anyone actually know about this? I ask be cause in Usti they\’ve a pole by the river recording flood levels. 2006 seemed to flood the entire train station for example. So, does a late spring mean higher floods and if so, what does anyone think this years\’ levels will be?

What really happened in Cyprus: they elected a commie

Two months after Cyprus joined the euro area [in January, 2008], there were presidential elections and the Cypriot public elected as president a communist, Demetris Christofias. The public was convinced he could solve the political problem we had with Turkey and reunify the island. The issue was not economic.

If one thing has become clear over the last five years in Cyprus, it is that the euro area, which is not just a market economy but a currency union with strict rules, is not compatible with a communist government. Why is this important? This government took a country with excellent fiscal finances, a surplus in fiscal accounts, and a banking system that was in excellent health. They started overspending, not only for unproductive government expenditures but also they raised implicit liabilities by raising pension promises, and so forth.

The left lost the benefits cuts argument over housing benefit caps

Polly is decrying the coming cuts in benefits. Well, why not, we\’d rather expect her to do so. And maybe they\’re good cuts and maybe they\’re not.

But I think we can pinpoint where the left actually lost this argument. It was right back at the beginning. When the top limit for housing benefit was introduced.

So the bastard capitalist neoliberal Tory scum said that in future housing benefit would be limited to £400. And there were screams and wails about how this would mean the social cleansing of London. The left were really gearing up at this point. Then everyone realised that the limit was £400 a week. And suddenly the comments sections (no, not just the Mail, The Guardian too) were full of people shouting \”But, but, that\’s more than I fucking earn! What do you mean it\’s a catastrophe that housing benefit will be limited to well over average wages?\”

This democratic thing that vox populi, vox dei did mean that the campaign of outrage over such a, to the hoi polloi entirely reasonable, limit on benefits couldn\’t really gain any traction.

And they\’ve not really been able to gain much traction on any of the other issues since. Moving to only paying, what is it, 30% of median rents, the bedroom tax, all these other things, all of which are going to have a much greater effect, these just haven\’t generated outrage on the Clapton Omnibus. For that first roar from the left turned out to be against something that middle England thought was entirely acceptable. And I do mean middle England here, those on mean and median wages.

Why should someone get more than I sodding earn in total just to pay their sodding rent? Move you feckless bastards.

Whether it should have been this way is an entirely different matter. But I do think that this is the way it was. The protests against benefits cuts shot their bolt too early on the wrong subject. And much of the population just isn\’t listening to their wails as a result.

Now Mr. Murphy is complaining that auditors obey the law

The Bank of England issued a statement yesterday saying that the UK’s major banks and building societies are currently underestimating their losses by £50 billion.

I think that’s true.

But why didn’t they say as a result that the accounts of the banks in question are not true and fair?

Or that they cannot have been properly audited as a result?

And that this crisis is in no small part the fault of the Big 4 auditors who signed those accounts off and who in very large part helped set the rules under which those accounts were prepared that were written by the International Accounting Standards Board, of which they are major funders?

Why is it that when auditors have so very obviously failed completely and utterly in their duty we just turn a blind eye?

Because the law says that auditors should audit banks in this manner. It\’s what the law actually says they must do.

But accounts were and should be prepared on an anticipated loss basis as happened to 2005

Yes, the law was changed in 2005.

Ritchie\’s capital controls

Man\’s badly misinformed:

The measures suggested in this chapter are forms of capital control: they are intended to make sure that capital is accountable wherever it is. This is essential if the inevitable increase in the rate of return to capital that has been a characteristic of the last thirty years, and which has been so harmful to the world economy, is to be corrected.

Increase in the rate of return to capital? Where?

There\’s been an increase in the rate of return to human capital, education, most certainly. But capital as capital?

Thirty years of the free flow of capital has resulted in at least 5% of world GDP shifting from labour to capital.

This just isn\’t true.

He\’s making the mistake of actually believing research from the TUC.

Has the labour share of income fallen? Yes, it most certainly has? Has the capital share of income risen over the past 30 years? No, actually, it hasn\’t.

What has risen is the amount of tax governments are taking off people. And, given the way that GDP is measured using the income approach, this is what explains the falling labour share. Specifically, there\’s been a significant rise in both employer paid social security taxes and in taxation on consumption: specifically, VAT. Those two are what explains the falling labour share. Must be, as the capital share hasn\’t budged.

It\’s not just that his solutions are wrong, it\’s that his basic facts about the real world are.

Payments for investment purposes, whether for direct investment or portfolio investment will all require prior consent for payment.
Payments for speculation will be subject to quota allocation, which could be withdrawn at any time.

And his solution is entirely fascist. You only get to send your money where The State thinks it appropriate that you do. Quite apart from anything else he\’s entirely missed that the past 30 years of the free movement of capital have at the very least coincided with, although I would insist caused, the greatest reduction in human poverty in the history of our species. He would undo all of that just so that he could tell rich people what to do with their money.

Which century is Richard Seymour living in?

I\’m not entirely convinced that it\’s this one.

But what does the banking system do that we actually need? In the present system, banks perform a number of functional requirements. Commercial banks operate as a clearing house for bills of exchange, thus reducing the costs of circulation and ensuring the quality of those bills as a measure of value.

Banks can do that, certainly. It\’s even possible that some of them do, occasionally, deal with bills of exchange (although that particular function is more likely to be found in an invoice factoring company these days). But to describe it as a core function or competence of 21 st century banking would be more than a little odd.

It would be as if the writer\’s knowledge of how banking works were cribbed from some 19th century explanatory or polemical tome….oh, wait, yes, I do see the problem.

It would require taking as much of the economy out of the market as possible and placing it under direct popular control. It would require, in short, a sustained popular challenge to capitalist power,

It just never ceases to amaze me how people continue to get this wrong. Capital, capitalism, and markets are simply entirely different things. Different axes. One can have a non-capitalist system which contains markets just as one can have a capitalist system without them. And of the two it is vastly more important that we continue to have markets than that any form of capitalism survives.

I really just don\’t get why people continually confuse the two.

In which we praise the Australian command of language

And the courage of a newspaper to print such joyous prose:

“There are some ideas so absurd,” said George Orwell, “that only an intellectual could believe them.” There are other ideas, even absurderer, that only The Conversation could deem worthy of public discourse.

The Convo, a sort of undergrad Onan the Barbarian’s soggy biscuit circle taken to its natural, digital conclusion, reached new heights of frantic monkey spanking last week with an otherwise po-faced suggestion that all Australian drinkers be issued with an ID card that would track their grog purchases.

Mmm, Orwellian. But wait, there’s more surveillance state goodness where that came from. Through the magic of modern technology, the card could scold them at the checkout for drinking too much and even whack a punitive and sharply escalating tax hit on punters as the night wore on and they nudged it just a little too enthusiastically, at least for the straighteners and punishers at The Conversation.

Not even the current leadership of the ALP is suicidal enough to go down this path. They will empty your superannuation accounts before moving in on your drinking money. The desperate politicians of Cyprus, facing the prospect of national bankruptcy, decided to steal the savings of Russian mafia bosses instead of doing something like this. Even a censorious puckered arse like Abbott, who might in the darkest corners of his shrivelled heart, enjoy the misery such a system would bring, and, possibly, the encouragement it might offer to church going if the altar wine was exempt … even he could probably not be moved in this direction. No matter how much Cardinal Pell urged him on from the cloisters.

There is only one political party with the balls-out craziness to get fully behind this scheme. I think I’m going to have to withhold my usual sympathy vote from the Greens until I hear them swear on a stack of lentils that they will never endorse the idea.

Just marvellous.

I can think of several UK blogs which could be described as soggy biscuit circles. Although I doubt very much that I\’d ever be able to find a UK newspaper that would let me say so in print.

In which I disagree with Suzanne Moore

but protein and decent vegetables are beyond a food stamp budget. You cannot lecture people about healthy diets when fresh produce is so expensive.


Sure, out of season strawberries are expensive but basic decent fresh food which you then prepare yourself is vastly cheaper than supermarket Shergar lasagne.

As John B regularly says, it\’s entirely possible, even in the most austere food desert in the country, to make a nourishing, tasty, filling meal out of fresh ingredients for £1 a head.

Piss easy in fact.