All your money belong to us; the government

Well, here it is, the definitive Ritchie statement that your income actually belongs to the State:

The truth is that governments spend first and then reclaims the tax spent from the economy in sufficient amount to make sure that there is sustainable growth without inflation and that goals in addressing inequality and market failure are simultaneously achieved. Viewed like that there is no logic to balancing the government’s books if to do so would result in less economic activity, more inequality, more market failure or a less sustainable future.

But as yet only some economists and central bankers are beginning to get their heads around the reality of money, and many fewer still have got their heads around the reality that tax reclaims money the government has created by spending it into the economy. What this true perspective on tax means is that tax is not a process of the government claiming money others have made, not least because (quite literally) most of us do not have the power to make money. It is instead a process of the government claiming back that which is already its own because government created that part of our income through its spending into the economy. That point also makes clear that (as I have long argued) we have no right to our gross incomes, but only to our net earnings after tax, because the tax element of our supposed earnings always belongs to the government, who literally made it by spending it into the economy in the first place.

Note the detail:

“less economic activity, more inequality, more market failure or a less sustainable future.”

The government, righteously, has an unlimited claim upon our incomes and wealth in pursuit of economic activity (presumably thus it can tax us all so much that the income effect predominates and we all work longer hours), equality (make up any tax rate of the rich you like), market failure (Ritchie hsa a very expansive view of what failure is here) and sustainability (somewhat undefined and thus rather scary).

That’s not really a world view which leaves us with all that much liberty or freedom, is it?

Oh, and do note, he’s actually got the Positive Money ideas wrong. Tax is to extract from the economy the inflation that the government spending puts into it. Under Ritchie’s formulation we can have inflation out the wazoo as long as we are pursuing inequality for example. Hello Venezuela!

42 thoughts on “All your money belong to us; the government”

  1. I was trying to remember the name for this wacky view, then looked at the comments and MyBurningEars had already provided it- it’s Chartalism. He’s an awful long way off the rails now.

  2. I think the new and self-described moniker for this point of view is Modern Monetary Theory or MMT.

    But I know that has a (tiny) following of academic economists at a uni in Australia and a couple in the US. Whereas Positive Money and Murphy are both people who didn’t finish off undergraduate economics because they “knew it was wrong”, so I’m not sure how they stand in comparison to the other groups.

  3. Yes, very much so. Positive Money folks and Chartalists would insist that they’re very different. But it’s a bit like the difference between the foot washing Baptists and the hand washing Baptists.

    The problem with this view of money as purely the creation of the State is that we can simply observe the world and see that people use things other than state created money all the time. Vide the use of fine art to move “cash” around in the drugs trade for example. At the extrme, buying rounds in pubs is a form of money: the social currency of standing your round. It may well be true that most money these days is state created money. But that doesn’t mean that there’s a limitless amount of buggering about with it that they can do and we’ll all still use state created money. Vide Zimbabwe.

  4. As an aside, the idea of a job guarantee or minimum income guarantee (Timmy’s preference) is prevalent in chartalist thought. They’d disagree with OGH on how to fund it, of course.

  5. Cheers Tim. Would love to hear the Chartalist explanation, or exculpation, for Zimbabwe sometime. (“Not true Chartalism, so it doesn’t count” perhaps?)

  6. “But as yet only some economists and central bankers are beginning to get their heads around the reality of money, and many fewer still have got their heads around the reality that tax reclaims money the government has created by spending it into the economy.”

    Does anyone know where you get the forms to nominate someone for the Nobel?

  7. “The David Icke of accounting is in the room.”

    Ritchie is trying to extort money from businesses through his Fairytale Tax Mark and to extract money from his supporters through grants and donations.

    I think L Ron Hubbard is a more apposite comparison.

  8. The interesting thing about Ritchie’s latest philosophy of tax (if there is one) is that following his argument, the right to tax comes from the government’s creation- and thus ownership- of the money, since it is theirs and we are just allowed some of it if they want us to have it.

    Which would logically mean that they have no right to tax non-government money, such as electronic currencies like bitcoin, or taxation of goods in kind, as was common before the modern era.

    Nor, come to think of it, physical assets based on their perceived potential future value. Like “mansions”.

  9. MBE-

    Would love to hear the Chartalist explanation, or exculpation, for Zimbabwe sometime. (“Not true Chartalism, so it doesn’t count” perhaps?)

    I think it would be something along the lines of failing to tax the money they’d created back out of the economy.

  10. Just because the State can destroy the value of money (by printing lots and lots of it) does not mean they created that value. If a country used gold as a currency, would Richie be claiming Alchemy as reality and banning people who disagreed?

  11. @Ian B:

    Your neoliberal sophistry is easily refuted:

    Bitcoin is only made possible through computers, Internet, etc all of which could only exist because of the state therefore give me your money.

    Mansions only exist and have value because of infrastructure, surroundings, businesses all of which could only exist because of the state therefore give me your money,

    Exchanging a lump of flint carved into an arrowhead for some bones carved into jewellery could only happen because of the…uhm…the…eh….the…… Just give me your money.

  12. We all remember that Ritchie’s immediate, visceral reaction to the arrival of Bitcoin was to call for it to be banned. Likewise he gets an attack of the vapours at the thought a free banking regime.

    Which rally makes sense; if banks were able to issue heir own promissory notes then? So his logic goes, all money would be lo g to the banks. Oh very well done Ritchie.

  13. “money the government has created by spending it into the economy”
    ??

    Ritchie’s always been a tad confused, now lets cause some more speculative chaos.

    Where the hell are we going – a dark place that’s where.

    Actually, we are on the road to perdition stopping off at an Orwellian nightmare – 1984 junction.

    With, a welfare state of endless benefits free at the point of access, and add in open borders: which is only storing up demographic and borrowing lunacy.

    Now, we can philosophize about the creation of money [means of exchange] and argue about distinctions pertaining to wealth, then argue about imposition of taxes, the unreserved reserve banking and QE and we are nowhere near what our government is part of – and planning.

    I read an article in the Times the other week, some economics ace bod ranting, promulgating about a cashless society and the benefits of such a banking utopia.

    In the end, it all boils down to government and does government represent you and your interests?

    imho, I can state categorically, the UK elective dictatorship we are currently ruled by do not have our best interests at heart – and if they ever did – I’d like to know about it.

    If he possessed enough cerebral connections to project an ideal world and Ritchie’s wet dream, it would be a cashless society and where truly the government has all the proles by the short and curlies, literally and metaphorically.

    NOW.

    They sent me a new debit card, it has a ‘contactless’ facility – whatever and jeepers – I never asked for it but by God I am getting one – “sonny you’ll get what yer given and like it!”

    Oh yes, that’s just the start and think on, buy gold, platinum but no more shoving it away under the mattress and even if you still do that – the government could print a new currency tomorrow – just to spite the hoarders but good luck with that – now we have 14 million Indo-Paki-Afri-Euro people living here………..

    Dystopia – is already here and cashless we will be, after a war or three or four, time for…… cue the Rothschilds.

    Happy days.

  14. Has anyone actuall reminded Ritchie that the government don’t issue money, the Bank Of England does?

    The USA did have some government money (greenbacks) but it’s all Fed Bills these days.

  15. I presume he just thinks that the govt created the money to spend into the economy out of thin air……..

  16. Really, I think his sole purpose is to get in with Labour/SNP Government ministers.

    Could there be any more joyous news for an MP or councillor to hear that all those trillions were yours, yes personally yours, to spend as you wished? If you were a Scot and told all those English billions were your personal little piggy bank, well I think they’d all have to be sedated for a few days.

    And, given the huge sums involved, if a tiny, weeny minute percentage seeped into your coffers, well, it would be trivial, wouldn’t it?

  17. John Miller

    He was pegged for the Alan Walters role under Miliband until the incident where he slagged the ababa for putting Poppy Dinsey on Newsnight ahead of him

  18. Van _ Patten

    Not this time. I really can’t believe aainstream had him pegged for an economics job, just no.

  19. We have a couple of idiots on this blog before misunderstanding what is meant by banks creating more ey out of thin air. Could I invite them back on today to critique the Murph’s thoughts.

  20. The bloke’s mad. The madder he gets the more even the man down the pub will be able to see it.

    The Tories should be shouting about him – and lying that he’s a Labour adviser – from the rooftops.

    (The left lie all the time, the ‘right’ need to read their playbook.)

  21. By the way, I have to admit to being somewhat disappointed by the easy refutation of my neoliberal sophistry.

  22. What’s happened to the argument that private banks create money out of thin air? Does that mean banks have the same rights over the money they create as the governrment does?

  23. “market failure (Ritchie hsa a very expansive view of what failure is here)”

    Surely his concept of market failure is “if there’s a market, that’s a failure”?

  24. Ironman

    I have it on authority that UNITE were pushing him as ‘price’ for their support of Ed Miliband, although I think some of Balls’ team found a lot of his published works open to relatively easy Attack, and the idea was classed as ‘possible’ rather than provable. Lest we forget Walters was subject to sustained attacks by Tory ‘Wets’ in the 80s. Obviously that was in a very different media environment, though! It’s also worth examining Murphy’s blogs from earlier years (09/10) – it really is noticeable how much better he handled criticism then (These are the entries when the likes of Obo was still permitted on the blog)- he didn’t appear as mad then, honestly!

    The brilliant ‘Interested’ is right that this needs to be a major plank of Attack – your money belongs to the state and there is nothing you can do if we want to give to Guinea – Bissau’s HIV sufferers for the next 40 years- should go down a storm….. That combined with his links with people who are sympathetic to ISIS should be enough to discredit him completely……

  25. Abacab,

    I’d say it’s more like economic intelligent design, i.e. it’s utter bollocks but a bit of sophistry can make it seem vaguely plausible to those who want to believe that we should bow down and pay obeisance to the government, the giver of all and the taker away of only that portion that rightly belongs to it, with which great and noble deeds will be done such as the redistribution of wealth from the evil hard working to the virtuous indolents.

  26. “That combined with his links with people who are sympathetic to ISIS should be enough to discredit him completely”

    Didn’t seem to hurt George Galloway.

  27. DocBud-

    Indeed, the belief in the need for state control of markets is akin to Intelligent Design; that is, they don’t believe that the system (economy, or evolution) can run itself and produce organised outcomes.

  28. “Didn’t seem to hurt George Galloway.”

    Well, it does kinda appeal to his core vote though…

  29. @GlenDorran

    Mansions only exist and have value because of infrastructure, surroundings, businesses all of which could only exist because of the state therefore give me your money

    So, quite literally – Barry O’Bama’s viewpoint “..you didn’t build that. Somebody else [i.e. Government] made that happen”.

    Yes, I suspect that this is the LHTD’s position and why he feels that the UK Government is entitled to the entire assets and income of the economy.

    All carefully monitored by HMRC Staff and coordinated by the PCS union for whom the LHTD is one of the main “shills”.

  30. John Galt-

    Indeed. If you’ve ever talked particualrly to American style “liberals”, they will claim that everything in the world is the result of government action, so we owe the government for it.

  31. Classy comment on his ‘Is there any such thing as taxpayers’ money’ post:

    “I do not accept the government is the agent of the people any more than a company is agent for its shareholders”

    Definitely ramping up to another age of ‘Do As You’re Told’, then.

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