There’s not a lot of hope left really

In the comments:

 

Hi Tim!

Yes, it’s me. The guy that you obviously love insulting.

First, let me thank you sincerly for pointing out the obvious error in my blog post http://simonthorpesideas.blogspot.fr/2015/06/a-message-for-alexis-tsipras-tell-your.html

You are indeed correct that with the Basel Banking regulation stipulating that the risk-weighting for sovereign debt for a CCC country like Greece is set at 150%, the amount of capital required to hold €1 billion of Greek government debt is not €150 billion. I have thus corrected the figure on my blog to €150 million. However, your claim that I was “out in capital requirements by two, count them two, orders of magnitude” is actually wrong too. A billion is THREE orders of magnitude larger than a million.

Anything else that I got wrong?

Do you deny that when commercial banks buy sovereign debt for AAA to AA- countries (like the UK, France, Germany etc), they need no capital at all (because the risk weighting specifiied by the Basel rules is set at 0%?

Do you deny that this is likely to be one reason why Banks like
Société Généale can have assets worth over 1200 times their capital ($1.7 trillion vs $1.4 billion) – see
http://www.accuity.com/useful-links/bank-rankings/

Do you deny that the increase in UK public sector debt from £975 billion to over £1600 billion in the period from end of 2009 to end of 2014 was financed by commercial banks using money that they didn’t actually have to by UK bonds?

Do you deny my claim in that post (that you neglected to include in your edited version) that UK taxpayers have been paying an average of 4.4% of GDP every year since 1694 in interest payments on public sector debt?
http://simonthorpesideas.blogspot.fr/2014/11/the-biggest-racket-in-history-how-banks.html

Do you deny that the money lent by the Rothschilds to finance the Napoleonic wars, and which meant that UK taxpayers were paying over 9.0% of GDP every year between 1815 to 1822 was money created out of thin air?

Do you deny that the money used to finance the 1st World War was also created out of thin air by Banks, and that this meant that UK taxpayers paid between 8.5% and 9.6% of GDP in interest payments to the banking sector every year from 1922 to 1933 – the roaring twenties for those close to the people with their hands on the money tree that David Cameron claims doesn’t exist?

(If you do want to deny this, please take the question up with the person responsible for the data set you can find herehttp://www.ukpublicspending.co.uk/spending_chart_1692_2016UKp_14c1li011lcn_97t#view
not me).

I’m looking forward to a real debate on this one, Tim. Like the other debate we had where you finally gave up – the one where you claimed that even a 0.01% tax on the UK’s £2 quadrillion a year in FInancial Transactions would make the sky fall in, and that it is far better to use Corporation Tax, VAT and Income Tax “because corporations don’t pay taxes, only people pay taxes”.

Come on Tim. Let’s have some real fun.

But here’s a warning to all the commentators on your Blog. I’m not stupid. I’ve read one hell of a lot in the last 4.5 years. And the detailed and carefully researched arguments on my blog now run to over 300,000 words. You can download the whole thing here http://bit.ly/1NzgKaf

With very best wishes to all your readers

Simon

67 thoughts on “There’s not a lot of hope left really”

  1. “I’m looking forward to a real debate on this one, Tim. Like the other debate we had where you finally gave up”

    I.e. You let him have the last word because it was 3am and you wanted to go to bed.

  2. If you do want to deny this, please take the question up with the person responsible for the data set you can find here

    Ah, the teenage lefty debating trick of making dubious assertions and then inviting anyone who disagrees to take it up with some higher figure not involved in the discussion.

  3. Rob, it’s a socialist performance metric: production not productivity, and taking no cognisance of fitness for purpose.


  4. However, your claim that I was “out in capital requirements by two, count them two, orders of magnitude” is actually wrong too. A billion is THREE orders of magnitude larger than a million.
    Anything else that I got wrong?

    Curious. I wonder how he’d react to one of his students trying this on?

  5. “Do you deny that the increase in UK public sector debt from £975 billion to over £1600 billion in the period from end of 2009 to end of 2014 was financed by commercial banks using money that they didn’t actually have to by UK bonds?”

    So in situations of catastrophic debt the lender is the bad guy not the fuckwit who borrows to finance stupid and reckless spending?

    With this well-read genius leftist on the case we should all visit our local superstore and purchase an inexpensive bucket. So we have something to collapse into as his relentless logic and intellect destroys our sacred cows one by one.

    Steve:+1

  6. There should be an internet law, similar to Godwin’s, that says as an online discussion grows longer, the probability of somebody bursting onto the scene who has just discovered “the truth” about fractional reserve banking approaches 1.

  7. @Tim Newman,

    Yes, that would be nice (and seems to coincide with reality), however the probability of _anything, no matter how ludicrous_ being stated approaches 1 as the length of the thread tends to infinity.

  8. Surreptitious Evil

    He also clearly doesn’t understand “bank assets”.

    Assets are (loosely) the sum of deposits and capital. Therefore, the connection between them and the Basel 2 capital treatment for Tier 1 securitiy holdings is rather, well, ‘loose’.

  9. ‘Out of thin air’ is the ostrich dengerous phrase in the modern world. Using ‘ex nihilo’ is actually worse, because you know what you’re doing but are leading others astray.
    Do the ‘out of thin air’ brigade really believe there are no limitations on a commercial bank’s lending?
    More to the point SIMON: how has this “devious” system been in place for the last 450-odd years if Fiat currencies have only genuinely been operational for past half century?
    Anyway, I hope you found your one hell of a lot of reading enjoyable, because it sure as hell wasn’t informative.

  10. I know the actual economics is not really relevant here, but I seem to remember from my basic economics course that banks actually have to fund their lending to anyone through borrowing (customer, interbank etc.). Central banks then control the supply of money by requiring banks to have an account with them and charging interest or (increasingly) by imposing liquidity requirements on banks.

    At no point does anyone need to mention the Basel Capital accord (I through III) to explain the creation of money. That is because the Basel capital requirements relates to having sufficient capital to support credit losses and has very little to do with banks economic role in the money supply.

    Bit like saying there is international banking conspiracy because the speed limit on the M4 is 70 mph.

  11. “created out of thin air by Banks”

    The capitalisation (in typographic, not fiscal, terms) of the word “banks” is like scare-quotes; it tends to indicate that banks are evil and scary.

  12. Anything else I got wrong?

    Hello Simon, I’m replying here because your site wants me to log on before I comment.

    In April 2015, Greece was forced to pay 12% interest on its public sector debt. The Germans only paid 0.56% on their debt…

    No. The site you link to gives secondary-market yields on government bonds. That’s not what the governments are paying, it’s the interest rate they’d have to pay to be able to sell new 10-year bonds in the market. Recent Greek borrowing has been from the EFSF, which generously charges Greece only the (low) interest rate it pays itself. Summary of interest payments here, EFSF details on its site.

    …loans made with fictitious money created out of thin air…
    It’s true that the banking system creates broad money “out of thin air”. It’s not true that a bank can collect interest on money it creates for free. For us long as the money sits in an account at the lending bank, it’s just thin air. Once the borrower takes the money out of the account, the lending bank has to fund the loan.

  13. If banks can create money out of thin air, why did so many of them go bust ? Those bankers must have been *really* stupid.

  14. Your autocorrect is clearly an AI – I took ‘ostrich dangerous’ to mean ‘very likely to be kicked in the balls’.

  15. Mr Thorpe’s thought processes have much in common with those of the now-retired financial economist and politician Mr Godfrey Bloom. After a good lunch.

  16. “You are indeed correct that with the Basel Banking regulation stipulating that the risk-weighting for sovereign debt for a CCC country like Greece is set at 150%, the amount of capital required to hold €1 billion of Greek government debt is not €150 billion. I have thus corrected the figure on my blog to €150 million. However, your claim that I was “out in capital requirements by two, count them two, orders of magnitude” is actually wrong too. A billion is THREE orders of magnitude larger than a million.”

    Dear Mr Thorpe.

    150% risk weighting means that we multiply E1 billion by 1.5 times. This means that the E1 billion bond is treated as if it were E1.5 billion in risk weighted assets not E150 million, which would mean it had a risk weighting of 15%. This is indeed two orders of magnitude.

  17. Maybe I’m being really thick, but isn’t 150% of 1bn = 1.5bn, rather than 150million? I know my maths is rusty, but surely it isn’t *that* rusty?

  18. “Société Généale can have assets worth over 1200 times their capital ($1.7 trillion vs $1.4 billion) – see
    http://www.accuity.com/useful-links/bank-rankings/

    Dear Mr Thorpe

    When you do your extensive reading, you might consider checking data. Societe Generale has shareholders equity and capital of E59 billion
    http://www.societegenerale.com/en/measuring-our-performance/information-and-publications/financial-results
    Annual Report 2014 page 2.

    The other numbers look iffy too, Barclays has £66 billion in its account as at end 2014, rather than $4 billion or so.

  19. Why on earth is anyone giving this neo-Nazi nutcase the time of day? He’s not making an economic argument, he’s repeating old anti-semitic claptrap about the Zionist conspiracy to steal the sweat of the working man’s brow.

  20. What a lethal combination, a man with the attitude towards factual accuracy of Polly and the economic knowledge of the Murphmeister. He doesn’t have a lot going for him, does he?

    What is the point of comparing the asset side of a balance sheet with a small part of the liability side?

    How does he not know that the bulk of UK gilts are owned by fund managers and insurance companies?

    Why does he not think that gilt purchases have to be paid for ie that the government does not donate them all as if to a charity?

    Admittedly these are not questions to which I would like answers. But they seem to undermine the value of his attempt to rewrite economics.

  21. SJW,

    > The site you link to gives secondary-market yields on government bonds.

    My God. Did he really just do that? He condescendingly lectured Tim about economics, and then assumed that bond issuers pay the interest rates in the secondary market? There are no words.

  22. A billion is THREE orders of magnitude larger than a million

    Oh dear.

    $1m = same order of magnitude
    $100m = 1 order of magnitude higher
    $1000m (1 billion) = 2 orders of magnitude higher

    Children normally make this mistake when you give them the following riddle:

    A doctor gives you three pills to take at intervals of two hours, starting at 2pm. At what time do take the last pill?

    But they’re not professors.

  23. My bad:

    $1m = same order of magnitude
    $100m = 1 order of magnitude higher
    $1000m (1 billion) = 2 orders of magnitude higher

    Maybe $10m is another order of magnitude higher, making 3?

  24. I always find it amusing when someone discovers that some money is conjured up out of thin air and acts as if that’s news. Of course some money is created out of thin air: all money is created out of thin air.

    “Did you know that most money is just numbers on a computer?”
    “Yes, or, as it’s also known, a record. What did you think that coin in your pocket was?”

  25. I thought “ostrich dangerous” had something to do with sticking one’s head in the sand. It may have started as a typo, but I think we should keep it.

  26. @Tim Newman: isn’t an order of magnitude times 10? You appear to have missed out £10m in your list: £1m x 10 = £10m x 10 = £100m x10 =£1000m (1 billion).

  27. Dear Mr Worstall

    “Yes, it’s me. The guy that you obviously love insulting”

    The ‘guy’ is obviously not familiar with your work: we, your loyal readers, know that you are happy to insult many, many people, some of whom are not ‘guys’.

    A warning to all your commentators and very best wishes to all your readers? That’s just stupid.

    DP

  28. Hang on a sec, is he accusing the Germans and the Frankfurt-based ECB of being evil Zionist Jewish bankers?

  29. Squander Two

    We really will have cause to use it as well. So yes, we should keep it.

    P.S. To be honest, it might have been as much to do with my stubby fingers as the Auto-correct.

  30. @Tim Newman: isn’t an order of magnitude times 10? You appear to have missed out £10m in your list: £1m x 10 = £10m x 10 = £100m x10 =£1000m (1 billion).

    Indeed, quite right. My bad.

  31. Diogenes,

    Until you have written “over 300,000 words on this subject” then I hardly think you are suited to question him.

    That goes for the rest of you neo-liberal Shylocks – get typing!

  32. if we were rational beings, we would count in sixteens rather than tens, and then an order of magnitude would be sixteen times, and two orders of magnitude would be 256 times etc, except that we wouldn’t write them that way in 16-based arithmetic obviously.

    I use “rational” in the specific sense of ‘giving me the opportunity to deploy the sixteens times table we learnt at primary school’.

    Mind you, we also learnt the fourteens times table, therefore …..

  33. He is saying that Nathan Rothschild created his loans out of thin air? What? Why did he go to the trouble of buying gold bullion all over Europe when he could just invent it in a millisecond instead?

  34. “Auto-correct; how the hell did ‘most’ become ‘ostrich’?”

    Also, why was “dengerous” not auto-corrected?

  35. Course, we’ve only got Thorpe’s word for it he’s written 300,000 words. Considering that he can’t figure out how to multiply by 150% on his second attempt, he may only have written 300 words.

    But here’s a warning to all the commentators on your Blog. I’m not stupid.

    Look, Thorpe, everyone makes mistakes. I know I do. And then we have our mistakes pointed out to us, and we get to go and fix them, and we’re doubly careful when fixing them, because we already know we got it wrong once. You’ve done that, and you’ve still fucked it up. And we’re not talking about a complex differential equation here. Either you can’t understand percentages or you can’t multiply by 1.5, or both.

    You’re a professional scientist. You should be profoundly embarrassed by such an absurdly stupid public mistake, made while crowing about how incredibly clever you are. I know, some sciences are more mathsy than others, but still. Multiplying by 1.5. Fuck’s sake.

    Yeah, you’re stupid. Ostrich-dangerously so.

  36. The ‘300,000 words’ meme reminds me of when Murphy boasts about having his batshit crazy witterings shared by thousands of morons – the fact it’s rubbish seems to have passed him by. Mention of the Rothschilds leads me to suggest as Dave points out, that he is in fact a new neo-Nazi….

  37. Andrew M>

    Yes, see my comment a bit above yours. There’s nothing original here, just the same tired old antisemitic tropes. The Rothschild and Shylock references are a dead giveaway even if you don’t recognise the bits from The International Jew.

  38. dearime: I often count in 16s. 2^4-sized chunks is a useful way of dealing with binary numbers, i.e hexadecimal digits [0-9a-f]. You can’t really do without it writing software, unless you program in COBOL. It’s a slightly better reason for doing it than to deploy your primary rote learning. Up to 16 was a lot of punishment – we only had to learn up to 12x back in the 50s, for £sd I guess.

    As for the 300k words, I wonder if he set the font colour to green…

  39. what really blows my mind about people like this, when they talk about money being created out of thin air, which has some truth to it as we all know, is that they talk as if banks really have no constraints here. In other thread he said banks can create an arbitrary amount of money to buy bonds. Like NatWest could buy up the global AAA sovereign bond market if it felt like it, and because creating money out of thin air is free, why it would make muchos profit. In fact, why bother with that, why not just print money and give it to themselves? How can a bank that can print money out of thin air ever go bust? What does a liquidity crisis mean, if you have the entire planetary atmosphere as your raw material?

  40. OK, I have read up on Basel 3 and I can confirm that, as expected, Simon Thorpe has got it bass-ackwards. It requires the average ratio of a bank’s tier 1 capital (basically share capital +share premium account + retained earnings) to total assets of 3% or more with another provision that the ration of tier1 capital to risk-weighted assets must be 4.5% or more. So I think it is safe to deny his first assertion.

    It is probably safe to deny his second assertion. Unless the genial society has at least 3% of the value of its loan book in share capital and retained earnings, then it is not complying with Basel 3.

  41. Luis

    Yes, all bankers should have all the money, but how do they work out how much they should each have in Thorpetopia?

  42. “aimed that even a 0.01% tax on the UK’s £2 quadrillion Financial Transactions”

    He got this number wrong as well. The real number is eleventy-seven bajiliion.

  43. What Greece should do is simply create a bank, and borrow it’s money from it.

    The coupon would be immaterial.

    Option 1: Set it very low, as this would be a transaction between consenting institutions, and no one else should interfere.

    Option 2: Set it at the market rate, which might be punishingly high. No matter if it is, borrow more to cover the cost.

    Meanwhile, the government will be benefiting from the bank’s inevitably massive profits.

    Have I just sorted out the Greek / Eurozone crisis?

    Well, thank you very much.

  44. What the Greeks really need is their own ratings agency. Grant triple-A status to their own debt. If they can’t pay the coupon, simply issue more of that triple-A goodness. That’ll teach the gnomes of Zürich Basel.

  45. Really, they do live in a simple little world, don’t they?

    If it’s easy to create money out of thin air, go to a region free of banking laws and set up a multi trillion dollar bank and buy the USA.

  46. “@Dearieme – shurely we should count in dozens?”

    Those of us who live near Norfolk find that idea attractive.

  47. “Do you deny that when commercial banks buy sovereign debt for AAA to AA- countries (like the UK, France, Germany etc), they need no capital at all (because the risk weighting specifiied by the Basel rules is set at 0%?”

    Hmmm… surely this would mean that they can buy any amount of debt, which will always pay interest. This would surely mean that the yield would tend towards zero at all times. Which doesn’t happen. Shomething wrong, Shurely…

  48. “Yes, it’s me. The guy that you obviously love insulting.”

    He needs to be much more specific than that.

  49. @dearieme A friend who knows a bit more about these things than i says we should be Using duodecimal as it’s easily divisible by 1,2,3,4,6. Superior to decimal or hexadecimal.

  50. Course, we’ve only got Thorpe’s word for it he’s written 300,000 words. Considering that he can’t figure out how to multiply by 150% on his second attempt, he may only have written 300 words.

    Judging by the apparent paucity of his post, I’d go in the other direction and say he’s probably written well over 300 million words.

  51. So Much for Subtlety

    John miller – “Really, they do live in a simple little world, don’t they? If it’s easy to create money out of thin air, go to a region free of banking laws and set up a multi trillion dollar bank and buy the USA.”

    They could finally achieve socialism in one simple step – set up a bank in the Caymans. Create some money. Buy every factory, every company, every piece of property, in the world.

    No one has to die. No one needs to be out of pocket. Simple.

    Someone ask him why he is selfishly refusing to liberate the workers of the world!

  52. ‘Do you deny that when commercial banks buy sovereign debt for AAA to AA- countries (like the UK, France, Germany etc), they need no capital at all (because the risk weighting specifiied by the Basel rules is set at 0%?’

    Yes – central banks set reserve requirements. A bank that just issued an unlimited amount of broad money would be illiquid pretty soon…

    ‘Do you deny that this is likely to be one reason why Banks like Société Généale can have assets worth over 1200 times their capital ($1.7 trillion vs $1.4 billion) – see
    http://www.accuity.com/useful-links/bank-rankings/

    This is confusing. Soc Gen’s 2014 filing lists assets of EUR1.3 trillion and equity of EUR0.059 trillion…so a ratio of 21 times?

    ‘Do you deny that the increase in UK public sector debt from £975 billion to over £1600 billion in the period from end of 2009 to end of 2014 was financed by commercial banks using money that they didn’t actually have to by UK bonds?’

    Yes. M4 was flat over this period. The Bank of England, however, did buy 375billion and I’m sure there have been plenty of safe-haven flows owing to the Eurozone crisis.

    ‘Do you deny my claim in that post (that you neglected to include in your edited version) that UK taxpayers have been paying an average of 4.4% of GDP every year since 1694 in interest payments on public sector debt?’

    Don’t know. But sounds like a good reason to cut public debt.

    ‘Do you deny that the money lent by the Rothschilds to finance the Napoleonic wars, and which meant that UK taxpayers were paying over 9.0% of GDP every year between 1815 to 1822 was money created out of thin air?’

    See above.

    ‘Do you deny that the money used to finance the 1st World War was also created out of thin air by Banks, and that this meant that UK taxpayers paid between 8.5% and 9.6% of GDP in interest payments to the banking sector every year from 1922 to 1933 – the roaring twenties for those close to the people with their hands on the money tree that David Cameron claims doesn’t exist?’

    See above

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