Dear God Ritchie’s a fucking cretin

He’s still not getting the point about QE at all:

So, let’s cut to the quick. First, there was no reason why QE had to buy gilts. In fact £1 billion was used for other assets, and then Mervyn King brought a halt to that (I understand). But quite specifically, that was the Bank not following Treasury guidelines.

Second, note the Treasury was firmly in command of this process, authorising what could be purchased. The Bank could merely suggest.

Third, the Bank was indemnified for losses.

Fourth, the condition was that the assets had to be capable of sale at investment grade in normal times (which we still do not have: we still have 0.5% interest rates with no sign of a change in prospect now, I suggest).

So, first of all, unless you can argue that the bonds issued by a new National Investment Bank would not carry investment grade status now I think we can say three further things.

First, People’s Quantitative Easing is not only legal, it has already (subject to National Investment Bank bonds being sold by tender into the market in the first instance, as I have always said is necessary) already been authorised.

Second, the idea that the Bank of England already had any independence on this issue is a total fiction.

Third, when and if the market returns to whatever normal might now be defined to be because these bonds will still exist (I have never said otherwise, although people like Chris Giles in the FT claimed I had presuming (probably in accounting ignorance) that de facto cancelation by consolidation is the same is legal cancellation, which it is not) then they could still be sold, which is the Treasury requirement for acceptability.

So, all the legal and structural arguments for People’s Quantitative Easing fall away: it is already authorised and legal.

So now the question is, why not do it? We still have no effective monetary policy in the UK and no chance of it in the foreseeable future: what might be considered ‘normal interest rates’ are likely to be a very long way off. In that case what is the reason for not doing QE assuming, as is true that we have a) unemployment b) low productivity and so c) under-usage of capacity which only needs the availability of credit (which is, note, the reason for QE) to bring it into use?

And why not also do it when a) we have increased market uncertainty b) a threat to export growth as a result of the China crash and c) a significant new risk of deflation which we need to do at all costs?

And finally, right across the country – in every constituency – I guarantee projects that are ‘shovel ready’ can be found. If I put out the appeal to local authorities and health authorities I think we can be sure they could line up with:

Extensions that are needed
Repairs needing doing
Insulation projects
Small road schemes
Local transport infrastructure improvements
Bandwidth improvements
Houses needing building
PFI projects they would love to drop
New schools
GP surgeries
And then ask universities and you’d get:

Capital for research projects and joint ventures
New applied research e.g. on renewables
And if you want to be really broad minded:

Create a small business venture capital fund.
Why not do all that now, when it is legal, authorised and could be managed by a new Nation al Investment Bank under existing BoE authority from the Treasury right now.

Listen moron.

The aim and purpose of QE is not to provide money to do anything. It’s to lower longer term interest rates. That’s why you buy extant paper with the newly created money. This takes safer assets off the market and thus reduces their yield, increases their price. Thus, everyone looking for a scrap of interest has to move out along the risk curve. This lowers long term interest rates.

That’s why you do it.

You are proposing something very different. The creation of new money with which to go build stufff. It’s simply not the same thing.

Capisce?

Buying bonds specifically created to be fed into your machine is not QE. Because you’re not lowering the long term interest rate, are you? This is simple monetary financing of expenditure.

30 thoughts on “Dear God Ritchie’s a fucking cretin”

  1. Also you can reverse QE in a fine-grained manner to keep inflation under control. Good luck reversing the spending on all those gewgaws. One mega dose of buyer’s remorse there.

  2. Regardless of his economic arguments, what he is proposing is back-to-the future – a sort of DBC Reed universe where NEDC and NEDO and ICFC and FFI get reinvented and the Meriden motorcycle works becomes a publically-owned cooperative…..Let’s roll back to the glory days of the 1970s!

    And does he seriously think that there is a large army of project managers, contractors and engineers sitting around waiting for this “investment” to happen?

  3. “…does he seriously think that there is a large army of project managers, contractors and engineers sitting around waiting for this “investment” to happen?”

    The Murph is a self-confessed expert at so many things I’m sure he can do it all himself.

    He’s an entrepreneur, doncha know.

  4. But – he’s been talking to Danny (5 million unemployed) Blanchflower and thus he’s very important. Corbyn will doubtless be promoting this bollox tomorrow.

  5. How can he *still* not understand this? It’s been explained to him often enough.

    … And putting the PQE nonsense aside, and the lack of people to actually do any of this construction does he realise the bureaucracy and red tape that local authorities go through to get anything done? Consultations, tenders, planning notices….these things can take years. As a stimulus, it’s going to be pretty delayed.

    He is such a fuckwit.

  6. diogenes

    You are spot on with your last comment: Oddly when I raised this with him and Reed their response was to call me a ‘troll’ and not address a single one of the substantive issues I raised.

    Leaving aside the issues Tim raises which as Venezuela and Zimbabwe prove, are likely to shaft the entire economy longer term if this crazy policy is pursued…..

  7. Van_Patten:

    Heh. “Feral bricklayers, plumbers and electricians will be put on the plane back to Poland if they don’t submit to the will of the Courageous State! The People’s Glorious Infrastructure will be built, without the help of these counter-revolutionaries!”

    It would be funny if it wasn’t so serious.

  8. GlenDorran:

    “… And putting the PQE nonsense aside, and the lack of people to actually do any of this construction does he realise the bureaucracy and red tape that local authorities go through to get anything done? Consultations, tenders, planning notices….these things can take years. As a stimulus, it’s going to be pretty delayed.”

    When Corbyn’s Thousand Year Reich is ushered in, he’ll have lots of time in which to realise his plans. Also, consultations, tenders and planning decisions can be either avoided, or conducted at the point of a bayonet in a totalitarian state*

    * in a government of the people.

    Seriously- I reread Speer’s Inside the Third Reich last month: there’s a strong similarity between Ritchie’s plans for the economy and what Hitler decided best served his curajus state.

  9. Bloke in Costa Rica

    If Corbyn and Murphy ever were to achieve power, I wonder how they’d explain five years in how it came to be that the Ministry for Tractor Production was forced to report it hadn’t produced any fucking tractors. They’d probably pull the usual trick of blaming it on wreckers and splittists and shooting the Minister responsible.

  10. The objective is to create a slush fund for off-budget spending by the executive.

    “I guarantee projects that are ‘shovel ready’ can be found.”

    That one has been used before.

    https://www.youtube.com/watch?v=O55aRrvXtio

    There is nothing in his list of can do projects that the elected representatives of the people, Parliament, couldn’t authorize if they thought it important. That they have chosen not to says that they aren’t such good ideas.

  11. abacab

    Granted that strictly the options are not mutually exclusive, but I tend to think that if he’s a liar, then he’s a cunning propagandist, which suggests he’s no fool.

  12. @Theo,

    I suspect it’s some of one and some of the other. On the economics, he’s a fool. He just doesn’t understand it.

    But like Blair, he believes his own sh1t, and is thus an accomplished liar and can lie with a straight face.

    Or maybe it’s the homebrew talking tonight…….

  13. No, he’s not a cunning propagandist. He’s an opportunist who’s found out what people with no brain like to hear and he tells them what they want to hear and whips them up into a frenzy. Pretty much the same technique of scammers and quack doctors the world over.

  14. Wow, you ask local authorities if they want to build stuff with free money, and they said yes. Crazy times!

  15. Serious question about QE: who valued the assets which were bought? I am assuming they weren’t bought by the BoE on the open market. Or were they?

  16. GlenDorran>

    “How can he *still* not understand this? It’s been explained to him often enough.”

    At this stage I think there’s little doubt that Ritchie does understand it. The reality is that Corbynomics/Ritchienomics isn’t actually new at all. It’s a straight-up copy of Nazi economics. I’m quite certain that they’re both well aware of that, and that it is a deliberate deception.

  17. Bloke in North Dorset

    @GlenDorran,

    “GlenDorran
    August 25, 2015 at 6:25 pm

    How can he *still* not understand this? It’s been explained to him often enough.

    … And putting the PQE nonsense aside, and the lack of people to actually do any of this construction does he realise the bureaucracy and red tape that local authorities go through to get anything done? Consultations, tenders, planning notices….these things can take years. As a stimulus, it’s going to be pretty delayed. ”

    Do you really think that will be a problem for Ritchie and the left in general? Once they’ve got their hands on the levers of power anyone who stands in their will will be following he Governor of the Bank of England. It will be Government by diktat. We all ready now he believes in the spirit of the law as divined by him and not the rule of law so a few local government bureaucrats with their petty rules will be no problem.

  18. I still say that you have boosted the Murph more than anyone in the world. I only heard about him here. If Ed Balls was in charge, he’d be told to fuck off.
    What follows from that I don’t know.

  19. funny that in an argument on his site recently he referred to consolidation cancelling debts using accounting rules, and claiming the person questioning him didn’t understand this. Now apparently it’s the opposite or rather it’s a different type of consolidation.
    That said you have to be careful applying standard account rules to sovereign govts as an ex colleague advised me once when I asked how the hell they could claim PFI as off balance sheet.

  20. So, let’s cut to the quick
    Is this a Freudian slip?

    Mervyn King brought a halt to that (I understand).
    Where “I understand” = I’m guessing and can’t be bothered to check.

    Third, the Bank was indemnified for losses.
    Who is the guarantor?

    0.5% interest rates with no sign of a change in prospect now, I suggest).
    Mark Carney and the MPC wouldn’t seem to agree but then what do they know?

    unless you can argue that the bonds issued by a new National Investment Bank would not carry investment grade status now I think we can say three further things
    They wouldn’t so you needn’t bother.

    And why not also do it when a) […] b) […] and c) a significant new risk of deflation which we need to do at all costs?
    He’s a stupendous priapic fountain of sloganeering and semantic goo.

  21. So – I paraphrase

    I, economist and tax expert Richard Murphy, invented PQE, which as you can see was done already in 2011 – even though it wasn’t.
    PQE is done, like it was before, to fund new ‘shovel ready ‘ projects – because the BoE was mandated to acquire existing high quality, investment grade assets.
    The purpose of PQE is, as it was then, to finance new projects and boost the REALLY economy – which is why the Chancellor expressly states it is to lower the cost of finance, maybe even induce corporates to issue new debt instruments.
    PQE is to fund the debt instruments of a new National Invesent Bank, just like the QE authorised in 2011 – which was a mandate to acquire EXISTING debt instruments.
    This shows once and for all that BoE independence is a facade, a big lie – which is why the Chancellor.and BoE were so clear what responsibilities rested with whom and why the BoE decided only to purchase gilts, despite its express mandate to choose other assets should it wish.
    The QE we’ve tried so far only served the bankers by raising asset prices, not like PQE, not like this QE from 2011, – which had the express purpose of raising asset prices and so lowering yields.

    Yes indeed, this proves everything I’ve said about PQE- by saying exactly the opposite in the simplest terms possible.

  22. Dave,

    > The reality is that Corbynomics/Ritchienomics isn’t actually new at all. It’s a straight-up copy of Nazi economics. I’m quite certain that they’re both well aware of that, and that it is a deliberate deception.

    I wish I could find the original quote, but Jonah Goldberg once said something like, “Yes, yes, of course they were evil. But apart from the war crimes and concentration camps and so on, what’s your problem with the Nazis? Because I can hate them even without all that stuff.”

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