Skip to content

Dear God Allfucking Mighty the man’s stupid

John McDonnell correctly said this weekend that running a surplus on the government’s budget makes no sense.

He is right. In a clear indication that he understands sectoral balances he said:

There is an economic illiteracy about this. If you have a surplus in that sense you are actually taking capacity out of the economy.

Let me elaborate a little. What a government surplus means is that the government is not borrowing anymore: it is repaying debt.

There are two consequences of this. The first is that because government debt is a private asset its repayment necessarily reduces private wealth. You cannot interpret this any other way: it is a fact.

Good God this is stupid even by Ritchie standards. Cash is a financial asset, in private hands it is private wealth. Swapping one type of private wealth, government bonds, for another type of private wealth, cash, does not reduce private wealth.

Seriously, do we call someone with £1 million in their wallet poor? Well then.

As to running a surplus making no sense doesn’t anyone ever read any Keynes any more? For he did indeed say that when the economy is in recession then let’s have a bit of fiscal stimulus. As he also said that when the economy is booming we should have a bit of fiscal austerity. That is, a surplus on the government accounts.

And what makes Murphaloon a complete fucking dunce here is that he himself says exactly the same thing. So we move over to MMT, his PQE is used to pay for everything. It then becomes tax which curbs the potentially resultant inflation. Which is fiscal austerity possibly to the point that the budget is running a surplus in order to constrain inflation.


16 thoughts on “Dear God Allfucking Mighty the man’s stupid”

  1. Pervasive in Murphy’s pronouncements is his belief in the heavy hand of government on economies. It boggles the mind how much better off we would be with governments’ help.

  2. On an MMT discussion somewhere, I saw someone trying to justify larger levels of government debt (ie the PQE less taxed bit in MMT) as a form of private sector wealth or investment / savings (ie, on the flip side).

    More diversity officers and the like apparently representing some sort of increased wealth!

    I haven’t got time to find it right now, but I wonder if that is the kind of argument that is influencing his thinking…

  3. Isn’t it the case though that accumulated private saving is reduced pound-for-pound when there is a government surplus. The government surplus has two negative effects for the private sector: the stock of financial assets [money or bonds] held by the private sector, which represents its wealth, falls. Plus private disposable income also falls in line with net taxation. Now you might say that government bond purchases provide the private wealth-holder with cash. Which is true. But is it not also the case that the liquidation of wealth is driven by the shortage of cash in the private sector arising from tax demands exceeding income. The cash from the bond sales pays the Government’s net tax bill.

    So the fact that the non-government sector is dependent on the government to provide funds for both its desired net savings and payment of taxes to the government becomes a matter of accounting. Which to my mind, reinforces why the pursuit of government budget surpluses will be contractionary.

  4. I see there’s no place for Murphy in Corbyn’s economic advisory committee.

    Labour has today unveiled its Economic Advisory Committee that will be convened by the Shadow Chancellor John McDonnell MP, and will report directly to Labour leader Jeremy Corbyn MP.
    Meeting quarterly, the purpose of the Committee will be to discuss and develop ideas around the official economic strategy that Labour will be advocating under the new leadership.
    The Committee, which contains a broad based group of world leading economists, includes:
    Mariana Mazzucato, Professor, University of Sussex
    Joseph Stiglitz, Professor, Columbia University, recipient of the 2001 Nobel Memorial Prize in economics.
    Thomas Piketty, Professor, Paris School of Economics
    Anastasia Nesvetailova, Professor, City University London
    Danny Blanchflower, Bruce V, Rauner Professor of Economics Dartmouth and Stirling, Ex-member of the MPC
    Ann Pettiffor, Director of Policy Research in Macroeconomics (PRIME), and an Honorary Research Fellow at the Political Economy Research Centre of City University
    Simon Wren-Lewis, Professor of Economic Policy, Blavatnik School of Government, University of Oxford.

    Even you right wing loons must surely admit that’s a mightily impressive line-up.

  5. You still won’t get a useful definition of austerity out of that lot. You could get out your spread sheet showing adjusted for inflation UK tax receipts peaked in 07/08 and we are still spending considerably more than that. You could inflate the number further to account for population growth, and once again you’d find we’re still spending more than the 07/08 number. You could reframe your point and say both record government borrowing and record money printing has occurred.
    You still could not convince a single one of that panel of anything at all other than that spending has been insufficient.

  6. “As he also said that when the economy is booming we should have a bit of fiscal austerity. That is, a surplus on the government accounts.”

    Does a bit of fiscal austerity necessarily mean a budget surplus? With inflation targeted at 2%, and (real) growth at, say, 2%, aren’t you reducing debt/GDP if deficit is 3% (or just if you have a balance)?

  7. I should have guessed a nobel prize-winning economist couldn’t hold a candle to a bunch of right wing second rate blog commentator loons. Silly me.

  8. I’d take somebody who has balanced a budget over some prize-winning Professor any day. Anders Borg and Bjarne Corydon, deposed finance ministers of Sweden and Denmark, have half a dozen balanced budgets between them plus a few overspends, and were presumably available.
    The Corbyn panel reads like it’s been decided in advance what advice he wants to get from them, and it will be the advice his fan club wants to hear.

  9. “I should have guessed a nobel prize-winning economist couldn’t hold a candle to a bunch of right wing second rate blog commentator loons. Silly me.”

    Appeal to Authority. Yellow card.

  10. My reaction was that McDonnell had rounded up a bunch of loonies and no-hopers.

    Go through the list and Stiglitz is the only one who has any real credentials as a thinker, or who makes the Super scholar list.

    Piketty might be a good data-gatherer but he is very much the fashionable economist of the decade – very little of his work seems to be of interest, even to other economists – not in the top 1000 of citations
    At the age of 44, does he have enough knowledge to be a “wise man”?

    Blanchflower is on the citation list at 347, compared with 72 for Stiglitz. However, if you follow his twitter feed or have seen him on Question Time, you will know that he is unquestionably someone with very predictable opinions on every subject. Why have him on a panel when you know his views in advance? Also, given that most of his publications are about labour markets and debunking the Philips curve, his forecasts of unemployment in the UK economy have given a lot of amusement to Guido Fawkes over the years – he is totally out-of-tune with the UK economy.

    As for Mazzucato, just do a search on this blog for a number of take-downs of her questionable grasp of economics.

    Pettifor is a fellow of the New Economics Foundation, which is not a great recommendation. She has also been debunked several times on this blog.

    Wren-Lewis seems to have had little impact on his profession. But he has served for long times at the Treasury and various policy think-tanks. Wikipedia doesn’t even know his date of birth.

    It’s a strange bunch of people: that is about the only thing you can say about it.

  11. KJ

    The superb diogenes has it – and I think Stiglitz, as he says, is the sole member of that advisory body where you could make an appeal to authority – ye Gods, Pettifor & Mazzucato (For real?) I have not heard much from Wren-Lewis in fairness, nor Nesvestiola – and Blanchflower is the TUC house economist so his views are drearily predictable. I think you ‘oversell’ the expertise on offer. Once it’s assisted in securing the 51 seats in 2020 that Labour is on course to win I’ll duly acknowledge that debt.

Leave a Reply

Your email address will not be published. Required fields are marked *