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If only Ritchie knew some economics

So, the Great Man tells us that he’s worried:

The same warning could be given within the UK: there will be corporate failures here if interest rates rise.

And household failures too: mortgage repossession rates will probably increase significantly.

On top of which there will be less investment, and so lower growth and more unemployment.

This is the price of economists hankering after ‘normal times’. For students of economic history the whole process of rate increases has a horrible feeling of FDR’s policy in 1937 about it, which he had to very rapidly reverse in 1938. Or to put it another way, it feels like economic folly foretold.

There’s a number of different explanations for what happened in 1937:

Economists disagree about the causes of this downturn.

Keynesian economists assign blame to cuts in federal spending and increases in taxes at the insistence of the US Treasury.[4] Historian Robert C. Goldston also noted that two vital New Deal job programs, the Public Works Administration and Works Progress Administration, experienced drastic cuts in the budget which Roosevelt signed into law for the 1937-1938 fiscal year.[5]

Monetarists, such as Milton Friedman, assign blame to the Federal Reserve’s tightening of the money supply in 1936 and 1937.[6]

Contrary to the monetarist assumption Austrian School economist Johnathan Catalan assigns blame to the relatively large expansion of the money supply from 1933 to 1937. He also notes that the money supply did not tighten until after the recession began.[7]

Some argue that the Undistributed profits tax enacted in 1936 caused a panic in Corporate America. Faced with the specter of taxation on retained earnings the business world immediately ceased most planned expansion and capital equipment purchases.

Both Friedman and the Austrian school are merely neoliberal sophists so their explanations cannot be correct. Which only leaves the increase in taxation or the greater taxation of corporate profits as possible explanations acceptable to Ritchie.

And given that he thinks that corporate subsidies of £93 billion should be looked at (ie, corporate taxation should be increased) and that taxation should be increased as well, which of the policies he supports will he credit with causing the next recession?

22 thoughts on “If only Ritchie knew some economics”

  1. And household failures too: mortgage repossession rates will probably increase significantly.

    Hah! Middle England would sell the nation to the Qataris before allowing that to happen.

  2. His new article “Post Corbynomics” indicates that the shadow finance team have backtracked from ennobling him or having him advise them in any significant way.

    His sources of charity grant funding are therefore secure given his divorce from frontline Labour party involvement.

    He cannot however refrain from giving himself quite a literary tug-job in the article about his recent influence and brush with power.

  3. If my recollection of the late 1930’s is right, there have been one or two changes. One is that “money” can be batted around the world in seconds as opposed to weeks or months.

  4. He’s going back to thinking big thoughts about big issues.

    Hopefully will keep him tucked up out of harm’s way.

    When do you think he’ll make his “I coulda been a contender” speech?

  5. Murph is in Charles de Gaulle mode, sitting in his shed awaiting the call from a desperate nation. He really cannot see the lack of coherence in his brain fart thinking, why bother to increase “investment” if you plan to take 20bn out of the economy in taxes? And who needs a Minister for Tax? The fool doesn’t know that we have one already?

  6. Murph’s biggest problem is the state of the UK economy.

    Relative to pretty much everyone else, the UK is doing rather well. The EU is not, and support for the EU remains a key virtue signal for the left. Worse, it’s going to be tricky to blame the ills of communist China on neolibrulisminnit.

    On top of this, the 98% of Labour MP’s who don’t support Corbyn are bound to insist on some common sense compromises. Corbyn may be deluded, but he’ll have his eyes on Downing Street, and the ends justify the means..

    The LHTD may be in his shed for some time.

  7. The ‘Post Corbynomics’ link is hilarious – basically even Corbyn looked at the deranged output on TRUK – probably also took a look at the output of the Stool pigeon who occasionally finds his way onto these pages and rewound to say ‘perhaps not’ – hilarious. Or it could be that they wouldn’t pay the greedy swine (no austerity in Downham Market!) enough danegeld to make it worth his while – As GlenDorran said – how long until his ‘Contender’ speech?

  8. Am I alone in finding it amusing that one Keynesian line on the basic failure of FDR to get the US economy moving is that he never spent enough?

    It reminds me of the Bennite line that Labour lost the 1973 election because it was not socialist enough. Or the apologists for Marxist – Leninism who claim that there has never been been a proper Marxist state.

  9. “That is your final comment on this blog”

    Although I reserve the right to allow you further posts if they are sufficiently humble and congratulatory and sycophantic enough to give me a warm and moist feeling in my groin.

  10. Diogenes
    “It reminds me of the Bennite line that Labour lost the 1973 election because it was not socialist enough.”

    Or the Corbynites line that the Labour Party lost the 2015 election for the same reason

  11. AndrewK/ Bravefart

    ‘Future contributions will be deleted’ – at least Lawrence Sybian will still get through…..

  12. So if you want to experience the Joy of Tax but nobody wants to participate with you, do you have to engage in Taxsturbation in your shed in Norfolk instead?

  13. For Thinking big thoughts could we substitute
    not having the intellectual capacity or discipline to support whatever popped into your head at random with data or evidence or to even think through logical conclusions and consequences

    Because of course that’s not his role, details are for the little people

  14. I think you will find Ritchie has played his hand very well from his perspective. He has massively raised his profile just in time for his new book to come out. His reputation as the author of Corbynomics has gained him the title of Professor. This will all increase his earning power for leftie reports.

    By not being part of the Corbyn advisor team he can avoid blame for when it all goes wrong. If by some mischance the world economy collapses and PQE saves everything he can claim a share of the Nobel prize.

    Murphy has set himself up for a very comfortable retirement.

  15. Devonchap

    Are you his agent? I have been told that all publicity is good publicity but it is a tough position to maintain when the brand is toxic. Even the Guardian took against him, in a polite and understated way: the Guardian, never knowingly under – stated.

  16. I’m with DevonChap.

    Corbyn will have surprised many by selling out so quickly and across such a wide area.

    Poor old Murph seems to have been one of the casualties of this. However, that does leave him untainted, and as sole keeper of the PQE flame.

  17. I don’t care for Mr Murphy or his arguments. But he has found a niche and is working it well for him. The sales of his new book will be at least double what they were going to be before Corbyn turned up.

    A brief spell in the public glare is all he needs and he is getting out before he is chased out. Whether by design or chance it works.

  18. Devonchap is quite correct.

    He will still be in demand from the BBC and other sources, masquerading as a tax expert – and if Corbyn does manage to get in and, naturally given how idiotic the policies themselves are, presides over total economic collapse he will be sitting pretty atop his dunghill – still able to disclaim any responsibility for the impact of those policies.

    All in all, you have to give Murphy credit – like many of the truly dangerous in history he has an acute sense of self-preservation and an animal cunning which seems to be in line to set him up comfortably (at least financially) for retirement (which cannot come soon enough for humanity!)

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