Ritchie the valiant warrior!

But third, is something more significant. It is the obvious agreement of those writing the letter with three of the first four arguments I made on the success of Corbynomics last weekend. Those writing appear to agree that the case for infrastructure investment is clear: their only argument is that it should be financed by conventional debt and not a form of QE. They add their names in the process to those from Chris Giles to Larry Elliott in saying this.

Is that a coup? I’d say so: 55 conventional economists appear to have agreed that the case for investment is made because interest rates are so low at present that not making that investment would be an error of judgement. They don’t go on, of course, to ask why that investment is not being made as a result. Nor do they consider issues such as the framing of the debate or the austerity narrative to which some signatories may have contributed: they just say this investment should take place with conventional funding. And since that investment is not happening and the demand for it is a core part of Corbynomics the truth is that these signatories have tried to oppose Corbynomics by agreeing with one of its core objectives.

Arguing for more infrastructure investment at a time of spare capacity and low interest rates is hardly novel. So it’s also not a surprise to find that when Ritchie says something not novel, indeed standard, many economists agree.

When Ritchie says something novel, non-standard, that we should just print the money to pay for it, amaaaazingly, economists don’t agree.

Quite remarkable that, really.

29 thoughts on “Ritchie the valiant warrior!”

  1. Most of the Left isn’t campaigning for more capex spending on infrastructure though. They just want more opex spending on schools, hospitals, civil servants, pensions, benefits, and so on. Not sure Ritchie/Corbyn’s supporters have twigged this yet.

  2. Most of the Left isn’t campaigning for more capex spending on infrastructure though.

    Indeed, they mostly scream blue murder when somebody proposes actually building something people need, e.g. a new runway at Heathrow or more major roads.

  3. Yes, it’s a classic bait and switch. People are tempted by the roads, airports, etc and vote for them. They get instead more tax inspectors, more government, more waste.

  4. But third…

    His arguments are like a fairground test-your-strength machine and this one only makes it to three points which is a bit feeble and merely the equivalent of baying at the full moon.

    Has anyone noticed him going beyond seven?

    Or has Dr M maybe threatened to have him sectioned if he reaches eight – a level of lunatic babbling, bilious incoherence?

  5. Murphy complains that something is badly written and incomprehensible.

    Do Quakers not bother with all that mote and beam stuff?

  6. Although the whole Corbyn/Murphy thing is an interesting demonstration of behavioural economics and decision making, particularly framing.

    Faced with these two, I’m actually starting to think that Yvette Cooper is a reasonable choice.

    Despite Ritchie “not doing personal”, he’s accusing her of being an economic illiterate today.

  7. So its alright for the banks to print money and waste it on inflation of property and other asset prices but not OK for the State to print money for infrastructure and cheap housing ?
    As long as that’s clear.(Time to crank up the hysterical ad hominem machine.)

  8. Can you buy Yvette Balls in Ann Summers?

    “People are tempted by the roads, airports, etc and vote for them”

    Nah, people don’t like airports and roads.

  9. DBC Reed

    well here’s the thing. If the government spends money on A instead of B, then you could complain we spent money on A instead of B! That’s fiscal policy.

    But when the Bank of England swaps bonds for money and later reverses the deal and swaps money back for bonds. what’s the opportunity cost? Other swaps. So you could complain the BoE should have swapped money for other things, but saying we swapped money for bonds when we could have been building houses does not work.

    this confusion is really at the heart of support for PQE

  10. that said, if you swap money for bonds and then never swap them back again, there is a sense in which you get to spend that money, but note that *still* pushes up asset prices, which is what you don’t like, and whether PQE could actually deliver that (permanent monetary expansion) is what recent arguments have been about, I’m on the “it cannot” side.

  11. “What are all those airports doing for Spain?”

    Well yes, but if you ask people do they want more money spent on roads n stuff, they will say yes, but ask them if they want more money spent on tax collectors n stuff, they will say no.

    Richie knows his friends won’t get their pork unless he convinces the public they’ll get most of it. Which they won’t.

  12. Rob,

    but if you ask people do they want more money spent on roads n stuff, they will say yes, but ask them if they want more money spent on tax collectors n stuff, they will say no

    Local councils face a similar quandry all the time: spend money on roads or spend the same money on schools & the elderly. Most voters will choose the latter. Judging by the number of potholes around the country, councils are following the vote.

  13. My favourite part of his criticism is that the first issue he has with it, is that it is “incomprehensible” – from a man who has a spelling error in his link to the post about it being incomprehensible, on a personal blog that apparently has a minimum quota of typos per post.

  14. I’ve got the letter in front of me and it does NOT say that there is a case for more infrastructure investment.
    What it says is any public investment that is needed can be financed conventionally.
    So Murphy is wrong.
    Maybe he should have listened in English lessons in school

  15. “Yes, it’s a classic bait and switch. People are tempted by the roads, airports, etc and vote for them. They get instead more tax inspectors, more government, more waste.”

    My LA (Norfolk) is whinging in todays Eastern Daily Press (LA Fanzine/Newspaper) about all the terrible cuts it might have to make.

    Oddly the beauracracy seems to not be on this list.

    A few years ago, the Head of Arts or something, on £125k left. For some reason the post wasn’t filled. They quietly removed the post after a while; nobody noticed.

  16. “So its alright for the banks to print money and waste it on inflation of property and other asset prices but not OK for the State to print money for infrastructure and cheap housing?”

    Banks don’t print money. At least, not when they offer loans.

  17. @NiV
    No but they create it; they have the State do any actual printing for them.
    @ LE, or since you have been outed by Frances Coppola, Paddy Carter.
    So PQE is ruled out because it could be inflationary.The present system (basically a fraud by which the public are told they are borrowing existing money at interest when they receive money just made up ex nihilo) has no propensity to inflation we are led to assume, despite the existence of the MPC which meets monthly with a statutory duty to maintain only a low rate of inflation in line with weak and watery Keynesian doctrine.
    It is symptomatic of the Thought Police State we now live in that the original century- old Social Credit scheme to socialise the creation of credit and to dish out unearned income in National Dividends to bridge the gap between the value of the unfulfilled potential production and the spending power presently in circulation is not being referenced in this debate although it would obviate all this pseudo-intellectual shilly shallying over bonds.In fact PQE is not radical enough.
    Though what do you expect when bank “lending” is part of the language?
    Michael Hudson on Keyser last night described how the parasitic financial system was killing its host (the title of his new book). Parasites apparently secrete enzymes that lull the host into believing that the parasite is essential to its well being. He then went on to describe how modern people are in debt peonage because they are paying so much for mortgages and rents that they can’t afford the products of their fellow workers’ labours.He was enthusiastic for Corbyn (whom Keyser is iffy about).

  18. “No but they create it;…”

    No they don’t.

    “The present system (basically a fraud by which the public are told they are borrowing existing money at interest when they receive money just made up ex nihilo)”

    That’s not how the present system works, as I’ve explained several times before.

    “Money” is simply a promise to pay something of value some time in the future. When taking out a bank loan, the only person creating money is the borrower, when he or she signs a contract promising to repay a certain sum on a certain schedule. This contract is as much “money” as a banknote, and the bank keeps it and puts it in their vault.

    The money the bank hands back to the customer is essentially based on the value of the money they themselves have just created and given to the bank, leavened with enough of the liquid assets on deposit to change it into a more liquid form.

    The role of a bank is not to create money, it is to convert it into more or less liquid forms. Depositors put in liquid cash and get a non-liquid savings account (i.e. they have to give notice to withdraw their money). Borrowers put in an illiquid promise to repay and get liquid credit in return. On both of these transactions, the bank is simply exchanging one form of money for another, giving a net zero. They no more create money when they lend than they destroy money when they accept deposits.

    And all the money created by the borrower is destroyed when they make the scheduled repayments.

    If you can manage to remain so completely blind to the bank’s vault full of debt contracts when trying to figure out where the money comes from or what assets the bank holds to back its currency, then no wonder you can be persuaded by the likes of Corbyn and Murphy. Honestly, it’s really not done by magic.

    Money is a credible and enforceable promise to pay something of real value later, in exchange for something else of value right now. How is Corbyn proposing that the PQE credit will be repaid, and with what? Where will the real value come from?


    PS I’m so sorry to hear about your mind-controlling parasite. Hope you get better soon.

  19. Address your comments to the Bank of England who follow my analysis of genesis of money ( or rather the other way round). Good to hear that when I issue an IOU with no backing I am not committing fraud but increasing the money supply with the full permission of the State.

  20. DBC

    “Address your comments to the Bank of England”

    Why?

    Are you unable to understand / assess the value of NiV’s explanation for yourself?

    “Good to hear that when I issue an IOU with no backing I am not committing fraud but increasing the money supply with the full permission of the State”

    If you clean my drive, and we agree that I owe you a fiver or a pint, do you think that we have just increased the money supply / printed money?

    Suppose that I cut your hedge, value a fiver / pint, and we call it quits (we’ll both declare the income of course, no evil evaders us), have we increased the money supply?

    Or did you mean something else?

  21. “Address your comments to the Bank of England who follow my analysis of genesis of money ( or rather the other way round).”

    So far as I know, that any IOU (retail voucher, phone credit, cheque, commercial paper, mortgage, promissory note, etc.) constitutes a form of money is standard theory. There’s a whole bunch of technical terminology that goes with this topic, and some might argue in such terms – but I find that sort of pedantry obscures rather than clarifies.

    Somehow, I think you might be misinterpreting what the BoE is saying, but I’m not going to waste any time arguing. Argument ad Verecundiam is already a fallacy, after all…

    If you want to recount what the BoE’s counter-argument/evidence actually *was*, then we can discuss that by all means.

    “Good to hear that when I issue an IOU with no backing I am not committing fraud but increasing the money supply with the full permission of the State.”

    I think you mean “counterfeiting”, and that only applies to ‘currencies’, which come with specific extra legal guarantees that are strictly regulated, ‘Money’ is a somewhat broader concept than a ‘currency’. It’s only fraudulent if you don’t intend to honour the debt, or you deceive the receiver about how likely that is.

    And yes, you do have the state’s permission:
    http://www.legislation.gov.uk/ukpga/Vict/45-46/61

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