Macroeconomics dear boy, macroeconomics

So, we have a Fiscal Charter that sets out a promise that this government plans to shrink the UK economy in perpetuity.

We do?

So, when does the economy hit zero and we all starve?

Or perhaps Ritchie doesn’t understand that even Keynes suggested that running a surplus in the good times is something of a reasonable idea?

11 thoughts on “Macroeconomics dear boy, macroeconomics”

  1. So Much For Subtlety

    In perpetuity? What happens the day after the economy hits zero? It keeps shrinking? It hits the singularity?

    We have an immigration policy that is predicated on negative per capita income until the White people run out. But at even that, at some point, will stop. Just shy of the Stone Age I would guess.

  2. Let’s get ral shall we? This is just neoliteeral pendantry.

    It is obvio that when I wroote “in perpetuity” I did not mnea “in perpetuity”.

    My mean was clea. Do you not understndr that?

    Candidly you are wasting my tmei.

    That was your lastcmment.

  3. It’s because he has this idee fixe that you can only expand the economy if the government runs a deficit. It’s as if he is completely unaware of that fringe element of society called “the private sector”. This hotbed of neo-liberal vice has been quite good at expanding the economy in the past, but OMFG he hasn’t heard of that.

  4. He just can’t conceive of economic growth without base money growth too. Somebody should explain to him what the V means in MV=PQ

  5. I’m generally of the view that macro is largely waffle. Here, Ritchie demonstrates the difference between largely waffle and entirely waffle.

  6. Andrew M: a little while after QE started, I had an actual economics graduate (y’know, one who finished all three years rather than leaving during the first term) tell me, in all seriousness, that since QE raised M it had to, absolutely logically necessarily had to, have increased Q because P was, observably, failing to increase. He shut up quite quickly when I pointed out that V had been observed to be dropping calamitously. Since then, I’ve always harboured a sneaking suspicion that lots of economics graduates don’t know how to read an equation.

  7. I haven’t bothered looking at the fiscal charter as it just seems a political stunt likely to be thrown out when it doesn’t suit the government (there is a reason the budget is a special act of Parliament after all).
    What I have seen though is that deficits are allowed under certain conditions, so the only way it can be surplus to perpetuity is if good times are here for good. Wasn’t Murphy predicting financial apocalypse part 2 before 2020?
    Anyway you would think he would support something that gave govt an excuse to raise taxes, after all if a surplus is just tax take less spend then you can always increase one rather than decrease the other. So a labour govt could claim they were voted to do X and the only way to pay for it under the rules is to raise taxes, sorry about that, but it’s the last lots fault etc….

  8. Bloke in Costa Rica

    You could, theoretically, shrink the economy in perpetuity if the time spent to reduce it by a given fraction was constant.

    Of course by “the economy”, Murphy means that bit of it that he and his troughers can get stuck into. Shrinking that, especially the fucking awful “third sector” would be wonderful. That Carmina Burana woman wouldn’t starve in a hurry.

  9. “We have an immigration policy that is predicated on negative per capita income until the White people run out”

    Racist shit from a Thick.Racist.Prick

  10. Philip Walker

    He’s not the only one. This is from the St. Louis Fed:

    “Based on this equation, holding the money velocity constant, if the money supply (M) increases at a faster rate than real economic output (Q), the price level (P) must increase to make up the difference.”

    They then went on to explain that the reason why the price level hadn’t increased was because velocity had collapsed. Which according to them was due to very low interest rates encouraging people to hoard money instead of spending it. No mention of the fact that if you vastly increase M when the private sector doesn’t want to spend, velocity must fall, by definition. QE depresses the velocity of money.

    But it is probably a bit much to expect a recent graduate to understand something that is apparently beyond the comprehension of Fed wonks.

    The St. Louis Fed paper is here:

    https://www.stlouisfed.org/On-The-Economy/2014/September/What-Does-Money-Velocity-Tell-Us-about-Low-Inflation-in-the-US

    I took it apart when it first came out:

    http://www.pieria.co.uk/articles/getting_things_wrong_federal_reserve_style

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