Creating chitties isn’t creating capital.

Third, our understanding of economics is changing. We now, for the first time, really understand money. We can therefore newly understand public finances and the integration of monetary and fiscal policy that I outline in my book, using QE, at least in part. And by integrating that understanding with a willingness to let the state produce, costlessly, the capital to put the economy (public and private: this is not a state only revolution by a very long way, but a state partnered one) to work the process of change can begin.

He really just doesn’t get it, does he?

If we print lots of chitties in the basement of the Bank of England then we’ve unlimited capital to do whatever we want!

He’s still not grasped that money isn’t capital. Capital is that labour, machinery, technology, that is deployed. Money is, quite seriously, just the chitties to get it moved around. We’ve not created any more labour, no more machinery, not changed technology, by printing more money.

Which is, of course, why sending more chitties off after the same resources is inflationary.

45 thoughts on “Creating chitties isn’t creating capital.”

  1. Candidly, you are wasting Professor Murphy’s time. For he is a professor and all ideas about everything were first developed by him.

    And if you can magic money out of thin air, as Professor Murphy has proved in his books, then you can obviously magic labour and machinery out of thin air.

    Your time here is at an end.

  2. AndrewC

    You could be Murphy but your spelling is too good

    Tim

    You might as well bark at the moon – he doesn’t have a clue – about anything, and rejects correction of self-evident errors as Trolling. No doubt one of the two resident trolls on here will arrive to point to the BOE ‘Money Creation in the modern economy’ as vindicating him shortly

  3. Q. Why hasn’t anyone done this before?
    A. Because only now do we understand it.
    Q. Who understands it?
    A. Richard Murphy.

    Lol.

  4. If you print a chitty granting planning permission to build a factory, have you created capital?

  5. @Andrew M: no, you have avoided preventing someone else from doing so.

    Bureaucrats usually prefer the other decision.

  6. OT Enough about that, who knew Neil Hamilton was so highly regarded in your sort of set, that he’s been given a ‘leader’ job!

    FFS the man’s a disaster and it’s the best you outers can do for a high profile gig?

    Did anyone see him on Question Time last night?

    You’re all fucking nuts if you think ukip are capable of anything vaguely sensible.

    But then Worstall is the kind of failure that Hamilton isn’t. At least Hamilton hasn’t failed yet.

    What with Johnson, Gove, Farage, and Hamilton, it’s just like Fraggle Rock.

    These are the people you want to ‘regain our sovereignty’, Leading the British to new heights of economic and global influence.

    Neil Hamilton. Jeebus.

  7. Andrew Duffin,

    That’s true in plain English; but using the accountancy definition of capital, does granting planning permission create capital?

  8. I always resent his use of words like “our” and “we”.

    He’s not part of any group I’d care to belong to.

  9. “let the state produce, costlessly, the capital to put the economy . . . to work”

    Even a fourth-grader would be embarrassed to say the state can do anything “costlessly”.

    Up to now, I had supposed Richard to be smarter than a fourth grader.

    I must revise my opinion.

  10. Fascinating, and not a little ironic, that a person whose writing, grammar, vocabulary and sentence structure is at best turgid and clunking and at worst almost impenetrable should be speaking at an event whose purposes is to celebrate English literature?

    Unless the invitation to Murphy to speak was for it to used as a model example of how not to express ideas?

  11. At least Hamilton hasn’t failed yet.

    Really?

    So, at least we know that the 1997 General Election didn’t happen in whatever fantasy world Arnald inhabits when he forgets to take his meds.

  12. Arny Old Iron

    Is this your variant on the ‘Dead Cat on the table’ strategy beloved of Lynton Crosby – Hopefully by talking about UKIP and Neil Hamilton you’ll divert people’s attention from Tim’s expose of Murphy being unaware of even basic economics – that is to say, Money not being the same as Capital?

    Your comment would not make it past the TRUK Comments policy I fear: ‘ This blog is focussed on providing creative solutions to the tax and economic issues we face in the interests of all rather than a few. If your comment is not a constructive contribution to that process it may well be deleted.’

  13. Henry Crun

    I forgot that indeed – lacking the ‘elan’ and ready wit of Carol Wilcox or the humanity of Andrew Dickie I am of course ‘one of the bastards destroying the country’ that gets Lawrence from Guernsey so het up…..

  14. John Fembup, “Up to now, I had supposed Richard to be smarter than a fourth grader. ”

    No, no you misunderstand. Murphy’s target audience is less smart than a fourth grader, or so Murphy thinks.

    Though perhaps ‘target customers’ or ‘target victims’ are better descriptors.

  15. Hello everybody and what has got you in a tizz today?.Oh its that brainteaser “Money is not the same as capital” . Couldn’t agree more, of course. The banks create money hand over fist by the “commercial banks making loans ” (BoE quote) method but, warns Uncle Tim “sending more chitties after the same resources is inflationary”. So sending more money after the same residential building land is inflationary.So stop the land price inflation, why don’t you? More work for the overworked but always cheerful Carol Wilcox and the somewhat argumentative Labour Land Campaign. Of course, Tim Worstall is a land taxer for classic Adam Smith reasons which is why I came to enjoy his blog, but he keeps quiet about that now.The frankly fascist mob who believe they have a right to untaxed capital gains in the price of houses fixed up by the State have properly got out of hand and now believe that they will prosper after Brexit without doing any work ,the same as they do now.Oh dear, what’s to become of us.?

  16. From an accounting perspective if the granting of planning permission increased the value of the land (which is likely) then it would be assessed and revalued in the accounts to represent it’s new asset value, though it would be an unrealised gain until the asset was sold. Land though is something of a special case when it comes to accounting for physical assets.
    He could well be thinking in terms of intangible assets which can have a much more fluid valuation, though I would picture him being against the changes in this area over the last couple of decades

  17. “We now, for the first time, really understand money.”

    Beyond parody. The fucker really does talk to God, doesn’t he?

    “Candidly, Jehovah, ……..”

  18. Once we accept that money is just some artwork that … (continue unintelligible rant) … we can see that printing money more money does create wealth.

    Sadly I can think of several piss poor arguments to fill in the rant. This can be viewed with a small donation to my economic development fund. If Murphaloon can make money doing this I should be able to as well. At least once I overcome my conscience.

  19. “The frankly fascist mob who believe they have a right to untaxed capital gains in the price of houses fixed up by the State have properly got out of hand”

    But, who are these people? And is this the new meaning of Fascist? (That is, something which displeases me, but may not displease some on the centre-right).

    Marmite is Fascist.

  20. ‘The frankly fascist mob who believe they have a right to untaxed capital gains in the price of houses fixed up by the State have properly got out of hand and now believe that they will prosper after Brexit without doing any work ,the same as they do now’

    Who would these people be exactly DBCR?

    ‘More work for the overworked but always cheerful Carol Wilcox’

    That could be true – I have heard that the likes of Franz Ziereis, Max Koegel, Jozef Kramer and Arthur Liebehenschel were supposed to be famous raconteurs outside of their day job…..

  21. I think there’s a confusion of chitties here.

    A chitty granting planning permission on a piece of land may be increase the value, because value has been added (that people want to pay for).

    Just printing 20k based on nothing adds no value.

    I suppose we’re all supposed to be shocked by the process of value (not money) creation, but I don’t see why we should be. “Fucking brilliant” seems the more obvious term, not least because that value will end up taxed.

  22. dearieme

    I only just noticed that – Perhaps he should have paid more attention in his economics course and he would realise people have known about the nature of money for centuries. He might be better talking about Neil Hamilton instead….

  23. Lord, he sounds like Hitler at a rally:

    “our understanding of economics is changing!
    We now, for the first time, really understand money!
    And by integrating that understanding with a willingness to let the state produce, costlessly, the capital to put the economy to work the process of change can begin!

    It is the start of a thousand years reich!
    Apart for the Jews!”

  24. So stop the land price inflation, why don’t you?

    Indeed. Issue more building chits. In places people want to live.

    Make them easier to get too, so you don’t have to be one of these evil land hoarding large companies to afford the delay.

    No need to bugger around with the tax system. Supply and demand. The easiest lesson of economics. Even some idiot lefties get it.

  25. @ DBC Reed
    How long have*you* worked? When you have worked *more* than 50 years you might be able to talk on the same forum as I. I am pretty confident that you haven’t because any male in my generation as rude as you would have been *taught* manners – either across his father’s knee or the hard way.

  26. The inestimable Don Boudreaux, an actual economist, had to explain this selfsame point to another embarrassingly clueless author recently:

    “Rushkoff’s most obvious error (to someone who actually knows economics) is that the “capital” in “land, labor, and capital” commonly listed as factors of production is not money. It’s machines, tools, processed chemicals, and other intermediate goods that are useful for producing final outputs. The fact that we economists are partly to blame for this confusion – because we use “capital” sometimes to mean “investments or investable funds” and other times to mean capital goods (or “producer goods“) – doesn’t excuse Rushkoff. It’s clear to anyone who studies basic economics even with no more attention than that of a C- student that the “capital” in “land, labor, and capital” means capital goods. ”

    http://cafehayek.com/2016/05/40793.html

  27. Money is used to measure the value of capital invested, just as a cubit was used to measure the height of Goliath – the measuring instrument is not* the same as the thing, or person, measured.

  28. DBC – land values going up because of real or artificial (planning) scarcity is not the same as credit creation. And is not inflationary.

  29. DBC–Economic advice from you dickhead? How many times you bag of shit? House price antics are the result of the socialistic bungling of the state. “Fascistic” is the usual leftist deceit as Corporate Socialism –today’s vile system–is just as much socialism as the jackbooted version.

    Arnaud–to hear a cunt like you talking about any particular group–when your peers are Beria and Pol Pot, Castro and “No Bog-Roll here” Madura is even-more sickening than eating your Gurn-Sea burgers. 120 % pure bullshite.

  30. ‘money isn’t capital’

    Explain “working capital,” definition one:

    1.The cash available for day-to-day operations of an organization.

  31. @J77 Rude, me? I am agreeing with our host: creating new money to pay for developing some of the inelastic supply of land is inflationary.
    I am 73.Don’t come the old soldier with me ,sonny (testing your knowledge of idioms from the last seventy years which you make rude claims to know more about than I do)
    @SE By all means but why, with all this demand for houses, is the private sector not rushing in to build? Could it be that they don’t want to prick the bubble of house price inflation “The monopolists keeping their markets constantly understocked , by never supplying the effectual demand, sell their commodities much above the natural price” Adam Smith ace land taxer not that the Adam Smith Institute ever publicises the fact.
    @JC “Not least because that value will end up taxed” The entirely state sponsored rise in a land values won’t be. That’s kinda the point..

    My ranting about Fascism stem from the fact that there is a large group of pensioners and people approaching retirement who look to the State to promote house price inflation and provide their pensions with no interest ,in either sense, in wages ,employment levels etc and who can be relied on to support all the British political parties which promise guaranteed untaxed unearned capital gains in house prices (all of them). This is wholesale bribery, and since is against the interests of the working people ,fascistic.

  32. You don’t understand fascism DBC. Still. You also can’t get over your LVT fixation when the original post had nothing to do with it.

  33. @ DBC Reed
    Maybe your eyesight is failing I was actually claiming to have worked 50 years and asking whether you had done so – a question you carefully omitted to answer.
    Calling people fascists and idlers is rude and you were implying that all other readers of this blog are both. Fifty years ago that would have got “come outside and say that”, so why haven’t you learned to keep a civil tongue in your head?.

  34. @J77
    I an not about to take lectures in the old way of settling arguments by somebody who doesn’t put his own name to his insults.I believe that ,if you say something tendentious ,you should put your name to it: not hide anonymously like a little boy throwing shit over a wall.(Some of the remarks made about Carol Wilcox on this blog are libellous but the perpetrators cringe away lie pussies).
    I have not “implied” that everybody on this site is fascist or idle. People who take unearned, untaxed capital gains out of the system and expect other people, who are working, to pay for the State’s expenditures via taxation is probably fascist in effect, for the reasons I give above.As you are such a staunch worker( for the same time as me BTW), you will probably recall that people, back in our day, who did not pay their taxes were once considered scum: not praised as is often the way nowadays. Look at the caning Ivor Novello got for using somebody else’s petrol coupons : a month in gaol.People who live off land values alone are, by definition , idle.
    LWt The original mailing gave a perfect explanation of the principles behind LVT ,which by the way, our host used to describe better and more sympathetically than anybody else on the Net.

  35. @ DBC Reed
    I am not asking you to take lessons in dispute settlement – I am asking you not to be so offensively rude. You are persistently so, and have repeatedly, not just today, alleged that readers are sponging off “workers” because the price of houses has gone up (which is tosh – the only way to cash in a notional profit without buying a different house at a correspondingly inflated price is to drop dead or go into a nursing home [in the latter case the house will be sold to pay fees which would be borne by the local authority if one had negligible savings]).

  36. ‘Explain “working capital…’

    This thread is about the difference between capital and capital goods, which is what Ritchie completely fails to grasp even whilst boasting about being the first person to “really understand” money and going on to devise a “new understanding” of public finances premised entirely on this first-grader howler.

    He is claiming to have invented an economic perpetual-motion machine, and children as young as 5 are pointing out to him that he hasn’t.

  37. @J77
    I note you are handing out advice about gentlemanly conduct while remaining anonymous . I could make some unkind comments about the manners of Varsity men but I will refrain.
    Try reading “Sitting on your assets; Vancouver land..” .It might be better for you to look at the problem more objectively for being farther away.The original research was done by a mathematician (so it must be unarguable!)

  38. @ DBC Reed
    You are not within streets of gentlemanly conduct. My #1 son 9the bright one) has instructed me not to publish my full name on internet blogs – if you are 73 you should be able to remember Labour Partyy supporters going round breaking windows of anyone with a Conservative Party poster and he doesn’t want his elderly landlady upset by vandalism (like me, he graduated under a Labour government and had to leave home to find a job).
    You habitually make unkind comments – or do you only classify “Arnald” as unkind? Your failure some time ago to apologise for grossly offensive and inaccurate comments when I politely pointed out your error placed you in the category of “those on whom courtesy is wasted” – while I habitually disagree with the more extreme commentators even SMFS behaves more tolerably.
    Does Vancouver have a system whereby you can sell the house and automatically buy an identical one at the price you originally paid? Or are you just bullshitting again? If I sold my house and cashed in the notional profit I should not have half enough money to buy back the flat I lived in before I was married despite paying off two small mortgages (£10k and £6k) out of my earnings in the interim. I suppose that when the lady who bought my flat dies her nephew or niece will inherit an asset *minus 40% IHT* but the current sale price is of no more benefit to her than to me – it is a nice place and THAT IS THAT.
    There is NO objective view of a personal situation that benefits from being 10,000 miles too far away.

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