No, really, he’s a fucking idiot

Stuart Cheeseman says:
September 1 2016 at 12:57 pm
Haven’t you been advocating (massively) increased borrowing to fund public spending – what would have happened to the net government wealth in lieu of all that borrowing?

Reply
Richard Murphy says:
September 1 2016 at 1:20 pm
Tax revenues would have increased so net government worth would have increased as well

Reply
Stuart Cheeseman says:
September 1 2016 at 1:40 pm
Tax revenues would have increased by more than the debt?

That’s pretty special borrowing…

Richard Murphy says:
September 1 2016 at 2:05 pm
Have you heard of the multiplier effect?

Remember, this is an accountant. And he doesn’t know the difference between a flow, income, and a stock, wealth. Or something passing over the P&L, the tax revenues, and something on the balance sheet, the net capital position.

Of course he also gets the economics wrong:

Kenneth Halton says:
September 1 2016 at 2:51 pm
I don’t understand your point. The government’s net position declined, because it’s been issuing more and more bonds. Obviously. Yet you advocate that they should issue more bonds, which would make the government’s net position worse. Your casual references to the multiplier effect are unhelpful, because the ME is either an illusion or severely limited — there’s a large literature on this piece of Keynesian dogma, by the way.

Reply
Richard Murphy says:
September 1 2016 at 6:04 pm
It’s position declined because it spent without investing

And the IMF now think the multiplier can be well over 2

So shall we talk about facts here?

The multiplier is the effect on GDP pf the spending, not the effect on tax revenues or government accounts of the spending.

38 thoughts on “No, really, he’s a fucking idiot”

  1. As an MD, Project Director and Engineer- I’d be seriously worried if this idiot did my books. How does he manage to think and breath unaided? At least you can have a civil conversation with the Inland revenue when they get it wrong…

  2. But Tim you forget – a hitherto unknown contributor ‘Schofield’ comes back with a superlative comeback

    ‘The Neo-Liberal monetary and economic ideas you have in your head are mostly made-up fantasies to support a super-rich oligarchy.’

    Pick the bones out of that!

    on TRUK watch – Have you seen his mental diarrhoea on Ireland – too loose a stool for a single post so he appears to have crapped out about four of them. In addition, apparently it’s a good day to bury bad news that the Fair Tax Mark (97% below expected uptake by now) has a new brochure…

  3. “The multiplier is the effect on GDP of the spending, not the effect on tax revenues or government accounts of the spending.”

    Ah, but once Murphy gets the Courageous tax system he wants, GDP and tax revenues will be almost equal.

  4. VP

    As an avid reader of Murphy’s authoritative books, could you confirm that he advocates banning advertising on the grounds that it encourages wasteful consumerism on useless goods and services that no-one really wants or needs? Except, apparently, advertising on useless products like the Fair Tax Mark.

  5. Tim.

    I’m the last one to defend him, given his usual idiocy, but Isn’t he simply suggesting that spending now (by borrowing) will create increased tax revenues in the future, ie the references to multiplier / tax received as % of GDP, etc. Ie enabling a future surplus, hence a reduction in future borrowing, etc.

    Ignore whether ot not his multiplier assumptions on GDP are actually valid or not, I don’t believe he’s actually confusing the basic arithmetic “in the current time frame”.

    At least not on this occasion. That’s my reading anyway.

  6. BF

    I can assist in clarification certainly.

    For him advertising is a socially useless function that should be heavily taxed. (rather than banned) However, when challenged on TRUK (back in the day) on whether such a ban would be extended to the State or to charitable organisations he said that was a futile question, implying that such organisations would be able to advertise free of any additional tax imposed on advertising, which I imagine would include ‘socially useful’ projects like the Fair Tax Mark.

    The only area where a blanket ban would be in order is on advertising products aimed at children. Again, however, such a ban did not extend to ‘useful public information campaigns’ by the state and other nominated bodies. Like any totalitarian (and his much repeated belief in ‘democracy’ is in the type of democracy one sees in the Democratic People’s Republic of Korea I think – with him in the Kim Jong-il role) he recognises the need to appeal to people when they are young and their minds more easily swayed…..

  7. His “Green QE” will be investing in windmills and other subsidy-sucking endeavours, so more likely to have a ‘divider’ effect on future tax revenues than be a ‘multiplier’.

  8. “he recognises the need to appeal to people when they are young and their minds more easily swayed…..”

    And he also realises that most six year olds won’t have the knowledge or ability to trip him up. I said most…

  9. “The normal formula used is called the Massachusetts formula and it allocates one-third of the profit on the basis of the state where sales take place, one-third on the basis of the state where staff are engaged and one-third on the basis of where physical assets owned by the corporation are located.” From Murphy.

    Except that it didn’t. The Massachusetts formula was an attempt at taxing rail companies based on mileage of track in various US states. There never was a 1/3, 1/3, 1/3 ‘formula’ and it was a 19th century approach and was gradually dropped anyway.

    Murphy’s ignorance is staggering. Is he really saying one third of the profit of a UK company selling a luxury car to someone on holiday in Monaco should be taxed in Monaco?

    FFS.

  10. @Andrew C

    No of course he isn’t

    He’s saying all of the profit should be taxed in the UK plus a further 1/3 taxed in Monaco as well, at tax rates approved by Brussels . . . .

  11. “And the IMF now think the multiplier can be well over 2”
    If that was the case then increases in government spending might be self-funding in a country where tax is not too far under 50% of GDP. But that then begs the question “would UK GDP be negative if there was no government spending?”
    Somehow I find it difficult to believe that it would be.

  12. Time, you say “Remember, this is an accountant.”

    But, there is a special type of accountant, a Turf Accountant, which I believe is appropriate for Murphy.

    A Turf Accountant being an accountant whose professional body should exclude from membership – ie Turf out.

  13. @RH

    that, indeed seems to be the thinking behind the likes of Murphy. Re-write all world-wide tax legislation to the betterment of the UK. Other countries won’t complain and won’t retaliate. More tax will roll into the UK exchequer. So easy I can’t believe someone hasn’t already tried it.

  14. > PF

    even if that were the point being made , it would take ten years and tax revenue increased by 10% of the borrowing for the government to start reducing the debt to below the original figure.

  15. But, there is a special type of accountant, a Turf Accountant, which I believe is appropriate for Murphy.

    The idea of Richard Murphy trying to make book (without fucking it up completely) is genuinely funny…

    I can see him rambling on about how point spreads are neoliberal sophistry while his backers prepare to drop him in the Thames for being unable to balance his book correctly for the fifth month in a row.

  16. Dinero,

    Don’t get me wrong, I’m not defending his argument.

    I was only pointing out that, on this particular occasion, what he said didn’t necessarily imply that he didn’t understand basic P&L versus BS accounting – that was all.

    And that’s not “really” defending him, as it’s not exactly raising the bar..:)

  17. This man wants to ban advertising, for fucks sake. God knows what his Quaker beliefs say about gambling.

    He wants to ban other people from advertising… He’s still at it himself. I suspect his view of gambling would equally self-serving.

  18. PF>

    I think you’re overcharitable. Murphy is saying that the government has borrowed X, and that tax revenues as a result should be 2X – but the debt is a stock, the revenues a flow. He wants to compare revenues to the interest on the debt, perhaps. It really is that basic an error/lie.

  19. @ PF
    I should have said in my previous post that you were right before going on to point out that his number self-evidently was wrong *for the UK*.
    It is conceivable that the multiplier is well over 2 for some economy somewhere in the world – just not here since Osborne’s pseudo-austerity has reduced the budget deficit.

  20. @ Dave
    No, Murphy was saying that if government spending increases by X, GDP will increaseby more than 2.nX so government revenues will increase by X because total taxes (central plus local government) take more than (100/2.n)% of marginal income.
    So in Murphy’s alternate universe government spending increases are more than self-funding. So under Brown when government spending was 40-odd% of GDP and the structural deficit was at least 9% (anyone think that Darling overstated his boss’ incompetence?), GDP excluding the impact of government spending was negative.

  21. The Quaker philosophy is to tell people that gambling is bad for them and advise them not to do it. Not to ban it. British Quakerism’s little red book is called “Advices and Queries”, not “Rules and Don’t Ask Back”.

  22. I think you’re overcharitable

    I’m like that..:)

    but the debt is a stock, the revenues a flow.

    Actually, the “increase” in debt is simply the result of an equivalent current “spend”, which is a flow, just the same as the alleged future tax revenue, also a flow. Stuart Cheeseman, although he didn’t say it, at 1.40pm meant “increase” in debt (implicit from his comment at 12.57pm).

    Reading again, what J77 just said – it’s the increase the Murph is referring to, not the absolute level of debt.

    I agree though re the rest. Hell, what am I doing, defending “le Murd” (© Ecks) on a Friday evening, oh well, I guess it was my turn…

  23. Stuart Cheeseman’s (perfectly reasonable) “disbelief” at 1.40pm was presumably based on not realising that Murph was thinking multipliers / timing delay, which he then mentioned..

    I can’t personally believe Murph had mucked that up in his mind and then simply rescued himself at that point with multipliers… Honestly, I can’t, as that really is the equivalent of a basic times tables multiplication error…

  24. Bloke in Costa Rica

    Dennis, I would like to sit Murphy down and say: oddschecker.com show Bet365 has a line on Jeremy Corbyn vs. Owen Smith at -3300/1000, in US odds. What is the overround? I bet he’s so innumerate he couldn’t work it out even after you’d told him what that meant (it’s 23/374 or 6.15%, incidentally, which is pretty high, and -3300 is an implied probability of 0.971 i.e. overwhleming.)

  25. @ BiCR
    WTF?
    I don’t know what you are talking about and my degree of innumeracy is so great that the maths teacher made fun of it on the occasion that I came second in class. Try talking English English, not American English, on an British/European blog.

  26. Bloke in North Dorset

    I’ve spent some time trying ti find what projects the IMF thinks have a multiplier of 2 in a first world economy.

    When I was doing licence bids for GSM network in third world countries the IMF did reckon they would have a multiplier of 2 or more, but that was countries with little or no telecoms infrastructure and a reasonable stable Government eg India.

    If there are such projects then the Government is guilty of gross negligence.

  27. john77: that is English. Quite straightforward English. Anyone (like Murphy) who makes noises about matters financial or economic should be able to handle it. If you want bookies’ odds, then Corbyn is at 33s and Smith is 9 to 1 against. Now do the arithmetic.

  28. Richie thinks the Government can print endless money without consequences; the IMF believes in magic multipliers.

    all those countries with huge debts and no growth around the world – why haven’t they taken these easy options? Why is a lonely blogger the only sane, candid voice in this neoliberal wilderness?

  29. Ritchie has got the IMF confused with Standard & Poor, who said about 19 months ago that the UK should fix its roads
    And that really was about it for spending with a 2+ multiplier effect.
    Confusing the IMF with S&P isn’t really a sin. But conflating one item of spending as meaning all government spending has worthy outcomes is risible.

  30. So according to the bookies Corbyn is an odd on certainty?
    I’ve known a few bookies, running a book would be way be beyond Murphy, though his thoughts on paying tax on stake or winnings should be entertaining (I imagine he would go for pay on both)

  31. Bloke in Costa Rica

    john77: no. Those are each side of the wager. In US odds, negative numbers mean odds on and positive numbers mean odds against, with the magnitude of each at least 100. 100 means evens (plus or minus 100 are the same). If the figure is positive, it’s how much will be won on a $100 bet. If it’s negative, it’s how much money you need to stake to win $100. With each value there’s an implied probability. A value of -600, for example, has an implied probability of 6/7 or 0.857, which means the bookie thinks it has an 85.7% chance of occurring. A value of 600 has an implied probability of 1/7 or 0.142, which means the bookie thinks it has a 14.2% chance of occurring. The implied probabilities in a two-way line like this always sum to more than one. The amount by which it exceeds one is called the overround and represents the profit to the bookie in the event of a balanced book (in which the potential payout times the implicit probability of that outcome are equal on both sides). It’s usually called the ‘vigorish’, ‘vig’ or ‘juice’. You will never see a line like -600/600 because even if the book is balanced the bookie will make no money. Something like -241/199 is normal, which has an overround of 4200/101959 or 4.1%. The arithmetic is very easy. But I still doubt Murphy could do it.

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