July 2017

Spudda says this is very good

Charles Adams has a post under the above title on Progressive Pulse which explores important aspects of money creation, and cancellation, as well as the chance that monetary policy might work. I strongly recommend it.


Figure 1: The government spend and tax circuit. The difference between spend and tax equals private sector saving and is known as the deficit.


This is precisely what Graeber does in his video. And the conclusion is simple – private sector net saving (S-I) is a function of the size of the government’s deficit which leads one to think that the private sector cannot save unless the government is in deficit. Except that (S-I) is not “net saving” in any traditional economic perspective. (S-I) is saving net of investment. It’s extremely misleading to define private sector “net saving” as (S-I) because Saving cannot identically equal (S-I) unless I is equal to zero. Given that investment is the most important piece of Keynesian economics and the economy, it’s preposterous to present the economy in this manner because investment adds to private sector saving.

To be clear about this, the private sector’s strength does not come from the size of the government’s deficit. It comes from the productive output of its own INTRA-SECTOR claims. For instance, pull up the Fed’s Flow of Funds report. You’ll notice that households have a large financial and non-financial asset claim against other sectors (primarily the corporate sector). The fact that the financial asset claims net to zero inside the private sector is meaningless. It’s like saying that balance sheets balance (well, duh). The key point is, private sector net saving is comprised of a huge component of non-financial assets (like houses) as well as financial claims against the corporate sector (as well as other sectors). These assets only net to zero if you ignore non-financial assets (pretty sure no one ignores non-financial assets like houses after the housing crisis) or view shareholder’s equity as being a net negative for the economy (which is utterly ridiculous given that shareholder’s equity reflects the strength and quality of the private sector’s output). After all, if I walked into a bank for a loan the bank wouldn’t turn me away saying “sorry pal, but your assets are netted against a corporation so we can’t make a new loan to you”. That’s just not how the economy works in any realistic sense.

The MMT definition of “net saving” gives the reader an unbalanced and unrealistic understanding of private sector saving. To be blunt, it is a useless definition and it should not be used. But MMT does not care about that. MMT wants to emphasize the importance of the budget deficit at all times. They want you to think that the private sector cannot flourish unless the government is constantly feeding it and supporting it with what they call “net financial assets”. As if it is impossible for the private sector to be stable without a large and sustained budget deficit. Yes, that theory works great except in the case of every hyperinflation or socialist run regime where these “net financial assets” significantly contribute to private sector instability.



If markets need taming interest rate rises are the wrong way to do it. Use targeted taxes instead.

But that leave’s the question of what is the answer? Is the answer to force many more into more debt, and to create insolvencies by increasing interest rates? Does that make sense? Or is the need to do something much more radical?

Isn’t the real need to increase capital gains tax to reduce the yield on exuberance?

And to have a financial transactions tax to slow markets?

Shouldn’t capital gains be charged on houses on death, at least?

And in places where favourable treatment is given to bond taxation shouldn’t that be withdrawn?

And what about an investment income surcharge to effectively charge national insurance on capital income to force a reduction in prices by reducing yield?

Reducing tax relief on pension contributions would also help by reducing flows into the market for the time being.

All these things and more are possible to reduce the pressure on markets. They would work. They would hit at the real issues. The amount of ‘collateral damage’ each would create would be minimal.

So why aren’t they being proposed? Ask the central bankers. Their failure to suggest them is a measure of their irresponsibility. And that of the governments to which they are accountable.

Candidly, central banks are in charge of monetary policy, not fiscal.

Further, the reason they’re worrying is because, as Spudda still can’t quite grasp, they need to withdraw that extra money supply created by QE.

Yes, idiot

We’re entering a period of intense wartime memorialisation. As the salvation of the British and French from certain death by sheer pluckiness comes alive again in Christopher Nolan’s – by the way, brilliant – film, the centenary of Passchendaele fills the TV schedules with grainy death and plangent trumpets. Farage and his ilk have to own these moments, since their narrative takes so much animation from the atmosphere these wars create: hazily remembered high drama in which British phlegm won the day, and sly foreigners were put in their place. I understand instinctively why Farage would like it if young people spent a lot more time thinking about our victory in the second world war. Yet I wonder what, specifically, he wants the young to understand about Dunkirk, and the more I wonder, the more I think that maybe he didn’t actually watch it.

Nigel runs battlefield tours, as done for years. As with his fishing (where he even writes fishing columns) it’s one of his private interests. He’s also rather good at it.

Ah, yes, amazing how often this has been discovered

A trove of Nazi treasure valued at over £500million has been pinpointed in a Bavarian wood.
But the hoard cannot be excavated because the treasure hunter who has found it has fallen out with the landowner — whose permission he needs to extract it.
Hans Glueck, 76, who has quested after the hoard of gold, diamonds, artworks and rare postage stamps for two decades says the owner of the land wants the treasure for himself.
But without the map and coordinates he has obtained down the years ‘he is as blind as a mole,’ said the fortune-seeker.

I know of two instances here in Czech of the Nazi gold train being found.

Perhaps “claimed” to be found is more accurate because no one ever does produce the gold.

Yes, save the trains!

Narp launched a “Rally for Trains” campaign that saw events last month across the country, from Portland, Oregon, to Miami, Florida, via Wausau, Wisconsin.

One rally was in Alpine, a west Texas town of about 6,000 people in Brewster County – an area bigger than Connecticut that gave 53% of its votes to Trump in the 2016 presidential election. A Trump-Pence Make America Great Again poster is fixed to a balcony above a store opposite the station along one of Alpine’s main drags, which could pass for a western film set but for a Thai food truck.

Inside the smart waiting room – which has a mural of a ticket office window in lieu of an actual ticket office – Gwynne Jamieson wielded a placard that read: “Trump promised more infrastructure, we get less? Save Alpine’s Amtrak!”


The next nearest Amtrak station, Sanderson, is 85 miles away. The loss of a service used by about 5,000 people a year,

Ah, well, umm, no actually. What are we talking about, 10 people a day or summat?

Close the damn thing.

I do love the smell of a bargain in the morning

So, car boot sale type thing. Pottering around, much of it unmitigated tripe and tchotchke. A few bits and pieces which you’d have to know about to get it right. Some old watches for example. Know your brands and maybe you might get somewhere. Old cameras (but I’m pretty sure everyone knows a Leica is really valuable). An operational Remington Portable.

Just don’t know enough about these things.

Then some old coins. Girt big silvery ones. Size of the old Crown. One in fact was an old crown, from late enough that it’s Cu Ni. Hmm. But one of the others was a 1922 Liberty Dollar. That’s definitely silver.

300 Ks for the 8 coins. Call it £10 maybe.

Hmm, if the others (Peru, Ghana, Korea some Arab place I’ve no idea about) are Cu Ni then that’s a reasonable price for some souvenir type thing. If on the other hand the others are all also Ag then that’s a bargain price.

Paid up, got them home, looked them up. I’ve just bought 6 ounces of silver for £10.


The margin here is wondrous. The volume not so much.

The man’s barking

To comprehend why there will probably not be a non-violent solution to the crisis of Venezuela one must know what is at play in the global geopolitical plan. What is at stake are the largest existing oil reserves in the world in Venezuela. For the global dominance of the United States it is crucial to maintain control of the largest oil reserves in the world. Whatever country, however democratic it may be, has this strategic resource and does not make it accessible to the multinational oil companies, a majority of which are North American, will become the focus of an imperial intervention.

The threat to national security of which the presidents of United States speak of is not solely in access to petroleum but above all in the fact that the global exchange of oil is denominated in U.S. dollars, the true nucleus of power of the United States since no other country has the privilege of printing the bills they wish without this significantly affecting their monetary value.

This is the reason why Iraq was invaded and the Middle East and Libya razed (in the last case with the active complicity of France’s Sarkozy). For this same motive there was interference, now documented, in the Brazilian crisis because the exploitation of the pre-salt oil fields was in the hands of the Brazilian people. For this same reason Iran returned to being in danger.

Is there no economic delusion some lefty isn’t prey to? that oil is priced in dollars just doesn’t matter.

Can you imagine the furore?

China has successfully produced natural gas from methane hydrate, also known as “flammable ice”, in an experimental project in the South China Sea, the land and resources ministry said on Saturday.

Fracking for methane hydrates?

Still, look at the good side, Swampy will end up getting a wash as he tries to picket the site.


Civil Engineering becomes “mud. And there is always mud.” Boxing is “hit. don’t get hit.” Economics is “incentives matter. Opportunity costs.” If you can get your mind around those two points then you’ll be doing better than all too many professional economists.
The first is obvious, people react to what they’ll get from doing or not doing something. The second is rather more subtle and it’s something that economists really do insist upon. The cost of doing something is whatever you give up to do that thing.
The cost of making love to your mistress is not making love to your wife that afternoon, not unless your lifestyle is very much more exciting than that of most of us. Being slightly more serious one of the costs of going into business making mobile phones is not being able to use the capital, the buildings, the land, to make cars.
We’ve had to give up our ambitions to be Henry Ford in order to be one of the Ambani brothers (preferably the one making money).
There are always opportunity costs because we can always be doing something else other than what we actually are doing. The cost of whatever it is is whatever it is we give up to do it.

That mistress and wife point is probably one that makes more sense to an older, rather than younger, man.


While Vince and the Vegan Society welcome the new wave of plant-powered sports stars, others are less happy because many are giving up meat for personal performance benefits, not because they are in tune with the vegan lifestyle and compassion for animals.

They usual nonsense about intentions mattering, not actions. But, but, my intentions when shooting the kulaks were excellent…..

Interesting negotiating technique

The reason that the EU27 are willing to accept this negative outcome is that greater goods are at stake: the unity of the EU27, the integrity of the Single Market and the future of European integration. While there is willingness to find a compromise with the UK, a country leaving the EU cannot be better off than a remaining member. Allowing cherry picking of benefits would act as a signal to others inside the EU that a Europe à la carte is obtainable, opening the Pandora’s box of disintegration.

But this hard line is also based on the nature of the Union: in the end, the EU is a community of law, underpinned by the EU Treaties and safeguarded by the European Court of Justice. The notion that the EU could somehow concede on fundamental aspects of the treaties, such as freedom of movement or the oversight of the ECJ, is not only unlikely but would be struck down by the Court when challenged, making the Tony Blair suggestion unworkable. A deal, including a transition arrangement, will only be possible if the UK accepts the EU’s red lines while, at least temporarily, breaking the promises made to the UK electorate,

European integration is so important that sod the bloody voters……

Umm, are we sure this will work?

A radical plan by the US drugs regulator to reduce nicotine in cigarettes to non-addictive levels saw shares in FTSE 100 tobacco giants British American Tobacco and Imperial Brands go up in smoke.

Fags are a method of delivering nicotine. Reduce the nicotine level and people will smoke more or fewer fags?

The things that kill being the tar etc, not the nicotine. So, this increases or reduces the harm from smoking?

Dangerous thing this polyamory

Two women in Germany are in hospital with broken bones after a threesome with a man went badly wrong.
The first woman suffered broken bones in her feet and legs after she toppled ten feet from a balcony in Bad Breisig as she reached her climax.
Her naked friend screamed and ran down the stairs to help her, slipped, and broke bones in her arm and neck.

I can see Rocco rewriting his script already.

I wonder which NGO is behind this?

It’s going from bad to worse for Acacia Mining.

The London-listed gold company has just been told it owes $190bn in unpaid taxes and penalties by the government of Tanzania.

The country’s President John Magufuli has accused the company of deliberately understating its exports to avoid paying royalties and other taxes.

Acacia has strongly denied the charges, saying that it has fully declared all revenues from its mines in the country.

Long story short. Acacia runs gold mines in Tanzania. Govt alleges – and a government committee has confirmed via analysis – that Acacia is grossly underestimating gold content of semi-processed ore it exports. Thus a tax bill for 2 centuries worth of gross revenue that Acacia reports.

This is a shakedown by Tanzanian govt. There is simply no way at all that there is the gold content being claimed. Quite apart from anything else, where the hell is the money going? For it’s most certainly not turning up in the company accounts. They’re also flat out wrong on their valuation method. Ore doesn’t pay out for what is in the ore, only for what is commercially extractable. So things like the level of Ytterbium are an irrelevance.

The thing is, such allegations won’t come from nowhere. My guess is that there’s an agitator, some NGO, behind this. Who, I have no idea.

Worth noting though that the basic claim about gross misinvoicing started with Alex Cobham, he’s now at TJN. He claimed some massive fraud by Glencore over copper exports from Zambia. He was wrong, grossly so. He was comparing the copper price of thousands of tonnes leaving Zambia with the price of the odd 10 kg sample leaving Switzerland. Entirely unaware that recorded customs prices include the cost of transport. And, yes, the cost of transport per kg for a shipload of copper is different from the cost per kg of transport of a sample by DHL.

This was followed by a UN look at South Africa’s mineral exports, entirely fucked up again by the committee. And now this in Tanzania.

Wouldn’t it be interesting to know which NGO or adviser is behind this clusterfuck?

So, my plan works then

Incomes increased over the past financial year as wages rose more quickly than pay, aided by the rising income tax threshold.

The average household’s disposable income – after tax, benefits and inflation – rose by 1.8pc to £27,200 for the financial year 2016-17, the Office for National Statistics said.

Given that it really was me (although, agreed, not me alone) with that raise the damn tax allowance argument I guess my plot to make the Brits better off worked then, eh?


Is this the end of the tits and tequila culture of package holidays?
Rhiannon Lucy Cosslett

From our exclusive series, Questions In The Guardian We Can Answer

What’s he babbling about now?

The FT has reported this morning that Paul Ryan and his key colleagues in the US legislature have abandoned plans to introduce their corporate tax reform in that country.

They called the planned reform a border adjustment tax. Technically it is a destination based corporate cash flow tax. Either way it imposed a tax charge on importing goods into a country and let income from exports off corporation tax altogether.

There’s another upside though. This plan was created by Mike Devereux and related parties, including the ideologues at the supposedly politically neutral Institute for Fiscal Studies here in the UK, who included it in their Mirrlees Review (very much following the prescription for economists Dean Baker referred to yesterday) of what they saw to be the best direction for the future of UK taxation. Devereux et al won some political support for this idea in the UK as a result, including in the UK parliament, where in my time I have strongly criticised it when giving evidence to committees. I have also vocally opposed it at World Bank events. I now sincerely hope we have heard the last of it, and much else in the deeply misguided Mirrlees Review which deserves to be consigned to the same bin that Ryan has used for his plan.

I’ve just read the relevant chapters of Mirrlees and can’t actually see that it says that at all. The argument rather seems to be that we should only be taxing excess profits, or economic rents (rather the same thing), not a border adjustment tax at all.

Anyone care to point out where I’m wrong on this?