Skip to content

Interesting

As this report argues, government spending creates new money for circulation in the economy, at literally no cost. What it also argues is that an independent Scotland with its own currency should use this ability to generate economic activity, and so jobs, until such time as there is full employment in Scotland. At that point tax has to be used to cancel all the new money created by government spending. Until that point is reached then that is not necessary: creating more employment is the higher priority because the more employment there is the more Scotland uses its most valuable non-renewable resource for creating value, which is its people’s time. And by doing that Scotland will boost its income to the highest possible degree, which is good for well-being, the supply of public services, demand, and the creation of vibrant businesses that not only meet Scottish need but also create products for export markets. Indeed, there is no better way to ensure Scotland has a strong currency than by stimulating the domestic economy in ways that in turn maximise export potential.

We’ll stimulate the economy and this will reduce the trade deficit – that’s what that boost the economy and thereby boost exports to strengthen the economy is.

Hmm.

A faster GDP growth than trade partners’ ones usually results in trade deficit, since imports are elastic to GDP (they rise more than proportionally).

Hmm.

I am now suggesting that Scotland should, when it is independent have equity capital.

Unlike debt, equity capital is usually issued without a repayment date, indicates ownership of a stake in the concern, and maybe a vote, and is considered to be the foundation on which the company is built. Indeed, it’s usually said that a company is run for its shareholders, who are the people who own its equity capital.

In my opinion the idea that equity capital only exists in companies but that debt can exist in both companies and countries is absurd. After all, countries do have people they are run for. And those who run countries do have people they are accountable to, who have a vote. And those people do, as a matter of fact, have a stake invested in the success of their country. Now suppose that the money a country can create costlessly if it wants to do so, as happened, for example, when the UK created £435 billion of money to fund its quantitative easing programme, or which it can create to fund its money supply by spending that necessary money into the economy (as Scotland will need to do to create enough of its own currency to keep the economy going if it becomes an independent country) was not treated as debt reduction (as happened in that case) but was instead treated as being the equity capital of country held in trust for all time for the benefit of the people of that country.

A special body, or court, elected by the people of Scotland, or alternatively drawn from a second parliamentary chamber, could become trustees for this capital. The capital in question would not need to be repaid. Why should it? After all, it was created out of nothing. And nor would it carry interest. Again, why should it? It cost nothing to create. But it would, nonetheless, be the core funding that would keep the Scottish money supply under control, increasing over time if economic expansion demanded it, and maybe being reduced if the risk of inflation demanded that as well.

But what it would not be is debt. It would be Scottish equity capital: the money created by the nation for the people of Scotland to be held on their behalf by trustees but with the politicians of Scotland responsible to the electorate for its careful management in the interests of all. Debt be damned in that case: the balance sheet credit created by the spending Scotland would need to create the prosperity that investment and full employment would deliver would not pass into the hands of a few as private debt but would instead be held in trust for everybody in the country. This is entirely technically possible, at least if created when outside the EU (as Scotland would be bound to be for a period). And what this represents is money, economy, tax, politics and nationhood being combined into a new concept of capital that transforms opportunity for all.

We already do this. It’s called the money supply.

Sheesh.

21 thoughts on “Interesting”

  1. It would be Scottish equity capital: the money created by the nation for the people of Scotland to be held on their behalf by trustees but with the politicians of Scotland responsible to the electorate for its careful management in the interests of all.

    Has he ever met a politician, Scottish or otherwise?

  2. Seldom have I read anything as spectacularly stupid as this! It really is a cut-out-and-keep example of Murphinomics!

  3. The tl;dr version of every single Murphy article ever – “more tax, more spending, more debt, no consequences, how dare you doubt me I HAVE SPOKEN”

  4. “As this report argues, government spending creates new money for circulation in the economy, at literally no cost.”

    TANSTAAFL.

  5. In a previous piece about his so called White paper he’s quite prepared to monitor individuals bank accounts “In that case a new progressive consumption tax that would be charged on flows through bank accounts, and so charge the wealthiest at the highest rates,” I suspect that a spudotollah Scottish tax office would employ 25% of the population to monitor it’s citizens spending habits. Perhaps they could call it the Stasi.

  6. I think on the recent evidence that the time is rapidly approaching when our revered Professor will be spending his time in some social care facility slumped in a piss-stained armchair soiling himself and occasionally shouting “Tax them, tax them all!” until a nurse administers another sedative.

  7. Well he’s still wriggling on his previous article about the definition of excessive consumption. Proof that he makes all his stuff up whilst sitting on the toilet.

  8. Moqifen

    I was going to say the piece reads like something from North Korea but the GDR would be just as apt a comparison.

    Your second entry did make me laugh out loud!!

  9. “at literally no cost.”

    I had no idea.

    And now that leftist economists have bestowed this gift, it’s up to leftist scientists to create a literally perpetual motion device, forever ending our energy dependence.

  10. Equity capital in a company gets a vote, non equity doesn’t. So he wants to disenfranchise all Scots and empower foreign investors?

  11. I rather like the venerable Mr Christuy’s suggestions for a Proscribed Individual Selective Spend, and a Carbon Unitary Net Taxation System, based upon the excellent work of Messrs Slor and Insalate.

  12. Bloke in Tejas in Normandy

    “He’s remarkably good at reinventing the wheel but in a triangular or square shape.”

    Nah. He reinvents the flat tyre.

  13. So, ensure that it requires the entire population to produce any product. Then, as soon as the first business breaks ranks and produces more product using less people, everybody else goes bust.

  14. “Now suppose that the money a country can create costlessly … was instead treated as being the equity capital of country held in trust for all time for the benefit of the people of that country.”

    OK. Run the presses, create lots of luvverly, luvverly moolah, and call it equity.

    “A special body … could become trustees for this capital … but with the politicians of Scotland responsible to the electorate for its careful management in the interests of all.”

    At which point, De La Rue are out of a job. Because those presses are never going to be run again, since to do would be massively dilutive to the existing stock of ‘equity capital’.

    Now try taxing that ‘equity capital’ that doesn’t pay any dividends. Hang about in the Gorbals for a bit, see what happens.

    Good grief.

Leave a Reply

Your email address will not be published. Required fields are marked *