Not that I’m as important as Martin Luther or anything but I am actually important you know!

The Senior Lecturer:

1) All money is created by a promise to pay.

OK, fair enough, not complete nor definitional but useful all the same.

2) The fiat currency of a government is created by its promise to pay.

No, it’s something that other people can use as a promise to pay.

3) The promise made by a government to pay is backed by its willingness to accept that currency in settlement of taxes owing.

Backed by, certainly, to some extent. But again this isn’t definitional. Cash US dollars circulate in Russia, they cannot be used to pay Russian taxes, the users aren’t racking up US taxes yet believe me, they do still have value. This is also where most of the seigniorage earned by the Federal Reserve comes from. Precisely and exactly those notes which circulate outside the US and which do not cycle back through the tax system.

4) As a result all fiat money is backed by the promise that there will be an obligation to pay taxes in the future.

No.

5) without taxes there would, then, be no fiat money.

See 4). Both because of 3).

6) Government debt is, in that case, not a sum to be repaid by the government. It does instead represent government spending not yet cancelled by taxes due.

That doesn’t even follow by his own premises.

7) Since all fiat money is created by government spending in advance of tax collection the government’s debt is, then, simply the major part of the money supply.

No, not at all. The statistics are here. M4, total money supply, is some £2.2 trillion, absent gilts. Notes and coin, absent QE effects, maybe £80 billion. National debt is, dunno, £1.6 trillion? It’s not in either of those, oddly enough.

8) Banks can create money when they lend, but only under government licence.

This is where the distinction between money and credit becomes important. Banks cannot create narrow money, M0. They can create elements of M4, broad money. But we’ve another set of names for the distinction, money and credit. If you rewrite the theses so far making that distinction then Ritchie’s idea falls to pieces.

9) The licence the government grants to a bank to create money means that he bank is never independent of the government and is responsible to it.

The banks issues credit, not money.

10) As a consequence the government has a duty to regulate banks to ensure that they use their licence to create money appropriately.

Meh. There aren’t that many people who argue for no bank regulation. A few, the free bankers. Who do make that M0 and M4 distinction. What Spudda means here is “use that licence in the manner I consider appropriate” which is a rather different Fat Controller sort of meaning, isn’t it?

11) This obligation to regulate banks is universal, and should be reciprocal i.e. nations owe this duty to each other as well as to their own populations.

Eh? Zimbabwe owes it to the UK not to issue too much money?

12) Since banks can create money in the currency of a country both outside as well as within its jurisdiction the supply of data on the banking activities undertaken in one state to the authorities of another who has the obligation to regulate both monetary and taxation transactions arising within their state is inherent within the nature of the banking system.

Again with the confusion here. State have the righteous monopoly on the creation of their own fiat currency. But not on the creation of credit.

13) Tax is the mechanism most readily available to a government to impose its fiscal and social policies on a country.

Odd that really, a great deal of Keynes is about how spending can be used to influence fisal policy.

14) Markets have a natural tendency to concentrate wealth because wealth has never been equally distributed.

An entire non sequitur. Whether or not wealth has ever been equally distributed means nothing as to whether markets concentrate it or not. What’s worse is that they don’t. Capitalism we might think concentrates it, we can certainly make that argument. But it’s markets which temper that very process. When entrepreneurs end up with some 3% of value created, near all the rest turning up as the consumer surplus, that’s not concentration, is it?

15) The concentration of wealth within an economy reduces the well-being of all within it as those with excess resources derive lower marginal utility from their consumption than those with below average resources. Relative poverty always follows, as can absolute poverty.

Relative poverty is measured by income. Consumption is determined by income – well, usually. If it ain’t then people are becoming less wealthy. Thus neither really have anything to do with the wealth distribution.

No, really. Assume a wealth distribution. Double asset values, halve the return from assets. Relative poverty and incomes haven’t budged an inch, wealth inequality has soared.

16) The redistribution of income and wealth to achieve greater equality in the distribution of both does, therefore, increase well-being.

To a point Lord Spudda, to a point. The best guess from the likes of the OECD, IMF and the rest is that some 13 or 14 points on the Gini is about it. Yes, increased value of marginal resources etc, but also the effect running the other way, too high a level of redistribution strangling incentives in the economy.

BTW, the UK tax and benefit system moves the Gini by some 13 or 14 points…..

17) The legal ownership of land concentrates the ownership of wealth.

Yer wha?

18) Land cannot be owned: it can only be tenanted.

Well, if you want to say that property can only be owned to death, maybe. You know, you’re not there to own it afterward. But otherwise this is drivel. We have rather a large system whih insists, very strongly, that land is indeed owned. Ever heard of the Land Registry?

19) The common ownership of land will therefore reduce wealth concentration.

Has no one pointed out to the Senior Lecturer the existence of Garrett Hardin? Elinor Ostrom? Even Henry George?

20) Markets tend towards monopoly.

Not obviously, no? There is that Marxist insistence that they do but it has not been proven. And even then, it’s really a reference to monopsony, a word that didn’t exist when Marx was writing.

21) Monopoly is contrary to the interests of consumers.

The exercise of monopoly power does, yes. So, that’s the NHS, state education system and so on that has to go, right?

22) Monopoly results in the generation of excess profits, or rents.

The exercise of monopoly power does, yes. But it is the exercise, not the existence.

23) To prevent such profits arising markets must be regulated by governments to ensure the fairest possible outcomes for all, including the rights of new entrants to the market.

We should indeed regulate to ensure ease of market access. You know, make it easier to set up private schools and hospitals perhaps?

24) The payment of interest is a transfer of wealth, none being created in the process of payment.

Bollocks. Interest is the time value of money, no more. This is Thomas Aquinas and his drivel about fair prices and usury, isn’t it?

25) The payment of interest concentrates wealth.

Bill Gates issues bonds to buy a company. I buy some, Bill pays me interest. This is concentrating wealth?

26) It is the job of government to, as a result. regulate the availability of credit and the price that is paid for it so that exploitation should not arise.

And we reach credit and price controls! You know, like interest ceilings on payday loans so that they don’t exist? Or perhaps he wants to extend that to junk bonds?

27) The obligation to regulate credit extends to the promotion of activities that induce the extension of credit, including advertising.

From Aquinas to banning soap powder ads. That’s an interesting tack, isn’t it?

28) The physical resources of the planet are finite.

In a sense, but only in a sense. We cannot use more copper atoms than there are copper atoms, that’s true. This says nothing about what we can use copper atoms for, the value we can create by doing so.

29) The second law of thermodynamics holds true.

Holds true in a closed system. Which this planet is not, there’s a vast nuclear reactor up there pumping energy in every second. We just ain’t in a closed system.

30) The use of the minimum possible energy in the process of meeting human need is, therefore, a necessity and not a choice.

There is, out there, some limit to the energy we can use. Current annual global energy use is, can’t recall, a few seconds, maybe a few minutes worth, of the energy arriving.

31) The use of taxation to change behaviour with regard to wealth and income distribution, the ownership of land, the abuse of markets, the payment of interest and the exploitation of natural resources is a necessity.

I have just justified why I should be the Fat Controller. Kip Esquire’s Law.

32) The process of taxation must be democratically controlled.

Err, yes? Not by unaccountable bureaucracies perhaps?

33) It is the job if government to ensure that when a tax has been decided upon it is equitably enforced.

Why not? We also have courts out there to decide what that equity is, according to the laws the government has written. Along with constitutions and constitutional courts to check whether the basic idea is indeed equitable.

34) A government must be held accountable for its failure to enforce the payment of taxes legally due because this represents a failure of its social as well as its fiscal obligations to those who elected it.

Sure. Hey, that tax is legally due, go collect it.

35) No government has the right to undermine the right of another government to collect the taxes owing to it.

Don’t think anyone argues otherwise. That’s rather different from what is meant here, that no government should structure matters so that less tax is legally due.

36) No government has the right to undermine the tax base or rate of anther government.

Sure they do. Taxes on Frenchmen working in London are lower than taxes on Frenchmen working in Paris. Shrug.

37) Governments have the positive obligation to assist each other in the process of collecting taxes lawfully due by those liable to pay them.

We do have extradition treaties, not paying tax is a crime so……

38) Each person must have the right to appeal against any tax liability imposed upon them and have that appeal heard in an independent court.

We’ve heard of this rule of law thing, yes.

39) To be equitable a tax system must take into account the capacity of a person to make payment and maintain their rights as described in Article 25 of the United Nations Universal Declaration of Human Rights.

OK.

40) Companies, corporations, partnerships, trusts, foundations, charities and other legal entities created by common or statute law are agents of those who create, own, manage or benefit from them as the situation requires with regard to taxation and afford no separate or identifiable rights not attributable to those persons when acting in their own beneficial capacity.

He doesn’t actually mean this. For if he did it would be impossible to say that “companies pay taxes” or that “companies should pay more taxes.”

41) Each person has the right to enjoy their after tax income or wealth without hindrance so long as the purpose they pursue with it is itself legal.

Sure, we’ve heard of private property too, the right to enjoy it within the law.

42) A person is an agent of the state acting as a trustee or custodian of the state’s funds due in taxation arising as a result of the income, wealth or transactions that they enjoy until such time as that taxation is settled and the funds that they hold in that capacity are not theirs to rightfully enjoy without such obligation having been taken into account.

No. This is just “Tutti nelle Stati” once again.

43) A person acting in breach of their obligation as an agent of the state to appropriately manage and retain the funds that they owe in taxation shall be liable for penalty for not doing so.

If you don’t pay your tax you get nicked. And?

44) The state shall, in reciprocation of the obligation to pay tax appropriately account for the use made of that taxation in a manner that shall be appropriate to those with obligation to make payment.

Well, yeah, most of us do make it easy for people to pay us.

45) Those who, when holding political or public office fail to account for taxation due or paid be held accountable for their failure to do so.

Ooooh, Goodie! We get to jail politicians and bureaucrats then, do we?

39 thoughts on “Not that I’m as important as Martin Luther or anything but I am actually important you know!”

  1. Thesis 1 is obviously incorrect. When people physically exchanged gold or silver for goods, where was the promise to pay? They actually handed over valuable coins. The promise to pay only came along when paper began to supersede specie

  2. Matthew L, he thought this bunch of tripe up during his morning routine. Not even Snippa can prolong a shit long enough to dream up 95 pointless thoughts

  3. What a concatenation of drivel!

    Everyone will have their own personal favourites, of course, but I was much taken by:

    11) This obligation to regulate banks is universal, and should be reciprocal i.e. nations owe this duty to each other as well as to their own populations.

    So the BoE (as banking supervisor of the day) had a duty to supervise BCCI, headquartered in the UK, but failed. Should central banks elsewhere have been able to rely on the BoE and not bothered with supervision of the BBCI branches in their jurisdictions? Or should they have reported to the BoE on the good standing or otherwise of the BCCI branches?

    12) Since banks can create money in the currency of a country both outside as well as within its jurisdiction the supply of data on the banking activities undertaken in one state to the authorities of another who has the obligation to regulate both monetary and taxation transactions arising within their state is inherent within the nature of the banking system.

    This is utter tripe. BCCI branches (to stick with that example) might, depending on local regulations governing exchange control, have been able to lend or take deposits in, say, USD but these positions would have had to be squared off with correspondent banks or be permitted as open positions by the central bank.

    Apart from being daft and unworkable, anything approaching the level of oversight required in these §§ would require an administrative machine that only a maniac like Spud Tuberson, master of the universe, would relish.

  4. No government has the right to undermine the tax base or rate of anther government.

    Bollocks. He is claiming all States should charge the same taxes and rates. What are they?

  5. @diogenes-“Matthew L, he thought this bunch of tripe up during his morning routine. Not even Snippa can prolong a shit long enough to dream up 95 pointless thoughts” – sorry but the amount of shit the potato spews out suggests that he spends most of his life on the bog. I note that videos of him such as the horror show with the snp that tim inflicted on us show him sitting down either with a grimace on his face (its coming boys) or with a smug smile of satisfaction (of a jobbie well done). Sorry to lower the tone but the potato really brings out the worst in me.

  6. The use of the minimum possible energy in the process of meeting human need is, therefore, a necessity and not a choice.

    Note: not human wants, or human desires: human need. Needs as defined by the State, of course.

    The second law of thermodynamics holds true.

    Genuine LOL. What the fuck is that doing there?

    The sheer pomposity of posting this shit on Luther’s anniversary. The man’s self-regard is simply gigantic.

  7. Murphy’s applied for planning permission to Ely Council to build an extension to his unimpressive end terrace. The unextended property is simply too small to accommodate the massively expanded Murphy ego

  8. Actually, it is refreshing to see an out and out Communist, someone who isn’t actually hiding it and pretending to be something else. We need more in public life, to scare the shit out of the stupid, bovine middle-classes currently flirting with Corbyn.

  9. Lizard

    One wonders if Paul Mason was on the KGB’s list of “useful idiots” in the UK like Michael *Boot* Foot or perhaps dismissed like Tony Benn as too stupid and dangerous.

  10. “No government has the right to undermine the tax base or rate of anther government.”

    Funny, he seems to think it’s OK for the US to do just that by taxing its nationals residing in the jurisdiction of other governments, and would like the UK to do the same.

    Autres temps, autres trous dans la souche…

  11. I did not plan on writing this before I woke up this morning. The 45 were literally written one after each other.

    I don’t believe him. He revels in giving the impression that he’s spontaneous and hyper-productive. In his fantasy world, he doubtless sees himself as the Luther of economics. Yet all the Murphatollah has produced here is 45 Faeces.

  12. Bloke in Costa Rica

    Thermodynamics? What odds will anyone give me that if you wrote δQ = T dS on a piece of paper Murphy would be able to identify it?

  13. BiCR I am under the impression that Snippa thinks he devised the 2nd law of thermodynamics. Candidly your insistence on equations is neoliberal nonsense. Your time here is over.

  14. I did not plan on writing this before I woke up this morning. The 45 were literally written one after each other

    I didn’t plan on having a shit this morning either but it happened.

  15. The 45 were literally written one after each other

    Really? Misspelled, contradictory, mostly bollocks, some complete gibberish…amazed they were all vomited out in one session. Amazing and very revealing that he sees this as an attribute, not a fault.

  16. Blind-eye Tuber sings the blues:

    Woke Up this morning…
    Thermodynamics on mah mind,
    Got 48 more bits of crap
    With mah thumb from my behind…

  17. “Interest is the time value of money, no more.”

    Hmm. Interest at the risk free rate is the time value of money (the rate payable to acquire the use of money). Interest above the risk-free rate contains a margin to reward the lender for assuming the credit risk of the borrower.

  18. “OK, fair enough, not complete nor definitional but useful all the same.”

    A more complete definition is that it is a credible, enforceable, transferable promise to pay.

    “No, it’s something that other people can use as a promise to pay.”

    That part of the currency created by the government is created by the government’s promise to pay. But a lot of the rest of it is created by other people’s promises to acquire and pay in government currency.

    “Cash US dollars circulate in Russia, they cannot be used to pay Russian taxes, the users aren’t racking up US taxes yet believe me, they do still have value.”

    That’s because it’s transferable. What matters is that *somebody, somewhere* promises to pay – it doesn’t have to be the actual person currently holding it. US dollars have value because they know they can ultimately give them to an American who *does* need them to pay taxes.

    “This is also where most of the seigniorage earned by the Federal Reserve comes from. Precisely and exactly those notes which circulate outside the US and which do not cycle back through the tax system.”

    They get back into the US eventually, (unless they fall to pieces in which case the last person holding them is stiffed with the bill). It doesn’t matter how long the cycle is, or that most of the people on the route have no intention of using them to pay taxes. They have value because Americans *can* pay taxes with them, not because everyone always does.

    “As a result all fiat money is backed by the promise that there will be an obligation to pay taxes in the future.” “No.”

    True – sort of. Cash is backed solely by the government. Most of the rest of the fiat money is backed by other people’s promise to deliver goods and services. The government-backed component (including the cash) just acts as a medium of exchange.

    “without taxes there would, then, be no fiat money.”

    Possibly. There might be non-fiat money. Or the government might fund its currency using something else of value it owns. For example, Norway put all the money from selling its nationally-owned oil resources into a big fund, that it can use to pay the bills. That money is backed by oil, not taxes. There are other alternatives. But “fiat” money in the sense it is commonly used is generally derived from a tax-based promise to pay. But there’s nothing that says money has to be fiat.

    ” Government debt is, in that case, not a sum to be repaid by the government. It does instead represent government spending not yet cancelled by taxes due.” “That doesn’t even follow by his own premises.”

    The second sentence is partially correct, but it contradicts the first sentence. Accepting it as taxes *is* to repay it.

    “Banks can create money when they lend, but only under government licence.”

    Banks don’t create money, borrowers do. It’s the borrowers who promise to repay.

    And no government license is required. Anyone can do it by scribbling out an IOU, or signing a contract. What the government does with its regulations is to ensure credibility.

    “The licence the government grants to a bank to create money means that he bank is never independent of the government and is responsible to it”

    There is no licence to create money. A borrower creates money by going into the bank and signing a piece of paper promising to repay £150,000 over the next 30 years. It turns that peice of paper from something worth about £0.05 to something worth £150,000 to the bank (less a bit to allow for defaults and admin). What the government does is to make sure the bank doesn’t fiddle with the 1’s and 0’s and issue money it doesn’t actually have. But government isn’t necessary.

    But you can do the same thing by borrowing £10 from your neighbour and signing an IOU promising to repay. The IOU is created money – but there’s no government in sight. They only get involved (via their representatives, the police) if it turns out your neighbour was lending you cash he didn’t actually own, and when you didn’t pay it back, he couldn’t pay it back to its proper owners, and they got a bit upset. That’s not a special license though – that’s just law enforcement and honest business.

    “Thesis 1 is obviously incorrect. When people physically exchanged gold or silver for goods, where was the promise to pay? They actually handed over valuable coins. The promise to pay only came along when paper began to supersede specie”

    To the extent that people actually value gold, rather than it exchangeability for things they *do* want, that’s barter. To the extent that most people had no actual use for gold other than as money, the value is ultimately founded on the expectations of the few who do.

  19. he’s always banging on about saving the planet and not using up resources and global warming – but flies all over the place, If he was really worried about future generations he wouldn’t have had 2 kids. Hypocrite doesn’t even come close to this massive self entitled bellend.

  20. Not convinced Niv. A banknote is just a piece of paper that people believe has value. Paying for a transaction in gold or paper is the same transaction. I imagine that a lump of gold will get you further in Micronesia than a Russian banknote

  21. Furthermore, are you really saying that if I own £100 of gilts and I pay £100 of tax then the government does not have to repay the gilt?

  22. Bloke in North Dorset

    Is there a historical event he couldn’t make about himself?

    I look forward to November next year to see how he makes the end of WW1 about him.

    And if he’s going to get all physics, how about markets abhor a vacuum? .

  23. The thing that NiV needs to grasp is that people consistently swimming against the stream of threads need to be rather more pithy in their interventions. Well done to Diogenes for reading him but I fear lots of others won’t have bothered.

  24. A formidable chain of logic, based on three entirely reasonable premises:
    1. The world owes me a living.
    2. Somebody else is going to have to pay for it.
    3. Tax the bastards!

  25. Diogenes, of course, hits on the essential nature of money. It’s an agreed token of wealth, facilitates commerce. Without the agreement, it’s of no value. That governments print the stuff is an irrelevance. By & large the users of the government tokens let governments fuck around with the supply of the tokens is just for convenience sake. Governments overdo the fucking around, like creating too many of them, users stop using those particular token & switch to safer ones. Why the Zimbabwe ones became toilet paper & why dollars US were a currency of convenience in Russia.
    With particular reference to gold. Gold coins are as much tokens as any other money. Except the material they’re made of has its own intrinsic value. But the important thing is the confidence the minted article contains the correct amount of metal it purports to.That it isn’t necessary to weigh & assay each coin every time they’re exchanged Debase the coinage & the confidence evaporates. They’re no longer agreed to be money.

  26. Today he’s talking about constraints. I dare say he’s about to invent economics from first principles, only to wibble on about why traditional economics doesn’t address this sort of thing.

  27. “Not convinced Niv. A banknote is just a piece of paper that people believe has value.”

    Why do people believe it has value? Because they know there are people who will exchange goods and services for it. But ultimately, somebody has to exchange it for goods and services without passing it on, because it can’t last forever without falling apart. (Or without the government falling apart.)

    So for that last person, it has no exchange value, so they’re probably not going to pay full value to the next to last person, and they’ll discount to the next in the chain, and so on. As the note gets increasingly ratty, it’s value gradually drops towards zero in expectation of its ultimate disintegration.

    Actual money doesn’t do that, because everyone knows the bank takes in worn bank notes for their full value and burns them, rather than spending them. It’s an essential part of the process that gives them value.

    Value is conveyed backwards along the chain – the value of cash for each holder is founded on the value it has for the *next* holder – so you have to look at where the chain *ends* to understand where its value ultimately comes from.

    “Furthermore, are you really saying that if I own £100 of gilts and I pay £100 of tax then the government does not have to repay the gilt?”

    Yes, if you use the gilts to pay the taxes! (But that’s what I meant by “partially”. Government spending and cash are cancelled by taxes. Gilts are cancelled by repayment with something else. But you always have to close the loop.)

    “The thing that NiV needs to grasp is that people consistently swimming against the stream of threads need to be rather more pithy in their interventions.”

    Wrong!

    Pithy enough for you? 🙂 But given that some people consistently fail to understand even the long and detailed explanations, I really don’t see how they’re going to follow the pithy ones. That’d just be a waste of time. I adjust my exposition to suit my audience. If you all made it clear that you understood what the hell I was talking about, I’d gradually shorten them because I’d know long explanations weren’t necessary.

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