Ritchie and bonds again

Robert Ley says:
October 6 2017 at 11:56 am
This sounds like an idea which is crying out to be revived.

What rates of return do you envisage the bonds paying, and what mechanism would be provided for local investors who wanted to buy or sell once the bonds had been launched ?

One point of contention you might find being raised by certain ‘regulars’ is identifying how the capital amount borrowed by the Authority might be repaid if it is spent on illiquid assets such as housing, recreation spaces or air quality improvements, as your correspondent suggests. But I would imagine this could be reclaimed via taxation ?

Reply
Richard Murphy says:
October 6 2017 at 12:12 pm
I think bonds should be long term

And it should be assumed they roll over

OK. So, taken to the extreme these are perpetuals with no secondary market. How high is that interest rate going to have to be?

29 thoughts on “Ritchie and bonds again”

  1. I haven’t tried posting there under my nom de plume in ages.. could be the time. It is like watching a car crash. If his understanding of tax is weak, his understanding of Markets is non-existent….

  2. You can even cash in premium bonds but he wants companies or individuals to lock in their investment? What fool would invest in something like that? The only equivalent I can think of is Royal Albert Hall Debentures, which at least give you the right to attend concerts.

  3. Because trading in secondary pieces of paper doesn’t create investment in the real economy. Thus saving into secondary pieces of paper should not be possible.

  4. I think a lot of the TRUK posters are surviving to post another day because Arnald is no longer sniffing around and informing Murphy.

    Would be rather fun if Murphy’s unerring talent for pissing off everyone with whom he has ever had any sort of personal relationship, however ephemeral, got rid of Arnald too.

  5. Rhetoric aside, what would the rate of interest need to be for anyone sensate to invest in a perpetual with no secondary market?

  6. I can’t bare to go to his site to read his guff, so can anyone elaborate why there would no secondary market for his bonds? Do they not pay interest? Maybe once a year you just get a photo or a drawing of the infrastructure you have paid for, a bit like when you sponsor a donkey or one of those kids at World Vision.

  7. I sneeze in threes said:
    “can anyone elaborate why there would no secondary market for his bonds?”

    Without ploughing through all his drivel to check, I don’t think it’s that there couldn’t be a secondary market, it’s that Murphy doesn’t think there should be a secondary market. For the reason Tim gave above.

    Quite how he would go about banning all secondary markets in his government perpetual bonds I don’t know. A Murphy-advised government could stop direct trading by refusing to register changes of ownership, but it would be difficult to prevent derivative markets, especially offshore ones. But no doubt he would get great pleasure from trying to ban it.

  8. He hasn’t got a fucking Scooby about how bonds work. The way you’re going to get paid out (After having been locked into a long term bond) is by the issue of a long term bond (which I would imagine you’re locked into until maturity). Rinse and repeat.

    Essentially all your investment is belong to me

    What rate of return would I want ? Infinity wouldn’t even come close.

  9. Worzel, you’re assuming that the Courageous State will give you a choice about whether to invest in its bonds.

  10. Richard, candidly, you have to remember it was never your money in the first place, so you may be right.

    I sense your time here is ending

  11. Richard

    I’m guessing the derivative, or rather secondary market would be offshore and would operate simply by replicating the terms of he originals.

    So.I.don’t.known if my question stands up to exposure.to reality. It would be nice to know the answer if it does though.

  12. Since a state of courage can create currency at will, the interest rate is immaterial. The state of courage will always be able to pay

  13. As proof

    Graeme says:
    October 6 2017 at 10:29 am
    33 trillion works out to be about 4000 per person. Is that really such a staggering figure? If anything it seems low to me. I like to keep enough in the bank to cover a year of bills and only then seek out riskier investment opportunities. I suspect that many people have similar amounts in cash or short-term deposits. Don’t banks then lend this money out, subject to reserve requirements?
    Reply
    Richard Murphy says:
    October 6 2017 at 11:57 am
    You know that is a sum beyond the imagination of the vast majority in the world?
    Do you have any clue about wealth distribution?
    Do you also have any clue about how banking works and that deposits are not lent out?
    Your comments are not just ill-informed, they show a staggering naivety

  14. You know that is a sum beyond the imagination of the vast majority in the world?

    And? £500m is a sum beyond the imagination of the vast majority in the world. His point is…what? Large sum of small, imaginable or not, it isn’t his fucking money.

  15. I’m tempted to accuse him of numerical racism for some laughs. Hans Rosling once put up some data that in even the poorest countries children are getting 6+ years of education, mainly in arithmetic, reading, writing (or the equivalent) and language.
    Some poor brown people may not be able to imagine having that £4k, but the vast majority can imagine the numbers that end in trillions. For example, it’s common in India to see numbers ending in lakh crore or 12 zeroes, and the vast majority of the world is better educated than the average Indian.

  16. Bloke in Costa Rica

    The break-even rate you’d need to invest in a perpetuity would be its coupon multiplied by the discount rate. The algebra is very neat. The Net Present Value of a perpetuity yielding £x p.a. with a discount rate of r% p.a. is £100 x/r. Of course if Murphy could set the discount rate you’d be buggered because he’d make it absolutely ruinous, but then no-one would buy the bonds (unless forced to).

  17. I read Tuppence’s comment as that £4000 was an unimaginable amount! Clearly, I need a drink to clear my head.

  18. I think a Murphybond would be he takes your savings or pension and gives you a piece of paper saying “this went towards building a school/hospital/government building”.

  19. Bloke in north dorset – yes entirely voluntary. Of 100% of the income that you have as it belongs to the state.
    The state is mother, the state is father, blessed be the state.

    Those not buying bonds will be shot and the money they did have used to buy bonds.

  20. So Richie wants be to lend my money* to a cretinous Labour run council to spunk away as they please?

    The first 30% will go just to maintain their Ponzi scheme pensions, at least 50% will be wasted in administration and the remainder will get spent on some scheme such as rocking horse riding lessons for one-legged black lesbians.

    All fairly predictable and the obvious risk to the bond. Clearly the return in the real world (not some left wing fantasy) would need to be substantial.

    However, whatever the return was, why would I bother? The council would rinse me on my council tax to pay be back (minus all the overhead listed) so I can never make money!!!

    * Well, what the state let’s me have of ‘its’ money.

  21. Murphy believes in Inheritance Tax so there needs to be some basis for valuing the bonds when the “investor” (donor) dies. That *implies* a secondary market…

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