Doesn’t really work, does it?

Once the necessary support measures to start the economy going again, when that happens, are also added in I think it’s quite possible to imagine this estimate at least doubling.

It took more than a decade for UK notional national debt (without QE being taken into account) to increase by £1 trillion after 2008. It will take much less time to repeat that on this occasion. However, after QE (which cancels the debt that deficits notionally create because the government buys its own debt back when it does QE, and it cannot owe itself money) the increase in real debt may be quite modest in my prediction. QE funding, or variations on it, will run almost in parallel with the deficit in my expectation, as it did for much of the period from 2009 to 2014. As a result the supposed ‘cost’ to taxpayers will be minimal.

We need to get our heads around all this, and soon.

OK, let’s run this as Ritchie says. We don;t actually do QE as such – the ability to reverse it by selling the BoE held bonds back into the market being the important differentiator here – and instead we do the straight monetisation of fiscal policy that is MMT.

We pump another £1 trillion of base money into the system.

A good guess as to current base money is the £80 billion we started with before QE plus QE. So, call it £500 billion among friends. We now add a trillion. That’s a pretty big jump in the money supply.

OK, during depressed times that might not cause inflation. I think there’s a good chance it will but leave that aside. Accept the claim that it won’t.

Hmm. But when we’ve recovered? We’ve now got three times the base money supply? We’re going to have to cancel some of that money, aren’t we?

MMT says tax it back to cancel it. OK. So, we raise taxation in order to prevent the inflation. And so people are paying more tax – how is this not a cost to taxpayers?

Which is one of the things I keep trying to point out about MMT. If it works then it doesn’t make any difference. We print to spend instead of borrowing – cool. But once we’re back to the usual relationship between base and wide money therefore inflation we have to raise taxes. And what’s the difference between paying higher taxes to kill inflation and higher taxes to pay back borrowings?

24 thoughts on “Doesn’t really work, does it?”

  1. Thanks, this answers the question Scott Adams asked a couple of day ago that I mentioned in another thread. Duh, of course the extra money is still circulating when the bad times end.

    But if we don’t carry this lockdown on too long (so jobs and businesses still exist) there could be a bounceback boom, yes? And if so, won’t the growth take care of the extra dosh? In that case printing is better than borrowing.

    We’ll have a test. The US is printing, the UK is borrowing.

  2. Did my daily excercise bit. Some people take their dogs for a walk, I took my beer bottles. It’s allowed isn’t it? Didn’t see any twitching curtains although I did the same yesterday so am probably pushing it.

  3. The Reverend Wilbert Awdry keeps on blogging:

    Richard Murphy says:

    March 27 2020 at 12:36 pm

    Only 1,000 books on railway history in this house…….

    Built up over nearly 50 years

    Reply

    Captain sensible says:

    March 27 2020 at 1:46 pm

    bet your fun to have a pint with

  4. Lord Murphy of Ely

    What’s the difference between using tax to pay back borrowing, and using tax to reduce inflation?

    You can tax the rich to pay back borrowing, but if you want to reduce inflation you have to tax people with a higher propensity to consume – i.e. the not-rich. If you ask MMTers about this, you’ll hear back nothing but crickets.

  5. Only 1,000 books on railway history in this house…….

    No-one needs 1,000 books on railway history. Two or perhaps three should suffice

  6. If there weren’t railway history anoraks, many small independent book shops would fold. Every man needs a hobby, the narrower the subject matter the better, for instance historical OS maps and the evolution of public footpaths.

  7. Dennis, The Swinging Tool of Capitalism

    Train enthusiasts are harmless. If only Ritchie had restricted himself to blogging about trains.

    It’s only a matter of time before he claims he invented the steam engine.

  8. ‘Once the necessary support measures to start the economy going again’

    Government taking its boot heal off the neck of the economy. We have extreme throttling of the economy by government. They are the problem. Murph calls for “necessary support measures.” Only one needed is, “Leave us the fvck alone.”**

    **Note: this is the same cure for American drug manufacturing going to China. The decadent days of harassing your key businesses is over.

  9. If he is serious about owning 1000 books on railway history, then I suggest he is unable to count. Yet another thing he cannot do

  10. Bloke in North Dorset

    He can’t have 1,000 book unless they’re all written by R Murphy otherwise that would be acknowledging someone has greater knowledge than him.

  11. @Jussi March 29, 2020 at 11:45 am

    Show some spirit and copy Farage. Farage on LBC: “I’ve been going out more than once a day”
    “Brexit Party leader Nigel Farage has admitted breaking coronavirus lockdown rules saying that “common sense” will need come into place if people are facing an extended time indoors.

    Answering calls during his phone-in on LBC, Mr Farage said he had left his own house eight times in the past five days”

    Nigel Farage update:
    https://www.youtube.com/watch?v=h4EU8xlE69M
    imo Farage being rather too negative & panic, fear

    Germany Death Rate vs rest:
    “In the US, 1.8 per cent (2,191 deaths in 124,686 confirmed cases), Italy 10.8 per cent, Spain 8.2 per cent, Germany 0.8 per cent, France 6.1 per cent, UK 6.0 per cent. A fifteen-fold difference in death rate for the same disease seems odd amongst such similar countries: all developed, all with good healthcare systems. All tackling the same disease.”
    https://www.spectator.co.uk/article/how-to-understand-and-report-figures-for-covid-19-deaths-

    @Dennis

    Ritchie admits Marx invented the steam engine, but Richie came up with the idea

    @Gamecock

    Gov’t Stasi needs a good kicking

  12. You guys remind me of one of my favorite stories:

    ~1828, Congressman David Crockett (yes, the one that died at the Alamo) from Kentucky, addressing the House, said he killed 106 bears in 8 months. Another Congressman jumped to his feet, and yelled out, “Crockett, you are a LIAR! I know you are a liar, because you CAN’T COUNT TO A HUNDRED!”

  13. Pcar

    “A fifteen-fold difference in death rate for the same disease seems odd amongst such similar countries: all developed, all with good healthcare systems. All tackling the same disease.”

    It’s not odd at all. Because, as we know, the recorded cases are complete nonsense. They are all much, much higher.

    Any back of a fag packet calc of current UK cases could “possibly” be somewhere in the low 7 digits? Hint: work back from current deaths (and even those are not consistently recorded from country to country). You don’t calc mortality rate, perhaps better to look at all the evidence and use a broad assumption (perhaps 0.5% to 1.0% as a possible start point?). You might also factor in some additional asymptomatic (that may not be obviously included in the start point numbers used?), lag (an approximate infection to death time interval) and time escalation rate. And maybe other stuff I can’t think of instantly off the top of my head.

  14. @PF

    NP. Bottom line Dr John Lee says stats are garbage, more so as CV-19 now notifiable disease (means if had it, recorded as death “due to” not “with” it) and real mortality rate orders of magnitude lower

    Stasi Watch
    – Current restrictions could last for Six Months or even longer – UK deputy chief medical officer
    https://www.youtube.com/watch?v=DrZIHw372n0

    All based on Ferguson/Imperial models – GIGO – Oxford Epidemiology Prof vehemently disagrees

    – “A former crime commissioner told Iain Dale police should Taser people who don’t obey lockdown rules and if they still don’t comply, the police should “fire something at them which makes them comply permanently.”

    Former Detective Chief Superintendent Kevin Hurley called the police powers brought in to restrict movement “weak, insipid and they will be very difficult to use.”
    https://www.youtube.com/watch?v=Rne9517eWX8

    If only he would have cared as much about the over a million victims of islamic child rape gangs. Strange that the UK suddenly has loads of police officers patrolling the streets and setting up checkpoints. Normally they can hardly ever be seen

    Good Guy Watch
    – Crenshaw blasts Hellary Clinton’s criticism of Trump amid crisis: It’s not the time
    https://www.youtube.com/watch?v=LipcDhI5kWo

    Crenshaw spot on about optimism, courage and strength

    – McCarthy on relief bill: History will not be kind to the Democrats
    https://www.youtube.com/watch?v=FZcSRaQb4Ro

    Democrats wanted to impeach Trump when they accused him of holding up foreign aid and the Democrats happily hold up American aid at the expense of peoples lives
    “while Trump fiddles” Really Pelosi? You could have passed this bill last week and instead you decided to try and shove a bunch of pork into the bill, including more funding to Kill babies, and hold the bill up until you could get what you wanted. You are a disgusting person Pelosi
    AOC always looks like an emotionally wrecked 8 year old having a temper tantrum

  15. “AOC always looks like an emotionally wrecked 8 year old having a temper tantrum.”

    Dunno, whenever I see her with her mouth open I feel like feeding her a sugar lump and patting her on the forehead.

  16. Bloke in North Dorset

    Germany Death Rate vs rest:
    “In the US, 1.8 per cent (2,191 deaths in 124,686 confirmed cases), Italy 10.8 per cent, Spain 8.2 per cent, Germany 0.8 per cent, France 6.1 per cent, UK 6.0 per cent. A fifteen-fold difference in death rate for the same disease seems odd amongst such similar countries: all developed, all with good healthcare systems. All tackling the same disease.”

    There was an interesting and fun Twitter thread yesterday. Andrew Neil did some research and claimed that the difference in death rates isn’t to do with recording, they’re the same as other countries, but their better health care system. He then went on to describe it as a mix of public and private insurance.

    Cue Twitter outrage for implying its better than NHS and comparisons with USA, but he’s not one to back down in a fight.

  17. @BiND

    I read Andrew Neil’s (pbuh) thread, and I’m sure he’s relaying what he’s been told. But the numbers don’t make sense. If Germany has identified a larger number of CV-19 infections, through greater testing, then you’d expect to see them reporting a greater number of people dying with CV-19 but mainly from other causes. The fact this isn’t the case can only be explained by the counting (either of infections or deaths or both) being done very differently – yes, Italy has a slightly older population, maybe the German health service is a bit better than average, but such factors can only account for a relatively small difference in the stats, not (as we see) an apparent order of magnitude.

  18. but such factors can only account for a relatively small difference in the stats, not (as we see) an apparent order of magnitude

    Depends. Infection rates for MRSA vary much more widely, and it’s probably all down to the quality of hygiene in hospitals. Some countries insist on strict washing before and after every examination, and some are sloppy and don’t. The countries where people obey strict rules, like Sweden, have almost no cases. Countries where people are sloppy, like Brazil, have magnitudes more.

    I suspect the Italians and Spanish are killing their CV-19 cases in the hospitals. People are going in and getting cross-infected, and that is fatal if you are weakened.

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