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Unearned income, eh?

Mike says:
August 27 2021 at 4:01 pm
It’s perfectly reasonable for people on negligible income to expect a return on their savings at a rate comparable to that of inflation. That dwindling sum is all they have, with no prospect of earning any more.
The policy of zero interest rates can’t be sustained, since it’s driving up house prices & household debt. And as someone that’s had negative equity and sold at a loss, house prices need to be significantly reduced.

Richard Murphy says:
August 27 2021 at 6:24 pm
Why should people expect an unearned return?

Why has every major religion condemned this?

Why don’t we when savings do not contribute to macro well being ?

Sorry, but I am saying please justify why you want unearned reward


That savings finance investment (yes, S does equal I) seems not to have occurred to the P³. Nor that there is a time value to money. People do have to delay their consumption in order to have savings after all.

But at least we’ve an explanation why those green bonds should only pay 1%, well below inflation.

24 thoughts on “Unearned income, eh?”

  1. It’s not unearned. You are lending the money to someone else to use and they pay you interest for the privilege. It’s an exchange. The man is a cretin.

  2. Why has every major religion condemned this?

    After we’ve ruined the economy we can start on the sodomites.

  3. Why has every major religion condemned this?

    Why has the founder of every major religion been crap at economics?

  4. Which major religion has condemned this? The only one I can think of is Islam and they use all sorts of creative ways to avoid calling interest what is essentially interest

  5. Bloke in North Dorset

    If I lend my money to someone else I want a part of the profit they are making. I also want that to reflect the risk I am taking that I won’t get the money back.

    The interest rate lets me select between competing requirements based on my circumstances.

  6. Captain Potato’s interlocutor, Mike, isn’t even asking for a return that reflects the time value of money or a reward for the risk: he’s only asking for “savings at a rate comparable to that of inflation” which though a pretty modest demand arouses uncomprehending tuberous ire. Please justify why you want unearned reward!

  7. Hasn’t Catholic doctrine changed since the Middle Ages, though, Chris? And also, it seems to exclude the Orthodox strains of Christianity

  8. “It’s perfectly reasonable for people … to expect a return on their savings at a rate comparable to that of inflation”

    Most people think “reasonable” whatever they were used to when younger. The bottom plot here shows savings account interest rate vs CPI inflation rate from 1989 onwards. For about the first 20 years savings > CPI – hence for many people “reasonable”. The lines crossed in about 2008-09, presumably because the Central Banks started their great monetary experiment.

    ns&i stopped selling their index-linked savings certificates in 2011.

  9. @Bravefart, or he has made some terrible investments! The constant hustling for grants is distinctly suspicious.

  10. Dennis, Dispensing Wisdom. Or Something.

    Why has every major religion condemned this?

    And why has every religion then found a workaround that essentially negates that condemnation?

    Christians found their workaround in the Jews (think Rothschild family, etc.).

    Muslims have their own way of working around it as well… And it isn’t particularly subtle, either. For all intents and purposes they just call interest “profit” and hand a couple of imams some cash to declare the deal to be Sharia compliant.

  11. Mike is *not* asking for unearned income – he is asking that the value of the savings be frozen by increasing the nominal value at the same rate as the currency is debased.
    That Murphy refuses to understand that demonstrates that either he has nil understanding of money or he is a liar.

  12. “Hasn’t Catholic doctrine changed since the Middle Ages?”: and infallible at each stage. The Age of Miracles has not passed.

  13. “Why should people expect an unearned return?”

    To compensate them for the risk that they wont get their money back, amongst many other reasons.

    I wonder if Spud would advance me a zero percent loan?

  14. For those of you suggesting that you need a return to compensate you against the risk of losing your asset… In the new normal of Spud and Klaus Schwab, ownership is so passé.

  15. I am confused – the Spud is certainly in favour of unearned income when it’s him collecting it. What value has he provided in his three professorships, for just the most egregious example?

  16. @ dcardno
    Murphy isn’t quite that self-contradictory: he said “why should people expect an unearned return?” He doesn’t always expect an unearned return and when a competent economist joined Cambridge Econometrics he resigned because he expected he would not receive an unearned return.
    As many commentators have pointed out capitalists expect an *earned* return on their money which Murphy has evaded (not avoided, evaded) discussing. When I was young, Actuaries expected savers to look for a 3% (net of inflation) return on their savings, based on an average of their meticulous observation of the previous dozen generations. Income tax (originally only levied on income from savings) means that the nominal interest rate needs to be about 50% greater than the rate of “inflation” (debasement of the currency). With income tax at 7s9d in the pound, 3% merely covered said debasement that the Conservatives tried to keep at or below 2% pa
    BraveFart and Chris: if you feel you need to translate this, please feel free to do so.

  17. Spud is referred to as P³ because he has claimed to have held three separate chairs in economics. In actuality (WikiP):

    In September 2015, Murphy was appointed Professor of Practice in International Political Economy in the Department of International Politics at City University London, as a part-time appointment involving research and teaching. Previously he had been a visiting fellow at University of Portsmouth Business School, the Centre for Global Political Economy at the University of Sussex, and at the Tax Research Institute at the University of Nottingham.

  18. “Unearned Income”
    What, like selling Papal Indulgences or Carbon Credits?
    Drinking tea while warming up the photocopier isn’t really earning now is it?

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