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He never realises when he’s leaving a hostage

And what, anyway, does this debt represent? It is the money created by the government as a result of its spending not yet taxed back by it. It is, in effect, the national money supply.

Why has that increased? There are two main reasons. One is that commercial banks have not created enough liquidity to ensure the smooth operation of the national economy.

The other is that the amount of money needed to provide liquidity within the economy has increased because what is called the velocity of circulation of money has slowed considerably since the global financial crisis, but also because since the use of cash declined considerably, more money is required to compensate for that. The government has provided it by not taxing back money it has created.

OK, that’s the money equation. MV=PQ – which on other days he denies as being Friedmanite neoliberalism.

Anyway, just take what he’s said there seriously. The national debt is the money supply that government hasn’t taxed back yes. It necessarily rose because velocity of money circulation fell. OK, so what happens when V rises? Then we’ve got to do QT, plus pay down the national debt, obviously.

And guess what? The US velocity of money is increasing and so I’d assume that the UK one is. At which point Ricthie’s own argument should lead to him arguing to pay off some of the debt. But it never will, will it?

9 thoughts on “He never realises when he’s leaving a hostage”

  1. I understand the Gyppos’ve pissed away so much money that they’re whining for the wicked white West to lavish hard cash on them. The only velocity of money that the articles seem to imply is its velocity from the silly suckers who give it to them into their pockets.

  2. I sneeze in threes

    Please can you indicate when you are quoting. We might incorrectly think you have gone mad and need to stage an intervention.

    How does cash have a higher velocity than electronic payments? Business bank cask maybe every day, or less frequently.

  3. But… but… but…
    According to the same Professor, money is just a bunch of numbers on a computer, and banks can create or destroy money at just the touch of a button…

    So how could liquidity ever be a problem in the first place if that is the case?

    Does someone have an alter ego that isn’t banned yet to pose this question to our Mighty Academic? 0:)

  4. Grikath

    My alterego can only engage in Newspeak on that site and not realizing I had already been banned in 2016 he made a point of actually banning me about 6 months ago when I said he’d blocked 20,000 people on Twitter.

    The whole post is incoherent even by his standards – he seems to contradict himself four times even in the space of six paragraphs…

  5. MV = PQ = GDP

    M = (PQ)/V = GDP/V

    The laws of physics say that when I wave my arm, Jupiter quakes, ever so slightly. Likewise, as a margin investor, when I borrow money to purchase stocks, which is a non-GDP transaction that increases the money supply, then velocity falls, ever so slightly, as it must by arithmetical necessity.

    Recently however, interest rates are too high, so I’m using my dividends to pay down my HELOC, which is a non-GDP transaction. As such, M falls and V has to rise.

    The actions of millions of investors like myself is what’s causing V to rise.

    Richard Werner again because some of you missed it the first time (Richard is using the older money equation here):

    “Solving the enigma of the ‘velocity decline’

    The problems arising from the implicit assumption that nominal GDP (that
    is, PY) can be used to represent total transaction values (PT) are obvious.
    GDP transactions are a subset of all transactions. The mainstream quantity
    equation (2) that uses income or GDP to represent transactions will thus
    only be reliable in time periods when the value of non-GDP transactions,
    such as asset transactions, remains constant (thus dropping out when con-
    sidering flows). However, when their value rises, this will cause GDP to be
    an unreliable proxy for the value of all transactions. In those time periods
    we must expect the traditional quantity equation, MV = PY, to give the
    appearance of a fall in the velocity V, as money is used for transactions other
    than nominal GDP (PY). This explains why in many countries with asset
    price booms economists puzzled over an apparent ‘velocity decline’, a
    ‘breakdown of the money demand function’ or a ‘mystery of missing
    money’ — issues that severely hampered the monetarist approach to mone-
    tarv nolicv implementation…”

  6. I was always vaguely embarrassed about being an accountant.
    It took discovering Murphy to become ashamed of it…

  7. Grist

    Don’t feel guilt or embarrassment. It’s nigh on certain he paid or arranged for someone else to pass the exams on his behalf.

    He has such a poor understanding of basic GAAP that either he used a ‘ringer’ or is suffering from early onset dementia. I simply cannot believe that anyone who has such a poor understanding of basic accounting (Concepts like double entry bookkeeping and depreciation seem to be a mystery to him) got his qualifications legitimately.

  8. @V_P

    Murphy clearly has a fair knowledge of accountancy. If he had none, he would occasionally be right entirely by accident. Economics was pretty much solved by the middle of the 19th Century, but — to ensure the continued employment of professors of economics — they have to find all sorts of rabbit holes to “disprove” Smith, Ricardo et al.; conversely they do the opposite to “prove” Marx. Spud saw that game and tried to replicate it with accountancy: the problem is that accountancy is far more numerical than economics, so in “disproving” accountancy rather than economics, he looks like an ignorant twonk instead of just a regular one. Worse, he seems to have bought a lot of his own bull hence the inconsistency.

  9. Pass the fvckin’ sick bag

    Pilgrim Slight Return says:
    July 21 2023 at 9:31 am
    Looks idyllic – and you Sir are an inspirational character.

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