As Rachel Reeves made clear in her Mansion House speech last night, she wants to relax banking regulations. Big bonuses will be coming back, paid much sooner than has been permitted of late. The aim is to increase risk-taking in financial services. She is issuing new remit letters to the Bank of England and others, emphasising that this is her expectation, although copies do not appear to be available as yet. Her belief is that this will boost the economy. She is wrong.
Aristotle noted a very long time ago that money cannot be made from money. His reasoning was clear. Value is created from the production of goods and services that meet needs. Bankers cannot do that. No one can eat money.
The counterargument to that suggestion is that banking and financial services facilitate the aggregation of capital, which can release productive capacity. I disagree with that claim in the modern fiat-currency economy. Banks are the primary source of capital for many companies where growth is most likely. But they do not aggregate depositor money to make loans. Instead, they make loans out of funds they create under a licence from a government-run central bank.
MMT means we do not require a motivated, incentivised, banking sector.
Which is pretty good twattery. Even under Spud’s absurd interpretation of MMT – that banks are not constrained by deposits – it’s still true that bankers allocate credit and investment bankers capital. So, we still want those doing the allocating to be motivated, incentivised, vubrant and all the rest.
The potato’s complaint doesn’t matter……
I wonder if someone is wondering where Lord Alli’s endless supply of money to “donate” to senior government ministers is coming from? Since the bankers’ union is not overt and doesn’t donate money to the Labour Party, is she letting the bankers bribe themselves?
Aristotle noted a very long time ago that money cannot be made from money. His reasoning was clear. Value is created from the production of goods and services that meet needs.
I would have thought that simple statement completely destroys MMT.
Echoing the BiS – he has basically destroyed his own argument.
The counterargument to that suggestion is that banking and financial services facilitate the aggregation of capital, which can release productive capacity. I disagree with that claim in the modern fiat-currency economy. Banks are the primary source of capital for many companies where growth is most likely. But they do not aggregate depositor money to make loans. Instead, they make loans out of funds they create under a licence from a government-run central bank. Bankers, as most people understand them to be, do not, therefore, fulfil the task of lending depositor funds. Rachel Reeves has fallen for a fallacy that her former employers at the Bank of England have admitted is not true.
What’s amazing is how doggedly he clings to the fallacy. It is a misinterpretation of a decade old paper. It’s obsolete. He’s obsolete. Sadly he seems committed to increasing his bullshit output, especially in video form , until senility or death intervene.
First, they charge massively for the use of loaned funds created costlessly by them. The return to them on their government-created right to create such funds is phenomenal and wholly inappropriately charged for by the government as the facilitator of this oligopolistic exploitation of millions in the UK and beyond.
The Market for personal and business loans is reasonably competitive as far as I’m aware. Be advised this is probably the least objectionable of his characterisations.
Second, they use the capital provided by depositors to speculate. This is not a creative process. It is, in effect, gambling. The net contribution to society is negative. The costs incurred necessarily prevent it from being a zero-sum game, after all. The returns are biased toward those with the most capital. The upward redistribution of resources within society exacerbates the similar inequalities created by the core banking function.
So peddling bullshit to gullible students and publicly lying about economics is a ‘net positive to society’? the man is the equivalent of a tapeworm.
Third, they supposedly advise others with financial capital that might be aggregated, such as pension funds. In this role, they, and others in the financial services sector, face three major problems.
Firstly, they are not competent to advise on the productive use of capital because bankers and financial services specialists have never been engaged in such activities.
Secondly, bankers only understand financial capital, which is fundamentally different to productive capital, and since accounting post-2005 has only concentrated on reporting returns to financial capital, the ability to differentiate the two has been almost entirely lost, at least within the City.
Third, since bankers only take a microeconomic and financial view of the world, and accounting still fails to recognise the cost of the externalities created by capital when used by companies, the advice provided by bankers is inevitably counter-productive to the necessary goal of achieving climate stability upon which human life depends.
This is such a gigantic load of steaming horseshit I don’t even think it’s worth fisking. He wouldn’t know ‘productive use of capital’ if it ran him over with a steamroller (and bounced no doubt)
Despite all this, Rachel Reeves went out of her way in her speech to describe the financial services sector as ‘the crown jewel in our economy’. This is total nonsense because there is literally nothing that the financial service sector can do to add value to the economy without there being opportunities for them to fund within the remainder of the economy. In other words, the financial service sector that Rachel Reeves describes can only have a parasitical role, extracting value from the real productive value of the economy created entirely outside the walls of the City of London. Reeves appears unaware of this.
I am guessing this is why he is such a fan of Hamas. All those ‘Jewish bankers.’
I stress, when saying this, that I am not passing judgement on the routine supply of basic banking services, or accounting services, or of routine insurance. The value of all of these I recognise, but it was also glaringly obvious that this was not the focus of what Rachel Reeves was describing when referring to financial services in her speech. It was the growth capacity of the supposed speculative capital aggregation activity to which she was making reference, and there is no evidence this adds value, or that changes to it can produce beneficial outcomes.
Well that’s all fine and dandy then – you don’t ‘pass judgement’. You arrogant, parasitic piece of garbage. Your incessant evil, which has no end either in scope or duration is a blight on the entire country. Frankly it’s a shame Trump doesn’t take more of an interest in you. You provide less than zero value and your productivity is very negative indeed, attacking as you do a large swathe of the people that actually pay for your wages in the variety of grifting activities which you involve yourself in.
Let me take local authority pension funds as an example. Rachel Reeves wishes to aggregate the 86 existing local such funds and create eight mega funds from them. She claims that this will improve their contribution to the UK economy. What she ignores is that the criteria for the success of these funds is whether they are able, or not, to meet the likely financial requirements of their members when they are in retirement. Nothing else matters and at present, these funds have between them an aggregate surplus of approximately £100 billion. In other words, they are more than succeeding at delivering for the people to whom they have obligation. Unless she can demonstrate that aggregating these funds to create a pool of opportunity for higher risk, and so potentially lower return investment, can deliver better outcomes for the members in question (who have never got a mention in her discussion of this issue) then her proposal is recklessly irresponsible.
I’d actually agree with certain elements of this critique but it sits ill with someone who wants to steal every ISA and Private pension in the country to fund his own pet schemes. I’d rather my own pension wasn’t invested in the ‘Green New Deal’ but you don’t give that option, do you?
I very strongly suspect that she is being that irresponsible. What she has forgotten, as have all within the financial services sector, is that they only exist to service the end consumer, who is the individual saver. They do not exist to service the collective interest of the City. Nor do they exist to provide funds for speculative purposes that might promote bankers’ bonuses. Their sole purpose is, in the case of pension funds, to supply a secure income to a person in their old age. It should be added that when seeking to do so, they should also seek to ensure that the opportunity for such old age should exist, which means that they must be inherently engaged in tackling climate change, which never got a mention in anything that Rachel Reeves had to say last night, so obsessed with her growth mantra is she, which is so contrary to the likelihood of achieving that goal of sustainability.
One hopeful dividend of the Trump election is that the Climate Change scam is being exposed, and that those peddling it for the purpose of gaining power over people are held to account. This would include Murphy. Indeed if, as I am reading the goal is to reinvent the 1980s perhaps sending one of the Freelance CIA teams similar to those that fought Communists in that decade over to the Fens is an option?
Did Reeves have anything useful to say about the economy as a consequence yesterday? No, is the answer to that. She added no value at all. But, she did threaten the well-being of a group of pensioners who are currently very well served by their local authority trustees.
She also significantly increased the chance that there will be future significant financial instability in the City of London by encouraging the taking of short-term speculative positions that are highly risky but which do fuel the payment of bonuses wholly inappropriately to people who have no downside consequences from undertaking this activity, of which asymmetry she appears to have no understanding.
So, was this a good night for the economy? No, it most definitely was not. Rachel Reeves is really a very big threat to the well-being of this country.
I’d agree Reeves, as part of the worst government in human history is a very great threat to the well – being of the country. The only way she could be worse is if she followed your policy prescriptions.
Yeah, ancient Greece… that famous period of peace and harmony. Definitely want to be taking my advice from there on how to run an economy.
Aristotle’s economics were rooted on the principles of household management… Something our friend has repeatedly told us has nothing in common with running a national economy.
On the other hand Aristotle thought it was all about a higher moral purpose and telling other people what was the right thing to do with their wealth, so some alignment there.
So now money is useless because bankers? He has no capacity for self awareness does he.
He’s just attacked his own ideology and doesn’t realise it.
“Value is created from the production of goods and services that meet needs. Bankers cannot do that.”
Because… they… don’t… produce… services… ?
Does he ever read his own stuff?
I have come to the conclusion that Reeves is just making it up as they go along
Much like her CV and LinkedIn pofile which is updating before our very eyes
Chocolate ration has gone up……
“Aristotle noted a very long time ago that money cannot be made from money.”
Aristotle also claimed elephants don’t have knees. Argument from authority can leave you looking like a twat. But then, it’s Murphy.
I can never understand why people perpetually quote the Greeks. (Because it shows [or you would like it to suggest] you had “a certain type of education”?). Most of their pronouncements were in the realm of “the bloody obvious”.
Arthur the Cat
I think it was the great Noel Scoper who occasionally reappears in this parish who highlighted an article where Murphy used as many as 15 fallacies of logic in a single article.
– Straw Man
– False authority
– argument from incredulity
– Continuum fallacy
– Moralistic fallacy
– Moving the goalposts
The list is endless. Obviously we are all guilty of these at some point but when you have set yourself up as the Supreme authority on every subject in the known universe and your knowledge base is zero, you are on the proverbial Sticky wicket…
Oh, Spud is confusing ‘money’ and ‘value’.
Again.
No, banks can’t create ‘value’, sure.
They can, however, create ‘money’.
“Aristotle noted a very long time ago that money cannot be made from money. His reasoning was clear. Value is created from the production of goods and services that meet needs.
I would have thought that simple statement completely destroys MMT.”
That’s because you are a fuckin cretin.
I wonder if Spud has ever read any Aristotle. My crib tells me ” In “Politics,” Aristotle argues that money is a necessary invention for facilitating trade, serving as a medium of exchange and a measure of value. He distinguishes between natural wealth-getting, which includes necessary goods for life, and unnatural wealth-getting, which focuses on accumulating money beyond natural needs. Aristotle criticizes the pursuit of money for its own sake, particularly through usury, as it distorts the purpose of money and leads to social discord. He emphasizes that economic activities should support the good life, not undermine it”.
Sounds pretty sensible to me
@Diogenes
Are you sure you’re not quoting the Sage of Ely?
“ Second, they use the capital provided by depositors to speculate.”
But I thought banks don’t use depositors’ funds. Or is that tomorrow?
Arrrgh
These new people ,ably assisted by the advice of cretins like Murphy, will destroy what little’s left of the UK economy. Reeves is out of her depth and floundering in a sea of illusion.
IFF Rachel Reeves has learned how to distinguish useless and, hence, unnecessary regulation from useful regulation then her actions may be useful and promote real growth (as distinct from spuriously reported “growth” arising from money spent and utterly wasted on filling in forms but included in GDP). Her work in he BoE has inevitably exposed her to lots of useless regulation so she could know some of it is a waste and junk it with some of the lefties hesitating to object because she is part of a Labour government.
One can hope …
I’m not sure Reeves alleged employment at the BoE as a recent graduate in her early 20s gives her much insight
Every CV revision seems to make her much vaunted experience less and less believable
She’s not Chancellor because of her purported expertise in economics. She’s Chancellor because almost nobody else in the Labour government can count.
(An obvious exception is Miliband but he’s plainly insane.)
I can never understand why people perpetually quote the Greeks. … Most of their pronouncements were in the realm of “the bloody obvious”.
Perhaps, but they were in many cases the first people (to have been recorded in) saying so.
“All of Western philosophy is but a footnote to Plato.” Alfred North Whitehead (attrib.)
I think that’s about it, Cris. No doubt people were saying the same things in Ur. There’s nothing particularly profound about them. As I suggested above, the same words & sentiments as Aristotle’s – albeit poorly typed & spelt – could have appeared on the Sage of Ely’s blog with no doubt him claiming copyright. And could you find someone more ignorant?
“Aristotle criticizes the pursuit of money for its own sake, particularly through usury, as it distorts the purpose of money and leads to social discord.”
So he’s denying the time value of money?
More to the point, he’s writing about an economy that functions entirely differently from a modern economy. In ancient Greece a horde of money really was the Scrooge McDuck pile of gold. So gold sitting on the pile is not tokens of value circulating commerce. If people really did hoard money, less tokens of value circulating in commerce means less commerce. Those still in circulation increase in value against goods & services so the incentive develops to hoard them & benefit from future increase in value & not spend them. Commerce contracts. Modern money is just a book keeping entry. The value it represents is out in the economy, presumably producing more value. Commerce expands. That’s capitalism. Elon Musk has accumulated the most money in the world. He keeps it under the bed?
So why pretend what was written then is valid today?
I’m not so sure that is an entirely good idea – about a decade and a half ago we had a rather nasty experience when “increased risk tolerance” had a close encouinter with “too big to fail.”
Nothing at all to do with Spud’s inabiity to understand any of it – just an observation.
@Diogenes – “Aristotle … unnatural wealth-getting, which focuses on accumulating money beyond natural needs.”
That’s looking at the situation from the wrong perspective. Rather than looking at the person accumulating the wealth, we should look at the people that they deal with. It would be a great disappointment to very many people if Taylor Swift suddenly decided that she had enough money and would stop singing and writing songs. And it would be very bad for society if someone like Elon Musk routinely decided that he had sold enough cars to live comfortably, so shut down the source of their wealth.
And, of course, it’s worth bearing in mind that Aristotle got a lot of things wrong. It’s quite interesting to read his writings and see which things he speculated on are now known and how many he got right.