Spud fails to grasp. You can’t use the one thing to control many different variables.
First, we would need a new Capital Management Act. That would give the Treasury powers to require registration and reporting of cross-border financial positions, to impose quantitative limits or charges on classes of flows (for example, short-term wholesale funding), and to direct the Bank of England and the regulators to use their tools to achieve those aims. The old Exchange Control Act is a precedent: it shows Parliament has done this before.
Second, the Bank of England’s remit would have to change. Alongside price and financial stability, it must have an explicit duty to maintain external and capital-flow stability. It would then be required to use macro-prudential tools, such as counter-cyclical capital requirements on foreign exposures, reserve requirements on short-term foreign liabilities, and limits on FX mismatches, to pursue that goal. Access to sterling liquidity could be restricted to institutions that comply.
Third, the PRA (Prudential Regulation Authority) and FCA (Financial Conduct Authority) rulebooks would need to be revised. All sterling payment, clearing and repo activity for UK residents should take place in supervised entities that disclose their beneficial ownership and meet new reporting standards on FX, derivatives and securities financing. Time-varying regulatory charges (otherwise known as a Spahn tax), which are the equivalent of a transactions tax, could be applied to destabilising, short-term financial flows. Highly leveraged non-banks reliant on foreign funding could face tighter liquidity and leverage rules as a result.
Finally, we should not underestimate the importance of transparency. A public register of major cross-border positions, linked to company accounts and trust disclosures, would itself change behaviour.
Yes but.
You can control capital flows, sure you can. You can control interest rates, sure you can. You can control the FX rate, sure you can. But you cannot control interest rates, capital flows and the FX rate all at the same time. This was the old complaint about Bretton Woods, recall? Sure we controlled the FX rate, we had capital controls and then interest rates were out of our hands – because we had to use them to manage the FX rate.
Sigh.
“First, we would need a new Capital Management Act. That would give the Treasury powers to require registration and reporting of cross-border financial positions, to impose quantitative limits or charges on classes of flows”
I think we’ve finally found a good use for Bitcoin. Convert your money to crypto, stick the key up on an FTP server, fly off to your tax haven and then download and sell the crypto.
And that’s just if you’re trying to pay for some ElectronVolts you bought from a supplier the other side of the Tweed.
The word control gives him a (viagra assisted) hard on. If his policy were enacted tomorrow and he finds out it solved nothing and created more problems, his next move would be regional control – can’t have London sucking in all that capital. Then 15 minute cities with capital controls. Control control control
More control would end up in the license Raj, with him behind the counter, or so he thinks.
Blah, blah, blah.
A check valve on capital. Inflow will completely stop. Outflow will expand. All foreign owned businesses will cease growth and major maintenance, and begin planning their exit.
Econocide.
The wittering on ‘control’ would be less laughable if Spud, and politicos in general, had some concept of Control Theory: negative feedback, phase delay, instability and loop gain, etc.
Indeed, passing a serious course on Linear Circuit Analysis & Control Theory ought to be mandatory.
It’s not as if it’s unpleasant: I enjoyed it so much I took it twice 🙂
NB Anecodote. Did a management team exercise that consisted of managing ‘production volume’ and ‘sale price’ of a product. The exercise was cleverly designed to cause a 4 turn delay between output feedback and changing decisions. None of the other participants had the faintest idea of control theory and insisted on massive over correction ‘to make the output change’.
Result was total instability, swinging between extremes.
Just like real life economies.
All that was needed was a basic inkling, and >2 brain cells. Sigh.
You wonder if he’s capable of driving a car. And if he is, is he capable of observing that he’s capable of driving a car and noticing *why* he’s capable of driving a car.
PIO. Pilot Induced Oscillations.
This is why climate models are failures. Thousands of known and unknown nonlinear feedback paths. Incomplete knowledge of initial conditions. I don’t know if climate scientists are ever explicitly taught this. Engineers need it because ignoring it causes things to destroy themselves.
We simply don’t know enough about the atmosphere to model it.
Hilariously, the Met Office thinks that can be fixed with a bigger computer.
“We simply don’t know enough about the atmosphere to model it”
Preee-cisely.
This was known as “parametric sensitivity” when I was an undergraduate.
Freeman Dyson (1923- 2020)
University of Michigan 2005 – Winter Commencement Address
You should have learnt a fair bit about that dancing in and out of the showers after a rugby or football match.
FYI Dan from Lotus Eaters has had a look at Spud’s alternative budget: https://lotuseaters.com/premium-brokenomics-147-09-12-2025. There is a preview for non subscribers.
Commenters were impressed: “This is genuinely, without exaggeration, one of the most mental things I have ever seen.”
Even I genuinely didn’t have the energy given the thing was 14 posts – Tim had a similar reaction when confronted with Murphy’s first book. But the worrying thing for me is people believe it. The education system is that weak
I don’t blame you. It was definitely a magnificent octopus. It’s dangerous to stare into the abyss too much.
It’s more than that. Pluralistic ignorance is at play.
BBC/Guardian spout stupid stuff. Repeat lies over and over. People who don’t really believe it believe everyone else does, so they keep quiet. And APPEAR to believe.
So *every* reinsurance contract at Lloyds of London with an overseas insurer (the overwhelming majority) would have to be registerted and approved by some Murphy-appointed bureaucrat before it came into force …
“verbum pactum meum” – unless Murphy says no
Again it’s hard to know what he means. If you get 100 euros in holiday money is that in scope? If someone in the US buys a few shares in a UK company?
If his fantasies were enacted I’d just move abroad where my assets already are. Would be far easier than dealing with it.
That won’t be a problem, because you won’t be allowed foreign holidays in MurphyWorld. He will be allowed to travel to international lefty smugfest conferences, of course, but we’ll be lucky if we get approval for a weekend in Scarborough.
He wants an independent Scotland – but he wants Scotland to have control over the BoE?
In this dirty old part of the city, where the sun refuse to shine
I will say that his editing of this post at least makes it literate. I’m wondering if he’s put it through a quantum filter or outsourced it to ChatGPT
You are right to say that Thatcher did two things: first, she used an Order in Council to switch off exchange controls in 1979; then, eventually, she scrapped most of the legal framework.
Whereas you of course think that regulation is axiomatically a good thing. Famously pronouncing that you had ‘Had no Human Rights prior to 1997’
She also removed the “Corset” (Supplementary Special Deposit Scheme), which was the Bank of England mechanism designed to restrict the growth of the broad money supply between 1973 and 1980 by penalising banks that lent too much, as well as relaxing hire purchase rules and deregulating Building Societies to allow them to lend more. Thatcher’s changes were widespread.
I think of lot of Corbyn/ Polanski fans including yourself simply think if we revert back to 1978 things will be better. This is particularly entertaining when you consider your absurd post regarding Trump earlier in the day. I’m also amused that the growth of the Money Supply is an object of concern. I thought MMT meant there was no limit on the money we could suply or was that on Tuesday.
Ever since, those who benefit from an open-door system have pretended that this history makes capital controls impossible. It doesn’t. It just means we have to legislate again.
Well it’s a theory – based on the Budget speech I am sure this would work.
First, we would need a new Capital Management Act. That would give the Treasury powers to require registration and reporting of cross-border financial positions, to impose quantitative limits or charges on classes of flows (for example, short-term wholesale funding), and to direct the Bank of England and the regulators to use their tools to achieve those aims. The old Exchange Control Act is a precedent: it shows Parliament has done this before.
And your theory is if you make the capital flows less ‘excessive’ and limit them this money will do what precisely? Hang around? I’d imagine even some EU jurisdictions would be interested in creaming it off before you even consider Switzerland and the Middle East (And that’s just in EMEA!!)
Second, the Bank of England’s remit would have to change. Alongside price and financial stability, it must have an explicit duty to maintain external and capital-flow stability. It would then be required to use macro-prudential tools, such as counter-cyclical capital requirements on foreign exposures, reserve requirements on short-term foreign liabilities, and limits on FX mismatches, to pursue that goal. Access to sterling liquidity could be restricted to institutions that comply.
Jesus Christ on a pogo stick. I work in such an institution – you don’t need to be Jane FIsher or Jamie Dimon to predict what the reaction to such an arduous reporting regime would be. UK entities would be wound down and I’d imagine any such Sterling transaction might be routed through an offshore jurisdictions. I would say that such a regime would succeed in stopping capital flows. The only snag would be that you’d once again learn a crucial sum that you often seem to forget – ‘What is 100% of zero, from a taxation perspective?’
Third, the PRA (Prudential Regulation Authority) and FCA (Financial Conduct Authority) rulebooks would need to be revised. All sterling payment, clearing and repo activity for UK residents should take place in supervised entities that disclose their beneficial ownership and meet new reporting standards on FX, derivatives and securities financing. Time-varying regulatory charges (otherwise known as a Spahn tax), which are the equivalent of a transactions tax, could be applied to destabilising, short-term financial flows. Highly leveraged non-banks reliant on foreign funding could face tighter liquidity and leverage rules as a result.
As per above – these entities would be set up for sure but almost all the activity bar a minimum needed to comply with this onerous regime (which resembles several African countries – at least we can;t call you racist on this occasion) would shift offshore.Again your regulatory charges would yield no revenue.
Finally, we should not underestimate the importance of transparency. A public register of major cross-border positions, linked to company accounts and trust disclosures, would itself change behaviour.
None of this is technically challenging: banks already track these positions. What is missing is not the how, but the political will to say that managing capital flows is a normal function of a state that wants an economy which serves its people.
In fairness – this is consistent with your ideological hatred of people exercising freedoms in a way of which you disapprove of. The sobriquet of ‘the Fat Controller’ is well earned
I now believe that this is an essential direction of travel.
‘I have no more territiorial demands in Europe’ as a man of similar self-regard once said.
One of two things would happen. Some people overseas would work out how to exploit these rules to their benefit at huge expense to the UK tax payer. Alternatively most people overseas would avoid sterling like the plague which would also be a huge expense to the UK tax payer. Sadly these two scenarios are not mutually exclusive.
I wonder if the Great Brain Of Ely has remembered that there’s millions of dusky foreigners in the UK now, lots of whom are sending money back ‘home’ on a monthly basis. I’m going to enjoy the reaction when Gauleiter Spud tells them all ‘All your money belongs to Bwana now!’
First, second, and third are all the same thing: all people must do as I, the Fat Controller, dictate.