Well. OK. Can we test this?
So, govt creates and spends narrow money. Does the national debt equal the narrow money base?
Hmm, tt doesn’t? Oh, then the statement is not true, is it?
Well. OK. Can we test this?
So, govt creates and spends narrow money. Does the national debt equal the narrow money base?
Hmm, tt doesn’t? Oh, then the statement is not true, is it?
Wow that “cumulative difference” is clumsy phrasing, as in:
What’s the cumulative difference between 17 minus 8
Basically it’s WTF is he going on about. Is he trying to explain subtraction?
Dunno. Is the “cumulative” a shorthand for sustained overspending and the various mechanisms that facilitate the sustainment? His cartoon doesn’t mention government borrowing, which is an odd omission given the title and subject.
I think the explanation is the traditional one: he’s a twat.
“Government borrowing” is merely money in the economy the government has yet to assert ownership of, because it’s special money: it’s only in the economy because its actual owners have decided to place it there temporarily. Were government to assert ownership of it a great deal of other money would immediately vanish from the economy and the government would suddenly find its obligations require rather more money than is left in the economy. At this point the debt becomes actual debt to other economies and the government collapses.
He’s trying to describe the area under a curve but doesn’t know it, which is why it sounds weird.
I think you’re being far too technical with your “narrow money”. It’s much simpler than this. Spud is asserting that the government owns all money, that it chooses to take some from the economy to spend itself, and that it could take more, until it takes all of it, the Communist endgame.
In this scenario the government can’t run out of money whilst an economy still exists.
Norman – he has both Zimbabwe and Weimar put to him and shrugged both of them off as actually confirming MMT described how the real world worked. It’s an insuperable level of ignorance!!
I’d suggest government has no influence on money at all & certainly doesn’t create it. It’s created in commerce. Government is simply just another consumer. Government’s a service industry.
The government has *a lot* of influence on money. All *value* is created by individuals, the overwhelming majority of what people want is created by the private sector but the government prints money which is used as a means of exchange. When it prints too much there is too much money chasing an unchanged amount of goods and services so prices go up and the value of £-denominated savings go down, (increasing equality by making everyone with savings poorer).
No John. The underlying value of money is determined by commerce. You’re talking about the number of individual tokens the government issues. That’s irrelevant. It makes no difference to the value circulating in commerce..The tokens are constantly revalued by way of transactions in commerce.
Money is merely a means of exchange – a gold coin may have some intrinsic value to a dentist or someone wanting to heat an aircraft windscreen but £ notes aren’t even very good firelighters.
When Attlee devalued the £ from $4.20 to $2.80 did commerce in the UK shrink by one-third? No, just the amount that OAPs could buy with their lifetime savings.
And that’s BiS’s point. Those pensioners had mistaken money for value. It’s not, which is why they found their purchasing power suddenly halved.
You seem to have misread BiS. He said that money is created in commerce. *Value* is created in commerce (and other ways e.g. through Jim growing food). Narrow money is created by the government; broad money can be created by banks but that creation is constrained by the supply of narrow money and banking regulations.
Here’s a question I’d like Tim to answer. Money is a token of value. Value is created in production & consumed via commerce. So the total value of the tokens must equal the value circulating in commerce at any one instant. It definitely can’t be GDP because GDP is over a period not the instant. Assets can can have no value except briefly when they’re bought or sold. At other times their value is indeterminate. So what, if any, economic expression tells us what value’s in the economy, now?
Indeed. Force a billionaire to sell his assets, will they fetch a billion? No, because those assets will flood the market and Supply & Demand tells us that when supply increases the price drops. So the bloke is not and never was a billionaire because that billion can never actually be realised.
Bit of a problem when it comes to wealth taxes and Tax The Rich, eh?
A lesson learned by the Second Triumvirate. And quickly forgotten.
“Bit of a problem when it comes to wealth taxes and Tax The Rich, eh?”
Not really, because the usual suspects will define their terms in a manner that will ensure they get what they want. And as the people in charge of saying what the law is or isn’t, they can legislate that black is white if they want. And the courts would have to uphold it. So defining ‘asset value’ as ‘amount of shares held times normal market price per share and ignoring any 2nd/3rd order effects’ will be a piece of the proverbial.
No problem. Because the purpose of the taxes is not to raise the money but to harm the rich. The money raising is merely a pretext to get support for the taxes from the greedy.
MV=PQ. The money equation. Money times it’s speed of circulation equals prices times quantity.
Or, the amount of money we have times the number of times we use that money equals the prices of things we use money for times the number of times we use money for those things.
It’s the foundation of monetarism. The problem always came that when you decided to really define “money” (so, just notes and coins? Include current accounts? Loans, what?) whatever the measure you used to do so stopped acting nice the moment you started using it as a target. Goodhart’s Law.
(so, just notes and coins? Include current accounts? Loans, what?)
None of them. Notes & coins are just pieces of paper or metal. And current account balances & loans are not part of commerce. Money & commerce are inseparable. And money isn’t a thing, it’s a dynamic part of the process of commerce.
An example using cash to make it simple. You have some notes in your pocket, your wages from your employer. The underlying value of those notes is the services you provided to your employer. You take your notes to a restaurant & exchange them for a meal. Now the restaurateur has the notes. What’s the underlying value of the notes now? It’s the value of the meal he sold you.
Interestingly, the change he gave you for the notes, their underlying value is still the services you supplied to your employer. That hasn’t participated in commerce.
What I’m tying to do is to get past the bollox of economics & understand what is actually happening. And it seems that what is actually happening is extremely simple & easy to understand..
“You have some notes in your pocket, your wages from your employer. The underlying value of those notes is the services you provided to your employer. You take your notes to a restaurant & exchange them for a meal. Now the restaurateur has the notes. What’s the underlying value of the notes now? It’s the value of the meal he sold you.”
If I’ve read this right, I think there’s two things in there;
“underlying value of those notes is the services you provided”, seems a wee bit LToV to me. But, it’s the value of those services, as viewed by the employer. Which is
“It’s the value of the meal he sold you”, appears to be intrinsic value stuff?
“the change he gave you for the notes, their underlying value is still the services you supplied to your employer. That hasn’t participated in commerce.”
Your employer did not participate in that transaction, yup. You’re saying the residual amount after the meal is the pro-rata reduced number of hours/whatever you put in?
There’s a whole load of options here right? Above the value of the tokens in reducing transaction costs – bartering and so on.
I’m with you on this, BiS. I always thought, and so does nearly everyone else I talk to, that economics was all about money, numbers, and clever formulas. It’s not. That’s all spreadsheet nerdwank. It’s about the production, exchange and consumption of goods and services, and above all, who decides. That’s it.
Which isn’t to say you can’t get rich doing nerdwank but as has often been mentioned here, few economists seem to. The rich get rich doing goods & services properly, or by being rentiers of one kind or another: fucking parasites, IOW. Tapeworms.
You obviously get it Norm.
What interests me at the moment is the creation of value which we depend on to consume. And what should be regarded as “value”? There’s some things we can agree are value. Dinner for instance. For other things it becomes increasingly obscure. Do DEI coordinators produce actual value?
Folk here regularly talk about their pensions, savings & houses & their retirements. But they’re all assets. You can’t eat them. To eat, they have to be exchanged for something will buy food.
Government policy seems intent on making the creation of value increasingly difficult by imposed costs. So what’s happening to the creation of “real” value in commerce in the economy now? Is it rising? Staying the same? Falling?
Because when these folks want to liquidate their assets, will there be sufficient value in the economy to exchange for them? In short, will anyone be interested in buying them? It doesn’t matter what the book value of your pension is. It’s whether there is sufficient food to eat.
Personally I think current government policies, aided by ever eager economists, are quite capable of driving the economy back to the level of subsistence farming. In which case money will become irrelevant.
Economics is an attempt to describe *part of reality*. Whereas Mathematics is an attempt to describe *all of reality*.
IFF you have an expert who is on tap not on top (a position into which I habitually try to place myself) then l/he can use economics to tell Baldwin/Attlee/MacMillan/Wilson/whoever what the effect of different policies will be. Baldwin listened to Keynes and the UK recovered a lot faster than than the US under FDR’s “New Deal”.
The first time I, as Treasurer, proposed reducing the subscription rate at one of my running clubs I was outvoted by the membership most of whom did not understand the accounts. The second time, after I had pointed out each year for three years that we had *too much* money in the bank, they agreed; it now has the largest membership of any of the (few) clubs in its category; we did not do it to increase membership but economics tells us that was very likely to happen..
Interesting pricing change.
Going the other way, a National Trust membership has just gone over £100 a year. It will be interesting to see if this psychological barrier being crossed reduces subscriptions.
In what way does that differ from the production, exchange and consumption of goods and services, and who decides?
And, as I’m sure you well know, mathematics does not explain religious beliefs, so your claim that mathematics explains all of reality looks a little shaky to me.
But then, I’ve never met a modest mathematician.
Actually Descartes demonstrated that choosing to believe in God was rational.
I have met a modest mathematician (actually I have met several, most of whom were significantly better than I, but one came immediately to mind). I admit that it is very easy for the kid who comes top at arithmetic when he is 5 or 6 to be fooled into thinking he is clever but it isn’t compulsory; your problem is that you won’t know whether or not someone is a mathematician unless some calculation is required.
Your first sentence is unclear – please specify which “that” you are talking about?
Eh?
Just the other day you were insisting that money has no recollection of where it’s come from or idea of where it’s going. I suggested that was mostly true of cash rather than all forms of money. Que insults.
And now here we are with this bollocks.
The underlying value of “notes” is the confidence people making exchanges have in their use as tokens of exchange. If you’ve got fifty quid to spend, nobody cares if you got it by working hard or winning it on the ponies. They might have a concern if it was stolen, but beyond that so long as they believe they can use those fifty notes to buy goods and services at a similar exchange rate as last week, they’ll trade with you for them.
Money has no recollection from whence it came because its underlying value changes with each transaction its used for. It isn’t a thing. It’s an aspect of a process.
The confidence part is what defines the tokens of value.
Nonsense. Cash’s underlying value is it’s perceived worth as a token of exchange. Fifty quid from the bookies has the same value as fifty quid from window cleaning on a hot day.
You’re wibbling.
Utter bollox Cash’s value as a token of value in exchange depends on the commerce that underlies it. And it gets valued by what it’s exchanged for. So in my example, it got valued against hours working. And was subsequently valued against dinner. The token has no intrinsic value .
When you consider buying something, you are valuing it against all the other alternative things you could buy.
Why do you think the Usual Suspects™ are so hot on creating Official Digital Currency based on blockchain technology?
Suddenly the currency has a *very* accurate memory…
It is a very common fallacy to think that things have an inherent value. The notes only have a value to the extent that you or someone else values them. And the value can go up or down as circumstances change. Supose, for example that the restaurant says that they don’t take cash – then the notes are worth less to you. Even more so if the restaurant examines the notes and says they’re fake. Or, the other way around, as you are about to use a note you realise it’s in some way very valuable (autographed by a famous person, anm old collectible one etc).
MV=PQ is a con trick if you can’t measure V in any way other than PQ/M. Show me V. Tell me how you measure it independent of P, Q and M. Looks like a fudge factor to anybody but an economist.
Yes, V depends on the way you decide to measure P, Q and M.
If you do measure P, Q and M consistently over time, then you have a time series for V consistent with those definitions..
The monetarist assertion is that V is stable, or at least broadly predictable.
During Covid, P was initially stable, Q was depressed by lockdown etc, and M grew rapidly (furlough and other government spending). V fell sharply.
At this point the monetarist (not Bank of England!) expectation was that V would return to normal. Q bounced back a bit, the excess M wasn’t removed, so the heavy lifting was done by the rise in P (= inflation).
What mystifies is not that economists talk about this stuff, but that most of the public, politicians and central banks (who really ought to know better!) don’t understand it.
That’s by design. If the public understood this stuff the whole Establishment scam would collapse.
There is no money involved when a peasant grows food on his personal plot of land to feed his family (or a factory worker grows food on his allotment).
There’s none needed because no transactions are involved. This is yer peasant or worker directly providing services to himself. A bit like housework (but don’t tell the girlies).
Fat lot of good that did Roscoe Filburn.
An extreme case of “judicial activism” by a Court packed by FDR and his Democrats. The decision rests on some very arguable assumptions (including that Filburn would have chosen to spend money to buy wheat from an out-of-state seller if he had not grown it and that, in itself, implies that he had spare money to do so)..
This implies there are two, parallel economies: one consisting of trade (the exchange of goods and services), the other of self-generated goods and services which are not traded. Housework, kitchen gardening and auto-didacticism all being examples of the latter.
I’ve barely been formally taught in anything I’ve ever done for a living. My value as a service provider has nearly all been self-generated. I’ve done my own value-addition by studying and practicing. And then there’s the other stuff I’ve learned, that gives me great pleasure but from which I’ve never generated income.
You can fuck off if you want to try to value and tax that.
Tell that to FDR!
I’ve had arguments with HMRC (most frequently due to the incompetence of their programmers), but they have never tried to tax me on my unpaid voluntary work.
But even voluntary work is trade: you’re working for someone else. What I find interesting is when you’re working solely for yourself, as kitchen gardening and housework certainly are, or when you put considerable time and effort into pleasing yourself, as you do with your running. Are they going to try to “value” and tax that?
Sowell makes abundantly clear just how corrupt the US governmental process became, with its absurd “interstate trade” figleaf, so it’s hardly surprising the bought-and-paid-for FDR did what he did in a land of self-starters.
HMRC are constrained by decisions by the Law Lords, who IMHO are both more modest and more intelligent than the US Supreme Court. So they do not attempt to tax me on non-existent income. There was a period when they taxed owner-occupiers on the rent that they didn’t pay but someone (maybe MacMillan:I can’t remember, abolished that nonsense).
If I won a cash prize in a race (and the pigs performed aerobatics at Farnborough) that would be taxable. AFAIK the medals have no sale value (and HMRC look at the resale value): after I die no 1 son will have to find a scrap metal merchant to get rid of them (ISTM it would be rude if *I* threw them away).
I would have thought it’s not you who should be taxed. Maybe whoever you did the unpaid work for. They have received a material benefit.
Charities are generally exempt from tax. If they paid me and I paid tax on the pay less costs and then gift-aided the pay back to them HMRC would be worse off. I decided that seemed a bit spivvy so I have never done it.
“Community sports clubs” are not actually charities but tax treatment is pretty much identical.
This one again? The more you borrow the richer you are? A ten year old could see through it.
A ten year old can see through it. But economists?
It works if you can get away with defaulting on your debts while keeping the cash.
Ah, a bit like BBLs, then.
A saving grace is that at least it’s not another one of his risible “Venn diagrams for our times”