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Economics

Not every reforming idea is a good one

Reform’s plan to overhaul the Bank of England will leave markets more exposed to financial shocks, a senior official at the central bank has suggested.

Victoria Saporta, a director at the Bank, signalled that the party’s scheme to stop the Bank paying interest on money held there by commercial banks could return Britain to a world of “significant” volatility in financial markets.

After all, who would want to be caught supoporting an economic idea Spud approves of?

No, not a good idea at all.

OK, so we can ignore the rest of this

Equally disappointed are those who have been busy burnishing Trump’s populist veneer. Steve Bannon had repeatedly promised higher taxes for millionaires, but he has confessed he’s “very upset”. That’s because the bill would cut taxes by over $600bn for the top 1% of wage-earners, also known as millionaires. It amounts to the largest upward transfer of wealth in American history.

So it’s a cut in the taxes upon wages. This is nota transfer of wealth as wealth is assets and wages are income.

Bird knows shit about economics therefore – or possibly does but has put that aside in favour of some propaganda. Therefore we can dismiss the rest of it as being shit, can’t we?

Err, no

A successful economy is not just about maximising raw output. It is about maximising total consumer satisfaction. As service levels collapse, GDP may stay the same, but we are all worse off in ways that the figures don’t reveal.

It’s about maximising human utility.

Yes, yes, a trivial distinction no doubt. But once we allow anyone to start changing the definitions in mere moments we’ll end up in SpudLand where all definitions have changed.

The big news is …..Japan

Now, this is not wholly MMT. Because they’ve been doing QE. But we still gain an example of what happens when the politicians are told they can just get the central bank to issue as much money as they want to spend.

Japan’s been running huge deficits for decades. The Bank of Japan has been issuing new money to pay for it. And issuing bonds – which they then buy about half of. So, QE.

But then spend what you want and do so by printing money is MMT, right?

So, the national debt is 235% of GP. The Bank of Japan’sholdings of bonds is some 100% of GDP. And now inflation is rising, yields on bonds are rising and possibly – possibly – the wheels are coming off.

The base MMT insistence, govts can just get the central bank to print money to spend is true. The base argument against MMT – or at least my base argument againsty – is yes, but what then? Given political incentives, spending money is fun and taxing isn’t, what happens when we’ve run through all of that?

As, arguably, we’re about to see in Japan. Debt of 235% of GDP has interest rates rising to 4% at the long end. That debt, much issued at much lower coupons of course, is going to have to be rolled over or redeemed – or defaulted upon, inflated away – at some point.

So, what happens?

Gonna be a fun test, no?

Blimey

In his 2017 book Prosperity Without Growth, Tim Jackson, an ecological economist at the University of Surrey, called on advanced countries to shift their economies towards local services, such as nursing and teaching, and the development of more rewarding and less resource intensive professions like handicrafts.

Basket weaving, that’s the secret to a 21 st century economy!

It’s not, necessarily, wholly true

Tobacco is grown legitimately in many countries, the main producers being China, India, Brazil and the US, and to a lesser extent countries in south and southeast Asia. The raw tobacco in counterfeit cigarettes is often Chinese waste product not good enough for the legal manufacturers to use, according to private investigators employed by big tobacco companies. The investigators say workers in the illegal factories will commonly sweep tobacco from the floor or around the dirty machines to maximise the yield. It can be mouldy and sometimes even contains traces of mouse and rat droppings, asbestos dust and a fast-breeding pest called a tobacco worm. Unlike legal cigarettes, they do not use self-extinguishing paper that stops burning if the smoker stops puffing on them, making them an increased fire hazard and even more unhealthy than the real thing.

It is what you’d expect the legasl ‘baccy companies to say of course….

Blimey

Donald Trump’s tariffs tsar has accused Britain of being a “compliant servant of communist China” at risk of having its “blood sucked” dry by Beijing.

Peter Navarro, the president’s trade adviser, said the Government must resist “string-laden gifts” from Beijing and avoid becoming a “dumping ground” for goods that China can no longer sell to the US.

In an intervention set to complicate trade negotiations between Britain and America, he told The Telegraph: “If the Chinese vampire can’t suck the American blood, it’s going to suck the UK blood and the EU blood.

“This is a very dangerous time for the world economies with respect to exposure to China.”

Who’s he casting as Burffy in that little movie going on in his head? Pam Bondi?

Well, I dunno, really

Shipwrecked in the 21st century’: how people made it through Europe’s worst blackout in living memory

We went shopping.

Oven and cook top are electric. So, off we went and bought a bbq. Which we need anyway. Plus some charcoal. So we had hamburgers. OK. Wifey did insist on something to boil water as well – we’d not want to have to wait for fire up the barbie to boil water for morning coffee. So, €20 on a little gas camping stove.

And that was it really. So not hugely exciting.

We did find that one supermarket chain – Continente – is v well prepared. Their tills were still working. And the multibanco payment systems were – couldn’t get cash from the hole in the wall but could pay by card. Not that that mattered to us I had, as I usually do, a couple of hundred cash.

But it was possible to see how buying panics start. So, while we’re buying the bbq in one shop someone in hte line to pay says “The supermarket’s run out of water” so everyone in that line picks up another 20 to 30 litres of water. Some were buying 100 litres etc. No stocking system can really deal with that sort of immediate spike in demand. Stripping the shelves bare etc.

Saw the same thing with the bread (bread is a bv important part of the P diet) in the supermarket that had power. People buying 3 and 5 days supplies, vast piles of rolls and loaves. Yet the supermarket had enough power that it was still baking fresh. The mass buying wasn’t – perhaps = wholly logical. But again we can see how just a twitch in the system can lead to shelves stripped bare.

All of which is why, of course, economists like rationing by price. If the supermarket had couble, tripled, the price of bread then perhaps the shelves wouldn’t have been bare. Folk would have taken what was needed, not hoarded.

Yes, you’re right, there are many social reasons why the supermarket didn’t. And even some of the complaints – but only the rich can get bread! – have validity too. And yet by hte standards the economists care about it does in fact work. How do we pread available – and now limited – supply over current demand? Change prices because that’s efficient. It makes people think about how much they actually do need and so limits that demand on that limited supply.

Whether the answer’s “right” is a bigger question than the economics. But within economics it’s a pretty good answer.

Because this is how you’ve defined it

Previous surveys have tended to find that richer countries report being generally happier, but the new research, which looked at a wider range of indicators, showed the opposite.

“We see a negative relationship between GDP and meaning in life,” said Dr Tyler VanderWeele, professor of epidemiology at Harvard University.

The search ever goes on. Now that socialism is proven to make us poorer we must find out that being poorer really makes us happier so that we can be socialist.

Snigger

So, a big Guardian piece about how lower taxes for the rich are just neoliberalism, Maaan.

A young journalist named Jude Wanniski had an epiphany when at a lunch meeting, he watched the economist Arthur Laffer draw a curve on a napkin to argue to the Ford staffers Dick Cheney and Don Rumsfeld that cutting taxes could raise companies’ revenues.

No, the curve shows that lower rates could – note could – increase tax revenues.

It’s entirely agnostic about corporate revenues. And if they’re going to get that wrong then the rest of their analysis is going to be, well….

Which it always was going to be. It’s from David Sirota. He who thought Chavez did a good economic job:

No, Chavez became the bugaboo of American politics because his full-throated advocacy of socialism and redistributionism at once represented a fundamental critique of neoliberal economics, and also delivered some indisputably positive results. Indeed, as shown by some of the most significant indicators, Chavez racked up an economic record that a legacy-obsessed American president could only dream of achieving.

Erm, yes?

Meanwhile, a recent study by Malaga University found that long-term rents surged in areas where tourism apartments make up 10 per cent of the market. That includes Seville and Malaga, where rents have risen 33 per cent and 31 per cent over the last seven years, respectively.

“This study shows the strong relationship that exists between the presence of tourism apartments and rising rents,” said Enrique Navarro of the Andalusian Institute for Research and Innovation in Tourism (IATUR), which commissioned the study.

Increase demand, increase prices, yes.

So, increase supply.

Err, yes

I don’t want to sound too apocalyptic at Easter weekend, but I wonder if today we glimpse a reverse process in operation. Many of the states of southeast Asia, like China, are repressive. All the dysfunction of political oligarchy as characterised by Orwell is visible to a lesser or greater degree. They are also poor. Vietnam, for all its recent success, has a GDP per capita of just $4,300 and hasn’t yet managed to electrify the entire nation. I heard one tourist say: “I don’t think they are any competition for the West. They’re still quite underdeveloped.”

But look a little deeper and one discerns many potent qualities, not least a truly stunning work ethic, visible everywhere I went.

The poor do work bloody hard. They’re poor, see?

Sigh.

Could be true, could be true

Simon Carter of British Land says that, with high-end facilities at a premium again, gambling on construction during the pandemic has paid off

British Land did, after all, have a horrible problem. Not as bad as Intu, obviously, but still.

But note that he agrees it was a gamble. And the economy is made up of those investing to do thise, some gambles win, some lose. The advantage of the market system is that we find out which – and can then do more of those that win.

Worth pointing out that this was the plan all along

More graduates face earning the minimum wage as the salary gap between university leavers and the country’s lowest earners disappears.

Rapid increases in the National Living Wage mean a full-time worker on the UK’s lowest salary now earns £25,500. Meanwhile, one in 10 graduate roles were advertised at £25,000 at the end of last year, according to Indeed data.

Around a quarter of entry-level roles requiring a degree offered an average salary of £27,765, scarcely more than the legal minimum.

Graduate entry always did pay less than skilled manual work. But less than burger slinging?

The useful point here is that this has always been the plan. You know that insistence upon greater equality? A smaller Gini? Less income inequality? This is it. Wage compression. It’s the same thing.

This is all meant and planned.

Questions in The Observer We Can Answer

Who is running Britain’s economy – Rachel Reeves or Donald Trump?

Neither, obviously.

No one does run an economy. It simply is. That anyone even wants “someone” to “run” the economy is a delusion let alone actual attempts at it.

Sure, sure, it’s possible to unfluence it at the margins, it’s definitely possible to fuck it up but run it? Naaaah, crazed ambition Mate.

This is, of course, mad

Trump’s ‘idiotic’ and flawed tariff calculations stun economists
Richard Partington
Senior economics correspondent

Actually agreeing with The Guardian on a matter economic leaves me feeling all dirty. But this is indeed mad:

For each country, the White House looked up its trade in goods deficit for 2024, then divided that by the total value of imports. Trump, to be “kind”, said he would, however, offer a discount, so halved that figure. The calculation was even distilled into a formula.

For example, take the figures for China:

Goods trade deficit: $291.9bn

Total goods imports: $438.9bn

Those figures divided = 0.67, or 67%

And halved = 34%

The US does not – cannot – produce vanilla or coffee. Yet the places which do produce them for the US are now hit with tariffs because they produce vanilla and coffee for the US.

Entirely, wholly, mad. Even before we get to the idea that bilateral trade deficits don’t mean a thing. Even if you’re foolish enough to think that a trade deficit is important – it ain’t – a bilateral one is even then still of no importance at all. Even if you are deluded about deficits in general it’s still the overall balance you’re deluded about, not individual fractions of it.

And leaving out services is insane too.

We’d all better hope this is 4D chess and not an actual belief or proposal…..

Feelz, eh?

Rachel Reeves swears this is not a return to austerity. What matters is that it feels like one
Gaby Hinsliff

Government spends 45% of everything and that’s not enough?

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