Dear Mr. Sanders


You say about the United States that “when working families cannot afford childcare or higher education for their kids,”.

Given your examples here I assume that means that working families can afford food, shelter, clothing, transport, leisure, electronic gadgetry and the Netflix subscription. Sounds like a rich place to me, a population living as high on the hog as any large group of humans ever have done. Sounds, in fact, like that economy thing is pretty much done, properly baked.

yours etc

Tim Worstall

Reversing QE

Well, yes, sorta:

Andrew Bailey, the Bank of England’s governor, has already created confusion by saying government bonds could be sold back to the market before interest rates are raised significantly, reversing the previous signal.

Not as big a change as you might think. For selling the QE bonds back into the market will raise interest rates……


More than 80% of the world’s savings are invested in property, mostly residential.

Not sure that “world” has much to do with the British tax system. Where it’s more like one third – £5 trillion of £15 trillion in household wealth – that’s in property.

A minimum wage that is too high

While some blame the rioting on Zuma’s imprisonment, the country is also fractured by chronic unemployment — almost 47 per cent of young people have no job.

So, why are 49% of da youf unemployed?

SA’s minimum wage is now 21.9 rand an hour. Or, $1.50.

Which is, clearly, too high, otherwise there wouldn’t be 49% youth unemployment…..

Just a thought on wealth inequality

Apparently having wealthy people around is a bad thing. There are those who insist that the mere existence of billionaires is harmful – rather than it being a reflection of inflation.

So, UK. Jeff Bezos is about to strap himself to a column of high explosive and light the fuse. If this moves from controlled to uncontrolled burning then Jeff Bezos will be in many more pieces than he’s currently planning to be.

This would remove one of those hateful and harmful billionaires.

OK, so how would this benefit wider human society?

A technical note for The Guardian

Surge in business activity hampered by supply shortages


Britain’s economy surged ahead in June as private-sector businesses secured extra work and created thousands of new jobs, but analysts warned cost pressures were mounting for companies amid labour shortages and continuing disruption to global supply chains. The flash IHS Markit/Cips purchasing managers’ index, a closely watched barometer of private sector activity, fell slightly to 61.7 in June from 62.9 in May.

By the standards of these things that’s stunningly high. But then we’d expect that at present. Further, this is a reduction in the speed of growth – closer to acceleration than velocity. Above 50 is growth, below shrinkage. The higher the number the faster the growth, a fall in it to 61.7 shows that the growth isn’t as fast as it was but it’s not contraction.

OK, now the technical detail. Supply shortages actually push the PMI up. By construction, if supply times rise that’s taken as an indication of increased growth. Because, if growth does surge then we’re likely to see rises in supply times. So, the construction of the index takes an increase in supply times as being evidence of faster growth.

Fine, an index can be constructed any way anyone wants. But it is necessary to understand how it is. In this case supply shortages are evidence for the surge in business activity, not a hampering……

That growing wealth inequality

Britain lost 18,000 millionaires last year as the pandemic battered financial markets, while the rest of Europe’s rich grew their fortunes.

The UK is now home to 573,000 people with investable assets of more than $1m (£722,000) compared with 591,000 last year, according to Capgemini’s World Wealth Report.

At the same time their total wealth fell 1pc as Britain’s deepest recession in 300 years trashed asset values.

Doesn’t seem to be happening, does it?


The number of unemployment-benefit recipients is falling at a faster rate in Missouri and 21 other states canceling enhanced and extended payments this month, suggesting that ending the aid could push more people to take jobs.

Federal pandemic aid bills boosted unemployment payments by $300 a person each week and extended those payments for as long as 18 months, well longer than the typical 26 weeks or less. The benefits are set to expire in early September, but states can opt out before then.

Well done to The Guardian!

Two big drivers of food inflation, in the UK at least, are the spike in demand for goods as bars and restaurants reopen, and the fallout from Brexit, which has caused shortages of workers on farms and in warehouses and food processing centres, and hindered the flow of goods into the country.

From the ONS:

On a monthly basis, CPIH rose by 0.5% in May 2021, compared with little change in May 2020.
Rising prices for clothing, motor fuel, recreational goods (particularly games and recording media), and meals and drinks consumed out resulted in the largest upward contributions to the change in the CPIH 12-month inflation rate between April and May 2021.
These were partially offset by a large downward contribution from food and non-alcoholic beverages, where prices fell this year but rose a year ago, particularly for bread and cereals.

Once off or start of a trend?

US inflation surged even further last month, raising fears that the world’s largest economy risks overheating as ultra-low interest rates and Joe Biden’s extravagant spending plans pump up growth.

Prices recorded their biggest jump since 2008 according to the Bureau of Economic Affairs, with an increase of 3.9pc on the year.

Opinions differ. So, place your bets, this is what makes markets.

As to my opinion, well, I dunno.

But I would note that near all of those who insist it is just a blip are those who also want to insist that lotsnlotsnlots of deficit spending is a thoroughly good idea, nowt can go wrong. And it’s entirely possible that they think the spending is great because there won’t be any inflation. But I think the way to bet is that they’re dismissing the inflation possibility because they love the spending.

That is, the inflation surely won’t happen crowd are talking their own political book which isn’t, quite, the way to do economics.


Labor shortages bid up what economists call the reservation wage—the lowest wage that will fetch willing workers.

No, that’s the market wage. The reservation wage is:

A worker’s reservation wage is the minimum wage that the worker requires in order to participate in the labor market. It represents the monetary value of an hour of leisure (broadly defined as any non-labor-market activity) to the worker.

Entirely so, this is the point of QE

Andrew Orlowski thinks that Son and Softbank are in for a reckoning. Probably right too. But:

For years, too much money has been chasing too few good ideas.

It worth recalling that this is deliberate. This is the point of QE.

Lower the return on safe assets – government bonds – and force those looking for yield out along the risk curve. Near abolish riskless profit and force those looking for profit to take more risk. This actually has been, all along, the point of QE.

Does not compute

And this trade in human beings meant that you got free labor in the colonies in the Caribbean, in the Americas, and so on.

Sigh. If you buy the laborer then the labour isn’t free, is it? The labour costs that capital cost, the price of the labourer, divided by the number of years of labour gained. Plus, obviously, the operating costs of the labour.

Slave labour might well have been cheaper, but it wasn’t free.

Where primary commodities were produced at very suppressed prices, these primary commodities in their sale brought huge profits and this profit margin is what created the capital sums for the emergence of capitalism. That’s the origin of it. 30% of the British Midlands capital formation took place through the drain of wealth from India.

That’s the next sentence. Which doesn’t make all that much sense, given that slave labour wasn’t used in India……

And today, the debt crisis, the burden on so called developing countries is over $11 trillion. There is no way these countries can ever pay it; and in the current Coronavirus recession it is an impossible payment for them. This year developing countries have to pay almost $4 trillion in debt servicing. That’s not the $11 trillion principle. This is to service the debt, and it’s not possible.

Entirely bollocks. They ain’t paying a 40% interest rate whatever the actual sums outstanding might be.

At which point I got bored with the nonsense.

The actual lesson to take here – the euro is a shitty idea

Torsten Bell tells us of some new research:

EU inequality has declined post-financial crisis, but in the euro area inequality has been slightly increasing.

What’s going on? Fast-growing eastern Europe, largely in the EU but not the eurozone, has narrowed the gap with older and richer EU members. But incomes among southern eurozone members such as Greece and Italy have stagnated, falling further behind Germany. The main takeaway? Don’t take economic catch-up by poorer countries of their richer neighbours for granted.

No, that’s not the lesson to take. Rather, if poor folks not in the euro are growing faster than rich folks, and poor folks inside the euro are not, then our conclusion must be that the euro is bad for poor folks.

Or, as everyone but the most committed federast has been pointing out for 30 years now, the euro is a really shitty idea.

Economist doesn’t understand economics

In the first instance there is an economic concern. I explained recently that what economists invariably assume when undertaking their work is that the world always returns to what it calls ‘equilibrium’. You might as easily refer to that as ‘normal’. The assumption is that everything deviates from a mean, to which it returns.


As in, Fuck No.

Equilibrium is balance. The entire point of Keynesian economics, for example, is the proof that there are multiple equilibria and that it is not – necessarily – true that the economy will stabilise at the previous, or indeed any specific, equilibrium.

It is true that there’s an assumption that an economy will return to balance. But absolutely not that it will return to the same balance as before, to normal. If this were so then the entire subject of macroeconomics wouldn’t be worth even thinking about now, would it? Because whatever the hell happens nothing need be done, eh?

It is entirely because there is the possibility of a move to an undesirable equilibrium that there’s even discussion of our having a macroeconomic policy set.

How is it that the P³ always, but always, manages to grasp the wrong end of the stick?

Isn’t this a surprise?

Most people feel, from time to time, that their work is meaningless. David Graeber, the late anthropologist, built an elaborate thesis out of this insight. He argued in a book in 2018 that society has been deliberately creating more and more “bullshit jobs” in professions such as financial services to fill the time of educated workers who need the money to pay off student debts but who suffer from depression because of their work. His thesis has been cited more than 800 times by academics, according to Google Scholar, and often repeated in the media.

When the book came out, this columnist was unimpressed, arguing that the thesis was a partial reworking of the insights of C. Northcote Parkinson, who argued that bureaucracy has an innate tendency to expand and make work for itself. Three academics—Magdalena Soffia, Alex Wood and Brendan Burchell—have undertaken a systematic analysis* of the claims behind Mr Graeber’s work and found that the data often show the exact opposite of what he predicted. The bullshit-jobs thesis, in other words, is largely bullshit.

David Graeber? Wrong?


Back to this old argument

Perhaps such Orwellian gymnastics reconcile the contradiction that Mosley himself struggled to explain – that in their youthful formation his own politics had been of the “left” even while “I agreed with my father’s ideas.”

Well, yes, but fascism was, in economic terms, rather of the left. National self-sufficiency and corporatism. The opposite, that is, of classical liberalism and to the extent that the left is in opposition to class lib then fascism is of that left.

You can certainly find fascist economics over on the left. As Colin Hines so protested about.

Why we might be buggered

Either way, serious inflationary pressures are now upon us. The Bank of England insists this situation is transitory and we should “look through” rising prices. So why raise ultra-low interest rates or rein in quantitative easing (QE), the extraordinary ongoing expansion of our central bank’s balance sheet?

That view is convenient – telling politicians and financial markets what they want to hear.

Well yes. The thing is though, it’s a standard assumption that monetary policy takes about 18 months to work. So if you want to head off inflation you’re got to tighten monetary policy 18 months before the inflation arrives. Not, as will likely happen, 6 months after it does.

No, the MMT solution of higher taxes doesn’t work any faster. Especially given that we generally only raise tax rates for next year, not the current one.