Ragging on Ritchie


It can even be argued that what these millionaires are saying is entirely appropriate to counter the runaway inflation in capital asset prices. Just look at housing and the stock exchange for evidence of that.

But this does not mean that the rich must pay so that least well off do not have to. The fact is that we do not have to balance government books. There is also no evidence that government spending is creating inflation, even if other things are.

Govt has stuck £875 billion of new money into the economy. There’s no inflation. Asset inflation doesn’t count apparently.

Getting the effect the wrong way around again

As the evidence of the previous chart shows, the line continues almost flat after 2001. We have in that case had the longest period of price stability in UK history. But what is apparent is that whenever there has been an inflation hike there is always very soon afterwards a substantial fall. Too often that actually resulted in deflation – which discourages economic activity. Thankfully, we now avoid that. But there are three key issues to note, and I will concentrate on more recent history whilst nothing the longer trend.

Guess what? Not one of those three key issues is that possibly an independent central bank is a good idea? Or even, that the BoE continually changing interest rates might have had something to do with this.


But this is worse:

Even if interest rates go up there is actually no reason why interest costs on this quantity of debt owned by the government need go up: the Bank of England need not pay base rates on the central bank reserves accounts held by UK clearing banks with the Bank of England as a result of QE: the existing rate could be maintained if desired and there is literally nothing those banks could do about it. Why they need a windfall gain of billions from an interest rate rise is very hard to work out and anyone having the political courage to oppose them would seem to me to have an open political goal to aim at by opposing that benefit going to banks.

No. So, assume we do start to get general inflation as a result of QE and the increase in the money supply. That is the form of inflation that would be treated with interest rate rises after all.

OK. So, those bank reserves at the BoE. Currently the banks aren’t too worried that they’re not lending them out. Interest rates are titchy so why take the risks? Park then at BoE, make a little and be happy.

Now we raise interest rates but not those at the BoE. So, what do the banks do? Scramble to withdraw those reserves and lend them out. Which increases the wide money supply by increasing V, the velocity of circulation. By not increasing the BoE interest rate we’ve just increased the inflation we’re trying to stop by increasing interest rates.

If we wanted to curb inflation we’d want to raise the BoE rate on reserves above market rates. Which is silly, obviously, which is why we’ll reverse QE instead.

It’s great when the Great Accountant gets the credit and debit the wrong away around, isn’t it? Did someone move the desk from the window?

Infamy! Infamy!

So, why has the government made such a paltry offer? There are three reasons, I suggest.

The first is that this idea was first mooted as a spoiler to neuter a Labour proposal, which I think might well have been influenced by the proposals the Green New Deal Group has made. There was never any real government commitment to this idea.

Second, the government does not want this scheme to work. They only believe in private sector solutions, and this scheme could show the public liked state sector ones.

Third, they really do not want to raise too much money. In 2015 George Osborne offered a bond that raised £15 billion and crashed the NS&I web site, so popular was it. If the 1% we recommended had been made available this time I think that would have happened again. But that might than have also shown the public wanted to save for green projects, and that is a message the government does not want relayed. In that case they have priced this to fail.

They’ve all got it in for me!

An alternative explanation is indeed possible. As Spud has been known to point out people actively desire to save green. To know that their savings are going to make the world a better place. Which means they’ll happily buy green bonds at a lower rate of interest then, doesn’t it? And if they won’t buy at a lower interest rate then they don’t preferentially invest green, do they?

This is Venezuelan

There really was a Venezuelan minister of finance who said that inflation was nothing to do with money, it was just capitalists raising prices.

Richard Kirby says:
October 20 2021 at 2:10 pm
I just read an article in the Evening Standard that reports that “Banks say financing loans is already more expensive due to the City expectations that rates are going up”.

This is puzzling, since as we know from the explainer on the Bank of England website, commercial banks create the money for loans and mortgages out of thin air by pressing a few keys on a computer, so why do they think they need to look for financing?

Richard Murphy says:
October 20 2021 at 4:04 pm
They don’t

They have cash coming out of their ears

And they create all they lend

But they also want to profit out of any opportunity

Umm, wha’?

This is, of course, classic populism. Experts are discounted by populism. They are the elite. They are to be ridiculed and blamed. They are to be made the subjects of hate as the government seeks to divide society. But whatever happens their opinion must not be acted on, whatever the harm might be from ignoring them. In the land of populist equality, Jo down the pub has an opinion that is just as important, and if they say eat steak and guzzle diesel, well that’s just fine with this government and sod the consequences so long as they still vote Tory.

I think it time to say that the era of Enlightenment is most definitely under threat. Maybe it is drawing to a close. A very Dark Age is starting.

It usually thought to be an Enlightenment notion that the plebs and peasants don’t have to do what they’re damn well told, isn’t it?

Well, no, not really

The message is as dismal. In summary, it is that the Treasury reluctantly concedes that something needs to be done, but not by them, and that it greatly pains them that they might have to change the tax system as a result of the demise of the carbon taxes that have been such easy revenue raisers for them. Climate change is, very obviously, a great inconvenience in that respect.

If revenues from carbon taxes are falling that means that carbon emissions which pay carbon taxes are falling.

That is, the carbon tax is doing its job of reducing carbon emissions. Or even, solving climate change is a great inconvenience.

Isn’t this lovely?

Unwinding QE is relatively easy. Using QE the Bank buys gilts issued by the Treasury. All gilts are issued for fixed periods varying from only a couple of years to up to 50 years. Because technically the gilts the Bank buys aren’t cancelled – because the Treasury and Bank like to play a game of make believe that suggests that the Bank of a England is independent of the government – the gilts it owns eventuality come to the end of their lives. When that happens the Treasury repays the sum borrowed, including to the Bank of England.

The reality is that the Treasury pays for the redemption of the old gilt by issuing new gilts. In effect, they ask the markets for the money they have redeemed back. And to date the Bank of England had gone along with this. It has always reinvested the proceeds of any redemption in alternative gilts that it has repurchased from the money markets. The QE process has been pretty much uninterrupted by redemptions in that case.

However, hints are being given that this is to change. Andrew Bailey, the Governor of the Bank, wants to reduce the size of its QE debt holding, and next March it so happens that £28 billion of the debt it owns will come up for redemption.

It wasn’t that long ago that His Sagacity was insisting that QE would never be unwound as no one would ever do such a thing. Therefore that £800 billion of gilts at the Bank of England didn’t really exist and therefore the national debt was very much lower than the official figures.

Whether QE should be reversed is another matter. But now we find out that it is easy and that the BoE is going to do it. So, all that £800 billion of gilts is in fact – at least in a conditional, possible, maybe contingent, sense – part of the national debt, isn’t it?

Wonder if that’ll be admitted anytime soon?

Where’s my prize?

And where was the economics prize that might have gone to someone suggesting we might just need to change the way we manage resources if we are to survive? There wasn’t one, because the whole theme was that we definitely didn’t want to upset the status quo.

Pity The Sage has missed that they’ve already given the Big One, the Nobel, to the bloke who has already told us that. William Nordhaus and let’s have a carbon tax. And the subsidiary one, the peerage, to Nick Stern for saying the same thing.

You know, the solution that The Sage can’t bear to accept. Largely, one assumes, because the solution doesn’t emanate from The Sage.

The rhetoric needs to be a little better

There is discussion in newspapers today of MPs being fearful for their physical well-being. I think it profoundly unfortunate that they are. I also think that it is apparent that their safety must be ensured. Whilst safety can never be guaranteed it is apparent that more can be done to protect them. I think doing so would be wise.

But I want to add a discordant note. I do not in any way wish to undermine the significance of MPs’ fear. I wish to show no disrespect to the late Sir David Amess. But MPs are not the only people to know the reality of fear in the UK. Nor was his the only unnecessary, and so to be regretted, death on Friday.

The Treasury is reported to be trying to undermine planned green investment in the UK. There will be countless, especially younger people, who will be profoundly fearful as a result.

If your pensions are not spent according to my mad plan about windmills then this is exactly the same as an MP being stabbed to death while talking to his constituents.

Disagree and you’re a neoliberal!


He began with this text, the opening paragraph of Adam Smith’s Theory of Moral Sentiments
This is the fundamental perspective of economics that it seems that those who claim to be the followers of Smith, but are not, have forgotten. Economics should be about caring about the other person, because that really matters.

No, the idea is in the title of the book. This is about morals. It’s the other book that is about economics, Wealth of Nations.

Indeed, morals should inform our approaches to economics, just like they should inform our decisions on who we shag. You know, morals. But that doesn’t change what economics is about because it’s a positive, not normative, science. Fiddling with interest rates has the same effect whatever you think about starvling waifs. Cool, so you use economics to work out, well, if we do this then that over there will happen. Morals are about well, do we want that to happen? Therefore we’ll not do that other then, shall we?

Economics, that is, is amoral. Humans aren’t and shouldn’t be but economics is. Just like chemistry is amoral.

So The Sage of Ely is a populist then?

The foundations of populist politics are easy to explain.

First you say that the people are oppressed by an elite.

Then you say that the experts in that elite are not telling the truth.

In place of their expert view you offer an alternative explanation that undermines that expert view.

You wait for anger to rise as people turn against the elite.

You then capture that anger for political gain.

He’s been claiming all that about the neolibruls for how long now?

Then this:

It will then be said that the NHS is failing.

It will then be argued that a private sector alternative would be better.

The NHS GP service will be privatised.

His own wife is a GP. Does he now know that GPs are private already?

The knowledge is strong here

Pete Turner says:
October 13 2021 at 9:18 am
You have constantly talked about the merits of pension funds and individuals buying long dated Government Bonds for security ..well have you noticed that from the summer 2020 the 30 year gilt is down over 40%!!!!! …pretty shocking for a “no risk” investment..you clearly have no understanding of duration risk. Thankfully some of us do.

Richard Murphy says:
October 13 2021 at 11:01 am
Have you noticed that if you hold a 30 year bond you might do so for the long term?

Apparently not…

Thank goodness I do not engage investment advice from the likes of you

Pete Turner says:
October 13 2021 at 1:25 pm
Richard, I am not giving you advice I am sticking just to facts so no conjecture. So yes from last summer the 30yr gilt is down over 40%. And from today if you hold it to maturity (so longer term as you say) when it repays at par you are guaranteed a further loss..those are the facts.

Richard Murphy says:
October 13 2021 at 1:40 pm
And the demand for them remains strong

I suspect you will find the volume traded is low

How do you have something with strong demand and low traded volume? The implication seems to be lots of people buying them and yet no one buying them.

Yes, absolutely!

And politics does require integrity.

If Cummings is right (and he may not be) both were treated as incidental to the gains that the Conservatives might make. No wonder politicians are held in contempt in that case.

Surely we can do better than that?

So, let’s rejoin the EU. Or an independent Scotland could. Which means signing up to join the euro. But then, well, just never bother to do so.

That would be acting with integrity, wouldn’t it?

It’s like Dachau, innit?

I have some experience of the internet trolls. I have suffered the threats to self and property. I have massive sympathy for Chris (Packham – Ed) and his courage. As he says, all this has a cost. Those doing the trolling and making the threats want that cost to be felt. I think that criminal. So do they. That’s why they seek anonymity when causing harm. But the campaigns do have to go on.

Having people disagree with him in his comments section is just like having your car trashed, innit?


The over-riding impression of the Tories this week is that they are all about messaging. There is no delivery. There is no grand plan. There will likely be no change. That they don’t want any is implicit in their name. So, all they actually do now is create and deliver slogans. Their belief is that so long as those slogans continue to roll and are more memorable – however vacuous they are – than anything Labour has to say then they can and will win the next general election. There is nothing to market. The marketing is it. And nothing is sacred, former Tory governments included.

This from the man who spends his time – as he insists himself – creating narratives.

The elephant trap works!

The first is that there is remarkably little tax evasion going on. Nor, come to that is there that much tax avoidance

Because there are no elephants in the kitchen.

Of course, the more rational explanation is that there never was much tax evasion nor avoidance going on. Making all that “work” irrelevant to the amount of it.

Glad we’ve got that sorted out then

Labour has a choice to make. It can say it will balance the books or it can deliver political change. But it can’t do both.

The only way we can have political change is by spending money we don’t have. Further, all the money that is currently spent is done so with 100% efficiency.

That is interesting, isn’t it? We’re already in the best of all possible worlds.