Ragging on Ritchie

Private companies could be prevented from accumulating untaxed personal wealth.

People must stop reinvesting past profits. That’ll sort things out, no?

Those with privilege carry half the risk of childhood obesity that those in deprived groups have.

This is the real cost of the toleration of income and wealth inequality, discrimination, and the failure to recognise the impact of neurodivergence, since all those subject to these are more likely to be in the deprived groups.

The lumpen are fat because we’re not nice to the autistic.

Well, could be I guess. But I think we’d require some proof, no?

What is society? It sounds like an obvious question, but modern economics rarely answers it well.

Too often economics starts with the idea of isolated individuals making rational choices in markets, as if society somehow emerges afterwards. I argue that this has the relationship completely the wrong way round.

We are not born as independent individuals. We become who we are through our relationships with other people. Families, education, communities, trust, language and shared knowledge all come before markets. Society creates the conditions in which individuals can flourish, not the other way around. In other words, society does not emerge from independent individuals. Independent individuals emerge from society.

Much too Borg for my liking in fact.

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?

I watched Gary Stevenson’s Channel 4 documentary, How to Get Filthy Rich With Gary Stevenson, last night. I have a recommendation for you. It is that you do not waste your time.

This programme is deeply embarrassing. Gary shows himself quite unable to make the argument he sets out to deliver and, in the process, undermines the case for any form of increase in tax on wealth by failing to win any of the arguments with any of the people that he interviews, whilst emoting extensively, blubbing occasionally, proving himself to be all heart and no head, and someone lacking the expertise needed to make his case.

Well, OK.

My conclusion? It is the same as that which I supplied to Channel 4 when they asked me whether I thought they should make this programme before it was commissioned. I told them that if they wanted to make a programme on the subject, they should commission it from somebody who knew about economics, tax, and the way government finance worked.

I never heard back from them thereafter, and that does not worry me.

Ah.

None of the major political parties or Restore are fielding a candidate because the chance of another by-election if Nigel Farage were to win this contest is very high indeed. That is because, if he is returned to Parliament, it is thought to be highly likely that the Parliamentary Standards Office will exclude him from office because of the non-declaration of the donations and support he received prior to the 2024 general election.

There is absolutely no way, no way at all, that the PSO would refuse to seat Nigel if he won this byelection. We sorted that one out centuries ago with John Wilkes. The MP is the person the voters decided will be the MP.

This is just drivel.

that bond markets set interest rates, and can withdraw from the gilts market even though they cannot function without gilts,

There are some who must hold gilts because the law says they must. Defined benefit pensions schemes perhaps. But those that are left of those tend to be in run off so will fade from the market over time.

What Spud is really referring to is repos. Where gilts are indeed used. But he’s confusing “are used” with “must be used”.

Of course gilts buyers can withdraw from the gilts market. Every blip upwards in market interest rates is one more of those deciding to do just that…..

The politics of grievance has dominated debate in both Britain and the United States. Spud, Gazza and Zack have all built political narratives around anger, blame and the promise that someone else is responsible for people’s hardship.

But is that politics now running out of road?

Hope so, eh?

The real purpose of saving should be capital formation

Nope. The purpose of saving is saving.

True, it might be nice if it creates lovely new capital things but that’s not the same. The purpose of savings is to have savings.

People often ask me what difference Modern Monetary Theory (MMT) would actually make in practice.

The surprising answer is that, in many respects, MMT already describes how the UK monetary system actually works.

Therefore MMT is neoliberal and we must abjure it.

Right?

Most discussions about economics begin with money. I think that’s a mistake.

In this video, I explain why money is not the economy, why wealth is not the same thing as money, and why economics has become obsessed with the wrong things.

Starting with a simple thought experiment about being stranded on a desert island, I explore what really creates value, why energy and human potential matter far more than financial wealth, and why money is simply an accounting system that allows society to organise itself.

Economic textbooks all try, really hard, to get the above point across. So much so that it’s actually the plot line of a Terry Prachett novel: “Making Money”.

Spud’s claim to being heterodox here is only, in fact, coming around to the standard view.

For of course this logic is not true

If a government declares a unit of account to be legal tender, it establishes the only means by which any claim in the economy can be legally enforced. No debt, no obligation, and no claim of any kind can be compelled to settlement except in that unit.

Conscription is not settled by some payment of folding stuff. Well, not often perhaps. Thereby refuting one of Spud’s axioms.

I have appreciated all the messages of goodwill over the last week or so, but as Steve Keen and I agreed in a discussion this week, we both feel driven by the scale of the crisis the world’s economy, its democracy, and its environment face. As a consequence, we are both taking a decidedly unusual approach to retirement by maybe working harder than we ever have. The only reason is that we feel the crisis is so overwhelming that answers are needed as soon as possible.

Capt Keen and Capt Spud to the rescue of civilisation!

So what colour will their capes be?

If money is just an accounting entry, why do we spend so much time worrying about it?

After all, nobody lies awake worrying whether there are enough metres or kilograms. They are simply units we use to measure things.

If money is just the unit we use to organise economic activity, why does it dominate politics?

Metres and kilos stay the same size however many of them we have. The same is not true of money. Therefore the quantity of money is a useful thing to think about…..

The latest is that you should save in bonds in order to back quantum computing.

I dunno, really. I find it difficult to think of something so much more suited to risk capital…..

Now it is reversing that process through quantitative tightening (QT). QT increases the amount of government debt that private investors must absorb and may therefore contribute to higher yields.

It is impossible to understand today’s gilt market properly without understanding QE and QT, and their role on interest rates, but Gary almost ignores them.

The purpose is to raise interest rates therefore “may” is the wrong word there.

Government bonds also underpin the financial system because they are widely used as collateral in the City of London repo markets. Banks, investment firms and other financial institutions rely upon them to manage liquidity and finance their own activities. Without bonds, banking in the City of London would fall apart.

No. That gilts are so used is wholly true. But if gilts did not exist something else would be used. That is, that something is used does not mean it is essential that thing be used.

The City does not simply do the government a favour by buying gilts.

The City absolutely depends upon a continuing supply of gilts for its own business model to work.

This isn’t true.

Anyway, the real lesson today is that everyone should listen to me, The Potato of Ely, not Gazza.

What should my primary focus now be on?

But what is potential?

It isn’t unlimited.

None of us is born with infinite possibilities.

We each have one lifetime.

Spud discovers opportunity costs! How far is he going to get into economics now he’s discovered the second secret of the subject?

Imagine you are alone on a desert island.

You have nothing.

You have a choice.

You can spend the day making money.

You could carve shells into coins. Print banknotes on leaves. Even declare yourself Governor of the Island Bank.

By sunset, you could be a billionaire.

Would you be any better off?

Of course not.

There is nobody to trade with.

No markets.

Therefore MMT is not the solution and neoliberalism is. Money doesn’t solve, markets do.

QED

The second event happened in the cab on the way home, because Jacqueline had reached the point of being too fatigued to safely drive me, but still accompanied me. We were talking about the care I had enjoyed, and how the NHS would be totally incapacitated by the policies of Farage and Lowe. Our taxi driver was curious and tentatively sought our opinion. He told us that he has many people as passengers who are strong supporters of the far-right parties. He then added, “What these people don’t realise is that they are the ones who’re going to pay the price for what Farage wants, and there’s no way you can persuade them Farage is out to screw them.”

It’s in the taxi driver union contract, always provide deep and meaningful commentary to foreign correspondents (source, PJ O’Rourke).

So that’s another career for Spud then.