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Ragging on Ritchie

Not historically accurate, no

What is the point of power if it is not to help the most vulnerable and least well off, which there is no sign that Labour will do?

Power has been, historically, sought after and acquired for one of two reasons.

1) To live high on the hog.

2) To have power over others.

It has always been vastly, vastly, better to be ruled by the first set of greedy bastards than by those who enjoy the actual process of power itself.

Jeebus

The question about whether debt is sustainable requires, first of all, the question to be asked, ‘Is the government in debt?’ The answer is it is not.

Just insane.

Snigger

I gather that the article is here, but I would not bother reading it because the above summary reveals just how wrong Policy Exchange is and these authors are.

First, savings do not fund investment. The UK has £8,100 billion of financial wealth according to the Office for National Statistics: vastly more cash is available from savings than might ever be needed to fund investment and that investment is not happening because that is not the use now made of savings. They are almost all used for speculative purposes, those saved with the government excepted.

Second, investment is actually almost invariably funded by credit, and that is created out of thin air by banks. Policy Exchange reveals that it does not know how the economy works.

Odd that an accountant seems not to have heard of equity as a component in investing.

Nor, obviously, that net new investment is going to be net new saving, not the current stock of saving? For it that were not true, then where would all the results of the investing of the past be if not in the stock of saving/investment?

I might have said this you know

Professor Joseph Stiglitz: Debt does matter, both economically, and, perhaps even more, politically. Let me first try toexplain MMT, the modern monetary theory, which has argued that it does not matter at all. I also want to make it clearthat the view held by many people, that it is the most important thing, is wrong. I am not at all worried about the level ofdebt in the United States. So the view that we face an existential crisis because of the debt is wrong, but the other view, that we do not have to think about it, is also wrong.

The origin of the view that it does not matter at all goes back to the 2008 financial crisis, where we expanded the basemoney supply enormously—by fivefold in the US and Europe—and there was no inflation. That led people to believe that you could increase the money supply enormously without any inflationary consequences. There was no inflation, because the money went from the Government into the banks’ coffers and they did not lend it, so it did not have any inflationaryeffect, but it did not have any benefit either.

If that money had gone into the banks, the banks had lent it, and the people to whom it had been lent had spent it, wewould have had enormous inflation, but we would not have needed to increase the money supply that much. We kept doing it, because we hoped that increasing the money supply would stimulate the economy, but it had a very weak effect.That is the fallacy in MMT: if you increase the money supply and nobody spends the money, it does not cause a problem, but it does not solve a problem, either.

That’s Joe Stiglitz, Nobel Laureate.

No, he is not saying it because I did, not did I because he, both because that’s actually correct. As everyone was in fact saying back then.

Here in a retired acciountant from Wandsworth on the subject:

So we have to conclude that Stiglitz did this deliberately. I stress, that I really would not mind if Joe Stiglitz had offered an honest critique of MMT to this committee. He is, of course, entitled to do so. Economics is full of disagreements. But he did nothing of the sort. He did three things.

First he revealed his ignorance, not just of MMT, but also of banking, the role of the national debt, and the fact that there is such a thing as double entry so that when discussing that issue we also have to consider the preferences of those who own wealth and their desire for safe places to save.

Second, he misrepresented the truth, and I am really not sure that this is what anyone should do before a parliamentary committee.

Third, as a consequence, he might have served his purpose but he made himself look stupid in the process. He might, like many economists, think that a worthwhile thing to do, but I would have thought that he had by now reached a sufficient stage of maturity to get over playing such silly games.

Who to believe, eh, who to believe?

Eh?

So, for example, the price that we pay for much of the software that we use represents a rent. Now that annual charging is commonplace the pretence that it is otherwise has been abandoned. Nothing about the pricing of these products accords with standard microeconomic theory on pricing: it is simply maximised in the interests of the greed of both the senior management of the enterprises involved, and their owners.

In what way does Microsoft 365 violate microeconomic principles of pricing?

It is the extraction of rents that is doing four things in our economy.

Third, it is destroying innovation of any sort, as the intention of the rentier is to protect what they have, not to create something new.

Whut? The last few decades have seen the internet, the web, mobile phones, smartphones, earch and email. We’re on hte cusp pof whatever it is that AI might bring us. And the fool says that innovation is being destroyed?

How does Spud remember how to breathe?

We are going to be so lucky

The new book from Smurf:

In that case, let me start with some suggestions as to the arguments that are wrong. There could be a long list of these. I am not convinced that will help anyone, so I am working on the idea of there being just three that I wish to tackle.

When it comes to microeconomics my bête noire is that markets deliver optimal outcomes for society and that, as a result, government interference must be minimised at all times.

On macroeconomics, the argument needing to be addressed might be the household analogy, which is the mechanism used to ensure that impoverished microeconomic thinking dominates macroeconomic analysis as well, wholly inappropriately.

Then there is the question of human motivation, the understanding of which is necessary if we are to suggest how the economy should work. The current assumption that pervades society is that greed ultimately motivates all human actions. I disagree.

One and three are wrong, not believed by any economist. That is, what Smurf believes economists believe is not what they do. On two the household analogy doesn;t lead to micro- impositions on macro-. So that’s wrong too.

Gonna be a joy this next one, no?

The last line is missing here

My suggestion is a simpler one. If you really think that being Chancellor is going to be so difficult that you have to talk about it all the time then you’re not up to the job .

No one pretends that such a role is ever going to be easy. In that case what it requires is that the person willing to undertake it have the confidence to take on the task.

I’m not asking for the self-confidence that tips into arrogant foolishness. We all know the risks in that.

Instead, what is required is that quiet self-confidence that competence delivers.

Rachel Reeves clearly thinks she lacks that because of her perpetual references to the difficulty of the task. It really does make me wonder whether she is fit to undertake it.

And therefore arise Lord Smurf, the peer to save us in our hour of need…..

Possibly…..

What I will note is that this is happening at the same time as the Tory establishment is very obviously collapsing. So too, though, is Labour which has abandoned everything it seems to stand for, leaving the much of England, at least, without any realistic left-of-centre option available in elections at present.

….England doesn’t desire a centre left option?

I mean, could be. Politicians follow what they think will get them elected and perhaps it really is true that the English – as opposed to the Celts – are further to the right than the current left of centre?

Whoo, Boy

There is a cost to this. If the government borrows less, someone else has to borrow more: that’s the way in which any economy works if new money (all of which is debt-based) is to be created, which is the actual rule that cannot be broken because, unlike so-called fiscal rules, it is based on facts.

This from the bloke who repeatedly claims that QT destroys money. Even, the bloke who opposes QT because it destroys money.

And if QT is happening – it is – and money is being destroyed – it is – gthen we don’t have a problem about how is going to borrow in order to create new money, do we?

Impressive

What Sunak and his far-right allies want to create with their pernicious rhetoric of unity, to which Labour subscribes, is a feeling of inclusion for some in a group from which others are most definitely excluded.

Unity’s Bad, M’Kay?

But perhaps most of all there is the realisation that the need for a new, unifying, narrative within politics is very high.

Unity’s Good, M’Kay?

After that there is my belief that any such narrative has to simultaneously accept the imperative of collective co-existence and the innate requirement that this be fair whilst at the same time recognising that the differences between us have to be accepted and even celebrated because they are what make us unique so that we can stand out in a world where our obvious need for company and mutuality is ever-present.

A wise person once summarised this as loving our neighbours as ourselves, but I am going further than that.

Aren’t we the lucky ones to be treated to the Fifth Gospel?

If people have alternatives then…..

….it’s not possible to impose the monopoly vision upon them, is it?

The focus of most tax authorities was on the scale of the tax losses that they might generate, but in terms of their political economic impact, their consequence was much bigger. John Christensen and I suggested, right from the beginning of the time that we worked together in 2003, that the real function of tax havens was to act as the launchpad for an assault on democracy.

The underlying logic of this claim has always been quite straightforward. Those who hate representative government subscribe to the simple logic that if only they can starve democracies of the revenue that they require to fulfil their mandates then they can undermine the whole social contract that is the foundation of the democratic promise created by the universal electoral suffrage that has only really been commonplace from the 1930s onwards. Tax havens are a way to deny them that revenue.

That you call the monopoly vision democracy doesn’t change that it is a monopoly vision. Which is why choices must be denied, of course.

Oh Dear

What she really means is that the wealthy are immune from the pressure that higher interest rates impose on the rest of the population, and even gain from them, and as a result of their considerable, and relatively excessive, spending power within the economy inflation is continuing at above 2% and there is no real prospect of that changing.

The consequence is that she admitted that the single tool that she claimed was available to the Bank of England to control inflation – which she said is the interest rate, whilst conveniently ignoring both quantitative easing and the massive current quantitative tightening programme – is not able to bring the rate of inflation down at present because the richest in the UK are insisting on continuing to spend. This is despite the massive economic pressure being brought to bear on those with lower incomes, either from downward pressure on wages, which the Bank of England is heavily promoting, or from increased interest rates.

You would think, as a result, that Mann would realise that keeping interest rates high was a futile exercise. Far from it, though: she is still an advocate for raising them.

What is not hinted at in the reports of what she said are any indications that she thought that other tools might be brought into use to tackle this issue. Raising taxes on the wealthy would, of course, be one way to address this issue. That is glaringly obviously necessary, given the problem she outlines. I am sure it was not said.

The wealthy do not consume all their income. Therefore changes in interest rates do not change their consumption habits – they can dissave if required.

Raising taxes upon hte wealthy in order to reduce inflationary pressure does not work. For the wealthy do not consume all their income, have savings, and can therefore dissave to maintain their consumption.

Well, logically, yes

The Tories are an anti-Muslim mob

What do you expect with a Hindoo as party leader?

Just for the hard of thinking. This is a very cheap shot at an obvious point. It is not a reflection of my views on anything at all. Other than that Professor Richard J Murphy is known to offer up all sorts of opportunities for very cheap shots.

Interesting claim

What puzzles and depresses me is the claim on the one hand that we are the most highly taxed we’ve been in a generation, yet all public services seem to be going down the pan for lack of funding. Can anyone explain to me how this can be?

That is, it has to be said, an excellent question. Thankfully, it is not too difficult to provide an explanation.

The UK government has since 2010 sought to reduce its overall level of expenditure. As is obvious from the above equation, GDP must have been reduced as a result.

Since government spending does,inevitably, become someone else’s income, because contrary to the impression most politicians present it is not money poured into a black hole, consumption (C) is also reduced by cuts in government spending.

Governments since 2010 have also sought to reduce the level of benefits and other payments made by it, reducing the capacity for consumption as a consequence.

Tax is high because government hasn’t been taxing enough.

My Word. Really?

Then there is this in the FT:

A lack of available loans from traditional UK lenders is pushing vulnerable consumers towards unregulated credit products as they struggle financially in the cost of living crisis, according to a study.

The UK nonprime lending market — which offers loans to riskier customers with average to low credit scores — has shrunk by more than a third since 2019.

In contrast, unsecured loans from unregulated lenders, such as those offering buy now, pay later (BNPL) products, have jumped in recent years, according to research from credit-checking platform ClearScore and consultancy EY.

The result is that the most vulnerable people in the UK who need to borrow to meet unexpected costs because they have little, or usually no, savings are being forced into the highest cost, most abusive, arrangements.

You mean that closing down, through price regulation and caps, the regulated lending industry like Wonga, Amigo and Morses, wasn’t, in fact, all that good an idea?

My word, that is a surprise.

Anyone with a memory?

Richard Murphy says:
February 26 2024 at 6:26 pm
This is fiscal drag at work

A Sunak production

Back two decades I – along with other neoliberals – insisted that the personal allowance should rise, substantially, to makeup for the fiscal drag of previous decades. We won.

The biggest opposition came from Murphy and the likes who insisted that richer people gained the greater amount of tax relief from reversing fiscal drag. So therefore don’t do it.

I really do despise those who change their tune dependent upon what is opportune.

Shouldn’t an accountant have a grasp of numbers?

Investment advisers Hargreaves Lansdown issued a press release this morning saying:

Debts cost an average of £406 a month – as arrears mount

The average household spends £406 on monthly debt repayments, excluding the mortgage. Those with mortgages spend an average of £814 on top of this.

Almost one in ten households (9%) are in arrears. Among the lowest fifth of earners this rises to 27%.

One in five people are concerned about their debt position.

Credit card debt is up 12.7% in a year to £68.9 billion and other consumer debt (including loans, overdrafts and car finance) is up 6.7% to £150.4 billion (Bank of England).

The arrears data worries me, as does the increase in credit. But so too does the bigger picture.

There are about 27 million households in the UK. Around £132 billion is being paid by those households a month to service debt interest, exclusion mortgage costs. That is a staggering upward annual redistribution of wealth. And you wonder why I want interest rates to be as low as possible? That’s the reason why. Those without wealth are being exploited by those with it, and that is a recipe for an unstable society, which is exactly where we are heading.

Umm, if households are paying £132 billion a month then those debts are going to be paid off in about 6 weeks. And if the debt burden is 6 weeks of repayments then the debt burden isn’t, not really, something of any great import.

Oh, and of course, the HL numbers are “debt repayment” not interest on debt.

But then I guess the move from accountant to political economist means you don’t have to pay attention to actual numbers any more. Or even reality.

A word doesn’t fit here

I had discussions with other economists yesterday

Can anyone guess which one it is?

To cap it:

Not only are we not at full employment because there are plenty of people who would like work who do not currently have it, but in making his claim he is ignoring the vast misallocation of labour resources within the economy that we have. There are doctors, nurses, teachers, social workers, and many others who would love to pursue their chosen professions, but because of the denial of resources by the government cannot face the quite literal life-threatening stress upon them from seeking to do so. Those with these skills are working on other tasks within the economy or are simply not working at all, not because the market indicates that it is desirable, but precisely because government policy has denied them the opportunity to deliver what society needs in ways that are humanly possible. No amount of pretence that the market can overcome such a policy failure can disguise this very obvious issue.

Vast underused resources of doctors and nurses in a country which seems to import half of those it does use.

Errm?

He never does check his proclamations against reality, does he?

Sigh

The result could be a complete electoral mess, with many candidates being returned in our first-past-the-post system with remarkably small proportions of the overall vote, discrediting the election as a whole as a consequence.

This is the guy who touts PR recall. Which produces winners of seats with even lower portions of the vote.

Sigh

Core CPI (excluding energy, food, alcohol and tobacco) rose by 5.1% in the 12 months to December 2023, the same rate as in November;
….
The rise in tobacco prices is still related to a change in the law deliberately pushing prices up. Everything else nets out to zero. And no one expected another significant fall in inflation until the energy price cap falls in a couple of months’ time.

The media will be all over this saying the battle on inflation has not been won as yet and that catch up wage rises are threatening a wagwe price spiral. All of that is nonsense. By mid-year inflation will be near 2%. That will be hard to avoid now. Eberything else in the media omn this issue is just fodder to let the Bank of England keep interest rates high.

Core CPI is the policy relevant inflation rate, not CPI.