Ragging on Ritchie

Tre Professori double counts

He’s plugging sustainable cost accounting again. Gissa Job etc. Where we get this:

And as it turns out, almost no one does seem to think Scope 3 is material. So we end up with the absurd situation where airports claim they are carbon-neutral because they ignore the emissions from the planes that fly from them and coal mines can make the same claim because they say someone else burns the coal that they mine, and they claim that’s got nothing to do with them when glaringly obviously that’s untrue.

Well, someone sells me a car. Which uses petrol. Scope 3 emissions then depend upon how much I use that car. How can the car manufacturer be made responsible for how much I drive?

Which is why Scope 3 emissions are not the responsibility of the people who don’t make the emissions. Well, that plus the fact that my supplier’s Scope 3 emissions are my Scope 1 or 2 therefore they’re already included in the system anyway….

Not entirely and wholly, no

Central bank independence is a policy goal of neoliberal economics that seeks to undermine democratic control of the economy and the accountability of the government for it, but it is not what happens in practice.

In the evidence given to support this it is said that:

What this makes clear is that the purpose of the move was political: it was to reassure markets that a new Labour government would be seeking to prudent with regard to government finances by passing control of interest rates to the Bank of England.

Quite, the point of central bank independence is to take control of interest rates and the money supply away from whatever nutter manages to get elected. Or at least to make it more difficult for whoever does to Zimbabwefie the economy. Which is why it was brought in by a Labour government. They being at most risk of the belief that they will, they therefore gaining the most from the perceived reduction of that risk.

Commonweal and Resilience

A new report out that Spudda likes from some Scots blokes. Which says:

where economic activity is not
concentrated in a few geographical areas.

That’s a good thing, a wide distribution of economic activity.

very long ‘just-in-time’
supply chains,

That’s a bad thing, a wide distribution of economic activity.

They’re cretins in short. But then Snippa’s approval is going to push us toward that conclusion anyway….

Interesting

And, as the Bank of England has now acknowledged, the chance that any of the debt that it has bought back from the financial markets will ever be resold back into those same financial markets is remote, in the extreme. None ever has been. In that case, for all practical purposes this debt has been cancelled. UK national debt should, then, be stated net of all quantitative easing because that debt does, in effect, no longer exist.

 

So, I had a look at the link where the BoE acknowledged this and guess what? I didn’t find it. Surely Snippa cannot be lying to us? Although:

If we were the central bank of the Weimar Republic or Zimbabwe, the mechanical transactions on our
balance sheet would be similar to what is actually happening in the UK right now. That is not where you
would find the smoking gun. The difference would be that government would be telling the central bank what
to do, implicitly or explicitly, in order to achieve fiscal objectives while subordinating any inflation objectives, a
situation also known as fiscal dominance. Why would that ultimately lead to inflation? Because, once a
government decides to prioritise its fiscal objectives above its inflation objectives, it is likely to involve
removing central bank independence implicitly or explicitly, and crucially keeping short-term interest rates
lower than would be appropriate to meet the inflation target. The real ex-post financing cost of government
debt could be lower,27 because the debt reduction would be in part achieved via higher inflation. Weimar and
Zimbabwe had central banks that issued however much central bank money was required to achieve the
government’s financing needs, without any credible action to meet inflation objectives.

Yes, that’s right, they do say that explicitly moving to monetary financing of fiscal policy would lead to inflation.

Oh.

Entirely stunning

Second, this is economically appropriate. As is being widely noted, the savings ratio is rising rapidly as the coronavirus crisis develops. In other words, people are saving higher proportions of their income. That is a natural reaction to economic stress, but only exacerbates the problems that we face because there will be less available to be spent on consumption as a consequence. This, then, means that wealth should be taxed more to encourage the redistribution of income and wealth from those who are saving to those who will spend, and that necessarily means that the wealthy pay more tax so that those on low income, who have the lowest savings ratios, have more income available to them. This will speed economic recovery and alleviate poverty at the same time.

He’s advocating wealth taxation. And yet seems entirely unaware of – certainly hasn’t addressed – the standard economic conclusion from optimal tax theory that wealth shouldn’t be taxed at all.

We knew this but still, it’s a nice admission

The government has only got four economic tasks.

It has to make sure anyone who wants a job can have one.

It has to make sure they can live on the wage that they earn, and help if they cannot.

It has to make sure that the jobs people people have don’t harm our long term survival.

It has to make sure it can deliver all the support that’s required to deliver these objectives, from education and healthcare, to security, justice and defence, onwards.

Not a single mention of freedom or liberty there…..

We’re going to have a hell of an inflation rate – or tax rate, of course

And that’s all because they pretend that the debt subject to QE will sold back into markets one day, which would literally not now be possible: there’s just too much of it.

So, OK, we print money so that government can spend it. Shrug. At some point the economy returns to normal. That increase in the money supply is going to boost the inflation rate. Substantially. To which there are two responses. We can sell those bonds back to the market, collect the cash and cancel it. Or, we can do as MMT says, and raise tax rates to collect the money and cancel it. And if there’s too much QE to be able to sell the bonds then what will the tax rate have to be?

Because it’s a shit idea that shouldn’t be enacted

If now isn’t the time for a Green New deal, why not?

From our ever popular series, Ritchiebollock questions that we can answer.

In slightly more detail, the Stern Review insisted that we should not try to plan our response to climate change, Instead, stick on a carbon tax and allow the answer to be emergent. Largely on the grounds that if we did try to plan it then we’d end up with purebred bollocks like the Green New Deal. The planners of which are so amazingly incompetent they think jobs are a benefit instead of what they are, a cost.

Plus, of course, we really want to turn over the design of our entire economy to Caroline Lucas and Richard Murphy, right?

Ahahahaha

So, Ritchie discovers some research on multinationals. Which shows that Google has a presence in 192 countries.

Now you might see why we need country-by-country reporting. Without it we cannot know very much about a great deal of what goes on within these companies, most especially when a comparison between the number of companies reported on in the financial statements and the actual number of locations in which the entity is present is considered. Look at Alphabet on that one, if you will….. (which is Google, for those unfamiliar with the name of its parent company).

What the research shows is that you can get to Google from 192 countries. Not even that Google can show you an ad in 192 countries, which it can’t. But that – even if you’ve got to use a VPN – you can ask google a question in every UN member.

This proves why we need country by country reporting.

Err, yea, Spud, yea.

An interesting idea

But, just imagine three things. Just suppose £28 billion had been invested into the UK economy instead of lent to it? think how much more robust the economic recovery would be in that case.

Second, imagine that this was now a National Wealth Fund run by a National Wealth Service – investing for the future of this country. How much easier would that be to explain?

And third, suppose that this money had been used to leverage:

Commitments to a green transition;
A commitment to paying a real living wage;
The better representation of employee interests on boards;
A commitment to full accounting for tax on public record;
An end to the use of tax avoidance schemes.

The interesting question being, are those things that would make us wealthier?

The Spud plan for saving businesses from going bust

Conditions have to be attached including:

Going for zero carbon
Accounting for doing so via sustainable cost accounting
Paying living wages
Recognising unions
An end to tax abuse and all involvement with tax havens
Real measures to address gender pay gaps
Investment in and responsibility to all stakeholders
Employees on the board

How many businesses would survive the imposition of those costs?

Erm, why?

I predicted, very early on in this crisis, that consumers would react to it the way that consumers always do in situations such as this, which is that they would save.

Data in the FT suggests that I was right: the tendency to save has been very pronounced in five EU countries

Entirely true, the savings rate is up, this does normally happen.

If the new savings that people now want to make were redirected for social purpose then there would be a way to use them to keep jobs going and build the future we really need.

Why redirected for social purpose? Investing in anything attains that same goal……

Too good not to share

Spud points us to this:

It’s that time again. A mumpsimus (16th century) is someone who refuses to budge/insists that they are right, despite clear evidence that they are wrong. Plural: mumpsimuses.

Amazingly, it was not a moment of self-realisation.

Yeah, but, yeah, but

And because that new money simply replaces that which would normally be created by commercial bank lending which isn’t happening right now there is no chance it will deliver inflation. Instead it just keeps is going. Thank goodness for gov’t and its ability to create new money in that case, I say End/

OK, cool.

Twelfth, in that case without the injection of new government-created money that is happening right now into the economy it would literally grind to a halt. Would anyone prefer that to this new money creation which will be used to clear a large part of this so-called debt? 13/

And when the economy stops being ground to a halt and the banks start lending again which creates that new money again then what happens to inflation?

Tenth, anyone who claims we cannot repay ignores the fact that the government can buy back its own debt any time it likes: it has had the Bank of England create £575bn of new money via QE to do this over the last decade and none of that has to be repaid because the gov’t owns the BoE 11/

Well, actually, that’s when the BoE has to sell those QE bonds back into the market in order to remove that QE created money from the economy. The only alternative to that being to increase tax rates to do the same. Which is, of course, indistinguishable from increasing taxes to pay off the government debt.

It’s Thursday

Raise the zero rated income threshold to £36k.

By all means, increase tax on the rich but it won’t make any difference. They are already at their maximum propensity to consume and an extra 10 or 20% tax won’t change that.

Reply
Richard Murphy says:
May 21 2020 at 11:24 am
How would the government be paid for if more than 60% of people in the country did not pay income tax?

Today is a day when tax does pay for government spending.

He doesn’t know, does he?

Talk of L, U or even W shaped recoveries for the UK economy from the crisis that we are now in all seem wildly optimistic.

At best our economy is going to be in an L shaped recovery, with a very long period of flatlining followed by a very slow uptick, maybe.

An interesting prediction

The future will be green, of course. But what else it will be has now to be imagined. I have been asked to write a book on that issue. There is, of course, no funding attached to the request. But it does, somehow, seem to be the most pressing thing I could do.

No advance? Well, OK, if you think it’s important. But even at the speed that Snippa writes there’s a good chance that the L shape will have been disproven by the time he finishes. Which would be fun, wouldn’t it?

The economics of exchange rates

Snippa worries about the falling pound. Hmm:

It is true that the very last thing that we need right now, as our economy heads to a likelihood of at least 25% unemployment is another economic shock, but that is exactly what this government is planning to give it.

What is a standard solution to high unemployment? To lower your exchange rate. Home production becomes a better deal relative to imports, this is stimulatory to the economy. Exports become more attractive relative to the domestic production of the consuming countries. This is stimulatory to our economy.

We, if we have high unemployment, want a lower pound. Snippa tells us that a lower pound would be a disaster because high unemployment.

And yes, it’s Snippa who taught economics at a British university, not us.

Integrated systems, Ho yes

England is worse than Scotland because England has done summat or other to the NHS. Had more private provision. Perhaps it’s not integrated with the care home sector. But, summat, less government anyway:

That is not a definition of success.

And it is a sure sign that the UK (or rather, England) remains an outlier on this issue, largely because unlike Scotland, Wales and Northern Ireland it does not have an integrated care system.

As assertion and one that might even be true:

Meanwhile, the academics said that Scotland so far appears to be suffering a proportionally higher number of confirmed Covid-19 fatalities than the rest of the UK, with 9.4 per cent of confirmed coronavirus deaths in Scotland, home to just 8.2 per cent of the overall population….

Oh, Scotland is performing worse then. Thus whatever the system is in England is preferable to the one in Scotland. Well, using the initial logic from Spud it would be. But we’re never going to hear him say that, are we?