Ragging on Ritchie

Saving democracy

I have a suggestion that elaborates on what I did last night. It is that those who support democracy have to act to deliver it, working in cooperation to do so. They should demand from their politicians:

An agreement on a new economic settlement – that we will promote full employment, the meeting of need and the delivery a climate transition within a framework designed to deliver that goal;

That is, we’ll save democracy by insisting that the base economic structure can never be challenged by the result of an election.

Agreement to enhance accountability so that never again can a party, a person or a government hold the country to ransom to support the interests of a few at cost to the many;

Ditto – what the folks vote to be gimps for the tories?

Ho Hum

He is a wonder, isn’t he?

As is apparent these are related objectives but with the auditor being required to take an active rather than a passive role in ensuring that stakeholder needs are met.

Right now the value-added in audit is very far from clear. In the proposal that we make the role of the auditor is decidedly proactive and the added value is clear. Audit would, as a consequence, be both an attractive career option and one that would provide a very much more obvious role than a career in box-ticking.

KPMG is failing, but the task it is failing at is one so badly defined that systemic reform is required.

Auditors thereby become the shadow managers of every firm.

Which would be fun, given that no significant auditor has ever been willing to give the Fat Controller a post-training job.

How weird

Tories are evil, fascists, exploiters:

In that case worry if you are young, because you have no economic value, unless you were born with a silver spoon firmly in place.

Umm, what’s the point of exploiting the young if there’s no economic value in exploiting the young? Idiot’s got it the wrong way around. His actual claim is that you’ve no moral value, therefore can be exploited for your economic value.

Another proof that this is all just word salad.

Amazing as it may seem his political rhetoric is even worse than his economic.

Amazingly, yes, he wants to make it worse

The article is a little vague as to what this proposal might mean. It would seem that the idea is that the government should absorb the impact of some energy price increases at present but that the cost will be recovered when energy prices inevitably fall. At that time consumer prices will be maintained to repay money paid by the government now. In other words, the government will, in effect, provide a hedging mechanism to smooth consumer energy prices.

In principle, I have no problem with us. In practice, I do of course have an issue, which is that what this clearly implies is that the consumer energy market has completely failed and that as far as consumer pricing is concerned if such a scheme is to be put in place then government-regulated prices will be in operation into the foreseeable future, in which case the reason for private sector activity in the sector has to be questioned.

A problem caused by price fixing is to be solved by permanent price fixing. It’s as if he’s the perfect heat seeking missile for the wrong answer…..

That’s not good

Since 2016, when it started publishing accounts in full, Farmdrop made total cumulative sales of £23.3m and operating losses of £33.9m.

But:

The company raised about $41m (£30m) in capital over almost 10 years,

How could this be? The Sage of Ely has just assured us that near all investment is made via bank loans!

Fascinating

Inflation can be caused for four reasons.

First, if a government tries to spend more within an economy already at productive full employment it will create inflation because the resources required to meet the demand that it is stimulating will not be available. Price increases would, then, be the inevitable consequence. This is an incredibly rare phenomenon because full employment at a living wage, indicating that all labour is used productively, is almost unknown.

Most economists would argue that that’s the major form of inflation rather than being incredibly rare. But then, you know, the P³ and economics.

It’s also a wonder where he’s got that living wage qualification from. Near no one in Turkey makes the British living wage but they’ve got quite a lot of inflation there, don’t they?

Blimey, surprise here!

There is a rare unanimity in the country this morning. A significant majority think that our prime minister is a liar and that as a result of his own law breaking of laws that his government passed he should resign. Opinion polls suggest that around two thirds of the country are in support of his going. As usual we must both despair and worry about the others.

Turnout was 67% at the last GE. Tories got 43% of the vote. So, more people today think Boris should be PM than thought at the last GE.

That’s a damning blow, isn’t it?

The people who didn’t hire me for a well paid and successful career should die stabbie, stabbie, deaths!

The real question this raises is what does this mean for a firm that was, for the sake of the record, forty years ago my employer? My suggestion is that the claim, so often made, that there were just ‘bad apples’ in this firm and occasional lapses of quality is ceasing to make any sense now. KPMG has a long list of failings, and is at present not taking government contracts because of doubts about its ethics.

That last point is key. An audit firm is only as good as its ethics. The quality of its opinion making is all that matters, and ethical objectivity is key to that. If KPMG cannot be believed, and I cannot be alone in no longer believing it can be, then there is nothing left for it to do.

That is, I think, the point that has been reached now by KPMG. This firm has failed. No objective regulator could, in my opinion, any longer think it a fit and proper organisation to undertake audits. In that case its licence should be revoked.

Of course, when the government, in the form of the Post Office (note, post office, not Royal Mail) end up jailing people through their hiding of the evidence about a computing system the same doesn’t apply, does it?

Jeez, monetary policy simply explained at last!

It would seem that the usual Tory view is that inflation almost invariably arises from excess money creation resulting in government deficits as a consequence of excess government spending. Broadly speaking this equates to their belief in the quantity theory of money which suggests that if too much money is created it will pursue a finite supply of goods and services, inevitably increasing their prices as a result. There are, of course, numerous problems with this claim. Firstly, the deficit may arise because of insufficient taxation, and not because of excess spending. Secondly, there is no reason to think that the supply of goods and services is fixed. Whether because more money attracts more activity into the marketplace, or encourages more people to work, or incentivises increases in productivity, this claim may be false. Third, there is no reason why the excess money supply needs to come as a consequence of government activity: banks can also create money and excess private debt can have the same consequence. The theory ignores this, although eventually when full employment is reached (which is not something with which we are familiar) it is true that this theory might have some credibility. However, my caveat is appropriate: I would suggest that we really do not know what this looks like, and therefore we do not need to worry about it.

Just to pick up on one point – for yes, of course, it’s bollocks – that assertion that the quantity theory of money ignores bank creation of money. The Q theory is:

money supply × velocity of money = price level × real GDP.

The money supply meant there is the narrow money supply, or M0. Velocity money is best thought of as the multiplier effects of banks creating credit atop that base or narrow money supply.

So, recast the equation, base money times bank activity* equals prices times real GDP.

That is, the quantity theory of money is how we incorporate bank lending and money creation into out theory of inflation. You know, rather than ignoring it?

*This is rough, wrong, but useful

I think this is wrong, think so

For example, the overnight bank repo markets would cease to exist if there wasn’t government debt. For some bizarre reason some MMT proponents may wish to create massive instability in the banking system, but I don’t. In that case we need that to provide security for large-scale overnight deposit taking and that requires that there be significant quantities of government debt in issue.

Well, it’s possible to do repo without govt bonds, however convenient they might be to do it. But I thought that repo was the alternative to deposit taking, not the form of it? Anyone?

True, true

One thing that has characterised my work since campaigning became my main activity has been a willingness to be opportunistic.

Many have been impressed by the ability to spot which policy proposal is going to get grant money thrown at it….

Rilly?

And we face the most massive immediate crisis as a result. There is evidence that one in ten people who get omicron many get long Covid, with massive consequences.

Gosh. Do we still say “citation needed” these days?

An alternative explanation is possible

If I could work all this out on the basis of the evidence that scientists were producing then why couldn’t the government? That is the question that needs answering, except there will never be a reasonable answer to that. Only wilful blindness can explain the government’s inaction.

Not that I’m saying that the P³ is right of course. But assume and an alternative explanation is possible. Which is that governments are shit.

Which is why we don’t want governments to be doing things. The surprise being that the P³ never can bring himself to make that logical leap.

Hmmm

Second, it was drawn to my attention yesterday that Twitter seemed to be particularly excited about unsubstantiated claims about the state of Prince William’s marriage.

Divorced bloke gets on high horse about third in line to throne’s marriage gossip.

Instead, what troubles me is that in what passes for a constitutional settlement within the UK the decisions of some people as to how they will conduct their personal lives might have implication for the conduct of government. Prince William, in particular, is second in line to the throne and his father will be well into his seventies if he does ever become king. In that case the succession rests pretty heavily on his shoulders. Like it or not, public confidence in his conduct matters whether you are a monarchist or not.

There is a point at which we say fuck off to pompous gits, isn’t there?

Umm, why?

a supposed market in consumer energy in the UK when it is very obvious that this should be under state monopoly control.

Why should retail power supply be a state monopoly?

We can – say – heat our houses using coal, wood, electricity, gas and jumpers. So, the coal merchant, the wood bloke, the gas and ‘leccie supplies and all jumper makers must be the one, single, state company?

Or is this just one of those conclusions based upon nothing but manual manipulation of the rectum?

He can’t even keep his own analysis straight

Second, the cost of producing gas has not risen. All that has risen is the price, driven by fears of Russia, in the main. But by no means all the gas we use is Russian. There will be UK companies making a great deal of money from this increase in gas prices: the money does not all disappear into a bottomless pit. The government could take action to recover at least some of the excess profits that will be made to then subsidise the fuels bills of those needing help – as many will. But I very much doubt that will happen.

We’re in a shortage, so let’s tax supply to subsidise demand. Yeah, right……

But this:

Fourth, the good news from that is that inflation, excepting fuel prices, may well fall – although the chance that the Bank of England will allow for that is low, meaning that they will probably add to the woes in 2022 by increasing interest rates.

But if decreased demand will lower inflation – so it’s not just supply chain woes of reopening, isn’t merely transitory – then the correct reaction to the inflation we thought we were about to have would have been to raise interest rates.

But the P³ kept insisting that we shouldn’t to that because it was all just transitory.

Interest rate rises reduce inflation *by* reducing demand. So, if reduced demand reduces inflation then higher interest would have reduced inflation.

Err, yes

Peel, Isle of Man; Douglas, Isle of Man; Georgetown, Cayman Islands and Gibraltar are on the list.

It’s Brenda – The Crown – which decides. She’s also Lord of Mann.

The how do you pay for it explanation that won’t be in the book

However, I share the quote for a reason. Steve rightly says:

To really answer [the question ‘How are you going to pay for it?’] you have to understand the dynamics of our monetary system—and that means you have to understand double-entry bookkeeping, because that’s the way banks and governments create money, and keep track of financial transactions.

For that reason, I am going to have to explain the double-entry of banking in the forthcoming book. But nothing like the way Steve does with a Godley model. That’s not to say they are wrong because they are not. It is because most people will not follow them, and everyone has a right to know this.

The actual explanation he won’t use.

Society has a number of resources, we can use resources to do a number of different things. Government can make the decision that we, the people, don’t get to do what we want with our resources. Instead, they are taken from us and used to do what government wants to use those resources to do.

And that’s it.

All the talk of money, taxation, debt, is a discussion of ways to do that, not the doing itself. Government takes our stuff and does stuff with it.