Ragging on Ritchie

So we get to bang up Maduro do we?

When false economics doctrine costs lives it is time for it to be replaced, and for those who peddle it to be called out for their crimes. And yes, I know there is no crime that they can be found guilty of, but that does not stop there being a crime. The crime of indifference to the death of others arising as a consequence of your actions is one by which politicians should be judged.

Even, if anyone ever enacted the P³’s policies and they didn’t – as they won’t – work we get to bang him up?

Almost worth the pain of their being enacted really – to the extent that Maduro hasn’t already.

Today’s P³

Today’s intellectual contortion is that nurses aren’t getting a 12.5% pay rise because we’re not taxing the rich enough. Which would seem to indicate that – contrary to repeated assertion – tax pays for spending.

He then wibbles off into misunderstanding his own MMT. Finally, he admits that financing government through money printing is inflationary. Therefore we have to tax money back. OK, not the way I’d do it but that is at least reasonable economics. Monetisation of fiscal policy is prone to inflation.

Then he says that therefore we need to tax the rich.

But that’s in conflict with what is true on odd days of the week which is that rich folks don’t spend all their money. They just save it. Not invest it, they just Scrooge McDuck it. At which point of course taxing them doesn;t reduce inflation, does it?

Inflation being the result of more money chasing goods and services and Scrooge McDucked savings don’t do that. So, either his precepts about taxation are wrong or his precepts about savings are.

By his own logic if we are to tax to prevent MMT induced inflation then we need to tax the money people might use for consumption. That means poorer people who do spend all their cash. As he’s also pointed out, taxing richer people doesn’t – or might not – change consumption because they’ll just run down the, Scrooge McDucked, savings in order to maintain consumption.

We end up with MMT having to insist that inflation is prevented by taxing the poor. Which is most, most, progressive I think you’ll agree.

This man is insane

As a result of this the P³ tells us that:

The key indicator is the second line down – the aggregate spending.

In February 2021 spending is on aggregate 73% of what it was in February 2020.

But, crucially, despite the vaccines it is still lower now than it was from last June onwards. So far the vaccine programme has not increased consumer confidence.

Sunak thinks it will. I am not convinced, as I suggested yesterday.

It is going to take a long time for people hit as hard as we have been to think that this the moment to spend all their savings.

What it actually shows us is that people would love to be out there spending their savings. Because, from the original source, he misses this bit:

These data series are experimental faster indicators for estimating UK spending on credit and debit cards. They track the daily Clearing House Automated Payment System (CHAPS) payments made by credit and debit card payment processors to around 100 major UK retail corporates. These payments are the proceeds of recent credit and debit card transactions made by customers at their stores, both via physical and via online platforms.

What happened in early Jan? All the physical – OK, most – closed and they’re not open as yet.

They’re currently physically constrained from spending that is…..

Most interesting

First on tax, he did almost nothing. He is simply letting inflationary stealth increase taxes over time by not increasing allowances. This has been done before, which is going to be a recurring theme of all that follows. It’s never been popular. It is regressive. We needed progressive tax change. We are not getting it.

When, a decade back, I was shouting that we need to increase the personal allowance to counter decades of stealth taxes by not increasing allowances I was told – by the P³ – that this was regressive and therefore I was a neoliberal fascist and the like.

Fun how descriptions of exact the same thing change over time, isn’t it?


This is pretty serious stuff.

Breaking international law is not something a government should do lightly. Our government does, however, appear indifferent to it. That is, in itself, mightily worrying.

And then there is the fact, not to be ignored, that as yet the EU exit agreement has not been ratified by the EU itself. Quite simply, this is not as yet a done deal. And the EU could, in the light of such provocations, decide to walk away still.

Treaties become law when they’re ratified, not before…..

He’s sounding like Wakefield

Second, in the very short term everything that Sunak says today depends on Covid being beaten by June. That is a wildly optimistic forecast because of the UK’s vaccination policy. France is seeing a signifiant vaccination effect as a result of following the prescribed action for double vaccinating within 21 days. We are not seeing anything like that vaccine impact, but are seeing a good lockdown result.

Where does he get these ideas from?

Umm, eh?

But, Giles wants to say that interest rate risers could cost the government £25bn, which he says represents a 5p basic rate tax increase (which is not true, either in quantum, or in fact because there is no direct link between government deficits and tax rates, meaning Giles should also get the runner up prize in the ‘duffer of the year’ awards for thinking so).

What P³ version of economics do we have here? Tax rates are not connected to deficits?

Yes, I get his point that tax doesn’t pay for spending – understand although perhaps not agree with – but tax rates don;t link with how much tax is collected and therefore what the deficit between spending and tax income is?

El Twatto is Twattish

First, the country has not got more than £2 trillion in debt. The government has bought back around £800 billion of its own debt. Quantitative easing has cancelled that debt. In eleven years not a single penny’s worth of the repurchased debt has been sold back to the financial markets.

So, just like a paid off mortgage has been cancelled, so has this government debt been cancelled. In that case, I am not sure why you want me to explain how to repay government debt that has already been repaid? Your question doesn’t make sense unless you’re asking me how we would repay the debt twice, and I’m not sure why you would want us to do that.

Second, you say that government debt must be repaid, but the fact is that people are still queueing up to buy government debt. So, you need to explain to me why it is that the government wants to repay debt that people are desperate to buy? I am not sure I understand the reason for that.

No bugger would buy the debt so the BoE had to buy £800 billion. Therefore people are lining up to buy he debt that no bugger would buy?

Sigh, this cannot be true

just recall when Northern Rock failed in 2007. There was the first run on a bank in the UK for 160 years.

That is literally how all money is made. One lender, the bank. One borrower, the customer.

It cannot be just the one bank otherwise there never would have been the run on Northern Rock.

It has to be the banking system as a whole, not just the one bank….that’s how one bit of it can run out of money, because one bit of it cannot create money.

This is simply gorgeous:

Tax also does something else. By reducing what we can spend it restricts the size of the private sector economy to guarantee that the resources that we need for the collective good that the public sector delivers are available. Tax makes space for things like education.

He would, of course, deny there is anything like crowding out. Then he insists that the purpose of tax is crowding out. Sigh.

So, as a matter of fact a government like that of the UK that has its own currency and central bank has to run a deficit. It’s the only way it can keep the money supply going. Which is why almost all governments do run deficits in the modern era.

And please don’t quote Germany to me as an exception to this because it, of course, has not got its own currency. It uses the euro, and the eurozone as a whole runs a deficit, meaning that the rule still holds.

OK – Singapore.

And this is equally gorgeous:

This gives the clue as to another weird thing about this supposed national debt. It really isn’t debt at all. Yes, you read that right. The national debt isn’t debt at all.

That’s because, as is apparent from the description I have given, the so-called national debt is just made up of money that the government has spent into the economy of our country that it has, for its own good reasons, decided to not to tax back as yet.

So it’s our debt to the government then, some amount of tax that we’ll get charged in the future. Which is, of course, just what we’ve all been saying all the time. The national debt is going to be paid by taxing us some more in the future.



Perhaps some think that more than 1.7 p in the pound should be repaid?

Or even, given that the story is that borrowing boosts the economy and thereby pays the taxes that pays off the debt, we’d like to see some sign of this happening?

Another P³ observation

That insistence that the one dose policy doesn’t work in oldsters:

Matt Hancock hails ‘exciting’ data showing one dose of vaccine cuts risk of hospitalisation among top age groups by more than 80 per cent

He at least says that he’s getting all his information from Independent Sage. I know they’re the usual bunch of lefties but what’s in it for them to keep getting these things so wrong?

Funny thing about averages

Richard Murphy says:
February 28 2021 at 2:16 pm
Any0one who can say on average we are better off when he knows how widely unequal is the spread of income and wealth in the UK is a fool.

But that may be too kind.

They obscure distributions. Rather the point of them to be honest.


The private sector has had money poured into it by this government during this crisis, mainly to compensate it for not being able to work. But schools, the justice system, social care and health are all creaking under the enormous workload that they have continued to manage, albeit in some cases (like justice) with enormous difficulty and growing (and unjust) delays. There would appear to be no hint so far that the money that these bedrocks of our society require will be available, or that those who have worked so hard to make sure that services have continued, despite the odds, will see any recognition for their efforts when they know many others have done nothing.

Have budgets been cut?


Has the workload increased?

Nope – not even in the NHS because they’ve delayed near all but Covid. So, why should more money be needed then?


If people should be – or even want to – invest in specific schemes, specific buildings and projects they can go look at, touch, then why wouldn’t equity be a better funding mechanism? Actual, you know, ownership?

Rather than 1% bonds at a time when inflation is highly likely to rise?


I have not got a crystal ball. But I do know three things. The first is that current UK vaccination policy, popular as it is, provides a perfect opportunity for vaccine-resistant mutations to develop. They may not. But equally likely, they might. That’s what vaccines do.

So we must never vaccinate anyone in order not to create vaccine resistant strains?


P³ on Andy Haldane and inflation:

It was at this juncture that I realised I was reading the work of someone who I think I can appropriately describe as a fool.

Basically, Haldane says that the increase in the money supply might come through as inflation, might not. We’ll see.

The P³ insists that it cannot because if it did then QE would have to be reversed and that would shatter his MMT projections. So, therefore, it won’t.

The beauty of this is that if increased money supply doesn’t juice the economy then MMT wouldn’t work at all. Yet P³ wants to insist that it does but also that there will be no inflation.


An interesting prediction

Mark and note:

Howard Reed says:
February 27 2021 at 6:12 am
I think the risk of sustained inflation in the 2020s is miniscule. While there is some pent-up demand and a possibility of a slight uptick in inflation when the current lockdown eases up and things become a bit more normal, that’s all it will be – a slight uptick, if that. CPI inflation is currently 0.7% on the latest annual figure, so it might rise to 2 or 3%. So what? I would then expect it to fall back below target after a few months. You and Danny are absolutely right on this. It’s a storm in a teacup, being propagated by the same inflation hawks who have been consistently wrong ever since 2009 in predicting a massive increase in prices.

I do think that without the reversal of QE at some point there will be a significant inflation. There’s a lot of weight on that “at some point” of course.

But we’ll see, won’t we? The universe being nice about stuff like this, it does, eventually, test predictions.