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Ragging on Ritchie

Not understanding banking again

The same is true if you put your money in a bank. If you put your money in a bank, all you have done is move money out of your current account into a deposit account at the bank.

This is simply an electronic transfer between two balances in the bank’s bookkeeping system. The bank then pays you interest, which it might not have done on the current account, but otherwise, precisely nothing has changed. The money in the bank was dead when it sat in your current account. It became interest bearing when you put it into a deposit account, but the bank doesn’t do anything with it.

It does not, in particular, lend it to anyone else.

It can’t because it owes it back to you. It can’t take the money that it owes back to you and say, well, I don’t owe it to whoever you are now, and I’ll put it onto somebody else’s account because you’ll say, hey, what have you done with my money? Where is it? It’s got to stay on your bank statement to record the fact they owe you. They can’t transfer your bank statement to somebody else’s ownership.

And that’s all that having money in the bank means. It means you have a balance on your bank statement. Nothing else at all.

When they lend money to somebody else, it’s new money that they create for that purpose. So, saving in a bank, is absolutely dead money, totally and utterly. It does not produce any new economic activity.

If banks don’t need deposits in order to be able to lend then how can we have bank runs?

Depends on where you start from

Torsten Bell, recently departed from the Resolution Foundation and now expected to be a Swansea MP, who I think might be in the running at that time. As former Chief of Staff to Ed Miliband, he already knows his way around. Whilst he is still right of centre,

Torsten? Right of centre? Right of where you are, perhaps, but of centre?

Now here’s an interesting thought

No they don’t. Taxpayers have got nothing to do with footing the bill.

When the rail industry, the coal mines, the steel industry, the road transport industry, and other industries were all nationalised post the Second World War because the economy required their output and they were left in a dire state, by the consequences of that war, the owners were paid for the value of their businesses.

And they were paid with government bonds. Government bonds are simply a statement of a loan with the government. The government said “We owe you the money that this bond represents and we’ll settle it with you in 30 year’s time” – that was the normal figure used at the time by the way – “and we’ll pay interest on it in the meantime of say 3%.” That was the normal figure used at the time.

And the consequence was that they paid market value because the businesses in question could generate a surplus sufficient to cover that interest cost.

Back then 3% was 3% real. So, did those nationalisations make 3% real returns?

Even, when we flogged them off, did we pay off the national debt that we’d taken out to buy them?

And the bonds themselves were not paid for out of taxpayers’ money. Let’s be clear that even if there is such a thing as taxpayers’ money, and I doubt it, what happened to those bonds when they came to be due for payment in the 1970s was that the value was extended. In other words, the original bonds were replaced with new bonds for another 30 years. And what happened when we got to 2005 and those bonds ran out? They were replaced with new bonds which ran for another 30 plus years.

Ah, no, we didn’t. Therefore we didn’t make 3% real, did we? For we’ve not got the companies but we do have the debts still…..

Sometimes those activities did not make revenue surpluses but that was because of the choice that government subsequently made to improve the quality of the services to meet the needs of the people of this country. And that’s an entirely separate issue.

Or, the other way of putting that, government’s crap at running such activities. Meaning it does cost taxpayers’ money. QED.

An interesting question

Argentina’s inflation rate (MoM) has now fallen 5 months in a row. Javier Milei was sworn in December 10, 2023 just 7 months ago.

Down from 25.5% to just 4.2%

How did Argentina’s President Javier Milei do it?

Slashing government spending.

OK, that’s simple enough (and not fully correct either).

But I wonder what Spud’s answer would be to “How did he do it?”

New Vermine!

Many of these suggestions will be familiar to readers of this blog because it looks as though Plaid Cymru, like the Greens and the Liberal Democrats, have adopted many of the ideas in my Taxing Wealth Report 2024: some of the figures look remarkably similar. I cannot be sure what the relationship between that Report and those three manifestoes is, but the coincidences do appear high.

PC does, in my opinion, play an important role in Welsh politics, even though it remains a minority party. It champions Wales and the Welsh language.

Unlike Labour, which dominates the Welsh scene, it is a party of ambition.

It is willing to promote the interests of the people it seeks to serve, and not vested interests.

Its role in promoting the opinion of those who live in West Wales in particular, which is an area for which I have a strong affection, is important, and from my conversations there, I realise that it is appreciated.

I think he’s realised that, as a matter of policy, the SNP does not nominate for vermine.

It’s delightful logic, isn’t it?

The quantum tax required from the economy is, then, always the balancing figure within the fiscal equation, seeking to find the appropriate compromise between controlling inflation and providing economic stimulus.

All this nuance was lost when focusing upon tax alone, without ever discussing why that tax might not be at an appropriate level given the demand for public services in the country.

The difficulty with Spud’s framing here is that we know we can get two different answers from the electorate.

1) What free gifties would you like?

2) How much tax are you prepared to pay to get them?

This isn’t changed by tax being the thing that pays for those gifties or the balancing figure within the fiscal equation. Humans don’t work that way.

We can explain this

Yesterday, this post of mine was removed from TikTok for a while……Apparently, it violated rules by encouraging hate speech……..This morning, I had a warning from Facebook that this post in which I discuss the Tory manifesto costings might also encourage hate speech……Far-right thought and deep misogyny thrive on these sites. But I am getting warnings for providing reasoned political comment.

What is going on?

A system of censorship has been built around and over online content. As Spud would applaud if it were dedicated only to no-platforming climate deniers etc. But that’s not the way censorship works, is it?

Proof that it’s a bad idea

It is a strange moment when an idea that you have promoted suddenly moves towards the political centre stage, even if Nigel Farage is the person who is doing the pushing.

This happened yesterday when the Reform Party presented its idea to eliminate payments of interest to the UK’s commercial banks and other financial services organisations that enjoy the privilege of having a central bank reserve account balance with the Bank of England. As I have noted here many times, the payment of bank base rate on these accounts at one time cost in excess of £40 billion a year, and still costs in excess of £35 billion per annum now.

What other proof do we require?


The Tories introduced the lifetime pension cap. Based on the value of a fund, and not just contributions, it has caused major difficulties for hospital consultants in particular. There was an obvious problem needing a solution.

The Tory solution was to abandon the cap.

That solved nothing but perpetuated a massive bias towards wealth in the pension system.

Now, Labour says it will maintain that bias.

It could have instead said it would abandon the cap and cut the rate of relief on contributions. That would have worked.

He was going to increase the taxation of public sectror pensions contribuitions, was he?

Imagine using Monbiot to explain economics?

Spudcup does:

To explain this requires that I revisit an explanation of just what neoliberalism is. George Monbiot did this very well in 2016, and although he has a new book out on this theme, I doubt that he will do much better than this:

Neoliberalism sees competition as the defining characteristic of human relations.

Given that I am a neoliberal I am allosed to say bollocks to this.

The defining belief of neoliberals is that humans are a cooperative species and markets are how they do that cooperatin’. A market transaction is a cooperation. The competition is between those who you might cooperate with.

This isn’t difficult people.

Rocco, one for you I think?

If only politicians understood double entry

The argument then becomes but there’s always the other side of the ledger in any transaction – which is obviously true. We want to do things that make a profit – a real profit that is, the outcome, the result, is worth more than the use of those same inputs put to other use. That’s value additive and it’s value we consume, it’s value that is our real income and so on. We want the things we do in hte world – our consumption of resources like land, labour capital and so on – to be value additive.

Where Spud’s argument goes wrong is that he thinks government spending is that value additive solution. The reason he goes wrong here is:

worth more than the use of those same inputs put to other use

It’s not that “solving child poverty would be nice” it’s that perhaps leaving that cash in the pockets of investors might get us free energy – fusion say. You know, maybe something better? Leaving investors alone to get on with things did, after all, bring us free telecoms. 2 billion do now gain free telecoms from WhatsApp after all…..

No, not it’s not, asshole

As the Guardian has highlighted this morning, new data shows that 2.1 million children now qualify for free school means. This is one in four children now do so.

The figures have grown dramatically
The figure has almost doubled.

This is a real measure of poverty.

Eligibility for free school meals hsa changed over these years. It has become easier – and at a higher income level – to gain them.


To translate for you

I have already mentioned that I spent some of yesterday at an event at Queen Mary, University of London, discussing the future of water companies in England and Wales.

Whilst I was there I was questioned by one of the academics present as to why I expose myself to so much personal stress as a consequence of writing this blog, posting videos, and other social media activity.

This being an academic event, I suggested that my motivation for writing this blog is that we are subject to a hegemonic political system that is only presenting the people of this country with a neoliberal view that I am quite certain is detrimental to the well-being of most people in this country, and beyond. As a consequence, I think it my job to use my best efforts to critique that system and provide suggestions as to alternative ways in which our economy might be organised to deliver better outcomes for the vast majority of people in the UK and elsewhere. As long as the current position of economic oppression of the majority persists, I cannot see a reason to change what I do.

The shorter and more accurate version:

Because I’m paid more than the blog’s worth to write it.


Thirdly, Farage would have nothing like the power he has unless the BBC thought it necessary, in the interest of so-called balance, to so frequently platform far-right parties and organisations in this country.

The current betting is that these “far-rights” will gain some 12% or more of the vote. Why shouldn’t such views gain media representation?

Spud’s maths lessons

Now let me pose a question I often put on the board when starting a discussion of maths in the context of the political economy of data with second year undergraduates. It was this:

2 + 2 = ?

I have never yet had a student give the right answer.

They all say 4.

It isn’t.

It’s 5. Both those figures written as 2 were 2.49 rounded to the nearest whole number. The sum of the two is 4.98, which rounded to the nearest whole number is 5. The answers the students gave me were almost 25% out in all cases.

And these wrong answers came despite children being taught about rounding to whole numbers in primary schools, just about anywhere in the world.

Holy Shit that’s bad.

Because the thing you’re taught about rounding numbers is that you don’t round numbers during a calculation – for this very reason – and only do so with the final answer.

Well, they did at the LSE, Downside, Worth, the Air Force school in Naples and St Alphege’s anyway.



Shein sells very large quantities of clothing that it knows are unlikely to be worn more than a few times, at most. They are intended to arrive in a waste tip sometime very soon after their original purchase.

Garments that are returned to them are apparently routinely binned and not recycled.

This is a company that has set out to abuse the planet.

There are also questions about its tax affairs. It seems to undertake a lot of activity in feeeports.

I know there have been questions about its employment practices.

So, why are so many celebrating this company choosing to have its shares listed in London?

Spud now wants to apply sumptuary laws to who may list on the London Stock Market.

Odd for a supposed economist to miss that, by definition, utility is defined by the doer, not the beholder.

Cretinous economics

Most actual profit, i.e. reward in excess of effort expended, in the modern economy comes from exploitation, whether of natural resources, monopoly power, rents or the exploitation of people, many of whom will require state subsidy to simply make their lives possible as a result.

There are two possible and useful definitions of profit.

1) The excess of value created over the costs of the inputs.

2) The portion of 1) that the captialists manage to appropriate. In a market economy this is always a pretty small proportion – most of it ends up in hte consumer surplus, the value enjoyed by consumers but which they don’t have to pay for.

1) is the thing we desperately want to happen. 2) we want to happen only to the extent that it encourages lots and lots of 1).

Both are, of course, wildly different from the dreams of the potato.