Ragging on Ritchie

If only the political economist could understand a GDP report

We’re told that:

Second, the V shaped recovery that Andy Haldane of the Bank of England likes to talk about does not exist; not that I ever thought it did.

OK:

Dunno really, Looks vaguely V-ish to me but then what do I know?

Unsurprisingly the UK economy grew in August.

However, it was by only 2.1%.

Erm, that’s 2.1% in a single month. Not at an annualised rate, but in toto. Leaving aside, for a moment, everyone else’s recoveries from recent lockdown that, umm, about as fast or faster than any economy has grown, ever. Keep that rate up and we get (remember, compounding) something like 30% GDP growth in a year. Pretty cool really.

And then this:

Much of the rest resulted from the assumption that those in education were working again. Knock those two apparently virus spreading sectors out of consideration and the rest of the economy remained more than 9% below its previous crisis level.

No, the economy as a whole is still 9% below. It actually says so:

the level of output has not fully recovered from the record falls seen across March and April 2020, and is still 9.2% below the levels seen in February 2020,

Further, we shouldn’t try to dismiss the effect of education. For the reason that the UK had a larger recession than anyone else is because we’re the only people who counted the absence of education (and health care) as part of the recession in the first place.

Jeez, can’t he even read the reports that are the basis of pontifications about economics?

Dear God, where has he got this idea from?

First, I am reliably informed there is no such term as ‘herd immunity’ in public health medicine. The term only exists in veterinary medicine. So this is not a medical, epidemiological or public health declaration in that case.

What the hell does he think the effect of a vaccine is then?

Jeebus.

(which is unsurprising as the common cold is also a Covid)

No it isn’t.

Third, no policy of this sort has ever been used in society.

It’s the way we deal with every infectious disease we can. Measles, mumps, smallpox, we attempt at least to gain herd immunity.

This is not, then, epidemiology at all. Nor is it science.

Well, yes Snippa, I think we can say that of your maunderings.

And the logic that underpins it is that of that branch of economic thinking.

Over time I have formed the very firm opinion that many who adhere to that way of thinking are of the opinion that the elderly are simply a burden on society who do not add to economic production. If you look at how much the elderly do add to the production side of GDP this is, of course, a sustainable argument in a great many cases. It takes only a moment in that case to extend the argument and to argue that the elderly do, then, have no worth. And what this so-called epidemiological approach does is in that case provide is cover for what I think might best be called the cull of the elderly that many of this persuasion would, I think, like.

Quite so, us elderly free market liberals are all in favour of a cull of elderly folks.

Cretin.

And all that is being done in the interests of supporting the free enterprise economy to operate without constraints because it is assumed that the elderly are pretty much outside it.

Nurse, more lithium please.

So let’s stop the pretence that this has anything at all to do with health issues. This is the economics of neoliberalism running riot, and revealing in the process its utter indifference to the interests of anyone but those who can ‘add value’ within that system.

Sigh.

He’s republished it here. With a not moderated by him comments section.

He does keep raising the stakes, doesn’t he?

There is no obligation to balance the books, after all. There is only an obligation to use the power of office for the public good, and that means that the power to create money must be used to deliver full employment for all who want it, at which point it may well be that tax revenues will cover all spending the government desires because for it to do otherwise would be inflationary. So, to create money (and not, I stress, borrow it) would in that case be the sacred duty. And there would be no need to reverse that money creation so long as the public, or at least the private sector, wished to save and so keep those funds with the government, which is what the actual consequence would be as the sectoral balances would show.

So tax revenues will, at full employment, more than cover the extra money printed to get there. Further, peeps will invest in government bonds because they want to.

Perhaps not so much really, For Snippa also claims that peeps want to invest lots in govt bonds now because uncertainty. Uncertainty that will disappear once we’ve got full employment and less uncertainty. Or, more technically, he#s missing that peeps will invest abroad.

But OK. Now think of his other assertion. We’ve a risk there of inflation given that full employment and money manufacture. So, this is when people are going to want to invest more in fixed income bonds from government?

Oh, right

Might I also add that it is also totally avoidable? I have little doubt that, debt or not, Cineworld could survive if the rents it pays were to be reduced. But, once more, I suspect that landlord inflexibility will not be available in this case. It is the rentier who is destroying our economy and much of our way of life in the post-Covid world. And it is the landlord, with the banker, who will be destroying jobs. We need to remember that.

Snippa is trenchant as ever. Oh, and perhaps not entirely and wholly correct in each and every detail:

Cineworld is among a raft of firms which have refused to pay rent during the coronavirus crisis

El Snippa is Snippa

Well, no, not really. Creative destruction is simply the advance of technological change. The connection with markets and neoliberalism is only that these are good ways of gaining the technological change.

As to invisible hands Adam Smith actually used it as proof that capital will always pay some portion of corporate taxation. But then that’s actual economics so not something we can expect Dickie to understand.

Perhaps also worth pointing out that economics doesn’t even pretend to be a method of divining routes to salvation. That’s more about the Grandpa figure with the beard than it is Karl.

And now to link this claim to another

What this data makes clear is that to date the government has borrowed no money in the current financial year.

The claim being that QE has meant the BoE has financed everything by printing money to buy up the gilts issued. No, don’t say yes or no to that, just run with the idea to explore the implications.

What this data also means is that so far this year no effective demand has been made of the bond markets to support the government.

The implication of that being?

Quite, we can’t take current market interest rates or prices as being indicative of the government’s demands upon the market for financing, can we?

And yet the Uno-Professore will be back tomorrow to insist that low market interest rates reflect the market’s desire to have government bonds, won’t he?

There’s a corollary to this observation

That there has been significant overall support for increased tax and spending since 2015 is hardly surprising. I suspect that such support is increasing again at present. What is apparent is that during periods of Conservative government it almost invariably increases, and usually exceeds support for keeping tax and spending the same, whilst being massively more popular than reducing tax or spending.

The support for more tax and spending decreases during a Labour government as we see what the fuckers do with it.

Twat is twat

This is the only waited to deliver long-term prosperity. And, the problems implicit in a society which is overly dependent upon house ownership must also be addressed, including a restriction upon the right of banks to ever seek to recover more than the value of the property from the mortgage holder so that the concept of negative equity is eliminated from consideration.

So the entire country is to be treated to jingle mail then? Property speculation should be a one way bet?

Householders cannot be held responsible for macroeconomic failure. Governments have this responsibility, and if they need to compensate banks for that fact, then so be it. But the torment of being held enslaved by a mortgage cannot be an outcome of this crisis.

Yes, that is what he’s saying. Losses on buying property must be paid by the government. Profits can be kept by the buyer.

The real issues are systemic, and the CPS proposal goes nowhere near addressing them.

Privatising profits and socialising losses in the housing market is the way to do this, is it?

One would almost suspect that Snippa got on the wrong end of negative equity somewhere along the line.

Mutually contradictory beliefs

The first, and most obvious possibility, is that Trump is not a successful business person, at all. Instead he is an arch manipulator of borrowed funds, using them to give the appearance of a successful business career when he is, in fact, simply accumulating debt that he might well be unable to repay. The possibility that this might arise during the course of a second term in office is particularly worrying: how can the President go bankrupt?

The second, and again quite obvious interpretation of this information is to suggest that Trump is a massive tax avoiders,

They can’t both be true, obviously.

Trump could, of course, simply deny the claims in one very simple, and effective way: he could publish his tax returns.

Well, no, not really, not when the NYT is trying to claim both at the same time.

What was it they said about exams?

Ah, yes, make sure you read the question:

My review of procurement issues was as follows:

Private / public sector dynamics

Questions

Has the pandemic led to an increase in state funding to the public sector, or has it opened the way for further outsourcing to private sector companies
Are any changes in public sector procurement policy likely to be short-term (i.e. lasting for the duration of the pandemic) or long-term?
Answers

There is very widespread concern that the pandemic has led to a significant increase in state funding of the private sector

Dickie’s Celebrating Today!

It’s fascinating and welcome that India is refusing to take tax lying down now.

I’ve just noted their aggressive, and I think appropriate, response to Vodafone’s tax abuse, which they are tackling with retrospective legislation. This is a country that will no longer tolerate tax abuse via tax havens – and good for them.

Yes, Go India!

The Permanent Court of Arbitration at the Hague has finally ruled in favour of the telecom giant Vodafone in an investment treaty arbitration (ITA) dispute against India, initiated under the India-Netherlands Bilateral Investment Treaty (BIT).

This ruling marks the culmination of almost a decade long bitter tax dispute between India and the Vodafone Group.

Oh.

Vodafone argued that the imposition of tax claims through retrospective amendment, even when the final word had already been said by the Supreme Court, amounts to a violation of fair and equitable treatment (FET) promised under the India-Netherlands BIT. The India-Netherlands BIT in its Article 4.1 provides that the investors shall at all times be accorded fair and equitable treatment, which includes an obligation to ensure a stable and predictable regulatory environment.

In other words, when the Supreme Court has decided a dispute, it would be presumed that a matter has attained finality. However, circumventing the effect of the apex court’s judgment by resorting to retrospective legislation, certainly creates an unpredictable and unstable business environment. The Indian government just did that.

India now has to pay $5 million and change to Vodafone for legal bills. How much of that do we think Dickie and his chums at Tax Justice should contribute towards that?

We can, of course, look forward to more articles decrying ISDS and arbitration as they prevent governments from illegal actions.

But is he right here?

What Sunak did was something so typically British. He took a German idea and copied it, and got everything wrong in the process of doing so.

OK, Kurzarbeit etc. Subsidy to putting people on short working hours.

What might have been a good idea turns into a disaster as a consequence. The reality is that employers with people on the scheme will be required to pay them at least 66% more per hour than they would pay equivalent full-time employees, and that differential only get worse when the fact that the employer has to pay the national insurance and pension contributions on the government’s contribution to pay is taken into account. This is likely to increase the cost per hour by more than 80%.

Well, the German system includes that same payment of social security contributions. Which are – around and about – double in Germany what they are in the UK. So that’s not making a German idea worse.

It’s the other bit. I’ve not looked at the details here and am not going to. So, over to you. What does he mean that pay is going to be higher for short timers than full?

Idiot is, yes, idiot

It’s as if an economist had never heard of labour hoarding, or of recruitment and training costs. Indeed, had not heard of Ford and his $5 a day:

But this means wage cost per employee time worked has gone up by a third when the business is facing a massive downturn in its business and threat to its survival or it would not be thinking about doing this. Wage cost to the business is now £13,333.

So rationally, any business that knows this might last for at least six months, as the government says we should expect, will look at this scenario and sack half its employees and get the same work for much less cost.

In fact, any business facing this situation will probably have no choice but sack staff and nit use this scheme if it is to survive. That’s because any scheme like this is an invitation to make people redundant, and not a job retention scheme.

Let’s sincerely hope that Sunak does not deliver this CBI created idea.

It’s even as if a commentator on current politics and economics was unaware that this is the German scheme so praised by so many.

Hmmm, well

Tinkering at the edges of furlough will not prevent the unemployment crisis coming our way
….
Such a scheme does undoubtedly meet the government’s usual criteria of appearing to be doing something, whilst being largely ineffective.

The scheme being criticised by Snippa is an almost exact copy of what Germany has been doing. Something which is generally thought to have worked quite well…..

Well, of course Snippa was going to fall for this

As the International Consortium of Investigative Journalists reports this morning, the FinCEN Files that it has uncovered show trillions in tainted dollars flow freely through major banks around the world, swamping a broken money laundering enforcement system.

Well, no, that’s not what they did find.

What they got was a set of SARs – Suspicious Activity Reports. Which is what a bank fills out when it thinks there might be something going on. Note the think, might, there.

The government – FinCEN – then decides whether it is actually dodgy or not.

So, there’s blokes hanging around the back door of the 7/11. You think they’re up to nefarity. You call the cops who go talk to them. Maybe it’s nefarity, maybe it ain’t and it’s up to the cops to find out.

Snippa’s position here is that you calling the cops is both proof of nefarity and also that you’re doing it, you the person reporting it in to be checked upon.

As it happens an old mate actually works in this field.

It’s mad to say every SAR reflects a criminal transaction.

….
Filing a SAR is the equivalent of calling the cops, with the even lower bar that you don’t have to see a crime being committed, just something unusual you don’t see a good explanation for. The cops take it from there.

Snippa is trying to use the records of the reporting system to prove that there is no reporting system.

‘Ee’s mad, of course.

Another amusement

A ranking of how influential we all are:

Richard Murphy
1958 – Present (62 years)

#423442 Person’s Overall Influence
Richard Murphy is a British chartered accountant and political economist who campaigns on issues of tax avoidance and tax evasion.

How interesting. And:

Tim Worstall
1963 – Present (57 years)

#39871 Person’s Overall Influence
Tim Worstall is a British-born writer and blogger and Senior Fellow of the Adam Smith Institute.

Which is the point at which we have to explain orders of magnitude, no?

And as an amusement

“Hi Richard,

I hadn’t looked up Tim Worstall for a long, long time until today. Now I wish I hadn’t. The comments on Brexit-related posts are appalling. Not merely ideological but racist. Anyone who shows the smallest hint of trying to understand an issue in the round is immediately jumped on. Clearly, it’s not the unhinged on social media we need to be worried about, but stuff like this. And no moderation whatsoever from Worstall.“

Called free speech. I recommend it.

Even an accountant should understand this

As the FT has reported this morning:

Starbucks’ European division paid $175m in dividends to its US parent company last year, despite recording a 99 per cent fall in pre-tax profit as it spent heavily on developing more takeaway and drive-through services.

The company revealed in the latest accounts for its UK and European business that pre-tax profit fell from $99.5m in 2018, to $600,000 in 2019, as it incurred costs restructuring its operations, closing underperforming stores and investing in new formats. Its UK subsidiary reported a loss of £6.6m because of “difficult conditions on the UK high street”, it said.

And as I noted in the same article:

“What these accounts tell us is that there is still remarkably little [we know] about how Starbucks is making profits,” said economist and tax campaigner Richard Murphy. He said that while there was no evidence of tax avoidance there was a “strong tax motivation” in the way Starbucks managed its finances. He suggested the company publish “country by country accounts”.

Well, it isn’t making profits, is it? It’s right there, the UK is making a loss, Europe is just about scraping even.

The $175 million comes from past profits, not current ones….