Ragging on Ritchie

Can you say the phrase “Your bed, you lie in it”?

First, this change in the law slipped through Parliament without any effective scrutiny, or warning, in December as part of the Internal Markets Bill, on which the attention was elsewhere, for good reason.

Second, the complaint made by overseas traders is entirely fair. The requirement that they be registered for UK VAT to make a single sale to the UK is absurd, not least when the UK’s VAT registration limit is £85,000. Not only does this smack of an unlevel playing field, it is administratively absurd. A business could, if this arrangement was replicated around the world, be registered in well over 150 countries and have to do VAT returns for each once a quarter. That is clearly impossible. It is the UK’s job to collect its tax owing, and not that of those who might wish to sell to us. It is entirely reasonable that companies are now refusing to sell to the UK.

Back that year or three the P³ was telling us that it was disgusting that folks selling on Amazon didn’t have to register for VAT. This was an outrage that must be stopped. Something Must Be Done!

Now that something has been done, as demanded, he’s agin’ it.

Can you say the phrase “Echo Chamber?”

I actually welcome disagreement. One reason I have invested considerable effort in the comments section of the blog is that I always wanted to make this blog a safe space for discussion for those who wished to debate differing views on issues of real concern without being trolled by the usual, predictable, and often rather nasty, right wingers from the neoliberal echo-chamber. That has, by and large, worked,

Oh, right

There is, however, no vaccine for climate change. Nor will there be. There is only a need for changed behaviour, a massively changed economy and a new structuring of how we manage our priorities and Iives, all of which will take time to achieve, which is why the process should be starting now.

But that process is not starting now,

Quite correct, it’s not starting now. It’s been going on for a couple of decades now in fact:

But, you know, trying to teach facts to a potato is difficult.

There are people who know these decisions are required. And there are people who know what needs to be done. But there is an obstacle, and it is the politics of populism, now afflicting both the largest UK political parties, neither of whom now seem capable of delivering any form of effective political leadership.

That sounds terribly like someone shouting that the people should just shut up and do what they’re damn well told, doesn’t it?

Cometh the hour, cometh the man

Richard Murphy says:
January 5 2021 at 10:14 am
Corbyn was not a suitable leader for Labour – he was utterly hopeless – and I saw him close up

John McDonnell was a straightforward austerian

Nor is Starmer suitable

but the question is then no who the right leader is,

It’ll take a moment as SuperKartoffel is looking for a telephone booth but fear not……

Sweet Jesu Goddam Almighty

Doesn’t the man understand anything?

Growth

Low. Maybe one or two percent at most, with a real risk it could be negative. It will almost certainly be behind every other major economy because of Covid mismanagement and Brexit. On this conventional criteria it will be a bad year.

Why has British GDP performance been so much worse than other places? Partly, at least, because the ONS has actually been measuring performance correctly, even if differently. The fall in education delivered, for example, has been taken as a fall in GDP. This is logical but unusual. Normally government provided services are valued at their cost of provision, not value of output. So, other places with closed schools (and this isn’t the only part that ONS has been doing it to) have not recorded a fall in GDP as a result. But the UK has.

OK. This being something that is well known. Among those paying attention at least.

So, what does this mean about the relative UK performance as we all open up again? Yes, that’s right, the UK will outperform. Because for us opening up schools – ‘n’ other stuff – will be counted, directly, as an increase in GDP and it won’t be in other places.

It’s built into the very method of counting that the UK will outperform on GDP growth. And someone who wanted to say that the Tory Bastards never get anything right would be getting his excuses in now. If, that is, he knew anything about GDP accounting.

You will holiday in Blackpool Comrade. And like it

This will not, of course apply to the Dachau appreciating classes. But for the oiks it’ll be just and righteous:

Jim Round says:
January 3 2021 at 3:12 pm
I was travelling through Blackpool before Christmas due to work and whilst in the area I thought about what could help an economy that is seasonal, dependant on the British weather and also, according to various sources, has a decline in permanent population and mental health plus several other major issues.
More “secure” employment is usually found going down the M55 in the opposite direction. (Preston)
The likes of Fleetwood once relied considerably on fishing (Cod Heads)
Lytham and St Anne’s has an “older” demographic.
There are some decent older homes around the area, although I saw little room for GSHP’s or ASHP’s (this is something that needs much further investigation into wether it is practical)
How do you mitigate the fact that you can get better value (and weather) by holidaying abroad (which means air travel)
There are several other coastal communities with similar issues.
I think that more than a green new deal is needed here.
“Maybe the SNP? And they’re going.”
Where are they going?

Reply
Richard Murphy says:
January 3 2021 at 6:10 pm
We need to increase the cost of air travel.

It really is remarkably simple….

Believing both is difficult

What that means is that what we need now is an industrial strategy, which is something no UK government has had for decades. Money has to be spent, wisely. This is, of course, why we need a Green New Deal and a national investment bank to direct it, including by taking stakes in companies.

There’s a certain handwaving assumption there, that government direction of investment will mean money being spent wisely. You know, HST 2 and all that. Even, as the P³ himself says:

The government has shown no more awareness of this economic consequence of coronavirus, and the long term impact it will have, than it has of the epidemic itself. It has randomly bunged money (no other term is appropriate), without reason, and with indifference to consequence,

So, err, more government direction of investment solves this problem how?

Pariahs, scumdogs!

It would appear that the creation of Singapore-on-Thames is now the intention of the government. The UK clearly wishes to become an even bigger tax haven than it already is, and a pariah state on the world stage.

‘Ee’s right you know. Talk of the bierkeller, no tea seller outside Mumbai train station talks of anything else. Those Brits, pariahs because they’ve not enacted Ritchie’s tax ideas.

Those in Singapore are wondering too. “So, Ashad, we’re richer than they are, yes?” “I believe you’re right MeiMei.” “And we’ve got a better health care system than they do?” “We do, and it’s vastly cheaper.” “We’re growing faster are we?” “We are.” “We’ve sorted out the housing problem?” “We have and they haven’t.” “So, why wouldn’t they want to become Singapore on Thames?” “It violates the principles of Elynomics.” “Ah, well, yes, that does explain it.”

This is very bad news indeed for tax justice, the cause of beating global tax competition that is dedicated to undermining the right of the democratic state to tax,

Well, he’s got one bit right. Tax competition is indeed aimed at reducing the ability to tax. Monopolies are always damaging and a monopoly of taxation right around the world would be one of the more damaging ones too. Precisely because it would not be possible to vote with ones’ feet.

Fascinating

The need to maintain economic discipline in a changed environment, and to tackle rising inequality will, in any case, demand this.

OK, so inequality will be rising, will it?

First, Covid, plus Brexit will mean very limited, if any economic recovery in the year. The OBR suggested that growth might be 5% or so assuming no Covid second wave. That now looks to be fanciful. Presuming we are in lockdown for several months from mid January onwards, as Covid deaths exceed 1,000 a day, the likelihood of any recovery is remote. Brexit simply adds to the likelihood.

The recession will continue, perhaps get worse.

Believing both is fascinating. Because inequality falls in recessions. The richer among us gain more of their incomes from profit than the poorer. Profits fall faster and further than any other component of national income in a recession.

This is why inequality is today – by the Gini, 90/10, 80/20 and so on measures – is lower than it was in 2008.

But then this is the man with three economic professorships declaiming on the subject of economics.

It only took him three lines

Stump thinking normally spreads itself out over days. Here it’s only taken three lines:

I want a Return to the time when monopoly was rightly mistrusted, because it always exploits.

I want a Return to the time when professions had ethics.

I want a Return to a National Health Service.

We should have a monopoly health service because monopoly always exploits.

Well, OK, if this is true, then……

And as is also clear, whilst the 1866 Act says that all government revenues shall be paid into this account, nothing says there must be a balance held on it to permit this payment instruction to be enacted: it can happen, come what may, even if the overdrawn balance on it is growing. So an overdraft is legislated for here, and authorised by law, come what may.

So, UK law has already enacted MMT.

If we’ve already been doing this for a century and a half then why is it that things ain’t perfect?

Further, if we’ve already been doing this for a century and a half isn’t that a useful proof of the contention that MMT causes inflation? Because the last century and a half is when the UK has had sustained inflation rather than switching from inflation to deflation and back again……

Well, yes, obviously

They raise a number of concerns. In particular, that whilst steps to block companies from the supply chain if they do not have identifiable beneficial ownership are welcome, they then note that:

the clauses on toughening up the exclusion of businesses displaying poor tax conduct are weak in the extreme. Nothing at all on tax avoiders.

Tax avoidance is, by definition, legal. Why should someone be barred from supplying government if they are, by definition, obeying the law?

What, exactly, is not required?

Richard Murphy says:
December 16 2020 at 9:54 am
It could be

But most of all, we transform the rules on advertising

An economy that requires people to go into debt for things they do not need because of the power of advertising is one with a deeply flawed economic model

Which of those things are not required.

Further, who gets to say what is required and what is not?

Also worth noting that the government itself is usually the leading single advertiser…..

We’ll see, eh?

Because of the way the ONS does its stats, which seriously benefits the government at present, the true scale of this crisis is not apparent as yet. But for those thinking 2021 is going to be a bonanza, think again. It won’t be.

The reason for saying that is straightforward. When people fear redundancy they do not spend. Many in the private sector will have that fear. And Sunak is already offering austerity. Job cuts in the state sector will follow. No one turns on the spending taps in that scenario.

We are in trouble. And it can only get worse.

Well, OK, maybe:

In September 2020, retail sales volumes increased by 1.5% from August. This was the fifth consecutive month of growth in the industry from May to September 2020, resulting in an increase of 5.5% in volume sales when compared with the pre-pandemic levels in February 2020.

That rarity from Spud, a testable proposition.

Your over and under on retail sales growth/shrinkage for 2021 over 2019 then?

An interesting MMT test

No deal Brexit will cause the £ to fall. OK, change in terms of trade, change in value of currency, obvious. But it’s a nice test for MMT:

Consultant Capital Economics suggests an even bigger drop to $1.15 against the dollar and below parity against the euro. Capital says the Consumer Prices Index (CPI) might hit 3.5pc next year, the highest since George Osborne’s austerity VAT hike pushed up prices in 2011.

We get inflation. At which point Snippa tells us we have to curb new money creation – and thus spending – and raise taxes. But this will be at a time of rising unemployment and spare capacity in the economy. Which is when we shouldn’t curb spending nor raise taxes.

That is, we’ve a test of the MMT contention, that we can control the money supply, inflation and the FX rate all at the same time through the same instruments. We can’t, of course. There ain’t no economic philosophers’ stone.

Amazingly, some people have thought about this

Third, as I have said for a long time, this is the wrong approach. Companies worth saving do not need loans now. They need equity. That is what the government should be supplying. Take stakes of not less than 25.1% to have some control. Appoint directors, including one from the workforce. Require real business plans, and monitoring. Hold the stakes in a National Wealth Service. Build for the future, and give the votes of confidence that equity provides rather than the kisses of death that extra debt burdens create in the corporate sector.

The trouble is, of course, that the Tories and the Treasury are a lethal combination. Neither understand business. And it’s showing.

Government ownership – and direction, that’s what the 25.1% is for – of swathes of the economy has been shown not to work well.

Which is why people don’t want to do it.

Of course, there’s another criticism of the idea possible. Snippa insists that neither the Tories nor the Treasury understand business. Yet he wants the Tories and the Treasury – for it will be them for a few years at least – to be directing all those businesses. Not going to work out well, is it?

Economics in no lessons

Let’s start at the very beginning. A person goes into a bank and asks for a £1,000 loan. The bank checks them out, and agrees. And that is all that it takes to create new money. Money is just a promise to pay. That simple exchange of promises is all it takes to create it.

No, that’s credit. OK, so, we can call that money if we like. But it’s broad money. M3 or M4 money. This is important. It’s not the same as central bank money, which is narrow, base or M0 money. The big difference is that wide money is the MV and narrow the M in the money equation – MV=PQ. This is important.

Tax is what gives the pound its value. If the government could just create money without limit it would soon be worthless. But it does not do that. Tax ensures that the government can control the amount of money in the economy.

Nope, we’ve just agreed that a bank can create that wide or M3 money. Therefore the government does not control it. Influence, sure, but not control. Further, it is not tax power that gives money its value. We have monies that are not taxed – bitcoin say. It’s not a very good money and all that but it has value. Further, we have monies that have no value despite taxing power existing. Z$ for example. So, again, we find ourselves in a world where taxation can influence the value of a money but cannot be the full and total determinant of said value.

We’re not in SnippaWorld, where influences are total reality.

And there is. We could have a government promise full employment. It could create the jobs we need. It could force up the minimum wage by guaranteeing local work for anyone who wanted it. And we could improve benefits too. All using government made money. Not tax.

But would there be inflation then? Not if we then taxed enough and cut spending a bit. But people at work in good jobs do pay more tax. And they claim fewer benefits. So that condition is easy to meet. And if we still needed more tax? Well, we could do that, if needed.

The difference between this and the old tax a lot first then spend the money is what? We still end up in a high tax, high government spending, world, don’t we?

Eleventh, inflation is not now controlled by interest rates – because we don’t want them to rise. It’s going to be controlled by tax. I admit, right now no one has an ideal tax to achieve this goal. I am working on it. It is possible. And it’s progressive, and so fair.

Snigger.

The underlying problem here is that Snippa is just sure that he’s found the Philosopher’s Stone of economics. Government can control interest rates, the quantity of money, the inflation rate and the FX rate all at the same time. With the one instrument.

Naaah, ain’t gonna happen.