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Ragging on Ritchie

If people have alternatives then…..

….it’s not possible to impose the monopoly vision upon them, is it?

The focus of most tax authorities was on the scale of the tax losses that they might generate, but in terms of their political economic impact, their consequence was much bigger. John Christensen and I suggested, right from the beginning of the time that we worked together in 2003, that the real function of tax havens was to act as the launchpad for an assault on democracy.

The underlying logic of this claim has always been quite straightforward. Those who hate representative government subscribe to the simple logic that if only they can starve democracies of the revenue that they require to fulfil their mandates then they can undermine the whole social contract that is the foundation of the democratic promise created by the universal electoral suffrage that has only really been commonplace from the 1930s onwards. Tax havens are a way to deny them that revenue.

That you call the monopoly vision democracy doesn’t change that it is a monopoly vision. Which is why choices must be denied, of course.

Oh Dear

What she really means is that the wealthy are immune from the pressure that higher interest rates impose on the rest of the population, and even gain from them, and as a result of their considerable, and relatively excessive, spending power within the economy inflation is continuing at above 2% and there is no real prospect of that changing.

The consequence is that she admitted that the single tool that she claimed was available to the Bank of England to control inflation – which she said is the interest rate, whilst conveniently ignoring both quantitative easing and the massive current quantitative tightening programme – is not able to bring the rate of inflation down at present because the richest in the UK are insisting on continuing to spend. This is despite the massive economic pressure being brought to bear on those with lower incomes, either from downward pressure on wages, which the Bank of England is heavily promoting, or from increased interest rates.

You would think, as a result, that Mann would realise that keeping interest rates high was a futile exercise. Far from it, though: she is still an advocate for raising them.

What is not hinted at in the reports of what she said are any indications that she thought that other tools might be brought into use to tackle this issue. Raising taxes on the wealthy would, of course, be one way to address this issue. That is glaringly obviously necessary, given the problem she outlines. I am sure it was not said.

The wealthy do not consume all their income. Therefore changes in interest rates do not change their consumption habits – they can dissave if required.

Raising taxes upon hte wealthy in order to reduce inflationary pressure does not work. For the wealthy do not consume all their income, have savings, and can therefore dissave to maintain their consumption.

Well, logically, yes

The Tories are an anti-Muslim mob

What do you expect with a Hindoo as party leader?

Just for the hard of thinking. This is a very cheap shot at an obvious point. It is not a reflection of my views on anything at all. Other than that Professor Richard J Murphy is known to offer up all sorts of opportunities for very cheap shots.

Interesting claim

What puzzles and depresses me is the claim on the one hand that we are the most highly taxed we’ve been in a generation, yet all public services seem to be going down the pan for lack of funding. Can anyone explain to me how this can be?

That is, it has to be said, an excellent question. Thankfully, it is not too difficult to provide an explanation.

The UK government has since 2010 sought to reduce its overall level of expenditure. As is obvious from the above equation, GDP must have been reduced as a result.

Since government spending does,inevitably, become someone else’s income, because contrary to the impression most politicians present it is not money poured into a black hole, consumption (C) is also reduced by cuts in government spending.

Governments since 2010 have also sought to reduce the level of benefits and other payments made by it, reducing the capacity for consumption as a consequence.

Tax is high because government hasn’t been taxing enough.

My Word. Really?

Then there is this in the FT:

A lack of available loans from traditional UK lenders is pushing vulnerable consumers towards unregulated credit products as they struggle financially in the cost of living crisis, according to a study.

The UK nonprime lending market — which offers loans to riskier customers with average to low credit scores — has shrunk by more than a third since 2019.

In contrast, unsecured loans from unregulated lenders, such as those offering buy now, pay later (BNPL) products, have jumped in recent years, according to research from credit-checking platform ClearScore and consultancy EY.

The result is that the most vulnerable people in the UK who need to borrow to meet unexpected costs because they have little, or usually no, savings are being forced into the highest cost, most abusive, arrangements.

You mean that closing down, through price regulation and caps, the regulated lending industry like Wonga, Amigo and Morses, wasn’t, in fact, all that good an idea?

My word, that is a surprise.

Anyone with a memory?

Richard Murphy says:
February 26 2024 at 6:26 pm
This is fiscal drag at work

A Sunak production

Back two decades I – along with other neoliberals – insisted that the personal allowance should rise, substantially, to makeup for the fiscal drag of previous decades. We won.

The biggest opposition came from Murphy and the likes who insisted that richer people gained the greater amount of tax relief from reversing fiscal drag. So therefore don’t do it.

I really do despise those who change their tune dependent upon what is opportune.

Shouldn’t an accountant have a grasp of numbers?

Investment advisers Hargreaves Lansdown issued a press release this morning saying:

Debts cost an average of £406 a month – as arrears mount

The average household spends £406 on monthly debt repayments, excluding the mortgage. Those with mortgages spend an average of £814 on top of this.

Almost one in ten households (9%) are in arrears. Among the lowest fifth of earners this rises to 27%.

One in five people are concerned about their debt position.

Credit card debt is up 12.7% in a year to £68.9 billion and other consumer debt (including loans, overdrafts and car finance) is up 6.7% to £150.4 billion (Bank of England).

The arrears data worries me, as does the increase in credit. But so too does the bigger picture.

There are about 27 million households in the UK. Around £132 billion is being paid by those households a month to service debt interest, exclusion mortgage costs. That is a staggering upward annual redistribution of wealth. And you wonder why I want interest rates to be as low as possible? That’s the reason why. Those without wealth are being exploited by those with it, and that is a recipe for an unstable society, which is exactly where we are heading.

Umm, if households are paying £132 billion a month then those debts are going to be paid off in about 6 weeks. And if the debt burden is 6 weeks of repayments then the debt burden isn’t, not really, something of any great import.

Oh, and of course, the HL numbers are “debt repayment” not interest on debt.

But then I guess the move from accountant to political economist means you don’t have to pay attention to actual numbers any more. Or even reality.

A word doesn’t fit here

I had discussions with other economists yesterday

Can anyone guess which one it is?

To cap it:

Not only are we not at full employment because there are plenty of people who would like work who do not currently have it, but in making his claim he is ignoring the vast misallocation of labour resources within the economy that we have. There are doctors, nurses, teachers, social workers, and many others who would love to pursue their chosen professions, but because of the denial of resources by the government cannot face the quite literal life-threatening stress upon them from seeking to do so. Those with these skills are working on other tasks within the economy or are simply not working at all, not because the market indicates that it is desirable, but precisely because government policy has denied them the opportunity to deliver what society needs in ways that are humanly possible. No amount of pretence that the market can overcome such a policy failure can disguise this very obvious issue.

Vast underused resources of doctors and nurses in a country which seems to import half of those it does use.

Errm?

He never does check his proclamations against reality, does he?

Sigh

The result could be a complete electoral mess, with many candidates being returned in our first-past-the-post system with remarkably small proportions of the overall vote, discrediting the election as a whole as a consequence.

This is the guy who touts PR recall. Which produces winners of seats with even lower portions of the vote.

Sigh

Core CPI (excluding energy, food, alcohol and tobacco) rose by 5.1% in the 12 months to December 2023, the same rate as in November;
….
The rise in tobacco prices is still related to a change in the law deliberately pushing prices up. Everything else nets out to zero. And no one expected another significant fall in inflation until the energy price cap falls in a couple of months’ time.

The media will be all over this saying the battle on inflation has not been won as yet and that catch up wage rises are threatening a wagwe price spiral. All of that is nonsense. By mid-year inflation will be near 2%. That will be hard to avoid now. Eberything else in the media omn this issue is just fodder to let the Bank of England keep interest rates high.

Core CPI is the policy relevant inflation rate, not CPI.

‘T’is to Larff

Spud tells us that if households save more, government saves more (or borrows less), business doesn’t invest more, then foreigners must dissave from the UK.

OK.

This would also mean the disappearance of the trade deficit, the bit Spud doesn’t note.

This would also, apparently, be a disaster. At which point, Spud in his own words:

Think tanks are very good at suggesting that governments should do joined-up thinking. It looks to me as though the Resolution Foundation might need to do the same. It might also need to sharpen up its understanding of macroeconomics. It might be a little more credible if it did so.

Ho Hum.

This is the necessary consequence of the infallible logic implicit within double-entry bookkeeping, which is that every action has a reaction

Double entry also applies to trade deficits and capital surpluses, see?

Oh, well done!

Spud misses the error that the Resolution Foundation commits:

The Resolution Foundation published a report this morning which suggests that at least 30% of UK households have savings of less than £1,000 and are, therefore, unable to manage many of the cash-flow risks that are a normal part of life as a consequence of unexpected events.

You do not need to have £1k in cash savings to be able to manage cash flow risks. You need to be able to have access to £1k in order to be able to manage cashflow risks.

These are not the same thing. In a country with a banking and credit system the requirement is that you be able to go get £1k if you need it – by, say, borrowing it.

The very existence of a credit system means all require lower amounts of cash savings.

What fresh hell is this?

In the process of doing so they entirely missed the point that without deposits, a bank has no meaning. Holding deposits is it essential purpose.

Two weeks back we were being told that banks don’t even need deposits. Now they’re the very purpose of them?

The name for something that simply holds deposits is “a safe”.

Both resonate with me. I will never be the world’s greatest theoretician. I might not even be an outstanding theoretician. But I think I hear the music of political economy, without the need for any ‘ism’ but pragmatism, tinged with empathy. The condition of the person dismissed too often as ‘ordinary’ is what matters to me, and not the promotion of any ideology.

He’s now declaring himself to be the Mozart of political economy. Ho Hum.

Err, really?

We would never describe deposits with a bank as a threat to its viability and something that they must urgently pay back or limit in amount. So, in that case, why on earth are we saying that about this national savings bank?

Isn’t, umm, that the definition of whether a bank is bust or not? That it can, or cannot, pay back the deposits? That is, this is the very thing we do worry about with banks?

That’s only because we know that, like all savings accounts, the person depositing the money can at some time ask for it back. But we don’t say banks are in debt because they also owe the money saved with them back to depositors. So why do we do that in the case of governments?

Actually, we do, yes. Deposits are liabilities on bank balance sheets. They’re what the bank owes to other people. This is the basic point of double entry bookkeeping for banks.

To put it another way, almost everything politicians say about the economy is made up of convenient myths that they create that have not a single element of truth within them.

Snigger. Physician, heal thyself.

I believes in free speech I does, open conversation and discussion

You now need to pre-register to be allowed into the troll banning system:

There is, however, in all this a problem for any new commentator who has a genuine desire to post a serious comment on the blog. If you wish to warn me of your intent to do so, please do get in touch. My contact details are on the blog. Tell me who you are, what email address you will be using and give me some serious evidence that you are a real human being. You can still use a short name to post if you wish, but please tell me what that is as well. That will increase the probability of your post getting on.

But be warned that I am well aware that some trolls try to appear to be reasonable people for three or four comments and then reveal their true selves. Anyone playing that game will end up being treated as spam just as much as those who reveal themselves on their first posting end up being treated that way.

Ho Hum.

I do, very much, like this:

The trend is, however, significant and exposes the hypocrisy inherent in what many of these commentators like to claim, which is that my work is completely irrelevant. If it was, they would not be commenting in such numbers.

People disagreeing with me shows that I’m right! And, AND, important!

Just a thought

Yes, of course, new speshul rules would be an outrage.

Sue Gray, the senior civil servant who now works as an adviser to Sir Keir, had a pension worth £1.9m as of March 31 last year, according to government accounts.

Meanwhile, Nick Joicey, a senior civil servant and husband of the shadow chancellor Rachel Reeves, had a pension approaching the old limit, worth £967,000, as of March 31 2022.

However, something different. You know how Spud says that pensions tax relief is in fact a tax subsidy, a break?

Under the old rules, any savings over the limit were taxed at 55pc if the money was taken as a lump sum, or 25pc plus the individual’s income tax rate if taken out gradually.

Richer people actually end up paying more tax by having a large pension. Over time they do at lesat. So that’s even more proof that pensions relief isn’t, in fact, a cdost at all. It’s a deferral – leading to higher, over time, tax revenues.

Which rather blows a hole in Spud’s complaint really.

Spudnomics II

This means that, in total, the Taxing Wealth Report 2024 now suggests that more than £200 billion per annum could be released into the economy as a consequence of relatively easy-to-deliver tax forms that would result in a much fairer UK taxation system.

Spud thinks that moving money around creates more money. Cute thought, no?

Spudnomics

And, let’s be clear, that abandoning this proposal is economically illiterate, as I suggested in the Guardian a few days ago. Not only would this plan pay for itself out of the economic multiplier effects that it would generate, which would give rise to significant further private sector investment and private spending, and so tax paid,

Apparently government spending has a high multiplier when the economy is already at full employment.

This is not one of those insistences empirically supported.

Piddling little matter

As the Guardian reports this morning:

Protesters who wear masks could face arrest, up to a month in jail and a £1,000 fine under proposed measures that human rights campaigners claim are pandering to “culture war nonsense”.

The Guardian adds:

Demonstrators will no longer be able to use the right to protest as a reasonable excuse if they commit public order offences such as serious disruption.

A change in the law. Maybe a good one, maybe a bad one, but a change in the law all the same.

When do we admit that we live in a state where the rule of law no longer applies?

This is the rule of law, obviously.