Ragging on Ritchie


Wealth and income are different, but flows (I.e. increase) in wealth are absolutely economically equivalent. Try spotting the difference when both end up in the same bank account: you can’t

An increase in wealth is not economically equivalent to an increase in income. For by definition income is a receipt. A change in wealth may be a receipt – if you cash in – but it could be simply a change in valuation. And thus something that doesn’t arrive in a bank account because it has not been cashed in.

And, amazingly, we do have a tax system which taxes increases in wealth which have been cashed in. What we do not have is what The Tuberousness is suggesting, one which taxes wealth not cashed in, that economically different thing.

This is a new meaning of the word “expert”

Wealth tax rise could raise £174bn to tackle Covid-19, expert says

Which expert is that?

UK taxes should be central to debate on paying for pandemic, suggests Richard Murphy


The government has the potential to raise up to £174bn a year to help cope with the Covid-19 crisis if it taxed wealth at the same rate as income, a UK tax expert has said.

Aha. Actually, Ahahahahahaha.

Taxing wealth at 45% annually ain’t gonna work you know.

Richard Murphy, a professor in political economy at City University in London, said income was being taxed at almost 10 times the rate of wealth – and that the disparity should be central to any debate about who should pay for the pandemic.

Well one is a stock, the other a flow. So, yes, different tax rates are about right, justified, certainly.

In an analysis of the period from 2011 to 2018, Murphy said income had been taxed on average at 29.4% while wealth – generated mostly from rising house prices and the increased value of personal pensions – had been taxed at 3.4%.

I never know with Larry Elliott. At times I think he actually writes down what Murphy says, without correcting for the obvious errors, just so that people can see how ridiculous the claims are.

“This has massive implications for the forthcoming debate on who, if anyone, should pay for the coronavirus crisis. What is clear is that the only fair answer will be that those on the highest incomes, and those with wealth, are the only people who could afford to pick up that bill. If anything, everyone else needs a tax cut just to help them survive. Any politician with any concern for tax justice will have to understand this.”

A Richard Murphy

But tax doesn’t pay for government spending. Or is this Thursday, so it does?

Anyone know how to do video editing?

In this video here:


Apparently we get this:


If you have the stamina to listen for only a few mins, that is all it takes for Murphy to volunteer, gratuitously, that he is at the moment a professor at 3 universities, in different subjects.

I think that might be a handy cut out and keep quote if someone can edit down to just that specific 15 seconds or whatever it is…..

An interesting prediction

In the long term, I cannot see coronavirus and the reaction to it creating inflation.

Production is down. Budget deficit – which is stimulatory – is up. To the extent that QE is paying for the deficit the narrow money supply is up.

This will not cause inflation.


The peeps do not agree

I think we can all agree here. Tories do not tax according to social justice – not the definition usually used of social justice at least.

We also have an actual fact here. The Tories won the last election. Gained the plurality of votes necessary to do so.

A tax system is based upon mutual trust. An electorate has to believe that its government will impose appropriate taxes and then administer them not just legally but in accordance with the principles of social justice.

Therefore that’s bollocks, isn’t it? A plurality of the population doesn’t agree because they voted for the Bastard Tories and against taxation based upon social justice.

A government has to trust that its electorate (and those, like companies, who owe tax even though they rightly have no vote) will pay in accordance with the spirit as well as the letter of the law of the country.

And that is petitio principii. El Tuberoso wants to insist that all should obey the spirit of tax law – except himself in those well documented instances. The British system disagrees, it states that people must obey the law as it is written.

ZIL Lanes

We know how this works, don’t we?

Andrew Dickie drew my attention to this Dutch manifesto for the After Coronavirus era:


4) Reduction of consumption and travel, with a radical decrease in luxurious and wasteful forms, towards necessary, sustainable and meaningful forms of consumption and travel.

ZIL Lanes for Sages from Ely, innit?

Hands up who thinks it might work this way?

Right now the UK government has, through its own negligence, decided to put the lives of doctors and other medical staff at risk by not supplying them with the PPE that they need.

And what the means is that not only are doctors putting their own lives ta risk – which we should not be asking them to do – but that they are also putting the lives of all those they move between in hospitals at risk, and that they are also putting their families and others that they meet in the community (and yes, the go shopping like the rest of us, where they will meet people) at risk as well.

A point will be reached – and I suspect it will be very soon – where doctors will say that the balance of those risks has shifted and that it would better for them not to work than to do so. The overall risk to society will be reduced by them not seeing patients in hospital.

This is before we start to consider such thoughts as, well, doesn’t each hospital have a team of purchasing managers? And why didn’t they buy PPE? And if it is true that it is Ministers who should have been doing that then don;t we get to fire all the purchasing managers as not being needed?


How many universities will make it to 2021? The answer is many won’t, and those that do will struggle to reach 2022

Given that we need fewer universities this is a good thing.

It’s amazing how little he grasps

Governments were very keen on monetary policy from about 1980 onwards, but in the last decade in very many countries in the world interest rates that governments can influence have been very low, and that means the policy is now largely ineffective in many jurisdictions.

No, speed and acceleration.

It means that further lowering of interest rates isn’t going to be all that effective at doing something. But if you think that monetary policy is currently ineffective just think of the alternative. What would a reversion to 5% real interest rates do to the economy? Hmm? Ah, so monetary policy is currently effective then, isn’t it?

As I said a decade back

In my opinion this adds an important distinction to MMT. It is that not all debt is equal.

It follows that not all money is equal.

And that not all QE is equal either.

The latter I have known for a long time. It was the whole basis for my argument for People’s (or Green) QE back in 2010. The point I made then was that the behavioural, social and economic consequence of injecting money into the economy via banks was always going to be very different to apparently undertaking the same process through a state investment bank that invested in the real or productive economy. Hudson et al have now explained this in most convincing fashion.

Yes, quite so. Which is why we did QE the way we did rather than printing hundreds of billions in money and spending it directly into the real economy.

The inflationary effect depends upon the V part in MV=PQ of course.

The net effect of the difference between types of QE being that you can indeed print and spend directly on real things. But only in extreme moderation.

Print hundreds of billions and you’ve got to play those games with interest rates. Go spend that amount directly and you’re created a firestorm of inflation. Because not all forms of QE are the same.

And the thing is, last time he made his point, a decade back, I made this one too.

This is actually from an accountant

No, amazingly, not that accountant.

How can small businesses regain their feet during the present COVID-19 crisis?

Bob’s suggested answer was:

I would offer: try marginal pricing.

Turnover is comprised of direct costs, fixed costs and profit(loss). At the very least businesses could exclude the profit element from their prices to make a contribution. A widget sold for £100 (pre-covid19) with a direct cost of £30, fixed costs recovery of £30 and profit of £40, could be sold for £60 and the financial position of the company in the short-term would be unaffected?

Rather missing that gross profit and profit are different things, no?

Tee Hee

The Telegraph needs to pick its tax experts with care

I readily admit I did not see who the noted experts were: I won’t pay for the Telegraph.

But let me assure them and their readers that the experts in question are not experts at all on this issue.

I suggest that the Telegraph cannot spot expertise on this issue. Those asked were clearly not in that category, whoever they were.

The Telegraph does know where Ely is, does it?

No it doesn’t

Although most economic theory suggests that markets should distribute both income and wealth fairly within a society,

Most economic theory doesn’t say that at all. It says they will be distributed efficiently. And also that often enough efficiency and equity will be in conflict.

There are good economic reasons why this is the case. With regard to income it is because the spending patterns of those with different levels of income vary considerably. For example, those on very low incomes tend to spend all of any additional income that they might earn precisely because they have unmet needs and wants. They also, very commonly, spend that additional income on consumption. This means that if they earn additional income it circulates back into the economy very quickly. They have what is called a high marginal propensity to consume.

In contrast, if the wealthiest in a society receive additional income they very often save it because they have few or no additional consumer spending that they need to undertake. They have a low marginal propensity to consume. Alternatively, if they do spend, they might buy items with either a long-term benefit, such as property, or items that reflect their social status e.g. artwork, antiques and other such items, which very often add very little overall value to the level of current economic activity in a country.

Which is to forget that a low marginal propensity to consume means a high one to save. Savings becoming the capital with which society builds the productive assets to increase future growth.

Jeez, doing economics without capital, eh?

The consequence is that countries with relatively low levels of income diversity tend to see overall higher levels of growth when compared to those with higher levels of income inequality.

And you know what? I’d really love to see that proven. No, not waved at as being obvious, but shown. Because I don’t believe it for a moment.

China, for example, is quite amazingly unequal but the growth rate is something to envy, no?

This is also true of countries with relatively low levels of wealth inequality. In this case this is because those with high levels of wealth tend to be very risk averse and overall do not invest in new risk-based or entrepreneurial activity: they do, instead, tends to invest in existing businesses, land and buildings or other stores of value which may suit their purpose of preserving existing wealth but which do not stimulate new economic activity in the economy as a whole.

Again, I’d love to see this shown. The US has fairly high levels of wealth inequality. The investment world over there is quite risk loving, isn’t it?

In contrast, those with lower levels of wealth tend to have greater risk appetites, and so are inclined to invest in new business activities that are more likely to encourage economic growth, new employment opportunities, and higher wages. Economies with lower levels of wealth diversity do, then, tend to have higher appetites for risk taking. As a result they also tend to have higher rates of growth.

It’s amazing how we can get more investment creating more wealth from the wealth distribution, but not more growth from greater savings from the income distribution, isn’t it? Seriously, he’s telling us that marginal propensity to spend – more of it – leads to growth, then talks about how investment – the savings that don’t happen – improve growth.

If a government does, then, wish to stimulate economic growth within its jurisdiction it is likely that it will wish to limit the diversity of incomes and wealth within that country to help stimulate this outcome, and by far the best way to do this is to use progressive taxation systems. A progressive tax is one that overall charges higher rates of tax on a person as their income or wealth rises.

A stunning answer, eh? The way to encourage people to risk and invest to make a fortune is to tax fortunes more heavily. Wouldn’t have thought of that answer myself you know.

And I’d really, really, love to know where that proof comes from.

Entirely true

If people could do the unthinkable to their economies to slow a pandemic, they could do the same to arrest catastrophic climate change

They – we – could. We could also take the example we have in front of us, the effect of it, and declare “Fuck that!”

Which is the way I would bet on it.

Which leads to what we really should be doing:

The coronavirus outbreak gives us a neat experiment in what happens when humans suddenly dramatically reduce both production and consumption. And, to put it mildly, most of us are not enjoying it one bit. That suggests that instead of the hair shirtery favoured by the Gretas of this world, our best solution is creating the technologies that allow us to keep consuming while also keeping the planet cool with our doing so.

and technological advance means more markets, more capitalism, more globalisation and, shock horror, less taxation.

Free speech is just so neoliberal

The Fitch ratings agency announced overnight that:

Fitch Downgrades Mexico to ‘BBB-‘; Outlook Stable

For those unfamiliar with rating agency nomenclature this means that Mexico’s debt is now just above what is called ‘junk’ status.

This is profoundly unhelpful. At a time when Mexico, like almost every Latin American country, is facing the challenge of coronavirus and a pile of US dollar debt over which it has almost no control as to cost, it is facing a rating agency saying that the cost of its debt servicing must basically increase through no fault at all of its own.

Well, no, it doesn’t actually say that. The cost of debt servicing is the coupon agreed at time of issuance. That’s not changed in the slightest.

The cost of borrowing more, that has risen, yes. But just because governments like to roll over their debt doesn’t mean that there’s not a difference between these two things.

This is argument that this can best be described as callous: Fitch is very clearly putting the interests of creditors above the lives of the people of Mexico.

It can also be described as profoundly unjust: developed country debtors will profit from the crisis at cost to a developing country.

It could be argued it represents a failed paradigm when governments are all that are now underpinning capitalism but are being downgraded in the interests of rentier capitalists, nonetheless.

But most it could just be called wrong. It is a symbol of all that is profoundly misguided, amoral and exploitative in the world of financial capitalism.

I suggest that the rating agencies be subject to enforced silence on government debt right now.

Or as this should be translated – I don’t like what people are saying so we must ban them from saying it. For that free speech thing is just so neoliberal, isn’t it?

He actually believes this shit

There is a very particular reason for this: unless a government of this particular sort that is actually responsible for creating the money that is in use in its jurisdiction first actually spends its currency into the economy by, for example, buying goods and services from people and businesses within it, then those people and businesses would not have the currency that they would need to pay the tax that is owing in that same currency.

This rather jars with the other insistence, that 97% of money is created as a bookkeeping exercise by banks.

The two cannot both be true. Either governments create all money in existence in which case, sure, government must create money before money can be used to pay tax, or governments don’t create all money, banks create a lot of it, in which case government money creation is not required for the payment of tax.

Single stump thinking.

And guess what:

Critically, the books of a government that is in this situation of having its own currency do not need to be balanced: instead the objective of a government in this situation is to run whatever deficits or surpluses are necessary to control the level of inflation which is arising within that economy, taking into consideration any desired inflation rate that they might decide upon. So, for example, if they have a desired inflation rate of 2% and the actual rate is 4% per annum then they will want to slow down the rate of growth in the economy, and will as a result wish to run a government financial surplus, or in other words, collect more cash in tax than they actually spend in cash terms during the course of the period. This has the net effect of withdrawing money from the economy, so reducing the purchasing power of people within it. This will necessarily mean that there is less money available to buy goods and services within the economy, which will reduce the pressure on prices, and so bring inflation back under control.

The suggestion ain’t never gonna be that a Curajus State might reduce expenditure now, is it?

There’s a solution here

And now comes my ‘but’. And this is a very big ‘but’. But because the government has not announced any extension to this scheme, and nor has it given any indication that lockdown will cease by the end of May, well advised large employers who know that they have to undertake a statutory consultancy period with their staff on redundancy arrangements will begin issuing redundancy notices to maybe millions of people tomorrow, because if staff cannot be paid after 1 June when the furlough scheme ends that’s when notice has to be given and the consultations need to begin. For smaller companies (employing less than 100 people) the date when notice is required is later: they will need to issue the redundancy notices at the end of the month.

Why not kill the bureaucratic requirement that causes the problem?

After all, it could, just possibly, be true that the solution to an excess of government is less government.