Tuesday, 21 May 2019

George Soros’s Institute for New Economic Thinking – or is it “Old Economic Thinking”?

Frances Coppola sets out a nice description here of a conference organised by the so called “Institute for New Economic Thinking” which according to her, consisted mainly of old duffers setting out OLD ideas rather than new ideas. (Article title: “Beyond Disappointment”.)

So how come?

Well my explanation is that INET was set up by George Soros with a seriously large amount of money: $50million to be exact. And that sort of money is guaranteed to attract those who are skilled at attracting grant money from government departments, the Rowntree Foundation and so on. I mean if you are short of something to do, plus you could do with embellishing your CV with “gave keynote speech at the INET conference at XYZ” or something like that, plus you wouldn’t say no to an expenses paid trip to XYZ, then it’s obvious what you need to do.

In contrast, those who actually do have novel ideas but who aren’t so skilled at the “grant money attracting” business don’t stand a chance.

But if you don’t like my explanation for what’s going on, here is a slightly different, but equally cynical explanation. (Article title: “George Soros’ INET: A conspiracy theory assessment”, by Norbert Haering.)


P.S.  I am grateful to "Rethinking Economics" for reminding me (via Twitter) about that Coppola article.

Friday, 17 May 2019

Random charts - 70.

Headings in large pink text were added by me.

Tuesday, 14 May 2019

The UK school building heated entirely by solar.


That’s the extension to the St George’s School, Wallasey, Cheshire, designed in 1959.

The south wall of the building is nothing but glass, and the floors and walls of the building are made of very thick masonry and concrete which absorbs heat on sunny days and releases it on cold days.

Obviously the lighting and heat emitted by children in the building contribute to heating the building.

A book on solar heating, “Your Solar Energy Home” by D.Howell says (p.12), “When architect A.E.Morgan designed the building, higher authority insisted he include a boiler. Imagine what a delicious day it was for Mr Morgan when after four years occupancy and not a day of use from the boiler, he was allowed to remove it.”

Monday, 13 May 2019

Article in the Frankfurter Allgemeine by Dirk Ehnts on MMT.

The article title is “Die Lösung liegt in höheren Staatsausgaben.”

I only read part of the article (the part highlighted by Lars Syll). So I won’t pass judgement on the article as a whole. But there’s a mistake in it, as follows.

Incidentally, I don’t speak German very well: I just used on of those instant online translation services to translate the article into English.

Anyway, the paragraph starting “Solange Geld auf dem…” claims deficits (i.e. private sector surpluses) are needed because people want to save for retirement and businesses want a positive cash flow. The flaw in that idea is as follows.

In the simple case of where the number of pensioners is constant as a proportion of the population and there is zero economic growth and zero inflation, clearly it is true that people want to save cash plus government debt/bonds among other things for their retirement. But they run down that stock of assets during retirement: i.e. money and other assets flow from pensioners to younger people who themselves are saving for retirement. So in that scenario, there is no need for a government deficit.

As for businesses, it is reasonable to assume they want a stock of cash, but again, in the above “zero growth and zero inflation” scenario, there is no reason for that desired stock to expand every year.

I suggest the actual reason for more or less non-stop deficits is that the private sector (including those saving for pensions and businesses) want a more or less constant stock of cash and government debt. (The sum of those two is sometimes referred to by MMTers as “Private Sector Net Financial Assets” (PSNFA)).

However, inflation constantly eats away at the real value of that  stock. Ergo the stock has to be constantly replenished, and that can only be done via a deficit.

Thus (and reverting to pensioners) pensioners’ desire to save does explain the need for deficits, but it’s not the desire to save as such which is the explanation. It’s the “inflation eating away at the real value of PSNFA” which is the explanation.

Indeed, on the subject of PSNFA, note that when I referred to “cash” above, I should really have said “base money” (i.e. state issued money as opposed to commercial bank issued money). Reason for that is that base money is a net asset far as the private sector is concerned (i.e. it is PSNFA), whereas commercial bank issued cash is not: that is, for every dollar of commercial bank created cash, there is a dollar of debt owed to a commercial bank, thus commercial bank issued money nets to nothing.

Incidentally, I’ve been pointing to that “inflation explains deficits” point for several years now. I’ve never seen any other economist grasp or appreciate the point.

Sunday, 12 May 2019

Random charts - 69.

Headings in pink were inserted by me.

Wednesday, 8 May 2019

Should central banks target unemployment?

A problem with much of the political left is that they are keener on virtue signalling than thinking up policies that actually benefit those they claim to be concerned about, i.e. less well off. For politicians (left or right of centre) that virtue signalling does of course make electoral sense: it wins votes.

But it’s disappointing to see a non-politician getting involved in the latter nonsense. Ann Pettifor in this article claims that central banks should target unemployment as well as central banks’ traditional target, i.e. inflation. John McDonnell, the Labour Party finance spokesman advocates the same.

Well “targetting unemployment” sounds very caring and saintly, but what does it actually mean? After all, central banks already target unemployment in that they target inflation. That is, inflation and unemployment are inversely related, thus the inflation target, which consists of keeping inflation down to 2% actually amounts to targeting unemployment: that is, it consists of minimising unemployment in as far as that is consistent with acceptable inflation.

Moreover, if say inflation was at 2% and unemployment was above target, what’s the Bank of England supposed to do? Abandon the inflation target? Neither Ann Pettifor nor John McDonnell tell us.

McDonnell actually went even further down the “daft targets for central banks” road when he suggested the BoE should target productivity! Well I ask you: what’s the BoE supposed to do if productivity increases are below target? I’m all ears, but I don’t seriously expect to hear anything inspiring from McDonnell.

Tuesday, 7 May 2019

Hilarious hypocrisy at The Guardian.

Sri Lanka is expelling 200 Muslim clerics, which you’d think is a pretty big story, given that “Islamophobia” is allegedly the crime of the century. So you’d expect the UK’s most heroically anti-Islamophobia paper, The Guardian, to devote considerable space to this story. But not a bit of it: they are totally silent, just as I predicted they’d be a few days ago on Facebook. Google something like “Guardian, Sri Lanka, Muslim, cleric, expel”. You won’t find anything. Possibly they’ve devoted a square inch to the story at the bottom of  an inside page, but certainly I found nothing when Googling. 

Given that the Guardian claims to be ultra-concerned about “Islamophobia”, why would this be? Well the average tabloid reader has doubtless worked it out. But leftards, sociologists and similar forms of low-life will be baffled, so I’ll explain.

The people of Sri Lanka have brown faces, and according to the Neanderthals who write for the Guardian, people with brown faces are beyond reproach, while people with white faces are guilty until proven innocent (which as you may have noticed, unless you’re as thick as a Guardian journalist, is pure racism). So this “expel Muslim clerics” story doesn’t fit the leftie narrative does it? That is, people with brown faces are behaving in a grotesquely “Islamophobic” manner, which is a huge problem for the above mentioned Neanderthals.

So what do they do? Sweep the whole thing under that carpet, that’s what they do.

Hilarious, innit?