Wednesday, 14 November 2018
So is Bill Mitchell. See for example his article entitled “When neoliberals masquerade as progressives.” But if you Google the name of his blog (“Billyblog”) and “progressive”, you find plenty more articles by him criticizing self-styled progressives.
Of course there are some genuinely progressive progressives. Unfortunately there are about as many people who haven’t the faintest idea how to bring about “progress” who describe themselves as progressive because that’s the cool thing to do nowadays.
Moreover, the very word “progressive” is a bit silly. Reason is that anyone who advocates X presumably thinks that X represents progress. Indeed, and to take an extreme example, no doubt Adolf Hitler thought that invading most of Europe and half of Russian represented “progress”. For that reason, I never describe myself as a progressive: the word is superfluous.
An example of a fake or defective progressive is Peter May and his “Progressive Pulse” blog. In this article entitled “Positive Money and MMT (continued)” he makes the classic mistake that dozens if not hundreds of critics of PM have made (including Ann Pettifor). The mistake is the assumption that because some independent committee of economists (e.g. a Bank of England committee) decides how much new money is to be created and spent each year, that therefor that committee has usurped powers which should be those of democratically elected politicians.
The flaw in that criticism of PM, as I’ve explained umpteen times, is as follows.
Under the existing system central banks (assuming they have a fair degree of independence) have the final word on how much stimulus is imparted over the next few months. Reason is that governments / politicians can impart as much or as little fiscal stimulus as they like (i.e. “borrow and spend”), but the central bank can negate that decision by governments via interest rate adjustments. E.g. if a central bank thinks there’s been too much fiscal stimulus, it can negate that by raising interest rates.
To summarise so far, in the case of the UK, the Bank of England ALREADY DETERMINES the amount of stimulus. But it DOES NOT take strictly political decisions, like what proportion of GDP goes to public spending or how that is split between education, health, etc. And quite right. To illustrate, if government wants to expand public spending by £Xbn a year and raise taxes by £Xbn to pay for that, it is free to do so.
Under the PM system, stimulus is implemented simply by government and central bank creating new money and spending it (and/or cutting taxes). The decision as to how much new money to create, i.e. the decision as to how much stimulus there needs to be is in the hands of a Bank of England committee or some other committee of economists. In contrast, politicians are totally free, as under the existing system to raise public spending and raise taxes to pay for that extra spending.
Incidentally, and in relation to Ann Pettifor, the above referred to article of hers was published in 2014, so it is conceivable that she has changed her mind since then. However, as it happens I have been followed her blog for years and I have not seen any sign of her changing her mind on the above topic.
To summarise, under both systems (the existing system and the PM system), a central bank committee or some other committee of economists decides on the amount of stimulus, while the decision as to what proportion of GDP goes to public spending and how that is split between education, health, etc remains with politicians.
Ergo a PM system would not usurp any democratic rights of politicians.
And finally, if you’re wondering why I haven’t made the above point in the comments after the fantastically “progressive” articles at the “Progressive Pulse” site, I have actually tried to. But it seems the fantastically progressive “Progressive Pulse” site does not like publishing comments which criticise its articles in too direct a manner. At least mine don’t get published there.
Strikes me that part of being “progressive” ought to consists of an open debate which allows all views to be aired, with the possible exception of views and comments which a downright offensive or plain stupid. But as you ought to have gathered by now, it tends to be the political left (which devotes half its time to telling all and sundry how “progressive” it is) which opposes free speech.
Tuesday, 13 November 2018
But people are fighting back: there’s a new journal where people can write articles anonymously. So if you suspect you might be accused of what George Orwell called “wrong-think”, you can try publishing what you have to say there. And on the same theme, I like this article by Scott Sumner (economics prof at Bentley University, Bentley University, Massachusetts) in which he says in relation to the national debt, “So how large a debt should we have? I don’t know.” (The article is entitled "Peak fiscal indiscipline")
Now given that SS writes about a million words a year on interest rates, national debts, monetary policy, fiscal policy, and related matters, that “I don’t know” admission is a bit strange.
I actually called him out on that one in the comments after his article, and suggested what the optimum debt might be (which is actually not a hundred miles from the amount that would result from adopting the new Labour Party “fiscal rule”). My comment appeared, but SS evidently didn’t like it, because it then disappeared. Like I say, some academics are not too keen on free speech.
I actually said:
"The debt ideally needs to be whatever induces the private sector to spend at a rate that brings full employment when the rate of interest on the debt is zero. I’ll explain.
As to best rate of interest on the debt, I see no reason why money should be confiscated from taxpayers just to pay interest to people who want to hoard dollars. I.e. agree with Milton Friedman who advocated the issuance of base money, but thought the size of the debt should be zero.
As to the AMOUNT of Fed issued dollars to issue, private sector spending varies with the stock of the private sector’s stock of liquid assets, thus the number of dollars issued, ideally, needs to be whatever brings full employment.
Obviously attaining the above ideal is difficult, but monetary and fiscal policy should always aim at moving towards it. Indeed, that’s pretty much what the UK Labour Party’s recently announced “fiscal rule” does".
Monday, 12 November 2018
As you ought to be aware, it is now illegal to suggest that Mohammed was a pedophile, despite the fact that all the evidence is that on normal dictionary definitions of the word “pedophile”, he was actually a pedophile. That’s because of a recent European Court of Human Rights ruling.
However, the odious little leftie jerks who can’t stand free speech have taken it a stage further: it seems you’ll get banned (permanently or temporarily) from Twitter if you have the temerity to suggest what everyone with an IQ over zero knows perfectly well, namely that Muslims are far more likely to commit terrorist offences than Buddhists, Hindus, Athiests, etc. Indeed, that blindingly obvious fact is backed by UK government (Home Office) figures.
The author of the Tweet below was temporarily banned for referring to the above indisputable point about Muslims and the Home Office figures which support the point. I’ve removed the name of the author.
You hef been varned. We hef veys off making you think only PC thoughts.
Sunday, 11 November 2018
I noticed on social media recently someone claiming to have done a quick count of the number of males versus females leaving comments after economics blog articles. So I thought I’d repeat that.
I trawled through the comments after one article from several different blogs. And what do you know? Out of a hundred “commentators” who had obviously male or female names, ninety six were male. Quite extraordinary.
Incidentally that ties up approximately with male to female ratio found in the letters column of the Financial Times. At least someone had a letter in the FT a year or so ago saying they’d done a count of male and female names and found that about ninety percent were male.
Obviously caveats are in order here. For example, to get better statistical significance, a number nearer a thousand rather than a hundred would be better. Plus it would be better if those doing the counting had no idea what the purpose of the count was. Plus it would be better to have several individuals, each counting up to perhaps a hundred, rather than one individual doing all thousand.
Still the above “ninety six” is not statistically totally insignificant.
Another point: just in case anyone thinks I’m unaware of the existence of a number of outstanding female economists, I am perfectly well aware of those individuals. For example I follow Frances Coppola’s blog.
This calls for a more thorough investigation.
Friday, 9 November 2018
That’s in a recent (and fairly short) article of his entitled “Why governments need to issue bonds despite modern monetary theory”.
His first reason, or perhaps I should say “blunder” is the idea that “people need safe places to save.” Well of course!! But if there’s no debt, and the state (i.e. government and central bank) just issue enough base money to keep the economy ticking over, then people can get “safe savings” in the form of zero interest yielding base money!
His second reason is that “those with pensions need locked in and guaranteed income streams.” Nonsense!
The reality is that the “income streams” for pension schemes do not need to take the form of interest from government debt, or indeed interest from anywhere else: the biggest pension scheme in the UK is the STATE PENSION SCHEME, and same goes for many other countries. That UK scheme has no income from government debt or any other form of interest yielding investment: money for today’s pensioners is supplied by people who are in work and who make contributions to that state pension scheme. Their employers also contribute.
That sort of pension scheme is known as “pay as you go”, and in addition to the latter state scheme, there are PRIVATE pay as you go schemes.
Murphy’s third reason is that “the banking sector has, post 2008, needed government bonds as a mechanism to secure overnight deposits.”
Well frankly I’m baffled. If Murphy is referring to “deposits” by normal retail depositors, why does a bank need a stock of government bonds before it can accept £X from someone who walks thru its door wanting to deposit that £X? Darned if I know.
Secondly, why has that bizarre need for government bonds suddenly appeared since 2008? Do you know? I don’t.
Alternatively, Murphy may be referring to “deposits” in the sense of “overnight loans from the Bank of England or other commercial banks”. But banks since QE have been awash with reserves (aka base money). They JUST HAVE NOT needed to go running to the BoE for reserves recently.
There’s a big demand for public debt.
Next, Murphy says there is a big demand for government debt. I bet there is!
What with the fall in interest rates over the last twenty years or so, people and institutions with cash to spare will be itching for government to issue bonds paying marginally above the going rate of interest for totally safe investments. But remember it’s taxpayers who fund interest payments made by governments.
Why on Earth should money be confiscated from taxpayers, many of whom earn less than the national average wage, just to fund interest payments to people with piles of cash under their metaphorical mattresses?
Government debt can fund public spending?
In his final paragraph, Murphy argues that government debt can fund public services. Well true: it can. But the fact that A, B or C are methods of funding something is not in itself an argument for doing the funding via A, B or C, rather than via D, E or F.
Milton Friedman and Warren Mosler (founder of MMT) have argued that government debt makes no sense. So it looks like Murphy needs to go away and look at their reasons before making over-simple statements like “government debt can fund public spending”.
The pros and cons of government debt are actually quite complicated. That’s not “complicated” in the sense that you need to be particularly clever to understand the relevant issues: it’s “complicated” in the sense that you need to spend a few hours or days reading up the subject in order to get a grip on it.
I actually published a paper on this subject recently entitled “The arguments for a permanent zero interest rate”. I’ll tidy that up a bit over the next few weeks and submit it to a journal.
And finally, for another take on Murphy’s article, see this article on the Mike Norman site entitled “Richard Murphy — Why governments need to issue bonds despite modern monetary theory.”
Monday, 5 November 2018
Jeremy Smith (co-director of PRIME) complains about what he calls the EU’s “dysfunctional fiscal rules” harming economic growth in EU periphery countries and helping the rise of the far right. There are several flaws in that argument.
First, in Germany (where the fiscal rules do not seem on the face of it to have dented economic growth), the “far right” is on the rise as much as anywhere else in Europe. That rather suggests it is not those fiscal rules or any harm to economic growth that is causing the rise of the “far right”.
Second, it’s entirely unclear who the “far right” are, and for the following reasons.
1. In the UK it was the main left of centre party, Labour, who implemented the jingoistic policy of invading Iraq for no good reason. In contrast, the two supposedly “far right” parties, the BNP and UKIP opposed the Iraq war from day one.
2. Labour is riddled with anti-semitism.
3. It’s the political left which is in love with arguably the most conservative, “far right” and backward organisation in the World, namely Islam.
Third, it is fatuous to complain about the EU fiscal rules unless you can produce a better alternative. Those fiscal rules exist to deal with changing relative competitiveness of different EU countries: that is, if a country becomes uncompetitive, it has to undergo a period of deflation (in both senses of the word) so as to regain competitiveness, rather than devalue, which was an option before the Euro was introduced. Of course you can argue the above deflation is a barmy way of dealing with the latter competitiveness problem. But that’s common currencies for you. I.e., and to repeat, people who complain about that barmy system should keep quiet unless they can think of a better alternative.
Saturday, 3 November 2018
Warning: this article contains sarcasm, p*ss taking, criticism etc which has been known to cause distress, nervous breakdowns, and occasionally an attack of the vapors. Anyway….
Do you want to know how to get hold of hundreds of thousands of pounds with a view to funding a nice well paid and respectable job for yourself in some nice location like central London? Here’s how.
Set up a worthy sounding organisation and apply to government and charities like the Joseph Rowntree Foundation for loads of dosh. The so called “Finance Innovation Lab” is a good example of this sort of wheeze.
It’s important to plaster your web-site with meaningful sounding and technical sounding phrases. For example on the Finance Innovation Lab home page we find the phrase (in large bold type), “Stand out as a purpose driven leader in financial innovation”.
Crickey: I’ve spent my entire life engaged in utterly purposeless activities, and now I’ve learned that activities should have a purpose. You learn something every day.
The home page also says “We incubate the people and ideas that can change finance for the better.” I always thought “people” were “incubated” in womens’ wombs – silly me.
As for the idea that people with ideas on finance need to be “incubated” by the Finance Innovation Lab or any similar organisation, that’s news to me. I’ve got loads of ideas on finance – set out on this “Ralphonomics” blog over the last ten years – but I feel no need to be “incubated” by anyone, thank you. Nor, far as I know do the other original thinkers on matters financial (e.g. Warren Mosler who founded Modern Monetary Theory, or Ben Dyson who founded Positive Money).
The Finance Innovation Lab do organise conferences and seminars. But personally I’m not inclined to burn up carbon based fuels just to get to such meetings: nowadays you can discuss ideas with anyone anywhere in the World via the internet.
The Finance Innovation Lab also publishes articles, but anyone can do that. I’ve published about a thousand on this “Ralphonomics blog” over the last ten years, and that’s cost taxpayers nothing, plus the Joseph Rowntree and similar organisations contributed not a penny to my very modest expenses.
Reverting to the subject of dosh, the Finance Innovation Lab are not half capable of pulling the stuff in. On their “support us” page, you’ll see they’ve managed to attract OVER A MILLION POUNDS in the last couple of years or so from the above mentioned Joseph Rowntree Foundation and others. But they still want more: as you’ll see on that page, you are invited to deplete your bank account by donating even more to them. I think I’ll decline that invitation.
Here endeth the p*ss taking.