Monday, 12 November 2018

Don’t speak the truth on Twitter!

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

Are women interested in economics?

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

Richard Murphy tries to claim government debt is essential.

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

The EU’s defective fiscal rules assist the “far right”?

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

Money for old rope.

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.

Friday, 2 November 2018

Malcolm Sawyer’s ideas are pretty much Keynes/MMT compliant.

Sawyer, who is a former economics prof at the University of Leeds in the UK, published a paper last month entitled “Six simple propositions on budget deficits, public debt and money.”

I like the layout of the paper in that the six points are simple and clear. A slight blemish is that the numbers of the sections in the main text do not tie up with the numbering of the six propositions in the abstract and introduction, e.g. proposition No2 in the abstract and introduction is dealt with in section 3 in the main text. I’ll use the numbering as set out in the abstract and introduction. Here goes.

The first proposition is, “Money availability is not a limitation on government expenditure as the central bank is able to provide any required finance. The key considerations should focus on the issues of the social desirability of the proposed expenditure and the eventual funding of the expenditure.”

Well that’s pure MMT / Keynes. So I have no problems with that. Incidentally, Sawyer does not mention MMT as such, but he does mention Abba Lerner who is often said to be the founding father of MMT.

The second proposition.

The second proposition is, “Phrases such as ‘magic money tree’ are designed to confuse and mislead.” Sawyer’s basic point is that the phrase is very emotional and political and adds nothing useful to the debate: quite right.

The third proposition.

This is that, “Proposals such as people’s QE do not enable any stimulus which cannot be obtained from conventional fiscal policy and is anti-democratic putting expenditure decisions in the hands of unelected central bankers.”

The reference to “anti-democratic” is not true. At least under the version of peoples’ QE advocated by Positive Money (and Sawyer specifically cites PM) “unelected central bankers” most certainly do not take political decisions.

As PM has made clear repeatedly, under PM proposals, the central bank decides the AMOUNT of stimulus (which is what it already does in that an independent CB can negate what it regards as excess or deficient fiscal stimulus via interest rate adjustments). In contrast, decisions which are obviously political, like what % of GDP is allocated to public spending and how that is split between education, health, etc is left with politicians. Quite right.

The fourth proposition.

This proposition criticises the idea that public investment should necessarily be funded via public borrowing. I actually criticised that idea myself in a recent paper of mine entitled “The Arguments for a Permanent Zero Interest Rate”. Indeed, I’ve been criticising that idea for years, so I agree with Sawyer there.

The fifth proposition.

This is: “The target for budget position should be to secure full employment and capacity. Funds would be forthcoming to underpin such a position.”

Well that again is pure Keynes/MMT. As Keynes said, “Look after unemployment and the budget will look after itself”.

The sixth proposition.

This is that, “Public debt should be judged sustainable (and not excessive) by reference to the level of debt which results from a budget position as forthcoming from proposition 5. Public debt is to be considered as less of an issue (when government can cover interest through taxation and through money creation) than private debt and foreign debt.”

Sawyer here essentially goes along with the popular myth that the debt should be “sustainable” (popular fashionable word). Well if I were to buy one pint of beer a day and throw it down the drain, that would be “sustainable” and for the simple reason that, like most people, I could afford to buy and throw away one pint of beer a day.

You’ll be amazed to learn that that “sustainability” argument is not a good reason to throw away one pint of beer a day. Or to put it more bluntly: s*d sustainability.

Government debt makes sense if there are good reasons for incurring government debt. (Forgive the statement of the obvious, but seems it’s necessary to make that statement of the obvious.)

Well now Sawyer himself pours a certain amount of cold water on  one of the most popular reasons given for government debt, namely that it can fund public investment, which is ironic. Moreover, I examined the other alleged justifications for government debt in section two of my above referred to paper, and far as I can see they are largely if not complete nonsense.

But there must be at least a hundred economists worldwide who have kept themselves busy over the last year at the taxpayers’ expense writing papers and articles on what level of debt is “sustainable”.  Nice work if you can get it…:-)