Richard Murphy puts his foot in it, for the umpteenth time.

This recent article by Murphy is frankly BS from start to finish. (Article title: “The Political Economy of Labour’s Fiscal Rule.”) There is so much rubbish in it that it would take me too long to deal with it all, but I’ll take approximately the first half of the article, just as a sample.
 
Incidentally, Tim Worstall has often referred to Murphy as “Murpha-loon” in the past, which is a name I’ll use here.

The first bit of nonsense is Murpha-loon’s claim that “It is a rule written to re-establish the neoclassical economic order of central banks running monetary policy in pursuit of a form of financial stability that favours one very particular group in society, who are already very favoured because neoclassical economics assumes that they should be.”

So the Labour Party is guilty (apparently unbeknown to itself) of promoting the interests of a “favoured” “group in society”?? This is  -  how can I put it  -  “interesting”. I’m all agog. Anyway, moving on…


Independent central banks.

The next “interesting” bit of Murpha-loon’s article is where he says “I don't believe in independent central banks. In fact, I do not believe we have ever had one. I have evidenced that.”

Well the article of his linked to there doesn’t actually provide any “evidence” that central banks are not independent!!! The reality is actually that there are all shades of central bank independence: i.e. some are very much under the thumb of politicians and some are not. To illustrate, there was obviously a significant increase in the degree of the Bank of England’s independence when Gordon Brown gave it nominal independence in 1997.


Balanced budgets.

Next, Murpha-loon accuses Wren-Lewis and Portes of backing balanced budgets. Specifically Murpha-loon accuses WL&P of claiming “fiscal policy should be avoided because governments should balance budgets”.

Actually anyone acquainted with WL’s articles over the last few years will know that he has devoted tens of thousands of words to attacking the balanced budget idea: indeed, WL has his own special name for the daft balanced budget idea. He calls it “macromedia”: at least “macromedia” is approximately synonymous with balanced budgets in WL’s articles.


Interest rates.

Next, Murpha-loon says “And third, like Keynes, I believe in long term low interest rates. And by low, I mean very low. And why do I do that? Because I think that to raise interest rates would trigger a credit crisis of untold magnitude in the UK, and beyond. And I cannot countenance that social cost.”

Well now, how does Murpha-loon square that with the fact that mortgagors were paying three times the rate of interest in the 1990s that they pay nowadays, yet economic growth was perfectly respectable in those days?

Of course a sudden rise in interest rates would cause problems, but a gradual rise would not be a huge problem.

To be fair, I favour low interest rates as well, but (to repeat) the idea that a rise in rates would necessarily bring a “credit crisis of untold magnitude” is obvious nonsense.

Next, what makes Murpha-loon think WL&P are actually advocating high interest rates? As the Labour Party fiscal rule clearly explains, when interest rates are significantly above zero, interest rate cuts would be used to impart stimulus, thus under that regime, rates would bump along just above zero most of the time!!!!

Well that’s it. Can’t be bothered with any more of this nonsense. Hope I’ve provided enough evidence that Murpha-loon is clueless.

Incidentally, if you’re wondering why I don’t answer Murpha-loon’s points in a comment after his articles, reason is that he bans anyone from commenting if they have the temerity to disagree with him in too direct a fashion.