Sunday, 31 May 2020

Dear oh dear: Richard Murphy tries to explain what money is.

To his credit, Richard Murphy has now got the basics of MMT. But a recent three minute Sound Cloud talk / recording on the subject of what money is, is a bit of a joke. (See also his transcript of the talk below the Sound Cloud ikon.)

He starts by claiming money is a promise to pay. Well certainly commercial bank issued money is a promise to pay: it’s a promise to pay central bank issued money. Witness the fact that if you go to an ATM and demand £X or $X, the bank makes good on its promise, and gives you £X or $X worth of central bank issued notes.

But what about central bank money itself, sometimes known as “base money”? Well around 1.20 minutes into the recording, Murphy points out that if you turn up at the Bank of England and demand that the BoE makes good on its “promise to pay”, you’ll get nothing.

So central bank issued money is clearly not a “promise to pay”!!!!

Around 2.00 He then says that money derives its value from the fact that government accepts base money, and only base money, in payment of tax (which is correct) So money does not derive its value from the fact that it is a  promise to pay!!! It derives its value (as MMTers have long pointed out) from the fact that the private sector needs to get hold of base money in order to pay taxes.

Murphy then finishes (according to his own transcript of his “lecture”) by saying the following (in green italics).

"So what is money? Money is a promise. It’s a promise to pay.

And the promise to pay that really matters is the one that the government makes. Which gets its value because we all have to pay tax in some way or other. And the government promises to take the money it makes - the pound - in payment of that tax.

Which is how they give their promise value".

Now hang on: when government accepts its own money in payment of tax, it is not making a payment. Quite the reverse in fact: it’s some taxpayer who is paying government! Certainly I’ve always got the impression when paying a tax that it’s me paying the tax, not government paying me. How about you?

Do we conclude that Richard Murphy, professor of political economy, was drunk when making that recording, or what?

Stop press (4th June 2020).  Someone called “Simon” has left a comment on Richard Murphy’s blog drawing attention to my above less than entirely flattering points about Murphy, and Richard Murphy is very upset. So I’ll run thru Simon and Richard Murphy’s points in chronological order.

First, Simon says my above article is “disrespectful”. No apologies offered. I certainly am “disrespectful” about people who call themselves “professors” and who, it turns out, don’t know what they are talking about.

You should see some of the language I’ve used about Kenneth Rogoff, the Harvard professor, who has arguably been the World’s most influential exponent of austerity over the last ten years. My language doesn’t bear repeating in polite company.

Then Murphy says “I find your views distasteful and have no desire to give them a platform.”  So do we take it that when “Professor Murphy” is teaching students economics, he tells them that a way of dealing with ideas they don’t agree with is to simply say “I find your views distasteful?”

Next, he makes the bizarre and totally nonsensical claim that I think I am the creator of MMT. I asked him for evidence to back that claim and his answer was that “I recall you claiming many times that you had the true insight into monetary economics well before MMT.”

Well perhaps I did! But that’s not the same as me claiming to have founded MMT, is it? Doubtless hundreds of other people round the World claimed to have “true insight into monetary economics” before MMT, but I wouldn’t accuse them on that basis of having claimed to have founded MMT!!

When you’ve stopped laughing, get ready for the next Murphy blunder.

He then says in respect of the latter “founded MMT” point, “If I am wrong, so be it, but it’s not an issue worth discussing.”

Er – well in that case, why’s he discussing the matter? Doh!

When you’ve stopped laughing, get ready for the next Murphy blunder.

He then says “And I am still not engaging because of past experience of the utter folly of doing so.” Well that’s a good all purpose insult. Does “Professor Murphy” teach his students to use the latter “utter folly” argument when in a tight corner?

I’m tempted to use that insult myself, but I don’t really want to sink the Professor Murphy’s level.

He then says he has banned me from his blog. I’ve actually been banned for several years: indeed, I was surprised my above mentioned comment was allowed at all.

The final and last laugh is that Murphy has recently got very concerned about “fascism”: always a favourite word among lefties, as George Orwell pointed out. But wait: one of the defining characteristics of fascism is opposition to free speech, and Murphy has, as pointed out above, just curtailed free speech on his blog. Notice the irony / self-contradiction / hypocrisy?

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