Economics
We Need Better Metrics

Tom Clark ... We need a new language to talk about the economy ... The images used by politicians can simplify difficult theories, but they are also being used to mislead us

Burgess COMMENTARY
There is massive dysfunction in the modern socio-enviro-economic system, and there is inadequate language and metrics to describe and manage this system. Peter Drucker famously said 'You manage what you measure', and I would add that you had better measure the right things.

Conventional money profit accounting is very powerful as the core of management information for corporate performance, but it is totally inadequate for the associated impacts on society and the environment.

I want to see the very powerful characteristics of conventional accountancy used to build a broader system of metrics that can be uniformly applied for every aspect of this system ... but it is the metrics that come before the language. I have called the idea Multi Dimension Impact Accounting, but colleagues have persuaded me that it should be called True Value Accounting.

Exciting times

Peter Burgess truevaluemetrics.org
Peter Burgess

We need a new language to talk about the economy ... The images used by politicians can simplify difficult theories, but they are also being used to mislead us

Ben Jenning's illustration for Tom Clark piece on political language Illustration: Ben Jennings

‘The big ideas that might make a difference – targeting higher inflation, printing money, or ploughing public funds into infrastructure – remain too contentious for politicians to voice out loud.’

Banks trembling, shares tumbling and gathering fears of a new slump. The start of 2016 has been chilling for a global economy that has still to shake off the crisis of 2008. Worse, there is no agreement on what to do should the worst happen again. The big ideas that might make a difference – targeting higher inflation, printing money to give consumers something to spend with, or ploughing serious public funds into infrastructure – remain too contentious for politicians to voice out loud. That is a shame, because history suggests that the words they use matter.

Of course policies and theories have to pass muster, but just as significant in determining which ones end up being pursued are the language in which they are discussed. A smart metaphor can do more to shift the sense of the possible than the negative interest rates that increasingly desperate central bankers are relying on to alter the mood.

From economics seminar rooms to rage-pumped Donald Trump rallies there is a consensus on one thing: we need to do better next time. The last recession was followed by years of anaemic growth and squeezed pay, and taxpayers saddled with the bill for bailing out the banks. Nobody is going to be thrilled with that mix, but the despair is most acute on the left.

A crisis caused by footloose finance and preceded by decades in which the rich had raced ahead of the rest might have ushered in a new order of stability and fair shares. Instead we have quantitative easing – which puffs up asset prices for the haves and renders homes less affordable for the have-nots – and fiscal austerity, which makes the poor poorer and also leaves them more exposed, by knocking down the old storm defences of the welfare state. In the US, the top 1% grabbed more than half the total growth in the first five years of recovery, while in the UK, George Osborne, a chancellor who saw no choice to imposing the bedroom tax, still found room to trim the tax rate on top incomes.

None of this should have been possible, but it was successfully sold as necessary. To understand how, we must reckon with the deep foundations of economic orthodoxy in our culture, especially the language.

It was, RH Tawney explained, the genius of the Reformation, the ideological revolution that readied the way for capitalism, to reimagine the “natural frailty” of human greed “into a resounding virtue”. Whereas poverty, in medieval religious theory at least, had been next to godliness, early modern thinkers from Hobbes to Smith equated wealth with worth. Trade became respectable, and lending money for profit, which had been sinful usury, became a fruitful outlet for thrift. Credit became interwoven with honour and pride, while debt was shot through with weighty moral obligations.

These are the orthodox financial prejudices that have, with brief exceptions, held sway ever since – in Gladstone’s red box as much as Thatcher’s handbag. When the 2008 economic storm hit (a metaphor which itself does ideological work, implying an act of nature rather than a crisis of human folly) the then shadow chancellor Osborne reached for a tried and tested script. “The cupboard is bare,” he sternly announced, likening bankrupt Britain to an over-indebted home.

From economics seminars to rage-pumped Trump rallies there is a consensus: we need to do better next time

Economists have objected to lazy comparisons between domestic and national finances for the best part of a century: governments can tax, grow or even print their way out of debt, three important escape routes not open to individuals. In the 30 years after the second world war there were deficits in all but six. But far from this leaving Britain’s cupboard bare, the national debt dwindled from 250% to 50% of GDP.

So the household metaphor is deeply misleading but it remains irresistible to politicians and powerful with the public. It offers a way to make sense of the otherwise baffling billions in national debt through analogy with everyday experience. Furthermore, explains Jonathan Charteris-Black, an expert on rhetoric at the University of the West of England, it embeds “one of the most widely used of all political images: the nation as family, with the government as responsible parent”.

It is all so familiar that only restless, malcontent minds will argue back against the claim that There Is No Alternative. But the awkward squad should not lose heart: with determined effort, the terms in which policies get discussed can sometimes be changed. One modest example was the one-off charge made on the utilities soon after Labour came to power in 1997. Few taxes are popular, but by being badged a “windfall levy” this one came to be seen as a fair way to share good fortune that had dropped into the lap of these firms.

Looking further back, Keynes was a master of the disruptive metaphor. He described the “animal spirits” of investors whose rationality he questioned, and dismissed the self-styled “wolves and tiger” of industry as pathetically “domesticated” beasts. He was even credited with livening technical debate about the efficacy of monetary policy in a liquidity trap by talking of “pushing on a piece of string”. Keynesians across the Atlantic, such as Lauchlin Currie, rationalised the deficits of Roosevelt’s New Deal as “pump priming” the economy. The image here is of an old-fashioned well, where you have to pour in a little fluid to clear air from the valve, which then allows you to pump out a far larger volume of water. It had intuitive appeal for the very many Americans who had then been raised on farms, but hydraulics remains a promising source of imagery. Where orthodox economics and the moralising that goes with it emphasises solid “stocks”, assets and liabilities of particular values – a nasty debt, a nice nest egg or indeed an empty cupboard – the real economy operates through continuous “flows” of payment and activity.

John Maynard Keynes with Harry Dexter White in 1946. ‘Keynes was a master of the disruptive metaphor.’ Photograph: Thomas D McAvoy/Time & Life Pictures/Getty Image

The engineer-turned-economist Bill Phillips illustrated this insight by building a marvellous machine that shunted coloured water about to illustrate how the components of national income related to one another. But there is no need to go to the lengths of constructing a physical metaphor to make the point about how the bubbling stream of a healthy economy can wash away the debris of debt. Or, indeed, how decisive interventions can be required to clear blockages in the arteries of finance.

The question endlessly put to the Labour opposition is whether it can put together a “credible, costed package of alternative economic plans”, and doing that will, of course, have to be part of the answer – but only part. For no such programme, whether it stacks up or not, will compete with Osborne’s until the public can be persuaded to talk about the economy differently.

John McDonnell, the shadow chancellor, has put great effort into assembling brainy economists to help refine his detailed commitments, but the results of their deliberations will likely attract even less attention than his one rhetorical flourish to date – “socialism with an iPad”. A creative writing competition might do more to help him prevail in the battles ahead.

JohannVonEndon 5h ago 1 2 A thought or two... Can anyone find a reference in any Marxist work of economics to the capitalist banks pushing their own self destruct button? I've been searching, but so far as I can see the pressure 'should' have come from the proletariat not the most capitalist part of the bourgeoisie - the banks. (Despite the fact that the banks are no longer part of the capitalist system, being 'too big to fail' and having had their debts socialised.) The only thing I can recall (probably inaccurately!) is some 'interpretable' references in Rosa Luxemburg's analysis of the 19 century Polish economy. The other area that looks like an explanation is obliquely referred to in Irving Fisher's analysis of the necessity of a debt deleveraging stage. (which we have not yet had) prior to a slow and managed Keynesian monetary Expansion in productive investment (and most definitely not of asset prices - which themselves quickly crush an economy/jobs). What seems to have happened this century(from 2000) is that the banks/finance sector ignored the well established historically proven, for the last 300+ years, mantra that 'printing money always causes a collapse' and to this end the sector financed academic research at places like Harvard to promote their view of exponential monetary expansion forever pushing up prices and so debt in an everlasting virtuous spiral and that this had no negative consequences. They banks also deliberately ignored the mathematically certain corollary that the poor get ever poorer and the rich get ever richer and ignored the inevitable social result as outline in traditional Marxist economic analysis the creation of a revolutionary proletariat with nothing to lose. The longer to downwave goes on, the worse the collapse and the longer it will take for a recovery to take place and the bigger the disruptive effect. We already see a retreat to an illusory past arcadia, isolationism and xenophobia in Europe, the Russian Federation and the USA - which could lead (historically did always lead) to war unless economics is fixed. I tried warning HM Treasury, Eddie George and Mervyn King in writing about the mathematical certainty of inevitable collapse if the present (form the mid 1990's) monetary polices were continued - but none of them wanted to listen to me an experienced economic soothsayer with a doctorate and 40 years of professional experience when the markets were apparently booming - for ever more! The collapse of economic rectitude and sound management of money necessitated ever cheaper money and the parcel being passed at ever faster rates = inevitable economic collapse. This also needed the collapse of intellectual and academic rigour from the whole subject of economics and the global corruption of auditing. We need a sound economic mathematically rigorous explanation of what is happening. We need this analysis of what is happening so that we can see a genuine way out of the state we are in, in something less than 30 to 50 years and without another world war caused by an uprising in isolationist xenophobia which has so often in the past been a 'solution' to gross economic regulatory mismanagement. My analysis leads me to firmly believe there is very strong evidence that the whole economic collapse can be placed at the door of the last 20 years of crass monetary regulation. Reply Report

Helen Pat 6h ago 4 5 Do we need a new language to talk about the economy? Or do we simply need to acknowledge the deep corruption which has usurped every area of government; granting of monopoly contracts; PFIs; lack of transparency in tenders in government contracts; legal and illegal fraud perpetrated with shameless effrontery at the tax payers expense? Why won't the good old fashioned language of plain talk serve to reveal shoddy practices? Reply Report

TeMataPeak Helen Pat 5h ago 0 1 I assume you are talking about rent seeking? \people seeking benefits for themselves through the political arena is nothing new but has become more pronounced since the state claimed ever bigger bits of the pie. So if you are against subsidy for farmers (whether they be sheep or wind) or you are against tariff protection for the steel industry, or oppose special regulations that hugely restricts house building then great. Good on you. Reply Report

mothercourage Helen Pat 5h ago 1 2 Well said ! Call a spade a spade ! In simple language we are all being screwed ! Reply Report

mothercourage 7h ago 2 3 Govt. aided monopoly, is something that needs to be investigated. Without a realisation that there is more to the economy than merely securing our wages and hopefully a home, an education and health care is crucial to understanding that the 'financial sector' is a law unto itself, because all these things are no longer secure. The very things that we work for and expect as a result are not only ignored by this, mainly illegal 'economic force' but are also laughed at, by them. They RELY opon us buying into the trick. Its about time our Govt. stopped turning a blind eye and accepted that we are begining to know whats going on, and that the more we know the less we like it ! Reply Report

TeMataPeak mothercourage 6h ago 0 1 200 words devoid of any meaning whatsoever. Reply Report

mothercourage TeMataPeak 5h ago 0 1 So you are very good at counting then !? Shame you dont have any feelings or morals though ! Reply Report

TeMataPeak mothercourage 5h ago 0 1 'Shame you dont have any feelings or morals though !' Knock me over with a feather. Really are you serious? Reply Report

asitwas TeMataPeak 3h ago 0 1 Understood totally but looks a bit short on 200 words so you must have added in a few of your own which destroyed all meaning for you. Reply Report

irreverentnurse 9h ago 1 2 it's about time we had crystal clear English spoken by all politicians. 'We're going to make the poor poorer'. 'We're going to kick the weak and disabled to the kerb.' 'We're going to make you work until you drop.' 'You are a commodity we hope to exploit until you die.' Even then you'd still find some voting for them. They have to use this swivel eyed looney tunes language because if they put it bluntly they wouldn't sound like very nice people and much more like the megalomaniacs they really are. Reply Report

TeMataPeak irreverentnurse 8h ago 1 2 And perhaps you should refrain from emotive hyperbole? Reply Report

irreverentnurse TeMataPeak 6h ago 1 2 as is your favoured response 'Yawn.' Reply Report

Helen Pat TeMataPeak 6h ago 1 2 Isn't it alarming how often those dominated by diseased governors grow to love the kleptocratic autocrats who seek to exploit them? Reply Report

TeMataPeak irreverentnurse 6h ago 0 1 Yep such indulgent silly paranoid conspiracy theories are a little tiring esp when so oft repeated. Reply Report

irreverentnurse TeMataPeak 5h ago 0 1 what, the ones David's just come back spouting about our national security being threatened if we leave? Reply Report

TeMataPeak Helen Pat 5h ago 0 1 Are you talking from a Public Choice angle? Reply Report

TeMataPeak irreverentnurse 5h ago 0 1 He might just believe if even if you or I don't. The art of politics is to win and he clearly wishes to win the Brexit vote. If he doesn't he's toast. Reply Report

irreverentnurse TeMataPeak 5h ago 0 1 If I didn't know he was for in, the ways he's gone about it had me wondering if he wanted us in or out. What a shambles. Much ado about nothing. Reply Report

ThomasXX 10h ago 0 1 Oh sorted with schizophrenia Reply Report

IGrumble 10h ago 2 3 Yes - how about honesty, due dilligence, integrity and as a scientific rigour as possible without being tinged by leftist or rightist propaganda, coupled with years of actual experience in analysing economic trends, markets and processes, rather than the voodo BS that passes for 'economics' today. Reply Report

FRabelais 11h ago 0 1 This article, which claims we need a new language of economics, itself includes over 100 cliches. From the beginning: Banks trembling, shares tumbling and gathering fears of a new slump. The start of 2016 has been chilling -- trembling, tumbling, gathering, slump, chilling. I thought the article was going to show how our language for describing and analysing economics was off the mark. Instead, the article soaks so many cliches into its thought that it comes out as .. well, add your own cliche. Reply Report

soundofthesuburbs 12h ago 1 2 We need economists that understand economics. The response of main stream economists to 2008 was: “How did that happen?” After 2008, even the Queen was asking the revered economists at the LSE 'If these things were so large how come everyone missed it?' In the common parlance “What do you morons do all day?” Main stream economists, in the intervening eight years, have come up with no explanations for this gargantuan flaw in their understanding. It is time to look for those that know what they are doing. In 2005, Steve Keen, saw the crisis coming and the private debt bubble inflating. In 2007, Ben Bernanke, could see no problems ahead. We know Central Banks were using fundamentally flawed economics prior to 2008 and have not put forward any reasons why they didn’t see 2008 coming. It should hardly be surprising then their fundamentally flawed economics does not come up with the right solutions. Let’s listen to an economist who knows what he is doing, Steve Keen and others on the renegade economics web-site, a sensible solution to the wholesale destruction of Neo-Liberal economics. https://www.youtube.com/watch?v=qrz76_j9MRs Reply Report

soundofthesuburbs soundofthesuburbs 12h ago 0 1 You don't need to sell a new economics, you just need to point out all the damage being done by the current economics. This is how politics works, it is the failure of the old that gets people to vote for something different. Reply Report

TeMataPeak soundofthesuburbs 8h ago 0 1 Yawn Reply Report

HeinzH 12h ago 1 2 There is no need for a new language,what is needed are people in finance who don´t lie for us and loot us.Lets face the facts,there are more criminals inside banks than outside banks. Reply Report

soundofthesuburbs 12h ago 1 2 The Neo-liberal ideology swept the world and it is now destroying itself. “There’s class warfare, all right, but it’s my class, the rich class, that’s making war, and we’re winning.” Warren Buffett The 1% went to war on the 99% (aka the global consumer), very silly really. Before they win, everyone loses. Capitalism is like Siamese twins at war with each other. The 1% and 99% always fighting each other to get more, but if either side win they destroy each other. The 1% were in the ascendency in the 1920s and blew it up with a Wall Street Crash in 1929. The 99% were in the ascendency in the 1970s and blew it up with constant strikes making individual nations uncompetitive. The 1% are in the ascendency again and have already caused another Wall Street Crash (2008) plunging the world into a global recession that seems without end. The 1% haven’t worked out that they have gone to war against the consumers that buy their products and services. Obviously this was all spotted by Marx a long time ago, but he had never seen the results of the 99% in power (Pol Pot’s Cambodia, Stalin’s Russia, Mao’s China, etc ...). He came from a wealthy family and was only too aware of the greed, self-interest and hypocrisy in his own class. It doesn’t seem to matter which ideology you try and follow the psychopaths always end up in the positions of power. Capitalism is an endless fight between the two sides, but neither side can win, to do so destroys themselves. A more balanced approach is needed but the very thing that makes Capitalism work, self-interest and greed, ensures neither side is ever happy with their lot and always wants more. Reply Report

Whiting soundofthesuburbs 12h ago 1 2 Re-read Orwell's 'Animal Farm'. But don't watch the movie, which was financed and re-written by the CIA. Reply Report

SylviaPlathsKnickers soundofthesuburbs 9h ago 0 1 The 1% were in the ascendency in the 1920s and blew it up with a Wall Street Crash in 1929. Pardon? The 1% LOVED the Great Depression. It allowed them to buy up untold amounts of property & (especially) property for pennies on the dollar when masses of far lesser beings were in dire need of cash to cover their debts, and had no choice but to sell low. The bust aspect of the capitalist boom/bust cycle is always the time of the greatest cashing-in by the richest of the rich. They may cash in in boom times (when things sell high), but they cash in big in bust times (when things sell low). Reply Report

TeMataPeak soundofthesuburbs 8h ago 0 1 Yawn Reply Report

TeMataPeak SylviaPlathsKnickers 7h ago 0 1 'The 1% LOVED the Great Depression. It allowed them to buy up untold amounts of property & (especially) property for pennies on the dollar' Good Lord I expect you probably believe this. Reply Report

DavidVinter SylviaPlathsKnickers 6h ago 0 1 If ordinary folk lived within their means, then the rich would find it much more difficult to take advantage of them. Reply Report

soundofthesuburbs 12h ago 0 1 Ever heard of Einstein’s definition of madness “Doing the same thing again and again and expecting to get a different result”? Today’s ideal is unregulated, trickledown Capitalism. We had un-regulated, trickledown Capitalism in the UK in the 19th Century. We know what it looks like. 1) Those at the top were very wealthy 2) Those lower down lived in grinding poverty, paid just enough to keep them alive to work with as little time off as possible. 3) Slavery 4) Child Labour Immense wealth at the top with nothing trickling down, just like today. This is what Capitalism maximized for profit looks like. Labour costs are reduced to the absolute minimum to maximise profit. (The majority got a larger slice of the pie through organised Labour movements.) The beginnings of regulation to deal with the wealthy UK businessman seeking to maximise profit, the abolition of slavery and child labour. Where regulation is lax today? Apple factories with suicide nets in China. The modern business person chases around the world to find the poorest nation with the laxest regulations so they can exploit these people in the same way they used to exploit the citizens of their own nations two hundred years ago. Labour costs are reduced to the absolute minimum to maximise profit. Capitalism in its natural state sucks everything up to the top. Capitalism in its natural state doesn’t create much demand. Reply Report

ParcelOfRogue soundofthesuburbs 11h ago 1 2 Some bits of truth but if that was all true why was Japan the first far east country to exploit it's poor agricultural workers to work in industry, to raise their wages to the point that they are now arguably the richest in the world? Taiwan and S. Korea are part way down that journey and are catching up with the west on living standards. Vietnam has recently started on that journey and is well behind China, who on average are behind the above countries but their wages are much higher than toiling in the fields. There are many problems in the west, but life spans keep increasing and the further back you go, the less well fed people were and if you go to pre-industrial exploitation, there were food shortages and famines, with more extreme versions further back. Co-operative Capitalism has arguably produced some of the best outcomes in the world in Germany and Scandinavia. All socialist experiments result in degrees of shortages, rationing, buildings unmaintained, a lack of freedom of speech, restrictions on movements and various levels of tyranny, the biggest two being Mao and Stalin, who beat Hitler on deaths. Reply Report

TeMataPeak 13h ago 0 1 'But there is no need to go to the lengths of constructing a physical metaphor to make the point about how the bubbling stream of a healthy economy can wash away the debris of debt' Clearly worked in Japan in the 1990s and 2000s. Its govt was (and is) heavily in debt and south to stimulate growth through huge capital spending. Vast sums wasted on poor value developments with very poor cost benefit returns. And where is Japan now - its still in the crap. Reply Report

TeMataPeak 13h ago 0 1 'John McDonnell, the shadow chancellor, has put great effort into assembling brainy economists to help refine his detailed commitments,' Ahh the appeal to the authority of s group of experts to give McDonnell's batty ideas credibility whist reinforcing the false premise of interventionists that experts can direct economic activity. His ragbag assortments of economists and no economists tell us nothing. Reply Report

HolyInsurgent 15h ago 0 1 Tom Clark: None of this should have been possible, but it was successfully sold as necessary. To understand how, we must reckon with the deep foundations of economic orthodoxy in our culture, especially the language. Yet another article which describes symptoms and not cure. The disease is neoliberalism. The Guardian for some arcane reason dare not state its name. “The cupboard is bare,” he sternly announced, likening bankrupt Britain to an over-indebted home. Simply one of a litany of lies that is the ideology called neoliberalism. Exactly like religion: based on arbitrary, unverified, and unverifiable premises. Critical thinkers point out whose agenda this serves. A state budget is not identical with a household or business budget. This was correctly argued in an article by Warwick Smith right here in the Guardian. It has not been discussed why since. Economists have objected to lazy comparisons between domestic and national finances for the best part of a century: governments can tax, grow or even print their way out of debt, three important escape routes not open to individuals. Certainly, if it is assumed we all still live in the 19th century. The world has moved on but neoliberal politicians are desperate to make us believe we haven't. Find out for yourself what 'national currency sovereignty' means and what powers a government has over its money supply and spending. So the household metaphor is deeply misleading but it remains irresistible to politicians and powerful with the public. Well, the public can't be blamed for being brainwashed by propaganda. Consider the tabloid quality of mainstream journalism, the worst it's ever been. Seek out the alternatives to the corporate press, the latter of which the Guardian is sadly entrenched. The question endlessly put to the Labour opposition is whether it can put together a “credible, costed package of alternative economic plans”, and doing that will, of course, have to be part of the answer – but only part. For no such programme, whether it stacks up or not, will compete with Osborne’s until the public can be persuaded to talk about the economy differently. The Guardian is the perfect forum to discuss it. Aside from Corbyn's own articles, I've yet to see anything but an anti-Corbyn smear campaign. I wonder why? John McDonnell, the shadow chancellor, has put great effort into assembling brainy economists to help refine his detailed commitments, but the results of their deliberations will likely attract even less attention than his one rhetorical flourish to date – “socialism with an iPad”. Including in the Guardian. This article is no exception. Start discussing and stop dancing around the issues. The entire article is preamble to something substantial which never materializes. Reply Report

Histfel HolyInsurgent 12h ago 0 1 'You keep using that word. I do not think it means what you think it means.' Reply Report

taxmesomemore 15h ago 0 1 Perhaps the BBC could address this dilemma: Borrowing to invest in needed skills and infrastructure enables innovation and trade for a better standard of living. But should we tax or borrow to reduce the pain of poverty? ...or should we devalue study and work by creating money and giving the cash to the poor? Reply Report

stevefrompolaca taxmesomemore 14h ago 0 1 ...or should we devalue study and work by creating money and giving the cash to the poor?... No let's print money and give it to the banks so they can devalue the rest of us. Reply Report

taxmesomemore stevefrompolaca 14h ago 0 1 Why print money at all? Reply Report

Robert Rudolph 18h ago 0 1 New language. Hmm. 'Overspending' won't cover it? Reply Report

Catchingup Robert Rudolph 16h ago 0 1 Nope. Reply Report fateeore 20h ago 1 2 Can't we stop this obsession with language policing and just let language be what it, is a means of communication I'm losing track of things I'm not allowed to say Reply Report spareusthelies 24h ago 1 2 But far from this leaving Britain’s cupboard bare, the national debt dwindled from 250% to 50% of GDP . Meaning, at the end of the war Britain had little in the way of GDP but a large amount of debt in comparison to the (small) amount of GDP. This was because Britain had been shelling and bombing its trading partners and vice versa, rather than selling to and buying from, them. Also showing that whilst war is bad for GDP, it is 'good' for increasing the amount of debt. So who won the war, Great Britain and its allies......or by complete coincidence and completely by accident, of course and, perish the thought....the Banks? WW11 followed a period of significant worldwide economic depression. I have a morbid sense that the bankers are warming up in their boardrooms, gleefully rubbing their hands in anticipation of the profits they hope to acquire.........let the carnage begin! And look, there goes Rothschild, saddled up and ready to begin transporting the gold... Reply Report alexplypin 24h ago 1 2 The `long term economic plan' is predicated upon the `meddlesome top down privatisation' of the NHS. Now, AQPs, who will loot profits out of their marginally costed `offers' for cherry-picked privatised services, will not even have to pretend that they will pay any tax back into the pot. As a cancer patient, I do not really want a boob job - no matter how `cheap' it might be. Reply Report YouHaveComment 24h ago 2 3 Worse, there is no agreement on what to do should the worst happen again. The people that matter have already decided. We will bail out the bankers, and cut public spending for everyone else. Bankers must not be punished for their cockups. Also we will look the other way when they use tax havens to avoid tax, and we want to cut corporation tax so that Britain becomes more like a tax haven. Finally we must reward the tax avoiders and the bankers that cock up with jobs. We will make it a legal requirement that they can bid to provide outsourced public services even when under investigation for fraud. And we will give them nice revolving door jobs running government departments. Reply Report zalacain 1d ago 3 4 A new language to try to hide the real intent of the left. Reply Report Wallstrom 1d ago 7 8 The above piece is a load of claptrap and similar wooly thinking would get you the sack as treasurer of a parish council. What economic model can give you an iPhone, monoclonal antibodies for cancer, an electric car or google. There are thousands of drugs in the British National Formulary but not one emerged from the Soviet Union. The problem with most lefties is that they dont understand human behaviour, most have never created a single job and none have been responsible for any of the great human inventions. They are able to write soft articles and do really look forward to the prospect of recessions. Reply Report ub313 Wallstrom 1d ago 1 2 Shame, I thought you were about to explain in what way it is a load of claptrap - which I suspect it is - but sadly you merely produced some claptrap of your own. This guy seems to be propounding Keynesianism, which is very much a liberal capitalist doctrine. Reply Report Wallstrom ub313 1d ago 0 1 How many jobs have you ever created? Reply Report crackersandcheese Wallstrom 23h ago 3 4 I wish there was a new way to shut cloth-eared austerity merchants the fuck up. Reply Report Daveinireland crackersandcheese 22h ago 0 1 Can't be bothered inventing it yourself, just waiting for the market to provide it for you? Reply Report Wallstrom crackersandcheese 15h ago 2 3 I thought you were advocating new language, not the traditional anglo-saxon response of somebody who has lost the argument. Reply Report epidavros Wallstrom 14h ago 0 1 Strange choices of examples. Most drugs you cite were produced by state funded labs - monoclonal antibodies being a prime example, invented in a state funded German lab. Google came out of a state funded university programme. And of course in principle in the Soviet Union EVERY job was created by the state, whether you like that or not. I suspect the number of jobs you have created is precisely this number: 0. Reply Report Wallstrom epidavros 6h ago 0 1 Cesar Milstein in cambridge received the nobel prize for monoclonal antibodies. This fact, and all the others in your post are inaccurate garbage. Now you are in the sixth form you will need to work harder. Reply Report epidavros Wallstrom 3h ago 0 1 He did indeed. Working at the university. Which is publicly funded. Doing publicly funded research. But his prize was for work in producing them, not discovering the, which he did not do. That was done in another publicly funded lab. I think its time for you to quit while you are behind. You correct facts that are not wrong with other facts that prove your core thesis wrong. Its not going to get any better for you. Reply Report Wallstrom epidavros 37m ago 0 1 In real life I hope you are not involved with educating children, other peoples money or healthcare. Reply Report epidavros Wallstrom 30m ago 0 1 An odd response from someone who could teach children precisely this much: 0. Reply Report ub313 Wallstrom 20 Feb 2016 22:16 0 1 People don't create jobs, capital creates jobs. You know this. Don't take the piss. Reply Report Open4Debate 1d ago 1 2 This article fails to provide a new language to talk about the economy - to do so would mean rethinking the real/money distinction Yes, money is a social construct – but it also happens to be the one that conducts real judgments about what gets produced, in what quantities and for whom Unless amended by the state – everything depends on profitability and profit is a pure monetary relation Money is a social construct – but we are ruled by the judgements of money. This is a variant on Marx’s theory of fetishism, where we are ruled by our own social products - although one that foregoes his attempt to make labour the ‘real’ source, substance and subject of value Under capitalism, people and things only have a ‘real value’ if they exchange with money. This makes money (and its value judgments) more real than people and things That is the kind of new language we need to talk about economics – one that acknowledges the capacity of money to impose its (real) value-judgments on us Reply Report zalacain Open4Debate 1d ago 2 3 Money doesn't impose anything. The market (which is people) judges the value of something, money is the measure. Blaming money for imposing value is like blaming kilometres for imposing distance. Reply Report colesla zalacain 23h ago 0 1 If we just got rid of these pesky measures of distance, then I could walk round the world in an evening! Reply Report epidavros zalacain 14h ago 0 1 The difference is kilometres are a fixed metric, and money is not. It is a best subjective and at worst capricious. Reply Report John Kennedy 1d ago 5 6 Sounds like someone is trying to trick the world into becoming Venezuela. Reply Report Daveinireland John Kennedy 23h ago 0 1 If they can achieve this, then they can rebrand Venezuela a success, because it's the same as everywhere else.... Reply Report lastingimpression 1d ago 1 2 The 'last' recession is still current for many of us. Roosevelt's 'New Deal' wasn't the success it is trumped up to be either - the second world war is what got the USA working again. But all of this is by the by. The problem is and remains globalisation. Whenever there is a new technology, there follows a period of globalisation and this is followed by a massive bust - it happened with the telegraph; it happened with the telephone and now it is happening with the internet. The bigger and more widespread the technology, the bigger and more widespread is the globalisation and the bigger and more widespread is the bust. The immediacy of the new technology allows for more risk taking. Risk taking means more speculation. Speculation means higher shares. Higher shares encourage more risk taking. It is a vicious spiral. Globalisation is the problem. Reply Report Catchingup lastingimpression 15h ago 1 2 Globalisation is unstoppable, inevitable. Continuation of change that has been occurring down the centuries. through history, society adapts, makes necessary changes that lead to better times. Reply Report DavidVinter lastingimpression 5h ago 0 1 Not quite, it is the advertising of new products or services persuading the gullible that they MUST HAVE this new product,and paying hard earned cash to get it. Why suddenly do folk cover their body with expensive painful tattoos ? Or get their flesh cut in order to slide metal rings into it? More often the poor. Why must folk buy the latest, more expensive phone when the previous one worked well? It baffles me. A newer X ray machine I understand. Fashion is the ruination of many. Reply Report TeMataPeak DavidVinter 4h ago 0 1 How wonderful that you are free from such temptations! Reply Report jimmurphysbrassneck 1d ago 3 4 The greatest mistake of all is when people who have no idea how a monopoly currency issuer works in reality is when they quote the so called national debt. They don't even know what it is they just post £1.6 trillion or the likes as if it it is a household debt. The madness in their minds believe the only way we can pay off a debt of £1.6 trillion so called debt is by runing a household budget surplus. Even though in 300 years of history we have only ever ran half a dozen of those for several years at a time. They can't grasp this simple fact. To run budget surpluses to pay that off would probably mean we would have to run a budget surplus for the next 1000 years. Yet they can't figure out the myth that is hidden behind the lie. Because the framing and propaganda thrown at them for the last 40 years actually makes them believe the monopoly issuer of a currency is a household budget. They don't recognise or believe the huge difference between a currency issuer and a currency user. They somehow believe the private sector or commercial banks creates £'s and not the government which is insanity. Watch them turn into Homer Simpson when you ask them to watch this simple 3 min video that explains the truth. Deficits are Necessary Their belief system is destroyed within 3 mins so they make up some crap about Zimbabwe or it only works in a closed economy. Without knowing what floating exchange rates are and how they work with the reserves in the Bank of England. Virginia’s colonial government in 1755 knew the truth long before the majority of voters in 2016. Which just goes to show how many voters have been framed and brainwashed out of their minds. The Virginia legislature took note redemption and its effect on controlling the value of its paper money seriously. Such is illustrated in the March 1760 paper money act which stated, ‘And whereas it is of the greatest importance to preserve the credit of the paper currency of this colony, and nothing can contribute more to that end than a due care to satisfy the publick that the paper bills of credit, or treasury-notes, are properly sunk, according to the true intent and meaning of the several acts of assembly passed for emitting the same; and the establishing a regular method for this purpose may prevent difficulties and confusion in settling the publick accounts. Be it therefore enacted, by the authority aforesaid, That Peyton Randolph, esquire, Robert Carter Nicholas, Benjamin Waller, Lewis Burwell and George Wythe, gentleman, or any three of them, be, and they are hereby appointed a committee, to examine at least twice in every year (and oftener, if thereto desired by the treasurer for the time being) all such bills of credit, or treasury-notes, redeemable on the first day of March, one thousand seven hundred and sixty five, as have been or shall be paid into the treasury, in discharge of the duties and taxes imposed by any former act of assembly; and upon receipt of the said bills or notes, the said committee shall give to the treasurer for the time being a certificate of the amount thereof, which shall avail the said treasurer in the settlements of his accounts as effectually, at all intents and purposes, as if he produced the said bills or notes themselves: And the said committee are hereby required and directed, so soon as they have given such certificate, to cause all such bills or notes to be burnt and destroyed.’ (Hening 1969, v. 7, p. 353) Yep, they knew hundreds of years ago to protect the value of the government’s paper currency, you’ve got to redeem it in taxes and burn the revenues generated. Exactly like we do with our taxes that are collected today. They are destroyed the second they hit the reserves. HM Treasury even show you how they do it. Importantly what this arrangement of accounts tells you, along with the description of the way Reserve accounts work at the Bank of England, is that spending is disconnected from the debt management operation. All entities operating at the Bank of England have an interest free overdraft available during the day to absorb flow differentials, and this effectively means that they spend on their accounts and then back fill (or under fill) to the target account balance using standard asset and liability optimisation mechanisms. Notice how the so called tax revenues never make it into the deficit / Surplus box. The fiscal conservative framing and propaganda try and convince you otherwise. No wonder they lost America the colonies were so far ahead of the game. Reply Report If_Not_Why_Not jimmurphysbrassneck 12h ago 0 1 'so they make up some crap about Zimbabwe or it only works in a closed economy.' It's not crap. It only does work in a closed economy. Further if you keep shaking the Magic Money Tree, eventually it will cause hyper inflation. Reply Report jimmurphysbrassneck If_Not_Why_Not 6h ago 1 2 Nonsense and just shows you have no understanding of floating exchange rates. I like how you ignored the Treasury model are we a closed economy ? Was the US a closed economy ? Just because it does not fit in with your confirmation bias does not mean you have to make stuff up. Reply Report If_Not_Why_Not jimmurphysbrassneck 6h ago 0 1 Yeah Right. The USA will now mint say 20 $1 Trillion coins, they can give couple to Chinese, that should satisfy them! Next the UK will fund all public expenditure/spending via MMT and expanding the BoE balance sheet. Life will be peachy. Your accounting tricks are just that. Reply Report jimmurphysbrassneck 1d ago 4 5 We need to say exctly what Modern Money is. Now that we no longer work from a gold standard or a fixed exchange rate. Problems in communicating the complexities of economic concepts and evidence are amplified by the ideological assumptions that dominate the public debate. Economics as an academic discipline and profession has come to be defined by a set of beliefs that are associated with the dominant free market paradigm. The consequence of this is a narrow debate that excludes the lessons of history and alternative economic paradigms that offer realistic insights into current economic conditions and related policy options. Conservative think-tanks and media outlets produce an array of ‘research’or ‘policy’reports such that the public understanding has become straitjacketed by orthodox concepts and conclusions that, in themselves, are erroneous, but also lead to policy outcomes that undermine prosperity and subvert public purpose. The willingness to tolerate mass unemployment, rising income inequality and poverty is a manifestation of this syndrome. Proponents of neo-classical macroeconomics have been extremely successful in their use of common metaphors to advance their ideological interests. What is, in fact, a myth that is designed to advance a narrow ideological interest, is constructed and accepted by the public as a verity. Thus ideology triumphs over evidence and we falsehoods as truth. Recent psychological studies have highlighted the extent to which pre-existing biases influence the way in which weinterpret factual information, including straightforward statistical data (for example, Kahan et al., 2013). This presents a problem for the communication of research outcomes that bearon public policy design, particularly where findings may be counterintuitive, or may challenge a dominant or controversial discourse, as in the case of economic austerity or climate change. The dominance of mainstream macroeconomics narrative in the public domain is achieved through a series of linked myths that are reinforced with strong metaphors. For example: Focus of attack Government spending: Living beyond means - Excess, Sacrifice needed Cuts needed immediately Nation has maxed out its credit card- Run out of money Irresponsible spending Spending like a drunken sailor- Wanton irresponsibility delinquent Focus of attack budget balance: Budget black hole - Astronomical analogy Collapse of massive star Deteriorating state of the budget- Health analogy illness, emergency TINA surgery Mushrooming budget deficit- Out of control and unbalanced The nation has run out of money, it is broke- Government budget is like a household budget the economy is like us Ballooning deficits and debt – inflated Out of control Focus of attack public debt: The UK is bankrupt- Nation is a badly managed insolvent firm The debt mountain- Huge, insurmountable, significant Burdening our grandchildren - Undermining family values Mortgaging the future - Undermining future Focus Of Attack Income Support: Welfare dependency- Drug addiction, ill health Dole shirkers, Skivers- Laziness, undeserving Working families- The paragon All reinforce a series of propositions promoted by mainstream economists and conservatives commentators to focus their attack on government intervention. The real truth is When we ask whether the nation can afford an initiative that a monopoly currency issuing government wishes to implement, we should ignore the £ cost and consider what real resources are available, as in levels of unemployment, equipment etc. Those available resources constitute the fiscal space. Whenever we talk about fiscal policy it should always be in relation to the fiscal space rather than centred on £ cost. The fiscal space should then always be related to the purposes to which we aspire, and the destination we wish to reach. Reply Report Constancemoan jimmurphysbrassneck 20 Feb 2016 22:21 0 1 That's why it is not wrong to stop the production of Trident submarines and the associated weapons. If the workers sat twiddling thumbs for the next 30 years it would not matter. The results of their labour are at best useless. They should employ their skills making useful products for the rest of us. You may wish to rip me apart for this, I shall wait your comments, @jimmurphysbrassneck Reply Report Daveinireland 1d ago 3 4 overnments can tax, grow or even print their way out of debt Really? I'd love to know which government taxed or printed it's way out of debt. Reply Report zalacain Daveinireland 1d ago 1 2 We know of lots that tired (such as Venezuela) but none that succeeded. Reply Report Daveinireland zalacain 23h ago 0 1 Well yes, there is no shortage of countries that have tried. I've just never heard of one that actually succeeded. Reply Report James Griffith 1d ago 0 1 But far from this leaving Britain’s cupboard bare, the national debt dwindled from 250% to 50% of GDP. Our economy had been shrunk vastly by the war effort. Multiple private enterprises had huge restrictions on them which help back GDP. Once rationing and restrictions were removed and the factories could start working the GDP would naturally skyrocket. We also cut down the vast bulk of our deficit by disbanding much of the armed forces (can't do that now) and we received huge sums from the Marshall plan. There is no comparison between that debt and this one. None at all. Reply Report AndrewJB James Griffith 1d ago 0 1 Other things that aided in growth after the war were the setting up and operation of the welfare state, and nationalisation of areas of the economy . So yes - nothing at all like today. Reply Report ShahOfBlah James Griffith 21h ago 0 1 So why did that not happen at the end of the First World War? The situation was nearly identical, in fact the UK suffered more losses in World War One. Probably something to do with the government following rigid orthodox right wing theories, following the end of World War One, as did the rest of the world which led to a global slump.The Second World War was followed by largely Keynesian economic theories which led to growth not seen an a scale before or since. Reply Report giants 1d ago 1 2 One thing is certain. The Labour Party must repudiate the Thatcherite Consensus which the Blairite entryists embraced . That Consensus is now obsolete. It is not working and will in the coming months be seen to be not working. Neo liberal economics were rejected after WW2 duw to the worldwide misery they caused. A new consensus will be assembled but it takes time and bitter experience. Reply Report completelydotty giants 1d ago 0 1 Really?? I look forward to hearing about it. I suspect we will be waiting for some time. Reply Report zalacain giants 1d ago 0 1 Which are richer, capitalists countries or socialists ones? End of story. Reply Report stevefrompolaca zalacain 14h ago 0 1 which has greater debts? I think you will find the USA is the most capitalist and also the most indebted of countries. You not think there may be a link? Reply Report TeMataPeak stevefrompolaca 14h ago 0 1 US is not the most capitalist. A number of countries score higher in terms of economic freedom Reply Report Anne Rasmussen 1d ago 0 1 Go to economic anthropology, the new way of thinking is already there I think. Reply Report RaymondDance 1d ago 3 4 Yet more evidence, both above and below the line, that no-one - but no-one - on the left understands the difference between money and wealth. Reply Report zalacain RaymondDance 1d ago 0 1 I think that economics should be compulsory at school to a certain level. Reply Report Catchingup zalacain 15h ago 0 1 What economic ideology would you like to see taught? Reply Report epidavros RaymondDance 14h ago 1 2 Well we are living through the fact that not only does nobody on the right understand it, but they will use force to impose their ideological misunderstanding of it on the world, to the detriment of almost everyone. Reply Report Fergus Hashimoto 1d ago 0 1 P.S. A commented summary of Adolf Wagner´s review of Alfred Marshall's Principles of Economics can be found at http://blueplanetnotes.blogspot.com/2016/02/german-historical-schools-critique-of.html Reply Report PATRICKNEWMAN 1d ago 0 1 Forget adopting the right theory - it's about putting the message across about a better economics ad infinitum, ad nauseum. As put down for Osborne how about describing his long term economic plan as Micawber moneynomics? Reply Report jimmurphysbrassneck 1d ago 0 1 Ha brilliant !! Where have you been Stephanie Kelton Sanders economic advisor has been changing this for 15 years. MMT have written 100 books on the subject. Reply Report Aussiealltheway 1d ago 1 2 The Lieberals have absolutely no idea of what they are doing. They think that by trying to confuse us, we will think that we're the crazy ones. They're a pack of bloody unicorns or pink fairies or whatever. They are kindergarten children in charge of the country. All they can think about is making money for themselves and their moronic religions with their airy-fairy gods. Reply Report soundofthesuburbs 1d ago 6 7 The Neo-liberal ideology swept the world and it is now destroying itself. “There’s class warfare, all right, but it’s my class, the rich class, that’s making war, and we’re winning.” Warren Buffett The 1% went to war on the 99% (aka the global consumer), very silly really. Before they win, everyone loses. Capitalism is like Siamese twins at war with each other. The 1% and 99% always fighting each other to get more, but if either side win they destroy each other. The 1% were in the ascendency in the 1920s and blew it up with a Wall Street Crash in 1929. The 99% were in the ascendency in the 1970s and blew it up with constant strikes making individual nations uncompetitive. The 1% are in the ascendency again and have already caused another Wall Street Crash (2008) plunging the world into a global recession that seems without end. The 1% haven’t worked out that they have gone to war against the consumers that buy their products and services. Obviously this was all spotted by Marx a long time ago, but he had never seen the results of the 99% in power (Pol Pot’s Cambodia, Stalin’s Russia, Mao’s China, etc ...). He came from a wealthy family and was only too aware of the greed, self-interest and hypocrisy in his own class. It doesn’t seem to matter which ideology you try and follow the psychopaths always end up in the positions of power. Capitalism is an endless fight between the two sides, but neither side can win, to do so destroys themselves. A more balanced approach is needed but the very thing that makes Capitalism work, self-interest and greed, ensures neither side is ever happy with their lot and always wants more. Reply Report James Griffith soundofthesuburbs 1d ago 0 1 A very interesting analysis. Reply Report ub313 soundofthesuburbs 1d ago 0 1 Only problem is that the 99% clearly were not in power in the Leninist and Maoist states. Surely by definition those who control more wealth have more power? If we instead define 'the 1%' in terms of income, this might make more sense, but I'm pretty sure the most powerful individuals in the socialist states were those who enjoyed the highest incomes. Reply Report TeMataPeak James Griffith 14h ago 0 1 A totally delusional analysis Reply Report succulentpork 1d ago 0 1 'governments can tax, grow or even print their way out of debt, three important escape routes not open to individuals. ' Mostly they are. Individuals can steal the money from someone else (tax), work harder and more productively to earn more (grow), and also defaulting is open to both individuals and governments. Granted, counterfeiting money (printing) is not open to the individual, but this is really the equivalent of taxing/robbing anyhow. Reply Report pantokrator succulentpork 1d ago 0 1 You print money every time you use your credit cards - unfortunately it is 100+% debt, unlike government printed money. Reply Report jimmurphysbrassneck succulentpork 1d ago 2 3 You need to learn how central banks operate in reality and not in some fantasy land far far away. Reply Report Newmania2 jimmurphysbrassneck 1d ago 4 5 You do not print money every time you use a credit card the bank has to be balance the whole thing at 3.30PM every day . If it lends it must borrow . If banks could actually create money then Northern Crock would not have fallen over . While I Reply Report succulentpork jimmurphysbrassneck 1d ago 0 1 I know how central banks work. Reply Report succulentpork Newmania2 1d ago 0 1 What about deferred net settlement? Reply Report AaronClausen 1d ago 3 4 If a sovereign state attempts to print itself out of debt, without something to actually back the expansion of the moneys available (like say, increased economic output and employment), the currency quickly becomes devalued, to the point where even the government in question starts paying more. Reply Report ID3111798 AaronClausen 1d ago 3 4 Totally wrong - that's gold standard thinking which is well over 40 years out of date. Your comment clearly displays that you don't know the difference between fixed exchange rate economics and floating rate, and that you really should be reading more instead of spouting nonsense. You could start here, or just continue to remain in total ignorance if you like. It's utterly embarrassing that people like you are still out there shouting the Earth is flat. http://neweconomicperspectives.org/2011/06/mmp-blog-2-basics-of-macro-accounting.html The editor of this site is the current US Chief Economist. Reply Report pantokrator AaronClausen 1d ago 0 1 Completely and utterly false. Reply Report RaymondDance ID3111798 1d ago 1 2 The editor of this site is the current US Chief Economist. Is that supposed to be a recommendation? Reply Report giants AaronClausen 1d ago 0 1 The banks stopped lending backed by reserves years ago or haven't you heard. Every loan is created electronically. The British are the most indebted in the advanced world - some 487% of GDP. Reply Report Fergus Hashimoto 1d ago 0 1 This article is very sensible, but it suffers from a major flaw: ethnocentrism. All the authors cited (Tawney, Hobbes and Smith) are British. The denizens of the Anglosphere must grasp the fact that their economic attitudes, conventions and bromides are SPECIFIC to their culture. The most consistent attempt to counteract the baneful influence of Anglospheric free-market ideology was undertaken by the so-called German Historical School that flourished during the 19th century and whose most prominent spokesmen were Friedrich List, Max Weber, Adolf Wagner and Gustav Schmoller. The German Historical School stressed the importance of the public sector in the economy, and its advocates were known as “Katheder-Sozialisten”, i.e. “academic socialists”. At the same time it rejected (but excessively) the use of abstract mathematical models. Unfortunately in some cases the focus on the public sector and on the nation, as opposed to the market, led to chauvinist German nationalist positions, and was sometimes associated with anti-Semitism. Although the founder of the School, Friedrich List, was not an outspoken nationalist, the School drifted to the right as the 19th century wore on, and most members of the German Historical School eventually supported Germany’s imperialist policy that caused the first World War (1914-1918), as conclusively demonstrated in the 1960s by the German historian Fritz Fischer. In 1891 Adolf Wagner published a review of “Principles of Economics” by Alfred Marshall, at the time the most prominent British economist. This review cites most of the German Historical School’s critique of Anglo-Saxon economics, and is well worth reading. You can read it in English at http://socserv2.socsci.mcmaster.ca/econ/ugcm/3ll3/marshall/Wagner.htm. By the way, Wagner clearly shows his irrational anti-Semitic bias in this review. This however does not detract from his economic arguments, which are consistently rational. Reply Report ButFactsAreSacred Fergus Hashimoto 1d ago 1 2 their economic attitudes, conventions and bromides are SPECIFIC to their culture. And those of the German Historical School were equally specific to THEIR culture. Reply Report succulentpork 1d ago 2 3 ' the real economy operates through continuous “flows” of payment and activity.' This is, in fact, the very metaphor of the economy that we desperately need to do away with. It is the main model that most people have in their head. Spending = income = spending = income etc etc. And it gives rise to the belief that economic slumps are due to insufficient fluid in the pipes. Unfortunately, it is wrong. This circular flow of income model has two critical flaws. It ignores the capital structure of the economy. And it ignores time and time preference. Obviously most people won't know what that means because leftwing economics has largely done away with these crucial concepts. Reply Report jimmurphysbrassneck succulentpork 1d ago 0 1 Complete tripe. Even the top economic advisors to the top banks use the sectoral balances model. Everything within the model is either a currency flow or a currency stock. Reply Report succulentpork jimmurphysbrassneck 1d ago 0 1 I know everything withing the model is that. My point is that the model is not an accurate representation of reality, and thus using it in the way it is used is wrong. Where is capital? Where us time? Reply Report jimmurphysbrassneck succulentpork 1d ago 0 1 You are just being padantic. The sectoral balances framework and the closely related flow-of-funds approach is an extremely useful analytical tool. In one sense it is pure accounting. That provides useful insights in its own right. But to really use it as an engine for understanding and analysis we need to marry in theoretical conjectures that allow us comprehend how the balances respond to income shifts and how they correspond to different states of the economy. It is based on accounting principles rather than being a behavioural (theoretical) framework for understanding how the flows occur. Relatedly, there are no insights into the adjustment processes that govern the change in net financial assets in each sector. This does not reduce the utility and insights that the approach provides. Often economists and you like to denigrate analyses that manipulate accounting identities as if they are too low brow. But any approach is valuable if it provides useful ways of thinking. It is light years ahead what the right wing nut jobs use to analyse the same data. None of them saw the crash coming apart from the economists that used this model. Wynn Godley who introduced it warned your right wing friends but they didn't listen. So did many MMT economists who also use the model. Reply Report succulentpork jimmurphysbrassneck 1d ago 1 2 'None of them saw the crash coming apart from the economists that used this model.' Don't be silly. Accounting is not economics. Sure, virtually all models are useful. But income flows are considered by some people as an exact model of the economy. That is the only conclusion you can draw from what they infer from it. And it is insane. And that's why MMT'ers come up with such crazy notions that defy common sense. Reply Report jimmurphysbrassneck succulentpork 23h ago 0 1 Rubbish yet you can't debunk any of it. You wouldn't know where to start. The 3 min video below would probably tie you in knots. Reply Report taxmesomemore 1d ago 0 1 Many claim that countries never pay their debts. ...so austerity makes us feel upright and honest. Reply Report AaronClausen taxmesomemore 1d ago 0 1 To be sure, countries may never be out of debt. The United States, for instance, has never been out of debt since the Civil War. But there are different kinds of public debts, and in general, older debts should be retired. There is also how such money is used. If the borrowed money is used for infrastructure, a government can rightly claim, as would a private enterprise, that the debt is building and maintaining an asset whose value will be maintained for much longer than the repayment period. However, if a government produces and grows a 'structural deficit', in which money is spent on various programmes like welfare benefits or civil service salaries, that is generally considered a 'lower quality' debt. Reply Report taxmesomemore AaronClausen 1d ago 0 1 Sure, I understand that borrowing to fund current costs make little sense (like payday loans) and that borrowing to invest in needed skills and infrastructure makes a lot more sense to enable innovation and trade and a better standard of living. But should we tax or borrow to reduce poverty or devalue study and work by printing money and giving to the poor? Reply Report richardjwilliams 1d ago 2 3 It matters little what metaphors are used to describe UK economics, particularly when saying that our National Debt dropped form 250 to 50 % of GDP when the initial data refers to the immediate aftermath of WW2. Under Osborne and in spite of his protestations of debt reduction it has nearly doubled. currently heading ever upward and approaching £1.6 Trillion !!. Disastrously Labour. even if they surround themselves with economists. are just not able to form a credible government. In fact the only political body who produced a costed manifesto at the last election were UKIP, who again have some really sound policies and yet again do not have enough experienced members to form a sound government. The UK is at a cusp in our economic future, and unless Osborne cancels grandiose idiocies such as HS2 at £55Bn and counting , stops the £220Bn already pledged for wind farms, crippling UK manufacturing through crazy energy tariffs.and handing £12Bn a year to overseas aid and more to the EU we cannot possibly narrow the gap. If interest rates rise we will be paying more in interest than we do for major government departmental budgets. Reply Report James Murray 1d ago 2 3 Yes but even the Guardian economic experts do not seem to know who 'creates' money. It is not the Government - although they do create the 3% of the money supply when they commission the fiat money of notes and coins from the Royal Mint. In fact, the other 97% is created by the banks in the hundreds of thousands of loans they make every year. It's true the banks do not lend out money from the big pool of money people had deposited or saved with them. See www.positivemoney.org for the real explanation. Once this is realised, it is a short step to accept that the Gov't can easily create money not from taxes or borrowing, but by selling the Bank of England Treasury Bonds with no interest at all. No debt and no interest, but only when there is deflation (as now) or a recession threatened. It is a smart alternative to the £375 billion of QE 'created' from nothing which, as said above, has pumped up asset prices for the rich and screwed down the poor. It is so efficient that £10 billion would have given us the all the growth of the whole of the £375 billion of QE. see https://positivemoney.org/2014/06/waste-375-billion-failure-quantitative-easing-video/ Its the future Guardian readers, the future I say.... Reply Report soundofthesuburbs James Murray 1d ago 1 2 Economists ignoring the true nature of money and debt left them blind to 2008. It has also led to them using the wrong solutions ever since, they have done nothing about the private debt overhang. The next crisis is on its way. An economist who warned in 2005 about private debt levels ..... https://www.youtube.com/watch?v=qrz76_j9MRs Steve Keen is a man that could see what Ben Bernanke and Alan Greenspan couldn't. Reply Report pantokrator soundofthesuburbs 1d ago 0 1 Yes, the increasing private debt is the real problem. Reply Report pantokrator James Murray 1d ago 0 1 You are right it's not the government that creates most of the money, but only for ideological reasons of gross stupidity - there is no reason why the can't or shouldn't. Reply Report soundofthesuburbs pantokrator 1d ago 0 1 Well there is a good reason ...... both the US presidents that tried to move to Government created money were assassinated, Lincoln and Kennedy. Do you want to live? Reply Report pantokrator soundofthesuburbs 15h ago 0 1 What about FDR? Reply Report ExpletivesDeleted 1d ago 2 3 'Socialism with an iPad'? Is he serious? Can you imagine for one second that an iPad conceived and built by some committee in some nationalised industry would be anything other than a laughing stock! Reply Report taxmesomemore ExpletivesDeleted 1d ago 3 4 McDonnell is earnestly working on the Socialist iPad so it is made in the UK and relieves those Asian workers of their livelihoods. Reply Report mothercourage 1d ago 0 1 Keynes has got a lot to answer for, along with politicians of course, who obviously find economics just as boring as the rest of us and only listen to those who shout the loudest. Im a Hayek fan myself, The Road to Serfdom, is certainly worth a read. Ive also got a huge tome on economics, simply called ECONOMICS, by Samuelson, written in 1950s -1970s, which doesnt even mention anything about 'globalisation'. My point is that the 'financial sector' has developed relatively recently, becoming less acsessible, less answerable to people or Govts. in other words taken on a life of its own !! It can only be stopped with REGULATION, tight controls that prevent the idiots in charge from gambling with our money and skimming the cream off the top for themselves ! Reply Report soundofthesuburbs mothercourage 1d ago 1 2 I think we are on the Road to Serfdom using Hayek's ideas. Reply Report Wallstrom 1d ago 4 5 Should the Guardian be lecturing anyone on how to balance budgets? Reply Report unended Wallstrom 1d ago 4 5 The government doesn't need to balance any budget. Reply Report sockzodiac unended 1d ago 1 2 Yeah we can just have it all. You clearly have a belief in faries. Reply Report CrusadingTuna unended 1d ago 2 3 The government doesn't need to balance any budget. Wow. You should be Chancellor Chauncey. Reply Report Wallstrom unended 1d ago 4 5 Oh I forgot. The magic money tree with contributions from 'the rich' Let me guess, you were finance director at British Leyland. Reply Report ThirdBifurcation sockzodiac 1d ago 0 1 we should be forced in stead have nothnig? Reply Report unended Wallstrom 1d ago 3 4 Oh I forgot. The magic money tree with contributions from 'the rich' The government is the creator of pounds sterling. It doesn't need the rich. The rich need it. Reply Report freewales unended 1d ago 0 1 Your talking to idiots, they will never understand. Reply Report Wallstrom unended 1d ago 3 4 Can you tell me any economies where 'sixth form' economics like this has worked and why doesn't Greece exit the EU to do it. Yea but, no but, yea but, no but...... Reply Report Jacky Smith Wallstrom 1d ago 1 2 Can you show me an economy where 'free markets' have delivered something worth having? Anywhere? Global warming is the direct consequence of this sort of stupidity. You cannot have never ending growth on a finite planet - unless you understand that money isn't something real, it's a man-made concept that can be re-invented if everyone agrees that that should happen... Reply Report Wallstrom Jacky Smith 1d ago 1 2 'Where have free markets delivered' What have the Romans ever done for us? Reply Report unended Wallstrom 1d ago 0 1 Can you tell me any economies where 'sixth form' economics like this has worked and why doesn't Greece exit the EU to do it. Yea but, no but, yea but, no but...... Are you just asking me why Greece has made bad policy decisions? Greece is not a currency issuer. It relinquished currency sovereignty when it joined the euro and agreed to be a mere user of a foreign currency whose issuance it does not control. As a consequence, it subjected itself to credit markets, because now it was dependent upon other entities to obtain the currency it spends. Greece could certainly get out of its economic problems relatively easily. It simply requires that it leave the euro currency union and reclaim currency sovereignty. Reply Report ID3111798 CrusadingTuna 1d ago 1 2 Unneeded is totally right. You clearly have no idea about the Government's spending operations actually work. The Government spends first, the population saves some of that spending and so taxes will very rarely equal the original spending. If you spend less, the population still saves, but you get EVEN LESS back in taxes. Sound familiar??? You have savings right? Well someone has to be able to supply you those savings because all bank loans have to be paid back. And think of the people saving millions each year, where do you think that money is coming from? It comes from the Government sector and it's better thought of as an 'offset' than any kind of debt, just as the bank in Monopoly must provide a constant offset to the board so that the game can continue while the players try and collect all the money that was actually intended to be circulated. Where is the rule in Monopoly that the bank must try and balance it's books? The only way to do that is to take all the money back off the board. Rather than showing your extreme ignorance, start doing some reading. You could start here. The site editor is the current US Economist who will roundly tell you there is absolutely no reason the books have to be 'balanced'. Not unless you want the private sector to have ZERO savings. http://neweconomicperspectives.org/2011/06/mmp-blog-2-basics-of-macro-accounting.html Reply Report igazsag freewales 1d ago 1 2 You call people 'idiots' and in the same post you demonstrate that you don't know the difference between 'your' and 'you're'. Brilliant. Reply Report johnblack 1d ago 2 3 The level of economic debate in the UK is pretty poor. I have never understood how those Conservative elements who push the idea you run UK plc like the corner shop can explain QE - all £300+ bn of it. However they seem to manage it - and that explain why economic discussion is so limited. Reply Report worried johnblack 1d ago 2 3 They get away with it because the parliamentary balance allows them to...it has nothing to do with whatvyou or I know about finance and economics. Some say this type of govt action illustrates a lack of democracy ie the people being ignored Reply Report CrusadingTuna johnblack 1d ago 0 1 and that explain why economic discussion is so limited. Ooooo. Thah exthplain it do it. I wanid to know whoth explain it. Itth nithe to know thomeone underthands. Reply Report Elinore 1d ago 1 2 The word I would use is unprintable and uncharitable as well. This is how I am getting screwed by the economy. About two days ago I eagerly opened a missive from the DWP .It contained details of my rise in State Pension which was 2.9% or rather it should have been. But mine was only 2.6% so I phoned them up. It's only on the basic state pension said they, but not on all the other bits like Post 97 additional State Pension or Graduated Retirement Benefit. Ahh said I wisely, not understanding a bleeding word but I don't get a rise on my Occupational Pension because I was contracted out . That doesn't apply here they said. I was losing my will to live at this point. Can you tell me about Voluntary contributions to increase my State Pension I asked in a whimper. and will an increase on the basic state pension include this change to benefit. i We can't said the DWP whose job it is to look after State Pensions but we will give you a phone number and you can speak to a machine who will be able to answer you. So off I phoned and this machine kept asking me questions but didn't like my answers so eventually I got through to a nice lady in HMRC who couldn't answer the question, but she knew someone who could and if I just held on for about an hour so I would get an answer. And I did and the answer was yes , but I don't trust them somehow. The economy is very complex. I don't understand it. But I know I am getting thoroughly screwed and I'm not enjoying it. Reply Report CrusadingTuna Elinore 1d ago 0 1 Frankly, if your income is 2.6% more than last when inflation is almost non existent, I dont what you are worrying about. No point in dying of an aneurysm over 0.3% that most people are not even getting anyway init. Reply Report Elinore CrusadingTuna 1d ago 0 1 My income isn't 2.6% better, that's the point. The way the government works the economy is to give you something then find ways to take it back. Reply Report BaronessHawHaw Elinore 1d ago 0 1 Try Progress and Poverty. The biggest selling book on economics in history - and it's written for the layman. Winston Churchill, Einstein, Tolstoy, George Bernard Shaw were all big fans. Never truer than now. Reply Report morbile 1d ago 1 2 'Big ideas ' big bullshit more like. Time government came clean about finances especially when it comes to tax and debt. The slight of misplacing bits of debt and dressing it as investment is crap. PFI and other forms of smoke and mirrors used to disguise government debt should be banned. Let's have some real transparency and real figures that we can look at. Instead they puff themselves up when they succeed with their conjuring tricks in hiding the truth. But that's what money men do. They play with figures trying to find more ways of hiding the truth. If we tried to do it, we would be called conmen. But in government terms that translates to 'chancellor of the exchequer'. Reply Report sockzodiac 1d ago 0 1 even print their way out of debt Just one point I don't believe the government can do that unless, say like in Japan, they are able to plunder reserves of national savings. Then that sure ruled us out back in 2008. That just leaves foreign investors and none of those would ever be stupid enough to purchase government bonds in a way that leaves themselves open to that kind of thing. Unless maybe, you were part of something like the Euro, which might explain why that went tits up in double quick time and then required drastic austerity measures in order to save it. Go ask Cyprus about that. Reply Report freewales sockzodiac 1d ago 0 1 Printing money is linked to nothing, for evidence see what Osborne has done over the last six years. Reply Report sockzodiac 1d ago 1 2 One day we might actually have a government of the left that walks the talk on Keynesian economics. Instead of the ones that hear only what they want to hear and ignore all the rest. Till then, the nearest we've ever been, by a country mile, to a low inflation, sound money, low borrowing economy was under Thatcherism. Oh the irony of it and one completely lost on lefty Guardian readers always in search of silver bullets. Reply Report unended sockzodiac 1d ago 2 3 a low inflation, sound money, low borrowing economy (1) Do you even know what you mean when you use these terms? (2) Why do you suppose this should be a goal? Reply Report sockzodiac unended 1d ago 1 2 OK then let's have high inflation, a devalued pound and loads and loads of borrowing and see how much fun that is. Reply Report unended sockzodiac 1d ago 2 3 I am just asking because your understanding of the facts seems wrong. For example, the UK hasn't borrowed any money since even before Thatcher--it is a currency-issuer and currency-issuers do not borrow the currency they issue. (And, for what it's worth, a devalued pound would be good for domestic industries, since it would (1) make exports more attractive internationally, and (2) make imports more expensive, pushing consumers towards domestically produced goods.) Reply Report sockzodiac unended 1d ago 1 2 A quarter of government debt is indexed linked gilts that take into account the inflation rate when they mature, thus protecting the investor against devaluations. Around a third of the debt isn't indexed linked but the interest rate offered is set by the bond market and is a reflection of the risk such a bond carries. In other words, the higher the borrowing and the looser the money supply, the higher the interest rate that has to be offered to the market. An important consideration to any nation that needs to keep on borrowing to maintain its public services, as we currently do. Sound money and the austerity is what has kept our interest rate historically low, the alternative to that is not a prospect any sane economy should be considering. Reply Report unended sockzodiac 1d ago 2 3 In other words, the higher the borrowing and the looser the money supply, the higher the interest rate that has to be offered to the market. You don't understand the monetary system that the UK uses. The BoE sets the interest rate. It is not determined by the market. This can be done because the pound sterling is issued by the government and allowed to float on an exchange. An important consideration to any nation that needs to keep on borrowing to maintain its public services, as we currently do. The UK government doesn't borrow any money at all, ever. Zero. Zip. Zilch. This flows directly from its status as a currency-issuer. Take a step back and think it through. If you had a machine that spit out money that everybody accepted, what need would you have of borrowing? None. The same applies to the government. The government's selling of gilts is really just a government spending program whereby it offers people risk-free interest on savings. But it doesn't fund anything, and it's not 'borrowing.' Sound money and the austerity is what has kept our interest rate historically low No, you have the BoE to thank for that. Reply Report sockzodiac unended 1d ago 0 1 Printing more money just devalues the money already in circulation. Then when we have to buy in raw materials and food, that's when you find out it's going to cost ten quid for a litre of petrol. The government does not set the interest rates offered on the bond markets, the investors willingness to buy them, or otherwise, does. Reply Report unended sockzodiac 1d ago 2 3 Printing more money just devalues the money already in circulation. No, it doesn't. You don't understand how money works. If output increases because spending has increased as a result of net currency issuance, prices remain the same. The government does not set the interest rates offered on the bond markets.... Yes, it does. Reply Report picardy 1d ago 1 2 the obsession with banks and their welfare has to stop the city of london dominance of the agenda has to be stopped good old fashioned workers right workers pension workers nhs workers education workers jobs, wallst and the city of london and creeping up on rails is Brussels trying to squeeze a dictatorship into euro zone Reply Report MikeDrew2101 picardy 1d ago 1 2 What do you think would happen if the banks failed? Workers would not get paid. Benefits would not be able to be paid out. Taxes would not get to government. Companies would not be able to buy supplies. Reply Report freewales MikeDrew2101 1d ago 0 1 No absolute rubbish, now if you had said The BoE that might have caused the problem you envisaged, but then that's practically impossible. Reply Report MikeDrew2101 freewales 16h ago 0 1 Precisely how would all those with accounts with just one bank manage if it collapsed? The Banks are all entwined with one another that if one failed then the others would rapidly follow. Reply Report soundofthesuburbs 1d ago 3 4 'Whereas poverty, in medieval religious theory at least, had been next to godliness, early modern thinkers from Hobbes to Smith equated wealth with worth.' Adam Smith: “The Labour and time of the poor is in civilised countries sacrificed to the maintaining of the rich in ease and luxury. The Landlord is maintained in idleness and luxury by the labour of his tenants. The moneyed man is supported by his extractions from the industrious merchant and the needy who are obliged to support him in ease by a return for the use of his money. But every savage has the full fruits of his own labours; there are no landlords, no usurers and no tax gatherers.” Here Adam Smith equates wealth with idleness and notes how the labour of the poor keeps them in idleness. Like most classical economists he differentiated between “earned” and “unearned” wealth and noted how the wealthy maintained themselves in idleness and luxury via “unearned”, rentier income from their land and capital. Reply Report soundofthesuburbs soundofthesuburbs 1d ago 1 2 'Trickle down. my arse' Adam Smith or maybe that was Jim Royle. Reply Report CrusadingTuna 1d ago 5 6 I think all bets are off in terms of understanding what is happening now, and how best to deal with it. Inidividual issues are within known uderstandings, but the global picture is one that has never presented before. I really do not think anyone really knows where it is all going. We know where it isnt going. It isnt going back to where it was. No more secure employment, no more affordable pensions that give a liveable retirement, no more affordable housing, even for professional people, unless they get a big inheritance. This is not just the UK. It is global. Those who think it is just the UK should research. Most of the major issues rather than the petty ones, are the same everywhere. Reply Report DavidVinter CrusadingTuna 1d ago 1 2 Yes too many humans wanting a form of secure employment in an overpopulated world, where an ever increasing amount of production is being carried out by robots. Reply Report CrusadingTuna DavidVinter 1d ago 0 1 I think it is even more complicated than that! Reply Report GeneralDogsbody CrusadingTuna 1d ago 0 1 Too much debt, good and bad, in the global economy. Letting those holding the bad debt suffer the consequences would be playing musical chairs in the dark. Reply Report CrusadingTuna GeneralDogsbody 1d ago 0 1 Letting those holding the bad debt suffer the consequences would be playing musical chairs in the dark. Yes it would, although of course the blind do not know it is dark. Reply Report TonyB33 CrusadingTuna 1d ago 1 2 Hi Crusading Tuna It is very simple there are 7 billion people out there 1 billion earn roughly USD 1,000 a week 3 billion USD 20 a week and 3 Billion USD 7 a week. In the past communication barriers, transport barriers and tariff barriers protected western worker. The internet, container ships and the WTO have removed the barriers. Ultimately western living standards will have to fall given that 6 billion are on an average of USD 13.50 against the western wage of one Billion on USD 1,000.00 the fall is going to be long and hard. The value of money is being destroyed and we are all getting poorer, those with hard assets such as houses believe they are getting richer, but the reality is that the house is not rising in value its money that is falling. Very shortly the baby boomers will start trading those hard assets for services such as medical services, and assisted living space and as they all hit the exit together these assets will then reprice. Reply Report taxmesomemore TonyB33 1d ago 0 1 Globalization, the great leveler. Reply Report ID3111798 CrusadingTuna 1d ago 0 1 Plenty of people understand what is happening and how to deal with it. The editor of this website is the current US Chief Economist. http://neweconomicperspectives.org/2011/06/mmp-blog-2-basics-of-macro-accounting.html Reply Report CrusadingTuna ID3111798 20h ago 0 1 Yes, sectoral balances are not widely accepted. It is no more valid than David Ickes claim that he is the new Messiah. I am sure he believes it, and he is sincere...it's just he is not credible and neither is sectoral accounting. When the FT endorses it, I might reconsider, but dont hold your breath, and keep taking the tablets. Reply Report cerises 1d ago 1 2 Can't disagree with the premise, we desperately need a new framework, accessible to all, that would help us make economic decisions and vote for new economics and governments. But the power brokers, the finance industry and the politicians, won't want their paternalistic world threatened and we'll be swatted away like disruptive children. Change never seemed so far away. Reply Report MustaphaMondeo 1d ago 4 5 Muddling along is about all I require. Anything else is untrustworthy. Relying on high hopes of growth in a stagnant global economy to wipe out massive borrowing strikes me as being idiotic. If economists had a clue we would all be rich. But in real life they have their heads up their arses. Unbelievably shortsighted plans to expand economies by breeding workers in an unsustainable fashion. If they actually had some foresight the economists would be calling for contraception and vegetarianism. Instead we get HS2 and a new hub at Heathrow. Honestly, putting the lot to the sword would make the world a better place. Do we ever hear an economist suggesting growth is not a panacea? Reply Report ianita1978 MustaphaMondeo 1d ago 2 3 Thanks. All obvious and true. We are being led into an inferno by these fools. Reply Report DrChris MustaphaMondeo 1d ago 1 2 'Breeding workers in an unsustainable fashion'? Where are these worker breeding sites and who is running them? Economists do not make policy, they study the working of economies. They did not invent HS2 or a new hub at Heathrow (all excellent ideas actually) Reply Report MustaphaMondeo DrChris 1d ago 0 1 Germany. . . again. Reply Report DavidVinter MustaphaMondeo 1d ago 0 1 Yes, I do, but I'm an agricultural economist, and the stupidity of an ever increasing population wanting ever more goods is unsustainable. Reply Report MustaphaMondeo DavidVinter 1d ago 0 1 Forgiven the sword! Oh good, I wasn't really looking forward to all the beheading. Reply Report unended MustaphaMondeo 1d ago 0 1 Relying on high hopes of growth in a stagnant global economy to wipe out massive borrowing strikes me as being idiotic. It is, if only because the UK government doesn't borrow money at all. Reply Report MustaphaMondeo unended 23h ago 0 1 gilt, government security sold on the stock exchange, = borrowing. Reply Report unended MustaphaMondeo 23h ago 0 1 gilt, government security sold on the stock exchange, = borrowing. It's not borrowing, because there is no meaningful burden imposed on the government when it sells a gilt. When the government sells a gilt, it is merely providing the service of offering a risk free, interest-bearing savings account (or CD) to somebody. The government can always pay the interest promised, because it issues the currency that it's denominated to be paid in. Reply Report MustaphaMondeo unended 10h ago 0 1 The government risks the respect of the community. Ask the Weimar Republic and by extension a hundred million dead if the issuing of money is always a risk free option. It is borrowing. Reply Report BluebellWood 1d ago 4 5 I think the problem is that the whole way of economic thinking needs a serious overhaul. How did it come to be that money (which originally was simply a token of exchange for real goods and services) has now taken on a whole life of its own, which bears no relevance to people’s needs, their productivity, their contribution to society, etc.? Yet financial dealings – which have very little to do with the real world – have the power to impoverish whole nations and millions of individuals almost overnight. People did not suddenly stop ‘working hard’ and being productive, and societies did not suddenly stop needing essential services or basic needs such as enough food or shelter, when the financial crisis of 2007/8 happened. That a minority of people gambling on the money markets could wreak such destruction in the real world shows that this is an absolutely nonsensical basis for any human economy or society. The Wall Street Crash and its ensuing worldwide depression should at least have taught us that much (and that was minuscule compared to what’s going on today). All the real wealth and security that people collectively and individually gain for themselves can be wiped out in a second by some blip in the financial markets or by a small group of self-interested gamblers hoping to hit the jackpot for themselves. It is madness. And no, I have no answers. Possibly in 100 or 200 years’ time human beings will be more advanced in their thinking and look back and recognise how crazy all this is. But none of us will be around then. Reply Report colesla BluebellWood 1d ago 7 8 Look, the financial system has developed way beyond its original useful purpose, which was to provide investment opportunities for those willing to defer consumption now in return for increased consumption in the future and to provide credit to the most worthy projects in a way which limited and mitigated against an individual being exposed to large amounts of risk. It still performs that role, to some extent, but it extracts a heavy price in return by extracting a larger and larger % of the value of the firms and the individuals it deals with. Its become a huge blood sucking parasite upon the economy, and because its got the government in its back pocket, things are unlikely to change any time soon. The above opinion is nothing new - back when I did undergrad economics it was the first thing our lecturer explained to this. The entire profession of economics is convinced as to the hugely negative effects of an unregulated and out of control financial sector, but politicians simply don't want to listen. Reply Report DrChris BluebellWood 1d ago 2 3 We are not actually poor. Our standard of living is higher than it has ever been in human history. Reply Report pantokrator BluebellWood 1d ago 1 2 More advanced? - looking at the education stats in the UK vs the rest of the OECD, we're going backwards. Reply Report pantokrator DrChris 1d ago 1 2 Yet it could be higher, for all of us. Reply Report Ibmekon BluebellWood 1d ago 1 2 ' Possibly in 100 or 200 years’ time human beings will be more advanced i' Jesus drove out the money changers from the Temple. Wonder what he would have thought about FX trading ? Reply Report BluebellWood DrChris 1d ago 1 2 Our standard of living is higher than it has ever been in human history. Yours might be - certainly not everyone's. And while we as a society seek to take even more away from those who have least, and when even working people cannot even afford the basics of a roof over their heads and enough to pay the bills and feed and clothe their children, such glib generalities are meaningless. Reply Report BluebellWood colesla 1d ago 1 2 I wasn't particularly dissing economists, colesla. I've known one or two economists who lost their jobs for telling it like it is. Thatcher was notorious for hating economists generally because they said things she didn't want to hear (and were usually proved right). And I was under no illusion I was saying anything particularly original in my comment. I'm not an economist and have never pretended to be - economics wasn't even a subject on offer when I was at school! It just all seems like absolute madness to me from a layperson's point of view. Reply Report BluebellWood pantokrator 1d ago 0 1 Can't cope with the possibility that future generations might have more wisdom than you? That would be pessimism indeed. Reply Report pantokrator BluebellWood 1d ago 0 1 Wtf? Reply Report gandrew 1d ago 2 3 Thanks Tom. You might want to look at my Washing the Brain: Metaphor and Hidden Ideology. Here's one for you. Growth in mature economies is a cancer threatening the vital organs of the planet. Reply Report Hophazard 1d ago 1 2 The only thing you need to know about Corbyn and McDonnell is that are big admirers of the Venezuelan government that reduced their country to absolute ruins. http://www.bbc.co.uk/news/world-latin-america-35589524 They'd do the same to the UK given half a chance. Reply Report GreenOctopus Hophazard 1d ago 3 4 Fearsome bullshit. Reply Report stilt 1d ago 1 2 Interesting on metaphors, but no mention of Orwell's as this country being 'a family with the wrong people in charge' but the electorate has begged to differ for most of the time since WW2 apart from the successful Attlee governments and the rather disappointing Blair and Brown years. With the referendum on the EU and elections in many parts of the UK, it is make or break year for Corbyn as much as Cameron. The latter will depend on MacDonnell and his team coming up with workable proposals that are electorally popular that are not scuppered by Britain like all countries being part of the one world subsidised capitalist economy. Some hope? Reply Report DavidVinter stilt 1d ago 0 1 Under the Attlee government, devaluation from 4 dollars to the pound to 2.8 dollars to the pound took place within 6 months, and Attlee made it possible tor the UK to sell 6 Rolls Royce , top secret Nene jet engines to the Russians, on a promise, by Joe Stalin [of all people] that they would not copy the engines! No wonder Churchill was re elected within 6 years. Reply Report pantokrator DavidVinter 1d ago 0 1 Cos jet engines are much more important than the country's infrastructure. Reply Report mothercourage 1d ago 3 4 Great article ! Especially liked Keynes being described as 'the master of disruptive metaphor'. 'Fixing the roof while the sun shines' will be remembered as Osbournes best one. I guess its not enough for Labour to simply say that 'the homeless dont have a roof to fix'! They need some powerful language of their own. What about, :- 'While the sun shines lets fix the roof with solar panels.' or maybe, ' When a fat cat gets stuck in a pipe, he causes a blockage that reduces the flow to a trickle. ' That sort of thing, only better ? Reply Report Hophazard mothercourage 1d ago 0 1 Or they could stick with Thanks Hugo Chavez for showing that the poor matter and wealth can be shared. He made massive contributions to Venezuela & a very wide world. https://mobile.twitter.com/jeremycorbyn/status/309065744954580992?lang=en-gb Reply Report colesla mothercourage 1d ago 2 3 'When you have you foot upon the throat of the poor, don't miss the opportunity to steal his wallet' Reply Report unended Hophazard 1d ago 1 2 Chavez did make massive contributions to Venezuela and the world. Reply Report DavidVinter Hophazard 1d ago 1 2 And now they are bankrupt. Reply Report mothercourage colesla 1d ago 0 1 Lol ! Reply Report pantokrator DavidVinter 1d ago 0 1 Damn - get rid of that Chavez blokes. Reply Report taxmesomemore mothercourage 1d ago 0 1 We could go back to Miliband's freezing of energy prices so we ended up paying more than the rest of the world. ...while electricity generators chose to build elsewhere. Reply Report CforCynic taxmesomemore 1d ago 0 1 Milliband was a fucking idiot, but we *dont* pay 'more than the rest of the world'. Just have a look at electricity and gas prices across Europe, and you'll see just how bad people in some countries have it. Reply Report taxmesomemore CforCynic 1d ago 0 1 We would've been paying more than the rest of the world had Miliband been elected. Reply Report pantokrator 1d ago 3 4 'So the household metaphor is deeply misleading but it remains irresistible to politicians and powerful with the public.' Yes, the oldest and stupidest mythology is always the hardest to kill off - that politicians continue to hawk the household state-budget equivalence line shows they are either deceitful or incredibly stupid, or both. Reply Report Pyrrhomaniac pantokrator 1d ago 1 2 Yeah but just because the Household debt metaphor in imperfect doesn't mean the magic money tree works .81% of GDP Nat debt and £75bn of deficit is not under borrowed in any language Reply Report pantokrator Pyrrhomaniac 1d ago 2 3 It's not 'imperfect, it is just plain stupid at best and entirely deceitful at worst. It is not a 'magic money tree' - it is how state money is created. And it works - it worked in the 30s and it worked after WWII (when the NHS was created). Reply Report unended Pyrrhomaniac 1d ago 1 2 It's not borrowed at all, in fact. The UK has exactly zero debt. Reply Report pantokrator unended 1d ago 2 3 Exactly - it is just a recorded number for book keeping or political reasons. Reply Report Pyrrhomaniac pantokrator 1d ago 0 1 Great, no need to pay any of it back then .In fact no need to go through that tiresome business of issuing bonds and refinancing them or worrying about the yield . Wow ...this is so cool . Let stop tax !!! Lets just 'create' state money pah after all its just a recorded number , who cares about that . Reply Report BaronessHawHaw Pyrrhomaniac 1d ago 0 1 Isn't the Magic Money Tree where the Trickle Down Fairy lives? Reply Report pantokrator Pyrrhomaniac 1d ago 0 1 No there is 'no need to pay any of it back' because there is no one to pay it back to. Public deficit is the equal and opposite of private surplus - eliminate the public deficit and the private sector goes into debt - followed by another crash. This is exactly what happened in 2008. Reply Report pantokrator Pyrrhomaniac 1d ago 0 1 PS ignorant incredulity isn't a rational argument. Reply Report taxmesomemore unended 1d ago 0 1 We look forward to your corrections to Wikipedia: 'As of Q1 2015 UK government debt amounted to £1.56 trillion, or 81.58% of total GDP, at which time the annual cost of servicing (paying the interest) the public debt amounted to around £43bn (which is roughly 3% of GDP or 8% of UK government tax income). Approximately a third of this debt is owned by the British government due to the Bank of England's quantitative easing programme, so approximately 1/3 of the cost of servicing the debt is paid by the government to itself, reducing the annual servicing cost to approx 30bn (approx 2% of GDP, approx 5% of UK government tax income). In addition, interest payments spent generate tax revenue further down the line. If there is no saving in the spending chain the government will get all its money back. Due to the Government's significant budget deficit, the national debt is increasing by approximately £73.5 billion per annum, or around £1.4 billion each week. As a result of its efforts to balance the budget, the Government forecast in 2014 that the structural deficit will be eliminated in the financial year 2017/18. However it changed the year to 2018/19 in March 2015 and to 2019/20 in July 2015.' Reply Report unended taxmesomemore 1d ago 0 1 'As of Q1 2015 UK government debt amounted to £1.56 trillion, or 81.58% of total GDP, at which time the annual cost of servicing (paying the interest) the public debt amounted to around £43bn (which is roughly 3% of GDP or 8% of UK government tax income). That's not debt. It's a promise to issue currency. A 'debt' implies a meaningful burden. If I take on 'debt' denominated in a currency I am the sole creator and issuer of, and which costs nothing to produce other than a keystroke, then I have not taken on any meaningful burden, have I? The government runs a public spending program designed to pay people risk-free interest on excess pounds they have collected. Currently, people have taken advantage of that program to the tune of £1.56 trillion. The British people who have excess pounds are lucky the government operates such a spending program, as its effectively a subsidy. Reply Report Dows 1d ago 3 4 Economic growth is over as we rub up against planetary boundaries, climate change etc etc.. Good luck with getting any mainstream economist to admit that. Dismal science indeed. Reply Report colesla Dows 1d ago 0 1 Its not over, such an idea is as absurd as suggesting the sun will not rise tomorrow. Reply Report DrChris Dows 1d ago 0 1 You have never actually studied economics, have you? Reply Report pantokrator DrChris 1d ago 0 1 Neither have you, or, if you did you never grasped it. Reply Report pantokrator colesla 1d ago 0 1 Anyone who thinks growth is infinite doesn't grasp basic mathematics. Reply Report greeneb01 1d ago 4 5 Economists have objected to lazy comparisons between domestic and national finances for the best part of a century: governments can tax, grow or even print their way out of debt, three important escape routes not open to individuals. In the 30 years after the second world war there were deficits in all but six. But far from this leaving Britain’s cupboard bare, the national debt dwindled from 250% to 50% of GDP. Tom many thanks for pointing this fact out again for people to read. Economics is complex and two line summations of the problem/answer, as seen too often on these comment sections, are not the right way to ultimately justify the answer. However you are absolutely right - if you want to win the vote - you have to reduce it to something simple that folk can grasp - I just wish Labour would put loads more effort into doing that. Reply Report B5610661066 greeneb01 1d ago 6 7 I think Labour are finding a language people can understand. The trouble is so many people have been brainwashed by neo-liberal gobbledygook. Reply Report Ibmekon greeneb01 1d ago 0 1 'something 'simple' that folk can grasp ' Not going to get many votes with that attitude. Try 'less complex' - suggesting people are simple tends to piss them off. Reply Report greeneb01 Ibmekon 1d ago 4 5 No it needs to be simple - really simple - todays world is short soundbites that folk get - less complex won't cut it. Again - today - David Cameron is 'fighting for Britain' - it's bollocks but it sounds good - and it sways voters. I hate that this is required - it should be fully thought out and coherently argued - but the media of delivery today just does not support that to win the big elections. Catchphrase/slogan call it what u will - Labour needs to find some - in fact needs to reinforce them and drive them into the collective mindset - if it is to stand any chance of winning the next or subsequent election (all in my ever so humble opinion of course!!) Reply Report pantokrator greeneb01 1d ago 0 1 'Tom many thanks for pointing this fact out again for people to read.' I point it out at every opportunity, but am met with nothing but ridicule and incredulity. Reply Report pantokrator Ibmekon 1d ago 0 1 What attitude? Attacking the person for a perceived transgression is not helpful in the least. Try concentrating on the message, not the messenger. Reply Report pantokrator Ibmekon 1d ago 0 1 There is no suggestion in those words that 'people are simple' - that is just a very poor interpretation. Reply Report Ibmekon pantokrator 1d ago 1 2 It was the way it read - to me ! Reply Report Ibmekon greeneb01 1d ago 1 2 Well if you can buy an election with a few billion dollars worth of TV 10-20 second adverts - I have to agree with you. Reply Report greeneb01 Ibmekon 1d ago 1 2 Trump???? Reply Report Ibmekon greeneb01 1d ago 1 2 All US Republican, all bar one Democrat. And the one Democrat is unelectable because of Superich Delegate system. Reply Report pantokrator Ibmekon 1d ago 0 1 What about the actual point? Reply Report Ibmekon pantokrator 1d ago 0 1 Reducing something complex to something simple is a contradiction in terms - as lie if you like. Reply Report pantokrator Ibmekon 1d ago 0 1 What??? That is how science works - and it isn't complex, it's fucking simple - humans just love to get on a complexity obfuscation kick - now that is lying. Reply Report Ibmekon pantokrator 1d ago 0 1 ' science works' . Political science ? Tory good, Labour bad. There, no need to complicate matters. Reply Report pantokrator Ibmekon 1d ago 0 1 No, science - it breaks down complex processes into simple constituents, to get a total picture of how things work - Charles Darwin's theory of evolution was a masterful example of this. The same fundamentals apply to any system. Reply Report Ibmekon pantokrator 1d ago 1 2 'The same fundamentals apply to any system.' They do - if the system is closed and honestly represented. 'second world war there were deficits in all but six.' Having a system where every country in the world can in the same year report a trading loss (for tax purposes) - just does not add up ! Reply Report pantokrator Ibmekon 1d ago 0 1 I've got no idea what you're on about - you do know that money isn't real, it is only limited by the googleplex. It's a fantasy system, based on the trust that the worthless piece of paper in your hand has real value. Reply Report xtiffer greeneb01 1d ago 0 1 We might start with calling out the Tories' 'long-term economic scam'. Reply Report mikedow 1d ago 0 1 It's simpler to realize that there is no one person on the planet that can fully manage a global economy. Reply Report Ibmekon mikedow 1d ago 0 1 Even simpler to realize that the result would a catastrophic - just ask Darwinians. Reply Report greeneb01 1d ago 7 8 Labour needs to grasp it is 'selling' to the public what it's answer is - that's what the Tories grasped when they came up with the analogies. People accept the analogies, and vote for the ones they like (I know a sweeping generalisation - but it probably does account for a big swathe of those swing voters). The way to win is not simply through the intellectual debate - it is mandatory through the populist debate. Sell the vision, sell the emotion, sell the benefits - all in simple short analogous soundbites (with real substance behind it) - you have to beat 'fix the roof when the sun shines', 'stop the nation borrowing on its credit card' - this is what chimes with folk - and they vote for what chimes. Reply Report LolliusAgrippa greeneb01 1d ago 3 4 People psychologically rely on the short term, they would rather have £50 now rather than £100 in a month for example. The Tories (and Labour, hell lets just call it economic theory and government for the last 30 years) have based many policies on this fact and its easier to get votes for the Right and rely on simple short sightedness and the quick bung than it is for the Left to say 'we can do this long term' Reply Report greeneb01 LolliusAgrippa 1d ago 1 2 Agreed wholeheartedly - the trick will be do both. The Tories are on a long term vision to 'change the shape of Britain' - sounds warm, fuzzy, nice - but it is hellish. They get that it's a 'game' to get to power - in terms of how to promote it - and then use that power to your own ends. It is terrible our democracy reduces to this - but I feel that's the way it is - it is not intellectual power wins the debate any more - it is the populist one. Reply Report MustaphaMondeo LolliusAgrippa 1d ago 1 2 Brown and Miliband both failed to bribe the electorate. The Tories offered austerity. Reply Report pantokrator MustaphaMondeo 1d ago 0 1 The stupidest bribe ever - just goes to show. Reply Report DrThomasCopper 1d ago 0 1 Fiat money creates unlimited power in the hands of a few, and unlimited consequences for the many, a recipe for disaster. Money should be limited in nature. Reply Report paulc156 DrThomasCopper 1d ago 1 2 Just taking what you say at face value I'm already suspicious of your motivations. We've had fiat money for a very long time, especially during the 20thC and of course western civilisation has gone backwards in that time. A real disaster.... doesn't match reality dies it? I wonder what you've left out of your narrative... Reply Report DrChris DrThomasCopper 1d ago 1 2 If they have unlimited power, why do they not solve all the problems? Reply Report DavidVinter DrThomasCopper 1d ago 0 1 Yes just watch that TV programme where £26000 of benefits is paid in advance, very enlightening. Reply Report DrThomasCopper DrChris 1d ago 0 1 Fiat money is not being run for your benefit, they are running a legal Ponzi scheme which they want to continue operating for as long as possible or until they own all the real assets. Reply Report TedStewart 1d ago 7 8 The images used by politicians can simplify difficult theories, but they are also being used to mislead us What! Are you saying that the 'great recession' was not all Labour's fault, and these duplicitous lying Tory bustards have been selling us a load of 'porkies'? I don't believe it! :-/ Reply Report MustaphaMondeo TedStewart 1d ago 0 1 The only people claiming that the Tories blamed Labour for 2008 are Labour activists. It just makes the activists look stupid. Reply Report baldyman01 MustaphaMondeo 1d ago 0 1 So I didn't hear a tory minister on radio 4 the other day state '..when labour crashed the economy...' as a premise to a question? A premise that I note went without comment by the presenter. A repeat of the same lie, told over and over again during the election campaign. One of the major reasons that Labour lost is because they kept allowing the opposition to keep insinuating economic incompetence by this method and they kept letting it slide. Reply Report DavidVinter TedStewart 1d ago 0 1 Tory----Labour, it makes no difference, they all live on half truths. Reply Report MustaphaMondeo baldyman01 1d ago 1 2 You may well have done. I wouldn't be surprised. Nevertheless, there have been in my xperience many more accusations of unfair blame than actual unfair blame. The normal suggestion is that Brown was running a deficit when he didn't really need to. He was bribing public sector workers rather than dealing with the causes of very real problems in health and education. Labour lost, to my mind, by refusing to be honest about their deficit. Which serves them right. Bent politicians must be discarded. Reply Report xtiffer MustaphaMondeo 1d ago 0 1 You seem to have forgotten Cameron's trick with the 'no money left' note. Reply Report SimpleOldSailor 1d ago 11 12 What we want is not a new language but a new base line. The economy is doing well if the poorest are doing well. Reply Report changeisinevitable SimpleOldSailor 1d ago 3 4 well said Reply Report MustaphaMondeo SimpleOldSailor 1d ago 0 1 If World Futures (Earth) sold on the Arcturus Exchange are looking good we are managing ourselves well. I think they would be 'sell'. And the baseline wouldn't be the wealth of the poor but the quality of the culture X environmental degradation. Being poor isn't a big deal. Reply Report DavidVinter SimpleOldSailor 1d ago 0 1 That does not mean that the richest may be doing better still. Reply Report jyossarian 1d ago 1 2 Following Phyrriomaniac´s (of this parish) lead Yes we need to change metaphors. You have two cows....... Reply Report LolliusAgrippa jyossarian 1d ago 1 2 Is one far away? Reply Report BaronessHawHaw jyossarian 1d ago 1 2 You have two cows and you graze them on the land. The milk they produce we can call wages. The excess milk is made into cheese which can be traded - let's call this capital. So far so good. Unfortunately along comes a Tory. the Tory declares that now the land belongs to him and from now on the farmer must give the milk of one of the cows to him as 'RENT'. The Tory now starts to become very rich by doing no work.... Reply Report pantokrator jyossarian 1d ago 1 2 Except that our modern system means that two cows can be 4 or 8 or 16, simultaneously - it's a sort of quantum theory of money. Reply Report MustaphaMondeo LolliusAgrippa 1d ago 0 1 I got it! Reply Report DavidVinter BaronessHawHaw 1d ago 0 1 So the farmer puts more nitrogen fertilizer on the land and produces much more milk. Reply Report BaronessHawHaw DavidVinter 1d ago 0 1 And the Tory puts up the rent. Reply Report Hello_Old_Sausage 1d ago 3 4 Economics is junk science designed to befuddle and deceive. If the nation was run in the same manner that a responsible adult runs his own family budget, we wouldn't be in anything like the mess we are in today. Economic of the type practiced by the LSE (founded by the Fabian Society, incidently), is the science of 'resource allocation' and things really haven't changed much have they? The bulk of the wealth and resources of the nation and the world are more consolidated than ever into the hands of the small clique of the uber wealthy. The other elephant in the room is the 'privatization of the money supply.' Socialists talk much about taking public ownership of private property but they never mention restoring the power to issue coin and credit away from private banks and back to the people, to whom it rightly belongs. If the government wishes to build a school or a hospital, it should be able to issue the money to do so itself and spend that money directly into the economy INTEREST FREE, without any involvement from private banks or PFI. It would save the British taxpayer billions Funny that isn't it? This is NEVER mentioned Reply Report Alexander Mclennan Hello_Old_Sausage 1d ago 1 2 'Socialists talk much about taking public ownership of private property but they never mention restoring the power to issue coin and credit away from private banks and back to the people, to whom it rightly belongs.' Erm, yes they do. Reply Report jyossarian 1d ago 1 2 even print their way out of debt Also destroys the value of assets, creates massive currency devaluation, therefore also creates inflation... Been tried many times. Reply Report Joe Blackwell jyossarian 1d ago 7 8 Also destroys the value of assets, creates massive currency devaluation, therefore also creates inflation... Depends on the size of the output gap. Been tried many times. If you are thinking Zimbabwe or Wiemar Germany they experienced hyper-inflation due to a simultaneous printing of money and a massive drop in their productive output. In the case of Zimbabwe it dropped by about half. The CATO institute (Libertarian think tank) analysed all the occurrences of hyperinflation in the 20th century and found that not a single one was caused purely by printing money. The private banks have been creating spending power out of thin air for years and it hasn't created widespread inflation. Just inflation in the property market. Reply Report KatieL Joe Blackwell 1d ago 0 1 'The private banks have been creating spending power out of thin air for years and it hasn't created widespread inflation. ' No, that's because the money created by private banks is debt-backed. Government created money is backed only by belief in its value and that value is derived from its scarcity compared to the assets denominated in it. Reply Report Joe Blackwell KatieL 1d ago 5 6 Government created money is backed only by belief in its value and that value is derived from its scarcity compared to the assets denominated in it. Wrong, the value of fiat currency is derived from the fact that you need it to pay your taxes or you'll be thrown in jail. The distinction you make has no theoretical foundations. Reply Report greeneb01 jyossarian 1d ago 1 2 I think the argument goes the way of the emotive language - destroys, massive - how about reduces asset values back to their norm, currency equilibrium based upon productivity output - see these are boring terms - but are nearer the truth. We have printed significant amounts of money - as has USA - over last four-five years - don't see either of the elements you have outlined. Before you say its not the same thing - that it sits in banks and has not flowed to the real economy - that's the point - it is the controlled release to the real economy that re-aligns the elements that have moved out of kilter - asset prices, currency values. So let's not have a big Keynesian debate about money flows - but also let's not just jump in with with statements. Reply Report HoSimpson jyossarian 1d ago 1 2 Spot on. As for governments taxing and growing their way out of debt, a government can only set tax rates. Ultimate tax revenues have never been entirely within any government's control, and international trade and globalization have been chipping away at that for 20-odd years now. Let's ask Gordon Brown about growing your way out of debt. I don't agree with his party's politics but I've always thought of him personally as a very intelligent man. The one thing he lacked was luck. Reply Report jyossarian greeneb01 1d ago 0 1 you make some good points, to which I add. how about reduces asset values back to their norm if there is such a thing.... currency equilibrium based upon productivity output - Great theory, market sentiment of course has a greater impact We have printed significant amounts of money - as has USA - over last four-five years - don't see either of the elements you have outlined. Before you say its not the same thing - that it sits in banks and has not flowed to the real economy - that's the point The QE etc has flown into the real economy The asset relief programs / QE have allowed major financial institution balance sheet restructurings, which frees capital for economic activity. Without QE we would have been in a much bigger hole The lack of inflationary impact I think shows just the slowness of this process as banks have to have significantly higher regulatory capital ratios than before. But of course that´s just part of the equation Reply Report pantokrator jyossarian 1d ago 1 2 No it doesn't - it's the other way around, inflation causes money creation. You have fallen for Great Myth # 2 Reply Report greeneb01 jyossarian 1d ago 0 1 Your last paragraph confirms what I said - your second last contradicts it. Reply Report PSmd HoSimpson 1d ago 1 2 Well, yes, he lacked luck. Blair won three terms where economy expanded driven by property (in each term, equity release and property prices went up faster than economic growth). In Brown's, they went up slower than economic growth. Basically, property driven consumption. The same goes comparing the elections won by Thatcher and even Major's 1992 one, with Major's full term (that he lost). The election winners presided won after terms where Britain underwent a property drugs high, the losers lost after terms where Britain was on its coming down period. Not so much 'it's the economy, stupid' more 'it's my purchase power, stupid'. Reply Report DrChris jyossarian 1d ago 0 1 That is why we have such low inflation Reply Report DavidVinter HoSimpson 1d ago 0 1 Sorry but Gordon could not add up his income tax rates, and praised deregulation of the banking industry.---[at the lord mayors banquet]. Reply Report changeisinevitable 1d ago 6 7 people are more important than the invention called money. Reply Report pantokrator changeisinevitable 1d ago 1 2 Yes, but unfortunately money is now a god - the most successful belief system ever, in the history of humanity - the god almost everyone believes in. Reply Report ianita1978 changeisinevitable 1d ago 2 3 Not just people but all the other species, plants and natural world we inhabit are ALL more important than the exclusivist and murderous ideologies of our political Puritan Elect and their slavering worship of material Progress. Reply Report jyossarian 1d ago 0 1 bedroom tax It´s not a tax. Reply Report changeisinevitable jyossarian 1d ago 6 7 bedroom tax It´s not a tax. It is a punishment for the poor being poor by those who do evil. Reply Report BluebellWood changeisinevitable 1d ago 2 3 Exactly. And actually costs far more money in both the short and long term than it saves. Just sheer malice, really. Reply Report BluebellWood jyossarian 1d ago 1 2 You clearly do not understand how language works. If the vast majority of people call it the bedroom tax, rather than calling it by whatever euphemistic name the government wants us to use, then that's what the term is. I seem to remember a Tory government not wanting people to call the poll tax the poll tax either, even though that's exactly what it was. Fortunately we haven't (yet) got to the stage where any government can control and dictate the English language and how it's used, however much they might try to. Reply Report jyossarian BluebellWood 1d ago 0 1 it´s still not a tax, no matter what euphamisms its detractors wish to use. It´s a benefit reduction, but of course that doesn´t sound as good to a spin doctor worried about polls. Reply Report BluebellWood jyossarian 5h ago 0 1 OK, let's not call it a tax. Let's just call it a 'benefit reduction' for families in a high-rise block in a sink estate who were never warned, when their home was originally allocated to them, that they would lose benefits when their kids went to college, joined the army, got a job outside the area, etc; when their elderly parent died, or someone in the family became disabled or sick and needed a separate bedroom. Or even when the damp little room that was always uninhabitable anyway became the factor in making the poorest and most desititute lose benefits for the privilege of living in such accommodation in the first place. If council tenants on benefits are to be punished for having a spare bedroom, why shouldn't everyone be? For example, the royal family seem to have an awful lot of spare bedrooms in their taxpayer-funded residences. Actually, anyone having more bedrooms than is deemed necessary should be made to pay more tax according to your logic. Yes, it is a tax just like any other tax, if tax can be viewed as sacrificing a proportion of your disposable income to the government. The bedroom tax is just a spiteful and quite malicious politically-driven measure that causes huge distress to individuals, serves no practical benefit whatsoever, profits no-one at all, and costs society generally much more than keeping people in their current homes would do. Still - strangely - there are people like you who think this is a good idea. Could you explain your reasoning further? Reply Report jyossarian 1d ago 0 1 A crisis caused by footloose finance both banking and public Reply Report changeisinevitable jyossarian 1d ago 2 3 A crisis caused by the rich offshoring their responsibility. Reply Report Joe Blackwell jyossarian 1d ago 4 5 both banking and public Wrong, banks created the crisis by creating money when they lend and thus causing a massive increase in the money supply. All well and good until people start to pay of that debt. You then have a massive decrease in the money supply and a crash. Nothing to with the public finances which at the time where in good shape considering the long term trend. They were better than in Thatchers time. The data just doesn't support your point I'm afraid. Reply Report jyossarian Joe Blackwell 1d ago 0 1 Depends entirely on your data sources. (And your understanding of loan capital, but that´s another point entirely) Reply Report jyossarian 1d ago 2 3 . The big ideas that might make a difference – targeting higher inflation, how? printing money to give consumers something to spend with, been tried many times; has a direct opposite effect to targeting higher inflation. or ploughing serious public funds into infrastructure – with money from where? (See deficit) Reply Report changeisinevitable jyossarian 1d ago 1 2 TAX THE RICH Reply Report Alexander Mclennan jyossarian 1d ago 0 1 Another feeble minded voice of the establishment here. Reply Report paulc156 jyossarian 1d ago 0 1 printing money to give consumers something to spend with, been tried many times; has a direct opposite effect to targeting higher inflation When was it tried? Printing money to give consumers is not QE. Reply Report YouCanClaimThat jyossarian 1d ago 0 1 with money from where Public funds. You know where the money comes from. Reply Report jyossarian Alexander Mclennan 1d ago 0 1 How is questioning what is put forward in a column tantamount to ¨feeble minded voice of the establishment?¨ Reply Report Maharaja Brovinda Singh 1d ago 0 1 Politicians do not care about economics, nor do they often listen to economists! Reply Report Cornelius007 1d ago 1 2 Of course, there has to be a line somewhere in a Guardian article about the poor becoming poorer but the idea that we were saddled by the bank bailouts does not equate with what the national audit office tells us the banks borrowed in real cash. Real cash Guardian folks, not guarantees which amounted to no more than £160 Billion so where the author of this article can claim that the banks were the cause of our malaise is a mystery. We were saddled with welfare debt, the war and something which the Labour government could not avoid like it had done over many years along with the Tories, was the investment required to make our railways safe. There is a sound principle in welfare but not hiking it up to an unprecedented expansion of approximately 30%. I would hardly call that socialism with an iPad more like incompetence on a grand scale and along with that incompetence we have a chancellor who far from producing a magic fix has failed.. There is nothing wrong with measured socialism but the socialism supported in this media is nothing short of a milestone around our necks. Reply Report changeisinevitable Cornelius007 1d ago 1 2 the rich are the millstone for offshoring their responsibility. Reply Report Pyrrhomaniac 1d ago 3 4 Yes I agree we need new metaphors Suppose we picture debt as water flowing out of a boat. Let’s say it is serviceable little rowing boat with three men in it, got the picture? Ok if we don`t plug the hole (which stands for the amount by which we overspend each year let’s call that £75 billion…..because it is ), then obviously the boat will sink. One of the chaps suggest they try to mend the hole while another suggests swimming for the shore the third suggests talking about it in a different way ….. The true story of the hair and the tortoise is not much known. In fact whilst the hare’s brisk rate of progress to the finish and appearance of success carried much weight at the time as time passed many people began to say that the Hare orthodoxy was a stale mantra intoned by Hare-ists merely to cow other equally valid points of view .The tortoise-is-faster really gained more and more support with experts claiming the whole tired “language of hare-ism “ was illusory and misleading.. One day a great fire was seen sweeping towards the woodland and the animals decided to send the fastest for help . Unfortunately by this time the old stale Hare-ist orthodoxy was in disrepute and so they sent the tortoise There are metaphors and then there is complete …………… nonsense old sausage Reply Report Shanone Pyrrhomaniac 1d ago 0 1 ROTFL Tell that hare he has been running into the fire not away from it? Duh....! Tee hee Reply Report arbitrarynight Pyrrhomaniac 1d ago 0 1 Yes it is nonsense as water flows into a boat, not of it. Reply Report TouchingTheVoid 1d ago 2 3 The household expenditure metaphor works up to a point. Indebtedness - whether sovereign or domestic – dramatically curtails your control over your destiny and forces you to make undesirable choices. More to the point, it's a lot easier to build up debt than it is to pay it down again. In fact nobody in the Conservative Government has seriously suggested we could pay off our government's debts; merely that we attempt to break even on our spending so that the debt – with its massive burden of interest – is stabilised. Reply Report Alexander Mclennan TouchingTheVoid 1d ago 0 1 Right but in a real economy and not the one sided one, which most of the electorate have been led to believe thanks to the hammering home of said metaphor, there are two parts, public AND private. In order to pay off debt, we need a surplus, this means taking money out of the economy. The economy is not a business, or a household. Make no mistake debt is the problem, but when all spending equals all income, what is the solution? And when £120 billion in tax goes uncollected, who's really taking the piss here? Reply Report greeneb01 TouchingTheVoid 1d ago 0 1 Define 'Massive burden' Reply Report nishville 1d ago 2 3 Spot on. For instance, The Robbery Of The Millennium is still being referred to as a >financial crisis< by our naive but well-meaning politicians and media people. Reply Report AnderTMaster 1d ago 1 2 The only thing wrong with the current system is that too many of the super rich are tax dodging. Even this is not a big deal, as society does not mind winners getting super rich, even if they don't really deserve it. The biggest problem is the wide spread dodging of inheritance tax. As soon as this happens then you ruin the competition that is 'life'. People stop trying to obey the rules and work hard. Society then descends into a violent squalid chaos. Ironically the super rich that inherited their money, don't want to live in a society like that either, even though they are the ones that created it. The solution is to ban the rich from politics and to clamp down hard on inheritance tax avoidance. Reply Report juliameg 1d ago 3 4 Economics is not a science. Political economics is just voodoo. George Osborne has an upper second in history and will inherit a baronetcy (a title sold by King James to fund the settlement of protestants in Northern Ireland). He is a career politician. He is neither qualified or experienced enough to have any expertise and thus is limited in his ability to analyse relevant information, think through complex problems or critique all those treasury consultants opinions. The consequence is that political expediancy corrupts the understanding of economic theory into a garble of key words strung meaninglessly together and disguises what is actually going on. This government does not think that behaviour in the money markets should be regulated. This government does not think that addressing the welfare of the general population is necessary or important. In fact this government does not think it should be governing at all - government services outsourced to for profit companies and government offices such as the treasury managed by City accountancy firms. It is certainly time that intelligent voices are heard but it is difficult to hear anything with this cacophony of ignorance in power. Reply Report ID7794850 1d ago 2 3 'In the 30 years after the second world war there were deficits in all but six. But far from this leaving Britain’s cupboard bare, the national debt dwindled from 250% to 50% of GDP.' Could somebody explain how this was possible. Reply Report colesla ID7794850 1d ago 3 4 Because running a deficit combined with well-targeted government spending can and does drive GDP growth. You're spending money now to invest in increased future capacity. Reply Report LolliusAgrippa ID7794850 1d ago 1 2 Economics Reply Report WNR22 ID7794850 1d ago 1 2 if the economy grows at 4% per annum and you run a deficit of 2% of GDP each year national debt will fall as a proportion of GDP even as the total debt increases in absolute terms Reply Report jyossarian ID7794850 1d ago 0 1 Marshall Plan Reply Report

KatieL colesla 1d ago 0 1 It's the 'well-targeted' which is the problem. Historically the targeting tends to end up doing things which are politically well received instead of actual growth promoting. It's not helped by all the people who insist government spending has an ROI of some multiple, when in fact that's the average attainable. And fairly inevitably, it transpires that their favourite hobby-horse, which MUST be funded, turns out to be returning way below unity... Reply Report

ID7794850 KatieL 1d ago 0 1 Thanks to everybody for replying. Think I would have grasped this if I'd thought about it longer but at the time I read it I was having a 'vacant' moment! Reply Report

paulc156 jyossarian 1d ago 0 1 Marshall Plan which only ran for about four years 1948-52/3 and amounted to about £4bn in total or less than £30bn in today's money. Reply Report

Supersage64 1d ago 0 1 Most economist can't read a balance sheet. The IMF also managed to sell a theory of debt to the world based on a flawed spread sheet. Not a single economist is aware of the massive windfall lying in the Asset purchase facility that will eventually find its way into the economy as debtless cash... £375billion in the UK, 1.5trllion Euros.... This is cash that will destroy Neoliberalism and banker power. It will destroy the Tories and right-wing politics because it exposes the lie of no money and austerity Reply Report

LordMurphy Supersage64 1d ago 0 1 The IMF showed itself to be servants of political masters in Washington when it agreed to lend billions to the government of Ukraine after it defaulted on its sovereign debt. I would not trust these people with the biscuit kitty. Reply Report

Hello_Old_Sausage LordMurphy 1d ago 0 1 The IMF has one single raison d'etre To keep the sovereign nations of the world in DEBT.......FOREVER Reply Report

Cloud9Cuckoo 1d ago 1 2 Good to raise the issue, but the main problem is still the assumption that Growth is Good, Growth is infinite, and Growth should therefore be our overriding goal. And that's because economists don't just use the wrong language; they ignore a large part of economics: the downsides of all economic activity. Forgetting about the environmental, social and structural costs of the economy, as the GDP-growth measurement does, is like a business just measuring turnover and not profit. Economists - and in particular the Left - need to wake up to the fact that GDP is a poor measure of the 'success' of an economy. Reply Report

LordMurphy Cloud9Cuckoo 1d ago 0 1 The growth these people posit is always based on the planet having a full quota of raw materials. This is nonsense as the planet is being rapidly denuded of materials in particular clean water and is being destroyed by the pollution of previous industrial activity. Reply Report Alexander Mclennan Cloud9Cuckoo 1d ago 0 1 Why in particular the left? The left aren't the ones saying GDP is a reliable measure of individual wealth. Reply Report

Pushers11 1d ago 3 4 'Governments can tax, grow or even print their way out of debt, three important escape routes not open to individuals.' and 'So the household metaphor is deeply misleading'. Yes and no. Governments do indeed have those ways out that individuals do not. However, even these are not limitless and the comparison to a house-hold debt is still apt and not that misleading. After all, a Government cannot increase taxes indefinitely - not unless they want no productivity or a full scale revolution. A Government cannot just keep printing (or in this day and age, entering into a computer) currency as it leads to inflation and in the end hyper-inflation. And yes, a GDP can grow but it doesn't always - just look at the last 'flat' decade. And the end of the day, no one and no institution (government or otherwise) can spend more than it earns indefinitely. Especially if you are borrowing currency (because no amount of taxation is enough to cover all the promises of 'stuff' the government brides the voters with), eventually the piper wants paying. Debt is just deferred poverty as you have to pay that money back sometime. Something socialists, who claim to care about the poor, would do well to note. Reply Report Alexander Mclennan Pushers11 1d ago 0 1 It is entirely misleading. Yes these measures are not limitless however an economy is a private and public sector. You've fallen into the right wing trap of seeing only a public sector debt and you're not recognising that the private sector is essentially being propped up and put into surplus, as the public sector is supplied by the private sector. In the year 2014/15 the tax gap (the difference between what taxes collected and what should have been collected) was circa £120 billion. Here, endeth the lesson. We're in a position whereby those who can pay won't and those who can't pay are being asked to. Reply Report

WNR22 Pushers11 1d ago 0 1 The point I think you are missing is that there were and remain various economic options open to the chancellor, however the use of the household metaphor deliberately and successfully encouraged support for austerity for political not economic reasons but then, as matters didn't turn out as he wished (low growth continuing deficits) acted as a constraint He could have, for example, significantly increased investment in infrastructure rather than cutting back but didn't in part, I suspect because it would have been at odds with the story he had told and in part because it allows the continued reduction in the size of the state Simon Wren Lewis (professor of economics at Oxford) has a pretty accessible blog on the damage caused by austerity over the years - but not surprisingly he's less good on the metaphor side of things...... http://mainlymacro.blogspot.co.uk/ Reply Report

Pushers11 WNR22 1d ago 0 1 But more spending would have meant more debt. And sure, that can work for a while but not forever. And... we want the continued reduction in the size of the State! That is a good thing! The more things done by the State the worse it is. The more things done by the private sector the better. Not necessarily because the private sector does things better (though that is usually the case) but because the private sector does so without forcing people to pay through taxation. It is a more moral, voluntary system. Unlike the Government which does things through force and coercion. Reply Report Pushers11 Alexander Mclennan 1d ago 0 1 I recognise there is private sector debt as well. Of course. But (unless they are getting bailouts which of course is utterly wrong and those companies should have been let go to the wall) at least private sector debt is either individual or in a company. Those people or companies are not forcing, through taxation, others to prop them up (again, other than those bailout ones). They repay their own debts. The Government has to use taxation to repay its debt, which is forced on all of us. Reply Report nihilist 1d ago 0 1 Sometimes Winston, 2+2 make 5. Its basically chaos and unpredictability dressed up to sound sophisticated and evidence based. Reply Report Ibmekon nihilist 1d ago 0 1 An economist will predict a horse will win the Derby, just not which one ! Reply Report stuartlarkin nihilist 1d ago 1 2 It is elite failure and national decline. Reply Report Alexander Mclennan nihilist 1d ago 1 2 Wrong, the best economists build models that reflect real events. Reply Report

Winstons1 1d ago 2 3 The problem is that many economists work to models that effectively has no economic reality anymore . Globalisation has changed everything.I doubt that there is has been anytime in history where we have individual corporations who boast greater turnover than the GDP's of many individual nations . With no national nor moral consequence ,they cruise the countries of the world looking for less regulation ,cheap labour and complicit politicians prepared to drop their trousers ,desperate to be seen as 'job creators'.They are run by executives who feel no compulsion or responsiblity other than to the quarterly spreadsheets and investor dividends. It is the slow and inevitable erosion and emasculation of national governments and the transfer of power to global corporations and capital markets. It is the economics of Hayek and Friedman gone global . Reply Report

LordMurphy Winstons1 1d ago 3 4 It's worse than that. Central Bankers are academic economists who imagine that the natural state of a real economy is equilibrium and try to achieve this unobtainable goal with policies that derive from failed algorithms and flawed models. The real economy is highly dynamic and volatile, peopled by people infused with herd mentality that make academic modelling impossible. They are also far too slow to react when shocks occur and this means that the measure set in place to deal with the shocks are always too little delivered far too late. But they have now gone beyond parody, as they belatedly realise that their attempts to create real growth with ultra low interest rates have failed miserably they think that negative rates might work when there is no evidence for this. Finally they focus on how low unemployment is without any reference to the quality and security of the jobs that are being done and what's even worse by ignoring inconvenient stats such as plummeting job participation rates. They are a disaster. Reply Report

JGrossman 1d ago 5 6 Of course this is all true. The current economic orthodoxy - basically Ayn Rand economics with some silly maths thrown in - is to economics what phlogiston was to chemistry. It's an idea that seemed reasonable when first formulated but has not stood the test of observation. In other words its been about as thoroughly falsified as creationism. But somehow I can't see Corbyn & Co having the mental firepower to come up with an alternative paradigm. Also, I don't see it coming from the economics profession. They're too intellectually inbred. Probably come from engineers and biologists. Jake G Reply Report colesla JGrossman 1d ago 0 1 What a load of drivel. Many prominent economists are advising Corbyn. Not a single economist in the entire world agrees with the Tory government. Many scientists switch to economics when they decide they want a real intellectual challenge. Reply Report bobfin colesla 1d ago 1 2 Many prominent economists are advising Corbyn. That's worrying as the old joke goes: ''If all the economists were laid end to end they'd never reach a conclusion' Reply Report bobfin JGrossman 1d ago 1 2 It's interesting that the so called 'Tiger Economies' (South Korea, Taiwan, Hong Kong, and Singapore) that experienced spectacular growth over the last 40 years were driven a mix of state intervention and free markets in some cases initiated by military dictatorships. II suspect there was not much adherence to neoclassical economic theory (left or right flavoured) just a series of pragmatic decisions of what seemed appropriate at the time for their societies. Reply Report colesla bobfin 24h ago 0 1 The economies that did well did so because they actually listened to the advice of economists, rather than self-interested supra-national organisations. Reply Report

bobfin colesla 23h ago 1 2 The economies that did well did so because they actually listened to the advice of economists Which economists? self-interested supra-national organisations What supra national organisations? Your reply seems irrelevant. The point I was making in response to JGrossman's post was that state intervention i.e. introduction of rules, regulations, government investment in specific industries is usually favoured by socialist or marxist economists, free market liberalism by right wing neoclassical economists. They are diametrically opposed. The fact that the 'Asian Tigers' were quite happy to pick and chose from the rival schools in very turbulent political times points to the fact that their economies were not run by an economist but rather by pragmatic autocrats. I am endorsing Jake's earlier point about the likelihood of future economies being run by scientists and engineers. Many scientists switch to economics when they decide they want a real intellectual challenge. A rather sweeping statement. Could you name a few? Reply Report

Sossij 1d ago 0 1 Hard working bill payers - ARRRRGGGHHHH! Reply Report

Budanevey 1d ago 0 1 Before the Enlightenment different empires acquired wealth through imperialism, dominating their neighbours, exacting protection money, sometimes simply invading them and taking what they had, including their productive workers as slaves. The Enlightenment offered us a different way of treating and trading with one another. Adam Smith's 'Wealth of Nations' observed in 1776 that productive self-interest naturally combines to provide general well-being through mutualised trade rather than feudal obligation, mercantilist rigging, conspiracies and imperialism. So influential was this book that it informed the creation of the United States and Britain's first Free Trade Agreement. Market economics never succeeded in eradicating non-mutual arrangements, however, because different traditions operated in other countries, and vigilance against politicians, cartels,monopolies, conspiracies, crime and imperial neighbours is always needed, and with the advent of party-controlled taxation, a new form of industrialised extortion was rapidly unleashed on the world, currently taking 40-50% of national incomes today and servicing interest payments on rapidly-rising public debts. Politicians have taken so much from the present, and stored up so much debt still to be paid in the future that they are currently finding it difficult to keep their past promises or make new ones. Nor is economics just about the quantity of money. Incentives are also a vital currency in our lives. When rewards for work, saving and investment are compromised, economic activity tails-off. Social justice has also become a modern incentive to consider, because people naturally resent tax avoiders, gross inequalities, and manifest exploitation, and they expect their taxes to help the poor, not vested interests. Governments may print money, put up taxes, rig markets, and pump-prime specific activity, but they cannot ultimately avoid the side-effects or consequences of their decisions, nor can they read the minds of people to know their true needs and wants or how strongly they feel about them. The world economy is simply too complex and rapidly-changing, which is why the price-mechanism operates more effectively, because it can do the parallel-processing that politicians and committees can never hope to match. Now that markets operate in digital economies where communications take place at light-speed, we can actually safely invoke Einstein and declare that command economies will never compete with market economies, because they can never go any faster. Reply Report

Ibmekon Budanevey 1d ago 1 2 'price-mechanism operates more effectively,' A sale occurs, and so the price is set. If one party has lied, is that a fair price ? Markets can and are rigged in many ways. A free and fair market only exists in theory. What we have now is a free for all - which favours the richy rich, who can buy the politicians to set the laws that govern the market. Reply Report Budanevey Ibmekon 1d ago 0 1 That's why vigilance is always required and markets need to be open. It's also why we need educated consumers, workers, investors, politicians and other participants. You're not saying anything that Adam Smith hadn't anticipated and covered in his book. Reply Report Ibmekon Budanevey 1d ago 1 2 'You're not saying anything that Adam Smith hadn't anticipated' But I did say what you did not - it is an idealised fantasy. Reply Report Budanevey Ibmekon 1d ago 0 1 Well if Adam Smith warned the same as you about crimes and conspiracies, it isn't an idealised fantasy. Reply Report Ibmekon Budanevey 1d ago 0 1 A free and fair market is an ideal - it cannot and does exist. Someone will always seek to control the market for their own benefit. That must be the government - not the Fed, J P Morgan et al Pretending that laissez faire will work is a con trick to allow the rich to rig the market. Reply Report Budanevey Ibmekon 1d ago 1 2 'Laissez-faire' was the derisive French misrepresentation of Adam Smith's economics. He never advocated the free-for-all implied by 'laissez-faire'. He explicitly referred to the dangers of cartels and conspiracies that require eternal vigilance. Your comment suggests to me that you've never read his book? Reply Report Ibmekon Budanevey 1d ago 1 2 'never read his book?' Correct - I picked laissez-faire from the language used to justify scrapping of sensible laws that controlled banking here and in the USA. Any member of the public could understand the rules and why they were needed - yet they were scrapped to allow a 'free market' economy. Were we lied to ? Reply Report Budanevey Ibmekon 1d ago 0 1 Politicians like Blair and Brown introduced the FSA and light-touch regulation in conjunction with a political objective to promote stakeholder economics and providing easy lending to riskier borrowers guaranteed by taxpayers. There was nothing 'free market' about it. They were copying Clinton who used Fannie Mae and Freddie Mac to provide sub prime mortgages guaranteed by American taxpayers. 'Sub prime' is a banking phrase that describes lending to unverified risks. Politicians who advocate risky banking guaranteed by taxpayers are clearly not engaged in a mutual market-oriented activity, because the taxpayers have no effective say in the matter. You really do need to read Adam Smith if you're going to understand the economics he advocated. Not only did he offer an enlightened insight into economics, but his contemporary, Erasmus Darwin, used his insight into natural economics to speculate that all life on Earth had evolved. It was his grandson, Charles, who later proved Evolution by Natural Selection. Reply Report Ibmekon Budanevey 1d ago 0 1 'Blair and Brown... nothing 'free market' about it' So they lied. 'read Adam Smith....understand the economics' You explanation was adequate - I just dismiss the notion of a free market as theoretical. Current markets - where an item might be bought and sold a thousand times a second would not in any case have been envisaged by Smith ? Reply Report

Budanevey Ibmekon 1d ago 0 1 Thank you for your comment. There are limitations to free markets, which Adam Smith explained very poetically. That's why he's worth reading, and you and he would agree about that. But we mustn't ignore the fact that relatively free markets dominate modern economics. Every time you can go into supermarket and buy a tin of beans, you're performing a mutually satisfactory transaction. When millions of people perform similar transactions with goods, services and labour, they are voting with their wallets in an arrangement that is far more democratic than any snapshot of voters' wishes taken once every five years in a General Election. Reply Report

Ibmekon Budanevey 1d ago 0 1 'go into supermarket and buy a tin of beans,' A good example of the state of the art so to speak. In my lifetime I have seen many gov regulation introduced to stop market abuse. For example I can remember when each manufacturer regularly change the net weight of their tins - for the purpose of making price comparison difficult. Not all contents were listed. We have health issues brought under regulation, limits to insects,fat,salt etc. Sell by dates to ensure freshness. There is a market - ie a choice of product, and price (assuming other anti competition legislation is working). If this market were 'freed up' like the banks - I fear that many of us would end up poisoned ! Reply Report Catchingup Ibmekon 15h ago 0 1 They want to get rid rules and regulations that came into being because of being ripped off in the past. Reply Report Ibmekon Catchingup 12h ago 0 1 Looks like Dave got what he wanted, London exemption from EU/EZ financial taxes. The threat of leaving the EU was a cynical ploy - a win/win situation for the banksters. Reply Report JSMills 1d ago 5 6 This is a very important article and John McDonnell would do well to pay heed. There is no doubt that the Tories have had the best of the economic argument since 2008 by using these domestic analogies, which as Tom Clark says are seductive but very very wrong. Merkel with her Shwabian housewife uses the same language as no doubt do all the austerians. They know it p - is nonsense but they still do it. The problem is that Economics is often counter- intuitive. It is like quantum physics. Trying to explain to the plain people of the hinterland, as Mencken called them, that because of the multiplier it was essential to spend when the economy is depressed and in debt is like trying to explain the collapse of the wave theory. Telling the man on the Clapham omnibus that a light wave can be a particle and a wave at the same time unless you look at it when it becomes a particle and they will try to have you committed. The use of language is essential to overcome this. Labour has come nowhere close. Clark is right McDonnell needs scriptwriters, including some comedians, to hone the demotic, as well as the eggheads Reply Report Ibmekon JSMills 1d ago 0 1 Please do not pretend economics is science. I do not understand God or economics - does that make economics a religion ? Reply Report AngryExpat Ibmekon 1d ago 3 4 Silly argument. I do not understand quantum physics or Hebrew. Does that make quantum physics a language? Reply Report Briar JSMills 1d ago 1 2 Not since 2008. Since 1979. Bliar's much vaunted electability rested on his abandoning the powerful moral arguments for social democracy and adopting the language of the 'free' (freedom of choice, his big ideological piece of cheese in the mouse trap) market. As long as the right can present itself as pragmatic and working with the grain of human nature (assumed to be selfish, greedy and vain), it will be able to dismiss, with a Clarksonesque sneer, all alternatives as feeble, effeminate idealism. So the tough guy swagger adopted by the Osbornes of this world will prevail until we manage to grapple with its claim to be practical common-sense and expose the red-clawed and toothed truth of its real nature. Reply Report Ibmekon AngryExpat 1d ago 1 2 Reductio ad Absurdum. Cannot wait for the day I hear a quantum physicist complain that the public cannot understand particle physics - just as they cannot understand QE ! Reply Report yorkslass AngryExpat 1d ago 1 2 yep. Quantum physics is a language - mathematics and nothing else. Reply Report Joe Blackwell Ibmekon 1d ago 0 1 Reductio ad Absurdum. hardly Reply Report Ibmekon Joe Blackwell 1d ago 0 1 Latin humour ? Reply Report Johan Van Herke JSMills 1d ago 0 1 JSMills comparing the counter-intuitive theories (which in particular , please??) of economics with that of quantum mechanics. seems to me about the same as comparing wilful obfuscation and justification of human greed with the genuine refractoriness of the ultimate root causes of reality. Reply Report Ibmekon Johan Van Herke 1d ago 0 1 'counter-intuitive theories ' Here's one - Paying a bankster a 7 digit bonus leads to a better deal for a bank customer. Just cannot get my head around that concept. Would a 9 digit bonus get us even deal ? Reply Report colesla Johan Van Herke 1d ago 0 1 QM tells us that you can't identify the location and velocity of a particle simultaneously. Once you observe one, the other goes haywire. Well the same applies to people, because people can read. Once an economist works out a pattern in their economic habits, someone reads his paper and finds a way to exploit this pattern, and then the people are forced to do something different instead. Hence the reason economics is so bloody tricky. At least electrons don't read physics journals. Reply Report Ibmekon colesla 1d ago 0 1 Touche ! Ask a poker player what he wants most - it is to know the strategy of the other player. Does not matter how mathematically clever the strategy is - the knowledge of it means the other player can win. Reply Report

colesla Ibmekon 1d ago 0 1 There are other 'counter-intuitive' theories that really aren't all that counter intuitive if you've got any kind of common sense. For example, if the government attempts to expand the economy by launching infrastructure projects in a time of high employment and high resource usage, it will ultimately have a limited effect, because they'll simply be using up labour and capital that would have been used by the private sector anyway. I don't think that is particularly counter-intuitive, but apparently some people do. Reply Report Ibmekon colesla 1d ago 0 1 Agreed. Another. You can get 'growth' just by monetizing something. You invent a new law says only legally registered paid qualified people can perform xyz job. Bingo, GDP rises - but no one has a service or goods that they did not have previously. Except we have the negative effect of the cost of a new quango. Reply Report colesla Ibmekon 1d ago 0 1 A very popular one: You can get growth just by persuading the public to buy more stuff, even when they clearly don't really want to. This is a truly terrible idea, because not only does it inevitably lead to a build of up private debt and stores up problems down the line, but it also diverts real resources away from more useful functions like investing in improving productive capacity for the future. Reply Report Ibmekon colesla 1d ago 0 1 And a lethal one. 'More people die from overdoses of prescription opioids than from all other drugs combined, including heroin and cocaine' https://www.drugabuse.gov/publications/drugfacts/prescription-over-counter-medications Reply Report Johan Van Herke colesla 1d ago 0 1

colesla wrote to Johan Van Herke 1. 'QM (Quantum Mechanics) tells us that you can't identify the location and velocity of a particle simultaneously. Once you observe one, the other goes haywire.' I think you are confusing Heisenberg’s uncertainty principle with a somewhat similar effect in physics, called the observer effect, 'which notes that measurements of certain systems cannot be made without affecting the systems. “ (for more details see : https://en.wikipedia.org/wiki/Uncertainty_principle) The “observer effect” also applies to non-quantum physics and in effect to all science. ' It refers to changes that the act of observation will make on a phenomenon being observed. This is often the result of instruments that, by necessity, alter the state of what they measure in some manner. A commonplace example is checking the pressure in an automobile tire; this is difficult to do without letting out some of the air, thus changing the pressure. This effect can be observed in many domains of physics and can often be reduced to insignificance by using better instruments or observation techniques.” Whereas the Uncertainty Principle in Quantum Physics can never be canceled (not by using better instruments nor better procedures... by nothing) https://en.wikipedia.org/wiki/Observer_effect_(physics) 2. “(post by Colesla : ) Well the same applies to people, because people can read. Once an economist works out a pattern in their economic habits, someone reads his paper and finds a way to exploit this pattern, and then the people are forced to do something different instead.” This is again different from either the quantum “uncertainty principle” or the general scientific “observer effect” ; you are referring here to the “ reflexive or self-altering prediction » in the social sciences (economy, sociology etc.) 'Self-fulfilling predictions and self-defeating (suicidal) predictions-collectively termed reflexive or self-altering prediction-occur whenever the issuance of a social or economic prediction causes alterations in behavior (decisions) that promote or thwart the expected outcome. (https://www.researchgate.net/publication/223476774_Do_Self-Fulfilling_Prophecies_Improve_or_Degrade_Predictive_Accuracy_How_Sociology_and_Economics_Can_Disagree_and_Both_Be_Right) 3. The three “phenomena” defined and distinguished above are all very interesting and whole libraries have been written on each of them, but I do not see how they are relevant for the topic that is under discussion here : i.e. up to which point are we justified to make comparisons with domestic budget management, whenever we are discussing national budget management? 4. By the way, I maintain that quantum physics (only useful on a sub-microscopic scale) is all too frequently invoked in order obfuscate macroscopic issues (to which the study objects of economics clearly belong ) . Reply Report

JSMills Briar 1d ago 0 1 Absolutely agree. Pessimistic though that this will happen soon Reply Report colesla Johan Van Herke 24h ago 0 1 Thanks for the completely unnecessary clarification Reply Report Johan Van Herke colesla 8h ago 0 1 You're welcome! Reply Report Ibmekon 1d ago 1 2 QE is money printing - very few economists are honest enough to state the obvious. Reply Report

LordMurphy Ibmekon 1d ago 1 2 Its far worse than that, its money printing to give free of charge to failed banks and zombie businesses in exchange for toxic overpriced assets in order to continue the plundering of the assets of ordinary people and to destroy the culture of thrift and of putting money away for a rainy day. Reply Report Ibmekon LordMurphy 1d ago 1 2 Its far, far worse than that, its produces mal investment - a bankster earns more in a day than a farmer earns in a year. Ok, so long as another country employs slave labour and sells us food. Reply Report Eddiel899 1d ago 3 4 Modern democracy can be summed up as government of the poor, by the middle class, for the rich. Reply Report dr8765 1d ago 2 3 Excellent article, a refreshing change from the usual garbage written about the economy by the embedded 'experts'. Reply Report

zumday_zoon 1d ago 5 6 The language used is intended to mislead. There's nothing accidental about the use of such language by politicians, because it has been shown time and again that the public always buy into it. Hence, even economically illiterate Osborne knows that reaching for the old household metaphor will fool the majority, leaving him free to help out his rich pals at our expense. Reply Report

WalterFromMalta 1d ago 9 10 Everyone claims to be a Keynesian now. There is, of course, that rather inconvenient which the 'spend, spend, spend,' crowd forget - Keynes actually valued prudence above all else, and argued that economies should, ideally, aim to be running surpluses most of the time. The 'chuck the money' at it solution does not make you a disciple of Keynes. The fact is, we, as a country, are living beyond our means. Austerity is not bad per se - provided the 'pain' is shared out accordingly. The problem with Osborne's austerity is that the poor are paying for the misdemeanours of the rich. Reply Report

Alexander Mclennan WalterFromMalta 1d ago 2 3 Most don't advocate spend, spend, spend (another tired cliche)as you put it. The tax gap is estimated to be in the tens of billions for 2015/16, here endeth the lesson. Reply Report B5610661066 1d ago 1 2 Good article. Reply Report