Today is the 500th anniversary of Martin Luther supposedly posting his 95 Theses on the door of Wittenberg's Castle Church. What precisely happened that day does not matter. Indisputably, and maybe unwittingly, Luther started a revolution by stating what he believed to be true. In the process he proved the power of narrative.
I have no intention of offering 95 Theses this morning. I start with these 45 instead. No doubt others might have suggestions.
- All money is created by a promise to pay.
- The fiat currency of a government is created by its promise to pay.
- The promise made by a government to pay is backed by its willingness to accept that currency in settlement of taxes owing.
- As a result all fiat money is backed by the promise that there will be an obligation to pay taxes in the future.
- without taxes there would, then, be no fiat money.
- Government debt is, in that case, not a sum to be repaid by the government. It does instead represent government spending not yet cancelled by taxes due.
- Since all fiat money is created by government spending in advance of tax collection the government's debt is, then, simply the major part of the money supply.
- Banks can create money when they lend, but only under government licence.
- The licence the government grants to a bank to create money means that he bank is never independent of the government and is responsible to it.
- As a consequence the government has a duty to regulate banks to ensure that they use their licence to create money appropriately.
- This obligation to regulate banks is universal, and should be reciprocal i.e. nations owe this duty to each other as well as to their own populations.
- Since banks can create money in the currency of a country both outside as well as within its jurisdiction the supply of data on the banking activities undertaken in one state to the authorities of another who has the obligation to regulate both monetary and taxation transactions arising within their state is inherent within the nature of the banking system.
- Tax is the mechanism most readily available to a government to impose its fiscal and social policies on a country.
- Markets have a natural tendency to concentrate wealth because wealth has never been equally distributed.
- The concentration of wealth within an economy reduces the well-being of all within it as those with excess resources derive lower marginal utility from their consumption than those with below average resources. Relative poverty always follows, as can absolute poverty.
- The redistribution of income and wealth to achieve greater equality in the distribution of both does, therefore, increase well-being.
- The legal ownership of land concentrates the ownership of wealth.
- Land cannot be owned: it can only be tenanted.
- The common ownership of land will therefore reduce wealth concentration.
- Markets tend towards monopoly.
- Monopoly is contrary to the interests of consumers.
- Monopoly results in the generation of excess profits, or rents.
- To prevent such profits arising markets must be regulated by governments to ensure the fairest possible outcomes for all, including the rights of new entrants to the market.
- The payment of interest is a transfer of wealth, none being created in the process of payment.
- The payment of interest concentrates wealth.
- It is the job of government to, as a result, regulate the availability of credit and the price that is paid for it so that exploitation should not arise.
- The obligation to regulate credit extends to the promotion of activities that induce the extension of credit, including advertising.
- The physical resources of the planet are finite.
- The second law of thermodynamics holds true.
- The use of the minimum possible energy in the process of meeting human need is, therefore, a necessity and not a choice.
- The use of taxation to change behaviour with regard to wealth and income distribution, the ownership of land, the abuse of markets, the payment of interest and the exploitation of natural resources is a necessity.
- The process of taxation must be democratically controlled.
- It is the job of government to ensure that when a tax has been decided upon it is equitably enforced.
- A government must be held accountable for its failure to enforce the payment of taxes legally due because this represents a failure of its social as well as its fiscal obligations to those who elected it.
- No government has the right to undermine the right of another government to collect the taxes owing to it.
- No government has the right to undermine the tax base or rate of another government.
- Governments have the positive obligation to assist each other in the process of collecting taxes lawfully due by those liable to pay them.
- Each person must have the right to appeal against any tax liability imposed upon them and have that appeal heard in an independent court.
- To be equitable a tax system must take into account the capacity of a person to make payment and maintain their rights as described in Article 25 of the United Nations Universal Declaration of Human Rights.
- Companies, corporations, partnerships, trusts, foundations, charities and other legal entities created by common or statute law are agents of those who create, own, manage or benefit from them as the situation requires with regard to taxation and afford no separate or identifiable rights not attributable to those persons when acting in their own beneficial capacity.
- Each person has the right to enjoy their after tax income or wealth without hindrance so long as the purpose they pursue with it is itself legal.
- A person is an agent of the state acting as a trustee or custodian of the state's funds due in taxation arising as a result of the income, wealth or transactions that they enjoy until such time as that taxation is settled and the funds that they hold in that capacity are not theirs to rightfully enjoy without such obligation having been taken into account.
- A person acting in breach of their obligation as an agent of the state to appropriately manage and retain the funds that they owe in taxation shall be liable for penalty for not doing so.
- The state shall, in reciprocation of the obligation to pay tax appropriately account for the use made of that taxation in a manner that shall be appropriate to those with obligation to make payment.
- Those who, when holding political or public office fail to account for taxation due or paid be held accountable for their failure to do so.
NB: I did not plan on writing this before I woke up this morning. The 45 were literally written one after each other. I am not pretending that this is a scholarly treatise: it's just a collection of thoughts.
Thanks for reading this post.
You can share this post on social media of your choice by clicking these icons:
You can subscribe to this blog's daily email here.
And if you would like to support this blog you can, here:
In Luther’s day a diet of Worms (sic) was fresh produce.
These days we have only a can of worms.
Excellent list – to be nailed to the doors of the Palace of Westminster, 10 & 11 Downing Street as well as Threadneedle Street. Would that they kick off the same revolutionary process that his action did. He had no idea what a fuse he had lit, so maybe worth a try!
Incidentally, I wish my brain functioned so lucidly first thing in the morning. Whatever it is you’re ‘on’ I want some too. Barista, un caffè ristretto, per favore.
Only one coffee before that….
Hi Richard,
A very good list. I particularly like point 27: “The obligation to regulate credit extends to the promotion of activities that induce the extension of credit, including advertising.”
This is a point that is seldom made.
Got about halfway – it would be very useful if OECD could see the real accounts of Chinese and other emerging market institutions. They are a real horror show and impact developed countries when capital flows into their markets.
eflon Don says:
October 31 2017 at 1:22 pm
“…. it would be very useful if OECD could see the real accounts of Chinese and other emerging market institutions. They are a real horror show and impact developed countries when capital flows into their markets.”
I don’t follow this. If the OECD were to see the Chinese accounts …what then?
In the overall scheme of things I suggest the Chinese have a rather better idea of what they are ‘at’ than the ‘Western’ nations.
If you want to see a ‘real horror show’ you don’t need to look very far. |
The last point is really important. Successive politicians of all parties have failed to collect the tax that is lawfully due. Can we really just continue to pretend that hasn’t happened? Local councillors in the same situation would be surcharged – why should ministers be any different? Or could they be prosecuted for cheating the revenue? Has anyone looked at this? Is it something we could crowdfund?
I’m not sure what you are getting at with points 28-30.
The second law of thermodynamics in simple form states that total entropy for an isolated system can never decrease over time.
Of course, the Earth is not an isolated system. In human terms we have access to essentially unlimited energy supplies – thanks to the sun. Not that energy can be destroyed of course – it can only change form.
In terms of physical resources, I suppose hey are finite. But only if you suppose they get “used up”. Which of course most resources don’t. Again, they just change form – which means they can be recycled.
Ah that’s OK then
let’s burn the place down
A nonsensical retort to your already nonsensical statement. What is burn the place down supposed to mean?
Unless you are suddenly an expert in physics, it sounds like you mentioned the second law of thermodynamics to try and sound knowledgeable or similar – when this law has nothing to do with what I assume you are trying to discuss, which I again assume is the so-called finite nature of global resources and global warming.
Energy cannot be destroyed. It can be changed from one form to another. We are lucky enough to have a near infinite source of it in the solar system. You would I hope also notice that energy can be stored.
In terms of our natural resources, you might say that we can run out of fossil fuels such as oil, but what you are really talking about is the stuff we can easily pull out of the ground. We can of course make oil – most easily by growing plants which produce it – but it is more expensive than the buried stuff. You can argue about cost of supply, but no about the supply itself. Likewise metals are in theory a finite resource, but the amount of copper and iron etc on the face of the planet is essentially fixed. It doesn’t get used up. It can always be recovered – the only thing of concern is the cost of doing so.
I haven’t bothered to go through your entire list – most of it is so obviously wrong that it is really not worth engaging with you on it , not least because your reply will essentially amount to “I’m always right”. Putting the 2nd alw of thermodynamics in though just highlighted how little you know.
If you can’t be bothered to engage with global warming then neither can I be bothered to engage with you
May be the main point is that all economic activity must be sustainable, with no long term damage to ecosystems and climate.
I would add that we should state the aim of returning CO_2 concentrations to 350 ppm.
Remaining at the current 400 ppm will lead to eventual ocean level rise of 10-20 m and enormous destruction of habitable land mass.
This was a theme of The Courageous State
You need to understand the laws of thermodynamics better. Your exposition of them is nonsensical.
Richard’s 45 points may be mistaken, but if they are it isn’t for the reason you give.
Tell me the rest….
Poor Samuel,
20 years ago I would feel guilty and elitist about dismissing as your contribution as shallow, impulsive and lazy, but now that we all have Google I feel no guilt whatsoever.
The concept of entropy is central and essential to Ecological Economics, an important and well-established school of thought with a history that is several decades long:
https://en.wikipedia.org/wiki/Ecological_economics
To substantiate my point about your commentary I typed these words into my Google search: “economics entropy 2nd law of thermodynamics”
Which anyone in your position could and should have done before sounding off in a high-handed, critical manner. Here’s what I got from the first page of search results (in order, from the top of the page downwards :
”Thermoeconomics’ (Wikipedia)
https://en.wikipedia.org/wiki/Thermoeconomics
‘Second Law of Thermodynamics May Explain Economic Evolution’
https://phys.org/news/2009-11-law-thermodynamics-economic-evolution.html
‘Economics, ecology and entropy: The second law of thermodynamics and the limits to growth’
https://link.springer.com/article/10.1007/BF02208231
‘The Second Law of Economics: Energy, Entropy, and the Origins of Wealth’
http://www.springer.com/gp/book/9781441993649
‘Economics as if the Laws of Thermodynamics Mattered’
http://www.steadystate.org/economics-as-if-the-laws-of-thermodynamics-mattered/
‘Entropy, limits to growth, and the prospects for weak sustainability’
http://www.embl-hamburg.de/aboutus/science_society/discussion/discussion_2006/ref1-13July06.pdf
‘Economic thermodynamics’
http://www.eoht.info/page/Economic+thermodynamics
‘Does Economics Violate the Laws of Physics?’ (Scientific American)
https://www.scientificamerican.com/article/does-economics-violate-th/
And that was just the first page of search results. So, when you can actually be bothered, it really is that easy.
Thanks Marco
Marco,
Thanks for this impressive intro to evonomics, with its explicit reproof of S.
In simpler terms though, it seems to me that the object of your reproof presents as a blinkered “equilibrium economist”, of whom it can be said:
“One who, if you have your head in a blazing oven, and your feet in the freezer, on balance you must be comfortable.”
Economics does, after all, have to deal – as evonomics most assuredly does – with real events on the ground, rather then mere formulae.
Andrew Dickie,
My reply to Samuel had nothing specifically to do with “Evonomics”, at least not that I am aware of and I did try (briefly ) to find a connection between the two. I imagine that there might be some sort of sequential relationship between our two contributions but for the moment, at least, it does seem to be elusive.
I nonetheless thank you for your reply. If and when I can find someone to translate it I will respond in due course.
I confess I thought the link obvious
Richard,
You’ve lost me with that one. Do Herman Daly and Robert Costanza know that they are leading lights in the ‘world’ of Evonomics (and would they want to)? And when I show Samuel that he could easily find the subject matter that he was hopelessly unaware of – what on earth does that have to do with being an ‘equilibrium economist’? Which I am not, but that’s OK I am sure that I have been called much worse things.
I can’t see where I’ve “introduced” evonomics” with a “reproof” of anything. All that I have introduced is how easy its to use a search engine when you don’t have a clue what the author might be talking about.
Marco
I think you are reading in what is not there
And that Andrew saw more there than you did
Let it go
You did not speak to each other’s conditions
Richard
“Andrew saw more there than you did”
Apparently so.
Oh Well. So be it.
Super stuff.
How about getting loads printed up in indelible ink and nailing them on doors in prominent public places?
Maybe…
How about printing them in inedible ink for the benefit of the dyslexic?
An exceptional list indeed. Most economists or finance experts would not even begin to understand the simplicity and depth of the rules shown here. They are too clever to understand the basics, or admit their vast ignorance of what money and taxes really are. All they are interested in is keeping their jobs, impressing one another and getting promotions and consultancy fees. The truth? What is that? and who cares anyway? Certainly not the scientists.
“The physical resources of the planet are finite.
The second law of thermodynamics holds true.
The use of the minimum possible energy in the process of meeting human need is, therefore, a necessity and not a choice.”
We’ve had this discussion before and for the time being we’ll disagree. But I fully accept the conclusion that waste is a ‘crime against nature’ and humanity.
Sometimes it is difficult to define waste because anything that falls into the category of ‘art’ is essentially of subjective value.
GK Chesterton would have us believe that ‘If a job is worth doing it is worth doing badly’
Consummate skill transcends mere utility. Creating beyond the limits of mere utility is what marks us as human.
36 No government has the right to undermine the tax base or rate of another government.
I don’t see how this is enforceable. If a government is to be allowed to determine its tax policy as part of its obligation to manage its national economy it may undercut tax rates in a neighbouring country (nowadays anywhere is thy neighbouring country) and this may effectively move capital and labour.
We have spent years trying to make it so
The whole Base Erosion and Profits Shifting process is about this
Richard Murphy says:
November 1 2017 at 8:27 pm
“We have spent years trying to make it so
The whole Base Erosion and Profits Shifting process is about this”
Well the failure is probably because legislators and economists persist in accepting the fallacy that it’s all about the money.
If we continue to treat symptoms rather than causes we will continue to fail.
40 Companies, corporations, partnerships, trusts, foundations, charities and other legal entities created by common or statute law are agents of those who create, own, manage or benefit from them as the situation requires with regard to taxation and afford no separate or identifiable rights not attributable to those persons when acting in their own beneficial capacity.
I need that in English, Richard. I’m afraid I don’t understand what you are getting at there. You are seeing an abuse in current practice I am not aware of. Not in these terms at any rate.
I am denying human rights to non humans
And am making humans accountable for their actions
OK, I think I get that.
45 Those who, when holding political or public office fail to account for taxation due or paid be held accountable for their failure to do so.
Hell’s Bells. That would put the cat amongst the pigeons!
1 All money is created by a promise to pay.
I’m not arguing with this except I really don’t believe it’s where you start.
Economics is about resources. Money doesn’t enter into it until you’ve tackled the whole matter of ownership of the means of production.
Money is just finance. Not real, just a means to an end – currency, store of value etc. To start with the money is like getting the Waddington’s Monopoly money out and divvying it up without bothering to unpack the board.
18 Land cannot be owned: it can only be tenanted.
19 The common ownership of land will therefore reduce wealth concentration.
THIS is where you have to start.
A nations principle asset is its land. What lies beneath it, what it will grow, what you can build on it or otherwise do with it.
If it’s in private hands the rest of the Lutheran postings are just going to flutter in the breeze. The entire ‘Western’ Economic model is predicated on private ownership of land.
We live with it or we change it. As long as we are prepared to live with property rights based on ownership by force of arms at some time distant in the past everything else is window dressing.
I don’t think you’d get Corbyn and McDonnell to buy that. They are far too reactionary. It’s just too far out of the box.
Andy – you are on to something in underlining these theses.
In the GDR, land could not be owned but buildings on the land could. This created interesting issues after 1989 when the GDR was subsumed into the FRG and (sadly, you might argue, since the Western tradition prevailed) title pre-1939/45 was re-established although sitting tenants were protected from eviction.
Wealth concentration was probably not that much influenced by reunification since plots of land reverted to those disposessed during the 50-odd years of NSDAP and SED control if they or their heirs were still alive to make a claim.
Obviously it would have been preferable if the FRG had adopted the GDR policy of land ownership by the state but policy-makers are not always as enlightened as we are. Sadly.
“I don’t think you’d get Corbyn and McDonnell to buy that”
It might be a little too much to expect at this point in time, ‘reactionary’ or not.
Marco, If not now, when?
Marco,
If we’re sitting on the verge of ecological catastrophe (which it is not too late to reverse) and living in an economic house of cards which will inevitably collapse (though no one will tell you when) and that isn’t sufficient to address some of the underlying issues I really don’t know what might actually prompt us to DO something.
“I would add that we should state the aim of returning CO_2 concentrations to 350 ppm.
Remaining at the current 400 ppm will lead to eventual ocean level rise of 10-20 m and enormous destruction of habitable land mass”
Bravo! I like the “returning” bit.
By land restoration, including planting trees on a massive scale. Land restoration sequesters large amounts of carbon. see the “Bonn Challenge” – for example here:
https://www.zmescience.com/ecology/pakistan-trees-climate-change-15082017/