I did a podcast / discussion with Unlearning Economics last week. This is what I had to say. My first answer on how we got to the state we are in was long (I can do monologues) but worth watching, I think, but heaven knows where they found that 20 year old picture:
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Once more Richard no one can fault your application to delivering more truth in economics.
All I can say is ‘Thanks mate’.
This is a plain warning:
https://www.theguardian.com/commentisfree/2022/oct/18/trussonomics-labour-market-public-spending
Labour needs to get their heads out of their arses on this. Austerity is not an option if they want to win and stay in power. They have to be brave and have:
Higher rates of tax for high earners.
Corporate taxation rises including carbon producers.
Increase stamp duty (if only to calm the housing market)
Tax the city – they’ve made hay out of this – why not?
Investment to close the tax gap and more effort to close the gap – not to punish but to curb inflation.
Lower VAT
(Stop under taxing those who can afford it, whose excess money cause inflation or market distortions ).
Get the BoE under control as per the law or dismiss the Governor. And state the truth to the public time and time again.
…whilst creating money (QE) to deal with the CoLC, pay rises for the public sector and CoL increase in the benefits system and/or to stabilise the pension system.
Change the council tax system and get those re-valuations done. Use the housing market to make LA’s richer instead of individuals.
All this should be done pretty rapidly, and then the follow on would be about longer term green investment.
It is high time BTW that the government had a national bank methinks. Or at least threaten one because it seems to me that the Government needs to assert who the money supply belongs to – it needs a better mechanism to put its money to work than the private banking system alone.
The Tories want to make out that there is no other recourse as part of their ‘disaster Government model’ and destroy people’s faith in democracy and hope.
Labour has to be better than that or they will just be seen as another iteration of out of touch politicians.
We talk about the economy dying and that is correct, but it is also the risk of our belief in democracy dying that is also at huge risk here and if the Labour party tipped us into a world of authoritarianism then that is tragedy in the making that will lock us into a world that makes Orwell’s writings look quaint in comparison.
I shared the Andrew Verity twitter thread with someone who asked, ‘why haven’t we seen this before?’ The tone implied it was probably a kooky idea that most sensible people ignored.
One answer is, of course, the power of the vested interests to block such discussion, or, if they can’t make fun of it -‘magic money tree’.
The other reason is the power of established ideas which are repeated so often they are assumed to be true. For example we hear ‘unfunded tax cuts’ a lot. It takes a deliberate effort to unlearn something and it is often accompanied by doubt for while.
A framework of knowledge is a paradigm and a paradigm shift, according to Thomas Kuhn wrote the “Structure of Scientific Revolutions” sixty years ago this year, usually only happen when the ‘old guard retire or die”. Unfortunately, we can’t afford to hang around.
This is why I often share your blog.
But a crisis can focus thought. We sure have one of them.
We have
It makes thinking even more important
I have made clear here my contempt for ‘Party’. Party is faction: nothing more. Penny Mordaunt in her defence of the Conservatve Government in Parliament yesterday, standing in for the craven PM, used the term ‘the national interest’ about twelve times. The national interest had nothing to do with it. If the national interest came first Liz Truss would already be gone, and the Conservative Party would be facing up to the electoral wrath of the British people, and its Parliamentary obliteration. It deserves nothing more. The Conservative Party is hanging on to power, continuing trashing the economy in order to look after the Conservative Party; and nothing else.
Even the markets treat the Conservatives with contempt; but this carries with it a crucial lesson we should not ignore. We assume that whatever Government is in power, they will now be treated the same. Interest rates will be the same. There is no measure being made of the Government itself; but of course we know that is not the case. We know markets turned against their own political acolytes. This Government disticntively brought this upon itself. The financial hurdles the markets have set for the Government are not ‘absolute’ measures. They are penal because interest rates are rising everywhere; but we know the Conservative Party’s wobbly reputation for competence and responsible government has collapsed. We know the markets rejected the so-called mini-budget. This carries a cost. Reputation is not trivial. In money terms, reputation has a price – because everything has a price. Think of an unemployed drunk looking for an overdraft; and all he can find is an interest premium rate attached, that even Wonga wouldn’t have dreamt of charging for a pay-day loan. Now substitute this Conservative Government for the drunk in this thought experiment. Would you charge the same rate to any Government if you had the influence and leverage? Even Governments are credit-rated. They are not all the same.
Need it be the same for any British Government that was in power now? The Conservative Party want you to beleive they are all the same. But is it true? For over a decade the Conservatives have been telling you their “reputation” counts in financial markets. Believe them. Their reputation has tanked; gone. There are no free lunches, especially for lunacy.
The removal of the Conservatives and the provision of a fresh British Government, untainted by neoliberal Conservative excess, or its low-talent ideologically driven politcians; a government that possessed even a small modicum of credibility, and the confidence of the British electorate; proposed no priority for lavish tax-cuts for the rich, but offering well judged public investment on infrastructure and renewables; a targeted windfall tax on the energy producer sector (e.g., Bloomberg’s forecast of £170Bn profit in the UK sector alone over the next two years frames the scale of the profit pool available); intent on determining a transformation of the domestic energy and housing strategy toward green, low energy solutions; and compassionate support for hard-pressed households through the cost of living crisis: will offer the country a better investment prospect, and I surmise potentially a better credit rating, and lower cost of borrowing than anyone would offer the credit-pariah Conservatives. In other words, the Conservatives themselves represent a national debt interest cost premium, a penalty paid by the UK for a Conservative government that insists on Hunt taking all the decisions now (decisions that seem exclusively focused on repairing the credibility of Conservative politicians at a pace designed for an election cycle, rather than fixing the problem while simultaneously healing the people’s ills).
Does any other Party fit the bill? Ah, that is a different matter; this was just a thought experiment.
What Paul Krugman I gather refers to as a ‘moron premium’.
The U.K. now a laughing stock. Truss and Co failed to recognise that the ‘markets’ are not entirely ideological and can spot a total dud when they see one.
Only the hedge funds are enjoying themselves as they revel in instability. Along with the M&A merchants who see the weak pound and crashing share prices as a chance to pick at the carcass of U.K. industry.
I did not expect confrimatory evidence for my thought experiment so quickly. At around 8am this morning the UK 30-Year Bond Yield was 4.11%. As of 3.45pm it was 3.9%. Truss has just saved us some money. If the Conservative government resigns, the UK will sae a great deal more.
Inspiring! Thank you.
I admire your proposals for redistribution.
One question … perhaps I missed something, but how do you imagine, redistribution from wealthier to poorer nations being accomplished?
One of the best ways would be debt waiver in the first instance
Then by sustainability payments
Thank you for that podcast, Richard. I have really enjoyed it; it makes so much sense to me.
I wonder if you could tell me the date that Chris Philp admitted in parliament that the BoE money was at no cost ‘to the taxpayer’. It would be so useful to be able to actually quote his words from the record in Hansard. Or even the date when you recorded the podcast so that I can search around that time.
I’m really glad you made the point that MMT is *apolitical*. I’m so tired of people telling me it’s a ‘leftie’ thing…
It was during his last appearance as chief Secretary, I think.
Richard
A number of points jumped out for me.
You are quite correct, everything must start with a clear vision, a goal of some sort. Once a vision has been determined and providing one understands the current starting point or current reality, we can work out a plan to get from where we are to where we want to be.
Modern Monetary Theory is an understanding of how the money system actually works, it is apolitical.
Labour have never, it seems, been savvy about the way the money system works. I heard once that when the UK left the gold standard in 1931 a labour politician said, I didn’t know we could do that.
Is Andrew Bailey useless, or is he in lockstep with Tufton street? Is this all part of a bigger plan to get rid of Truss and get Sunak in?
Whether we will ever get to the point of politicians actually having a long term vision is highly debatable. The money system is highly politicized, with those in power dolling out favours as they see fit.
One thing which still surprises me is why the BBC trot out the right wing think tanks as the experts?
You made some powerful points, I wonder who will see it, and I wonder whether the people who see it will accept or reject it?
Beliefs and ideologies are incredibly powerful and are in part what makes us human.
Thanks for your efforts.
I know people see this stuff
But they ate frightened to react to it
Excellent interview.
Just finished reading The Joy of Tax after previously reading The Courageous State and Money for Nothing.
Given me the belief that there is a different way. Thank you for this
Thanks
Brilliant Richard , thank you ….