I just posted this on Twitter:
He was talking to Sussana Reid (who is an excellent interviewer) on Good Morning Britain.
With incompetence on this scale on display, Labour really does not deserve to be in office later this year.
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Typo in title Richard taking
Talking
Thank you and well said, Richard.
Jones often tells the City how his hero is Blair and defends the invasion of Iraq. One has the impression that he could challenge Streeting as the more palatable (Blairite) candidate for the succession to Starmer.
Jones gives the impression that what Blair had to offer in the mid 1990s is still relevant this decade and with all the challenges the planet, not just the UK, faces, just like the Tories bring up Thatcher and even Churchill. He also seems to think that the west is able to call the shots like 2003.
He is deeply uninspiring for all those reasons
And the fact that he seems to know nothing about economics.
Thank you, Richard.
There are more like Jones in the pipeline.
“And the fact that he seems to know nothing about economics.”
But surely that exactly qualifies him to be Chief Sec? the lack of knowledge makes him more “pliable” with regard to his treasury minders & not a challenge to the other know-nothing Reeves. Yup, it’s going to be a cabinet of “all-the-no-marks”.
& the political imbeciles wonder why politicians have a trust rating of 12%.
Clement Attlee-type Labour does deserve to be in office.
It’s some of the current shadow cabinet that don’t deserve power.
I’m afraid you are talking, in real world terms, of an extinct species.
Corrected
Thanks
Are there any middle aged, middle class, white men with political vision ?
Who could be a 21stC Attlee, without morphing into populism, or worse, demagoguery ?
As power tends to corrupt, those able to resist self aggrandisement are few and far between.
Do we look to those like AOC or Greta for inspiration, and another type of person for organisation, to actually get the reforming done ?
If that division of labour were appropriate, I’d probably look to someone akin to three influential and pioneering American environmental scientists such as a David Keeling, Donna Meadows or Rachel Carson type for their immense determination and clear thinking, intelligence and awareness of the art of the possible.
However, my generation’s time is past, and we need determined young free thinkers, with energy, ethics and empathy, with technocratic abilities, as much as we need political leadership.
There are such young individuals amongst us however alternative social visionaries have always been initially greeted by disdain and ridicule as Thomas Kuhn has articulated in his History of Scientific Revolutions. At the moment their voices are being minimised by corporate and social media by being constantly framed as overemotional, unrealistic and elitist.
My teenage daughter recently confided in us that she hates her life and is realising that she has been born into the wrong historical period. I felt the same at her age back in the 1970s. The experience of the intervening years has done nothing but reinforce this emotional alienation. All we can do is offer her empathic communion.
I agree
I hope your daughter finds the way to express her frustration and so come to terms with it
Tell her to write a blog…..
Or do TikTok
This is nonsense, the government cannot create all the money it needs, as it needs to mitigate the impact that this would have on inflation, typically through increased taxation, which is clearly constrained.
To pretend otherwise is stupid – we can point to other countries / periods in history where printing simply money has had serious adverse impacts.
Go on then, But only refer to countries in the situation the UK is in. Zimbabwe, Venezuela and Weimar Germany weren’t.
Thank you and well said, Richard.
My masters dissertation on central bank independence, 1995, involved some research in Germany, coinciding with the federal elections in 1994.
It was explained how inflation was allowed to escalate into hyperinflation by / in Weimar Germany as a means of reducing the burden of WW1 reparations.
Independence for the Bundesbank was another means of devolving power from the centre. That devolution also meant a consolidation of Germany’s historic states into larger units able to resist the centre. Inflation performance had nothing to do with it.
With regard to Venezuela, which I used to deal with at HSBC as the state oil company PDVSA was a client and even met Hugo Chavez at Canning House in 2006, it’s never talked about that the country is under sanctions, politically motivated by Uncle Sam as the US and its allies / client states would like the compradors and oligarchs back in charge.
This is for Colonel Smithers & central bank “indepenence” (aka control by non-democratic forces).
Did you cover the events @ the Bundesbank in the 1960s?
Erhard & revaluation of the DMark – & Blessing’s (Bundesbank Pres) revenge by engineering a short recession – leading to the fall of Erhard & his replacement by Kiesinger (an old Nazi btw). Interestingly, the coalition that followed – focused on “wage restraint” (using Newspeak language – a Stability and Growth Pact). It is not difficult in any country to identify the enemy – it is the Treasury/Min of Finance and the Central Bank.
& the “independence” of the ECB is very much in the Bundesbank mold – not so many old-Nazis mind – but filled to the brim with neo-liberals that despise politicals.
Strangely, we don’t hear many complaints about banks creating money out of thin air, mostly to drive-up property prices and ensure rich returns for the financial sector and associated parasitic sectors of the economy —particularly when interest rates are high.
The taxation measures Richard has described to remove unproductive money from the economy would be more direct and effective in moderating inflation than interest rates, which seem to be there primarily to provide profit for the financial sector and to protect the wealthy.
Outrageous property price inflation (ignored in most government measures of inflation) has put home ownership largely out of reach of younger generations and has undoubtedly contributed to homelessness.
Redirecting money creation (and destruction) to facilitate productive infrastructure would benefit everyone, although I’ve no doubt that some would have difficulty getting used to the idea that piles of property and idle cash are no longer productive wealth generators in themselves.
A legacy of robust and resilient services and infrastructure —mitigating the impact of global heating— would be a better one to leave to future generations than the nonsensical concept of zero national debt.
Richard,
You asked for examples of countries with massive growth in money supply and inflation issues. How about Turkey and Argentina, both of whom have very high money supply growth and inflation in 2023? Both countries are in the G20.
Argentina – Growth in money supply (M3) in 2023 = 130%. Annual inflation rate in Argentina in Dec 2023 = 211%
Turkey – Growth in money supply (M3) in 2023 = 67%. Annual inflation rate in Turkey in Dec 2023 = 65%
All figures are from the Trading Economics web site.
Isn’t the quote from Milton Friedman – “inflation is always and everywhere a monetary phenomenon”? If you create a lot more money through MMT, you would also have to tax / borrow a lot more to remove all the extra money you create from the economy again. Even assuming you did that, with many more pounds circulating through the economy and with the money supply increasing, the value of the pound would be likely to drop as people spent more of the extra pounds in their pocket on imports and this would create additional cost push inflation through more pounds chasing higher imports from overseas.
Their borrowings are not denominated in their own currencies
They / you fail the rest in that case
There is no comparison
So, you think the only problems in Turkey and Argentina are too much money creation?
No, the excess creation of money is a symptom of broader institutional failings. Japan has created huge amounts of money without inflation.
No body is suggesting that MMT allows for money creation without limit/consequences.
Richard – The fact that Turkey and Argentina have borrowings in foreign currency is a symptom of the instability / inflation of their own currencies rather than a cause of their problems, I would suggest. No sane lender will willingly want to lend money denominated in a currency which is rapidly depreciating and no borrower will willingly want to pay the very high level of interest rates that would be required to compensate the lender for the risk of very rapid depreciation in the purchasing power of the nominal value of currency lent. The central bank can of course print money in these currencies (and they do), but the evidence shows large increases in the money supply generally result in corresponding large increases in inflation, as seen in both Turkey and Argentina. Countries with unstable / inflationary currencies have no alternative but to borrow in hard currencies.
Clive – Japan is indeed a special and very unusual case where they have managed to increase their money supply without causing inflation. Research seems to suggest that the additional money created only partially boosted the economy as households did not significantly increase their consumption and firms did not substantially increase their investment either, so inflation remained low. Very low inflation meant Japanese consumers were happy to hold currency in their bank accounts rather than spending it and were not worrying about the loss of its purchasing power. In my view, it seems very unlikely that this dynamic would be replicated in the UK. UK consumers in general have a low propensity to save and more of a tendency to spend whatever money they have, so it would be more likely that increases in the money supply put into the hands of UK consumers would indeed feed more directly into the economy and cause inflation from too much money chasing too few goods / available services as well as increased imports negatively affecting the value of the pound.
Ultimately, the stability of any modern sovereign currency is about market confidence in the way a currency is managed and the associated inflationary expectations for that currency. Taking GBP, EUR or USD as examples, there is already more than enough of each of these currencies already in existence to cause very significant inflationary problems *IF* confidence in the stability of these currencies evaporated and everyone who is already holding those currencies came to the conclusion that they needed to get out of their currency holdings by either buying goods / services or exchanging their existing currency for other assets / alternative currencies. This is the issue that MMT backers ultimately need to address – How do governments issue as much money as they think they “need” whilst simultaneously persuading holders of those same currencies that they can have confidence that the value of that currency is not going to be undermined by a large increase in the money supply? Confidence in a currency is a fickle thing and once lost with inflationary results, history shows that it is very hard to regain.
The research done by Reinhart and Rogoff in “This Time is Different, Eight Centuries of Financial Folly” show that humanity has a repeating pattern of thinking financial conditions in their particular situation are different from before and almost always this proves NOT to be true and financial disaster results. MMT seems to be just the latest incarnation of such thinking, especially if over-used and without rigour over potential inflationary consequences. Arguably, western governments have already been using MMT a lot through QE since 2008 and they have been trying to walk the tightrope of doing so whilst simultaneously keeping a lid on inflationary expectations.
Very politely, if you want to ignore all the evideence of what might be happening in Turkey and Argentina that provide reason why they may not be trusted, feel free to do so. The markets don’t.
Argentina is intensely unstable and has been ruled by a junta in its recent history. It has a track record of default.
Tyukey has a failing democracy, a very difficult polotcial history and a current government dominated by an unstable and often irrational authoritarian.
You ignore that and make up nonsense on. money creation to make your claim. You also, utterly absurdly, suggest MMT says governments may make any amount of money at will when it says nothing of the sort.
Now, why don’t you have another go, presuming you might deal with the facts, and not your fantasies. And I suggest you avoid using Reinhart and Rogoff if you want to be credible, because they are not.
Rupert,
Reinhart and Rogoff? That is your argument? Do you really want to go there?
The mistakes in Reinhart and Rogoff’s famous analysis of sovereign debt levels >90% were set out in 2013 by Herndon, Ash and Pollin, very quickly. Reinhart acknowledged the errors in their spreadsheets but defended the original argument, and pointed to findings in the Herndon, Ash and Pollin paper that seemed to lend weight to the defence. To cut through the academic ritual dance that accompanies such differences, I will move to the chase: a neat summation by Pollin (LSE: ‘Public debt, GDP growth, and austerity: why Reinhart and Rogoff are wrong’; 5th March, 2014), from which I have cut and paste a large, salient excerpt, here (Randall Wray and Paul Krugman are among the ranks of those who concur, while Dean Baker, of CEPR wrote a ‘Failed Rescue Attempt of Reinhart-Rogoff’ piece in 2013,):
“The Reinhart-Rogoff research is best known for its result that, across a broad range of countries and historical periods, economic growth declines dramatically when a country’s level of public debt exceeds 90% of gross domestic product. Working with the Reinhart-Rogoff data set, we show that there is no evidence to support this claim.First, in their work with a sample of 20 advanced economies over 1946-2009, they report that average (i.e. the mean figure in formal statistical terms) annual GDP growth ranges between about 3% and 4% when the ratio of public debt to GDP is below 90%. But they claimed that average growth collapses to -0.1% when the ratio rises above a 90% threshold.
However, Herndon, Ash, and I show that these results were based on three sets of mistakes: (1) exclusion of some of the available data; (2) coding errors with their working Excel spreadsheet; and (3) inappropriate methods for averaging statistics to produce their overall results. For example, because of these data-handling problems, a one-year experience in New Zealand in 1951, during which economic growth was -7.6% and the public debt level was high, ends up exerting a major influence on their overall findings. Indeed, this 1951 experience in New Zealand exerted equal influence on their overall findings as 19 years in which the UK economy operated with high public debt/GDP ratios. The UK economy experienced postwar growth at an average rate of 2.4% over these 19 years.
When we performed accurate recalculations using Reinhart-Rogoff’s dataset, we found that, when countries’ debt-to-GDP ratio exceeds 90%, average growth is 2.2%, not -0.1%. We also found that the relationship between growth and public debt varies widely over time and between countries. For example, for the years 2000 to 2009, the average GDP growth rate for countries carrying public debt levels greater than 90% of GDP was either comparable to or higher than those for countries whose public debt/GDP ratios ranged between 30 and 90% .
In their response to our April 2013 working paper, Reinhart and Rogoff say that their incorrect GDP growth figures, based on average (i.e. mean) GDP growth rate calculations, were never what they had emphasized in any case, either in the 2010 paper itself or subsequently. They argued that they had always given more credence to the alternative measures of GDP growth reported in their 2010 paper, which are the median figures (medians being another way to measure central tendencies in data). Most importantly, they observed that, using either our corrected average figures or the medians from their 2010 paper, GDP growth declines by about one percentage point when the public debt/GDP ratio crosses the 90% threshold.
Yet there were serious problems with Reinhart and Rogoff’s response. The most obvious was that the median GDP growth figures they reported in their 2010 paper are distorted by the same errors that affected their average growth figures. Indeed, in an “Errata” memorandum responding to our working paper, when Reinhart-Rogoff themselves corrected their Excel coding error and included all the data for all countries in their spreadsheet, the differences in median economic growth rates falls by only 0.4 percentage points between countries whose public debt/GDP ratio was between 60-90% and those where the ratio was over 90%—from 2.9 to 2.5% median GDP growth. In other words, based on Reinhart-Rogoff’s own recalculations in their Errata memo, we actually see, with their preferred median figures, still stronger evidence that there is no significant drop off in growth when a country passes the 90% public debt/GDP threshold. Reinhart-Rogoff themselves do not highlight this result in their Errata memo.
Reinhart and Rogoff also initially defended their 2010 findings by referring to the results with their dataset spanning 220 years, from 1790-2009. However, as we show in our CJE paper, they made the same statistical errors generating these 220-year calculations, and their results are similarly distorted. For example, with the 1790-2009 data, a one-year experience in Norway in the 60-90% public debt/GDP category—when economic growth happened to be an exceptionally high 10.2%—is accorded equal weight with 23 years in Canada, 35 years for Austria, 42 years for Italy, and 47 for Spain. We show that when properly recalculated, there is no difference at all in the average GDP growth rates over 1790-2009 for the countries in Reinhart-Rogoff’s dataset in which public debt ranges between 90-120% relative to countries in which public debt/GDP fell between 60-90%.
What does our critique of the Reinhart-Rogoff research mean in terms of economic policy? Consider a situation in which a country is approaching the threshold of a 90% public debt/GDP ratio. It is simply not accurate to assume that these countries are reaching a danger point where economic growth is likely to decline precipitously.
Rather, our corrected evidence shows that a country’s growth may be somewhat slower once it moves past the 90% public debt-to-GDP level. But we cannot count on this being true under all, or even most, circumstances. Are we considering the US demobilization after World War II or New Zealand experiencing a severe one-year recession? Our evidence shows that one needs to ask these and similar questions, including whether slow growth was the cause or consequence of higher public debt, before we can draw meaningful conclusions.
More generally, as my co-authors and I write in concluding our CJE paper, “policymakers cannot defend austerity measures on the grounds that public debt levels greater than 90% of GDP will consistently produce sharp declines in economic growth.”
Agreed, and thanks for your patience in writing this
John – Thanks for taking the time to post your critique of Reinhart and Rogoff, which I accept.
Rupert,
Kind of you to acknowledge the point; a gracefully unusual response in social media, although at least a little more likely here.
The sad part of Reinhart & Rogoff is that their citation counts are 1k+, but those who deconstructed their work? Fewer. When a bad idea takes hold and is supported by conventional wisdom and politicians, it hangs around polluting the air and distorting policy, long after ‘the facts’ have their pants on and taken to the field. That is how ideology survives.
Need to tell the public at everyone opportunity that any politician who is using a “government credit card analogy”, is either ignorant, or trying to mislead the public.
Labour Left, which includes John McDonnell and Richard Burgon, are not talking about that.
There was an Arise meeting on zoom on Monday night, when you were talking to MPs, Richard, in real life.
Richard Burgon was not at the meeting on Monday as he is ill, as are many other people in the commons, apparently.
“he is ill, as are many other people in the commons, apparently”
may be because of this:
https://www.theguardian.com/world/2024/mar/06/people-in-england-facing-food-poisoning-russian-roulette-as-illnesses-soar
Extract: “Experts point to various factors: weakening regulatory focus, a weakening of standards in importation checks post-Brexit and local authority cuts while the UK food standards authority puts it down to improved detection.”…….eh? illnesses soar cos of improved detection?
Could this be a cunning plan by the Tories – making much of the population to ill to vote. I think Rishi Baldrick should tell us.
I imagine they get the best unadulterated food possible and we pay for it.
Actually, John McDonnell coughed a couple of times during his speech, so I presume it’s one of those sort of bugs going round.
I haven’t seen my family who live in the same village for three weeks as they have been passing round coughs and colds. Not sure if it’s covid or not, but I went to the coffee shop yesterday and one of the workers I expected to see was away with covid.
Anyway, to change the subject, this is Corbyn’s group, the Peace and Justice Project.
https://thecorbynproject.com/news/budget-2024-peace-justice-project-response/
There’s an article by Prem Sikka in a link in this.
Just thinking that the increase in E Coli could be because of the state of our rivers and seas.
Credit to the BBC: “Many commentators have warned that it is misleading to refer to the country’s finances in the same way as you would talk about a household’s finances [..] Household analogies are dangerous territory, intensely contested, and can easily mislead”
In “Budget 2024: Is the tax take the highest for 70 years?”, BBC News, 6 March 2024
https://www.bbc.co.uk/news/uk-politics-68494168
Good…..
There is a place in Northumberland near Hexham, called “Once Brewed” if you’re approaching from the east, or “Twice Brewed” if approaching from the west. Explanatory Wikipedia review appended.
I mention this because I had a sort of tongue-slip in enunciating this as “Twice Borrowed” when thinking about what one of your followers some time ago eloquently described as the “Ludicrous Narrative of National Debt”.
Simply put, it is indeed so-called money that is borrowed twice. Attracting investment via bond-sales, with a concomitant liability for redemption + interest is I suppose a form of borrowing. Having received such investment, BoE the “lends” some of it to the government that owns BoE to cover the structural deficit. And that now twice borrowed money also has to be redeemed (via taxation) + interest back to BoE.
Ludicrous & farcical? Without doubt!
I have written to HM Treasury at length (snail mail was necessary), with variants to BoE, OBR, Rachel Reeves & other Labour MPs, BBC, Channel 4, Sky News, Julia G Patterson of Every-doctor (pleased to learn, Richard, of your contact with her) & at least 10 other publications various – SO FAR. The text of the HMT letter is also appended. It is as yet too early to expect, reasonably, a reply from them
Julia Patterson responded favourably. BoE ducked out of the issue citing their subservience to HMT as follows (excerpts):
“Dear Mr Peyton, Thank you for your email. Decisions on Government spending and taxation are matters for the Government and therefore you may wish to contact HM Treasury…for further information.”
My reply: “…I am perfectly well aware that decisions on these matters are indeed the government’s responsibility…..What I requested from you however was not “decisions” but clarity via a Quarterly Bulletin (perhaps your next one?) on how it all works…..BoE did this in Q1 2014 in terms of exactly how private commercial bank lending worked, ending years of nonsense about them being intermediaries between depositors & borrowers….I had also copied (more or less) my e-mail to the OBR, & I will now do the same to HM Treasury. Once again, thank you for your reply….”
BBC replied & stated that they needed more time – others have indicated that a reply is not guaranteed…….
Once again, I urge all followers of this blog to write to government, MPs, broadcast & written media et al. You don’t of course have to use my words – the vast majority of you are perfectly capable of expressing yourselves. The point is that something must be done to unlock the door to real change – otherwise we will all be “spitting into the wind” in perpetuity.
Richard M has put enormous effort & work in getting the message across for 20 years & more. Why not give him a hand? Imagine the effect of many people writing as opposed to one person.
Also imagine that I am a facsimile of the finger-pointing Kitchener poster from WW1.
i.e. “YOUR COUNTRY NEEDS YOU!”
https://drive.google.com/file/d/1cqQsi63bS_l6HCQ8KrT7pr66hibRsc5y/view?usp=drive_link
https://en.wikipedia.org/wiki/Once_Brewed
Many thanks
I visited Once Brewed last year
I winder of the cutting down of the sycamore has imapcted the number stopping?
Paradoxically there seems to be more visitors – having said that there is much to vist & see in that area
Part of the tree is going on display at The Sill, near Hexham, a very interesting community and exhibition building worth visiting even without the tree.
The last time I wanted to go there, there was a display of Lost Words, but it was a time when family had covid, so nobody to go with. Don’t know if it is still there.
Sycamore Gap birthday cards are selling really well in Durham.
Thanks
Forgot to say what I really meant to say.
This week I have had 4 letters from my MP, two about Gaza, one about the ECT and one about pensioners.
I think he is trying to clear his desk, which is rather important as he is Richard Holden, the chair of the tory party.
Anyone think there’s an election on the horizon?
He worked in central office to help May and Johnson get elected, before becoming a redwall MP himself in 2019.