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Why economists need to study history

Published by Anonymous (not verified) on Tue, 24/05/2022 - 8:01pm in




Axel Leijonhufvud In Memoriam

Published by Anonymous (not verified) on Mon, 23/05/2022 - 10:27pm in



  I first came across Axel’s writing as an undergraduate student at Manchester University where we were taught from his doctoral dissertation, Keynes and the Keynesians; a book that shot Axel to intellectual rock stardom. He argued in that book that Keynes’ General Theory had nothing to do with sticky wages and prices but was […]

Work is not the way out of the cost of living crisis

Published by Anonymous (not verified) on Mon, 23/05/2022 - 4:16pm in

According to Boris Johnson work is the way out of the cost of living crisis.

Like the Bank of England, Johnson claims the UK has a ‘red hot’ labour market, with vacancies exceeding the number of people available to accept employment.

My appraisal suggests this is untrue. The jobs available seem to have three characteristics. They are low paid. They are zero hours, or something akin to it. And many are with agencies, with the intention that the employer assume no obligation to the person they’d rather not call an employee beyond the end of any working day.

The latest example I found was in discussion with a teaching assistant training to be a teacher. Right now is the time when this year’s new teachers should be looking for their first jobs. But there are almost none available. Schools can no longer afford the commitment to permanent staff. So they hire supply teachers on temporary contracts to avoid the commitments required to a full-time staff member.

Older teachers cannot afford to work on the rates these supply contracts offer.

Younger teachers do not get the support they need.

Nor can they afford the rent. So they sometimes have to take a second job.

That also explains why vacancies exceed the number of available people: we live in a world where too many have to rely on multiple jobs to cover the basic cost of living. It’s really not rocket science to work this out, but it’s beyond Johnson and the Bank of England.

Teaching is not alone in being degraded in this way. Nursing is a long way down this route, with ‘bank’ nurses covering an increasing number of shifts. I have no doubt it is to be found elsewhere too. It is far too commonplace in university teaching. The approach riddles the private sector.

Professions are being degraded. Security is being destroyed. The quality of service supplied is being undermined. Wages do not cover costs. Children, patients and so many others do not get the service they expect from people who cannot in any way be blamed for that. The casualisation of their work is meant to undermine employees, and it does. The people to blame are those who thought this a good idea, from Cameron, Osborne, May, Hammond, Johnson and Sunak onwards.

The simple fact is that there is no ‘red hot’ labour market in the UK. There are just shit jobs on offer to those who in desperation have to eventually take them in the absence of any alternative.

This is not a solution to the cost of living crisis. It is all about the deliberate destruction of value in the name of increasing financialised returns, whether in state or private sectors, where that return is utterly indifferent to value, people, ethics or the long-term.

What to do about it? That’s a harder question. I will have to come back to it more than once, I suspect. But unless we can restore the dignity of work - and the direction is continually in the other direction at present - we really are in deep trouble.

Ultimately the answer is in reducing the rents that extract value every day from working people, whether those rents be literally exploitative charges for living in houses; excessive house prices and now growing mortgage costs; forced membership of pension schemes that cannot pay a return as the funds are invested in environmentally bankrupt companies, or the exploitation of people’s labour by employers who have been trained or forced to cease to care. All these crush the value of work.

In that case right now work provides no answer to the cost of living crisis, because that crisis has been created by the same monopoly empowered exploitative philosophy that is simultaneously seeking to destroy the value of people’s labour.

The cost of living crisis is indication that our economy is shot to pieces, and needs a complete overhaul. I suspect nothing less will do.

Failure to control inflation or mitigate its effects helps to control us

Published by Anonymous (not verified) on Mon, 23/05/2022 - 6:55am in

Inflationary fears are another useful tool to keep the masses suppressed and more fearful than they should be – particulalrly when this government, as it does, tells us there is not much they can do about it. While usually infation is controllable, government seems to suggest this time it is an ‘act of God’. Actually... Read more

People who do not care

Published by Anonymous (not verified) on Sat, 21/05/2022 - 6:11pm in



What gets me
are people
who do not

How can they
do that? I
will never

Treasury Obscurantism is flourishing

Published by Anonymous (not verified) on Sat, 21/05/2022 - 7:32am in

I now have a reply to my questions raised as a result of this letter I received. at the beginning of April this year, where I queried what were the assets alleged to back the issuance of Bank of England notes and Royal Mint coins. The letter I have now received insofar as it explains... Read more

Public sector debt paranoia at this moment in time is no excuse for the government imposing private poverty on the UK’s population

Published by Anonymous (not verified) on Fri, 20/05/2022 - 4:26pm in

As the Guardian has noted:

Consumer confidence in the UK has fallen to the lowest level since records began in 1974 amid growing concern over the cost of living crisis.

Stoking fears that Britain is heading for a recession caused by the squeeze on family budgets, the latest monthly snapshot showed consumers are now gloomier about their prospects than they were during the 2008 financial crisis.

The chart looks like this:

What can usefully be said that has not been by Danny Blanchflower and myself already? I think three things.

First, we were relight to have already called the recession based on this evidence of collapsing consumer confidence. As the Bank of England note in their new book on economics, mainstream economists have failed to call 148 of the last 153 recessions. I am happy not to be in the mainstream on this issue. We have already got this right, and it really wasn’t hard to do. You just had to talk to people to know what was coming our way.

Second, if we are already in recession, as I am certain is the case, then it is too late to take action to prevent it. Instead, as I have noted elsewhere today, the required action is on how to limit the impact of this crisis on people’s lives. As I said in a radio interview yesterday, the job now is:

  • to keep people in their homes, whether rented or mortgaged:
  • in their jobs;
  • out of debt;
  • with employers who can survive the shocks to come; and
  • to ensure that they are fed appropriately and are warm.

When at this moment none of those things can be taken for granted, and the government is doing nothing to help, this is a massive challenge which I fear the government will fail. The human cost of that will be high, and I will regret and mourn all the suffering that will occur because all of this is avoidable.

Third, whatever the political significance of Partygate, and it is huge because of the rapidly creeping corruption of fascism that it makes clear exists in this country, this issue is bigger. But, and that is a massive but, if I am right in saying so then it requires the main opposition parties to stop aligning with the bankrupt thinking of the Bank of England and to instead have the courage to go their own way. Direct intervention to help people, requiring government spending of £50 billion or maybe more, is required now.

That funding is readily available, whether through new money creation or by increasing the size of government deposit taking if the funds are to be used for investment purposes (and some should be). Public sector debt paranoia at this moment in time is no excuse for the government imposing private poverty on the UK’s population.

I suggested a programme of action in The Mirror yesterday. I could most certainly expand it. I have no doubt the Treasury and others read what I wrote. The silence from policy makers in response was deafening. And that genuinely worries me. Are we really to consign people to misery because of the poverty of economic thinking?

Inflation will go away – because it always does – and in the meantime here’s how to deal with it

Published by Anonymous (not verified) on Fri, 20/05/2022 - 4:15pm in

One of the arguments that Danny Blanchflower and I are making in our two person opposition to the prevailing establishment thinking on inflation is that the inflation we are now suffering will go away.

We don’t say that this is because of anything the Bank of England, the Fed or European Central Bank might do, most especially when they are getting almost everything wrong right now. We say it simply because it always does. That is an argument that, unlike the irrational claim of central bankers that increasing the price of money stops other inflationary pressures, is backed by data. The data in question comes from the Bank of England but is best presented by the St Louis Federal Reserve Bank, who have a great website when it comes to data. As they display it, this is the inflation data for England and then the UK from 1210 onwards:

Note three things. The first is that the trend in the peaks is steadily downwards.

The second is that deflation has not happened for a century.

The third is that every peak is followed by a fairly rapid downturn.

For those cynical about data from 1210 (and I am no more so than I am about that from last week in a great many cases) I have cut the period covered by the data in this second chart:

What is very apparent is how wavelike the pattern of inflation followed by deflation is until the last century.

And just in case anyone still doubts the data, this is the data from 1945:

The relevance of this last one is to show that inflation peaks are usually pronounced, and rarely result in plateaus. Even if they do, those plateaus are of short duration after which the trend is that there is an almost invariable sharp decline.

Politicians can make things worse, of course: Thatcher did in the early 80s, which most people tend to forget, but there are always consequences for deliberately trashing an economy, as she did. These exceptions apart, it is clear that inflation has not only recently, but throughout 800 or more years of history had a habit of correcting itself.

There are three reasons for pointing this out. The first is to suggest that talk of stagflation is just nonsense. That is especially the case when pay rises are way below inflation, and we’re facing a cost of living crisis because of a shortage of income right now and not demand-pull inflation because of excess wage rises at present.

Second, if inflation reverses without assistance much of the supposed role of supposedly independent central banks disappears.

Third, the focus of policy during periods of inflation should not then be on tackling the inflation. That will sort itself out simply because the panic buying, or market failings that give rise to it, will always be resolved by the the creation of a ‘new normal’ in which sanity is restored.

Fourth, instead the focus of policy during a period of inflation should be to:

a) make sure people survive it i.e. to protect the vulnerable who might otherwise suffer as a result of their loss of purchasing power (which should be the priority now);

b) to prevent the risk of recession because of the loss of that purchasing power creating short term liquidity issues for businesses that cannot see a way through to the other side of the inflationary period as a result, with a resulting loss of wellbeing for all involved. This is especially important right now because unless it happens the current pressure on spending p0wer is going to spillover very quickly into serious unemployment;

c) to address the systemic issues giving rise to the political, economic or social failure that resulted in the inflation. So, in our case:

  • address Brexit;
  • continue measures to tackle the impact of Covid on society;
  • tackle the causes of war in Ukraine;
  • address the vulnerability in supply chains;
  • reform energy supply and make it more sustainable, and
  • address the global crises (I use the plural deliberately) developing around food.

What would you not do? Increase interest rates, for a start, threatening mass homelessness when people cannot afford rents or mortgages out of already crushed incomes, and which force businesses into unmanageable debt, and which force developing countries who borrow in dollars into insolvency, whilst benefiting the financial establishment.

What else would you not do? You’d not sit back and do nothing to reduce the inflation peaks when they can be capped by judicious tax cuts to VAT and duties, which makes any downside of this crisis much easier to manage.

And what you would do is provide very specific support to the most vulnerable (people on benefits, pensions and low pay) whilst taking purchasing power away from those on high incomes and earnings who represent the one part of the economy where demand-pull conditions might exist.

This is a theory of how to manage the situation we are now in based on analysis, not economic voodoo. I fear that no one will listen until the damage has been done, but Danny and I will persist in making our case.

The F word is out in parliament – and rightly so

Published by Anonymous (not verified) on Fri, 20/05/2022 - 4:05pm in

SNP MP Mhairi Black made this speech in parliament yesterday:

For those who would rather read her speech, this is from Hansard:

For a party that prides itself on the economy, the Tories have a shocking record of running it. Our economy has the slowest growth in the G7. We have greater regional inequality than almost any other developed nation. Food banks now do the job of Government in providing for families—families that are more often than not in work.

The Government could start solving this crisis by providing solutions, such as closing tax-avoidance loopholes or creating a windfall tax for energy companies. Instead, we get endless Bills paying lip service to a manufactured culture war. The priority is not the economy. It seems to be things like protecting freedom of speech, yet the Tories are the ones who banned schools in England from using sources that are not overtly pro-capitalist. They are cracking down on freedom of assembly and protest. They are privatising Channel 4, when the Culture Secretary did not even know that Channel 4 receives no public money, so the argument is not financial. When we consider, as the hon. Member for Rhondda (Chris Bryant) touched on earlier, that the Culture Secretary was once a key focus of a Channel 4 documentary about the influence that Christian fundamentalism has on UK politics, it becomes even more concerning that this decision is political and personal. It is not professional.

Most terrifying of all, however, is that the Government literally want to get rid of the Human Rights Act. That begs the question: for whom do they think rights have gone too far? Do they know how scary it is to sit at home and wonder if it is you—is it your rights that are up for grabs? We have witnessed Windrush. Our economic strategy is to open our doors to the rest of the world when we need their hard work and then chuck them out 50 years later without a word’s notice. We tell our own citizens that their safety cannot be guaranteed in Rwanda, but we are perfectly happy to ship asylum seekers, people fleeing war and persecution, over to Rwanda as though they are cattle to be dealt with by someone else and despite knowing that the plan costs more than it will ever save.

This is just little England elites drunk on the memory of a British empire that no longer exists. We have the lowest pensions in Europe and the lowest sick pay. We pretend the minimum wage is a living wage when it is not. We miss our own economic targets time and again. We are happy to break international law. We are turning into a country where words hold no value.

Over the last 12 years, I fear we have been sleepwalking closer and closer to the F word. I know everyone is scared to say it for fear of sounding over the top or being accused of going too far, but I say this with all sincerity. When I say the F word, I am talking about fascism—fascism wrapped in red, white and blue. You may mock and you may disagree, but fascism does not come in with intentional evil plans or the introduction of leather jackboots. It does not happen like that. It happens subtly. It happens when we see Governments making decisions based on self-preservation, based on cronyism, based on anything that will keep them in power, when we see the concentration of power while avoiding any of the scrutiny or responsibility that comes with that power. It arrives under the guise of respectability and pride, which will then be refused to anyone who is deemed different. It arrives through the othering of people and the normalisation of human cruelty. I do not know how far down that road we are. Time will tell, but the things we do in the name of economic growth—the warning signs are there for everyone else to see, whether they admit it or not.

If the Bank of England is to pubish a textbook on economics it really should get it right when it comes to describing how modern banks work – but it does not

Published by Anonymous (not verified) on Fri, 20/05/2022 - 3:58pm in


Banking, Economics

This comes from page 182 of the Kindle edition* of the new Bank of England book on economics, which is in the chapter explaining the virtue of banking:

The implications are:

a) Money is tangible when it is not;

b) Banks lend other people's money when they don't; they always create loans out of thin air;

c) Banks are intermediaries when they are not, which the Bank of England has acknowledged  since 2014.

I admit that in the previous chapter it was explained that banks could and do create money out of thin air. But then we get his nonsense - which heads straight back to the old textbook teaching about banks as intermediaries. Not only does this contradict the previous chapter (never a good idea in a book) it is also wrong.  Banks in the UK - the target audience for this book - do not act as intermediaries. They never match savers and borrowers. The suggestion that they do so is just wrong and is deeply misleading.

And this is not a one-off mistake. On page 190 they say:

And on page 191 they say:

This is just drivel, to be polite. If banks do not need deposits to lend - and they do not - then this is total nonsense.

The Bank of England really should understand banking before they publish a book about it.

And for the record, they should follow their own advice. In 2014 they said in an article:

This article explains how, rather than banks lending out deposits that are placed with them, the act of lending creates deposits — the reverse of the sequence typically described in textbooks.

Now they have published their own textbook and then have done so using the out of date model of banking that they condemned as wrong in 2014. It's very hard to make incompetence on this scale up.

And, for the record, they also don't understand money. They never once note that it is a record of debt.

This is really grim stuff.

* Bought so that I could screenshot it.