Recent posts.

September 25, 2014

Institutional investors managing £15 trillion of assets have called for governments to phase out fossil fuel subsidies and set a stable price for carbon emissions, to help increase investment in clean energy. “International energy investment”, in Green taxing and spending, September 2014.

Lending to small and medium-sized enterprises through the Bank of England’s Funding for Lending scheme dropped by more than £1 billion in the first two quarters of this year. “UK banks, 2013-4″, in The 2010s: Recovery, August 2014.

At least £122bn of property in England and Wales is held through companies in offshore tax havens. There is concern that London property has become a haven for dirty money from around the world. Land tax, August 2014.

In the current year UK government revenue from residential stamp duty, payable by home-buyers, will be not very far from the previous peak figure of £6.7 billion reached in 2007-08. Land tax, November 2013.

In a new book, fuel taxes to reflect environmental costs are estimated for 156 countries. The revenue could be used to reduce other taxes, or to pay down public debt. This would be better than relying on a patchwork of uncoordinated policies, or waiting for global agreement on climate policies. “IMF fuel tax toolkit”, in Green taxing and spending, July 2014.

Referendum diary.

September 20, 2014

May 2011. The Scottish National Party won the Holyrood Scottish Parliament election.

May-June 2012. Yes Scotland and Better Together were launched.

October 2012. The Edinburgh agreement was signed. In the agreed referendum there was to be no third “devo-max” option on the ballot paper.

September 2013. I wrote in an email: If Scotland doesn’t choose independence, it doesn’t seem right that Scotland’s central bank should continue to be called the Bank of England.

January 2014. The Bank of England governor commented that a durable, successful currency union requires some ceding of national sovereignty.

April 2014. I wrote in an email: I haven’t got any strong opinions about Scottish independence and I don’t think its my business. (I’ve only lived here for a few years).

25 August. Alistair Darling’s attempt to explain the currency problem in the second leaders TV debate was swamped by interruptions from Alex Salmond and the audience. This seemed to be the moment when the increase in support for the Yes campaign happened. They were thought to have won the currency argument.

6 September. In a new YouGov opinion poll, support for Yes had increased, and was now greater than support for No.

8 September. American economist Paul Krugman commented that sharing a currency without sharing a government is dangerous, and if Scottish voters really believe that it’s safe to become a country without a currency, they have been badly misled.

10 September. I emailed the Krugman link to some political friends in England.
( http://www.nytimes.com/2014/09/08/opinion/paul-krugman-scots-what-the-heck.html ).

11 September. In a graphic of a new Survation referendum poll, in Metro, the figures were shown the wrong way round. Perhaps someone at Metro had assumed that the popularity of Yes had continued to increase. Actually the trend had reversed.

12 September. Standing up in a bus to get a Metro, I fell over. The driver and other passengers were a bit upset, and I got a big bruise. Metro had reprinted the graphic with the correct figures and an apology for yesterdays mistake. No had got 53 percent and Yes got 47 percent.

16 September. Three new opinion polls were announced, all with 52 percent for No and 48 percent for Yes.

18 September. Referendum day. In the middle of the afternoon I went for a walk along a cycle path and past the polling place. I knew which way I wanted to vote but still wasn’t sure that it was my business to do so.

Later. The final opinion poll, taken on voting day, was 53 percent No, 47 percent Yes.

Bedtime. There was a rumour on the radio that North Lanarkshire, which was expected to have a No majority, had voted Yes. I went to bed and left the radio turned on.

19 September, early morning. Soon after midnight the first regional result was announced. Clackmannanshire had voted No, with a larger majority than had been expected.

About 3 hours after that, 7 regional results had been declared. The City of Dundee and West Dunbartonshire both had Yes majorities. No had 50.2 percent of the total votes announced.

About an hour later, 21 of the 32 regional results had been declared, and No had 55 percent of the total vote. Orkney had the highest No vote, 67.2 percent, and North Lanarkshire had voted 51 percent Yes.

Next came the Glasgow result, 53 percent Yes. This was only enough to decrease the No share of the total vote to 54 percent. This was the moment when it became almost certain that No had won.

Next time I woke up it was daylight and No had won with a 55 percent majority.

Later I went shopping. The sky was grey, there was light rain, winter is coming on, and I’m still in the UK. I felt quite cheerful.

European election.

June 10, 2014

For me, in all the thousands of words I saw about the European election campaign, one sentence stood out. It was in the Manchester Friends of the Earth’s list of 10 policies:

” a new EU economic strategy . . . which shifts the tax burden from labour to resource consumption . . . “
( http://www.manchesterfoe.org.uk/eu-election-survey-response-peter-cranie-green-party/ ).

Environmental taxes on resources and pollution could be better than income taxes, not only for the environment, but also for reducing inequality.

( ” Progressive tax and inequality”, in “Citizens incomes and progressive tax”,
http://ammpol.wordpress.com/ubiprog ).

I think this policy should be a major feature in the 2015 Westminster election campaign.

Monetary policy.

March 16, 2014

Inflation targeting made central banks reluctant to accommodate the deflationary effects of China’s entry into the world trading system. The excessive liquidity they created fed the credit bubble. “Deflation”, in Inflation, interest, and the supply of money: Targets, 13 December 2012.

Vince Cable, the . . . Cabinet member . . . said . . . “It would be useful . . . to take account of different forms of inflation – imported and domestic – as well as asset inflation”. “Alternative targets”, in Inflation, interest, money supply: Targets, 18 February 2013.

The governor of the Bank of England favours regulation, resolution and restructuring for banks. They should rely less on debt, a resolution mechanism is needed for failing banks, and High Street banking should be kept separate from other banking operations. “Three Rs”, in The 2008 Crash: Reregulation, 3 May 2012.

The Positive Money campaign isn’t targeting the kind of banking which was a factor in the 2008 financial crisis, and won’t stop the creation of money by private banks. Positive Money, March 2014.

In the eurozone, average current account deficits between 1999 to 2007 are a better indicator of current problems than fiscal deficits or public debt. The euro and the pound. 7 December 2011.

The weakness of European banks was primarily driven by their exposure to falling US markets and the US dollar. The 2008 Crash: Causes. 18 July 2011.

Environment.

March 16, 2014

Environmentalists disagree about what combination of renewable energy, energy efficiency, fourth generation nuclear power, and carbon capture and storage should be used. They should unite in a campaign for green taxes on resources and pollution. “Energy price reform” in Green taxing and spending, November 2013.

A Green tax switch from income taxes to green taxes is being prevented by the widespread belief that progressive income taxes are essential for wealth redistribution. Citizens incomes could make green taxes progressive. “Progressive tax and inequality”, in Citizens incomes and progressive tax, 2006-2008.

If income taxes weren’t reduced, green taxes would have to be lower or government revenue would be higher. There would be less economic disturbance and public resistance to green taxes if the net government revenue from taxes and benefits remained unchanged. “Red and Blue reasons for a Green tax shift”, in Green taxing and spending, November 2007.

The earth is currently in the cooling stage of its long-term orbit cycle. But the global warming signal is now louder than the noise of random weather. A gradually rising carbon fee, collected from fossil fuel companies, should be distributed to all Americans on a per-capita basis every month. “Fossil fuels in America”, in Green taxing and spending, 9 May 2012.

Climate change is complicated, but the temperature increase in the last 3 decades is probably due to man-made atmospheric CO2. A short history of climate change, March 2007.

The estimated effects of a global carbon tax could be used to set national targets for carbon emissions. “A Way Forward”, from “Making Globalization Work”, Joseph Stiglitz, 2006, in Green taxing and spending.

Boom and bust.

February 8, 2014

A k-wave downturn, driven by demographic change, may be a factor in the global financial crisis. Other factors are American mortgage law, Chinese exports, and financial deregulation. Back in the downwave, 1 January 2012.

Alternative explanations for economic long waves include demography or technological innovation, as well as the debt-deflation credit-cycle theory favoured by post-Keynesian economists. “Alternative targets”, in Inflation, interest, money supply: Targets, November 2013.

Land tax, better management of protectionism, and better understanding of demography may be the best strategies for reducing economic instability. The search for a stable economy, March 2011.

Stop the high house prices, inefficient taxes, and speculative fevers which have destabilised the entire global economy. Land tax, 8 July 2010.

Welfare policy.

February 29, 2012

Benefit withdrawal is effectively a tax, and effective marginal tax rates, including benefit withdrawal, should be no higher for beneficiaries than for high income earners. “Full employment”, in Alison’s manifesto.

Work should be allocated by self-selection not compulsion, but beneficiaries should have a reasonable financial incentive to do paid work. Effective marginal tax rates should ideally be no higher for beneficiaries than for high-income taxpayers. Welfare reform for the 21st century, August 2010.

Making marginal tax more progressive doesn’t necessarily make average tax more progressive. “Coalition policy, 2010“, in Citizens incomes and progressive tax.

An example, using UK data from 2003-4, of a revenue-neutral Citizens Basic Income approximately half-way in value between the jobseekers allowance and the basic state pension. ammpol.wordpress.com/ammgraf.

Women should have their own money as individuals, not just as part of a family or household, and children need at least as much money as adults, if the cost of childcare, including the opportunity cost of parental childcare, is taken into account. Welfare reform for the 21st century, August 2010.

High priority was given to the need for tax and income support for women working in the home, and for more childcare facilities. The most logical way of doing this, with the least fuss, is by the basic income method. History of Basic Income politics in New Zealand, 1996.

Going round in circles, again.

February 1, 2011

The monetary reformer quoted some of my last lot of replies out of context, and didn’t put the rest on his blog. So I’m not sending him this lot, I’m just posting them here. I hope there won’t be any more.

X: For you, economics seems to be about money. For us, economics is about life.

A: That’s not fair.

You wrote: “Economic growth requires (at least in part) increasing loans. If loans do not increase, the economy, as it is presently structured, fails.“

That’s a purely monetary definition of economic failure. Also I think its wrong, from a monetary point of view as well as from a Green one.

I wrote “Economic growth or decline is about GDP, in other words, money. Sustainability is about resources, climate, population, and other species, as well as money.”

That definition of economic growth is not just my opinion. Wikipedia says: Economic growth is the increase of per capita gross domestic product (GDP) or other measure of aggregate income, typically reported as the annual rate of change in real GDP. (en.wikipedia.org/wiki/Economic_growth)

And we agree that there is more than just money to the definition of a sustainable economy, but I said it before you did.

X: I take it you standardised the figures for a generation according to the life expectancy at the time you were measuring?

A: Its about age at reproduction not life expectancy. I used lognormal distributions to model age-specific fertility rates, and let the computer find the numbers which fitted the data best. For more details, see “Couples and the K-wave” on my website.

X: If it is not created at the point a loan is made, where and when is it created, in your view?

A: You‘re arguing with yourself. I’ve already agreed that money is created when a loan is made.

X: One cannot sustainably borrow in order to provide for daily living needs.

A: As I’ve already commented, the mortgage system is an example of sustainable borrowing to meet daily needs, and its also an example of sustainable investment, usually, with exceptions, as in the last decade.

X: A: I have shown that [debt does not necessitate ever increasing production and productivity.]

A: The bit in square brackets was added by you. Its confusing without a hyphen after “ever”. You had written “Hoogendijk has shown that debt necessitates ever increasing production and productivity.” I replied that I had shown that it doesn’t. My opinion is that debt does not always make it necessary to increase production and productivity.

X: Two manufacturing firms . . . They are now in competition as before, but now they have to service their debt. How can this fail to drive both to boost throughput of materials?

A: You’re talking to yourself again. I didn’t say it would fail, I said they probably wouldn’t get into debt if the economy was unfavourable, because they wouldn‘t get a loan.

X: This system is an important driver of economic growth, since the real economy is burdened with the necessity of paying back interest.

A: Now you’ve gone full circle right back to where we started.

1. The real economy also benefits from the interest, which is paid to the depositor, from the borrower, through the bank.
2. The real economy is also burdened with the necessity of paying wages. Nobody thinks that wages should therefore be abolished.

I don’t want to go round this circle again so I hope there won’t be any more replies.

Banking system and economic growth.

January 29, 2011

I sent some replies to a discussion about monetary policy on another blog, but they haven’t appeared. So I’m posting them here instead.

X: Economic growth requires (at least in part) increasing loans. If loans do not increase, the economy, as it is presently structured, fails.

A: This still says that equilibrium in the economy, as it is presently structured, is failure. Zero economic growth is statistically very improbable in any economic system, but a stable balance between small amounts of economic growth and decline is possible in the economy as it is presently structured. For me economic failure is what was happening in 2008, extremely negative growth.

Economic growth or decline is about GDP, in other words, money. Sustainability is about resources, climate, population, and other species, as well as money.

X: A possible factor in economic cycles is engagement and disengagment with reality. There is an analogy to be drawn between bipolar illness and the market.

A: Bipolar illness doesn’t have the regularity of the long Kondratieff cycles (K-waves). Goldstein wrote that “ the relatively fixed length of a generation” is like “a clock that links long waves to calendar time.”  My demographic explanation has this regularity, its wavelength is 1.7 generations.

X: To clarify, I agree that the interest is paid with money that is in circulation. The new money is created at the point that the bank enters a loan into the account of the borrower. This new money is spent into circulation.

A: It doesn’t really matter whether the credit or the debt is defined as new money, as they are equal amounts of money. One is new money, the other is old money, one circulates, the other doesn‘t.

The debt doesn’t circulate, it stays in one place until it disappears when it is cancelled by the repayment by the borrower. Meanwhile the credit could more appropriately be described as “continuing to circulate”, not “being spent into circulation”.

X: My model of businesses A and B holds, because the only valid reason to borrow is to invest. One cannot sustainably borrow in order to provide for daily living needs.

A: Yes one can. Mortgages are an example. They are a way of transferring housing from old people to young people, while the interest on the mortgages transfers money in the other direction, to pensions.

X: Alison, will this cover it?

4 To pay back the interest means that the borrower either has to invest the loan to make a profit on the market, or from earning wages.

A: No, there is interest from other investments, or unearned money such as the scandalous capital gains in the last house price bubble, or pensions, or winning the lottery. Any of the money that is already in circulation may be used to pay the interest on a new loan.

Anyway I don’t see the point of line 4 unless you are wanting to prove that interest is unsustainable, and I don’t believe it is.

X: We need to sort out the impact of debt on growth. . . Hoogendijk has shown that debt necessitates ever increasing production and productivity.

A: I have shown that it doesn’t. Total debt may increase, decrease or be stable. I don’t know who Hoogendijk is, but he wouldn’t be the first expert who has been wrong.

X: Increasing productivity implies increasing unemployment, which entails increasing SS payments, which increases the country’s deficit. . . In order to attain a steady-state economy, which is what ecology requires, we need to ground our economics on ecological reality.

A: Yes, I agree. A Green tax shift from labour to resources and unearned capital gains from land is what is needed.

X: Interesting point from Atlanta Fed. If booms and busts cancel each other out, there has to be a better way of arranging things.

A: Its good that they cancel each other out but we need to make them smaller. Land tax, better management of protectionism, and better understanding of demography were my suggestions.

X: In the UK, they routinely produce 97% of new money.

A: This was your reply to my comment that the banks haven’t got a monopoly. . . See my next comment.

X: Leaving whether “Bank Monopoly” is precisely correct or not, the substantive proposal is that the ratio should move from 97/3 to ~50/50.
Does this meet with your approval?

A: Not really.

1. I wonder how enforceable a required reserve ratio is.
2. The most appropriate level of the ratio probably varies depending on whether stability or a boom or a bust is happening.
3. 50/50 may be too extreme. Between 2006 and 2009 the money multiplier, defined as “broad money relative to central bank money” or “the link between central bank money . . . and money in the economy”, was highest, at about 64, in early 2007, and lowest, at about 25, in late 2008. (Financial Times, 6 March 2009)

So the ratio of broad money to the total of central bank money plus broad money varied between 25/26 and 64/65. That‘s between 96.2% and 98.5%, in three years in which there was a transition from a major bubble to an exceptionally large crash. So a reduction to 50% might be too revolutionary.

A: So in the last 2 days we have found lots more disagreements, about growth, cycles, money creation, sustainable borrowing, interest, debt, cycles, broad money, money multipliers.

Its been interesting but I need to get on with the rest of my life, and don’t want to get involved in the wiki.

Economics, environment, welfare.

July 10, 2009

All the other pages on this site are listed in ammpol.wordpress.com/about, with a brief description of each page following its title and link.

They are grouped into five categories: Boom and bust, Monetary policy, Welfare, Environment, and Summaries.


Follow

Get every new post delivered to your Inbox.