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philmophlegmI've got nothing against Labour Party supporters (well, for the most part anyway). Mostly they're harmless. Some of them mean well but are probably misguided. Others have different (but perfectly acceptable) views to me on what society should be like, but have reasonably sensible ideas for achieving that vision. Some of my friends are Labour supporters. And I have to feel sorry for them at the moment, because it seems like having a sophisticated understanding of how the world works, a good knowledge of 20th and 21st century history and a rudimentary knowledge of basic economics are now apparently a hindrance if you want to lead the party.
I know that some of my readers are from the US, and are naturally more concerned with the US presidential race than the race to lead the UK's main opposition party. I'm afraid I haven't kept up with the US presidential race this time around, so I can't really comment. This time eight years ago, I predicted (completely correctly as it turned out) that Obama would win the nomination and the election. The best analysis I've seen this time round is this post:
Anyway, innocent Americans who have heard something about the Labour leadership battle might think that Jeremy Corbyn is sort of a British version of Bernie Sanders.
Not quite.
You can tell a lot about a man by who he chooses to associate with
I doubt that Bernie Sanders would have taken Osama Bin-Laden on a friendly tour of the Capitol three weeks after 9/11 for example. Yet Jeremy Corbyn invited IRA leader Gerry Adams to the Houses of Parliament for a chat just three weeks after the Brighton bombings in which the IRA tried to eliminate the entire British government at the Conservative Party Conference.
So he's pro-IRA. Any other terrorist organisations he's fond of? How about the anti-Israel groups Hamas and Hezbollah? He invited both of those groups to a cosy chat in parliament and said it was his "honour and pleasure" to do so. More than that, he's taken thousands of pounds in 'gifts' from organisations closely linked to Hamas. He's close to quite a few prominent anti-semites too. Raed Salah (guilty of inciting anti-Jewish racism and violence in Israel and of using the blood libel in the UK) was another parliamentary guest of Corbyn's. Corbyn wrote a letter defending Stephen Sizer, a conspiracy theorist vicar disciplined by the Church of England for an anti-semitic rant in which he claimed that Israel was behind the 9/11 attacks. He's presented programmes on PressTV, the Iranian government's state propaganda channel. He's (allegedly) donated to and been praised by self-confessed Holocaust-denier Paul Eisen.
This is someone who could conceivably end up as Prime Minister of the United Kingdom.
Corbynomics and the Murphmeister
How is he on economics? I've seen an article in one left-wing newspaper say in a throwaway line that "the fact Corbyn believes in Keynesian economics is apparently a bigger faux pas to the Labour hierarchy than his association with the characters mentioned above" (this was at the end of a larger article attacking his antisemitism). So Corbyn is a Keynesian is he? Presumably then in the good parts of the economic cycle he'd want to run a budget surplus to dampen demand and would want to avoid massive structural deficits. That's what Keynes argued. But no, Corbynomics is all about running massive permanent budget deficits, printing money and not caring about inflation. It's as if he's looked at all the economies around the world and felt that the best ones to copy would be Greece, Venezuela and Zimbabwe.
This will come as no surprise to anyone who has seen that his economic 'policy' has been drawn up by Richard Murphy. To my great shame, Richard Murphy is, like myself, a member of the Institute of Chartered Accountants in England and Wales. He's become semi-famous by his odd belief that the amount of corporation tax payable by companies should be determined not by Her Majesty's Revenue & Customs carrying out the wishes of the democratically-elected government of the day, but by Richard Murphy. In my personal experience, there are two types of Chartered Accountant - those who think Richard Murphy is an incompetent, self-aggrandising, ignorant ****** who continues to bring the profession into disrepute; and Richard Murphy. I haven't got the space or the time or the inclination to explain just how Richard Murphy is seemingly always wrong, but luckily I don't have to. The exceedingly clever Tim Worstall has 76 pages of posts on his blog doing just that.
There's a whole raft of hilarious pseudo-economic policies making up Corbynomics. I won't go into all of them here or critique them, because frankly more than enough vaguely sensible people have done that already (including many in the Labour Party, some of whom are also leadership contenders). They mostly depend upon not knowing how macroeconomics works and even more so not knowing how microeconomics works, or perhaps showing that 'a little knowledge is a dangerous thing' and getting things confused, or finding one of the popular handful of celebrity economists who go against the mainstream consensus to lean on. In CorbynMurphyWorld, inflation is never a monetary phenomenon, printing money is the solution to all our problems, the Laffer Curve does not exist, the crowding-out effect is nil and the public sector is always efficient.
Among my favourites are the idea that raising corporate taxes doesn't penalise individuals (who do they think ultimately pays corporate taxes...?) and the brilliant gem that the taxpayer is apparently subsidising companies to the tune of £21billion (because...capital allowances*) and £15billion (because the government buys things from companies) and that the government should end this 'corporate welfare' and use the money for a "multi-billion pound programme of infrastructure upgrades and support for high-tech and innovative industries". Yes, really.
The People's Quantitative Easing
And then there's 'The People's Quantitative Easing' (this is the printing money bit). Whereas the Bank of England's quantitative easing was (according to the Corbynistas) all about giving money to the evil bankers, Murphy's 'People's Quantitative Easing' is all about "investing in infrastructure" by creating new money and spending it. That demonstrates a lack of knowledge of monetary economics in general and more specifically what the quantitive easing programmes used by the Bank of England (and the US Federal Reserve) were for. Those quantitative easing programmes were all about increasing the supply of what we used to (when I were a callow young economics student) call 'broad money' in the economy.
The reason for doing that is hidden in the equation MV=PQ (Money Supply x Velocity of Money = Price Level x Real Quantity of Transactions)**. V is the speed at which people carry out transactions, or to put it another way, the speed at which 'narrow' money (actual cash) is turned into broad money (cash, bank deposits, money market accounts and all that jazz). The right hand side of that equation is essentially how productive the economy is (broadly speaking 'GDP'). If people are spending their money less, then V is lower, so M has to be increased to compensate, but the trick is to do that without just increasing P and hence causing inflation. Alternatively, if deflation is a risk (and it was in both countries), then increasing M through quantitative easing is hopefully a more effective way to increase P by just the right amount. And to be fair to the Bank and the Fed, that's pretty much how it has proved.
What was clever about quantitative easing was that the central banks created money to buy back government debt held in the banking system. In doing so, they forced the banks to exchange nice profitable interest earning government bonds for dull, non-interest bearing cash, so quantitative easing certainly wasn't giving money to the evil bankers. (Murphy shows how confused he is by the QE mechanism and the banks' intentions when he claims that "the gains went almost entirely to bankers who were, in effect, given costless money to speculate, which they did to the benefit of their bonuses and their banks’ profitability".) QE also meant that the price of those bonds increased (more demand for them), so they became less attractive to investors looking to get a given yield on their investments. Those investors looked instead to higher risk investments to get the return they wanted - corporate debt, making it easier and more profitable for companies to raise funds, which of course had been difficult in the credit crunch. Even better, most of this extra M stayed in the banking system and didn't make it into narrow cash, which meant that inflationary effects were much easier to control. This was entirely deliberate. Murphy's quantitative easing would be inflationary and destabilising precisely because it would throw the new M straight into narrow money.
In Part 2 of this four part series, I'll look at how Jeremy Corbyn can have gone from rank outsider to favourite in just a couple of weeks.
* Capital allowances are simply how depreciation is treated in tax accounting. Instead of choosing how quickly to depreciate the fixed assets your company has bought according to their useful economic life (as you do in actual accounting), when calculating how much profit you have made for tax purposes, you have to use a stipulated rate (usually 25% of the previous amount every year, a so called 'reducing balance').
** The Quantity Theory of Money, one of the oldest pieces of economics around. Even Copernicus (yes, that Copernicus) had some thoughts on it.
I know that some of my readers are from the US, and are naturally more concerned with the US presidential race than the race to lead the UK's main opposition party. I'm afraid I haven't kept up with the US presidential race this time around, so I can't really comment. This time eight years ago, I predicted (completely correctly as it turned out) that Obama would win the nomination and the election. The best analysis I've seen this time round is this post:
Anyway, innocent Americans who have heard something about the Labour leadership battle might think that Jeremy Corbyn is sort of a British version of Bernie Sanders.
Not quite.
You can tell a lot about a man by who he chooses to associate with
I doubt that Bernie Sanders would have taken Osama Bin-Laden on a friendly tour of the Capitol three weeks after 9/11 for example. Yet Jeremy Corbyn invited IRA leader Gerry Adams to the Houses of Parliament for a chat just three weeks after the Brighton bombings in which the IRA tried to eliminate the entire British government at the Conservative Party Conference.
So he's pro-IRA. Any other terrorist organisations he's fond of? How about the anti-Israel groups Hamas and Hezbollah? He invited both of those groups to a cosy chat in parliament and said it was his "honour and pleasure" to do so. More than that, he's taken thousands of pounds in 'gifts' from organisations closely linked to Hamas. He's close to quite a few prominent anti-semites too. Raed Salah (guilty of inciting anti-Jewish racism and violence in Israel and of using the blood libel in the UK) was another parliamentary guest of Corbyn's. Corbyn wrote a letter defending Stephen Sizer, a conspiracy theorist vicar disciplined by the Church of England for an anti-semitic rant in which he claimed that Israel was behind the 9/11 attacks. He's presented programmes on PressTV, the Iranian government's state propaganda channel. He's (allegedly) donated to and been praised by self-confessed Holocaust-denier Paul Eisen.
This is someone who could conceivably end up as Prime Minister of the United Kingdom.
Corbynomics and the Murphmeister
How is he on economics? I've seen an article in one left-wing newspaper say in a throwaway line that "the fact Corbyn believes in Keynesian economics is apparently a bigger faux pas to the Labour hierarchy than his association with the characters mentioned above" (this was at the end of a larger article attacking his antisemitism). So Corbyn is a Keynesian is he? Presumably then in the good parts of the economic cycle he'd want to run a budget surplus to dampen demand and would want to avoid massive structural deficits. That's what Keynes argued. But no, Corbynomics is all about running massive permanent budget deficits, printing money and not caring about inflation. It's as if he's looked at all the economies around the world and felt that the best ones to copy would be Greece, Venezuela and Zimbabwe.
This will come as no surprise to anyone who has seen that his economic 'policy' has been drawn up by Richard Murphy. To my great shame, Richard Murphy is, like myself, a member of the Institute of Chartered Accountants in England and Wales. He's become semi-famous by his odd belief that the amount of corporation tax payable by companies should be determined not by Her Majesty's Revenue & Customs carrying out the wishes of the democratically-elected government of the day, but by Richard Murphy. In my personal experience, there are two types of Chartered Accountant - those who think Richard Murphy is an incompetent, self-aggrandising, ignorant ****** who continues to bring the profession into disrepute; and Richard Murphy. I haven't got the space or the time or the inclination to explain just how Richard Murphy is seemingly always wrong, but luckily I don't have to. The exceedingly clever Tim Worstall has 76 pages of posts on his blog doing just that.
There's a whole raft of hilarious pseudo-economic policies making up Corbynomics. I won't go into all of them here or critique them, because frankly more than enough vaguely sensible people have done that already (including many in the Labour Party, some of whom are also leadership contenders). They mostly depend upon not knowing how macroeconomics works and even more so not knowing how microeconomics works, or perhaps showing that 'a little knowledge is a dangerous thing' and getting things confused, or finding one of the popular handful of celebrity economists who go against the mainstream consensus to lean on. In CorbynMurphyWorld, inflation is never a monetary phenomenon, printing money is the solution to all our problems, the Laffer Curve does not exist, the crowding-out effect is nil and the public sector is always efficient.
Among my favourites are the idea that raising corporate taxes doesn't penalise individuals (who do they think ultimately pays corporate taxes...?) and the brilliant gem that the taxpayer is apparently subsidising companies to the tune of £21billion (because...capital allowances*) and £15billion (because the government buys things from companies) and that the government should end this 'corporate welfare' and use the money for a "multi-billion pound programme of infrastructure upgrades and support for high-tech and innovative industries". Yes, really.
The People's Quantitative Easing
And then there's 'The People's Quantitative Easing' (this is the printing money bit). Whereas the Bank of England's quantitative easing was (according to the Corbynistas) all about giving money to the evil bankers, Murphy's 'People's Quantitative Easing' is all about "investing in infrastructure" by creating new money and spending it. That demonstrates a lack of knowledge of monetary economics in general and more specifically what the quantitive easing programmes used by the Bank of England (and the US Federal Reserve) were for. Those quantitative easing programmes were all about increasing the supply of what we used to (when I were a callow young economics student) call 'broad money' in the economy.
The reason for doing that is hidden in the equation MV=PQ (Money Supply x Velocity of Money = Price Level x Real Quantity of Transactions)**. V is the speed at which people carry out transactions, or to put it another way, the speed at which 'narrow' money (actual cash) is turned into broad money (cash, bank deposits, money market accounts and all that jazz). The right hand side of that equation is essentially how productive the economy is (broadly speaking 'GDP'). If people are spending their money less, then V is lower, so M has to be increased to compensate, but the trick is to do that without just increasing P and hence causing inflation. Alternatively, if deflation is a risk (and it was in both countries), then increasing M through quantitative easing is hopefully a more effective way to increase P by just the right amount. And to be fair to the Bank and the Fed, that's pretty much how it has proved.
What was clever about quantitative easing was that the central banks created money to buy back government debt held in the banking system. In doing so, they forced the banks to exchange nice profitable interest earning government bonds for dull, non-interest bearing cash, so quantitative easing certainly wasn't giving money to the evil bankers. (Murphy shows how confused he is by the QE mechanism and the banks' intentions when he claims that "the gains went almost entirely to bankers who were, in effect, given costless money to speculate, which they did to the benefit of their bonuses and their banks’ profitability".) QE also meant that the price of those bonds increased (more demand for them), so they became less attractive to investors looking to get a given yield on their investments. Those investors looked instead to higher risk investments to get the return they wanted - corporate debt, making it easier and more profitable for companies to raise funds, which of course had been difficult in the credit crunch. Even better, most of this extra M stayed in the banking system and didn't make it into narrow cash, which meant that inflationary effects were much easier to control. This was entirely deliberate. Murphy's quantitative easing would be inflationary and destabilising precisely because it would throw the new M straight into narrow money.
In Part 2 of this four part series, I'll look at how Jeremy Corbyn can have gone from rank outsider to favourite in just a couple of weeks.
* Capital allowances are simply how depreciation is treated in tax accounting. Instead of choosing how quickly to depreciate the fixed assets your company has bought according to their useful economic life (as you do in actual accounting), when calculating how much profit you have made for tax purposes, you have to use a stipulated rate (usually 25% of the previous amount every year, a so called 'reducing balance').
** The Quantity Theory of Money, one of the oldest pieces of economics around. Even Copernicus (yes, that Copernicus) had some thoughts on it.
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no subject
Date: 2015-08-16 12:27 am (UTC)I disagree with Larry Correia's analysis on one major point: the Democratic nominee might be Joe Biden. When I first heard this opinion I was flabbergasted, but upon reflection I find it plausible.
The Obamas and the Clintons hate each other with a passion. Uncle Joe is an idiot (in the actual original sense of that term) but he's Obama's idiot. Even though in the general population Obama's approval polls are low, he's still the Messiah to a whole lot of the Democrat base even now; and if there's one thing Obama knows how to do, it's win elections. The Clintons are no pikers either, but Bill is the one with the charisma, and Hillary is so loathsome that it doesn't rub off well onto her; and that's assuming Bill isn't deliberately letting her twist in the wind out of spite after a lifetime of annoyance.
Then there is the criminal probe into Hillary's emails. Now she is a grade A weasel -- she was in charge of cleaning up Bill's "bimbo eruptions" and their other various scandals; and the Clintons have lots of dirt on everybody -- so she could very well succeed in making it all go away. However, she's old and tired, so is Bill, and I suspect so is their blackmail material; and Obama and his team (Valerie Jarrett and so on) are younger, and at least as crafty, vindictive, and ruthless. So if Team Obama is able to come up with felony charges that will stick, I have no doubt he'd enjoy putting her in prison, or at minimum, talking her into conceding the election. Boy, would I hate to be an investigator or attorney working on the Hillary case. Those folks have to be getting it good and hard from both ends.
I think Larry is right about the Republican side. And I think Cruz beats Biden or Clinton, if he remains smart, principled and inspirational.
As to Corbyn's unsavory friends:
Obama is just as bad. He has Muslim Brotherhood people on his staff. He has taken every opportunity to snub Netanhayu and trip up Israel, while being kissy-kissy with Iran. I can see why some people infer that Obama is secretly a Muslim (and I guess a Shi'ite and Twelver? unlikely), but I don't think that's it. I think, in keeping with his leftist revolutionary worldview, he sees terrorists as kindred souls with valid grievances, though misguided and in need of some community-organizing. The entire project of his life, career and presidency has been to aid the revolution of the perceived Have-Nots against the perceived Haves. It's all in Alinsky.
no subject
Date: 2015-08-16 10:18 am (UTC)no subject
Date: 2015-08-16 03:59 am (UTC)BTW, this just popped up on my FB feed.
http://www.express.co.uk/news/politics/598661/Corbyn-trolls-abusing-me-Jewish
no subject
Date: 2015-08-16 10:22 am (UTC)no subject
Date: 2015-08-16 10:32 am (UTC)Because it's inflationary.
no subject
Date: 2015-08-20 10:25 pm (UTC)I'm not convinced that Keynes did argue for saving in a budget surplus. Essentially that's just taking money out of the economy and hiding it. For me at least this is a huge misreading of Keynes... caveat, I've read a lot about Keynes but the only of his own books I have actually read is The General Theory of Employment Interest and Money. My understanding of that is quite the opposite of yours. Keynes argues (sensibly IMHO) that you don't save even in a budget surplus as you want to keep the money going around the economy. Essentially that it is futile for governments to act like households (act as if they have fixed budget that they must stay within) because that's not how economies work.