" Are we looking at the economy all wrong"

Zack Polanski? Where's the roll eyes emoji when you need it!

The first is yet another lecture on modern monetary theory, while the second (which I found more interesting) gave examples of the low hanging fruit of taxation which could be used before we get to an out and out wealth tax, in order to bring about greater wealth equality.

Sadly for you, DAR, Polanski is very much on board with MMT and his ideas on the taxation of wealth come directly from Richard Murphy.

And, to answer the question in the post title. Yes, we are looking at the economy all wrong.

We will never achieve greater equality under the present neoliberal economic regime which works to further enrich the already wealthy and is based on ideology rather than sound empirical evidence.

MaizieD

^The first is yet another lecture on modern monetary theory, while the second (which I found more interesting) gave examples of the low hanging fruit of taxation which could be used before we get to an out and out wealth tax, in order to bring about greater wealth equality.^

Sadly for you, DAR, Polanski is very much on board with MMT and his ideas on the taxation of wealth come directly from Richard Murphy.

Why is that "sadly" for me Maizie? Zack Polanski's as entitled to his opinions as I am to mine. Richard Murphy himself seem to deny total agreement with other well-known proponents of MMT. It seems even he can move towards grown-up conversation these days.

I guess you didn't bother to watch it so no hope of discussing some of the tax suggestions brought up in the second half. I think it's quite shocking that we only pay NI on earned income. He put forward several interesting suggestions for first step taxation changes.

If you’re interested in our tax system and how incompetent HMRC is listen and weep.
If you get bored 🥱 hang on until 9.5 mins in. Then comes the kicker on how much money has been lost ( and probably still is)
to the public purse.
www.bbc.co.uk/sounds/play/m0029hw8

ViceVersa

Zack Polanski? Where's the roll eyes emoji when you need it!

Why?

StripeyGran

ViceVersa

Zack Polanski? Where's the roll eyes emoji when you need it!

Why?

Because why should I trust any word coming from someone who thinks a woman can have a penis? And that's just one example...

Isn't that why this government has brought in more people to track down money "lost" as you put it, petra? It's one area where it's pretty well guaranteed that these people recover more than they cost.

MaizieD

And, to answer the question in the post title. Yes, we are looking at the economy all wrong.

We will never achieve greater equality under the present neoliberal economic regime which works to further enrich the already wealthy and is based on ideology rather than sound empirical evidence.

Because oor previous and current Governments have no interest in greater equality. They are perfectly satisfied with the current system.

What worries me about MMT is that there is nothing wrong with the principle, but it is,in the end, dependent on thoughtful principled government issuing money from its central bank as required and most importantly KNOWING WHEN TO STOP.

Quite frankly I do not think there is a single country in the world, or ever has been, that given a licence to print money - which is what MMT is all about, would have the self control when things got difficult, to put a stop to printing money.

Indeed Canada, which is the one country that hs been moving towards MMT has fallen into that trap. and now faces the inflationary pressures that MMT was meant to stop.

MMT depends on governments having self control. Anyone else on here feel confident that any government would ever choose to stop printing money given a fee hand with no outside influences staying stop?

Ilovecheese

MaizieD

And, to answer the question in the post title. Yes, we are looking at the economy all wrong.

We will never achieve greater equality under the present neoliberal economic regime which works to further enrich the already wealthy and is based on ideology rather than sound empirical evidence.

Because oor previous and current Governments have no interest in greater equality. They are perfectly satisfied with the current system.

I do wonder if "previous and current Governments" always had "no interest in greater equality" or if some of them just got it wrong. We, not unreasonably, expect a lot of our governments, but can they live up to that? Added to that if you swing from left to right and back again all the time, a lot of each governments efforts is spent on reversing the last governments actions.

MaizieD

And, to answer the question in the post title. Yes, we are looking at the economy all wrong.

We will never achieve greater equality under the present neoliberal economic regime which works to further enrich the already wealthy and is based on ideology rather than sound empirical evidence.

And, to answer the question in the post title. Yes, we are looking at the economy all wrong. Maizie

Except, according to Richard Murphy, three of the top soothsayers for MMT don't agree. Perhaps it's only you who are the only absolutist on this matter?

The discussion I was suggesting was actually about the changes in the taxation of wealth that they talked about. Again, Murphy, annoying as I find him, was talking about some smaller, more incremental steps, than has been suggested so far.

Your worry and mine are much the same Monica, so I did find this slightly more nuanced conversation interesting.

The second half* is a good "Murphy" area because of his knowledge of taxation (as he reminds us, he was an accountant for 40 years). He suggests that taxing the rich is not going to be easy ("they are goin to scream, they will holler and shout") so he suggests his view of "low hanging fruit" are:

We could equalise the income tax rate and capital gains tax rate raising over a possible £12 billion a year.
There is no NI on investment income. Why not? That mean we have a system that is heavily biased against work. We had the Investment Income Surcharge from the 1960's to 1980's which was an extra 15% tax on investment income above a certain level (equaling NI at the time). Our combined rate is now 23%. 15% on investment income would raise £18 billion a year.

There is more, of course. But that gives a flavour. My brain is just shouting at me that, with an Investment Income Surcharge we could, once again, start to own the investment side of the NHS and Care, and bring costs down considerably.

*The second half starts at about 22.10.

Oh for an edit button - but I think it is readable!

I just have no trust in any system that relies on self-regulation without outside constraints. It has never worked, ever, with anything aand I repeat myself. Canada has been going down the MMT road - and sure, enough it has over stepped the mark and is now in just the onflationary situation that comes from having no one to tell it when to stop.

We have one of the most baffling and complicated tax systems in the world. What we need to do is simplify it, remove lots of the bells and whistles and special taxes here and allowances there.

Just tax people's income from all sources at a slow but gradually rising rate, no exceptions. Ditch NI, it is only income tax by another name. Drop stamp duty replace it with VAT on everything, housing, food, children's clothes the lot. the government can sort the problems that will cause through the benefits system.

MOnica. You completely misunderstand MMT.

It isn't any sort of economic 'system', it is a description of how money gets into the economy. It starts from the basic fact that our money is a sovereign currency and is only issued by the state. Banks can issue money under licence from the state but as what they issue as loans is paid back with interest, while the money enables economic activity once it is repaid it no longer exists and the requirement for interest means that it actually withdraws more money from the economy than it issues. Only the money issued by the government, which gets into the economy through state spending, leaves a surplus in the economy because it is never fully recovered by taxation. Without that surplus the supply of money available both for economic activity and to supply a growing population, would become scarce.

I'm sure that we haven't reached our relatively advanced ages without realising that the state issues money. There was a great deal of government angst over 'money supply' during the Thatcher regime, I recall.

Your belief that the magic letters MMT somehow turn governments into irresponsible unrestrained money issuers defies logic. Why would it change what governments have always done?

The sticking point for most people is the logic behind the fact that MMT informed economists say that spending comes before taxation. It is contrary to the story, that taxation funds spending, that has been told exhaustively for decades which is repeated by most economists and economic commentators. But this story defies logic too. State spending, which puts our money into the economy, has to come before taxation because without it people wouldn't have any money to pay in tax.

This is what AI says

If the state didn’t issue any money into the national economy but relied solely on taxation to fund its spending, the result would be severe economic contraction or even collapse. Here’s why:

No initial money supply:
If the government never issues money, there would be no base currency in circulation. The private sector wouldn’t have any money to pay taxes or conduct transactions unless it created its own parallel currency or used barter.

Circular impossibility:
Taxes can only be paid in the government’s currency. If the state never issues that currency (through spending or another channel), there’s no way for citizens to get the money they owe in taxes. The government would effectively be demanding payment in something that doesn’t exist.

Collapse of public services and aggregate demand:
Without state spending to introduce money, there would be no injections of income into the economy. Private activity would shrink dramatically because there would be no public sector demand, wages, or contracts paid in national currency.

Deflationary spiral:
Even if the government somehow began with a tiny existing money stock and then only taxed to spend, the net effect would continuously drain money out of circulation (since every tax removes more currency than the government re-injects). That would lead to deflation, unemployment, and shrinking output.

Alternative monetary systems would emerge:
In practice, people might start using other forms of money (foreign currency, commodity money, local credit systems) to fill the gap left by the absent state-issued money. But the government would lose control over monetary policy entirely.

In summary, a government that never issues its own money and depends solely on taxation would create an economy starved of liquidity and unable to grow. In modern terms, this would make it impossible for a fiat monetary system to function.

I have read all (well, most) of your posts on economic directions Maizie and agree with bits and its not a happy situation we are in but have Monica's reservations.

Would you say its possible to do it on a partial scale: if so, what would that mean in practice.

Many of us in the L Party wished at the time and still wish that the now government had not promised to not raise income tax. They've created a noose round the neck situation,

for fair and modest changes in income tax to pay for say the NHS and Care Services is something I've read quite a lot of Frans saying, "as long as it goes towards these situations, yes I would pay a bit more out".
I certainly would tho my income is low. I'd have balanced out the raise in the employers contribution to NI with income tax, and this could have alleviated the problem in hiring new people and also only offering Zero hours contracts.

Its recognised in parts of Scandinavia you have to pay out it you want decent services - I'm not saying people like it, but at least the reality is understood.

In the UK we get widespread grumbling on taxation but also anger at poor services. People dont seem to "get it"

Quite a lot of grans, not quite a lot of "Frans" 😬

M0nica

I just have no trust in any system that relies on self-regulation without outside constraints. It has never worked, ever, with anything aand I repeat myself. Canada has been going down the MMT road - and sure, enough it has over stepped the mark and is now in just the onflationary situation that comes from having no one to tell it when to stop.

Just tried to find information on this. It does seem there are some concerns, but it may be that they feel they have no alternative with Mad Malicious Trump on their doorstep.

I've just tried to copy over the automated transcript but it seems it's not possible.

I was, as I previously explained, interested in the tax changes Murphy suggested - there is really no point in trying to discuss this if no one watches it. All that happens is we get back to very silly arguments about MMT.

Sorry it wouldn't copy as the suggestions were interesting.

Have a good Sunday.

DaisyAnneReturns

M0nica

I just have no trust in any system that relies on self-regulation without outside constraints. It has never worked, ever, with anything aand I repeat myself. Canada has been going down the MMT road - and sure, enough it has over stepped the mark and is now in just the onflationary situation that comes from having no one to tell it when to stop.

Just tried to find information on this. It does seem there are some concerns, but it may be that they feel they have no alternative with Mad Malicious Trump on their doorstep.

I caan see no advantage for swapping one bad ssystem for another. At least the current system has some checks and balances.

MMT is just another way for those running the current system to change it for one that they will still run to their advantage, only with little or no supervision. No thanks.

I thought people might find the tax suggestions interesting for that reason M0nica. Mutphy seemed to be suggesting they could be used now.

Richard Murphy says " ... so we would protect people, we would try to deliver an economy free from fear. And people are living in fear at the moment. They're frightened of being ill. They're frightened of old age because our pensions aren't good enough. They're frightened that their children won't have a future because we haven't got a green policy anywhere. They're frightened their children not getting the education that is appropriate to what they need. They're frightened of being unemployed. They're frightened of leaving their jobs. They're frightened they're not getting enough pay. They're frightened they haven't got employment protections".

He only glossed over MMT, which he pointed out is neither "modern" or a "Theory".

DAR There is a saying. Faced with a complex and difficult problem, there is always a simple solution. It is always wrong

MMT is a simple solution to a difficult problem. It surprises me not that the new Green leader espouses it.

Back in the early years of GN, we used to have some very open political discussions and someone pointed out that the Greens, then supported exactly the same Friedmanite policies that Mrs Thatcher had supported and used to destroy the economy. I couldn't believe it until I read the official economic policy documents of the Green party at that time.

I think the Greens are doing the same again, jumping on an economic policy band wagon that has just started moving and calling it up as the (simple) answer to all our problems, as that is so much easier than addressing the problems we face now in the world as it is.

As for Maizie's belief that governments would be responsible money creators, as liesat the heart of MMR. Even the Canadians, whose government is only partially down the MMR route are already blaming their current inflation on irresponsible government money creation.

That is the hearat of my objection. I simply do not have any trust in any system that expects governments always to act in a responsible way. Their must be outside checks and balances to hold them to account.

Look at the incompetent and thoroughly useless governments we have had over the last 20 years. I wouldn't trust them to run the proverbial in a brewery, still less issue money as needed in a responsible manner. We would end up like Germans after WW! or Argentinia in the 60s and 70s, with daily inflation of 10% and paying for food with wheelbarrows full of notes.