Showing posts with label Positive Money. Show all posts
Showing posts with label Positive Money. Show all posts

Monday, 30 May 2016

How David Mitchell and Richard Dawkins are wrong about the EU referendum





On Sunday 29th of March 2016 the Guardian published an article by the actor/commedian David Mitchell entitled "The EU referendum should be a matter for parliament" in which he argued that it was wrong for David Cameron to offer a referendum on the UK's membership of the European Union as a Tory manifesto pledge. In the article Mitchell quoted the evolutionary biologist/relentless self-publicist Richard Dawkins view that it is an "outrage" that the public have been given a vote on whether we remain in the EU or not, and that the whole decision should be "a matter for parliament".

In this article I'm going to explain why I think Mitchell and Dawkins are dangerously wrong to claim that such important decisions should be left to our superior lords and masters in parliament to decide on because the general public are too ignorant to decide for themselves.

Cameron's gamble


Before I get to explaining how utterly wrong-headed the Mitchell/Dawkins "leave it to our lords and masters" view is, first I'm going to point out where David Mitchell was right. Mitchell described Cameron's offer of a referendum on the EU as a "hugely selfish and irresponsible act" driven mainly by the decades old Tory rift between the pro- and anti-EU factions and Cameron's terror of losing Tory votes to UKIP.

It's absolutely clear that Cameron's offer of an EU referendum was firstly a sop to the large number of mainly extreme-right Tory MPs who detest the EU and secondly as a ploy to derail the UKIP surge in Tory constituencies.

The decision to offer a referendum on the EU was based entirely on Cameron's own self-interest. In the year before the 2015 General Election UKIP trounced the Tories (and everyone else) in the low-turnout EU elections and two Tory MPs conducted high profile defections to UKIP. Cameron knew that if he didn't do something to draw the UKIP thorn then the Tory prospects of winning the 2015 General Election were very grim indeed.

In the short-term Cameron's EU gamble was a success. The Tories gained a majority at the 2015 General Election, in which the extreme-right Thatcher-worshipping Ukippers ended up taking more votes off Labour than they did from their Tory ideological blood brothers.

In fact it was such a successful gamble that we ended up with the remarkable, if not completely unprecedented situation where the UKIP leader Nigel Farage ended up publicly appealing for UKIP supporters to vote for the Tory party instead of his own party's candidates!

The problem of course is that in the longer-term the dice has to be rolled, and it's on a knife edge whether the UK will end up remaining in the EU or engaging in a chaotic Brexit led by a bunch of right-wing fanatics who haven't offered anything even remotely resembling a coherent plan for what a post-Brexit UK would look like.

If the public vote to remain in the UK then Cameron's selfish gamble will have been a success, however if they vote for Brexit then the short-term gains will be massively outweighed by the cost. Cameron's position as Prime Minister would be completely untenable and anyone who imagines that there wouldn't be severe chaos as a result of the utter lack of a coherent economic plan from the Brexiters must be utterly delusional.

Where Mitchell and Dawkins are wrong

Both Mitchell and Dawkins argue that referenda on lesser issues (such as fox hunting) would be fine, but that membership of the EU is far too important to be left to ordinary plebs to decide.

There is no arguing that huge numbers of people are woefully under-informed about the arguments for and against membership of the EU (due in a large part to the spectacular levels of bias in the UK mainstream media), however what makes the Mitchell/Dawkins stance so desperately patronising is the idea that our lords and masters in the Westminster political establishment know any better.

Parliament isn't full of experts


The idea that parliament is full of experts who are better qualified to make important decisions than the plebs is completely wrong-headed.

First of all it doesn't take any kind of special economic expertise to get elected to Westminster. Everyone knows that if you stick a red rosette on a pig it would get elected in some areas, and that a dog turd with a blue rosette would win an equally impressive landslide in certain Tory heartlands. You only have to listen to intellectually stunted individuals like Nick Gibb (Tory) or Naz Shah (Labour) to realise that under our deeply unrepresentative electoral system it's entirely possible for people who can barely string a sentence together to get into parliament.


Further proof that MPs are hardly an economically enlightened elite can be seen in the results of a Positive Money survey of MPs that found that only one in ten MP understood that the vast majority of the money supply is created out of nothing by private banks when they make loans, while more than seven out of ten of them actually believed in the ridiculously naive economic fairy story that all new money is created by the Bank of England on behalf of the government.

If the overwhelming majority of these people don't even understand the absolute economic basics like where money comes from, how on earth are they any more qualified than the man on the street to make decisions with important economic ramifications?

Electoral fraud

There has been a mainstream media blackout on the story that over two dozen Tory MPs stand accused of conning their way into parliament at the 2015 General Election by misdeclaring their electoral expenses. The allegations are extremely serious and multiple local police forces are investigating individual cases while there have been numerous calls for a Metropolitan Police investigation into whether Tory party HQ were guilty of orchestrating the fraud on a party-wide basis.

If more than two dozen Members of Parliament are indeed guilty of cheating their way into Westminster, what on earth would give them the right to decide whether the UK remains in the EU or not on our behalf?

Say what you like about the ordinary British citizen, much of it is likely to be unflattering, but nobody can accuse them of cheating their way into position to make such an important decision about the future of the UK.


Bowing and scraping

A notoriously liberal TV celebrity and a "ivory towers" professor lecturing the public that they are too stupid and ill-informed to make important decisions for themselves really does not reflect well on the Bremain camp at all. In fact it's a dangerous stance because, like it or not, the decision to have a referendum has already been made. This means that any effort by Bremainers like Mitchell to tell the public that they're too stupid to decide things for themselves, and that it's best left to the Wesminster establish to decide our fate, is likely just to just drive more people into the Brexit camp.

The funny thing about a lot of British people is that they absolutely love to bow and scrape before their lords and masters. Just look at the pathetic fawning over the royal family, listen to the absolute drivelling dirge that passes for the national anthem, or consider the fact somehow we ended up re-electing the most dangerously fanatical, out-of-touch and incompetent bunch of over-promoted elitists in living memory as our government. However the British really don't like to be told that they must bow and scrape before their betters, especially by a liberal TV celebrity and an "ivory tower" dwelling academic. There's a prevailing attitude that "we'll bow and scrape to our lords and masters because we want to, not because we're told to".

Conclusion

David Mitchell was absolutely right to point out that Cameron's offer of an EU referendum was an incredibly reckless gamble based purely on Tory self-interest, however he's wrong to claim that such important decisions should be left to the Westminster establishment.

He's wrong because the Westminster establishment are just as deeply misinformed about fundamentally important economic issues as the man on the street (if not more so because they live in an insulated bubble of wealth, power, privilege and influence).

He's wrong because a significant number of MPs stand accused of defrauding their way into parliament, meaning that if the decision was left to them, some of them could end up casting deciding votes on such an important decision despite having unlawfully cheated their way into that position in the first place.

He's wrong to complain about it now because the decision to have a referendum has already been made, meaning that liberal Bremainers lecturing ordinary people that they're too stupid to be allowed to vote is more than likely to drive an awful lot of them towards the Brexit camp, because at least the Brexit camp only assume that the general public are an ignorant bunch of halfwits, rather than stating it at them explicitly.

The Mitchell/Dawkins stance is wrong not because the public aren't under-informed, they generally are are because of the bias of the mainstream media, the fundamental lack of political and economic education in the comprehensive school system and the ridiculously short notice at which the EU referendum campaign was announced. It is still wrong though because it assumes that the people in parliament are any better at making such important decisions that the ordinary person on the street, abd because whining about it after the decision has already been made is a waste of time. Instead of spending hours writing that article, perhaps Mitchell could have invested the time in researching the facts of the EU debate for himself?


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Monday, 13 July 2015

The delusion that the modern economy is a capitalist one



I'd like to begin this article with a quote from the legendary economist John Maynard Keynes about the role of speculation in the economy:
"Speculators may do no harm as bubbles on a steady stream of enterprise. But the position is serious when enterprise becomes the bubble on a whirlpool of speculation. When the capital development of a country becomes a by-product of the activities of a casino, the job is likely to be ill-done." The General Theory of Employment, Interest and Money, 1936
It is only necessary to have the slightest familiarity with the current state of the global economy in order to understand that these days, real enterprise has been totally subsumed under a massive tide of reckless speculation. 

In order to illustrate this point I'll provide a few facts in bullet points:
  • It's very difficult to accurately assess the size of the global derivatives market because the gambling that goes on there is almost completely unregulated. Estimates range between $710 trillion and $1.2 quadrillion. To put these figures into perspective, the GDP of the entire world in 2014 was $77.3 trillion, which is only slightly over ten percent of the lower estimate of the size of the global derivatives casino.
  • The global financial sector insolvency crisis of 2007-08 was caused when banks and financial institutions all over the world realised that they had been gambling on highly complex sub-prime junk investments, that were packaged up and sold as AAA grade investments even though the people who designed them referred to them as "dog", "shit bag" and "shit breather" and then used Credit Default Swaps to bet against the very same products they were selling to their own clients.
  • The scale of the pre-crisis gambling was so bad that it took the biggest state sector interventions in history from the UK and US governments to save the financial sector from the bankruptcies they so richly deserved (funny how the free market anti-state intervention dogma goes completely out of the window when it's reckless bankers instead of factory workers in need of help isn't it?).
  • These days the vast majority of financial trading isn't even done by human beings any more. It's done by complex computer algorithms that can conduct vast numbers of trades in tiny fractions of a second (High Frequency Trading). Many people still seem to imagine the stock markets like they were in the 1980s with a load of sweaty and aggressive traders shouting buy and sell orders. Those days are well and truly gone. Nowadays the majority of financial trades are nothing more than extremely rapid computerised gambling.
  • Not only is speculation completely rampant in the modern economy, the entire system is skewed heavily in the favour of speculators. Just think about the fact that UK interest rates have been held at an all-time record low of 0.5% since March 2009. How many recklessly over-leveraged financial institutions and buy-to-let speculators would have gone under if interest rates had been anything like normal for the last six years? How much has this unprecedented period of all-time record low interest rates cost savers, pension funds, insurance funds and workers?
  • The private banks now create 97% of all money out of nothing at the moment they make the loan (you knew that right?). Of all of this electronic bank created money, only 8% gets loaned to businesses outside of the financial sector. The vast majority of the money created by the financial sector gets pumped into financial speculation (32%) and house price speculation (31%).  If we understand capitalism as capitalists using the means of production to create output and profits, then it's clear that the vast majority of the economic activity in the modern economy actually has nothing to do with capitalism. We're living in a post-capitalist speculation frenzy.
It seems that John Maynard Keynes fears about the capitalist economy turning into a dangerous whirlpool of speculation have come true. As usual Max Keiser has a compelling way of describing the situation:
"The means of production, which used to mean building factories and hiring labour, something that Marx talked about in his work, is no longer valid to describe the global economy. The means of production are now algorithmic trading."
Anyone who thinks that the modern economy is a capitalist one is simply betraying the fact that they either have a faulty understanding of the modern economy, or that they're unfamiliar with the actual definition of capitalism (perhaps using the word as a loose synonym for distinct concepts like "business" or "trade").

 Another Angry Voice  is a "Pay As You Feel" website. You can have access to all of my work for free, or you can choose to make a small donation to help me keep writing. The choice is entirely yours.






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Thursday, 4 September 2014

Recommended reading - Economics


Several people have written to me asking if I could suggest some books for them to read in order to broaden their understanding of economics. Instead of answering personally each time I've decided to combine the time I've been spending on writing short individualised responses into writing this more comprehensive article.

Hopefully it will be of some use to you, whether you specifically asked me for some recommendations or not.

Who this guide is for
         
         
This guide is intended to be useful whether you are an aspiring economics student, a current student disillusioned with the way in which your economics department uncritically pushes the failed neoclassical economic orthodoxy, an economics graduate who is keen to continue broadening their horizons, or someone with no background in economics at all who would simply like to learn more about the subject.

Many of the people to have asked me for reading advice are already economics students, economics graduates or people intending to study economics at university. It is a very positive sign that these guys have realised that there is a lot more to economics than the narrow mainstream neoclassical orthodoxy that has infected and overrun the majority of economics departments, and that they're looking for answers elsewhere.

Several of the other people to have asked me for economics reading tips have admitted that they have very little understanding of economics, which is hardly surprising given that economics courses aren't taught in the majority of UK state schools, meaning that the vast majority of the 93% of state educated kids end up leaving school as functional economic illiterates.

This public lack of basic economic literacy is extremely beneficial to the ruling establishment because it allows them to use all kinds of absolutely ludicrous economic fairy stories to justify their harmful economic policies.

I feel proud that people from many different walks of life have seen me as a reliable person to turn to for advice, and it makes me glad that there are still people out there who want to understand economic issues from different perspectives to the ones prescribed by the neoclassical orthodoxy.

Ha Joon Chang

A very good starting point for economics novices is the book "23 things they don't tell you about capitalism" by Ha Joon Chang. This is a brilliantly written book that rigorously deconstructs some of the many myths and outright fallacies that underpin conventional economics. In my opinion the best thing about the book is the way that Ha Joon Chang uses every day language to explain often quite complex economic ideas. Even if you feel that you're well aware of the flaws in orthodox neoclassical economics already, 23 Things is still worth a read because in my view it's a masterclass in discussing economic ideas in accessible language, which is an incredibly important skill.

I am looking forward to obtaining a copy of his latest book

Inside Job

Another good starting point is the 2011 film "Inside Job" directed by Charles Ferguson which provides an explanation of how the 2007/08 global financial sector insolvency crisis actually came about (spoiler alert - the UK Labour party was not entirely to blame for the global banking crisis as the Tory press would have you believe).

The truth is that the global financial sector insolvency crisis was caused by a toxic blend of greed, corruption, conflicts of interest, poor regulation, moral hazard, ideologically driven deregulations and an alphabet soup complex financial products.

The film gives a great overview of the economic meltdown that would have completely wiped out Wall Street and the City of London without the biggest state subsidies in history to bail out the insolvent financial sector institutions. The book of the same name provides a wealth of more detailed analysis.

Steve Keen

"Debunking Economics" by the Australian economist Steve Keen is an exceptionally good critique of the absolute nonsense that underpins the neoclassical economic orthodoxy. It's harder going than the work of Ha Joon Chang or Charles Ferguson, but it's really worth the effort. A must read for anyone who is intent on looking at economics from outside the narrow spectrum of the neoclassical orthodoxy.

Heterodox economics

Steve Keen talks a lot about heterodox economics in Debunking Economics. If you're intent on learning more about economics it's very important indeed to understand that there is no single unified subject called "economics". There is mainstream economics which is based on the flawed and assumption riddled neoclassical orthodoxy (more like a religious faith system than a social science), and then there are countless other fields of economics which are often classed together under the umbrella "heterodox economics".

There is actually very little in common between the various fields that are lumped together as "heterodox" other than that they have been pushed to the margins by the now completely invalidated, but still widely accepted, neoclassical orthodoxy.

This PDF provides a good overview of the myriad fields that make up "heterodox economics"
.

Behavoural Economics

Of the many promising heterodox economic fields, I'm particularly interested in behavioural economics, which stands in opposition to the neoclassical position that accurate economic models can be built upon the assumption that human beings act in their own rational self-interest. There is a huge amount of evidence to prove that in reality human beings actually make most of our decisions on an intuitive, non-rational level. Behavioural economics is about trying to work actual human behaviour, and human cognitive processes into our economic models.

If mainstream economics is ever going to make the progression from a pseudo-scientific quasi-religious ideology riddled with ludicrous assumptions and unquestionable core beliefs to become a legitimate social science, I'm certain that developments in behavioural economics are going to play an important part.


Economic inequality

Inequality has always been a theme in economics, but with the rise of the neoclassical orthodoxy it fell out of favour. In recent years inequality has made quite a comeback, so much so that two of the bestselling economics books in recent years directly addressed the theme. "The Spirit Level" by Kate Pickett and Richard Wilkinson popularised the theory that too much inequality is extremely bad for the economy, and the French economist Thomas Piketty further developed the theme that growing inequality is a major threat to economic stability in his book "Capital in the 21st Century".


The 2013 documentary "Inequality for All" featuring Robert Reich is certainly worth some 90 minutes of your time too.

You've got to learn some Marx

Even if you are strongly inclined to disagree with Marxist and socialist ideas, you've got to accept that Marx was a genius of his age and at least look at some of his work.  Many of Marx's criticisms of capitalism hold as true today as they did when he wrote them in the 19th Century.

Das Kapital
and the Communist Manifesto are both freely available on the Internet, so you've got no excuse for not at least taking a look. My personal view is that Marx's critiques of capitalism were immeasurably superior to his predictions about how capitalism might be overthrown. However I urge you to look for yourself and make up your own mind about Marx's ideas rather than blithely accepting other people's parsed, paraphrased, misrepresented or just completely made up interpretations of his work.

If you're interested in finding out a bit more about who Karl Marx actually was, Francis Wheen wrote a decent biography.

But, you should probably read some Rand too

In order to gain a more complete understanding of an issue, it is often necessary to read things with which we strongly disagree. Thus you should probably read some of Ayn Rand's demented frothing. Rand had a powerful influence over the reactionary right-wing in the US, in fact her book "Atlas Shrugged" is still regularly appears on bestseller lists in the US.

One of Rand's inner circle of sycophantic acolytes Alan Greenspan went on to become Chairman of the US Federal Reserve between 1987 and 2005, where he unleashed wave after wave of ideologically motivated deregulations that culminated in the 2007-08 global financial sector insolvency crisis. Reading some of Rand's raving pseudo-philosophy helps us understand the ideological roots of the cult of the individual, greed-is-a-virtue, privatise everything, neoclassical mentality that has now infested the majority of economics departments, central banks, multinational organisations and political parties on the planet.

Orthodox economics

As a sceptic of the mainstream economic orthodoxy and free market dogma I'd caution people to use their critical judgement when reading the work of economists like Freidrich Hayek, Ludvig von Mises or Milton Friedman, but then you should strive to keep your critical judgement in play whatever you read, whether you're inclined to agree with it or not.

I'd also suggest reading some Adam Smith (perhaps Wealth of Nations) and considering how different many of his economic ideas are to those of the modern economic right who have so often championed him.

John Maynard Keynes

It's bit difficult to know what to suggest with Keynes, he was an incredibly influential economist, but his writing style can be somewhat impenetrable. There have been so many interpretations of his work that several distinct schools of Keynesian economics have developed 
(Neo-Keynesians, Post-Keynesians and New Keynesians).

If you are formally studying economics, make sure you have established some knowledge of Keynes for yourself before you learn someone else's interpretation of his work. Here's a link to Keynes' General Theory of Economics, and here's a fairly comprehensive list of books that have been written about him.

  
The capitalist "doves"

There are many economics commentators who seem to accept most of the core unquestionable faith positions that underpin conventional economics, but who don't fully subscribe to the extreme 
end of the capitalist spectrum (deregulate and privatise everything, massive tax cuts for corporations and harsh austerity for the masses). These guys are by and large supporters of the neoclassical capitalist orthodoxy, but they want to tinker with some of the ancillary beliefs to make capitalism a bit fairer and a bit less ruthless.

There are two positions to take on these guys. One is summed up with the Chomsky quote "The smart way to keep people passive and obedient is to strictly limit the spectrum of acceptable opinion, but allow very lively debate within that spectrum." One might say that economists like Paul Krugman, Jeffrey Sachs and Nouriel Roubini are just providing the lively debate within the limited spectrum that is bounded by "capitalism rules OK". 

My personal view is that it is often worth reading what they have to say, despite the fact a lot of their core assumptions are extremely dubious.

Nouriel Roubini was one of the tiny minority of economists to accurately predict the 2007-08 financial sector insolvency crisis, so his book "Crisis Economics" is worth a read if you want to check out what one of these "capitalist doves" have to say.


Lesser known economists

                     
In my view some of the most interesting economists are people who have been largely forgotten, and rarely ever make appearances in standard economics courses.

Some of most interesting economists I've come across include Pierre-Joseph Proudhon (French socialist and founder of mutualism)  Henry George (American left-libertarian, advocate of Land Value Tax and Basic Income),  Antonio Gramsci (Italian Marxist, defined the term "hegemony") Silvio Gesell (German anarchist and egalitarian, founder of Freiwirtschaft) Kenneth Boulding (Anglo-American economist, philosopher and Quaker, pioneer in systems theory and evolutionary economics) and Hyman Minsky (American Post-Keynesian, developer of the financial instability hypothesis).

I obviously don't agree with everything these guys came up with, but as is often the case, many of the most interesting and challenging voices have ended up being pushed to the sidelines in favour of those who know how to tell the rich and powerful exactly what they want to hear. In the case of economics it's clear that the ruling establishment love to hear that greed, selfishness, lack of empathy, hunger for power and pure 
self-interest are not vices, but virtues.

Economics doesn't exist in a vacuum

Economics overlaps with countless other 
fields of human endeavour. In fact many of the great economists throughout the ages have been recognised as profound thinkers in other important subjects aside from economics. These leading economic thinkers were more than just professional "money men", they were renowned philosophers, scientists, inventors, statesmen, political theorists, activists, mathematicians, social commentators and businessmen as well.

In my view it is of fundamental importance to try to synthesise what we learn about economics with what we already know of the world. In my case I've devoted much of my time to the study of philosophy and politics, which is convenient because these subjects are t
wo of the most natural bedfellows of economics (in fact the three are often formally combined in PPE university courses).
   
A better understanding of philosophy can provide the cognitive abilities to identify and criticise structurally incoherent economic ideas. A better understanding of political history and familiarity with common political structures and processes helps to clarify how abstract economic theories have been applied in the real world of politics.

The advice to read up on philosophy and politics is a bit vague, so I'll provide details of a few (hopefully) interesting things that broadened my perspective on how economic theories can interact with the subjects of philosophy and politics. Perhaps they may be of some use to you.

  • Bertrand Russell - "Proposed roads to Freedom": If you want to make yourself smarter, read some Bertrand Russell. This is as good a place to start as any.
  • Naomi Klein - "The Shock Doctrine": This book is a meticulously written history and critique of neoliberal politics and economics.
  • Noam Chomsky - Understanding Power: Chomsky is one of the great living intellectuals. It doesn't matter at all whether one agrees with Chomsky's politics, only a fool would claim that the man isn't a genius.
These suggestions are possibly of little use to people of markedly different experiences and mindsets to my own, so if you're more inclined to take a scientific, literary or perhaps business oriented perspective in life, try to consider the crossovers between particular economic ideas and aspects of your other fields of expertise.

Economics needs more thinkers with diverse "real life" experience and new perspectives to offer. What it certainly doesn't need is any more of the kind who have devoted the majority of their study hours to the uncritical rote learning of neoclassical economic dogma and little else.
             
The Keiser Report

                           
Max Keiser is a controversial figure, but in my view he's probably done more to popularise economics reporting than any man since the dawn of the television age. Max and his now wife Stacey Herbert present the first half of the thrice weekly Keiser Report show, and in the second half of the show Max interviews a guest, often someone with economics expertise, but occasionally others too. Some of his more offbeat guests have included 
Frankie Boyle, George Galloway, Kerry-Ann Mendoza (AKA Scriptonite Daily), Russell Brand and Mark McGowan (AKA The Artist Taxi Driver).

I don't see eye to eye with Max Keiser on everything, he's too much of a "gold bug", he is too keen on the Austrian school of economics and he doesn't interview nearly enough left-libertarians for my liking. But one thing is for sure, The Keiser Report is guaranteed to give you food for thought, especially if the guest is an interesting one.

If you watch nothing else of the Keiser Report, at least try a couple of episodes featuring the aforementioned economist Steve Keen (episode 4, episode 77episode 226, episode 418episode 500).

                  
Tax-Dodging and Capital flight

Tax-dodging and capital flight are two important subjects in contemporary economics. I've written short introductory articles on both of these interrelated subjects. If you would like to learn more about the alarming scale of tax-dodging, and why it is such a major economic problem you could read "Treasure Islands: Tax havens and the men who stole the world" by Nicolas Shaxon, or you could take a look at Richard Murphy's Tax Research UK blog or the Tax Justice Network website.  
                   
Rethinking economics
             
Rethinking Economics is a global movement to promote pluralism and critical thinking in economics courses. The movement arose out of a protest by Manchester University students against the uncritical teaching of the neoclassical economic orthodoxy in their economics department, despite the fact that huge swathes of neoclassical economic theory have clearly been completely refuted by the global financial sector insolvency crisis and the massive state bailouts. 
The Manchester students are called The Post Crash Economics Society, and in 2014 they won  university society of the year at the 2014 NUS Awards.

Positive Money

Positive Money is a movement which attempts to educate the public about the nature of money, how most of it is created out of nothing by private banks and rented out to the public as interest bearing loans, why this is a problem (inflationary bubbles and ever increasing levels of debt), and what they propose to do about it (giving monopoly power to create money to a kind of central bank-politburo).

My view on Positive Money is surprisingly similar to my view on Karl Marx. They have correctly identified flaws in the economic system and have attempted to inform the public of the problems - which is highly commendable, but their proposed solutions leave quite a lot to be desired.

Whatever your views on the nature of currency, Positive Money are definitely worth keeping an eye on.

     
My own work
 
I have written several articles on economic subjects, I suppose this is one of the main reasons that people have asked me for advice on economic matters. So my economics articles are probably the main reason that this article even exists.

I have written about many subjects ranging from the absolute basics (the difference between a debt and a deficit) through economic ideas that lots of people tend to grasp intuitively without realising there are specific economic explanations (Marginal Propensity to ConsumeHidden InflationFiscal Multiplication) to much more complicated things (Information AsymmetryCredit Default SwapsQuantitative Easing).

I have also written a number of articles on Universal Basic Income and I intend to write a lot more about alternative currencies at some point in the future ...


Social media

I have set up a Twitter list of interesting economics related accounts. Feel free to do a spot of cherry picking of interesting accounts to follow, or to suggest other accounts you believe should be added to the list.

              
Finally

I hope this short guide to learning more about economics has been of use to you. 


If you would like to offer more economics recommendations in the comments section, please go ahead. 



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Wednesday, 21 May 2014

How the Green party is miles ahead of the game on monetary policy


For several years the group Positive Money has been running a public education drive to explain the way that money is created out of nothing by private banks, and then rented out to the public in interest bearing loans and mortgages, and why this kind of rentier system leads inevitably to irresolvable debt crises and vast speculative bubbles (here's a short video).

At first the establishment treated Positive Money dismissively, as if they were some kind of dangerous tinfoil hat wearing conspiracy peddlers, and tried to talk around the truth by harping on about things like capital requirements.

The Green party recognised the truth in what Positive Money have been highlighting, and in September 2013 they passed a motion to reform the monetary system by taking the power to create money away from the private banks and placing it in public hands.

This landmark motion didn't attract much attention at the time, this is hardly surprising since the mainstream economic press were hardly likely to pay much attention to what the Green party were up to. They should have been much more concerned with the fact that the Reinhart-Rogoff paper they had all lauded as concrete evidence that austerity was necessary was based on a hopelessly botched Excel spreadsheet that any proper science would have picked up in the process of peer review, and by the admission by the IMF that fiscal multipliers (government returns on investment) have been much, much higher since the global financial sector insolvency crisis (between 90p and £1.70 return per pound of investment, rather than the 50p return that austerity fetishists like George Osborne had assumed in their wildly over-optimistic economic projections).

Of the very little coverage about the Green party motion to reform the monetary system, the tone was negative. I actually agree with some of the criticism, because in my view their proposed solution isn't ideal, however to have recognised the problem and proposed a solution is far better than the political establishment (the Lib-Lab-Cons), which has carried on without any recognition of this glaring flaw in the way in which 97% of the money in the economy is created.


For the next six months Positive Money kept up their campaign to spread public awareness of the way money is created out of nothing by private banks and rented out to the public via interest bearing loans and mortgages, the political establishment continued to ignore the issue, and everyone pretty much forgot about the Greens.

Everything changed in March 2014 when the Bank of England released a document entitled Money Creation in the Modern Economy which admitted that "Whenever a bank makes a loan, it simultaneously creates a matching deposit in the borrower’s bank account, thereby creating new money" and goes on to explain that banks actually loan out money whether or not they have enough in deposits in their reserves and then borrow the shortfall from the central bank to top up their reserves; thus showing that the Bank of England has accepted that Positive Money were absolutely right. This is probably the closest thing to a revolutionary paper released by the Bank of England in living memory, and has brought the subject of monetary policy to the fore.


This admission from the Bank of England shows that the Green party were well ahead of the game when they voted to reform monetary policy six months beforehand, and that the four other parties are way behind the game, with their heads stuck firmly in the outdated neoliberal textbooks that created the financial sector insolvency crisis in the first place.

That none of the other four parties have shown any interest in reforming the way money is created, in order to prevent the inflation of more speculative property bubbles (like the London bubble) is an illustration that they don't have any solutions. This is because they don't actually seem capable of recognising what the problem actually is, let alone offering anything resembling a solution.


The fact that the Labour party and the Liberal Democrats are offering no new solutions on monetary policy is bad enough (UKIP have been far too busy with their immigration fearmongering campaigns to look at the problem either) but the behaviour of George Osborne and the Tories has been frankly ludicrous. Not only is Osborne incapable of seeing the problem, he's busy pumping taxpayers' cash into the housing market (via Help to Buy and other such schemes) in order to further inflate the speculative property bubble caused by excessive and uncontrolled private sector money creation.

I don't think the Green party have got it exactly right on monetary policy, but they're way ahead of the Lib-Dems, Labour and UKIP by virtue of having actually recognised the problem, and they're double the distance ahead of George Osborne and the Tories because the Tories have actually introduced a load of policies which exacerbate the problem by using taxpayers' cash to pump up the market with false credit. This creation of false credit is their cack-handed solution to help people that have been priced out of the market due to the speculative bubble that has been fuelled by private sector money creation. Not only have they failed to see the root cause of the problem, but the solution they've devised simply makes the mess even worse.

To put this situation into a nice simple narrative, the Green party started running the race over six months ago (their running style isn't perfect, but they're moving along quite nicely and will hopefully really hit their stride soon), Labour and the Liberal Democrats are milling around at the start line unaware that the race has actually started, UKIP are off in the crowd somewhere hunting out immigrants, Muslims and homosexuals to intimidate, and George Osborne, like the clueless towel-folder that he is, has set off running in completely the wrong direction, going backwards around the track.


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