The Lemon Fool

vand wrote:

NeilW wrote:
How is it a concern?
....

What crap.
Ultimately no entity can afford to keep living beyond its means (ie issuing ever increasing amounts of debt) indefinitely. Just because you have a printing press doesn't change the laws of production and consumption.

Seriously, just stop with the magic money tree idea. It's total nonsense.

It's actually known as the "Modern Monetary Theory". However most do use your turn of phrase.

More on financial repression, rather than MMT from Reuters.
https://www.reuters.com/breakingviews/c ... 021-09-02/

This is no free lunch, however. Financial repression acts as a closet wealth tax. Government creditors are the biggest losers. In 1946, a bear market in U.S. Treasuries commenced that lasted for 35 years. In the post-war decade, UK gilts lost around 40% of their purchasing power. Furthermore, as Napier points out, when credit is no longer allocated according to its market price, then governments must assume a greater role. In post-war France, most bank lending came under the state’s purview. In Britain, firms seeking to raise money in the City of London required approval from a Capital Issues Committee.

To paraphrase John Maynard Keynes, when the capital development of a country becomes a by-product of the political process, the job is likely to be ill done. By encouraging inflation and retarding economic growth, financial repression ends in stagflation – a term coined by the Tory politician Iain Macleod in the 1960s.

And here (showing that I'm young enough at heart to look things up) is a bit about MMT and examples of the downsides.
https://www.businessinsider.com/persona ... ?r=US&IR=T

NeilW wrote:

vand wrote:Debt/GDP and a country's ability to meet its future obligations is a concern,

How is it a concern?

Because if you wish to operate an open economy, that is to allow the population to purchase real goods and services that are either cheaper to supply, or only available overseas, then you have to introduce a means to exchange your pieces of paper (whatever they are) for those held by those overseas suppliers. An exchange rate will exist for that transaction.

You simply can not coerce those overseas suppliers to deliver those goods regardless of the amounts of pieces of paper or £s in the domestic system. So in the real world the real goods and the real consumption are down to actual labour and actual production, and all the pieces of paper denominated in £s and $s (and everything else) are just relative price labels.

So actual "real" debt and "real" GDP are what determines the outcome here, the "swapping" you refer to are £ accounting entries between different entities and holders, not real goods of production and consumption.

Now if you want to introduce capital controls and real barriers to trade such that only domestic goods are produced and consumed here, go ahead and pull the levers of MMT as much as you like, and witness the effects of the circularity of money between relative UK individuals and corporates. That won't produce food and energy on that magic tree you have planted however.

vand wrote:What crap.
Ultimately no entity can afford to keep living beyond its means (ie issuing ever increasing amounts of debt) indefinitely. Just because you have a printing press doesn't change the laws of production and consumption.

Seriously, just stop with the magic money tree idea. It's total nonsense.

I've given you the legislation. You've given me a belief that simply isn't supported by the facts on the ground.

Issuing debt is 'the printing press'. It's all the same thing. Japan has gone to 263% of GDP, has zero interest rates and low inflation.

We print, transact, and shred. That's how it works.

Money and stuff do not have a one-to-one correlation. They are inductively linked, not directly linked.

There's a power triangle in money as there is in the electrical supply. It works in a very similar way.

Now you may not be able to get your head around that. That's fine. But dismissing people that can just makes you look foolish. With a small f.

dealtn wrote:ause if you wish to operate an open economy, that is to allow the population to purchase real goods and services that are either cheaper to supply, or only available overseas,

Nope.

We have a trade deficit because overseas hasn't anywhere better to send their stuff. So they send it here in return for promises - because the alternative is not to produce and reduce output.

The facts on the ground defeat your belief. We're not begging for output from elsewhere. They are begging to sell it - otherwise they'd swap it for real things, not promises.

There is no universal exchange commodity. It's a myth. Money is a merely promise.

International exchange is a productivity play. There is a physical relationship between the number of Rolls Royce Engines you have to swap for an amount of oil.

Urbandreamer wrote:Indeed. This is certainly the case in some countries and was the case in the UK post WWII.

Which part of 'free floating' were you struggling with that caused you to equate that to the Bretton Woods era?

I mean seriously.

In a free floating system capital can't go anywhere else. Sterling will stay precisely where it is. All that happens is the ownership tags change. For you to leave somebody else has to come in.

Monetary "Capital" doesn't go anywhere. Because there isn't a fixed amount of it we're all fighting for. It's dynamically created as required.

NeilW wrote:

Urbandreamer wrote:Indeed. This is certainly the case in some countries and was the case in the UK post WWII.

Which part of 'free floating' were you struggling with that caused you to equate that to the Bretton Woods era?

I mean seriously.

In a free floating system capital can't go anywhere else. Sterling will stay precisely where it is. All that happens is the ownership tags change. For you to leave somebody else has to come in.

Monetary "Capital" doesn't go anywhere. Because there isn't a fixed amount of it we're all fighting for. It's dynamically created as required.

Tell me,why do you think that we are seeing quite such high inflation in food and energy?

Now please remind me, did we have rationing back then? Hint it ended a decade after the war. Why? Well to state the obvious, we need food imports. We now need energy imports as well, as has been pointed out to you.

Food and energy are NOT produced via the printing press. They are produced for the return that they generate. If the prices, for example the price paid for wind energy, is not allowed to rise to cover the costs of importing the machinery, then new turbines won't be built. (see recent events).
If we couldn't pay the gas bills to Norway, they wouldn't supply us the gas.

Hence simply printing more money, as you point out causes the exchange rate to change, leading to more money being needed, meaning more printing. It only works IF we constrain imports. In this case of food and energy and can dictate our own production (what I would regard as slave labor).

Ps, if anyone has an audible account, the book "When Money Dies" is currently in their two books for the price of one deal.

https://www.audible.co.uk/pd/When-Money ... 9e42e93351

I've not read it, but neither have I read this book.
https://www.amazon.co.uk/Cant-Just-Prin ... 84794339X/

NeilW wrote:

dealtn wrote:ause if you wish to operate an open economy, that is to allow the population to purchase real goods and services that are either cheaper to supply, or only available overseas,

Nope.

We have a trade deficit because overseas hasn't anywhere better to send their stuff. So they send it here in return for promises - because the alternative is not to produce and reduce output.

I am a foreigner. I have oil. You need energy and are cold. I don't need to sell anywhere else instead of you. I can sell to the same people I already do next year if needed. I don't like your paper promises. I won't like them next year either when they are worth less.

I am happy to take $s though when you are ready (or freezing). Good luck with your tree.

dealtn wrote:

NeilW wrote:
Nope.

We have a trade deficit because overseas hasn't anywhere better to send their stuff. So they send it here in return for promises - because the alternative is not to produce and reduce output.

I am a foreigner. I have oil. You need energy and are cold. I don't need to sell anywhere else instead of you. I can sell to the same people I already do next year if needed. I don't like your paper promises. I won't like them next year either when they are worth less.

I am happy to take $s though when you are ready (or freezing). Good luck with your tree.

Don't you as a foreigner have to put the oil on the open international market even though you extracted it from our national fields?? Why don't we just use it ourselves?
I'm getting confused again

servodude wrote:

dealtn wrote:
I am a foreigner. I have oil. You need energy and are cold. I don't need to sell anywhere else instead of you. I can sell to the same people I already do next year if needed. I don't like your paper promises. I won't like them next year either when they are worth less.

I am happy to take $s though when you are ready (or freezing). Good luck with your tree.

Don't you as a foreigner have to put the oil on the open international market even though you extracted it from our national fields?? Why don't we just use it ourselves?
I'm getting confused again

The foreigner’s oil is not in the UK. UK has no further developed reserves because they are being rapidly depleted, and the Starmer government is not allowing new exploration. Not that new exploration is at all likely to throw up new discoveries, as the UKCS is a busted flush.

NeilW wrote:There is no universal exchange commodity. It's a myth. Money is a merely promise.

That's fiat currency (debt). Money is tangible, we're still in part aligned to a gold standard, but a more fitting casual/dynamic version rather than a hard fixed pegged rate.

The US nationalised all American investment gold in 1934, compulsory purchased it and locked it up in Fort Knox. Owned by the Treasury, where the Fed are the Custodians who also hold gold certificates issued by the Treasury that are unusual in that they cannot be redeemed for physical gold, but can be used as collateral, at a fixed $42.2222/ounce coupon rate. The US post WW2 secured international agreement that the US$, backed by gold, would be used for international trade settlements. The Fed, backed by 8000 tons of gold, certificated at $42.2222/ounce, near 250 million troy ounces where at recent $2000/ounce prices, $42.2222 certificate rate is near 50 times leverage potential the Fed has available to it (comparable to as though it held 400,000 tons of gold.

As part of Fed policy, one eye is kept on the DXY and the other eye on gold. Broadly the USD 'averages' a broad range of other currencies, as does it broadly align with gold. The Fed can print/ease dollars, long/short gold to maintain that general objective. As part of being a international traded currency it also requires regulation, openness, availability/access, which up to recent (since Ukraine) it was. The threats by BRICS to swap to a 'alternative' simply don't have the common acceptance/agreement or regulation/openness/availability. As such they're just more inclined to settle on a secondary clearance system, such that the US can't lock individual members/countries out (sanctions).

Interestingly reported today, pay growth has caught up with inflation, so no longer falling in real terms. Also job market remains strong with employees on payrolls near record highs. So perhaps (clutching at straws) worst could (possibly) be over. If we do avoid a recession, would be remarkable, given the gloom and general narrative. Still see that as govts plan, to delay GE to Jan 25, get inflation down, avoid recession, then people will forget about this difficult period as by Jan 25 start to pick up their memories very short term. Still think we'll have Labour, but reckon that's their plan.

Adamski wrote:Interestingly reported today, pay growth has caught up with inflation, so no longer falling in real terms. Also job market remains strong with employees on payrolls near record highs. So perhaps (clutching at straws) worst could (possibly) be over. If we do avoid a recession, would be remarkable, given the gloom and general narrative. Still see that as govts plan, to delay GE to Jan 25, get inflation down, avoid recession, then people will forget about this difficult period as by Jan 25 start to pick up their memories very short term. Still think we'll have Labour, but reckon that's their plan.

If real wages are rising, without a corresponding increase in productivity, then this will lead to either:
1. Further inflation and/or
2. Erosion of profits (or in public sector increased govt. expenditure), if companies can not recover rising costs by increasing prices.
So, do you believe that this rise in real wages is due to a productivity increase? If not, it ain't good news ...

RockRabbit wrote:

Adamski wrote:Interestingly reported today, pay growth has caught up with inflation, so no longer falling in real terms. Also job market remains strong with employees on payrolls near record highs. So perhaps (clutching at straws) worst could (possibly) be over. If we do avoid a recession, would be remarkable, given the gloom and general narrative. Still see that as govts plan, to delay GE to Jan 25, get inflation down, avoid recession, then people will forget about this difficult period as by Jan 25 start to pick up their memories very short term. Still think we'll have Labour, but reckon that's their plan.

If real wages are rising, without a corresponding increase in productivity, then this will lead to either:
1. Further inflation and/or
2. Erosion of profits (or in public sector increased govt. expenditure), if companies can not recover rising costs by increasing prices.
So, do you believe that this rise in real wages is due to a productivity increase? If not, it ain't good news ...

or
3. Greater consumer demand which will stimulate new businesses with their own production. (See the Thatcher years...)

GS

servodude wrote:Don't you as a foreigner have to put the oil on the open international market even though you extracted it from our national fields?? Why don't we just use it ourselves?
I'm getting confused again

The UK only produces two thirds of its oil needs if I understand correctly. Other non-oil foreign goods are also needed -- wine, steel, tropical beach holidays, etc.


GS

GoSeigen wrote:

servodude wrote:Don't you as a foreigner have to put the oil on the open international market even though you extracted it from our national fields?? Why don't we just use it ourselves?
I'm getting confused again

The UK only produces two thirds of its oil needs if I understand correctly. Other non-oil foreign goods are also needed -- wine, steel, tropical beach holidays, etc.


GS

Indeed so. A simple web search provides this link upon oil.
https://assets.publishing.service.gov.u ... pter_3.pdf
This link upon gas.
https://www.statista.com/statistics/550 ... mports-uk/
This on food.
https://www.trade.gov/country-commercia ... al-sectors

We can't build a wall and hide behind it. We would starve and freeze.

We would not ALL starve and freeze forever.
There would be a population correction.

The increase in real wages and corresponding reduction in company profits make work more attractive than retirement.
Which is good, unless you complicate it with an instinct towards greed (retiring luxuriously) or idleness (for longer) like most Western aging democracies.

W.

Wuffle wrote:We would not ALL starve and freeze forever.
There would be a population correction.

The increase in real wages and corresponding reduction in company profits make work more attractive than retirement.
Which is good, unless you complicate it with an instinct towards greed (retiring luxuriously) or idleness (for longer) like most Western aging democracies.

W.

Careful! there's some round here mean something different when they talk about 'correcting the population" - less foxes and rabbits, and more like pigs'n' brown-shirts

Under Sunak, or Labour, and potential inward investments have tended to turn and run away, and are inclined to continue to do so for at least for the next 6 years once Lab are in government
The flight of the 1% that pay a third of the total tax take leaves the remaining 99% having to pay 50% more in taxes to fill that hole. Which is inclined to see even the next 9% richest looking towards migrating to greener pastures.

Already the push to train more doctors is seeing most declare that once qualified they'll move to live elsewhere for better conditions/pay (lower taxes).

LT/KK were the UK's best hope, but who totally blew it through LT's over-enthusiasm. Parliament and the Civil Service predominately still fighting a 6 year+ battle (tying the UK to the EU) will continue on and on, resulting in both a leave hit and a re-binding hit. Sunak for instance was all too quick to totally destroy the UK's NI best position.

MP's will continue to do well, with all the benefits that the bribery/corruption provides. Fundamentally the UK has transitioned to being a poorly managed banana republic international joke, where once it was seen and held as a central time zone centre of excellence for law, accounting and finance.

1nvest wrote:Under Sunak, or Labour, and potential inward investments have tended to turn and run away, and are inclined to continue to do so for at least for the next 6 years once Lab are in government

Inward investment (Foreign Direct Investment ) was higher than at any time since at least 1970 under New Labour up until the financial crisis. After that it stayed low until rebounding in late 2015/2016 when it briefly reached a still higher level before falling dramatically following the brexit vote. Hence, apart from the brexit effect, there is no reason why a moderate Starmer Labour government shouldn't attract inward investment.

https://www.macrotrends.net/countries/GBR/united-kingdom/foreign-direct-investment

ursaminortaur wrote:

1nvest wrote:Under Sunak, or Labour, and potential inward investments have tended to turn and run away, and are inclined to continue to do so for at least for the next 6 years once Lab are in government

Inward investment (Foreign Direct Investment ) was higher than at any time since at least 1970 under New Labour up until the financial crisis. After that it stayed low until rebounding in late 2015/2016 when it briefly reached a still higher level before falling dramatically following the brexit vote. Hence, apart from the brexit effect, there is no reason why a moderate Starmer Labour government shouldn't attract inward investment.

https://www.macrotrends.net/countries/GBR/united-kingdom/foreign-direct-investment

https://www.ons.gov.uk/economy/national ... elateddata

Inward FDI (millions £)
2016 191952
2017 74884
2018 65860
2019 42234
2020 34777
2021 -51748

Outward FDI 2021 61744

From what I see, neither Parliament, nor Labour, are offering anything that might attract investment away from being invested elsewhere, in a more regulatory/politically stable alternative. More a case of the complete opposite.