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By how much should the Bank of England increase interest rates in a traditional monetarist economy

You just can’t leave it can you. Now your misquoting me to try and invent a meaning that is contrary to my actual words. A common tactic of troll I notice.

In what way is this a misquote?
Orignial:
"The fact of the matter is that some companies have got too used to paying people low wages and using zero hours contracts, and can’t survive when it comes to paying a decent wage to attract workers."
My snipped version:
"The fact of the matter is that some companies have got too used to .......text removed..... using zero hours contracts..."

We all know that's not a misquote. I've just cut out the bits that are irrelevant, and left a "snip" in there to indicate that I've done so.

I notice that you still don't have any evidence for your assertions re mass unemployment. If me pointing out my personal experience of 4 different food factories is "trolling" then feel free to report my post.
 
I don't need any help, thanks. What I meant, and you will observe that I was not responding to you but to another poster, was that in your and a few others' posts about the great validity of MMT and the intrinsic evils of any other economic viewpoint, there is a flavour of authoritarian indoctrination rather than discussion, and an underlying "we know better." Supported by a few catchphrases like "state spending is not funded by taxation," which is absurd, and "Our government issues the currency," which is as obvious as it is meaningless. Combined with a tendency to evade questions and issues that threaten the doctrine.
Nothing authoritarian or doctrinal at all. The fact that our government issues currency is not meaningless at. The fact that our government issues currency means that it cannot run out of that currency. The money that our government issues is what funds it’s spending. That spending is not funded by taxation is true by logic, by definition and by observation.

If you do believe the monetarist mantra that our tax has a functional role in funding government spending, this is just the place for you to expand on your belief.
 
IIf we have significant unemployment in Scunthorpe then it should be a matter of a phone call to the Job Centre. Yet you're still suggesting that there is mass unemployment. Where, and what are your measures or personal experience that support this?

I can'r comment on St. However the general answers tend to be:

In some cases the unemployed persons live too far fron the jobs they are capable of doing.

In some cases the job may pay them too little to live on when they add in factors like travel expense.

In some cases there is no useful public transport to get to/from the job, and they can't afford a car.

In some cases they may have some disability or are a carer, or have some other reason that the local authority or NHS aren't able to deal with in their area.

etc.

So saying that there are milions of 'jobs' on offer doesn't ensure that number can be taken out of the unemployed state.

Devil in the details.

The point of Government *investment* 'spending' is to provide training, better transport, lower-priced housing, etc. So helping people to be *able* to get to jobs, and maybe even being fine *working for less* whilst still being happy - good for employers as well as their customers.

Snag is that it means intelligent 'investment' by Government that generates an economic and social return. This isn't therefore throwing money about, but *generating* wealth, etc.

But successive (Tory) Goverments simply bleat on...
 
In what way is this a misquote?
I highlighted it for you, it was about mass employment
Orignial:
"The fact of the matter is that some companies have got too used to paying people low wages and using zero hours contracts, and can’t survive when it comes to paying a decent wage to attract workers."
My snipped version:
"The fact of the matter is that some companies have got too used to .......text removed..... using zero hours contracts..."

We all know that's not a misquote. I've just cut out the bits that are irrelevant, and left a "snip" in there to indicate that I've done so.

I notice that you still don't have any evidence for your assertions re mass unemployment. If me pointing out my personal experience of 4 different food factories is "trolling" then feel free to report my post.
I did not make any assertions about mass unemployment. That’s you inventing stuff. What I did do, as you helpfully point to, is say that our current issue is to do with Low pay “"The fact of the matter is that some companies have got too used to paying people low wages and using zero hours contracts, and can’t survive when it comes to paying a decent wage to attract workers."

Which you helpfully demonstrate by complaining that your company cannot afford to hire people.
 
Not sure what the issue is. Friedman did come up with the helicopter jibe to say that public spending was, in his words, always and everywhere inflationary. Yes he used it against Keynes, but also against FDR and the Deal. What are you saying is incorrect?

I suspect we might be talking at cross purposes, so rather than go over the previous quotes I shall just say what I think as plainly as I can. Some of this therefore might be slightly repetitious.

Keynes rewrote the understanding of how money and interest rates work in the General Theory. In part he wrote about how we could use monetary financing to fix problems in the economy under specific circumstances. Specifically when interest rates are low and there is a net excess of savings (i.e. a liquidity trap) and this is what he said in the famous quote about paying people to dig up money I quoted above. Note also that even Keynes in the 1930s said it was better to spend it on infrastructure rather than just giving it out.

Friedman then attempted to ridicule this notion with the helicopter money jibe. Although he did this in the context of a paper where he was arguing that we could control both aggregate demand and inflation by controlling the money supply (i.e. Monetarism) a theory which would then be tried to disastrous effect by the Thatcher government.

Helicopter money has since become a way to talk about this type of unconventional monetary policy. Mostly this is a colloquial usage, although Bernanke famously used it in connection with policy back in 2003, the point being that it is used as a shorthand and not as a reference to Friedman's critique. In most cases I have come across in the last 20 years people mean it in this sense rather than as a Friedmanesque argument what Keynes's meant about the limits of monetary policy.

BTW Freidman didn't argue that public spending was always inflationary but rather that *monetary expansion* was always inflationary when it is in excess of the rate of growth of the output of the economy. At least that has always been my understanding. Although it quickly gets more complicated when one starts to think of sectoral balances, crowding out, expected inflation, etc. which is all mostly beyond my knowledge to argue about in any detail.

In modern times, of course, we wouldn't bother with the paying people to dig up money bit and would just give them money preferably in some way that maximised the chances of causing economic activity and minimised the chances of causing inflation. For example, paying people's gas bills directly instead of giving them money.

Well, we could pick through that, but still not sure how any of that contradicts anything I’ve said. Take a look at 3), yes Keynes contradicts or at least questions Classical quantity Theory of money, so does MMT. Monetarism adopts it.

My argument there is those points come directly from Keynes in 1937 and we don't need MMT to make those arguments. We get our understanding of modern money from Keynes, the subsequent abandonment of commodity money and the increasing number of examples where it seems the scope of Keynesian economics is broader than we thought.

So the two things I never understand about MMT are:

1) What is it suggesting that is not in Keynes? I mean in practical terms as I thoroughly believe that within the conventional Keynesian thought we have enough scope to address recessions, the green new deal and so on and all that stops us are essentially political choices about where we choose to spend and distribute money. I do not see how the scope of seigniorage from MMT offers much extra scope, especially in the context of a real world experiments where we just spent literally $trillions on QE.

2) How does MMT prevent inflationary spending? Keynesian economics has a bunch of stuff to say about aggregate demand, output gaps, etc. etc. and I never see any of that in MMT other than vague talk of independent spending boards. I would be deeply concerned about the chances of future governments abusing this.

Ultimately we might well say that how government funding and taxes work is all essentially an elaborate polite fiction but I don't believe (or have yet to be convinced) that this fiction prevents us from doing anything which we could currently do if we had the political will and economic capacity. I also think, at least to some extent, this fiction acts as a constraint about what is possible and if you remove that it would get out of hand quite quickly.

So explain to me not the semantics of what money means or how it works, but what, specifically, is in MMT that is not in Keynes and exactly how much more and why this allows the government to spend and under what circumstances.

OK, but still not sure if you are working from Monetarist assumptions or Keynesian ones

I have never been any sort of monetarist and my politics and economics are firmly from a Keynesian point of view.

The only caveat here is that the definition of Moneterism seems to have changed over my lifetime and now means more than just Friedman / Thatcher / Reagan claims that you can control aggregate demand and inflation by controlling the rate of growth of the money supply.
 
I highlighted it for you, it was about mass employment
I did not make any assertions about mass unemployment.
Yes you have. Here and in the past.

What I did do, as you helpfully point to, is say that our current issue is to do with Low pay “"The fact of the matter is that some companies have got too used to paying people low wages and using zero hours contracts, and can’t survive when it comes to paying a decent wage to attract workers."

Which you helpfully demonstrate by complaining that your company cannot afford to hire people.
No, 4 different locations. I'm not complaining, I'm pointing out a fact. You're banging on about ZHC too, none of the cases I quote use them. That's just you making a false assumption. Again.
 
PS I note that Keynes wrote all this in 1937, two years before the invention of the helicopter and further proof of his genius :)
 
Yes you have. Here and in the past.
I acknowledge that I have referred to mass unemployment in the past, I have done many times, but you said it was irrelevant. If it was irrelevant why do you bring it up again?

No, 4 different locations. I'm not complaining, I'm pointing out a fact. You're banging on about ZHC too, none of the cases I quote use them. That's just you making a false assumption. Again.
As you have helpfully pointed out, your quote was me making it clear what I was talking about. Not mass unemployment, but the poor employment that we currently have. I did not make an assertion that we currently have mass unemployment in response to your ONS data as you claim. You seem to want me to have said something different to those words you quote, which I don’t understand because you yourself keep telling me that your company cannot afford to employ people, that observation confirms my words.
 
PS I note that Keynes wrote all this in 1937, two years before the invention of the helicopter and further proof of his genius :)
And Friedman didn’t come up with his helicopter bollox until several decades after Keynes death!
 
PS I note that Keynes wrote all this in 1937, two years before the invention of the helicopter and further proof of his genius :)
Just looked it up, Friedman came up with his helicopter story in 1969, just in time for when Callaghan got all Friedman curious. But then Friedman did always talk about being ready for a disruption of any sort to exploit, sometimes he couldn’t wait and went in for creating Pinochet-like disruption first and then exploiting it.

Interesting chap Friedman, worth reading up on.
 
:D
Yes you have. Here and in the past.


No, 4 different locations. I'm not complaining, I'm pointing out a fact. You're banging on about ZHC too, none of the cases I quote use them. That's just you making a false assumption. Again.

I acknowledge that I have referred to mass unemployment in the past, I have done many times, but you said it was irrelevant. If it was irrelevant why do you bring it up again?


As you have helpfully pointed out, your quote was me making it clear what I was talking about. Not mass unemployment, but the poor employment that we currently have. I did not make an assertion that we currently have mass unemployment in response to your ONS data as you claim. You seem to want me to have said something different to those words you quote, which I don’t understand because you yourself keep telling me that your company cannot afford to employ people, that observation confirms my words.
Snack time.

2 aggressive types who don't understand their own posts....
 
I acknowledge that I have referred to mass unemployment in the past, I have done many times,
Hallelujah. Can we make a note of this before you deny it again?

t you said it was irrelevant. If it was irrelevant why do you bring it up again?
you raised it here, in a context where it wasn't irrelevant. My replies have all been about the fact that we currently have more vacancies than unemployed, which looks like full employment to me.

You don't believe the ONS data, apparently, because this is a "Tory measure" but that's up to you.

s you have helpfully pointed out, your quote was me making it clear what I was talking about. Not mass unemployment, but the poor employment that we currently have. I did not make an assertion that we currently have mass unemployment in response to your ONS data as you claim. You seem to want me to have said something different to those words you quote, which I don’t understand because you yourself keep telling me that your company cannot afford to employ people, that observation confirms my words.
I didn't say that my company couldn't afford to employ anyone for one minute. I said that 4 locations are hiring. Full time. So if thefe are all these poorly employed people on ZHC etc, why are they not applying for the full time work at Wren kitchens, or a chicken factory in Wales, Scunthorpe or Norwich, or a bakery in Yorkshire?
 
Hallelujah. Can we make a note of this before you deny it again?
I didn’t deny it, I acknowledged it you fool

you raised it here, in a context where it wasn't irrelevant. My replies have all been about the fact that we currently have more vacancies than unemployed, which looks like full employment to me.

Yes…according current data we have the lowest unemployment figures since 1970 something….and….your point is?

You don't believe the ONS data,

the data is a bunch of numbers that represent the current definition of unemployment. Why would I not believe it for what it is?
apparently, because this is a "Tory measure" but that's up to you.

It a measure of unemployment over time, and for the last 50 years or so we have has a Tory monetarist economic model. It’s not up to me at all, it’s just history

I didn't say that my company couldn't afford to employ anyone for one minute. I said that 4 locations are hiring. Full time. So if thefe are all these poorly employed people on ZHC etc, why are they not applying for the full time work at Wren kitchens, or a chicken factory in Wales, Scunthorpe or Norwich, or a bakery in Yorkshire?

Then they are failing business that have only managed to survive on low wages and obviously need a new business model if they are going to survive in an economic climate where low paid workers clearly need to be paid more.
 
I didn’t deny it, I acknowledged it you fool



Yes…according current data we have the lowest unemployment figures since 1970 something….and….your point is?



the data is a bunch of numbers that represent the current definition of unemployment. Why would I not believe it for what it is?

It a measure of unemployment over time, and for the last 50 years or so we have has a Tory monetarist economic model. It’s not up to me at all, it’s just history



Then they are failing business that have only managed to survive on low wages and obviously need a new business model if they are going to survive in an economic climate where low paid workers clearly need to be paid more.
Funny man. Failing businesses? All of them, says you. Hahahahaha. Not sure about Wren kitchens but the others are blue chip, supply a significant proportion of the UK s food and one of them is owned by a self made billionaire. If that's a failing business, who are you, Elon Musk?
 
And a troll trying to reignite a fire that had just died down
Not at all, just wondering why you’re bothering to argue. It’s obvious what you’re saying but the other bloke really doesn’t understand what you’re on about and you won’t get it through. Give up. No point in getting angry about it.
 
In here. Am hoping for some answers from the MMT experts.

I've long given up on the question of what the BoE should do with interest rates, so as it's getting interesting and I don't want to break up a party, please feel free to discuss MMT here now.

I should throw in that I'm just starting to get my head around the idea from what Le Baron, Klassik etc have been saying but I need to read their posts more carefully.

I think fundamentally it is that the government can spend what it wants (injection) through money creation as long as it taxes (withdrawal) at the right amount required to stop inflation resulting from the increase in money supply, or deflation from a decrease. So expenditure is the net of public and private spending minus taxation, and this total needs setting at the right level to prevent inflation. Rather than controlling inflation through interest rates it is done through taxation. Although the main policy objective is full employment (through spending) rather than inflation.

I have a few questions that I might be able to answer by reading the posts, but doing that could also raise further questions.

1. How do we know what level of taxation is required at any given time to prevent inflation? That's a fundamental theoreticial point, but I also have an operational point:

2. can the tax system be used to micromanage demand in real time as economic shocks come quickly and I understand changes to tax in the budget are often delayed by months or years as HMRC cannot change their systems quickly enough to apply them? Also, while salaried employees may see the changes quickly in their net incomes, the self employed and those who pay further tax through their annual return may not change their spending behaviour for some time.

If you think about how frequently the MPC meets and how their policy changes are applied immediately, we need a similarly agile policy here.

3. Do interest rates still have a role, what is that role if any, and who sets them? Also gilt issuance?

4. I understand that when employment is not full then there is excess labour that can be used but government spending (eg new hospitals) requires other finite resources. The govt will be competing with the private sector for these, so there will be an increase in prices and a commensurate fall in private sector output. If these price rises are to be limited by taxation then essentially the private sector demand for resources is to be shrunk through making production more expensive (if corporation tax) or demand for their output lower (through income tax). This will raise unemployment in the private sector which will need to be increased by the public sector to maintain full employment. This will lead to an ever increasing share of the economy by the public sector. I'm not sure this is what people want, because of a. the sort of stuff the public sector supply and b. the relative inefficiency and lack of innovation in the public sector.

5. There is an equilibrium level of unemployment in the private sector whatever people say. This can result from "search" unemployment where people are changing jobs and looking for new ones, and structural changes in the economy. When industries are no longer viable (which can be through changes in demand or international competition for example) people are laid off and need to find new jobs or retrain. If companies are not allowed to make redundancies then the economy will become ever more inefficient as it falls behind in technology and changes in consumer behaviour. So assume the govt will have to employ then to keep full employment. (Also that the govt can't make redundancies as that will create unemployment) Then you have a ratchet effect where those laid off always go straight to the public sector, adding to the issue above that it gets ever bigger.

6. This is all assuming a closed economy so far. What will the impact be on trade and exchange rates if MMT implied policies are implemented? I'm leaving this open for discussion rather than giving a view, but will note that if a currency weakens (eg if global markets have concerns about the efficacy of such policies) then imported goods get more expensive (and foreign demand for UK produced goods rises as they are cheaper for them) and inflation rises, requiring higher taxation, but I note that this will only be as effective as current interest rate policy fighting imported energy price inflation - and people are saying this is not effective. So maybe MMT (ie taxation as a policy tool) has the same, or its own set of, weaknesses as interest rates now.

A dream world where all countries implement these policies at the same time will annul any risks but I think it's safe to say that's not going to happen.

7. How would the transition to such a policy happen, and how quick would it be. What would happen to the economy, inflation and unemployment during this transition? The example I gave above about the tax system not being nimble is one example but I can see a lot of change required which is always a slower and bumpier journey than expected.

I think I'll leave it there for now as I'm rather busy today but I think it's enough to get on with!
 


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