Oh My Gosh!

[The Eagle]

There's no such thing as "middle-class", or "those on lower rungs". if you need to work to earn your corn, then you are working-class..

This whole "middle-class" thing is just a social pretension. The only difference between operating a photocopier and operating a fork-lift truck is that the photocopier operator will earn a third of the wages of the fork-lift truck operator.

Well said, the distinction between middle-class and working-class only benefits the ultra rich. Classic divide and conquer to distract us from the real parasites.

[Big Orange]

Extracting the surplus production from the tillers of the soil by force of arms looks pretty much like organised gangsterism to me. Of course, it could be said that the warrior class 'protected' the peasants, Sadly, what they were protecting them from was other thugs with swords ,spears and axes just like themselves. In fact 'protection racket' would be a pretty good description of how early mediaeval European society operated in the centuries after the collapse of the Roman Empire

While there was significantly more infrastructure and urban development (and quasi-industrial production) across Roman dominated Western Europe in comparison to Western Europe from the 500s to 1400s AD, Rome was in essence not much different in its brutal nature to the worse excesses of European colonialism and more fundamentally repressive, violent regimes like Nazi Germany, Soviet Russia, and North Korea, at least according to Simon James in Rome and the Sword (and if anything Medieval Feudalism seemingly arose on the foundations of the slowly dying Roman military/aristocratic/bureaucratic system, much like the Russian/Eastern European corporate criminals arose from the collapse of the Soviet system).

[okaycuckoo]

(and if anything Medieval Feudalism seemingly arose on the foundations of the slowly dying Roman military/aristocratic/bureaucratic system, much like the Russian/Eastern European corporate criminals arose from the collapse of the Soviet system).

That would make an interesting compare & contrast - but the data must boil down to who gets the cheapest energy.

[(Blizzard)]

I know you quoted from Keynes. But given your previous posts on his work it's obvious that you took his comments at face value thinking "he means if we give everyone 1 million quid we'd all be rich - how stupid", when in reality you missed the underlying concepts and precepts implicit in what he said.

I will try to explain.

...

Arguably, we had a (perhaps unintended) Keynesian style response to the recession of 2000-2003 (depending upon country), which was consequently a fairly mild recession. We all know what happened next.

It's pretty obvious that government deficit spending, or loose monetary policy, can boost an economy for a while.

In the long run, it does matter what you spend on, particularly if you spend on projects that actively destroy wealth. Burying money in the ground might sound stupid, but it's a hell of a lot less stupid than printing money and using it to bid up the cost of homes.

Also, the destruction of some businesses really is an unavoidable condition for the recovery. It isn't sustainable to have every other air-head working as a 'developer', interior-decorator or estate-agent, and one way or another those businesses need to go bust. Simply bailing them out just delays the inevitable.

One more thing: recessions and booms are defined by the ruling classes. They take no account of the real effect on the lives of ordinary people. 2000-2007 was an era in which many people in the UK became much poorer, and yet we call this a boom. So any policy that fixes 'their' recession, might actually make life worse.

Edited February 23, 2014 by (Blizzard)

[Ah-so]

The great depression in the USA is an example of government stimulus gone mad. The Federal Government confiscated gold and devalued it by 50%, essentially printing piles of money. They had all kinds of stimulus programs. They even went so far as burning food to stimulate food prices, causing people to go hungry. And guess what? The economy did not recover until they stopped meddling.

Can you supply a reputable link to this? I thought people were burning crops because they could not sell it - the potential buyers had no money. There was plenty of supply, but a demand problem. Therefore farmers were burning grain instead of coal (which they could not afford to buy as they could not sell their crops to pay for it).

[council dweller]

Well said, the distinction between middle-class and working-class only benefits the ultra rich. Classic divide and conquer to distract us from the real parasites.

That`s all very well but surely the middle class believe the lie 110%? They believe in their over-priced houses, their crappy education and their German cars, their trips to waitrose.......they must believe otherwise what do they have?

[davidg]

I saw some ancient roman coins in the British Museum- but they weren't money either. They used to be- there was a time when those coins could have been spent and bought me something- but not any more.

I'm quite happy to accept ancient Roman coins as payment for stuff.

[cybernoid]

I'm quite happy to accept ancient Roman coins as payment for stuff.

They're worth quite a lot of money

[cybernoid]

Artlcle from the telegraph in 2008. So that went well.

Plainly bonkers, Ive no idea why people even bother debating this these days.

Until recently, though, Brown and his entourage have played down their “big government” tendencies – stressing prudence, private enterprise and the joys of lower tax.

But now, with the UK in the grip of the credit crisis New Labour has revealed its true statist colours. “We are spending more to get the economy moving,” said Brown last week. “That’s the right thing to do.”

Well, actually, it isn’t. The last 50 years are riddled with grim episodes of Western governments trying to spend their way out of recession. Every attempt has gone wrong – resulting in spiralling national debts, soaring inflation and a plunging currency.

In 1976, then Labour Prime Minister Jim Callaghan made a passionate speech to his party conference, telling comrades “in all candour” that the option of reversing a downturn by “deficit-spending” simply “doesn’t exist”.

Callaghan was in a position to know. His Keynesian policies had destabilised the UK economy so seriously we were forced to go cap in hand to the International Monetary Fund.

That’s right – the UK’s mid-1970s IMF bail-out, the indisputable nadir of this country’s post-war economic history, was the direct result of Keynesian policy.

Yet, here we are 22 years on. The young left-wing firebrands who sneered at Callaghan’s brave admission now run the country. To gain power, they had to bury their beliefs, shave off their beards and parrot a faith in free markets.

Since 1997, despite this pretence, New Labour’s “soft Keynesian” concoction of high spending, loose credit controls and more tax has contributed mightily to our current predicament.

But faced with a crisis, and with their backs to the electoral wall, the Brownites are reaching for the intellectual comfort blanket of their youth – the “hard Keynesian” solution of ramping up spending sharply.

Because we’re in a crisis, though, Brown’s Keynesian declaration has raised barely any protest. That’s why the letter in today’s Sunday Telegraph is so important – which makes clear Keynesianism is a “misguided and discredited as a tool of economic management”. The economists who signed it cannot be dismissed as parti pris. The economic consensus against Keynesianism is based on evidence, not ideology.

For now, the airwaves are full of economists from investment banks and accounting practices whose firms stand to do quite nicely from a big dollop of extra public infrastructure spending. Keynesianism? Bring it on, they say.

But there are many, many dismal scientists with serious misgivings – but who don’t have “media strategies”, and who perhaps lack the courage to voice their concerns, given that millions of people are frightened about their jobs.

No one is denying the UK economy is in a bad place. New preliminary data shows the first quarterly output drop for 16 years. Between July and September, GDP fell 0.5 per cent, pushing annual growth down to 0.3 per cent.

As the signatories to our letter make clear, it is “inevitable government expenditure and debt rise in a recession” – as the “automatic stabilisers” kick in, the tax-take falls and benefit spending rises.

But Brown’s plan goes way beyond that, posing huge dangers – not least as we’re starting from a position of extreme fiscal weakness. Even last year, when growth was near trend, the Government borrowed £36bn – almost 3 per cent of GDP. And in only the first six months of this financial year, before the slowdown had really begun, we’ve already borrowed £38bn – a colossal 75 per cent up on the same period the year before.

Even without Brown’s misty-eyed Keynesian adventure, the public finances are set to deteriorate rapidly. But imagine how bad the numbers will get as Brown, as he said last week, “brings forward” public spending from future years. That can only lead to much higher taxation, hobbling the private sector and increasing the danger of a drawn-out Japanese-style slump.

Extra Government spending won’t help anyway. Most of it will simply fuel state-sector wage growth – winning Brown a few trade union votes, but boosting wage inflation elsewhere. The broader macro-economic implications are also alarming. If we keep borrowing, in the end the gilts market will simply dry up. Already, the UK government faces massive age-related liabilities that will undermine our credit-rating over the next few years – before Brown’s final spending spree.

And anyone who tells you inflation isn’t a problem is ignoring that borrowing itself is inflationary, and that the latest bank bail-outs will see the Bank of England printing money on a scale unprecedented in modern times.

This is the first serious slowdown under Labour – since 1976 – and a moment of acute economic danger. A wounded, desperate Prime Minister is making a final roll of the dice.

Faced with a desperate electorate, he is reaching for Keynesianism. It serves, also, as a fig-leaf for his previous profligate spending and as a bone to the Labour left.

But it is, indisputably, an immensely dangerous and counter-productive idea. That’s why economists must stand up and be counted.

The dismal scientists must speak out.

[wonderpup]

I'm quite happy to accept ancient Roman coins as payment for stuff

So were the ancient Romans- the difference is only that in ancient Rome there was a much wider consensus as to the 'moneyness' of the coins in question.

Most shops today would not agree that those coins are money- whereas most shops in ancient Rome would have agreed they were money.

So it's fair to say that the degree of 'moneyness' attributed to ancient roman currency is not an intrinsic quality of the coins themselves- they are unchanged- but was the result of a social consensus that has shifted over time.

So all that is required for something to be 'money' is a wide social consensus that that something is money. So moneyness is not a quality that can be imbued into physical objects like radiation- it's just a social convention.

This is why at certain times credit and currency are entirely fungible as 'money'- while at other times both credit and currency can lose all of their monetary value completely and revert to their non monetary value- which in the case of currency is it's value as paper or metal, and in the case of credit it's value of absolutely nothing.

[Si1]

So were the ancient Romans- the difference is only that in ancient Rome there was a much wider consensus as to the 'moneyness' of the coins in question.

Most shops today would not agree that those coins are money- whereas most shops in ancient Rome would have agreed they were money.

So it's fair to say that the degree of 'moneyness' attributed to ancient roman currency is not an intrinsic quality of the coins themselves- they are unchanged- but was the result of a social consensus that has shifted over time.

So all that is required for something to be 'money' is a wide social consensus that that something is money. So moneyness is not a quality that can be imbued into physical objects like radiation- it's just a social convention.

This is why at certain times credit and currency are entirely fungible as 'money'- while at other times both credit and currency can lose all of their monetary value completely and revert to their non monetary value- which in the case of currency is it's value as paper or metal, and in the case of credit it's value of absolutely nothing.

Wtf

Money is money because by law the govt says any debt can be settled with the national currency

Edited February 23, 2014 by Si1

[wonderpup]

Wtf

Money is money because by law the govt says any debt can be settled with the national currency

Do you settle all your debts by sending the creditor coins and notes- or do you use bank credit?

[Biggus]

Except what you said does not match reality. The government did absolutely nothing in terms of the contraction of the money supply, it fell 40% between 1929-33. Also government deficit spending amounted to a measly $3 billion between 1932 and 1941. Contrast that to the deficit spending of $23 billion in 1942 alone after the pearl harbor attack. Now that is economic stimulus. And not so coincidentally it's exactly the same time as the great depression is considered to have ended.

The price of gold in dollars was devalued by 50% overnight. The world was on a gold standard. In other words the dollar was devalued by about 50%.

https://en.wikipedia.org/wiki/Gold_Reserve_Act

[Biggus]

Can you supply a reputable link to this? I thought people were burning crops because they could not sell it - the potential buyers had no money. There was plenty of supply, but a demand problem. Therefore farmers were burning grain instead of coal (which they could not afford to buy as they could not sell their crops to pay for it).

http://en.wikipedia.org/wiki/Agricultural_Adjustment_Act

http://en.wikipedia.org/wiki/Agricultural_Adjustment_Act_of_1938

[Biggus]

I saw some ancient roman coins in the British Museum- but they weren't money either. They used to be- there was a time when those coins could have been spent and bought me something- but not any more.

So the 'moneyness' of money itself is not some intrinsic quality that exists in the coins or notes, it's more of a mutual agreement amongst a given group of people that a certain artefact represents money. And in our digital age we choose to designate electrons in the memories of computers as our way to represent money.

So as long as your credit is good it is exactly the same thing as money- they are fungible. Of course it can happen that times change and your credit may no longer be good- at which point it loses it's 'moneyness' and can no longer be spent. But the same can be said of notes or coins- time and circumstance can rob these too of their 'moneyness'

So it turns out that money is whatever we all agree it is at any given time and place- and if we all agree that credit is money then it is money- until we change our minds.

And the reality is that all our savings exist in the form of bank credit- and when someone asks you how much money you have you do not count only the notes and coins in your wallet do you? Most people will also include their bank credit as being part of their 'money'.

Nothing is more abstract than the arbitrary values we impute to notes and coins- after all those metal disks or oblongs of paper could have any numbers we chose printed on them. And as the Weimar Republic demonstrated, even when those numbers have been printed the agreed value they represent can change dramatically over a short period of time.

So there is really no such thing as 'money'- there is only moneyness- the property we attribute to a given artefact that allows it to fulfill the role of what we call money.

When formulating policy it is imperative to understand the difference between credit and money. The two behave differently. Money tends to circulate quite quickly and is spent on a wide variety of things. Credit tends to be lent and secured against a specific purchase, for example a house, then it sits there and does nothing. For example, over a trillion pounds is owed on mortgages in the UK. This is why UK houses are so expensive, while overall inflation only really took off when the BOE began to bail out bad credit with real money.

[Big Orange]

Didn't Roman coinage get cheapened and debased pretty badly in the Third Century? By the Fourth Century the Roman state tried to hold the economy and the armies together by introducing solidus coinage (the term "soldier" is derived from the type of coin paid to armed personnel).

[wonderpup]

When formulating policy it is imperative to understand the difference between credit and money. The two behave differently. Money tends to circulate quite quickly and is spent on a wide variety of things. Credit tends to be lent and secured against a specific purchase, for example a house, then it sits there and does nothing. For example, over a trillion pounds is owed on mortgages in the UK. This is why UK houses are so expensive, while overall inflation only really took off when the BOE began to bail out bad credit with real money.

Don't tell the worlds central bankers- they have been pumping billions into the system on the premise that once they get those asset prices back up people will be MEWing like crazy and save the economy.

The distinction between credit and money is not as clear cut as you make it sound- after all nearly all our 'money' is bank credit, with a very small proportion being in the form of notes and coins. And how does the system distinguish between bank credit that is created by hard work and saving and bank credit that is created out of thin air like HPI?

Imagine two guys- one has worked his as* off for 20 years and have saved a tidy sum in his bank account- another has done nothing but sit on his as* for twenty years but the house his mother left him has gone up in value 10 times. He then sells the house and deposits the proceeds into his bank account- and it comes to exactly the same amount as the savings of the first guy.

So one lump sum generated by real wealth creating activity- and another lump sum generated by crazy credit creation by irresponsible bankers.

How does the banking system differentiate between these two very different forms of money creation?

It doesn't. And that is where the shite hits the fan. The spending power of the guy who did nothing is identical to the spending power of the guy who worked and created something real to earn the money.

Thus our entire system is undermined.

[wonderpup]

Didn't Roman coinage get cheapened and debased pretty badly in the Third Century? By the Fourth Century the Roman state tried to hold the economy and the armies together by introducing solidus coinage (the term "soldier" is derived from the type of coin paid to armed personnel).

I remember reading something about that too- they also tried the kinds of price controls currently being attempted by Argentina- so nothing new under the sun.

Perhaps a little more history and a little less fancy maths would improve the standards of the Economics profession- they all seem to have been born yesterday, judging by how often the word 'unexpected' appears in their public pronouncements.

[davidg]

So it's fair to say that the degree of 'moneyness' attributed to ancient roman currency is not an intrinsic quality of the coins themselves

Bzzz wrong.

The amount of "moneyness" of any ancient coinage is totally about an intrinsic quality of the coins themselves... that is, how much gold or silver content they had. You could spend for example, silver anglo-saxon pennies throughout Europe in the early middle ages because of that, even though they were not the local currency.

[wherebee]

Can we just delete this thread now and get everyone to read 'Debt - the first 5000 years'.

About as good an explanation of debt and money as I have come across.

[Austin Allegro]

What middle class whingers seem to think is that if they experience a drop in net wealth, it will also mean a drop in all the good things in life such as culture, intelligent conversation, dinner parties etc. Such is the class-based nature of British society that people think being poor in financial terms means being poor in spirit also.

It needn't be like this. Where I live in Eastern Europe is probably a model for future British society in some ways - the vast majority of people are poor with a small super wealthy elite - yet people who live in ropey council flats go to the opera, visit art galleries and read good books. It was the same when I worked amongst very poor people in India - they had very little but could speak about current affairs, history, culture etc (in English which was not their first language) far more eloquently than most 'middle class' English people.

The trouble is that for London types, being poor really does mean sinking into the abyss, because you won't have much of a cultured life or a life for your children if you have to live in an ex council flat in Harlesden etc. The best advice I can give people like the writers of this article is get out of London, downsize and have a better quality of life, and stop chasing some dream of 1980s upwardly mobile urban living. You will still have a vastly better quality of life than most of the world's population.

[Eddie_George]

What middle class whingers seem to think is that if they experience a drop in net wealth, it will also mean a drop in all the good things in life such as culture, intelligent conversation, dinner parties etc. Such is the class-based nature of British society that people think being poor in financial terms means being poor in spirit also.

You're right, it's all about having material goods to flash at the Joneses next door.

The trouble is that for London types, being poor really does mean sinking into the abyss, because you won't have much of a cultured life or a life for your children if you have to live in an ex council flat in Harlesden etc. The best advice I can give people like the writers of this article is get out of London, downsize and have a better quality of life, and stop chasing some dream of 1980s upwardly mobile urban living. You will still have a vastly better quality of life than most of the world's population.

Oh, I don't know. There are tons of museums, galleries and exhibitions to visit in London that are totally free. They have it very nice down there.

[Austin Allegro]

You're right, it's all about having material goods to flash at the Joneses next door.

Oh, I don't know. There are tons of museums, galleries and exhibitions to visit in London that are totally free. They have it very nice down there.

True, but is that worth paying £600,000 on interest-only to live in an ex council flat in a slum, with murderers and drug addicts for neighbours? You would be better off living in the country and making the occasional day trip up to London.

The problem is that people like the writer of this article still live in a middle class fantasy of being 'the bottom rank of top people' and thinking that even if they live in a studio flat in Acton they are still spiritually on the same level as the old-moneyed classes of Sloane Square. You can tell this by the comment about Pimlico; she is still mentally living in the London of the 1950s. She would probably be financially better off working part time in a pub in Lincolnshire and living in a caravan, but that would never do because what would people at the Groucho Club say?

[gf3]

I live in Gloucester 10 miles up the road is Cheltenham. People will pay 30% more to have a house on a housing estate with a Cheltenham postcode. Perhaps understandable if you are walking distance to the town centre but why when you have to use the car anyway to get into town.

[winkie]

What middle class whingers seem to think is that if they experience a drop in net wealth, it will also mean a drop in all the good things in life such as culture, intelligent conversation, dinner parties etc. Such is the class-based nature of British society that people think being poor in financial terms means being poor in spirit also.

It needn't be like this. Where I live in Eastern Europe is probably a model for future British society in some ways - the vast majority of people are poor with a small super wealthy elite - yet people who live in ropey council flats go to the opera, visit art galleries and read good books. It was the same when I worked amongst very poor people in India - they had very little but could speak about current affairs, history, culture etc (in English which was not their first language) far more eloquently than most 'middle class' English people.

The trouble is that for London types, being poor really does mean sinking into the abyss, because you won't have much of a cultured life or a life for your children if you have to live in an ex council flat in Harlesden etc. The best advice I can give people like the writers of this article is get out of London, downsize and have a better quality of life, and stop chasing some dream of 1980s upwardly mobile urban living. You will still have a vastly better quality of life than most of the world's population.

....very true, times are changing but old times are now different to the new times...but new times do not have to mean bad times unless you live in past times that worked very differently.