The Corbynomics Thread

[scepticus]

Someone has been brushing up on their MMT!

To whit:

http://moneyweek.com/jeremy-corbyn-rise-of-corbynomics-is-no-joke-we-must-nip-it-in-the-bud/

I know its a delusional right wing piece (in many ways, as bad as the Corbynomics it seeks to denigrate), but worth reading. These ideas have been discussed here ad infinitum. Seems like Labour might end up doing something useful for a change by stimulating some actual debate in the mainstream about such things. Not saying I subscribe to Corbyns views, in general I don't and think much of it is delusional, but not all of it.

The extracts below are pasted from the article.

Corbynomics: money printing for the people

Next, he has proposed a “People’s QE” (who the last round of quantitative easing was for exactly, if not the “people”, is not quite clear). In any case, the People’s QE, according to Corbyn, would involve the Bank of England printing money that would be used directly to fund government spending. The Bank would “be given a new mandate to upgrade our economy to invest in large-scale housing, energy, infrastructure and digital projects”.

Most of us probably thought the Bank had enough on its plate with monetary policy and regulating finance – but according to Corbyn, all you have to do is print lots of money and you can use that to build social housing without any inflationary impact on an economy already running close to full employment.

The state takes over

It doesn’t stop there. Corbyn is arguing for a “strategic, innovative state” to take over industrial investment, which sounds very like a revival of the Labour Party of the 1970s, which poured lots of public money into state enterprises, only to see most of it vanish. The only real difference is that Corbyn would print the money rather than go to the trouble of borrowing it.

[The grown-ups view]

The government, and business, must patiently take the time to explain why the ideas pushed out by the likes of Corbyn are dangerous. Otherwise they will end up part of the mainstream debate, grow more influential – and make us all poorer.

[sPinwheel]

Oh how,scary.

[frederico]

This is great, because no one will ever have to work again and can have anything they want.

[reddog]

Corbyn's plans are pretty mad, but so were the previous rounds of QE, and I didn't here the media complaining too much about them.

A couple of unrelated points:

-Labour is supposed to be a left Wing party, so should have a proper left Wing leader.

-I know everyone is saying it would be 'hilarious' if he won, because the Tories would be all but guaranteed another election victory, but....the last general election was fairly close, and if there was some sort of economic catastrophy (like the ones we talk about everyday on HPC), then Labour with JC at the helm could easily win.

Edited July 26, 2015 by reddog

[pipllman]

there is a do on for him tonight and he apparently surprised everyone by showing up in person

https://www.youtube.com/watch?v=ab_5JgWmFrA

[Timak]

Explain why it wouldn't work.

You seem to be implying there would be inflation yet we currently have very low inflation and a very strong currency.

At the moment money is "printed" by the government, lent to banks and then lent back into the economy. All this money goes to mortgage borrowers leading to high house prices.

What he seems to be suggesting is that the money is printed/borrowed by the government and used to build state owned housing and infrastructure.

I don't see what is wrong with that?

[kjw]

QE finances government spending. This is just another option of HOW to spend it. A better one too in my view.

[pipllman]

how about stopping QE and cutting taxes to the same ££ effect whilst shrinking the state to match its income

why is the default position that government needs to intervene? it should keep its nose and its grasping hands out

[@contradevian]

Why on earth would building social housing be inflationary? On the contrary I'd have thought.

Just more desperate nonsense from those that printed off 325 odd billion to bail out banks and housing market.

Considering the mass chronic malinvestment conducted by the private sector, the State could hardly do much worse.

We throw billions of debt to pump up EXISTING housing stock, and have the nerve to pump this propaganda out without any sense of irony.

Global financial capitalism has FAILED FAILED FAILED time and time again, but yeh lets have more of the same

Edited July 26, 2015 by RentierParadisio

[interestrateripoff]

QE is already funding state spending.

[Dorkins]

[The grown-ups view]

The government, and business, must patiently take the time to explain why the ideas pushed out by the likes of Corbyn are dangerous. Otherwise they will end up part of the mainstream debate, grow more influential – and make us all poorer.

Odds are, if you were born after 1975 the economic policies of the "grown-ups" have been making you steadily poorer for the last 15-20 years. Corbyn's proposed changes might not be the right ones but at least he recognises the need for change. That puts him well ahead of the "grown-ups".

[richc]

Umm, you do know that median real wages fell by more than 10 percent after 2008, largely due to QE boosting import prices and the cost of living? "QE for the People" would simply be worse, as it would have even less credibility in the markets, would drive down the pound even more, and would raise the cost of living by an even a greater margin. But hey, it sounds good, so what else would you expect from the intellectually, morally and electorally bankrupt Labour Party.

[shindigger]

Nick Abbot discussing this on LBC right now.

http://www.lbc.co.uk/listen-live-3578

[sikejsudjek]

Its not mad at all. QE has only fuelled asset price inflation. There was some economic analysis a while back that showed that PPI payouts had done more to boost the economy than the entire QE program.

[richc]

Its not mad at all. QE has only fuelled asset price inflation. There was some economic analysis a while back that showed that PPI payouts had done more to boost the economy than the entire QE program.

The pound collapsed and consumer inflation rose. QE was not only directed at asset prices.

[scepticus]

Just to be clear I just posted the Moneyweek article - and by doing so I am not implying I agree or disagree.

However as I said before there are bits I agree with and bits I don't.

The main bit I agree with is that the government doesn't need to borrow or tax in order to spend. My own view is that issuing printed money to fund government programmes and issuing printing-press-guaranteed-government-debt are essentially the same thing (in terms of accounting both are public sector liabilities that are guaranteed). So our deficit is basically money printing but going under a different name.

If that is correct, then that doesn't mean one should print money to finance public spending, but it does alter the frame of the debate. You could for example take the same premise and use it to underpin a centralist or right wing programme.

The danger for the right is if/when the view I have espoused above becomes more generally accepted, then it will be identified with the politics of the left which will strengthen the latter very considerably versus the former.

[Byron]

Left wing politics and economics never work.....ever.

Not even in China

[scepticus]

Left wing politics and economics never work.....ever.

Not even in China

It clearly did work in China since it pulled masses of people out of poverty. However, its fair to say that what worked in the past won't necessarily work as well in future, and vice versa.

Long lived communist centralist societies fail because their approach works against human nature, and the same can be said about far right regimes.

For me what is interesting about the Corbyn thing is that its a vehicle for raising the reach of debate about our monetary systems. Syrizia is another example.

Most people understand that stuff has to be paid for some way or another, and the out and out appropriation of assets doesn't really count as 'paying', and they also understand, if only subconsciously, that someone has to play the role of debtor.

[richc]

Just to be clear I just posted the Moneyweek article - and by doing so I am not implying I agree or disagree.

However as I said before there are bits I agree with and bits I don't.

The main bit I agree with is that the government doesn't need to borrow or tax in order to spend. My own view is that issuing printed money to fund government programmes and issuing printing-press-guaranteed-government-debt are essentially the same thing (in terms of accounting both are public sector liabilities that are guaranteed). So our deficit is basically money printing but going under a different name.

If that is correct, then that doesn't mean one should print money to finance public spending, but it does alter the frame of the debate. You could for example take the same premise and use it to underpin a centralist or right wing programme.

The danger for the right is if/when the view I have espoused above becomes more generally accepted, then it will be identified with the politics of the left which will strengthen the latter very considerably versus the former.

A government could finance itself through borrowing, taxing, or printing, but that doesn't mean that they're equivalent. Printing( within reason) will reduce the value of the currency and drive up import prices, so that the people who actually pay for the government are those who consume imports, mainly consumers. Borrowing and taxing to pay back the borrowing will be paid back through taxation, so that those who pay taxes, mostly those with higher incomes, end up paying for the government.

[richc]

It clearly did work in China since it pulled masses of people out of poverty. However, its fair to say that what worked in the past won't necessarily work as well in future, and vice versa.

Long lived communist centralist societies fail because their approach works against human nature, and the same can be said about far right regimes.

For me what is interesting about the Corbyn thing is that its a vehicle for raising the reach of debate about our monetary systems. Syrizia is another example.

Most people understand that stuff has to be paid for some way or another, and the out and out appropriation of assets doesn't really count as 'paying', and they also understand, if only subconsciously, that someone has to play the role of debtor.

The Chinese economy started to take off when they stopped paying for education and health care in the countryside and forced the population into urban serfdom. Hardly left-wing economics.

[stormymonday_2011]

I am not a great lover of Corbyn but at least he presents a challenge to the status quo.

Where he and most other left wingers fall down is assuming that the state is the best medium for achieving social justice. The experience of my lifetime is that it sometimes advances this goal but more often is just exploited by sectional groups to pursue their own interests. Moreover, historically there is a fair bit of evidence that the tax system operated by states tends to take from the poor and productive and give to the rich and unproductive. In fact one of the main reasons British society is so unequal is that it is so difficult for the poor to accumulate and retain capital. In my view both Labour and Conservative politicians including our current beloved Chancellor are hellbent on ensuring that remains the case though obviously their reasons for doing so are different. Some of Osbornes mooted proposals reforms to pension tax relief which look to particularly hit those with the smallest pensions (i.e. less than £5000 pa) are a fine case in point. Discouraging savings, thrift and self reliance amongst earners while offering big IHT reliefs to property owners seems a particularly bizarre and regressive policy. It would be interesting if a British politician ever suggested a true redistribution of allocated wealth including land rather than just endless debates about income, earnings and benefits but that would be a bit too revolutionary for even the likes of Corbyn. It is important to note that even when a supposed outsider looks on the brink of becoming leader of the opposition that the terms of any economic debate looks likely to still remain incredibly constrained.

Edited July 26, 2015 by stormymonday_2011

[richc]

I am not a great lover of Corbyn but at least he presents a challenge to the status quo.

Where he and most other left wingers fall down is assuming that the state is the best medium for achieving social justice. The experience of my lifetime is that it sometimes advances this goal but more often is just exploited by sectional groups to pursue their own interests. Moreover, historically there is a fair bit of evidence that the tax system opertated by states tends to take from the poor and productive and give to the rich and unproductive. In fact one of the main reasons British society is so unequal is that it is so difficult for the poor to accumulate and retain capital. In my view both Labour and Conservative politicians including our current beloved Chancellor are hellbent on ensuring that remains the case though obviously their reasons for doing so are different.

How is Corbyn a challenge to the status quo? He's peddling the same old nonsense that middle-class malcontents have been pushing for the past 50 years and which has proven to be wrong time and again. He's a Tory wet dream of an opposition. All safely contained and useless.

Challenges in the UK are really not that hard to solve, but the public are presented with exactly two options, neither of which addresses the real issues -- hand over all you cash to rentier Tory scum, or hand over all of your cash to lazy Labour public sector scum. That's it. No more choices allowed, and Corbyn is right there restricting the debate to those two options.

Edited July 26, 2015 by richc

[scepticus]

I am not a great lover of Corbyn but at least he presents a challenge to the status quo.

Where he and most other left wingers fall down is assuming that the state is the best medium for achieving social justice. The experience of my lifetime is that it sometimes advances this goal but more often is just exploited by sectional groups to pursue their own interests. Moreover, historically there is a fair bit of evidence that the tax system operated by states tends to take from the poor and productive and give to the rich and unproductive. In fact one of the main reasons British society is so unequal is that it is so difficult for the poor to accumulate and retain capital. In my view both Labour and Conservative politicians including our current beloved Chancellor are hellbent on ensuring that remains the case though obviously their reasons for doing so are different. Some of Osbornes mooted proposals reforms to pension tax relief which look to particularly hit those with the smallest pensions (i.e. less than £5000 pa) are a fine case in point. Discouraging savings, thrift and self reliance amongst earners while offering big IHT reliefs to property owners seems a particularly bizarre and regressive policy. It would be interesting if a British politician ever suggested a true redistribution of allocated wealth including land rather than just endless debates about income, earnings and benefits but that would be a bit too revolutionary for even the likes of Corbyn. It is important to note that even when a supposed outsider looks on the brink of becoming leader of the opposition that the terms of any economic debate looks likely to still remain incredibly constrained.

Yes, that's pretty much how I see it.

[ManVsRecession]

I really hope Corbyn's been reading Martin Armstrong's blog.

• Corbyn talks about printing money for public works.
• He was vague on Andrew Marr as to the exact nature of any nationalisation.
• He said he saw the leader's job to be to encourage ideas and debate, and the development of practical solutions.

I wonder if this could be the time to start looking seriously at ideas like Positive Money and Martin Armstrong's Solution. Positive Money seems to have a lot of support on the left, and a lot of finance types and those on the right see merit in Armstrong's solution.

And they're basically very similar ideas!

Well worth a look for anyone not familiar with Armstrong.

http://www.autonozone.com/2015/04/07/key-points-of-martin-armstrongs-solution-conference/

Edited July 26, 2015 by ManVsRecession

[scepticus]

Printing( within reason) will reduce the value of the currency and drive up import prices, so that the people who actually pay for the government are those who consume imports, mainly consumers. Borrowing and taxing to pay back the borrowing will be paid back through taxation, so that those who pay taxes, mostly those with higher incomes, end up paying for the government.

That is what I was saying is the wrong viewpoint. Issuance of government debt backed by a printing press also reduces the value of currency and drives up import prices. Taxation is I agree different - financing via taxes generates a different dynamic to financing with money or debt.

If a government is able for whatever reason, to issue debt at negative rates, is that debt or tax?

6 years of QE with less effect on inflation increase than the previous 10 years of deficits ought to be a clue.

The means of financing - monetary or public debt is the wrong focus for debate. The correct focus is what deserves financing and how much, and by who.