Worstall @ the Weekend I recently read this piece in The Times. It tells the world a bit about Richard Murphy, the, uh, “economist” behind many of the ideas which make up Jeremy Corbyn's platform about money 'n' stuff.
It piqued my interest as I've been waging a near decade-long battle against the ideas (and at times, the person) of Richard Murphy. My point is that old Mark Twain line about "it ain't what you don't know that gets you into trouble, it's what you know for sure that just ain't so."
I was particularly delighted by Murphy saying this:
Mr Murphy said that threats by the very wealthy to leave the country to avoid taxes they did not like never materialised.
This is highly amusing, given that he's been campaigning for years now for a “passport tax”. This is akin to the American system, whereby you can leave the country but you still have to file and pay American taxes, minus whatever you've paid elsewhere – as opposed to the system every other country bar Eritrea has, which is that you pay tax where you reside and that's that.
The reason that Murphy wants a passport tax is because he's incandescent with rage over the way that people can (and do) just leave Britain and not pay UK tax. People like me, for example. Or a number of you. Or – as he has complained loudly – Mrs Green sitting in Monaco and paying not a whit of British tax on the dividends from BHS.
It's possible to think that people don't move over tax. It's also possible to think that they do, but we should catch them anyway. But it's extraordinarily difficult to believe in both at the same time.
Murphy is also the, ahem, thinker behind the Peoples' Quantitative Easing (QE) that Corbyn is touting. This is the idea that if the Bank of England (BoE) could print lots of money to lower long-term interest rates and get the economy at least stumbling forward, then that same BoE can print another £50bn or £60bn a year.
As we delved into the technical details of QE*, we noted that a) the money didn't flow through into the real economy and b) that the process was reversible. We were trying to solve the fact that the V in MV=PQ had collapsed and one way to deal with that was to increase M in order to prevent a collapse in P and or Q. But we also thought that V would return to normal at some point so QE must be reversible.
And the BoE has told us how it will be reversed.
Currently, those QE bonds they've bought mature, a bit at a time. So, currently, they buy more to keep the stock stable as they do mature. At some point they'll stop doing that. And so as they do mature, in order to roll them over (the British government very rarely indeed repays actual debt) the government will have to sell new bonds out into the market in order to pay the BoE. Who then accept the money and cancel it, thus reversing QE.
What Murphy is suggesting is that the BoE prints more money and then gives it to people to spend on insulating houses, building new ones, the usual sort of lefty wet dream of a stimulus programme. They may not actually be bad things to spend money on, but this method of financing them is not QE; it is the monetisation of spending – that is, just printing money in order to spend it.
It's also, going back to our technical discussion, making M0 to spend: and as that MV=PQ again tells us, making M0 to spend can be highly inflationary.