Mar03
Comedian-activist Mark Thomas hosts The Manifesto on BBC Radio 4, in which he and his studio audience consider proposals for a People’s Manifesto on topics ranging from the sublime to the ridiculous. Somewhere in the middle, there’s serious stuff with a comedic twist, and in the latest program, my “Modern Debt Jubilee” got a guernsey.
It didn’t win the Shout, so a proposal to eliminate tax avoidance got up instead, but it’s nice to see that the idea is getting into the public domain.
You can listen to the whole show here (though the link will expire in 5 days), or click on the movie below.
There are only two ways I can see:
- The first is to subsidise all jobs (ie a Universal Pension), so that the private sector can finally drive private sector wages to zero without starving people to death.
- or you exclude the private sector from job subsidy and have the state essentially buy up spare labour and deploy it in its own sector or the Third Sector. From a UK/EU point of view that has the advantage of being compatible with the EU State Aid rules.
Once you start messing around in the middle you always end up moving to one or the other of those positions.
Once you realise that taxation is irrelevant from a ‘funding’ point of view, you can strip it back to something very simple – as a mechanism to control inflation and drive any redistribution via a combination of Wealth, Sales and Income taxes.
‘Duties/Levies’ then deal with negative externalities.
It’s all about trying to work out what is the simplest thing that will work.
Steve,
You will be highly interested in this work on debt and deleveraging from Ray Dalio:
http://www.bwater.com/home/research–press.aspx?agreed=681454
Yes, it’s quite good stuff. I have glanced at it and will pay more attention once I have some lecture and paper writing out of the way!
Besides low interest rates what about allowing those with mortgages to offset their mortgages with their super savings backed by some guarantee. Of course cant touch it but instead of negative or positive (almost unlikely in the current climate) I would rather prefer to have no growth but have the money in tact and pay down the mortgage faster. I side with the guys who believe they will come after our super eventually and it is as good as gone. Already lost >10K by not leaving in cash. Few here have lost >20K. So why not have it in cash backed by zero growth with offset instead. Sorry if this is a bad idea and upsets many. Just my 2c.
“- or you exclude the private sector from job subsidy and have the state essentially buy up spare labour and deploy it in its own sector or the Third Sector. From a UK/EU point of view that has the advantage of being compatible with the EU State Aid rules”
this is pretty much the ELR(employer of last resort ) postion in mmt.
nice idea, but i think the devils in the detail, as to how you set up the transfer and pricing mechanism between the public sector and private sector, without building a mountain of beauracracy, and assuming away the real rigidities in the labour market, let alone the power of the union movement in certain jurisdictions.
agree whole heartedly about simplifying and stripping away the taxation framework,
go knows what all those umemployed tax accountants will do though
Also very interesting and very much overlapping (I think) with Steve’s reasoning is the work of Richard Duncan. He’s got a new book out (“The New Depression: The breakdown of the paper money economy”) and even the synopsis might strike a few chords around here:
http://eu.wiley.com/WileyCDA/WileyTitle/productCd-1118157796.html
I don’t see anything new in what Dalio has to say here. All deleveraging presently and in the past have been overwhelmingly to the benefit of the “system” and its “controllers”. As Steve has pointed out the real problem in today’s crisis is the degree and level of PERSONAL debt involved compared to crises in the past. If the financial system and its apologists want to pretend that the last 30+ years of debt increase is actually the creation and maintenance of a middle class instead of an unsustainable house of cards…then we should laugh heartily at them and insist that any deleveraging (bailout) MUST BE mutual and simultaneous. And then we must insist that in the future “free” market theory must relate to not only the operation of the business entities within the system, but to the individuals that also inhabit it.
As for Richard Duncan’s “new” theory of the quantity theory of credit…..that looks and sounds suspiciously like the quantity theory of money which if one has the cajones to buck current theory can largely be laughed off. Monetary theory suffers from the same blinding by orthodoxy as economics currently does. If we’re going to have a fiat money system (and I think its the best kind we can have actually) then we’re going to have to push past the reactionary falsehoods about “central planning” that come from several centuries of private control of the monetary system. The real problem is the elitist nature of “control” of the the monetary system. What we need is ACTUAL individually liberating control of the monetary system with macro-economic policies that insure exactly that……individual liberation and non-statist control. What matters is the nature and intentions of policy not whether or not the monetary system is centrally ADMINISTRATED. Central administration of individual economic sovereignty and freedom is still individual economic sovereignty and freedom. A = A, no?
Steve, I was curious if you could at some point comment on the views of Scott Sumner, the leader of the recently emerged Market Monetarist school, which holds that monetary policy should be based on NGDP targeting rather than inflation targeting. Sumner argues that the 2008 crisis could largely have been prevented if the historical NGDP growth rate was maintained. I imagine this would involve some form of demand side inflation engineering, where the explicit inflation target is momentarily ignored. Bernanke has at various points made comments along the lines of looking favorably upon NGDP targeting and several analysts (Jim Rickards among others) have speculated that the Fed will be swayed to employ it at some future point.
I have a suspicion that if NGDP targeting was employed, the principles of debt accumulation and corresponding interest rate drops you describe would be extended into negative real interest rate territory and lead to hyperinflation. Do you agree?
Is it possible for you to adjust your model to incorporate an NGDP targeting central bank? I assume the current model involves an inflation targeting central bank somewhere?
A great episode of four corners was on last night.
If you haven’t watched it I urge you to.
http://www.abc.net.au/4corners/stories/2012/03/08/3448633.htm
Make sure you watch it till the end when a 55 room hotel on the water is sold at a distressed sales auction for the same price as a two bedroom unit in Sydney’s Eastern Suburbs.
Puts a little perspective on just how ridiculous our property market is.
Baldbadger
VK actually the local baker already works for next to nothing supported by his partner. What I’m suggesting is much the same as the ‘universal pension’NeilW mentions. Just give a benefit that’s taxable and tax all subsequent income at 30%, balanced by a higher allowance, before tax, for those who don’t take up the benefit.
Of course we could just “lend” people the £1000 per month at 1% and have them deposit it in the new local banks [which would pay 5%] and lends to local people and buisness’s at 6%, this would not be so different from the current arrangement/scam with the bankrupt banks.
We’ve reached the age of leisure and should not be mean spirited in the distribution of the spoils, it’s a bit of a pity that the financial sector gamed the system ’til it largely had custody of our industrial culture [which it had no hand in creating] then sweated it to death or shipped it abroad, but since they now ‘own’ everthying the onus is on them to create and provide.
The current benefit system may work in some places but nowhere I know anything about. I could talk about numbers of situations i’m aquainted with but the worst is a woman who has 2 kids her rent is £680pw [two bedrooms and basement parking space, about 5mins walk from the H.of P.] her other benefits are something like £220pw which just about keeps them in rice and beans. Now I think she gets too much and not nearly enough. She’ll need an entry level job at about £70,000pa, allowing for childcare just to keep to her current ‘lifestyle’. Any work she does she would lose £1 for £1 in benefit. Whilst her circumstances are the most dire I know many others in similarly intractable situations but not one who doesn’t want to do something to improve their and their childrens lives but who are totally snookered. What’s important here though is to look not at the support for the people but the support of the rentiers, and housing benefit [Uk£21b pa] is just another way of propping up the banks. The cases I know of are not even extreme http://www.telegraph.co.uk/news/politics/5663014/Family-claims-147000-a-year-in-housing-benefit-for-seven-bedroom-home.html.