The places and people who help Barclays ‘minimize’ its taxes.

Yesterday, like many of you I read how a quarter of the UK’s largest companies had subsidiaries in Tax Havens. The Guardian reported that,

The 100 largest groups registered on the London Stock Exchange have more than 34,000 subsidiaries and joint ventures between them. A quarter of these, over 8,000, are located in jurisdictions that offer low tax rates or require limited disclosure to other tax authorities.

And that,

The banking sector has the largest number of tax haven companies, with the big four UK banks – HSBC, Royal Bank of Scotland, Barclays and Lloyds – having a total of 1,649 offshore subsidiaries. They have the largest number of companies registered in the Cayman Islands, with Barclays alone registering 174 subsidiaries and ventures there.

All these numbers came from a report by the charity ActionAid. The Guardian summarized the data and the raw spreadsheet which is less friendly but far more revealing is here. Like you I was disgusted by the fact that just 4 UK banks had 1,649 off-shore, tax-haven subsidiary companies.  But behind the numbers what always interests me more are the places and the people who run it all. So I did a little digging.

I decided to look at Barclays and its 174 subsidiaries in the Cayman Islands. First one of the 174 companies I looked at was Bors Investments Ltd. Bors is listed as registered at PO Box 309 Ugland House, Grand Cayman. A PO Box seemed odd for a subsidiary of the mighty Barclays  but I went on. Next I looked at was Braven Investments Ltd. It too was registered at PO Box 309 in Ugland House.  Must be quite a box, I thought. -I skipped down the list first to Mintaka Investments and then to Azzoli and finally to Zemedee Investments Ltd. They were all registered at Box 309 at Ugland House.

In fact 18,857 companies and ‘entities’ are registered there and according to the Wikipedia entry

“… has for years[1][2][3][4] been linked to tax evasion. During his campaign, US President Barack Obama referred to Ugland House as the “biggest building in the world or the biggest tax scam in the world”.[5][6]

So what was Ugland House I asked? Was it a corporate ants nest of furious global banking? Actually it looks more like a small hotel or well heeled club. You can see a picture and read a PR puff about how it has been cruelly misunderstood and unfairly vilified here. The occupiers of Ugland House are Maples and Calder, a law firm who describe themselves on their corporate web site as,

… a leading international law firm advising financial, institutional and business clients around the world on the laws of  Cayman Islands, Ireland and the British Virgin Islands.

Now what is it about the laws of The Caymans and British Virgin Islands that banks are so keen to be advised about? Road safety?  Well according to the PR puff piece Ugland House Explained the people in that house are helping 18,857 companies to,

play a crucial role in the worldwide economic recovery as a whole.

Good old Ugland House!

I did also notice however that Maples and Calder had just appointed a new CEO called Jude Scott who had previously,

 ”…served on various Cayman Islands Government and private sector committees, including the Cayman Islands Society of Professional Accountants, the Cayman Islands Financial Services Council, the Education Council, the Insolvency Rules Committee and the Stock Exchange.”

And it also turned out Jude Scott had also previously been,

“…an audit partner at the Cayman Islands office of Ernst & Young, Jude retired in 2008 after spending over 23 years with firm, specialising in the audits of investment funds, investment companies, banks and insurance companies.

The tax penny dropped.

Now I do have to be fair here, not all the companies I looked at were registered at Ugland some, like Abellio and Aspin were registered to Walkers SPV Limited at Walkers House. Walkers House is HQ of the leading Caymans law firm, Walkers. Their web site says their offices are in Caymans, British Virgin Islands, The US state of Delaware, Dubai, Dublin, Hong Kong,  London, Jersey  and Singapore. The role call of the worlds tax haven, tax ‘minimizing’, banking secrecy and money laundering centres.

Not, you understand, that I would ever suggest that any law firm or individual laywer would ever be involved with money laundering or with anything illegal at all for that matter.

At this point I returned to Braven Investment Ltd of PO Box 309 Ugland House. When I looked a little more I found that Braven has three directors. Mr N.R. Brand, K.Lykhman and Mr S.J. Ullman.  Mr Brand was also a director of 27 other companies most of which were on the list of Tax Haven (often Cayman Island) subsidiaries.

The list was:

Alymere Investments Two Ltd,  Antilia, Barclays, Aldersgate, Calthorpe, Cecrus, Cedron, Claudas, Equity value No. 1, Forest Road, Forest, Gallo, Gironde, Iris, Long Island International, Mintaka investments No.3, Mintaka No.4, Murray House, Oberon, Pyrus, Pythis, Raglan, Razzoli, Stellans, Tungshan, Zane, Zanone, Zemedee and Zepherine all of them ‘Investment Ltd’.  A busy man. Let’s say an 80 hour week, that works out at just under three hours for each company in a week. And that’s assuming Mr Brand has no other work to do for Barclays at all.

His fellow directors had a mere 11 directorships each to deal with. So I felt perhaps Mr Brand was the main man in this and if so I wanted to learn a little more.   I found  Mr Nicholas Richard Brand is listed on another company Zemedee Investments Ltd, as a ‘Banker’ who works for Barclays Capital.  That’s him on the left when he was doing a Barclays 10K charity run to raise money for the RNLI in 2010.

 What a convoluted and dysfunctional moral world bankers live in, I thought. Here was Mr Brand helping to raise money to help provide services for Lifeboats. Yet he spent his professional life helping at least 27 investment companies to avoid paying the UK taxes thus helping to ensure that the RNLI would need to raise money to replace cuts in government services for Lifeboats.

Now of course Mr Brand doesn’t live in the Cayman Islands and doesn’t work there either. So whatever work he does for all those Investment companies it doesn’t happen at Ugland House. In fact as far as I can see Mr Brand works at Barlcays Bank world HQ which is at 1 Churchill Place in Canary Wharf.

So it would seem all the banking and investing decisions are made in London. But the company is in the Cayman Islands. This will mean investment profits will be declared and taxed in the Caymans and not in London even though the work was done in London by someone who enjoys all the civil and social amenities and facilities paid for by the British tax payer. Thus his employers, the investment companies, benefit from the amenities of this country, such as safe streets, health service, public transport, road system, and a thousand other things all paid from the taxes, but then the company and therefore its beneficiaries refuse to pay their fair share towards all those amentities.  They are therefore, in my view, parasites upon the rest of us and upon civil life of the country and Mr Nicholas Brand helps them.

Of course Mr Brand isn’t alone. There are thousands of Mr Brands busy as bees helping tens of thousands of companies not pay taxes in the countries where the work is being done to make those companies and the people who own them that bit richer. To my mind, people like Mr Brand need to think about what they are achieving for whose benefit and to whose detriment. They need to wonder how those of us who do pay for all the things that make this country the  wonderful and civilized place it is – to me it is still wonderful and still civilized – how we feel about people we think of as tax cheats and those who help them to cheat.

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127 Responses to The places and people who help Barclays ‘minimize’ its taxes.

  1. Neil Wilson October 12, 2011 at 3:16 pm #

    ” This will mean teh inevstment profits will be declared and taxed in teh Caymans and not in London thought he work was done in London by someone who enjoys all the civil and socail amenities and facilities paid for by the tax payer. ”

    You need to think economically.

    Yes these tax havens are a nuisance, but they are not as much of a problem as they first appear.

    Firstly the London facilities are paid for by the state, not the taxpayer. The tax payer pays taxes to stop inflation taking hold because we have people employed in the NHS and the like.

    A simple understanding of endogenous money and the nature of a free-floating fiat currency tells you that.

    Taxes don’t fund anything, and for taxes to be paid in the Cayman Islands some GBP has to be converted into Cayman Island dollars, which puts it back into distribution.

    The problem with tax havens is simply one of fairness and distribution and is something Richard Murphy at Tax Research has been passionately campaign about for years.

    Again once you realise tax doesn’t fund anything then you can drop the pretence that people ‘get things the pay for’ and change tax so that it does its main job – controls inflation.

    A simple land value tax would be very difficult to avoid.

    • John Souter October 12, 2011 at 3:53 pm #

      Well there’s an answer that say’s it all!

    • ahimsa October 12, 2011 at 5:33 pm #

      @ Neil

      Interesting commentary.

      “Firstly the London facilities are paid for by the state, not the taxpayer. The tax payer pays taxes to stop inflation taking hold because we have people employed in the NHS and the like.”

      “Taxes don’t fund anything, and for taxes to be paid in the Cayman Islands some GBP has to be converted into Cayman Island dollars, which puts it back into distribution.”

      Whether taxes fund anything or not in the light of fiat money is an argument I should leave for others. Though, are you forgetting that, a state’s ability to pay for facilities, and to control inflation is always tempered by its income from taxation. Less taxation means the state can borrow less or print less.

      Regardless, I understood the thrust of David’s argument is that he would prefer much more of those GBP to be “put back into distribution” in the UK, preferably paying for state/taxpayer services as opposed to sitting in the bank accounts of the financial terrorist class.

      While money may be inherently worthless, it remains the currency of the day for storing, purchasing and measuring wealth. As such, don’t you think taxation’s main job might be to redistribute those tokens of wealth?

    • MrShigemitsu October 12, 2011 at 8:25 pm #

      “Taxes don’t fund anything”….

      Indeed.

      I was thinking along just those lines when I read this:

      http://www.guardian.co.uk/uk/feedarticle/9891301

      “Britain’s military involvement over Libya will cost the taxpayer an estimated £300 million, Defence Secretary Liam Fox has revealed.

      In a Commons written statement, Dr Fox said the cost of operations – from the start of the missions in March to the middle of December – was estimated at £160 million.

      The Ministry of Defence had previously put the cost of operations to the middle of September at £120 million.

      In addition, the MoD faces a bill of £140 million to replace the ammunition used.

      All costs will be met from Treasury reserves and will not affect the MoD’s core budget.

      Copyright (c) Press Association Ltd. 2011, All Rights Reserved.”

      “All costs will be met from Treasury reserves and will not affect the MoD’s core budget.” Funny, that.

      “Reserves…” Hmmmmm.

      So is this “taxpayers’” money, or was it just ‘magicked’ into existence?

      I reckon the latter.

      Shame they won’t create it for more useful things than war.

    • Edwin October 12, 2011 at 11:18 pm #

      How is the view from the high horse? Can you tweet a piccie?

      So if taxes don’t fund anything, I’d love to see what would happen if all taxes were suddenly withheld.

    • Toby October 13, 2011 at 9:46 am #

      @Niel Wilson

      The issue of taxes funding or not funding government spending is profoundly complicated. Even though humanity has the ability, via sovereign government, to print fiat money into existence, precisely because money is not wealth the printing of it is neither here nor there, unless the economy or economic activity exists to give the money something to do. It would be absurd to pay everyone a guaranteed income of $1m a year. Why? Because the system just doesn’t work like that. The economy funds money. Goods and services produced, bought and sold, over and over again, back money. Printing money is only one side of the equation. To control the quantity of money we have to destroy some of it somehow, or, drain out of and pump into the economy somehow, in response to economic activity. There is no exactly correct amount of money we can make available once and for all, then lean back and let the system take care of itself, and not only because people save and hoard. The money creation/destruction process has to stay dynamically responsive to what’s happening out there. So far so obvious.

      Equally obviously, taxation exists whether or not those taxing income and sales perceive taxation as funding, or as deftly controlling the quantity of money. When we tax money out of the economy we have to do so in a certain way, with some degree of progressiveness. Historically the poor and middle classes bear the brunt of the tax burden, because they together represent the highest number of earning people not well represented via lobbying, and on top of that, there’s the fact that, collectively, the pool of earning/spending they represent as available to tax is huge and easy to get at. If the richest 1% own 40-50% of the wealth, how much of that can be taxed? How much of it is income? How many of the super rich are politicians’ friends, or can offer politicians a nice little earner after they quit politics? So regardless of issues around funding, or cycling money in and out of the economy, how to do so will remain problematic while money is a lever to power and influence (and luxury and fun).

      When we tax the population it can’t be either random or uniform. A flat tax, for example, probably hurts the poor more than the rich. But I don’t want to defend one or the other taxation policy here, I want only to point out that the argument about taxation not funding government spending is, practically speaking, only helpful as a thought exercise (unless other elements of how we ‘do’ society are revolutionized). We can’t expect the government, just because they can print money, to pump endless amounts into the economy without taking some of it out again. This “some of it” is the devilish detail. How much do we drain from the economy, from whom, and how? And even though the money drained is not literally used to pay for state services, it may as well be, since what we are free to inject is dependent on what we are free to drain, being systemically constrained by quantity. One relates to the other. Hence ‘funding’ makes sense.

      Government spending is fundamentally different from private sector buying and selling. For example, paying a teacher does not result immediately in increased economic activity. The money goes into the economy via the teacher’s bank account, but the service she provides via the school she works at is free at the point of consumption; that is, it’s a cost because it’s not generating new business ‘out there.’ Ditto firefighters, police, army etc. Therefore, unless this money is drained out again somehow, it’s just inflationary, not because teaching is not valuable, but because of the nature of the flow of monies enabling teaching/firefighting/policing/military via the state and their effect on economic activity. Spending power is increased, but goods and services for sale are not. On the other hand, when we create new money in the private sector to enable the production of new widgets, economic activity goes up. That’s what money is about at core; economic activity. Free-at-point-of-consumption state services are ‘costs,’ systemically speaking. So what do we support ‘out there?’ What do we value? Economically ‘costly’ things like education and policing, or economically ‘productive’ things like cars and DVD players? This is similar to asking, How do we distribute our energies and resources, and to what end? The way we’ve being doing money, economy and state for centuries has held the so-called private sector in opposition to the state. Which is a huge topic that cannot be even remotely well addressed in a blog comment like this one.

      The core phenomena of scarcity, private property, and competition undergird both The Market and The State, and must be addressed before MMT’s observations can be as fruitful as I think they potentially are. While we assign value via money/price to things like cars and DVD players above things like motherhood, education, air, health, etc., we are forced into opposition with our own futures. We are forced by this system to become rapacious consumers to service an economy which must grow perpetually by turning finite ‘idle’ natural resources into goods and services. Until this is fixed at its roots (the three elements I just listed) we will be shifting deck chairs on the Titanic.

      (This comment is way too short, and yet somehow too long. I hope I’ve made at least some sense.)

      • Golem XIV October 13, 2011 at 9:55 am #

        Toby,

        What a great comment. Thank you.

        Not too long. Too short! More please.

        • Toby October 13, 2011 at 11:48 am #

          Wow. Thank you Golem! I’ve always admired your efforts and your way with evocative metaphors. I still remember from some Guardian comment the analogy of bankers greedily carrying their anvils of debt, all roped together, slowly moving across an iced-over lake, cracks tinkling threateningly.

          As to writing more on this topic, I always do at my blog, and in a book I’ve been writing for about 2 years now, but when it comes to commenting on other people’s blogs I’m careful not to outstay my welcome.

          Very broadly I believe humanity is at an enormous watershed which will redefine the wealth/value/money trio, while also tackling the problem of infinite growth. The kind of socio-economic system we need to develop to carry on thriving as one of Earth’s many species will be so different from the current one as to be beyond comprehension to us now. David Graeber talks of a failure of nerve and imagination in the face of obvious bankruptcy and total corruption, but imagining something very new is hard, takes lots of discussion, experimentation, despair, perseverance and time, including ironing out passionate disagreements as the new consensus is established. So it’s not surprising this is taking so much time.

          In my view money is not and cannot be wealth, and waged-labour is just a mechanism for getting spending power to as many people as possible (which is not a comment on work itself). We have to rethink both.

          Nation states are constructed fictions which, more or less, work to defend first and foremost private property and market operations (the price system) as extraction processes of the majority to the minority. Usury is a cornerstone of this process, and yokes us to perpetual growth too. (The Market/State dichotomy is a divide and conquer strategy, as is the bogus Left/Right split.)

          Private property is a convention we’ve inherited from Roman Law, and is but one ‘solution’ to perceived scarcity, i.e. how to distribute scarce stuff to people, including buying and selling. Private property allows us to use things we need, empowers us with ‘exclusive’ access to transport, shelter, warmth, sustenance, etc. But the practice comes, as do all things, at a price. Namely, greed, fear, selfishness, competition. With these qualities operating at the root of everything we do it should be no surprise we are in this mess.

          Scarcity is relative: is there too much or too little sand on the planet? Or oil? Or aluminium? Or soil? It depends on how we organise distribution and use of these things, and whether people can, via private property, make money from owning land under which oil might be found, or metals, etc. If nations/corporations have a vested interest in profiting from burning oil, or mining gold, aluminium, or whatever, they will do such in their own interest and not that of the people or the planet. That’s how the system works, from the bottom to the top. The famous Invisible Hand is supposed to take care of the mess, but obviously cannot. And money is merely a way of tracking all this, a measurement that ‘works’ via the price system (the market) to inform us what is worth what. Only, market-based price information is unreliable and manipulatable (inaccurate). There is too much power to be won be gaming the system, not to mention that environmental costs are not included in price information (externalities). That money is also seen as a store of value, is therefore a commodity to be bought and sold and profited from, only adds more spice to this already deadly mix of value-measure + power-lever. As a comparison, inches can’t be hoarded and cannot be a lever to power. Why should a measure of value do so? Can we design one not to?

          While we compete for access to and control of resources for profit and power, rather than cooperating and husbanding their exploitation as wisely as we are able, the pressure will be to mine as much as possible, consume as much as possible, make things to break as quickly as possible, and via advertising entice people to want another X every 6 months or less. A private property/scarcity/competition-based system can only inspire us to such blind greed. (The Story of Stuff is really good at showing this madness.)

          So the question is, is this the best humanity can come up with? Is this the best way of organising ourselves, policing our supposed greedy and ambitious natures? I think not, and am doing my little bit to argue for a very different socio-economic system. Others are at it too, obviously, yourself included, and hopefully, with a wise mix of competition and cooperation we can hammer out the improvements humanity desperately needs to come up with.

          And as the folks at Occupy Wall Street are putting into practice, it’s up to us. Rebellion, or going it alone into new structures and methodologies (non-violently while that is possible) is inescapable, perhaps even a duty for those who see the problems and have the time to commit in that way.

      • Mike Hall October 13, 2011 at 7:05 pm #

        @ Toby

        I suppose you might expect me to disagree with Golem’s assessment ‘great comment’, and indeed I am. But let me go thru’ it point by point & say why I think it’s rather muddled. Muddled in the sense that you appear not only to be offering your comment as a refutation of Neil Wilson’s point, but also as a general refutation of the basis of MMT, ‘functional finance’ & the positivemoney.org proposal to the ICB. If, in fact the latter is true, as it appears, what you appear to stating, or implying, as their postion, is a simply ludicrous misrepresentation, flat wrong in many respects. I’m afraid it appears you either haven’t read the source literature or have failed to reach even a basic understanding of it. Let me use the shorthand MMTPM to mean both proponents’ position.

        “….profoundly complicated…”

        Suggesting what? Taxation is certainly ‘complicated’ now vis-a-vis all the loopholes & fine print. Could it be that all the contortions needed to disguise a false & extractive paradigm has a lot to do with that? But why would MMTPM be any more complicated & on what basis of knowledge do you make such an assertion, being clearly non-expert? Straw man I think?

        “…unless the economy or economic activity exists to give the money something to do…”

        Can’t really make any sense of this (not any expression I’ve ever seen in economics literature). If the economy or economic activity already exists, then by definition money is active already & needs no more ‘money’ – if you mean gov spending by that. If you mean ‘resources’ or ‘capacity’ MMTPM is crystal clear on this regarding gov spending – only spend when there are idle resources, labour (by definition ‘inactive’) to be purchased, otherwise don’t.

        “It would be absurd to pay everyone a guaranteed income of $1m a year.”

        Are you implying MMTPM is suggesting a gov could? If so, utter misrepresentation. If not, why make such a statement? Do you really think +anyone+ thinks this?? (Recall, you’ve titled your piece @ Neil Wilson – implying you’re addressing him directly – a professional economics practitioner & writer.)

        Your next sentence reads:

        “Why? Because the system just doesn’t work like that.”

        Well, see above. Are you seriously suggesting MMTPM experts don’t know this?????? Frankly, Toby, don’t you think that’s a tad insulting to readers’ intelligence, never mind Neil Wilson’s?

        “There is no exactly correct amount of money we can make available once and for all, then lean back and let the system take care of itself,…”

        Again this not what MMTPM says, at all. So what’s your point?

        “So far so obvious.”

        Indeed.

        “I want only to point out that the argument about taxation not funding government spending is, practically speaking, only helpful as a thought exercise (unless other elements of how we ‘do’ society are revolutionized).”

        Not at all. The UK gov are stating ad nauseam, they can’t spend to ‘stimulate’ or relieve unemplyment, or for any other public purpose +precisely+ and +because+ they claim there is insufficient net +taxation+ funds to do so. Moreover, they are actually +making+ people unemployed & reducing services for exactly the same reason.

        It’s “…only helpful as a thought process…” ….well, if you are stating as fact that UK gov cannot, as a sovereign currency issuer, create new money (& ‘spend’ it – put it in circulation) – something which they have had to do, by contracting this out to private banks, for there to be any of that currency in circulation at all!

        On either count, hardly the trivial issue you dismiss out of hand. Unless, apparently without gaining any deep understanding of matters, you’ve already made up your mind & just wanted to talk about the subsidiary issue (applying to any economic system) of how to structure taxation for various distributional and other purposes – and neglected to make it clear to us that’s what you were doing.

        “And even though the money drained is not literally used to pay for state services…”

        Correct, and then you continue that sentence immediately contradicting yourself….

        “…it may as well be, since what we are free to inject is dependent on what we are free to drain, being systemically constrained by quantity. One relates to the other.

        As in , “…it may as well be…” purely because I’m now going to state, well that it just is. A breathtaking tautlogy if ever there was! And ‘systemically constrained by quantity’ – yes, but only applies under certain conditions, which substantive to the debate. I believe Steve Keen also debunks the ‘Quantity Theory of Money’ – rightly so, there’s virtually no empirical evidence to support it, quite the contrary.

        Next sentence:

        “Hence ‘funding’ makes sense.”

        Eh? See above, there’s no ‘hence’ about it!!

        “Government spending is fundamentally different from private sector buying and selling. For example, paying a teacher does not result immediately in increased economic activity. The money goes into the economy via the teacher’s bank account, but the service she provides via the school she works at is free at the point of consumption; that is, it’s a cost because it’s not generating new business ‘out there.’ ”

        This statement is just so mangled, I’m not sure where to begin…

        When the gov buys the services of the teacher, they are absolutely (under the present system) circulating money in the economy in exactly the same way as if a company paid for, say, the services of an office cleaner. Currently the gov sources the money to pay the teacher by borrowing or taxation derived from the exact same pool of money (the economy) that the company does to pay the cleaner. The public sector is ‘GDP’ just the same as the private sector! What teacher or cleaner actually ‘produce’ is irrelevant to the circulation of money.

        So, no, what you’ve said dioes not describe in any way why ‘gov buying selling’ is any different, ‘fundamentally’ or otherwise.

        “Therefore, unless this money is drained out again somehow, it’s just inflationary, not because teaching is not valuable, but because of the nature of the flow of monies enabling teaching/firefighting/policing/military via the state and their effect on economic activity.”

        I’m afraid this is just a regurgitation of the neoliberal dogma.

        New ‘private’ money works in exactly the same way introduced into the economy on a keyboard, for example, where loan finance is used. Gov is urging business, right now, to borrow money to invest & by extension hire the unemployed. Is this expected to be ‘inflationary’. NO!

        They key determinant (as explicitly recognised by MMTPM) for inflation is whether or not their are idle resources, capacity, unemployed people, available to be purchased. If there are, as in now, in a recession, then purchasing them does +not+ inherently create inflation, but +should+ merely expand (grow) the economy – more goods & services produced. There’s no difference in +this+ (repeat +this+) aspect, whether the ‘new’ money created to do so comes from the private or public sector.

        There is some complexity, devil in the detail, and some uncertainty in what result arises, expansion of ‘goods’/'services’ or ‘prices’, when new money is spent into the economy. But who spends that money is not inherently the issue. But the neoliberal narrative – near any gov spending to public purpose is ‘bad’ – wants you to believe there is & has invested trillions in maintaining such ignorance. (So don’t feel bad, new paradigms, by their very nature are hard!!)

        As regards your last paragraph, yes indeed, the corrupt & falsely described current economic system is just one aspect of an utterly broken society. But it is the subject of a great deal of public focus just now. And I think public awareness of a new possible paradigm is extremely helpful in bringing about interest in the new paradigms we need right across human society.

        MMTPM are two, similar in many respects, ways of changing economics. In their fundamental paradigm changing potential & very credible backing (not me, the many experts) they are surely worth the fullest public debate & with +proper understanding+ of their often hard, counter-intuitive primciples.

        If these are to be discarded, then what else is there at the moment, similarly worthy of consideration?

        Neoliberal economic thinking is a hugely important cornerstone to all you profess to dislike about our society run for the 1%. It sorely needs knocking down. Tinkering with it won’t do. Even a good go with sledge hammer in the 1930s didn’t prevent its return (with a vengeance) from around the 1970s.

        • Toby October 14, 2011 at 7:36 am #

          You have misread what I posted as a refutation of MMT. It was in fact a qualification of certain aspects of what Neil Wilson wrote as it applies to MMT. Hence I find your aggression puzzling. There is something about MMT (and other monetary theories) which does this to people. And as to experts or otherwise, we are all here to debate the important issues, not just the experts, and I can assure you there are many experts in economics who disagree profoundly with the MMT experts, far more deeply than do I. I don’t claim to be an expert, I just put my thoughts out there for comment, to contribute to all our understanding, including mine. And as I stated, the comment was way too short, even as I feared it was too long. It takes books to discuss these matters thoroughly, and no matter how deeply you or I might agree with this or that expert, there will be other experts who disagree just as deeply.

          I’m not going to go through what you wrote point by point here, because in doing so with my comment you’ve taken things out of context, after proceeding from the misreading I mentioned above, a lot of which merely chastises me for not being an expert.

          Instead I’ll try and nail this down a little bit. If government spends money into existence every time time it pays a teacher it is adding to the money supply every time it does so. And this must be the case if taxes are not directly funding government. If gov’t does not have some mechanism for draining some of that money out, such spending would be purely inflationary, because the teacher’s services are free at the point of consumption; that is, the money is not circulating back to government unless taxation occurs. Even though it doesn’t spend the same ‘physical’ (forgetting the electronic nature of modern money for a moment) money it ‘destroys’ or ‘trashes’ via taxation, the overall effect is _similar_ to funding. And even though the government is not like a household in that it can create and destroy fiat money, it is like a household to the degree that it is constrained by inflationary targets and available planetary/national resources.

          This is not a refutation of MMT. I know that. It is an expansion on what Neil Wilson laid out. A qualifier, an important caveat not in his post. It is not neoliberal dogma as you assert. In Warren Mosler’s “Seven Deadly Frauds…” book, this appears:

          “In general, I’d expect taxes to be quite a bit lower than government spending, for reasons already explained and also expanded on later in this book. In fact, a budget deficit of perhaps 5% of our gross domestic product might turn out to be the norm, which in today’s economy is about $750 billion annually.”

          This is what I had in mind when I typed my comment, straight from MMT’s mouth, not neoliberal dogma. In the end it is not money which affords anything, but resources, the health of the environment, human skills and knowledge, and this thinking is deeply in MMT, which is for me MMT’s most attractive element (alongside demystifying money). But this global resource of ecosystems and human ingenuity is the constraint against which money must work. Hence, if money were accurately to reflect global (or national) resources, money would then be a true reflection of those funds generally. Hence any system, whether governmental or private, in being funded by resources as accurately reflected by money, is effectively ‘funded’ by that money by extension.

          And yes, new money is created via keyboard strokes in both commercial and central banks, but the high powered money created by the central bank (or government) can only be removed from the system by government (or people burning money I guess, or burying it in the garden). The credit money created as loans by commercial banks destroys itself automatically, with only the interest earned being moved from reserve account to reserve account as appropriate. Either way, to prevent money supply booming too excessively relative to the real world, money created must be destroyed somehow. In that the money created is distributed throughout the populace in a very unequal manner, for all sorts of reasons, and in that money is power (regardless of how ‘easy’ it is to ‘create’ it), where things get very complicated is when we tax. Whom do we tax, how, and how much? That is difficult whether we are MMT adherents or gold bugs. That’s the complexity I was referring to. Were it easy, we’d have cracked it by now, and problems would be so yesterday.

          I’m not against MMT, but I am against any money system which is addicted to perpetual growth, and in which too much power is concentrated in too few hands. While credit-money creation is attached to compound interest the economy is forced to grow so as to prevent inflation, so that the new money created is echoed or reflected by new goods and services for sale. That more and more goods and services must be manufactured, bought and sold, faster and faster, to keep up with a necessarily growing money supply is a system flaw as far as I’m concerned. But I am not against ‘growth’ per se, nor am I for austerity. I’m against the unwise inflexibility of being addicted to growth. MMT plus a different banking system (plus many other things) is what I’d like to see. But while usury characterizes money creation, we have a problem, and thus far I have not seen proponents of MMT being against usury (they appear to dismiss it with “nets to zero”). To my mind this puts them in the Perpetual Growth camp, hence my reservations and efforts here.

          And please, can’t we discuss these things without the insults and aggression? Believe it or not I’ve spent the last three years reading about nothing but the money system. Does that make me an expert. Of course not. But I’m doing what I can and joining the debate where I hope my efforts will be mutually beneficial.

          • Mike Hall October 14, 2011 at 2:18 pm #

            Toby

            The problem is that your writing shows that you simply don’t understand macro economics very well at all & throw up a great deal of verbiage that misses the point, is obtuse & is likely to confuse. It’s extremely hard to pick out what you are actually saying and what point your making.

            Lets just take another example from what you’ve just written.

            You say:

            “I’m not against MMT, but I am against any money system which is addicted to perpetual growth…”

            That’s pure contradiction. MMT is +not+ a steady state system, so how can you +not+ be against it if you say in the same breath “…I am against any money system which is addicted to perpetual growth” ????

            Also, the use of the word “addicted” itself emotionally loads your statement, yet “…I’m not against MMT…” which earlier, your comments make clear that MMT accepts that modest continuing growth is a feature of the economic system (theirs & in fact all others to date).

            So what do you actually mean?

            You say your comment was not intended as a refutation of MMT (or PM) & yet in it’s substance, as far as one can pick out a clear statement, you frequently criticise it’s basis. Or dismiss it altogether as “….only helpful as a thought process…”

            Further, you say:

            “…and I can assure you there are many experts in economics who disagree profoundly with the MMT experts, far more deeply than do I. ”

            Indeed there are many (supposed) experts who ‘disagree profoundly’. Most of the entire edifice of mainstream macro economists in fact. They’ve done a great job eh?

            But you can ‘assure’ me (& fellow readers). Really? Then post up who you’re talking about & we can see their mettle, how well they did before the crash, how well they are doing now, what body of work they offer toward our paradigm changing, sustainable & socially just future. Links please. (See below my comment about being positive.)

            But let’s talk about something you (& not a few others, generally) have a problem with. Our ‘addiction’ to perpetual growth.

            Sure, money supply is linked to growth in use of resources & labour. But the real problem here is the fact that we’re using resources in an unsustainable way, big time.

            But there’s also another massive problem, that doesn’t seem to affect you personally. Around two thirds of the world’s population lives in abject poverty, barely getting enough food to keep them and their children alive (millions die young).

            There’s also 50 million or so right here in Europe & America living in poverty, no job or slave wages. Many of them die younger than they should.

            You appear to want a ‘steady state’ economy, presumably starting right now. Doubtless trying to substitute unsustainable use of resources for sustainable ones along the way. But what this means is that all our fellow humans (more numerous than us, recall) +either+ pretty much stay as they are +or+ we engage in a massive redistribution of resources. Sure, we could probably ensure people eat, have clean water to drink & achieve a modest improvement in their life expectancy. But what about the rest? The education, modern health care, welfare? All the myriad opportunities for for personal development & fulfilment that we near universally take for granted? Those things take a lot of resources. Like you, I really hope we can shift away from soul diminishing consumerism, but what remains, in terms of use of resources is +not+ trivial. I live on a dole-level income, so don’t ‘consume’ much (nor do I care to – I ‘downsized’ decades ago), but I still consume sh1tloads more than most humans alive today.

            So can we really achieve our sustainable & spiritually far more rewarding future with the minimum of social justice which, I, for one, consider +essential+ for it to be meaningful, or even achievable, with ‘steady state’, zero growth? IMO, not a dog’s chance from where human conciousness or use of resources is now.

            This aspect, I’ve found over the years, among vast numbers of ‘ecologically’ thinking people to be a massive blind spot. I think more younger people are starting to ‘get it’ but there is a vast legacy of this blindness remaining. Been there, done that, got the T-shirt.

            I think it’s program 3 of Adam Curtis’ ‘Century of The Self’ that’s particularly illuminating on the psychology of this – on how so much ‘alternative’ culture was co-opted into the mainstream paradigm, beginning in the 80s. I linked these programs in another post here somewhere. These are a ‘must watch’ – especially if your looking at stuff like ‘Transition Towns’. (I know a lot about this, Hopkins was in Ireland before Totnes,but out of respect for your choices, have thus far refrained from commenting.)

            I’m not against ‘steady state’, just not in the foreseeable future. A future we won’t have if we don’t transform our use of resources to sustainability in any case, regardless of our economic system.

            We’ve never had steady state, many consider it neither desireable nor even possible. I’ve not seen any fully worked out proposals mapping how it could be introduced. You haven’t linked anything either.

            Finally, you quote Warren Mosler on gov spending growth. What Mosler is getting at here, is a recognition that this has +always+ been the case, even whilst we pretend that such spending must be borrowed, debt serviced & paid back (hasn’t ever happened).

            They key with MMT (& PM) is that it blasts away the myth that governments (fiat, sovereign currency issuers etc.) are constrained purely by money. They aren’t, so long as there are idle resources, to be purchased. This opens up a whole new paradigm on what government can do. Moves the ‘politics’ to a whole new discussion on what we, the people, want it to do. Removes governments’ faux maxed ‘credit card’ ‘dismissal’ from the equation. Perhaps we could then get on with the sustainability & social justice transformation rather than the cruelty & waste of unemployment?

            I see a government role as vital in creating the future we want. The private sector won’t (isn’t beyond Greenwash) do it. Who else is there to direct the macro effort? Individuals can do +something+, but no where near enough. This really isn’t a contentious point, but widely reported, MSM & elsewhere.

            Sure, we need governments that actually represent the interests of the 99%. But we need that anyway.

            Finally again, I’m not aware of any insults toward you in my pieces. I believe my comments are about the issues. And both this & ‘aggression’ suggests to me a subtle effort by you to ‘ad hom’.

            If you are going to write comments with such flaws, confusion & contradiction, you can expect to be robustly challenged. I’m challenging your thinking, not you.

            You might also want to consider, as you admit to being non-expert on MMT (or PM), that rather than make negative comments about it, you might just refrain from commenting & let readers go and do their own research. And rather, in a spirit of keeping things positive & exploring potential solutions, confine your comments toward what +you+ think are solutions and argue & provide links for them.

  2. Rob October 12, 2011 at 3:49 pm #

    NB: RNLI (Royal National Lifeboat Institution) is not RNIB (Royal National Institute for the Blind). Although the same principle applies.

  3. Kit Green October 12, 2011 at 3:49 pm #

    RNIB not RNLI.

    Or possibly Lifeboats, not the blind.

    • Golem XIV October 12, 2011 at 5:37 pm #

      Sorry to both of you and to both RNLI and RNIB.

      Thanks for pointing it out. fixed now.

  4. Ian October 12, 2011 at 3:54 pm #

    @Neil Wilson

    What? With all due respect Neil – I didn’t follow most of that post at all.

    If Golem is talking about tax and state provided services – I cannot understand it when you say ” the London facilities are paid for by the state, not the taxpayer”??? In this context what is the difference between the “state” and the “tax payer”?

    It does seem like you might be showing off with “A simple understanding of endogenous money and the nature of a free-floating fiat currency tells you that.” Like – yeh – we all have a “simple” understanding of “endogenous money”. An Oxymoron I suggest.

  5. Pedronicus October 12, 2011 at 4:22 pm #

    I was amazed that the Guardian didn’t allow comments on that story yesterday and the story about how GS avoided paying 10 mill tax after a ‘cock up’.

  6. Skeptic October 12, 2011 at 4:34 pm #

    @Neil Wilson

    I understand that taxes are there to regulate aggregate demand and therefore to control inflation, but if some people/companies are not paying their share of taxes it means that the rest of us must compensate for this by paying more than our share.

    So the aggregate demand suppression is then more effective against the little guy than against the company that makes so much money for shuffling paper around.

  7. bill40 October 12, 2011 at 5:17 pm #

    Golem says;

    “Not, you understand, that I would ever suggest that any law firm or individual laywer would ever be involved with money laundering or with anything illegal at all for that matter.”

    Neither would I, but what we may think quitely may be a different matter. I suspect that if we tackled the tax abuses, hell let’s call it what it is, evasion at Ugland House alone we would raise more than tackling the totality of benefit fraud and incompetence.

    We are being robbed blind and I am pleased that this forum has drwn attention to this problem.

    @ Neil Wilson.

    100% correct on what taxation should before and 100% wrong on the severity of the criminality practised in tax havens.

  8. Charles Wheeler October 12, 2011 at 5:20 pm #

    Nicholas Shaxson’s Treasure Islands does a good job of explaining how the scope and extent of the inappropriately named ‘offshore’ world has skewed the global economy to the detriment of those not granted the privilege, and distorted the operation of world trade (half of which is estimated to pass through tax havens) to the particular detriment of the Third World.

  9. Wirplit October 12, 2011 at 6:01 pm #

    Right on Golem
    Hunt them from under their stones…!

    BTW…a lot more interesting than incomprehensible guff about ‘endogenous money” is some merely hard to fully comprehend fun from Reggie Middleton who has now taken on the role of class warrior in support of the OWS protests from that of giant vampire squid spearer
    http://www.zerohedge.com/contributed/why-occupy-wall-street-when-you-can-control-wall-street

    • Neil October 12, 2011 at 6:33 pm #

      Credit Suisse report on Chinese banks:

      “Wonder why China just bailed out its banks, preemptively, on Monday? Here’s why. In a report issued by Credit Suisse’s Sanjay Jain, the China strategist, who joins such now infamous skeptics as Bank of Countrywide Lynch’s David Cui, has revised his base case Non Performing Loan ratio forecast from 4.5%-5.0% to 8.0%-12.0%: a unprecedented doubling in cumulative losses. Why unprecedented? Because as he explains, this could “would work out to 65–100% of banks’ equity.” Crickets? Yes, Credit Suisse just singlehandedly said the equity value of the entire Chinese banking system is between 66% and 100% overvalued (with a downside case of $0.00). So for those putting two and two together, on one hand we have the four horsemen of the Chinese apocalypse, already presented visually before by Bank of America, consisting of i) a surge in underground lending, ii) a property downturn, iii) bad bank debt and iv) and “hot money” outflows, and on the other we have the vicious loop of what this means in terms of a central planning reaction. Simply said look for China to scramble to undo all the signals that it had been trying to spark while it was fighting with the Fed-inspired inflation bubble. Only problem is that like in the US and Europe, finding the Goldilocks point where all 4 are in equilibrium will be next to impossible, especially if investors in the country’s banks realize the equity they hold is worthless and scramble to get the hell out of Dalian. Then the fears over a parliamentary vote in Slovakia will seem like a pleasant walk in the park.”

      http://www.zerohedge.com/news/credit-suisse-buries-chinas-banks

    • richard in norway October 12, 2011 at 7:45 pm #

      I love reggie

  10. Mike Hall October 12, 2011 at 6:50 pm #

    Neil Wilson,

    thanks very much for your recent posts here & particularly your post above. I think it’s fair to say you would be in the ‘expert’ category of supporters of MMT & ‘functional finance’ economics. Speaking for myself & I would think quite a few others here your input here from an MMT perspective is most welcome.

    So, to expand a little & clarify on a most important perspective of taxation that Neil has raised, I’ll add a few words. I hope Neil will chime in & correct me if I’m not clear (or even wrong!).

    This concept that government spending (given sovereign etc conditions which already apply to UK pound, US dollar etc.) on the one hand & taxation on the other can, and should, be considered separate, & functionally unrelated at ‘source’, is so important to grasp. And this is the truth of the +current+ basic rules of monetary/fiscal operations.

    The notion that UK gov/treasury must first borrow or receive taxes in order to spend is +entirely+ a ‘political’ choice. There is +no+ bucket, mattress or bank account of money that UK gov must examine or ‘check’ before they spend. At all. Period. End of Story.

    Gov spending is about adding money into the economy toward achieving the public purpose.

    Taxation regulates aggregate demand overall & may incorporate within it elements to adjust distribution or sectoral inflation effects where they arise Increasing taxation removes money from the economy..

    The only way they are ‘connected’ is in how they may combine in their effects ‘downstream’ in the economy.

    Understanding this concept unleahes a completely new paradigm in how taxation could be structured.

    In this context, the banksters’ casino has to be removed in any case. The key problem is the creation of a vast, extractive, unproductive ‘financialised sector. And the focus on this should not be diverted or nullified, imo, by the notion that some additional tax compliance or even ‘Tobin’ tax can make their behaviour acceptable or economically desireable. I think we can all see that this narrative is quite favourable toward maintaining the status quo. Yes, in the current paradigm the unfairness of tax evasion is obnoxious, but what we want is a new paradigm, not some faux & highly reversible or loophole ridden tinkering with the present set up, right?

    What matters is real, available resources, now & into the future. Understanding what the real capabilities of both spending & taxation are, opens up a whole new vista of possibilities in tackling the vastly unequal & unsustainable access to resources that wealth buys.

    Which of course is a major reason why the wealthy elites & their useful idiots seek at all costs to maintain the lie that a sovereign currency +issuing+ government’s finances are just like your household or business. They profoundly aren’t.

    • Mike Hall October 12, 2011 at 8:23 pm #

      Whilst focusing on underlying issues I think I should add my appreciation to both the Guardian & Golem here for highlighting the obscene extent that the banksters, corporate mates & colluding politicians are gaming the present system. This deserves full exposure.

      Time we got rid of the entire shower of mainstream ‘authorities’ and replaced them with people who will really represent the ’99%’

      • Golem XIV October 12, 2011 at 8:30 pm #

        Thank you for this gesture Mike.

        I value your knowledge and passion and am glad you add all you do to the blog. That said I still did have to get off my chest what I say in my comment below. If my tone is a bit much here and there I hope you’ll put it down to frustration.

        • Mike Hall October 12, 2011 at 10:52 pm #

          No problem Golem & likewise, well, not so much that I hope that you can ‘bear with me’ as it were, but I note that you already do!

          As you’ve probably realised I wrote my added comment at the same time you were writing your comment below.

          I’m not a great writer, even a good one. I’m already concious that my comments are often long, maybe too long to hold the attention of our likely time constrained more casual readers. I really struggle to try & put my thoughts down in some coherent way.

          I guess what I’m really trying to do here (quite often) is to address the wider more casual readership & encourage them to believe & become curious that there are +real+ alternatives (to use that ever so tired word). Ones that are, potentially, paradigm changing & surprisingly close at hand.

          For me, MMT & functional finance is one such in the economics sphere, really quite remarkable. I’ve not found anything that comes close, but I’m always open to a challenge to that position.

          Although I don’t always mention it (but have sometimes), as in manage to fit it in, positivemoney.org / NEF / Prof Wernere’s proposals, contained in their excellent submission to UK’s ICB, are similarly paradigm changing. They have both, independently, adopted the same key principles and concepts. They and their implications have been completely ignored by Vickers, mainstream economists & the MSM all. To me, that missing public & economics debate, whether either ‘system’ ultimately gains favour or not, is a tragedy.

          I would suggest that either effort surely deserves to be firmly in the ‘could work’ box of options. And perhaps even more importantly both have the potential to get people thinking that there really is a different paradigm possible.

          So do I think you should be writing about them here? No, I don’t. Your blog stands perfectly well as it is, brilliantly exposing & explaining all the sh1t that is the mainstream ‘TINA’ as it inevitably surfaces as the scum will.

          But perhaps you’ll agree there’s scope in the comments section to address in a somewhat parallel fashion how we might turn things around? It’s hard enough to expose to a wider audience all the current fraudulent thinking. Even harder for real, (seemingly?) radical solutions to get a little traction in the public debate. But this is needed sometime, & soon, I’m sure you’d agree.

          Of course, to yourself & regular readers I’m going to sound a bit repetitive, perhaps to the point of irritation, but I think it likely that there’ll be a lot of readers who dip in from time to time & will not see things that way? Or new readers that won’t plow thru’ all the archives to even notice my repetition?

          Am I wrong to think that?

          • Golem XIV October 12, 2011 at 11:03 pm #

            Mike,

            Not wrong at all in my opinion. Amd I don’t think there is anything wrong with your writing.

            I think what you are trying to get peoppe to contemplate is important. I just think you sometimes might put people off what you are saying by the slightly evangelical tone you sometimes use.

            That’s all. I would regret if if you stopped writing and explaining.

          • Mike Hall October 12, 2011 at 11:23 pm #

            Fair point, I’ll try to do better!

            (I’m getting a real sense btw wider public understanding is building, very encouraging eh? I think an upcoming Greek default & massive bailing out of EU banks is going to outrage a lot of people. And even more will be looking for ‘sense’ in an otherwise insane world.)

    • Roger Lewis October 13, 2011 at 7:27 am #

      Mike, If I could stand up and applaud I would , Hell I have!
      I hope that Neil will join in the socratic spirit of enquiry that this Blog engenders.
      For me I must admit his is a novel point.

  11. richard in norway October 12, 2011 at 7:51 pm #

    Golem

    I’m surprised that you didn’t talk about the scam that Barclays was pulling that I heard about on R4 maybe last year. I didn’t understand it totally but it involved sending money back and forth between London and new York and claiming tax credits from both ends. Maybe there is someone who knows what I’m talking about and has a link

    • Golem XIV October 12, 2011 at 8:31 pm #

      I can’t remember the story you are talking about. I must have missed it. Sorry. Anyone else?

      • richard in norway October 12, 2011 at 9:12 pm #

        It was a guy who worked for the tax office who was being interviewed I think. It sounded like he was saying that it was perfectly legal and the only way to get them to stop was to go public. But its so long ago that I can’t remember it properly and like I said I didn’t understand it compleatly, it was quite technical. I listen to a lot of radio mostly R5 and R4 or their norweigen equivalents, but have trouble remembering everything I hear or when. Sorry I just thought someone else would have heard about it

  12. Golem XIV October 12, 2011 at 8:20 pm #

    Mike and Neil,

    I understand, really I do.I understood from neil’s post that he was taking an MMT view and that from that view the connection between what a government can chose to spend is not directly connected to what it can raise from tax.

    Nevertheless tax evasion is not good and is something a little more noxious than a mere nuisance. It allows those who can use the law and the tax system to avoid taxes in order to accumulate vast wealth and then use that wealth to buy power and yet more wealth.

    It is not just a matter of accounting or where money circulates when. It has real consequences for the lives of millions.

    What I write about in this piece and in many others is how this system is set up and how our governments act within it. They may not need to borrow but they do. The bond market might not need to make such a fuss about the borrowing of a sovereign fiat currency issuing governments but they do.

    And so long as they governments act within and according to, and enforce upon is measure dictated by , the old paradigm then it is worth understanding it.

    That doesn’t preclude coming to understand another paradigm. But to keep being told that this or that is missing the point is starting to get on my nerves.

    MMT is a good theory. I am coming to understand it. And yes I think we do need a new paradigm. BUT to dismiss an idea like the Tobin tax is, I think, politically unwise.

    We are where we are. The broader public believes what it believes and will move only slowly. We are not going to get society, or even a sizable minority of it, to jump to MMT in one go.

    Revolution is the kicking in of a rotten door. So we have to prove over and over how rotten this door is. Not just show the theorertical short comings of their paradigm or the strength of another one.

    It seems to me that we would do well to advocate things that will do something to reign in the rampant and unbridled power of the Financial class and their system. Not only to begin to reign them in but also give people conrete hope that they can do something.

    I understand such measures will be cirumvented. That doesn’t mean they’re useless as a cause.

    I suppose what I am uncomfortable with most of all is the tone of some of your (Mike) comments. I do realize they are meant with a genuine passion and sincerity. But in their tone they remind me of some of what I used to read in the left wing debates.

    Someone would suggest some socialist-type measure to improve the lot of the poorest – a child benefit let’s say – only to have a purist pop up and tell us we were missing the point. That what was being discussed was irrrelevant because it ignored the fundamental conflicts withint the Capitalist class system and worse, that by talking about such measures ‘within’ the present paradigm, we would only serve to prop it up. What we needed to do was to study the true theory and all would be clear and perfect.

    And once people appreciated the Marxist theory we wouild make the leap to the perfect system and all the problems we were worrying about would disappear.

    Now I know I am exagerating here. And I know that neither Mike nor Neil is of that ilk. But perhaps you can see how sometimes your tone – we’re just talking tone here – might grate a little and feel a little intollerant, quick to dismiss and fundamentalist at times.

    • MrShigemitsu October 12, 2011 at 8:42 pm #

      I wonder if a government, if it truly wished to do so, might actually find it “easier” to create its own money at its own central bank, than struggle to reform an entire worldwide financial system.

      In the end, perhaps it may simply have no choice?

      • Golem XIV October 12, 2011 at 9:19 pm #

        One of the few countries that did print their own currency and did so without permission or recourse to the BIS or anyone else over the last few decades and did it successfully – in the sense that they financed many huge projects on their own, without accumulating debt, without borrowing and without therefore pledging half the benefits to Western Banks was …Libya.

        • Wirplit October 12, 2011 at 10:18 pm #

          Libya did this of course by selling oil and because they felt no particular need to dispense the money to the populace they could build up very large reserves and then could then spend it ( or waste it) on various vast projects subsequently. Saudi Arabia at least up to the 90′s did the same. They too had no need of bank borrowing… the surplus of cash ( in foreign reserves) was so huge and the dispensing of it under control of very few was to a very small population. On top of which direct forward barter deals for the oil were also common.

          Its like someone winning the lottery …he doesn’t need to get a mortgage for the new mansion…

          ps I know you didn’t mean this, but actually De la Rue printed Libya’s money.

    • Roger Lewis October 13, 2011 at 7:32 am #

      A link to MMT for anyone that has met with another famous Golem Learning curve ( Is it only me?)
      http://pragcap.com/resources/understanding-modern-monetary-system

  13. MickC October 12, 2011 at 8:33 pm #

    And the Guardian mentioned that it also uses “tax efficient measures”? Thought not.

  14. Neil October 12, 2011 at 9:53 pm #

    ZeroHedge guest post on Chinese bubble, with charts and neat house-of-cards visuals:

    http://www.zerohedge.com/news/guest-post-china-continued-boom-or-bursting-bubble .

  15. Phil October 12, 2011 at 10:12 pm #

    Thought I’d repost my comment from the previous blog post – only because of the info at the end. cheers

    “I read a comment a few days ago which noted that a member of the public had asked on BBC Question Time if £75bn of QE was going to be a good thing given that it was likely to end up on bank balance sheets. The poster obviously saw this as a positive development because bit by bit the receievd wisdom is starting to be challenged. S/he is right. I’m happy to say that I was in the Question Time audience last week and I am pleased to report that it wasn’t only that particular member of the public who was expressing distrust of the banks – there were many murmours of agreement in the audience and a few of us did our best to shout our views in the hope they would be picked up by the microphones. I thought Billy Bragg did very well in pointing out that the current paradigm is broken and that the latest QE was throwing good money after bad. Baroness Warzi then had the front to tell him he was spreading myths that this was ‘another bank bailout’! Check out her lovely levers explanation of government fiscal policy…

    http://www.bbc.co.uk/iplayer/episode/b015r14c/Question_Time_06_10_2011/

    Elsewhere I managed to get the following letter published in the Independent and Metro newspapers:

    “The amount of invective being heaped on European countries in debt is worrying. It is true that the euro project was flawed from the start but the root of the crisis lies in America. US banks created the debt time-bombs, the securities and derivatives sold across Europe.

    In 2008, when banks began to implode under their own debts, we the public bailed them out. In the US, Britain and Europe, governments of every stripe had to borrow money to bail them out.

    Now, owing to the recession, it is harder to service those borrowings and the duplicitous credit-rating agencies castigate our governments for doing what was demanded of them by the banks in 2008. (It should also be remembered that there are major legal moves being made against the banks claiming massive fraud in selling investments they knew to be worthless).

    Blaming this country or that or castigating the EU is utterly wrong-headed and dangerous. This remains the crisis of fraudulent private banking debts being taken on to the public books.”

    http://www.independent.co.uk/opinion/letters/letters-no-one-voted-for-the-nhs-to-be-privatised-2368561.html

    I must say I would not have been able to write that only a few months ago and it was largely born out of a very neat summary written by Charles Wheeler on here last week. So many thanks to him and Golem.

    Thus… we can and we must do our best to get our view into the media. Only today I heard UKIP MEP Nigel Farage telliing Russia Today that the Euro bailout for Greece will not go to Athens but to the French and German banks who lent them the money. Given that Golem has had comments from UKIP members on here I think he can pat himself on the back. And didn’t Michael Portillo tell Andrew Neil the same thing on last week’s Politics Show?

    Even our dimwitted media can understand this – how long can they keep reporting the same story over and over without getting bored or asking questions themselves? Matthew Wright on the awful Wright Stuff programme was full of support this morning for the upcoming protest in the City of London. Sadly his ignorant viewers were not. Time to change that me thinks.

    Having originally proposed a greater presence on Facebook I wonder if we might have a concerted letter writing campaign? Many of the posters on here write on the comments sections of the broadsheets – why not push the message to their actual pages?

    When I write a letter I bcc it to the following:

    Daily Telegraph: dtletters@telegraph.co.uk

    Sunday Telegraph: stletters@telegraph.co.uk

    The Times: letters@thetimes.co.uk

    The Sunday Times: letters@sunday-times.co.uk
    (for publication only; please include postal address and daytime telephone number)

    The Independent and Independent on Sunday: letters@independent.co.uk

    The Guardian: letters@guardian.co.uk

    The Observer: letters@observer.co.uk

    The Daily Mail: letters@dailymail.co.uk

    The Mail on Sunday: letters@mailonsunday.co.uk

    The Daily Express and The Sunday Express: expressletters@express.co.uk

    The Mirror and The Sunday Mirror: mailbox@mirror.co.uk

    I think Mike Hall, Charles Wheeler, Bill, Princesschipchops, Neil, the Dork of Cork and all the other fantastic commentators here could acheive a lot.

    Any thoughts?”

    • Neil October 13, 2011 at 12:03 am #

      Further to Phil’s thoughts on spreading the message(s), here are some further suggestions:

      1. Assemble a few killer statistics (eg levels of government/corporate/household debt relative to GDP, main UK bank “assets” relative to UK GDP, world derivatives market relative to world GDP) etc. for people to put in a “signature” at the bottom of each email they send, together with a link to the blog. If anyone posts anywhere else on the issues, a link to the blog each time would also help.

      2. A brief analysis/list of points that would fit on an A4 or A5 sized sheet of paper and could be easily reproduced, used to give people you’re trying to explain the situation to, or as a poster for people to put in their windows etc. (again with the address of the blog).

      3. A template email drawing on 1 and 2 for people to send to their MPs etc via http://www.theyworkforyou.com/ .

      • Roger Lewis October 13, 2011 at 8:06 am #

        I’d be very happy to do this, I have links in my gravatar to various monetary reform sites and I have written a few times to my nearest and dearest asking for them to join me in discussing and trying to understand the issues. I regularly Tweet and link back here in a few places I tend to get involved in discussions.

    • bill40 October 13, 2011 at 1:15 pm #

      A general warning to those that would send out the same letter to multiple newspapers. The T & C’s generally state that letters must be original so there is very little chance of one letter being published multiple times especially if you bcc it.

  16. Pirate Jenny October 12, 2011 at 10:16 pm #

    Hi Golem,
    Have you seen this, it chimes in with what you are saying.

    From Elizabeth Warren

    http://www.youtube.com/watch?v=htX2usfqMEs

    • richard in norway October 13, 2011 at 12:52 am #

      Nice

    • Dave October 13, 2011 at 12:02 pm #

      Good short link !

  17. James October 12, 2011 at 10:19 pm #

    @Neil perhaps you could give a more plain English explanation of what you mean? I cant agree that tax dodges like those mentioned are fair in any way. Only the very very rich can utilise them, whilst the poorest in society have no option at all, other than to pay the legal rate. Since VAT is such a regressive tax they usually pay the highest proportionate rate. Along with paying more for credit (which they are more likely to need) and more for domestic bills etc.

    I agree that a land value tax would be harder to avoid, but from past experience I’d guess if there’s even the smallest loophole it would be found and exploited.

    • Mike Hall October 12, 2011 at 11:08 pm #

      What I think Neil is getting at is that once the true function of taxation is realised, then the entire tax code with more loopholes for the rich than a mountain of swiss cheese can be ripped up. We can then start with a clean sheet & really ensure that excessive accumulated wealth has only fair access to real resources & the public purpose of the 99% properly regarded.

      If that helps?

  18. Mike Hall October 12, 2011 at 10:58 pm #

    Link with some interest for Ireland, but also concerning the eurozone crisis.

    David McWilliams in the otherwise unremarkable (Irish) Independent.

    Potemkin Villages & The Troika

    “…the game is up. Let me tell you a dirty little secret: the Troika is redundant. Yes, redundant. The Irish IMF/EU deal is history. No matter what we do, events are overtaking us. The IMF/EU deal for Ireland will be torn up in the next three weeks and replaced with something quite, quite different.

    The Troika has failed because the main aim of the Troika was not to fix Ireland but to ring-fence Ireland. We were/are a pawn in a much bigger game and that game is saving the euro. To save the euro, the Troika had to do two things. The first was to indicate that Ireland (and Greece and Portugal) was uniquely delinquent and could therefore be treated in isolation.”

    http://www.independent.ie/opinion/columnists/david-mcwilliams/david-mcwilliams-troikas-dirty-little-secret-is-theyve-failed-utterly-2902831.html

  19. James October 13, 2011 at 12:00 am #

    I think the game that’s being played out here would do professor Moriarty proud. Millions of innocent victims losing jobs, pay, pensions and savings. All so that a few psychotically greedy men can buy bigger yachts.

  20. Syzygy October 13, 2011 at 1:18 am #

    I remember Richard in Norway’s banking device. I think it was identified in the Guardian or Observer several years ago. It described Bob Diamond’s huge department (I believe 50% of the staff) which was entirely devoted to running such subsideries. That was the reason for my surprise at Mr Diamond’s lack of knowledge when questioned by Chukka Umna in the Parliamentary Select Committee.

    I think it involved a bank in New York and Barclays colluding to swop monies and then re-import back in to the UK … resulting in both reducing their respective tax bills. I cannot remember the details but I got the impression that it had parallels with the ‘carousel’ VAT schemes of exporting CDs and books to the Jersey Islands.. and then re-importing them.

  21. Syzygy October 13, 2011 at 1:42 am #

    It isn’t just the UK which loses the revenue by the use of tax havens (18+ billion pa), there is also a pretty devastating effect on the populations of the tax havens. I think the government refused to underwrite the borrowing of the Cayman Island government so that they could pay their public servants but I know that the coalition have underwritten others. Effectively all the tax havens for which the British government takes responsibilty are unable to pay for their public services. Richard Murphy’s blog http://www.taxresearch.org.uk/Blog/ has lots of details.

  22. Roger Lewis October 13, 2011 at 8:11 am #

    Fantastic Blog two hours later time to do what I was going to do this morning.
    David this is a great blog thanks again.

    • Golem XIV October 13, 2011 at 9:09 am #

      Roger,

      Thank you. The pleasure is mine. I get back far more than I put in just reading and trying to keep up with all the comments that others leave.

  23. Patrick Donnelly October 13, 2011 at 10:10 am #

    The game being played out here, is billionaires trying to stay that way! They are the ones who stand to lose the most in this game, as some are out of the last loop. There will be few winners and these people, technically human, are stuck in an Alice in looking glass world!

    Have some sympathy!

    The point about land tax is an excellent one! But for that reason, it will not be adopted nor any other unavoidable tax! Good to see some research being done. Revenue organizations around the world cannot do it …… apparently!

  24. Patrick Donnelly October 13, 2011 at 10:11 am #

    What about the two that do not deal in tax avoidance havens? Should their board not be sacked?

  25. Neil October 13, 2011 at 11:20 am #

    Someone mentioned credit unions as an alternative to banks. Here’s the relevant association: http://www.abcul.org/home .

    I havn’t got one near me that I can join, but it might be worth thinking about starting one up locally, perhaps via your local Green Party or Transition Network (http://www.transitionnetwork.org/ ).

  26. Wirplit October 13, 2011 at 11:22 am #

    I am glad Golem you made your fairly lengthy comment about the MMT posters. I have nothing against the theory and have its true only a sketchy understanding of it anyhow as I am sure they would inform me pretty quickly … but its dismaying to see right at the head of the column of posts the one by Neil Wilson not because it is not true but because it has all the faults of being elliptical, highly particular and frankly off putting to the kind of eager viewer you have increasingly attracted to your Posts.

    I am with those who believe in getting messages across and not necessarily even in having a clear corrective except on the broadest lines. This is the general media criticism made against the OWS protesters. They are complaining about too many disparate things, are unfocused etc etc. Revolutions in consciousness are like that. The whole system is wrong but which bits make it strikingly obvious to the ordinary person?

    I think tax avoidance, evasion and downright criminality is a powerful place to start. If top banks and top companies are involved in this then ergo something is really wrong and so the questioning continues.

    Its easy to blind with science.. its what the Fog and Mirrors brigade at the levers of power are doing all the time. What has been refreshing about this blog is that it is based on a kind of rational outrage. Rational because it wants to understand, outraged because when it does… it sees how shocking it is.
    Golem is blessed with the ability to make an area of study…Banks,Capitalism, finance, Sovereign debt, CDO’s etc etc comprehensible that many find their eyes glaze over just to mention. More than that his passion is galvanizing to make one learn more.

    Lose that and you are talking to a tiny minority. Its because it is how it is that I have recommended this site to just about everyone I meet from every friend I have to the guy I bought a car from who happened to work as a lawyer for Santander.

    Theft and Fraud got ordinary people interested and then furious at parliamentary excesses …..and I don’t doubt Theft, Fraud and Tax Evasion will get ordinary people interested and furious at the financial excesses too.

    But its a process and often a pretty tough one to go on to the next stage of thinking and hoping to dismantle an entire system.
    I still think that as other posters have indicated we are at the lifting up the stones point still. Keeping things simple even when they are not and keeping them explanatory is key.

    Anyhow to this end I link to this. I was taken to the Degas exhibition at the Royal Academy and lo and behold who was the big sponser -NY Mellon so interesting to know what the art loving bankers are up to…http://articles.businessinsider.com/2011-10-07/wall_street/30253397_1_trial-dates-bny-mellon-bank

    • Mike Hall October 13, 2011 at 8:27 pm #

      I think the real message we need to take on board is that tax ‘cheating’ & the need for a radically different economic system are both equally & extremely important.

      I realised shortly after posting that I’d neglected this point & added my comment below it to correct that soon after. My error, I’m not perfect, far from it.

      But I do have some concerns that the tax issue is one that will readily grab public attention & divert attention from the other vital – even essential – issues. The economic system being only one. And we need, ideally, near simultaneous change in all.

      I would expect the (faux) ‘left’/'left centre’, particularly as gov opposition to jump on this tax issue & try to paint themselves (again) as having the interests of the 99% at heart. Doubtless the media will join in further feed the lie that the current political system will do anything of significance on this tax issue or anything much else.

      Would you prefer that there is no commentary here from an MMT / postivemoney.org perspective ?

      As far as I can tell, & I’m +very+ open to being corrected/debated (but see below), there are no other credible options for radical change of the economic system, even as a basic hypothesis, let alone ‘on the table’.

      It’s a tricky area, but it seems likely that many people, probably most will really struggle to grasp the economics arguments at play. At some point, if we get the opportunity of choosing, many of us will have to place some trust that experts are correct in their assertions that radical change is possible & practical.

      Perhaps it’s going to come down to ‘where’ we believe advocates ‘are coming from’. What kind of society they envision?

      For myself, I jumped off the corporate ‘pole’ 30 years ago. Since then I’ve been involved in all kinds of things aiming for a radically better, more caring & sustainable society. Working in renewable energy as an engineer. Helping found a worker co-operative & later some years as a co-operative development worker assisting all kinds of co-operative & community ventures. The number of voluntary, NGO and broadly ‘green’ or ‘social justice organisations I’ve been involved with over the years are too numerous to list. Only one ‘political’ entity – the Greens – from which I resigned in disgust over their economics policies.

      Whilst I’ve only been seriously digging into economics (systems) for 5 or 6 years (very intensively last 12 months), I feel I’ve a pretty good ‘lay’ understanding.

      Nontheless, I look damned hard at the people behind what I get behind, what kind of broader vision, concers do they have?. I’m picky.

      There is no-one, expert or prominent supporter behind, MMT or positivemoney I have the slightest concerns about. Many, if not all, have eschewed potentially very lucrative careers to persue a vision they can beleive in (& one I share).

      So, whilst expressing a little irritation is in vogue today, I’ll express mine.

      Blatently illinformed, lengthy, often admitted (very) non expert (or barely read the source material), or even one liner ‘critiques’ pretending knowledge that clearly isn’t present, is not helping. Merely confusing the issues and wasting time and energy. Economics is a hard subject. Most of the mainstream ‘proffessionals’ are lacking (but do know how to engage in rational reasoned debate, even if they choose not to). The public at large are woefully ignorant. Sorry if that’s harsh, but it’s true. That we are where we are is proof.

      So let’s strive for a better quality of debate on the macro economics. If some studying of source material hasn’t been done, statements from it (or links) clearly made, then it’s probably ‘opinion’. So make it a query, a question, an admission of low understanding. (Sure, I’ve been a little strident myself – I’ll try to do better.)

      Ok, feel better now, irritation over :)

  27. andrew October 13, 2011 at 11:51 am #

    Has anyone ever asked a UK government spokesperson to justify the part-state owned RBS and Lloyds TSB having so many subsidiaries in tax havens? ( see guardian article).

    I would be interested to hear the governments justification for avoiding paying tax to itself.

    • Neil October 13, 2011 at 12:07 pm #

      Andrew (and everyone else), why not write to the newspapers and/or your MP (http://www.theyworkforyou.com/ ) about this?

    • Dave October 13, 2011 at 12:34 pm #

      andrew 11.51 ” I would be interested to hear the governments justification for avoiding paying tax to itself.”

      Hehe. Nice one .

      The dumbass answer is if you stop some banks playing that game , and all the other crazy stuff like higher-order derivatives which show paper-profits, they would be even less ‘profitable’ and ‘competitive’ and the stockmarket price would fall even more …

      The other answer is that the government hasn’t got a clue ! ( expletives deleted)

      Good vid upstream from The Pirate —

      http://www.youtube.com/watch?v=htX2usfqMEs

  28. bill40 October 13, 2011 at 12:31 pm #

    I look at this blog and what it is trying to achieve as womens names and choices you make. (Apologies for the sexism but it’s womens names). First you meet TINA, she is MSM because she is the drab girl next door and convenient to believe in. So you marry her because There Is No Alternative.

    Unfortunately, a few years later the lovely seductress TIAAA arrives in town. Suddenly you are smitten and realise at last that There Is Always An Alternative. The harder you look the more there are and that you never had to make your small town, small minded choices, they were thrust upon you.

    Now in my case I married Tiaaa but found out she has a middle name, TINPA. As proud as I was to marry Tiaaa her other name reminded me that, There Is No Perfect Alternative.

    What holds the majority on here together is that we understand this, no-one has a perfect solution but, by Christ, we can do better than the current mess. The message is getting accross, I notice especially in the Telegraph people demanding changes without realising what they are asking for.

    Typically they support the system and demand household economics and slashing the public sector. It is the means to achieve this that makes me laugh because they then go onto totally contradict themselves and start demanding things like positive money, MMT FGF without realising what they actaully mean. I and a poster called Sweetness_Light take great delight in pointing out what they are calling for and where to find out more.

    How many will change their minds and abandon dearly held beliefes is a moot question blogs like this and our message cause enough people cognitive dissonance to seek alternatives.

    Can we change the system before what I believe will be a catostrophic violent crash of the entire system? As Obama used to say “Yes We Can”

    • Toby October 13, 2011 at 1:29 pm #

      Cool post, Bill40.

      And I agree that we can.

      But I’m not at all sure we’re justified in believing this.

  29. bill40 October 13, 2011 at 1:44 pm #

    Off Topic, to Neil and other posters on China. This was my response to an article on PragCap.

    I am sorry but China is just too big to generalise like this. I live in Nanning a prosperous city with a housing boom but nothing uncontrollable. Beijing and Shanghai may as well be other countries.

    There are some ommissions in this piece that must be recognised. The power of the CCP to control and confiscate money from whoever they like and the ongoing war against Hong Kong and shadow banks.

    Hong Kong can be taken back to one country, one system before you can blink. The CCP is not about to cede more power there. Rich people and their wealth can easily be “disappeared”.

    I do not approve of any of this but any imminent risk of collapse is wishful thinking by western powers. China trades with ASEAN and BRIC countries and still has a vast undeveloped internal market to tap into. It also has plans for a new reserve currency to challenge the dollar.

    I keep telling myself everyday, ” things work very differently here”. It’s something an outspoken chap like me does well to remember. So should a lot of commentators.

    Full article here, that falls into so many misconceptions and western assumptions. http://pragcap.com/china-boom-or-bust/comment-page-1#comment-81245

    • StevieFinn October 13, 2011 at 2:27 pm #

      I know what you mean about size, I spent a weekend just outside Huizhou about 8 yrs ago. I had never heard of it prior to my brief visit, massive place, the population probably bigger than the whole population of Ireland. I wish I had taken more notice, but I was jet & train lagged, spent most of the time stuck in a giant ant hill of a factory, hated the karaoke, the food & most of all, my fellow traveller.

  30. Neil October 13, 2011 at 1:49 pm #

    Telegraph reports:

    “ratings agency Fitch has downgraded state-backed banks RBS and Lloyds Banking Group. It also put Barclays on negative watch. HSBC escaped without a mention.

    In a statement, Fitch said:

    “The [downgrade] reflects Fitch’s view that support dynamics are changing in the UK. The banking system is not only large relative to the UK economy, but there is also more advanced political will to reduce the implicit support for the country’s banks, building on The Banking Act 2009 and, more recently the various policy recommendations of the Independent Commission on Banking.”

  31. Nell October 13, 2011 at 4:10 pm #

    For details on Barclays tax credit scam – I found the following article.
    http://www.propublica.org/article/barclays-deals-tax-credits-irs-us-banks-at-odds/single#republish

    • Neil October 13, 2011 at 5:04 pm #

      (Not to be confused with Nell…)

      Credit Suisse Buries European Banks, Sees Deutsche Bank And 65 Other Bank Failing Latest Stress Test, €400 Billion Capital Shortfall

      “the overall European banking sector is facing a €400bn capital shortfall which compares to a current market cap of €541bn”

      http://www.zerohedge.com/news/credit-suisse-buries-europeam-banks-sees-deutsche-bank-and-65-other-bank-failing-latest-stress-

      RBS tops the list, but no sign of UBS or Credit Suisse itself…

      Today, Barclays was the biggest faller, down 7.38pc to 173.2p, while RBS fell 6.39pc to 24.16p and Lloyds dipped 5.5pc to 34.2p.

      Slovakia’s voted Yes btw.

      • Neil October 13, 2011 at 5:25 pm #

        And Italian bank Unicredit was down 12% at 0.9265 euros, after dealing in its shares was suspended again. Intesa SanPaolo was down a mere 8% at 1.284.

      • StevieFinn October 13, 2011 at 5:46 pm #

        Re:- Failure of stress tests. I am assuming these tests have been done using mark to model & how tough are these new tests anyway ?, Dexia was doing just fine according to the last round of EBA tests.

        I wish I had been able to invest a few quid in bullshit a few years ago.

    • richard in norway October 13, 2011 at 5:58 pm #

      Thanks for tracking that down, I tried to find it myself but their were so many hits for Barclays and tax evasion etc that I gave up

      • Neil October 13, 2011 at 6:44 pm #

        Telegraph:

        “A very interesting report has been released by Markit today, which claims that Q3 will be “remembered in the credit markets as one of the worst in recent memory”.

        In a list of the top 10 “sovereign underperformers”, which is [sic - shows Greece?] unsurprisingly in the lead, Denmark sits in second place. The CDS on five year bonds rose 102 basis points over the last quarter, a 232pc climb.

        Quote Denmark is not a eurozone member, so is not directly exposed to the problems in the periphery. But its banks are going through a crisis that is dragging the rest of the economy down. About 75 regional lenders need to be either wound down or bought, according to some estimates. Funding is hard to come by and the subsequent deleveraging is choking growth and impinging on the country’s credit standing.”

        • Neil October 13, 2011 at 10:40 pm #

          http://www.zerohedge.com/news/fitch-downgrades-ubs-many-others-puts-morgan-stanley-goldman-downgrade-review

          “Fitch had to wait until just after the market close to release its latest market surprise which consisted of a “watch negative” announcement on the following banks Barclays, BNP Paribas, Credit Suisse, Deutsche Bank, Goldman, Morgan Stanley; others it just slashed some by multiple notches, among which: Landesbank Berlin IDR downgraded to A+ from AA-; Lloyds Banking Group IDR downgraded to A from AA-; RBS IDR downgraded to A from AA-; and most importantly UBS IDR downgraded to A from A+.”

          While according to Avaaz, “tomorrow at 7 am, the New York City police plan to evict the Occupy Wall Street protesters.”

  32. Charles Wheeler October 13, 2011 at 10:25 pm #

    There does seem to be some kind of consensus emerging that the prime cause of he crisis is 40 years of growing inequality – and not just from the left.

    Raghuram’s Faultlines has explored this angle, Roubini covers similar ground (http://goo.gl/2auvH), as does a recent post on LibCon (http://goo.gl/pNmqx), and this longer-term article: http://goo.gl/Ux5xl – which is well worth a read.

    The staggering rise in inequality has been masked by debt creation – which in the long-term simply exacerbates the problem as interest returns to the rentier class. As Roubini comments, this was entirely predictable.
    And yet… the remedy so far is to cut wages on the low paid, abolish disability benefits, slash spending on health and education, cut pensions and wipe out large parts of the public sector in a doomed attempt to save the banks and keep the bonuses flowing in an overheated finance sector.

    • keekster October 14, 2011 at 11:18 am #

      This is a fundamental point. What we have is a crisis as a result of a lack of demand. Its a simple fact that if a minority become more and more wealthy then the rest have to get by on less. A classic crisis of capitalism. This has been obscured by the creation of debt, by the minority, to make up for falling incomes. However, we now have reached the point of peak debt. Everyone hates to mention Marx, but he predited this approx 150 years ago. Although redistribution would help resolve this, and debt destruction, the endless economic growth model is beginning to test the planets limits, and so a return to normal is simply not credible. For example, the worlds population is set to double in the next 40 years, but will the food supply? I’m not convinced. A steady state economy and a banking/economic system that can cope will ultimnately be required.

  33. spc October 13, 2011 at 10:25 pm #

    Ubuntu font – good choice!

  34. richard in norway October 13, 2011 at 11:27 pm #

    i saw this and thought i should share

    Tories – fat-cat bakers responsible for crisis

    Posted by Tom Pride in cattiness

    In an amazing turnaround, the Tories agreed today that it was greedy bakers who were responsible for the biggest crisis facing the country since the great depression.

    Andrew Lansley, the Conservative Party spokesman on the baking sector, promised the government was aiming to cut 5 billion calories a day if it is to reduce the country’s addiction to baking and keep the nation fit and healthy. As part of this government initiative, Lansley and the chief medical officer, Sally Davies, have issued a call to action, urging bakers to start acting responsibly:

    “The biggest challenge facing us today, apart from the motorway speed limit, is the crisis in the baking sector and we accept that this was caused by the actions of a few greedy, over-indulgent and irresponsible fat-cat bakers.”

    In another development which shows how seriously the coaltion government is treating the crisis, Nick Clegg the Liberal Democrat leader and Deputy Prime Minister launched his own attack on the baking sector:

    “This crisis is a reminder of how reckless and greedy the global baking industry has become”

    Labour said in response to the government initiative that it welcomed the crackdown on irresponsible baking but that the real cause of the crisis was:

    “too many government fingers in too many pies.”

    A government spokesperson denied this, saying:

    “Eric Pickles has nothing to do with it.

    site is here http://tompride.wordpress.com/

  35. Wirplit October 14, 2011 at 1:38 am #

    A lot is going on as the cops have tried to drive out the protesters- a good piece on Occupy Wall St in NY Times
    http://opinionator.blogs.nytimes.com/2011/10/13/occupy-wall-streets-political-disobedience/?hp

  36. hackneyoil October 14, 2011 at 12:27 pm #

    This is quite off topic, but can anyone tell me more about Eurogedfor? Rumours are that this Euro riot police force are now operating in Greece:

    http://www.defencenet.gr/defence/index.php?option=com_content&task=view&id=25504&Itemid=139

    http://hellasfrappe.blogspot.com/2011/10/militarised-eurogedfor-rumoured-to-be.html#axzz1ako6j1a9

    Apologies if I hijacked the thread. I’ve been following this blog for a while and thought it the best place to get sensible answers.

    PS: Thanks for a great blog David. It’s one of the first places I check every day for a bit of sane commentary on the debt crisis.

    • Golem XIV October 14, 2011 at 12:56 pm #

      hackneoil,

      I conatcted a friend in Athems who says it is true.

      I am also contacting the Gendamerie direct. They are based in Italy. So far their email contact says their server is too busy to actually take my email. So no contact vie email. And the switchboard does not connect me to the press office either. It simply re-routes the call back to the starting welcome message. So no possibility of phone contact either.

      I’ll keep trying.

      • Kate October 14, 2011 at 1:30 pm #

        Re EGF on streets of Athens: This is really, really scary. Do any Irish readers remember the Irish rangers’ recent “Training” activities at Dublin airport?
        Also, over on OWS, the police are moving to clear them. This could get very nasty, very quickly!

  37. Les October 14, 2011 at 1:38 pm #

    Interesting story about the sell off in US Treasury bonds. This from zerohedge:

    “concerns about the reserve status of the greenback will start to resurface, precisely as many have been warning. And what has happened is that in six consecutive weeks, foreigners have sold $74 billion, or more government bonds in a sequential period of time than ever before.”

    The presumption is that the Chinese might be firing a warning shot across the bows over the Senate’s decision to propose a law for all out trade warfare with China. If this is true then the US may soon have matters other than the Eurozone crisis to concern them.

    The story is here for anyone interested.

    • Mike Hall October 14, 2011 at 2:28 pm #

      I think the presumption is likely correct, as US Tsys have been the go to destination of safety throughout, including, & notably, the ludicrous US gov debt debacle & absurd S&P ‘downgrade’.

      US gov, as sole creator of $US can always, in every circumstance meet it’s $ obligations.

      Exchange rate value might be a consideration, but if the US$ ‘crashed’, it’s not likely there’d be anyone else left standing to offer a better alternative. Given the size & importance of the US economy globally (even to China).

      • Golem XIV October 14, 2011 at 2:42 pm #

        This in ref to your replies to Toby above. I can’t reply to them direct the software doesn’t allow that many layers of replies.

        Actually I am finding your replies to be agressive. You say you’re attacking his ideas not him – pardon me but that is hair-splitting piffle. If you’re attacking you’re attacking. Idea or man it is the same. You sholdn’t be attacking at all.

        You also suggest that if he’s not expert he should not post at all. Only experts allowed to post? NOT ON THIS BLOG.

        As long as he is polite and tries to put his thinking in as clear a way as he can then he should feel free to put his opinions as you should put yours.

        But NO ONE should suggest on this blog that you can only comment if you’re an expert. I hope that is 100% clear.

      • Toby October 14, 2011 at 3:37 pm #

        I’ll reply here too.

        I’ve often linked, perhaps also directly in response to your comments, to Charles Eisentein’s work, in which he puts forward a plan. Here it is again:

        http://charleseisenstein.com/online-text/

        As to economists who are experts and yet not MMT advocates, Bernard Lietaer and Paul Krugman are two. There are others of course, e.g. Professor Franz Hoermann and Professor Bernd Senf, but they write in German so you’ll have to take my word for it. Beyond that I’m not going to run around for you gathering names you’ll dismiss as ‘non-expert’ or wrong because they don’t support MMT. My point wasn’t that some experts are stupid and others wonderfully smart, it was that your dismissal of my comment as being non-expert has no relevance. It’s the arguments that matter. And quite frankly you’ve yet to disagree with the spirit of what I’ve said thus far. No doubt you’ll be surprised to hear that I see us as being, in many areas, in broad agreement. For example, when I say I am against perpetual growth, or our systemic ‘addiction’ to it, I do not mean that people in poor countries should starve, or that the poor should. Far from it. For me abundance is the way forward, as well as growth in other areas (not the monetary). But this really takes a whole book to lay out, and I’ve linked to one (several times at this blog) that does just that. We’re writing blog comments, not white papers! Though in fact I am writing a book, but I’m hardly going to post it here, unfinished or otherwise.

        Regardless of what you think, I am not against MMT in its entirety. I can be for some parts of MMT and against others, what’s wrong with that? Like I’m not a Christian, but think much of what Jesus said was wise and has value. As I laid out in my response to you, it is the way in which MMT demystifies money that appeals to me, while there are those aspects that keep the rest of the system more or less as is which are unsatisfactory to me. Nor, by the way, do I agree with everything Charles Eisenstein says, even though he has a ‘viable’ plan. In fact there is no one I have yet read with whom I agree on everything. I am many things, but blindly loyal is not one of them. When I link to this or that thinker or article it is because I believe it is worth discussing, not because I think anyone should blindly follow it. You are putting yourself in direct opposition to me, unnecessarily I feel, and it’s not really getting either of us anywhere.

        And exactly what right do you have to tell me not to comment on someone else’s blog? You’re not an ‘expert’ either, yet I notice you have no problem offering your opinion–which is as it should be. As long as people agree with you, eh? Then all are welcomed by you on Golem XIV’s blog. Nice touch, Mike!

        • Mike Hall October 14, 2011 at 6:06 pm #

          Toby

          To talk of Eisenstein’s ‘Sacred Economics’ as a ‘viable plan’, in the sense of something that could be introduced in any reasonable timescale, is a bit of a stretch, to put it mildly. His ideas are near totally in the realm of ‘philosophy’ (that’s his background, not economics), way beyond the world as it is. He has no body of work at all in something that could be considered practical macro economics. Interesting ideas, but not a ‘plan’ & certainly nothing we could implement in time to meet the huge challenges we have to deal with in the next decade or two, not century.

          To consider that ‘Sacred Economics’ is somehow comparable as a potential major solution, to be equally considered with MMT(or PM) is absurd. Absolutely no practioner in macro economics, whatever their school of thought would consider it so. Surely you can see the difference? We not likely to get anything without at least the backing of +some+ credibly qualified & experienced people in the field?

          I think my point about ‘experts’ has been totally missed. That may well be my fault.

          Let me try to explain where I’m coming from on this.

          What is it we, as commenters, might be seeking to achieve here?

          I would suggest that what we might usefully do is to offer something of an antidote to the paucity of MSM information & analysis for a range of readership, wide ranging in prior knowledge, most almost certainly (very) non-expert. Perhaps to encourage people to believe particularly that there are real, practical, paradigm changing solutions out there. (There IS an Alternative etc.)? Perhaps importantly also, to point people in a direction, and encourage them to go see for themselves, find out more from source materials? So far, so good?

          But, recall for a moment what the tactics have been, by all the powerful corporate interests, over decades, to trash ideas they don’t like, so they can keep the staus quo.

          I think these tactics are most succinctly expressed in that quote from a Big Tobacco executive in a board meeting, when faced with the irrefutable evidence of tobacco’s carcinogenic effects…

          “….all we need to do is SOW THE SEEDS OF DOUBT…”

          These are exactly the tactics of the PR efforts denying climate change science & every other situation of evidence denial & support of ‘TINA’.

          It has proved to be an enormously powerful & successful tactic.

          So, if we want the seeds of a better understanding of real possiblities for radical change to grow, among an audience struggling to understand, time constrained etc., I suggest we +don’t+ fall into the same trap. The trap of spreading confusion – ‘seeds of doubt’ – such that people become all too easily discouraged in making further exploration of topics.

          Do you see what I’m getting at? ‘Non-expert’ comments is most all we have here. I not only have no issue with that, but see it as an enormous strength!

          But….you appear to me, perhaps not what you intended, to make a very poor, confusing & negative post about MMT (& PM). My query here is, do you really think yourself sufficiently competent to do that? If not, then maybe you should consider not making what are then likely to be very confusing (to many) comments about it. Instead, why not just post something you see as another possible alternative to be considered. Leave it at that. Two positives, options for readers to explore, minimal confusion spread by non-experts. D’you see?

          The exception to this, which I think is fair game, is all the ‘status quo’, TINA narrative, spewed out ad nauseam by the MSM & mainstream. They deserve all the criticism we can muster.

          But, for efforts by, yes, credible, qualified people, demonstrably trying to get their proposals into the public debate, for an equally demonstrable good purpose, we should perhaps be a little more circumspect about criticising them, from a non-expert perspective, likely spreading confusion, poorly founded ‘doubts’, in a public forum. Thus working against ourselves, unwittingly adopting the tactics of those who seek to defeat the change we seek.

          So am I guilty myself? Yes, probably.

          But, our ‘disagreement’ here has made me really think about this, and resolve to do better & be more careful in future. You and I clearly disagree, not on ultimate goals, but clearly on what might get us there, particularly in the ever shortening time that remains to do it. But we don’t need to debate those things here, & I suggest we shouldn’t. What do you think?

          Re. the ‘agression’ – I really don’t see it & it’s not intended. The written word I think is not always an easy medium.

          But, I’m afraid I felt I must defend MMT (&PM) from denigration as credible, radical alternatives. Just my opinion, of course. but in macro economics, or in much any other field, I’ve not seen anything as potentially powerful, as easily introduced, in over 35 years of interest in ‘alternatives.

          • Toby October 14, 2011 at 7:14 pm #

            Now we can talk to each other like adults.

            “To talk of Eisenstein’s ‘Sacred Economics’ as a ‘viable plan’, in the sense of something that could be introduced in any reasonable timescale, is a bit of a stretch, to put it mildly.”

            That a slight misrepresentation of what I said, but, why do you think that? The book contains the bones of a plan, but is itself not a plan. Had you read it before? To my mind he starts from first principles and works up from there. One of those first principles is the end of economic growth as we have known it, as has been advocated by economics experts like Herman Daly. If we accept steady-state as a necessity (and more and more are beginning to), other things flow from there logically. All sorts of things are forcing our hand on this, like peak oil, water shortages, climate change, degrading ecosystems, falling soil fertility, over-plundered rain forests etc. To ignore this is to ignore the environment. I don’t think we should be doing that. As for any reasonable timescale, what does that mean? A century? Because that’s how I think of this, as slow, multi-generational change with a firm eye on the enormity of the challenge. No more short term thinking.

            Eisenstein’s ‘plan,’ which is really a list of suggestions to be discussed, actually enables gentle de-growth of around 1-2% per annum, by buying debt with (per MMT principles actually) negative interest money spent into existence by gov’t. Many other things have to happen alongside this, but negative interest is an idea already floated by some central bankers, so is not wildly ‘loony fringe,’ hence already ‘out there’ in serious discourse. Bernard Lietaer, who helped design the Euro (for his sins) is a supporter of negative interest currency. If we don’t work something into our new socioeconomics that can cope systemically with steady-sate, which demurrage money can, I would say we have a deep problem. A demurrage would also have the bonus of draining money from the economy at a trackable rate, allowing us to inject money back in via a social dividend. This is a healthier way of dealing with technological unemployment and giving people a chance to contribute to society as creatively as possible. Forcing full employment would lead to paying people to dig holes to fill them again. There’s no dignity in earning money doing jobs society does not really need.

            As for gov’t, I support the principle of governance at more local level, via direct rather than representative democracy. Small is beautiful and all that. As Goethe said, “Which government is best? The one which teaches us to govern ourselves.” Gov’t is now so corrupt by finance and corporate power as to have forfeited its right to govern. We have to start again without them, prepare new means of self-governance until they bring their expertise (should such be needed again) into the new structures we build and shape. Until I see a politician with character, imagination and courage attain any power I will not be able to believe otherwise. As for the ‘experts’ advising politicians on money matters, I think we can agree we need far less of those.

            Frederick Soddy’s background was chemistry yet his analysis and criticism of economics was sound. Silvio Gesell was an autodidact, and many economics professors find his observations to be bang on (Keynes and Bernd Senf being two of them). That Eisenstein’s background is maths, philosophy and Chinese is of no interest to me, only his thinking and arguments are. Many trained economics experts are thoroughly wrong on many fundamental aspects of what economics should be about, like the finite nature of the planet’s resources and how to manage them intelligently, and hardly any understand money at all. As you no doubt know, Steve Keen (now a professor of economics I believe) debunks pretty much everything mainstream economics has to offer. Why economics expertise should be a prerequisite for coming up with fresh ideas is beyond me. I would say it should rule a person out, but I don’t want to be a fascist on the matter. ;-)

            As for embracing what is radical about MMT, I do, and have argued for MMT with colleagues at work (in German, so that’s not an easy job). They shake their heads at me in disbelief. I agree that money is to be created and destroyed at need, it is helpful to recognize that tax is trash, we can create money to fund economic activity, these are very exciting and positive contributions. But more important than these is the advocacy coming from ecologists, biophysical economists, and various free thinkers who let the logic and data lead them where it will. Carrying capacity is our real constraint. And yet we can have higher living standards AND de-growth. Since when was GDP a valid measure of health and happiness? We’ve had forty years of global GDP growth in which time global poverty has doubled and median wages have stagnated. It should therefore be obvious we can slow down the economy, expand the commons (see Ostrom’s “Managing the Commons” for the various cultural wisdoms in that area available to humanity), shrink the money-realm, declaw the state, and restore ecosystems to robust health, over the next decades, and lead happier, ‘richer’ lives, if we act boldly. MMT has an enormous role to play in this, but it is not, and there is no, silver bullet.

            I reserve my right to criticize MMT, and think you are over-estimating the power of my muddled thinking if you fear it corrupts readers of this blog one way or the other. But thanks for the (weird) compliment anyway. ;-)

  38. Kieran Zero October 14, 2011 at 2:35 pm #

    Off topic . . .but . . not really . .

    Have you noticed how there’s a blanket blackout on the enormous [and growing]
    demonstrations in america and now going global this weekend?

    Occupy Wall Street is conspicuous by it’s absence in the myopic UK media,
    who are, as usual, navel-gazing in a cul de sac.

    However, channel RT, easily avaible on your freeview box here in the UK, and home of Max Keiser, is providing sterling coverage.

    Mass demonstrations accross the USA, not reported in the UK.
    We are the 99%, and so are you,
    whether you realise it yet or not . . . :)

    All readers here might consider calling your loans, especially your credit card loans – they are not lawful, and therefore unenforceable, as you might know.

    http://www.getoutofdebtfree.org/

    It works, and I propose that it is now a moral duty – to starve the corrupt institutions of the leverage that the loans we make [of promised labour and production of future 'worth'] to the banks underwrite. Let them fail. They already have, right?

    Bring on the worldwide debt write-down [I have no debts, by the way].

    I don’t usually quote the Bible, but the money changers need their tables turning.
    ———————————–

    Leviticus 25:23
    The land must not be sold permanently, for the land belongs to me. You are only foreigners, my tenant farmers.

    ———————————–

    • Hawkeye October 14, 2011 at 2:49 pm #

      Kieran

      The #OWS It is getting a bit of (belated) coverage on the BBC. Yesterdays News at Ten had about a three minute slot by Mark Mardell. He has blogged about it here:

      http://www.bbc.co.uk/news/world-us-canada-15300501

      No mention of the upcoming UK actions though.

    • Charles Wheeler October 14, 2011 at 4:39 pm #

      “Even if the [media] does not mold our every opinion, it does mold our opinion visibility; it can frame the perceptual limits around which our opinions take shape. Here may lie the most important effect of the news media: they set the agenda for the rest of us, choosing what to emphasize and what to ignore or suppress, in effect, organizing much of our political world for us. The media may not always be able to tell us what to think, but they are strikingly successful in telling us what to think about … the media teach us tunnel vision conditioning us to perceive the problems of society as isolated particulars, thereby stunting our critical vision. Larger casualties are reduced to immediately distinct events, while the linkages of wealth, power and policy go unreported or are buried under a congestion of surface impressions and personalities.

      In sum, the media set the limits on public discourse. They may not always mold opinion, but they do not always have to. It is enough that they create opinion visibility, giving legitimacy to certain views and illegitimacy to others … This power to determine the issue agenda, the information flow, and the parameters of political debate so that it extends from ultra-right to no further than moderate center is, if not total, still totally awesome.”
      Inventing Reality Michael Parenti

      This can be seen in the way, for instance, that the Greek debt issue – and by extension the sovereign debt debate – has become completely detached from the causes of the crisis; how a problem of private market failure has transmuted into one of government profligacy.

      More generally, the ‘framing’ of issues has detached the privatisation of the NHS, the wiping out of disability benefits and the move to cut wages, pensions and the public sector into distinct events when, in reality, they all flow from the same source – the attempt to insulate those at the top of the income pile from the consequences of their appropriation of the proceeds of growth – and then loan it back to the rest of us.

      The coverage of the OWS demos has been both restrictive and highly selective – with the more cogent articulations of the debate left on the cutting room floor.

      But what would you expect from a media owned by billionaires and edited by millionaires?

      • Hawkeye October 14, 2011 at 4:56 pm #

        Charles,

        Just wait. After the protesting in Wall St, London, Milan and elsewhere, any major crash on the horzon will just end up being blamed on all those peasants!

        Everything was fine around here until you plebs began complaining about it!

  39. richard in norway October 14, 2011 at 3:00 pm #

    Is this euro riot police thing for real. How on earth is a group of dutch and German police going to help the situation. I mean definite tones of foreign occupation or is the intention to create so much chaos that the other nations in the firing line will behave themselves and do what there told. Sorry that was a stupid question of course that’s the plan it always been the plan

  40. keekster October 14, 2011 at 3:28 pm #

    Roger Lewis October 13, 2011 at 7:32 am #

    A link to MMT for anyone that has met with another famous Golem Learning curve ( Is it only me?)
    http://pragcap.com/resources/understanding-modern-monetary-system
    ….
    Had a read of this. Whilst interesting I’m not fully convinced. There are a few areas that are a liitle weak and I’m more inclinded to side with Positive Money’s understanding of how money is created as interesting bearing debt. I have also read quite of lot of articles by Steve Keen that add weight to the argument that all money (except cash) is created as credit or an interest bearing debt. And as a result the debt based money supply must constantly grow in order to create the new money needed to service the interest on the debt. I see no reason why we cant have a debt free money supply, as proposed by Positive Money, that avoids the need to have a money supply that grows exponentially. Nevertheless, thanks for the interesting link.

    • Mike Hall October 15, 2011 at 1:53 am #

      I have posted this link before, but it’s worth a repeat I think. I’ve not seen any MMT, Keen or any other resonses to it. It is a bit technical but there’s lots of interesting graphs.

      Some modelling of the introduction & performance over time of ‘debt free’ gov spending in Japan, using over 800 economic variables, by Prof Yamaguchi

      Seems to work quite well.

      http://www.monetary.org/yamaguchipaper.pdf

  41. Neil October 14, 2011 at 3:59 pm #

    Italian Students Storm Milan Goldman Sachs Office

    http://www.zerohedge.com/news/italian-students-storm-milan-goldman-sachs-office

    After Goldman, Italian Protestors Besiege, Storm Headquarters Of Berlusconi’s Fininvest

    http://www.zerohedge.com/news/after-goldman-italian-protestors-besiege-storm-headquarters-berlusconis-fininvest

  42. Charles Wheeler October 14, 2011 at 9:56 pm #

    See also:

    http://neweconomicperspectives.blogspot.com/p/modern-money-primer.html

    and the amazingly prolific Bill Mitchell:

    http://bilbo.economicoutlook.net/blog/

  43. Mike Hall October 15, 2011 at 1:45 am #

    @ Toby at 7-14pm

    Lol, now either my brain has rearranged itself or yours (or both!), but that’s a thoughtful post. I’ll do some more reading of Herman Daly & take a look at some of the others you mention, and come back at some point.

    Just to reiterate, there’s no disagreement on where we want to get to. Just how we might get there, steps on the way. As I said, I’m not against steady state, but perhaps you’ll agree that to most people it’s a +massively+ radical step. Much more of a leap than MMT/PM I think, noting the all too familiar ‘disbelief’ among your friends? Would I be right to suppose quite well educated friends? We have to keep trying tho’, eh? I’m thinking MMT/PM may well not be some ‘final’ or even long running approach, but could really be something to open the way.

    All the unemployment & health, welfare etc pressures, and well, actual damage on a psychological level, children, youth, adults, all weighs heavily on peoples’ ability to stretch their thinking toward radical changes. MMT/PM addresses many of these insecurities very directly. Kind of Mazlo’s hierarchy of ‘realisation’, if you follow? Take a lot of the fear & insecurity away & really get that public debate going, the one where we all, not just a few, really consider how amazing it could be, should be, to be human. (I think you have that vision too.)

    Well, a few thoughts for now…

    My point about Eisensteins background btw, was not out of concern for the validity (or otherwise) of his ideas, more the need for perceived credibility (perhaps some nuts n bolts know how too). One might hope that shouldn’t matter so much, especially now, given the mess the mainstream of ‘serious’ people have created, but I think it’s going to have some importance for a while yet.

    Resources & resource management is key, of course. Energy supply is the biggie, the ultimate constraint, until we can make it sustainable. With sufficient energy supply all the other issues are relatively easily resolved. My biggest concerns are time.and the remaining fossil energy ‘capital’, perhaps even more important the remaining pollution, greenhouse gas, capacity. The amount of energy infrastructure needing to be replaced is absolutely huge. I speak as an engineer here, not ‘expert’, but with a keen sense of scale & quantity. Technically possible (I think), & complex, but whether we can do it, managing reasonable life quality expectations, even starting tomorrow, on a ‘war’ production footing….well, it’s too close to call imo. Every year we delay, that vital resource ‘capital’ is decreasing to keep our life support running. Our, society’s, ‘first’ real step needs to be soon. And it needs to be at the ‘macro’ level. Changes that individuals can make, in the practical sense, are very limited under the present systems.

    I guess that’s what’s driving my sense of urgency in making the radical step that opens the way.

    I think I may have garnered the wrong impression of your thinking. You certainly do seem to be approaching things at the macro level. I hope you don’t mind me saying it – I do mean it in a friendly way – but my experience of Transition Towns etc. has given me the impression, well, they don’t have this focus. I mean in a practical sense, and at the national/international level. Maybe I’m out of date, or things are different where you are. I’m talking about it’s origins before the internet age, so maybe that’s a factor. I had a look at Transition Town Totnes’ website recently tho’, was a bit underwhelmed. It’s all good, on many levels, I just think the priority now is at the macro level. Good luck, anyhow, whatever you do.

    • Toby October 15, 2011 at 5:44 am #

      I have no experience of transition towns, and they are not part of my future (I’m not sure where you get the idea they are?). I will be looking into them more closely as time presents itself and have enormous respect for those who drive them forwards, but my path is different. Re-localisation, for me, is political first. Once we teach ourselves directly democratic methodologies which scale up, what’s necessary subsequent to that will present itself. We do what we can…

      Otherwise I agree with everything you wrote, just this brings out a contrarian response:

      “My point about Eisensteins background btw, was not out of concern for the validity (or otherwise) of his ideas, more the need for perceived credibility (perhaps some nuts n bolts know how too). One might hope that shouldn’t matter so much, especially now, given the mess the mainstream of ‘serious’ people have created, but I think it’s going to have some importance for a while yet.”

      Actually I think the ground is shifting fast. You’re right in essence about this, but that is one of the things I’ve chosen to fight. It’s a fight that gets one into hot water sometimes, but new ideas always come from outside the mainstream and seem insane at first. Look at the Wright Brothers and manned flight. Physics experts wrote books of great knowledge and detail ‘proving’ flight was impossible, and the mainstream took five years to accept flight had happened. Today we have the Internet, but cultural change is slow. Where the urgency of the situation forces you to pitch a less radical version of change than mine, my sense of urgency is forcing me to try and make the radical seem reasonable (which it is). We are in a radically dangerous situation and on a radically wrong path. Logically then, to get out of it we simply must entertain the radical ideas, which have become common sense to me (these last 3 years have turned my thinking on its head; I used to be ‘normal’!). Some ideas will prove themselves to be silly, others won’t. We’ll only sort the wheat from the chaff with impartial and intelligent debate and bold experimentation.

      • Toby October 15, 2011 at 6:23 am #

        Actually one last thing from me.

        Our energy problem, enormous as it is, is not as challenging as falling soil fertility. Monoculture farming is brewing terrible long term consequences for humanity which may well prove devastating. Petrochemical fertilizers can still maintain the illusion of soil fertility, but, from what I have understood (I’ve yet to look into this deeply), marginal returns there are close to zero. The antidotes to giant, monoculture farming are things like permaculture, which I suspect might be related to Transition Towns. And perhaps, with luck, vertical farms and hydroponics, but here I really am just a beginner.

        • Mike Hall October 15, 2011 at 1:00 pm #

          I agree with what you say about new ideas, very often, if not near always coming from outside the mainstream. But economics is not really a ‘science’ in the same way ‘physics’ is for example. The raw data is much fuzzier & setting up repeatable experiments – the meat and drink of scientific method – is virtually impossible, certainly at the macro level. I draw a distinction between outside the mainstream, but working in the field, and outside the mainstream & working in a different field (but it can be loose!).

          In brain evolution/psychology terms, and culturally (as noted in other posts here), we humans seem extraordinarliy disposed to not really ‘thinking’ very well, not realising just how much the limbic & para limbic impinge & even among highly educated people. That the economics profession, in commerce & academe both have demonstrably got things so wrong & can still give their most suspect cheerleaders Nobel Prizes, rather than break out a little honesty, is surely testament. See Bill Mitchell’s latest:

          “Rewarding those who are culpable”

          http://bilbo.economicoutlook.net/blog/?p=16498

          That said, there are people, a tiny minority at present (but growing?) who, to me, have really broken thru’ this brain evolution/cultural ‘discount rate’ (cf Nate Hagens & others) issue, & function markedly better whatever area of ‘future outcomes’ they consider. When such people appear within a field, with decades of experience in both practice & academe, well, I give their work some serious attention. But that’s not to exclude the work of others who write/think outside their main field – definitely with you on that, Toby.

          Whilst it may seem a rather arbitrary distinction to make, & loaded with my own subjectivity perhaps, the ‘empirical’ evidence, over my whole life, from the time of ‘normal’ you speak of (30yrs ago in my case), just can’t be ignored.

          Keynes is famously quoted “When the facts change, I change my mind. What do you do?”

          Which reminds me you mentioned Paul Krugman. Nobel Prize winning economist & a man who should be no stranger to the methods of academic rigour. MMT academics have tried over years to engage with him in a respectful manner. His only response has been to make some brief, but disparaging small paragraphs in his newspaper column, to some somewhat fuzzy, imprecise comments from non-expert MMT supporters. It’s really not good enough to treat serious enquiries from fellow academics in such a fashion. (I do place some ‘store’ on that – the ‘Enlightenment’ & all that.)

          Another thing struck me as I read your post this morning. We both agree, as do many here, that humanity faces real existential ecological and resource threats & the scientists are +very+ concerned about whether we can make the transformations we need in time, given the natural inertia in all the integrated infrastructure of 6 billion + humans. Contrarians & deniers have had far too much publicity in relation to their numbers & bone fides (‘seeds of doubt’ etc), but the media generally have spelt out the dangers & near all mainstream politicians, and ‘advisers’ have accepted the science. (A few less in the US perhaps.)

          However, it is the +economic+ crisis that has brought people out on the streets, not our existential threats. Rightly or wrongly, I can’t escape noting peoples clear priorities in considering what our first step toward paradigm change should be in the organisation of our economies.

          It’s seems obvious to me (& many others) that the Irish Greens completely ignored this & paid the price at the last election with the loss of every single TD (MP) seat. They also still seem to be in denial about this. Sure, there would have been some chaos, but had they used the power they had in coalition & stood up to the spineless appeasement of EU banking elites, I suspect they would have been heralded as heroes to many Irish & probably doubled their presence in the Dail in an ensuing election. (I made these points at the time, but to no avail…)

          You mention soil fertility. As it happens I spent a few years in my bizarrely varied ‘career’ working in an organic market garden. Working for/with an amazing guy, Ian Tolhurst, who wrote the commercial organic Soil Association ‘bible’ & who has done consultancy work all over the world for them & other NGOs in the field. I instigated a box scheme, did the marketing for it & the deliveries. This grew from ~ 30 bags/week to over 400 boxes/week last time I heard. Most of the produce was grown on the farm (2.5 acre walled garden + ~ 10 acres for field crops) with some drawn from other nearby growers. The farm in total also produced organic meat (by others) & this was an important element in maintaining fertility in the field crop areas. But, I was left in no doubt about the ability of organic methods to be highly productive & sustainable. A relatively small amount of ‘green’ waste recycling from the town would have ensured, together with the animal grazing, indefinite fertility. The quantity of meat production would suggest a ‘low’ meat diet (maybe 20% of typical) being approx optimal (& probably a lot healthier for us!). (Hi to the people of Reading & Hardwicke, hope you’re well!)

          I asked ‘Tolly’ (Ian T.) what he thought about permaculture. Basically, he said, …well, we do that already to the extent it’s useful for us. He’d read about it, but noted it had little relevant to add to existing practises. No doubt useful in a smaller urban/suburban garden situation but marginal in the scale of overall food production. Different climates/regions/demographics etc would change the balance of that somewhat, but in general not greatly.

          I hear noises that the EU ‘CAP’ authorities are looking at doing more to promote organic growing. I think this may have something to do with the impending global shortage of phosphorus, a vital input to the agri-business staple ‘NPK’ fertiliser.

          In our posts here (us and others) we’ve touched on democratic or representation systems and I feel there’s something to be discussed here in the light of the brain evolution/psycholgy aspects we’ve touched on. (Many thanks to other posted posters who’ve put up great links on this & added to my understanding of the subject!) I’d like to draw on my years in worker co-operatives & development of them & community enterprises (yes, another of my ‘career’ tangents!), to offer some insights.

          But I’ll leave it for now, with just a brief observation about the recent ‘protest’ movements – some experienced directly, other from first hand reports in internet blogs/posts. I have to say I am very excited and encouraged by the techniques and competence of the (generally) young people involved. Bravo! OWS, Climate Camp & many others, you +are+ a new vanguard of sanity!

          Sorry for another over long & somewhat rambling post!

  44. Aristonico Belargio October 15, 2011 at 5:38 am #

    Funny, at least 3 of the “big ban(g)ks” mentioned (Royal Bank of Scotland, Barclays and Lloyds) have their credit and debit card systems externalized to the same US based corporation. So, in any moment CIA (due to the disclosure grant provided by the “Freedom Act”) can peep in all those bank accounts, recollect all the data and do whatever they want with your credit information. The same goes for 3 or the big Irish, a great deal of the Dutch system and 2 of the big ones in Germany (one of them Deutsche Bank). Greeks are safe: they didn’t sign in the last moment for that corp.
    Welcome to reality…

  45. Neil October 15, 2011 at 10:34 am #

    Jeffrey Sachs on Today programme this morning publicising his new book:

    “International capital at the top is mobile, and is running circles around our government: this is the essence of globalisation.”

    http://news.bbc.co.uk/today/hi/today/newsid_9616000/9616410.stm

    By Jove, I think he’s got it…

  46. Charles Wheeler October 15, 2011 at 1:31 pm #

    “Re-localisation, for me, is political first.”

    My own view is that the greatest achievement of the ‘neoliberals’ has been to convince even their opponents that ‘Big Government’ is the problem. As a result we have a whole generation of libertarians (both left and right) who argue that smaller government is the answer – without explaining the mechanisms which would counter-balance the concentrations of wealth and power, the oligopolies and oligarchies that increasingly dominate political economy.

    We have a government which doesn’t believe in government. We have an Opposition that doesn’t believe in government. All the blueprints for ‘a new way of thinking’ (Blue Labour/Red Tory) seem to be drawn from the same well of ‘localism’ and ‘co-operativism’.

    ‘Neoliberalism’ – which is essentially an ideological justification for the concentration of economic and political power, using pseudo-scientific justifications (Ricardian Equivalence, Rational Expectations theory (for which one of its proponents has just received the (not really)Nobel Prize), the Efficient Market Hypothesis, the Laffer Curve, etc., etc., to argue against government action or regulation of the economy – is what has got us here. So it’s dispiriting to find that even those seeking an alternative have defaulted to the ‘localist’ position.

    For me, the idea of localism brings on a nose bleed – it signals a surrender to corporate power, because it doesn’t seem to address the issue of how this power operates. The splitting up of the NHS is being presented as ‘localism’ – giving power back to patients and communities when, in fact, it is simply cover for the takeover of healthcare by massive private health providers. The ‘free schools’ movement is already being hi-jacked by an economically and politically advantaged elite.

    ‘Localism’ seems to hark back to some imagined golden era of self-help and ‘gas and water socialism’ of the late Victorian period. But this attempt to ameliorate the forces of capitalist change was ultimately unable to cope with the disintegration of society under the stresses caused by accelerating inequality. As Ha-Joon Chang has argued, the role of government in the success of capitalist enterprise has been heavily edited by the revisionists of the new order from Ayn Rand, and Alan Greenspan to the ‘freshwater’ keepers of the flame.

    Neoliberals like to have their cake and eat it: arguing that the majority are much better off under the ‘free market’ than any alternative. And yet, most of those gains have been achieved in spite of the market – the provision of infrastructure, the regulation of labour (factory acts, health and safety, minimum wage, anti-discrimination, etc.), transfers in the form of pensions and other benefits, the setting up and funding of universal education and healthcare, etc., etc.. Without these developments the lives of a majority would have continued to be (as they are again becoming) racked with insecurity, ill-health, poverty and lack of opportunity. The social democratic welfare state improved the lives of many of us to the extent that it became a victim of its success, encouraging us to believe we no longer needed it. The ‘baby boomers’ who benefited from a decent state education, university education, NHS care, state pensions and a good infrastructure now acted to dismantle it domestically – just as we sought to ‘kick away the ladder’ globally by enforcing a strict neoliberal regimen on developing countries.

    As long as government is perceived as the problem rather than the solution – the conduit through which liberal democracy must operate to ensure some level of equity and counter the polarization of wealth and power that results from a more libertarian approach we are doomed.

    I accept that this is an unfashionable position – which is not surprising given that we’ve had three decades of government run by people who don’t believe in government, a health service run by people who don’t believe in state-run healthcare, an education system run by ex-public schoolboys, a housing sector run by ministers who can’t understand the concept of social housing, and a transport minister in thrall to Jeremy Clarkson. That’s a conundrum that’s difficult to grapple with.

    So, for me, ‘localism’ remains a cul-de-sac – but I’m open to suggestions as to how it would work.

    • Mike Hall October 15, 2011 at 4:17 pm #

      I suppose this also begs the question why not both? But it has been my experience, broadly, that those engaged in ‘localism’ tend to leave it at that. I don’t know why, but seems to be some dividing line (generalising)? It’s been a frustration of mine over the years.

      Reminds me of the antagonism (at least here) between ‘peak oil’ & ‘climate change’ campaigners. I couldn’t for the life of me see why. It may be better now. There did seem to be something of a correlation (I speak of SW Ireland again) between the more localist, power down, permaculture (self sufficiency?) movements & ‘peak oil’. Don’t know if this has been a more general thing?

    • Toby October 16, 2011 at 7:20 am #

      This is of course an enormous topic, and I can’t possibly do justice to it in a comment on a blog. However, what I am most certainly not for is neoliberalism, heck, I don’t even think there is such a thing as an individual, but again, that is another, though very related, large topic. The reason I believe in direct democracy is because representative appears to have failed, at least as we have it now. Where are the politicians in this system making the right noises and getting close to power? I hear of none. The system has obviously failed.

      Furthermore, state cannot be separated from market, that is a false dichotomy. David Graeber’s “Debt: The First 5,000 Years” looks at this in depth. For me and my studies, market is part of state, a subset of it. State exists primarily (including market) as an ‘elitist’ monopoly on power along Hobbesian lines to keep ‘order’ on the assumption that without this monopoly of power there would be ‘chaos’ or ‘anarchy.’ (Mike Hall has mentioned “The Century of the Self”, an excellent and eye-opening documentary which brings this point home very effectively). What is emerging for me (and others) is that this perception is part of our Cartesian self/not-self way of apprehending reality, that humans are separate from nature somehow, and have dominion over it. There are ‘idle resources’ ‘out there’ for our pleasure and control, we are ‘scientists’ objectively generating wealth and setting up infrastructures and institutions to keep ‘order’ in the face of, and kind of at war with ‘wild’ nature. I find this core perception profoundly unsatisfying. There is nothing which is not nature.

      How we incorporate the best of what we have thus far managed, as a species, that is, all our accumulated wisdom, into The New Way, we cannot possibly know in advance, just as we did not know what state was 10,000 years ago, or what capitalism was. They emerged over time, and we defined our systems in hindsight.

      So, for me, re-localisation is necessary as but _one_ part of ‘fixing’ what must be ‘fixed’ (it’s really just intelligent and wise adaption to new challenges). One thing I think we must avoid as best we can is more separation, to the degree that, e.g., millions of regional polities wander off in their own cultural directions, which, historically anyway, always leads to dehumanization, conflict and war. I am, e.g. very excited by the idea that English is becoming humanity’s first global language. That’s one of the reasons I’m switching from IT in an international energy utility company to teaching English here in Berlin. The Internet (and related technologies) is of course, in potential, an enormous assistance in setting up the open and transparent democratic processes that might replace the current system, and is a dynamic showing humanity how united it is at a deep level, that we are one animal among millions on a rock orbiting a medium-sized star. For me that global awareness is absolutely vital. Act local, think global.

      We, the 100%, have to do this together. A grandiose and almost obnoxious cliche, and it is impossible for 7bn humans to ‘come together’ and have a Big Society chat about what to do next. Hence the methodology for building new global consensus begins locally, but stays interconnected globally. We pool wisdom transparently, learn from our mistakes ‘together’, benefit from our successes ‘together.’ For me the goal is not the end of government per se, but the beginning of transparent and direct democracy. No doubt this will scale up in a representative fashion (how could it not), but the starting point is regional. This is precisely what the General Assemblies are working on in Occupy cities across the world, and sharing with one another via the Internet; local/global. The process is actually unifying, not fissiparous (except from the POV of the state of course).

      But of course it’s early days, is secessionist (sort of) in its intent, and thus cannot help but bring about enormous upheaval should it gain decent traction. What else are we to do? The entire socioeconomic and political system has broken down, been exposed as the money-value machine it more or less always was. Rigid hierarchies generate vested interests vying for power sociopathically and at great cost to the environment. To set up infrastructure and processes comfortable with steady-state growth, abundance, cooperation, is going to take a deep and far reaching redesign of how humanity self-organises, in partnership with nature, not at war with it and each other. I cannot see how re-localisation is not part of that. If that notion has been poisoned by the neoliberals, it’s time to take it back.

      • Charles Wheeler October 16, 2011 at 10:18 pm #

        I’m open to persuasion. But having read reams about/by Blond/Glasman et al, I’ve yet to find any really substantive, practical measures that re-localisation’ would involve.

        When I think of localism, my brain defaults to ‘postcode lottery’, locsal wage bargaining or, going back a bit further, the kind of ‘parish mentality’ that saw local paupers restricted from moving to find work, then forced into workhouses for not funding work, Poor Law Unions, local school boards, the domination of politics by the local gentry.

        Localism might have some attraction if you live in Westminster, but less for those living in Haringey.

        Without a strong centre, how do you enforce the redistribution between localities and individuals that is a prerequisite for ameliorating the huge concentrations of wealth and privilege that are a natural consequence of laissez-faire.

        Admittedly, I’m on a sticky wicket, arguing for the role of government in ‘empowering’ individuals by guaranteeing the kind of ‘positive’ freedoms libertarians generally ignore the need for, but someone’s got to do it.
        (Hobhouse’s ‘Liberalism’ is good on this:
        http://www.gutenberg.org/ebooks/28278
        (Reformism ran in the family!: http://en.wikipedia.org/wiki/Emily_Hobhouse)

        • Toby October 17, 2011 at 6:12 am #

          Without deep change of the money system, including rethinking the role of waged labour, re-localisation would lead to the bad old days, I agree. And, as stated, what it must not be is some form of regional ‘splendid isolation.’ In terms of managing resources and distributing goods I too cannot see how a global approach does not make most sense. So for me, again, this is a political aspect–of many other changes–which has to do with the contribution and involvement of as many of us as possible, in as meaningful a way as possible. Existing structures are rotten. In as inclusive and transparent a way as we are able we must rebuild. Where precisely that leads and what form it will take we simply cannot tell from here, but that a rebuild is necessary, is, I believe, unarguable.

          Thanks for the links, I’ll tale a look.

  47. StevieFinn October 15, 2011 at 2:05 pm #

    Caroline Lucas read ” The Debt Generation” & gave it a positive review. Last month she was involved in setting up the Greenhouse think tank. Here is a report from the website put together by Thomas Lines on banking, the Vickers report & how to create a sustainable system. I just wondered if anyone else had read it, & if so, what are your thoughts ?

    As Mike Hall stated the Green party in Ireland were a total disgrace, I wonder if there is any point looking to their UK counterparts for some inspiration, or would they become just another bunch of political sellouts.

    http://www.greenhousethinktank.org/page.php?pageid=recentpublications

  48. johnm33 October 15, 2011 at 6:32 pm #

    On the original topic of tax ‘minimalization’ perhaps a simple measure such as a uk turnover tax [of 20%?] imposed on ‘mature’ sectors of the economy, defined as those sectors where 5 or fewer players have 75% or more of market share. This would have unfortunate consequences for accountants, supermarkets, utilities, banks, tv companies, newspapers and phone companies, a beneficial effect on the governments finances, and would cheer me up no end. Perhaps for those corporations who are public spirited enough to contribute to political parties we could up it by 5%.
    We could fund the parties by giving them a £1 a vote won in general elections with the winner, of each constituency, getting the £1s of all the non voters too, [all paid over in 5 annual installments].
    Getting the message across to more people might best be served by a childrens game like monopoly based on what life/banking is like for elite banking insiders and politicians, and since everyones a winner perfect for the times ahead. You could even use real zimbabwean currency for it.
    In a previous comment [earlier post] i suggested that it may be better to open 75 new local banks rather than spend £75B buying up ‘assets’ the banks want ot get shot of, looks like they’re trying to privatise/emasculate the german ones which inspired the thought http://webofdebt.wordpress.com/2011/10/13/the-public-option-in-banking-another-look-at-the-german-model/
    It may be later than most people think when it comes to climate change this http://neven1.typepad.com/blog/ is, imo, the best blog/debate out there on the subject and the possibility of an ice free arctic in the next few summers is considered a very real prospect. Just for graphs etc though i dont think you can beat this http://sites.google.com/site/arcticseaicegraphs/ Forget the term global warming what’s coming is likely to be random unpredictable alterations to weather patterns as the northern hemisphere ‘tries’ to find a new dynamic equilibrium.

  49. Neil October 15, 2011 at 11:26 pm #

    For Steve Keen fans: http://www.zerohedge.com/news/steve-keen-keynes-and-failings-neoclassical-school .

  50. vicotr meldrew February 24, 2013 at 3:02 pm #

    At no point has the govt or tax payers paid any money to the RNLI. They are funded by volunteers and people donating. If you cant get that bit right, why bother with the article at all!

  51. StevieFinn February 24, 2013 at 4:55 pm #

    Dear Vicotr Meldrew.

    ‘ That’s him on the left when he was doing a Barclays 10K charity run to raise money for the RNLI in 2010 ‘

    A quote from the above article, check if you ‘ Don’t believe it ‘ : CHARITY being the important word to note.

  52. Richard July 30, 2013 at 4:33 pm #

    Not really sure what this article is trying to achieve.

    Most of the companies named in the article may be incorporated in Cayman, but they are in fact tax resident in the UK and therefore subject to UK corporation tax.

    If you do a company search at Companies House in the UK (http://www.companieshouse.gov.uk/) you will notice that most of the companies named are shown on the website and registered in the UK with offices in North Colonnade, Canary Wharf (i.e. Barclays offices)

    Just because a company is incorporated in the Cayman Islands it doesn’t necessarily mean that it’s tax resident in the Cayman Islands….

    Also, just because a person has a lot of directorships it doesn’t mean that they actually work for all of those companies. Richard Branson, for example, has been a director on nearly 200 companies and from this website: http://companycheck.co.uk/director/903949875 it looks like he was a director on over 100 companies in 1999 – you wouldn’t claim that Richard Branson spent less than an hour on each of those companies a week……

    As I said at the start, where exactly is the story here other than another attempt at banker bashing without actually researching the topic properly????

Trackbacks/Pingbacks

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