« Blaming the voters | Main | On feudal exploitation »

September 29, 2020



«in supporting Tories, are older savers acting in their own material interests? Possibly. The same low rates that destroy their incomes also push up house prices and help support shares. But I’m not sure this is sufficient answer to my question.»

Why don't you ask some tory savers? They will tell you that they hate low interest rates because it gives them a small return on their cash holdings, but fortunately they are making so much on their shares and property holdings that does not matter. In other words they want to have their cake and eat it too, with low interest rates for borrowers and high interest rates for savers (and George Osborne aimed to help them with a limited edition of "granny gilts") but they also know very well what really matters.

«For one thing, unless you downsize (which many older people are loath to do) a higher house price is little use: equity release schemes are not great value.»

Oh please please this is the usual stupid, stupid story. Remortgaging can be done in many ways, and indeed some are expensive, but not all, and anyhow the main point of view is that the next buyer (or the heirs) will pay for it. Someone who bought a property for £100k 20 years ago and now has £900k of redistributed equity is not going to quibble a lot about sharing a bit of that windfall with some finance vendor. It's free money!

But most importantly, for many people "my house is my pension", and getting £30,000-£40,000 (as a starting point) of redistributed equity per year enables them to spend all their aftertax income without having to save for a pension, which is in effect a very cheap (at least apparently) form of remortgaging.


«a higher house price is little use: equity release schemes are not great value.»

Whatever, the volume is still enormous:, one of my usual quotes:

“Another of Thatcher’s magic potions was ‘home equity withdrawal’ or remortgaging – drawing down the equity in the borrowers home for (mainly) consumption purposes – new cars, holidays, and so forth. Under the two Prime Ministers that preceded her, James Callaghan and Ted Heath, home equity withdrawal as a percentage of GDP growth was around 36% for both. Under Thatcher, this exploded to over £250bn across her premiership – a staggering 104% of GDP growth. To a significant extent, Thatcher grew the economy by unleashing easy credit, asset inflation (including house prices) and equity draw downs – ‘wealth creation’ indeed.
As an economic programme this is evidently unsustainable – oil runs out, assets run out (add the NHS to the list) and relying on rising house prices is, as the world has so painfully learnt, not exactly a model of financial prudence. The critical point is that without these asset sales and home equity it is questionable whether the economy would have been growing at all.
The story of Blair’s New Labour is eerily familiar. Under Major, such withdrawals amounted to only 8% of GDP growth, perhaps reflecting the wider economic climate.
But Blair did his homework and let loose – as did Thatcher – a wave of cheap credit, financial deregulation, house price inflation and an equity withdrawal-led consumption boom. Withdrawals under Blair’s leadership totalled around £365bn, that’s a full 103% of GDP growth over the same period.”

Dave Timoney

I wonder him much of this is folk-memory (i.e. exaggerated in the retelling) of the financial repression (due to high inflation) of the 1970s? Obviously, this would be ironic, given the current circumstances.


Aren't Ponzi schemes wonderful. What happens when the fat lady sings?

As we know the 'wealth' has gone to the top.


Sure some lucky homeowners in the South East (Never mind the regional inequality and devastation.) have got the crumbs, and some have cashed out.

But leverage works in reverse, what if your house goes underwater just as interest rise, increasing you debt servicing costs? What price pensions then?

Rushi, has cut stamp duty but that is just a sugar rush (it brought forward sales and is a one-off windfall and temporary to boot).


So what is their next alchemy to keep the houses afloat?

Blissex's article:

"Thatcherism was a remarkably irresponsible, economically stagnant and anti-social creed; we are still reeling from the consequences."

I could not agree more with Oliver Huitson.

"Oh please please this is the usual stupid, stupid story."

Do you want us to applaud a Ponzi scheme due to it's scale, longevity and continuation?

We understand it is a scam purported by the Government.


«financial repression (due to high inflation) of the 1970s»

There was financial repression in the 50s, and 60s too, due to political choices, and originating in the UK bankruptcy during the war in the 1940s.

This is suitably reflected in the history of the IMF and originally most european countries, including the UK, were IMF "Article XIV" special members, with limited convertibility of their currency, and very few were full "Article VIII" members. Several european countries passed to "Article VIII" in 1961 and more in 1971, as the "dollar shortage" turned into a "dollar glut".


Only then, largely because of the inflation generated by the dollar glut and the consequent quadrupling of the price of oil, exchange controls were reimposed.

But other measures of financial repression, among them the "corset" (which limited lending) was only abolished in 1980.


«Do you want us to applaud a Ponzi scheme due to it's scale, longevity and continuation?»

It is not quite a Ponzi scheme: it is an upward redistributive scheme. The redistribution is real, it not based on a mirage like in Ponzi scheme, and could well be permanent. After all before WW2 most poor people lived, for centuries, in horrible slums (if they were lucky not to be homeless) because other rents were unaffordable, and the slum owners and owners of better property were making big money from rent:


That upward redistribution has been working pretty well for 40 years (it *may* end in a terrible crash, or it may just slow down), and in all this time the leftoids have been doing pretty much nothing about it but raise their fists and sing the "Red Flag", or talk endlessly about identity politics.

Because they seem unable to understand that there are new political issues from mass rentierism, where it is 20-30% of the voters who are the lowest rungs of the "upper class", instead of the 1%. This has meant the really ridiculous situation where property owners in the "pushed behind" areas still vote Conservative and New Labour, even if those parties are shafting them, because they are even more terrified of "the communists".


I have savings that show a poor return, live in a safe Tory seat and do not vote Tory. When I can see which way the wind is blowing I may move cash into shares, mainly out of desperation. Not normally a good idea in late age.

But it seems to me that capitalists have little need to raise money from savers - capitalism has returned to being a private pre-stock market cartel and governments just roll the presses. I sometimes suspect the retail investment houses deliberately squander retail cash and preserve the few 'good' investments for their besties.

More widely I wonder if we might look to the Black Death solution. We have a massive surplus of humans, so get rid of 30% or so as a start. In the absence of clean energy sources and any new innovations that offer employment without much pollution, cutting the population might help the planet and the stock markets.

Covid has pointed the way, a few tweaks or a second vector might do the trick. The random nature of disease is helpful, affecting rich and poor nations alike, although the poorly organised rather moreso. A propensity for white caucasoids might be a useful tweak.

Some here might think socialism could help out. Well only if we all lived very much simpler and cheaper lives. Snag is capitalism is not going away and will always be grabbed by the powerful. Cutting population cuts off that problem.

Our government has made noises about more education. But purely as a 'get them off the streets' move. More education is not going to get us out of the over population hole. It will merely increase the number of 'Jane Austen studies' courses and rich Vice Chancellors. Pleasant but useless. The useful studies are usually difficult and a very long slog.

Not a self interested notion but ultimately the viruses may save humanity from itself.


Interest is low because there is literally nothing worth investing in. In their endless pursuit of higher profits the capitalist class has impoverished their entire customer base. I'm looking forward to the coming reign of terror. I unequivocally support the brutal murder of any and all rich people.


UserFriendly - To a certain extent I expect you're right. Distribution issues aside, there's enough food for everybody, there's enough toys for everybody and producing these only takes up the efforts of half the population, so the other half are in make-work employment like golf course management and derivatives trading/free to pursue life enriching alternative occupations in the arts/whatever. The point is, the rich need to spend their money, because at this stage, investing is just shovelling more people from the essential 50% to the inessential 50%. probably not a bad thing in itself, but the whole 100% still needs paying, so there's not much capitalist incentive to do it.


Jim mate...the kids got sent back to school because “kids rarely get ill from covid”. Except they get mildly ill and then spread it to parents and grandparents. Genocide by disease progression.


Looking to the United States, the answer to a pronounced rise in savings appears to me to be a sense or worry that the economy is quite weak and looks to be in for a long time of restructuring. The increase in savings is by the wealthier or higher earners.

While I may be fortunate, I simply have to go to a neighborhood market to realize that the economy has changed sharply and will not just reverse. So, I am "cautious" and likely to remain so.


September 30, 2020



Cases   ( 453,264)
Deaths   ( 42,143)

Deaths per million   ( 620)


Cases   ( 291,678)
Deaths   ( 9,560)

Deaths per million   ( 114)

No matter the swagger of a Boris Johnson, I have been worried.


September 30, 2020



Cases   ( 769,188)
Deaths   ( 31,791)

Deaths per million   (  680)


Cases   ( 75,542)
Deaths   ( 1,971)

Deaths per million   ( 193)

What am I to make of these differences. Does Spain have a thoroughly undeveloped infrastructure relative to per capita GDP? Then too, does this account for the British coronavirus numbers relative to those of Germany?


Sadly for mainstream models, the more governments borrow, the lower interest rates go. Toss out your orthodox intuitions and look at the financial reality before you ...


«Interest is low because there is literally nothing worth investing in»

This taken literally is based on an old technical mistake by the neoclassicals, derived from several classical political economists, that the interest rate and the profit rate must converge at equilibrium, because only in that way savings and investments have to balance.

But JM Keynes pointed out that in a monetary economy with banking the interest rate is not the price of "loanable funds", but the price of *liquidity*. and the demand for liquidity is quite a different thing from the supply of savings or the demand for investment funds.

There is a relationship between the price of liquidity and the profit rate: people want to be liquid to keep their options open as to future investments, so for example expectations of future higher profits will make people keep more liquid to invest in the future rather than now, etc.; but the link is complicated.

«In their endless pursuit of higher profits the capitalist class has impoverished their entire customer base»

My guess is that the big asset owners have plenty already, and don't necessarily pursue higher profits, and the managerial "sharecropper" class have figured out that the easiest ways to boost their "performance" related pay is to asset strip or do "optimistic" accounting, rather than squeeze the workers.

So my guess is that they are squeezing the workers because of power: to keep workers down, make them needy, desperate for a job, living hand-to-mouth, always on the edge of becoming under-class.
Because they got terrified during the 1970s by the "who governs the country" question.


"So my guess is that they are squeezing the workers because of power: to keep workers down, make them needy, desperate for a job, living hand-to-mouth, always on the edge of becoming under-class.

Because they got terrified during the 1970s by the "who governs the country" question."

Sounds right to me. They used inflation to crush COLAs, and were so successful that mainstreamers still believe in an "inflation constraint" today. So we forget that Israel used inflation-adjustment for decades successfully. Inflation is just another tool of power to make us scared, and it's working spectacularly well with economists.

James Charles

"Johnson’s Tories don’t even try to do so. They have figured out – perhaps by accident – that the best response to capitalism's failures is not to talk about economics."?

"Why Brexit is a chance to fix the UK economy’s long-term problems
Growth rate since joining EEC in 1973 has been slower than in decades before entry"

James Charles

“this paper reconstructs global real interest rates on an annual basis going back to the 14th century, covering 78% of advanced economy GDP over time. I show that across successive monetary and fiscal regimes, and a variety of asset classes, real interest rates have not been ‘stable’, and that since the major monetary upheavals of the late middle ages, a trend decline between 0.6–1.6 basis points per annum has prevailed.”


October 1, 2020



Cases   ( 460,178)
Deaths   ( 42,202)

Deaths per million   ( 621)


Cases   ( 295,530)
Deaths   ( 9,586)

Deaths per million   ( 114)


October 2, 2020



Cases   ( 7,531,397)
Deaths   ( 213,305)


Cases   ( 6,471,734)
Deaths   ( 100,873)


Cases   ( 748,315)
Deaths   ( 77,078)


Cases   ( 589,653)
Deaths   ( 32,155)


Cases   ( 467,146)
Deaths   ( 42,268)


Cases   ( 298,362)
Deaths   ( 9,596)


Cases   ( 162,320)
Deaths   ( 9,402)


Cases   ( 85,424)
Deaths   ( 4,634)


And the problem is: Finance

See the consequences of Finance, are Thatcherism.

And the solution: Capital controls!


"it forces up either unemployment or debt in trade deficit economies; and it weakens the negotiating power of workers and exacerbates income inequality everywhere. The only ones who benefit from unfettered capital flows are international bankers and the very wealthy owners of movable capital."

"Global capital has become the tail that wags the economic dog."


"Keynes appears to have been correct about the risks posed by unstable capital flows."

"Our plea is that even if policymakers reject Keynes’ policy prescription in favour of Kant’s, as we believe they should, they do not ignore the risks that Keynes highlighted.

Some reach the opposite conclusion.


"the solution: Capital controls!"

Better solution: inflation-adjusted central-bank-financed universal basic income, so we can ignore whatever virtual games finance wants to play.

James Charles

“ . . . just
27:10 one comment to this what's the role of
27:11 banks in this in the creating all this
27:13 debt and it's just one minute on this
27:16 think of developing countries and Bill
27:18 mentioned the the you know the debt
27:20 crisis we've had in many emerging
27:22 markets of developing countries they've
27:24 been piled they've a huge debt its
27:28 national debt has been piled onto them
27:29 because essentially there be encouraged
27:31 by the Washington institutions to borrow
27:33 from abroad in foreign currency and the
27:36 ideas oh they don't have enough savings
27:38 there are no money for growing the big
27:40 international banks will lend the money
27:41 and this was done now the truth of the
27:45 matter is and professor of international
27:46 banking the rules of international
27:47 banking are such that all the dollars
27:50 they've borrowed and the pound sterling
27:52 they've borrowed and the euros they've
27:54 borrowed never entered their own country
27:56 at all they never got there so if they
28:00 borrowed abroad say pound sterling from
28:01 London 500 million for South Africa and
28:05 then the South African Finance Minister
28:07 actually we'd like to spend some of that
28:08 at home in South Africa and they tell
28:11 Barclays oh can you sort of change that
28:13 all no problem we'll exchange that for
28:16 South African Rand for you where does
28:18 Barclays get the South African Rand from
28:20 it calls their correspondent bank in
28:22 South Africa and says and you know we
28:26 would like to to do deal sell 500
28:29 million pounds sterling by a South
28:31 African Rand what's a good rate they
28:33 shop around they agree now where does
28:35 the South African bank get the money
28:36 from it creates it out of nothing so
28:39 actually the lender banks borrowed the
28:43 money from the developing countries from
28:45 their banks locally it was all a big con
28:48 that's how they got indebted their
28:50 assets and their resources where the
28:52 collateral
28:53 so that the foreign lenders which is
28:55 creating wealth getting the local banks
28:58 to create the money they got control
29:02 over these developing countries . . . “


27:10 one comment to this what's the role of

[ Please do explain what I am supposed to learn from this? I am lost.

Also, I do not understand this argument:

"Why Brexit is a chance to fix the UK economy’s long-term problems
Growth rate since joining EEC in 1973 has been slower than in decades before entry"

https://www.theguardian.com/politics/2020/jan/31/why-brexit-is-chance-to-fix-uk-economy-long-term-problems ]


"what I am supposed to learn from this?"

It supports the reasoning laid out in https://www.bis.org/publ/work890.pdf

"As clearly documented in Borio and Disyatat (2015), net bilateral financial flows generally do not correspond to net bilateral trade flows."

"the binding constraint on capital accumulation in poor countries is less about access to physical resources than access to financing"

In other words, economists such as Simon Wren-Lewis are talking about noise when they go on about "gravity theory" meaning Brexit will make every Briton poorer. Finance matters more than real goods trade, and London is still a finance center.


Roll up, Roll up!
Millions of marks, err investors, for a ponzi scheme too risky for the banks regulator, but not individuals. A guaranteed (actually not) exceptional return on your investment for life ... honest! Just sign your life away on the dotted line, you have no choice.


"Boris Johnson has promised to create "Generation Buy" with low-deposit mortgages to help get young people onto the housing ladder.

The Prime Minister said he would "fix" the problem of unaffordable deposits that has caused millions of people to put their dreams of home ownership on hold."

If finance can asset strip the UK, why not poorer countries as well, all is fair in fraud...and war.

Finance merely extracts from the real economy, like rent, any and all value...

James Charles

“ . . . might be insufficient domestic credit, which is not constrained by saving. “
https://www.bis.org/publ/work890.pdf P9.
“The finding indicates that advice to encourage developing countries to borrow from abroad is misguided. The question is considered why the economics profession has failed over most of the past century to make any progress concerning knowledge of the monetary system, and why it instead moved ever further away from the truth as already recognised by the credit creation theory well over a century ago.. . .
If and when such foreign currencies are exchanged by developing countries into domestic currency, they will merely result in an increase in credit creation by the domestic banking system, denominated in domestic currency. However, this is something any developing country can arrange for without the need to borrow from abroad at all (Werner, 2000, {http://citeseerx.ist.psu.edu/viewdoc/download?doi=}
Werner, Richard A., 2003a).
So the advice to borrow from abroad was largely against the interests of the developing countries: it exposed these countries to foreign currency risk, often resulting in mounting debt and interest outflows in excess of any loans received.”


"If finance can asset strip the UK, why not poorer countries as well, all is fair in fraud...and war."

Because the UK, once the world's reserve, now shares an unlimited currency swap line with the Fed, which replaced the BoE as ultimate issuer of the world's reserve.

The UK produces limitless financial goods. If asset-stripping occurs, it is because dim politicians and clueless pop economists (such as SWL) keep the voters in ignorance.

It is hilarious that the BIS economists in https://www.bis.org/publ/work890.pdf use a mainstream DSGE model to show that physical trade flows are unconnected to financial flows.

"global banks are largely responsible for
the fickleness and retrenchment patterns seen in the data"

The world central bank unlimited currency swap network can and should be used to mitigate free market fickleness and retrenchment.

"the binding constraint on capital accumulation in poor countries is less about access
to physical resources than access to financing"

So use public central banks to decrease fickleness in financing. Give everyone in the world a dollar-denominated basic income. No taxes needed.


I appreciate the responses, which I have carefully read and thought through.




U.S.A. said no in 1945

We understand the problem.


"Some who talk about recovering from the pandemic cite an appealing goal: a return to normalcy. But that is the wrong target; normal is broken. Rather, the goal should be, as many have put it, to “build back better.” Twelve years ago, the financial crisis offered a rare opportunity to change capitalism, but it was squandered. Now, another crisis has presented another chance for renewal. This time, the world cannot afford to let it go to waste."

But this is Boris promising to "Build back better"

Some people, the elites like it this way.

But I have my pitchfork ready, but I fear it will just rust away...


The expected Greenspan put or alchemy.

It seems Boris fumbled the details.


"It should obviously be the case that buyers are able to cope with shocks, and that people with mortgages are not taking on more borrowing than they can afford or perching on the ragged edge of affordability, ready to fall off at the slightest shock."


The Guardian Explainer.

"Since the 1990s, house prices have risen from roughly four to eight times the average national income. Many reasons, such as 1m homes lying empty and rising buy-to-let demand, are cited as reasons for exploding property prices while some factors are missed out entirely."


Ultra low interest rates explain house price inflation.

back to capx.co article.
"Traditionally, we think of housing affordability in terms of house prices, but the key obstacle for people is actually deposits."

No deposits reflect the risk of default.

"Graham's key point - and the reason the report is titled 'Resentful Renters' - is that the changes after 2008 have artificially distorted the market."

No you are distorting the market, as the Government is accepting the interest rate risk fixing at ultra low, interest rates for 25 years, the market/regulator are pricing this risk. A Greenspan put for the housing market. Just as Mrs Thatcher sold council houses at below market rates, this is a mortgage fixed (for 25 years) at historically low levels into an over inflated housing market.

If the housing market crashes, the Tories loose the next election, therefore the Government takes on the interest rate risk to prop up the market!


Surely there is a profound, tragic problem in infrastructure development in the UK:

October 5, 2020



Cases   ( 515,571)
Deaths   ( 42,369)

Deaths per million   ( 623)


Cases   ( 302,542)
Deaths   ( 9,606)

Deaths per million   ( 115)


October 5, 2020



Cases ( 515,571)
Deaths ( 42,369)

Deaths per million ( 623)

[ Evidently, just how difficult the situation is in the UK, which I have repeatedly sought to call attention to since the ratio of deaths to cases pointed to an undercount, is now understood. Awful, awful. ]



Paul Krugman @paulkrugman

Words fail me. Numbers too.

Max Roser @MaxCRoser

In the UK the number of cases rose rapidly. But the public – and authorities – are only learning this now because these cases were only published now as a backlog. The reason was apparently that the database is managed in Excel and the number of columns had reached the maximum.
10:13 AM · Oct 5, 2020

The comments to this entry are closed.

blogs I like

Blog powered by Typepad