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September 28, 2021



"I regard minimum wages as a second-best, a means of achieving what would in a better world be done not through state diktat but collective bargaining."

Pity the poor cornershop workers. Or does your better world also include One Big Union? (If so I'm all for it, btw.)


Interesting read. There have been a series of investigative reports in the Guardian recently which on how EU expansion eastward created a huge pool of exploitable labour in the trucking and meat packaging industries and how this has discouraged native labour participation in wealthier European countries.

If Brexit does manage to reduce our dependency on such labour, it may have a silver lining.

Apart from a few economists such as David Card, however, I have generally been unimpressed by the approach taken to study the role that globalisation and automation (two things which can't really be separated) has played in contributing to inequality by the economics Profession. I am really wary of what these econometric approaches can really tell us.


Our blogger should be against that high minimum wage, because it would minimize either immigration or immigrant rights: why hire immigrants if you have to pay them the same or give them the same rights?


Slightly puzzled that you don't mention profit. Higher wages don't necessarily lead to higher prices if profit is reduced instead. In the for-profit care home sector for example where much work is at minimum wage, I and others have observed that very large amounts of operating profit (in some cases around three-quarters of wage costs) are washed out in payments to associated companies abroad in inflated 'admin expenses', rent or 'financing costs'. The difference between the wage bill and the real cost of production would allow considerable increase in wages with no impact on price. Less money would flow to tax havens abroad of course.



That is an argument for nationalizing the care sector, not raising the minimum wage, surely? There is nothing in your schema that would stop a for-profit hoovering up exactly the same profit as before? Or even more, because state-funded elements would stop, presumably.


"Part of the answer is to regard a higher minimum wage not as a standalone, isolated technocratic fix but as one of a suite of policies to improve life for the worst off."

That is the most depressing, disgraceful thing about the whole affair. Given the massive consequences of such a proposal, one might have thought it would already have been incorporated into a raft of linked and carefully thought through measures to show exactly what was meant to be achieved, how everyone unwaged is expected to cope, what happens to sectors (e.g. childcare) where virtually every worker earns far less than £15/hour even in the not-for-profit settings, why it is £15/hour and not anywhere between £9 and £90/hour, what inflationary impacts (and real resource constraints) are expected and how they would be mitigated, or at least play out. But these people have chucked it in as a gambit in some tedious internal political squabble. It isn't as if they haven't had years to do the hard work on this but no, it has been obviously made up on the hoof.


When even experts from the Joseph Rowntree Foundation and the Resolution Foundation are saying it is more important to bear down on zero-hours contracts and precarious employment than to raise minimum wages:


it is a sign that the benefits for alleviating poverty by raising the minimum wage are running out. A minimum wage of £15/hour for a 37.5 hour week would put the earner in the top 40% of UK incomes.




"I regard minimum wages as a second-best, a means of achieving what would in a better world be done not through state diktat but collective bargaining."

The union membership rate in the US for private workers was a mere 6.3% in 2020:


An equitable minimum wage is necessary, along with sufficiently expansionary fiscal policy to assure high employment.


September 29, 2021


United Kingdom

Cases ( 7,771,294)
Deaths ( 136,525)

Deaths per million ( 1,998)


Cases ( 96,106)
Deaths ( 4,636)

Deaths per million ( 3)

[ What a tragedy for Britain, but looking for alternative approaches to controlling the epidemic is evidently not possible for Conservative or Labour leadership. What a self-defeating tragedy. ]


What is not clear to me, is estimating what sort of economic penalty is being caused by Conservative coronavirus policy. Is there any such penalty? What then about the US? Has the unfortunate policy in the US, limited the economic recovery? I have no idea, though I should have.


As always the solution to zero hour contracts is simple.

Non-contracted employment would attract a legal premium of 100%.

This would mean a £15 per hour would attract a payment of £30 for each hour of a zero hour contract.

Just how much do employers value flexibility and how many staff would be switched to fixed hour contracts?

(Or fixed hours with double rate for overtime)

No dilemma

The minimum wage is a moral issue surrounding exploiting people.

See the meat packing industry:

"The booming meat industry has been supported by a steady supply of migrant labour, with the Netherlands home to the fastest-growing flexible labour market in Europe, with almost 40% of workers either on temporary contracts or self-employed."

Of course some do well out of a poll tax.


"The BBC provoked fury today after handing its chief Tim Davie an inflation-busting £75,000 pay rise to £525,000 after millions of over-75s lost free TV licences.

The 16.6 percent rise also follows job losses at the broadcaster and millions of pounds in cuts to services."

"1. Gary Lineker - DOWN

2020: £1,750,000-£1,754,999

2021: 1,360,000-£1,364,999

Pay cut taken: £390,000"

Not to mention other work for B.T. and a crisps manufacturer etc.

That is not to mention finance, e.g private equity etc.

A basic income is a moral right as a member of society (By birth) and work should attract additional income, if desired.

With the 0.1% detached from society we should impose taxation to make the situation more equal with consequences.

They are not above the rules of society.

The 0.1% have been indulged for far too long.


September 28, 2021

Should the MPC tighten monetary policy?

The general expectation is that they will, but is this the right thing to do?

Inflation in August was above target at over 3% (total or core). UK earnings are estimated to be back to their pre-pandemic levels, despite GDP being well below pre-pandemic levels. Chris Giles forcefully puts the case for some tightening.

It is tempting to argue against any tightening by drawing analogies with the US. Their inflation has been running at around 5%, yet the Fed has not yet started tightening, despite a far stronger fiscal stimulus in the US compared to the UK. One argument for ‘seeing through’ current inflation is that it stems from temporary shortages following the end of the pandemic. Latest data for core inflation suggests inflation rates are now beginning to fall....

-- Simon Wren-Lewis

Donald A Coffin

This has absolutely nothing to do with this post.

But whenever I try to link to a post, FB tells me I am violating its community standards. I do not know exactly *why* FB has a problem, but I am all but certain it has to do with the blog name...


My point is that cuts in hours is a desirable outcome at a higher hourly rate.

Zero hour contracts are just a method of reducing wages, as are faux self-employment.

We need a basic income.
A higher minimum wage.
Non-contracted hours or self employment should attract a risk premium of at least 100%.

We are all born naked, so some get a plastic spoon (if that) others a silver spoon. We should all have an equal call on the resourc2s of society.

The BBC is funded through a flat rate poll tax, and entertainment through copyright: Both Government diktat, I could go on about intellectual/physical property and finance are rigged by state diktat and are no part of free exchange.

Of course the media have propaganda power need to be co-opted and therefore need to be co-opted into maintaining the status quo.

As for Simon (W.L.) question: The whole house of cards/debt (e.g housing market) could collapse under the weight of debt.

Of course the accumulation of debt secured against property is just more exploitation, especially if you are in the 40% who don't own property!

Then we have a corporate take over of domestic housing as per the U.S described in a Guardian article by Mark Blyth.


«The whole house of cards/debt (e.g housing market) could collapse under the weight of debt.»

As long as the BoE is "accommodative" debt is not a constraint. The real constraint, like in any banana republic or operetta kingdom, is the balance of payments, especially as since 2007 the UK is no longer an oil exporter.

«exploitation, especially if you are in the 40% who don't own property!»

Property (and business) owners outside the "golden" tory areas of the Home Counties and London are also getting shafted, because Conservatives and New Labour have been ruthlessly doing whatever they can to attract new tenants and buyers from the "pushed behind" areas of the UK (and from abroad) to the south-east to pump up housing costs there.


September 30, 2021


United Kingdom

Cases ( 7,807,036)
Deaths ( 136,662)

Deaths per million ( 2,000)


Cases ( 96,128)
Deaths ( 4,636)

Deaths per million ( 3)

[ Beyond the distressing illness, what is the economic cost that the UK is bearing for the continuing of the epidemic? The government evidently assumes no meaningful cost, but how can that be so? ]



September 30, 2019

Keir Starmer’s Speech – Labour’s Best Thing Since Stale Bread
By Yves Smith

[ Betraying the principles of Labour, is what the guy is all about. ]


Mark Blyths article:


"In short, the pressures that used to affect those at the bottom end of the income scale are creeping ever upwards. The returns from a college degree have been flattening out while student debts continue to rise. Tenants’ rights are now a white, middle-class issue, and for the vast majority the ability to secure a good job to pay the rent seems ever further out of reach."

End game:
You will own nothing (Corporate ownership of everything).

Everything will be a (charged for) service.

You will not be able to sell your labour.

Minimum wage and other employment contracts may need a minimum duration (Currently one month rolling is the custom and practice) or people will be contracted by the hour on the hour - because Exploitation/Lawyers.

The future is more serfdom if business especially finance, creates the laws!


《 The real constraint, like in any banana republic or operetta kingdom, is the balance of payments 》

https://www.bis.org/publ/work890.htm :

《 We extend the standard open economy macroeconomic model to include credit creation, thus allowing us to study gross capital flows. The model clarifies that it is shifts in cross-border gross financial positions, rather than changes in real saving, that finance economic activity. 》

Don't even mainstream DSGErs these days recognize that financial flows dwarf and determine real trade flows? Are Eurodollar exports manufactured in City spreadsheets, and can the resulting assets be used to afford any energy inflation, because you hedged rising gas prices by buying calls?

《 how might we counter the potential inflationary impact of full employment and higher wages, 》

Simply index fully, as Israel demonstrated for decades? And since our technology is better now, can we automate away the manual indexation frictions that became the excuse to replace Cost Of Living Adjustments with punitive, statist, controlling measures like price controls, jacking up interest rates, austerity, etc.?

《 The future is more serfdom if business especially finance, creates the laws! 》

Can finance be a tool we can use for good?


«Minimum wage and other employment contracts may need a minimum duration (Currently one month rolling is the custom and practice)»

So the new normal is that the "job security" to aspire to would be "employment at will but with 30 days notice".

«or people will be contracted by the hour on the hour»

This is the very near future, "Zero hours" by T Maughan:


The politics are fairly simple:

* There is a large minority in the UK of "petit bourgeois" small property owners and landlords, and pensioners on good final salary fixed incomes (two categories that often overlap), who vote relentlessly for a low-wage, high-rent economy.

* There are several billions people around the world whose dream is to be “contracted by the hour on the hour” at £1-£2 per hour, and UK workers have to compete with them.

Given these the agents of rentier interests have figured out that:

* It is cheap and easy to create identity politics based "progressive" campaigns.

* It is cheap and easy to "sponsor" many of the would-be representatives of workers/renters.

What to do? Apparently the young people (or the old people from "pushed behind" areas) find it difficult to self-organize, in part because their would-be leaders who are not "sponsored" by rentier interests are more interested in debating politics than doing politics.

As "This is London" by Ban Judah describes, the overall outcome is an increasing return to dickensian conditions.


The Government sets the rules society operates by and is responsible for the scale of inequality.

Let's look at the ways the "petit bourgeois" and businesses damage society.

First the "petit bourgeois" may find their debt funded property Ponzi scheme collapses.

On to business (quickly, off the top of my head).

Pure rent seeking and state sponsored wealth extraction.

Intellectual property:
More rent extraction, while consecration of wealth of monopoly/monopsony gate keepers under the banner of entertainment and innovation. Rent extraction requires less capital and higher returns than doing/making things or servicing a customer, but this may be a minor by product (e.g Big pharma).

Exploration of people abroad, to facilitate the exploitation of people at home due to a vast pool of labour.

Monopoly/Monopsony (often through concentration of ownership).
Artificial restrictions (including intellectual property) to control prices of products/services and inputs (e.g. labour) inflating profits or asset stripping companies to maximise returns.

Business is destroying civil society.
But Keir Starmer only sees the genius of the private sector.

As for the balance of payments - see outsourcing and the waste of national resource. We need to both substitute imports and export advanced manufactured goods.

The status quo is not sustainable and the UK politicians will continue to manage decline to favour the rich as the pushed behind expands.

"And therefore never send to know for whom the bell tolls; it tolls for thee."

John Donne, No man is an Island.

In a word no.

I'm with Warren Buffet.


"Not widely understood, and with the potential to do terrible damage in the wrong hands, they have been labelled “weapons of wealth destruction” by Warren Buffett, the US investor, who is one of their biggest critics."

How can anything manufactured in a spreadsheet be anything other than a fraud? See Finance above.


«The Government sets the rules society operates by and is responsible for the scale of inequality.»

A lot of voters think that there is too little inequality between english asset owners and workers.
Some votewrs others think that what matters is inequality between the average of english people and average foreign workers, and that offshoring and immigration reduce that inequality, and that is quite a good thing (even if it increases inequality within the UK -- the greater good is that of the greatest number of people).

«the ways the "petit bourgeois" and businesses damage society.»

First: businesses are a good thing, but many people write "businesses" when they mean "business owners".

Second: the "petit bourgeois" and business owners think that "society" is themselves.

Different people have a different inclusiveness of the idea of "our own", and many tory voters don't include the "lazy, uppity, greedy" UK lower classes in their idea of "society". Pious preaching is not going to change that a lot...



If I wasn't clear:

Gas storage mitigates against peak demand.

Gas futures just transfers the risk.

Gas derivatives just gambles on price movements and justifies money creation to create the capital to fund this

non-existent trade and the fees extracted by the operators of the non-existent economic activity.

A shell just game watch the money disappear into bonuses for traders and their bosses, causing asset inflation.


My take on this is that there should be a minimum income because of bargaining power inequalities. But it should not be too high. Protecting incomes by manipulating the price is a bad idea, you are simply asking the market to do something that it is not designed to do. History is simply the lesson - the market is amoral. The right solution is a UBI and higher taxes to offset the UBI. This not only improves the economic security and bargaining power of the poor, it provides regional stimulus (possibly easing housing shortages as a consequence) it should also promote entrepreneurship, including social entrepreneurship. It would also kill 0 hours contracts.


If wishes were horses even beggars would ride.


Nor am I Ozymandias

I do know that the road to hell is labelled 996.

UK staff are rejecting the wage rates and working conditions of UK businesses.

All I can do is join the Cassandras warning of a new gilded age.


"the ball held in New York City in 1897 exemplified both sides of the period in which it was held. The very wealthy flaunted their newly extravagant lifestyles, viewing their riches — a result of that century’s great social and technological changes — as proof that the U.S. was on the right track. Meanwhile, others in the city struggled to get by."

Of course if like Boris I was "King of the world", but we are back to wishes and horses...


@aragon: is Buffett being disingenuous?


《 Essentially, while acknowledging the risk of derivatives like options, Berkshire Hathaway went on to say that they are a useful product in which the firm is heavily engaged. [...] The moral of the story here is don't buy into the headlines around Warren Buffett and options contracts. The truth is the exact opposite -- you might say that Warren loves Warrants. 》

Is the view that finance is just rentierism hopelessly naive? Rather than extracting money from the poor, does finance simply create more new money much faster than prices (even asset prices) rise? Why can't we use this knowledge to fund basic income, thus raising everyone's welfare simultaneously, in willful defiance of mainstream economic fables about Pareto optimality? Does finance give us a way to eliminate imagined mainstream constraints such as inflation, because central banks can control expectations by buying and selling inflation swaps?

《 Gas futures just transfers the risk. 》

Haven't central banks amply demonstrated they can assume any risk at zero taxpayer cost?


Also, see https://www.suerf.org/doc/doc_03afdbd66e7929b125f8597834fa83a4_4731_suerf.pdf&ved=2ahUKEwiyg4fo16nzAhU6EDQIHbRcBc8QFnoECCYQAQ&usg=AOvVaw2jKAzQIFksQx1GqNbHK5aK (sorry for the long ugly bare link) on current accounts:

《 the analysis clearly showed that any analysis of a country’s vulnerabilities related to current account deficits and international borrowing needs to prominently feature financial factors, drivers, and interactions. [...] This framework showed that current account deficits are not automatically “menacing”. Instead, in countries with certain characteristics of their international portfolios (including many of the OECD economies analyzed in this paper), current account deficits can automatically mitigate the negative impact of certain shocks (especially domestic risk shocks) through international risk sharing. 》

If your investments abroad return more than your trade deficit, can't you keep funding your imports?


Broken link - can you just search for "Bank of England External MPC Unit Discussion Paper No. 46 - SUERF"?


If your investments abroad return more than your trade deficit, can't you keep funding your imports?

[ Importantly so, both for the UK and US. ]


May I submit two more pieces of evidence, the first supporting the Fed's ability to assume any risk:


《 The Fed's forceful response to pandemic-induced turmoil in financial markets shored up investor confidence and improved market sentiment, effectively forestalling fire sales and stabilising conditions in the market well before the Fed bought anything. 》

In other words, frontrunning the Fed was profitable?

Second, from http://econbrowser.com/archives/2021/09/the-us-net-international-investment-position-and-projections-of-us-net-income

《 The United States is able to earn positive net international income despite its negative net international investment position because the average yield on U.S. investments abroad has exceeded the average yield on foreign investments in the United States. 》


The Fed only assumes risks for finance! (e.g AIG during the financial crisis). Not ordinary Americans (ditto BoE).

I haven't read the papers (yet) but.

I thought Long-Term Capital Management (LTCM) had tested the concept that you can hedge your way to profit.

I don't think this works for countries, even the U.S. has the dollar as a reserve currency.

This seems particularly dangerous with regard China, and transfers control offshore. Product manufacturing innovation often occurs where the product is manufactured, as obviously control over supply, not to mention intellectual property (go on then).


"The Semiconductor Heist Of The Century | Arm China Has Gone Completely Rogue, Operating As An Independent Company With Inhouse IP/R&D"


"Despite formally being fired, Allen Wu has remained in power. He ousted executives that were loyal to Arm. He has even hired security paid for by Arm China that reports to him. This security has kept Arm out of the Arm China offices. Allen Wu has aggressively taken over the firm and is operating it how he sees fit. One interesting tidbit is that Allen Wu sued Arm China in order to declare his dismissal illegal. He essentially sued himself as he represented both sides in that specific court case.

Arm has halted the transfer of any IP to entities on export control list. According to Arm, no IP has been stolen. Simultaneously, Arm has also tried to appeal to the government stating that this is bad for the Chinese semiconductor industry."

There is also the internal distribution effects of investment income.

"Outsourcing" breaks the social contract of the country (as does finance and business in general).

This is not distributing risk, weren't derivatives, hedging, and Mortgage Backed Securities, all supposed to that?

Finance is corrupt and corrupting.


Aragon, can the Fed learn? In the 1930s, the Fed didn't even bail out finance, but it has learned to cut short real economy recessions by pumping stocks? Why can't you and I influence elected representatives to ask why can't the Fed bail out little guys too with an inflation-protected non-tax-funded basic income?

Was LTCM's real flaw just political, like Lehman's? Big players could have bailed them out but essentially they were allowed to fail, as a signal? And that tactic failed because hedging has increased since LTCM and letting Lehman's fail caused a spreading panic resulting in much more intervention?

Why can't we figure out how to 3D print our own chips? Can basic income help unleash individualized innovation in ways that capitalism inherently stifles (because selling subscriptions to centralized, locked-down production is more profitable than innovating stand-alone production)?

Can finance be a virtual place for some humans to play with fictitious assets, while I get to live my simple basic income life pursuing knowledge, unmolested?



"The Semiconductor Heist Of The Century"

Having read this article carefully, I have no idea what the article is about. Please explain if possible, and is there another source?

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