Notices by Jonathan Schofield (urlyman@mastodon.social), page 4

@goatsarah https://mastodon.social/@urlyman/112710311276045373

…money creation and money supply is a domain of technology, so it seems it *should* be coherently understandable. We created it after all.

But what if it isn’t. What if some of it is analogous to the ‘black box’ effect of AI. We can see the inputs and the outputs but actually the complexities of its innards means that even its high priests have an understanding that is imperfect? 🤔

…In other words, we think that tax and spend are simple *direct* levers. But they’re not. It’s a complex system, albeit of our own creation.

NB: this is me ‘freewheeling’ out loud. I don’t know what I’m talking about and I’m mixing my metaphors

…Is it perhaps the case that if we clawed back the crazy transfer of wealth to the already wealthy that there has been, in the form of taxation, that that **wouldn’t pay for anything**.

But what it would do is:

1. Contract the money supply thus creating the breathing space for productive investment in things that are actually good (education, health, housing)

2. Reduce inequality which is then a dampener on resentment

3. Lower inflation

…Anyway, these thoughts occur to me as I reflect that yesterday I said this – https://mastodon.social/@urlyman/112547449207961294 – (ie: we do have the money), but maybe not in the way I have been conditioned to think…

When it comes to macro economics I’m stumbling around in the dark. I’d like to have a coherent understanding but there are conflicting narratives I don’t have a firm enough grip on to be able to reconcile.

It seems to me that there are

a) folks who really do know what they’re talking about but aren’t in power
b) folks who are *in power* who are no more coherent than me
c) folks who are in power who do understand things coherently but are also very happy that most people don’t

…So planning for [an #energytransition] is about planning for the use of *real resources.*

To build the infrastructure of a post-growth economy which is going to allow you in time to move back within planetary boundaries, you’re going to have to manage inflation risk while you do this.”

20 minutes in at
https://www.planetcritical.com/p/what-we-get-wrong-about-money

…If you don’t [have the productive capacity], and if you can’t import [it], then at the moment you’re either going to have to build up that capacity, or if you try to go ahead too quickly with those investments and you’re competing with the private sector for skills or technology which is in short supply, it could be inflationary…

…Beyond understanding that tax doesn’t pay for anything – because it destroys money – the key point is to understand what drives inflation.

Steven Hail puts it like this:

“You are limited by the productive capacity of your economy. So your ability to transition to renewables depends on whether you’ve got the materials, the skills, the technology, the institutional capacity to go about doing that…

The above is my attempt to reword in bullet point form what @RichardJMurphy wrote last year: https://www.taxresearch.org.uk/Blog/2023/04/28/sorting-out-the-spend-and-tax-cycle-in-modern-monetary-theory/

If I’ve got any of the details wrong, please correct me!

Tax

‘A’ is an economic actor with a tax obligation.

(Without tax there is no need for the currency.)

1. A instructs its commercial bank to settle their tax obligation
2. A’s commercial bank:
- debits A’s bank account by £X of *commercial bank money*
- debits £X of *base money* from its own Central Bank Reserve Account (CBRA)
3. Central Bank instructs the goverment’s tax office to settle A’s tax liability

Outcome:
the money supply has *decreased* by £X

This is me trying to synthesise and articulate things I have recently read and listened to…

- - -

How money gets created and destroyed by governments:

The principles below apply to a gov’t with its own sovereign-currency-issuing central bank: the UK and the USA being examples.

Things are more complicated for the Eurozone where 20 of the European Union’s member states share a common central bank. And more complicated still for a country with high levels of foreign currency denominated debt

Government spending

‘A’ is an implementor of government policy.

1. Government instructs Central Bank to credit A with £X for desired spending
2. Central Bank credits A’s commercial bank with £X of *base money*
3. A’s commercial bank
- receives £X of base money into its own Central Bank Reserve Account (CBRA)
- credits A’s bank account with £X of *commercial bank money*
4. A’s bank account has £X more commercial bank money in it than before.

Outcome:
money supply has *increased* by £X

The point of a wealth tax may not be to raise revenue. I confess I’m confused about whether tax pays for anything at all.

Let’s say it doesn’t, because:
- https://mastodon.social/@urlyman/112551829309979263
- https://mastodon.social/@urlyman/111918887148493591

But, taxing wealth is still *vital*.

More equal societies are happier and healthier. And also the *only* route to low carbon economies (other than collapse).

The point of a wealth tax is to make it socially unacceptable to be obscenely rich

It is with great sadness that I learn today that after weathering the elements for close to 5,000 years the sarsen stones of Stonehenge have been dissolved by some orange powder

#climateDiary

Meanwhile:

“If you look at the fossil record you can see there was this same pattern at the end of the Permian, where two-thirds of marine genera became extinct. We don’t have identical conditions to that now, but it’s worth pointing out that the environmental changes going on are similar.”
—@DrAndreaDutton

https://www.theguardian.com/environment/article/2024/jun/04/extreme-heat-oceans-acidification

#climateDiary

I saw about 3 questions’ worth of the #itvdebate last night. It was as facile as I expected.

The dynamic of it was something like this:

Q: these floorboards and the ones of the floor beneath and the ones of the floor beneath that are riddled with dry rot. How will you make this building safe?

Sunak: our oil investments will allow us to put a nice oil finish on all the floors

Starmer: that’s ridiculous! We will use wax

@pvonhellermannn same

…Some key differences:

- the UK has far less money involved directly in politics
- we have 1/5th the population but our economy is about 1/12th the size of the US
- our oil reserves are roughly 1/24th (I think) and our currency doesn’t flow through petroSterling the way the US is awash in petroDollars
- we have the NHS
- we have waaaaaaay fewer guns
- we don’t yet have the same powerbase among delusional Evangelicals.

What else?

This is worth a watch.
The UK is in the same self-imposed political bind as the US. It’s just different in degree

https://mstdn.ca/@dbattistella/112346920945245590