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[00:00:41] I don't know why you want to put up people's taxes. This is the Debunking Economics podcast with Steve Keen and Phil Dobbie. Well, we are in the midst of a UK election campaign, and it's a choice between two parties
[00:00:56] with very little difference, it seems. Certainly in how they account for the government budget. They both say they are fiscally conservative. They both see the need to reduce government debt and they are arguing over how they're each going to pay for their spending promises.
[00:01:09] But are they just leading the UK into a future with a continued stagnant economy with deteriorating public services? Will much change? Whoever wins? That's this week on the Debunking Economics podcast. Well, we are recording this just after the first televised debate between Rishi Sunak and Kias
[00:01:36] Dharma before the second debate. By the way, apologies for those people who are not in the UK. I think what we're going to talk about relates to any country, any politics anywhere in the world right now. But just to say that we are a little
[00:01:49] bit out of date because the free version of this podcast is already a week old, really. But we know the general direction. We know Rishi thinks Labour doesn't have a plan. We should stick with him. Better than devil, you know.
[00:02:00] Both sides are arguing that they're going to be fiscally conservative. Why? Because. And I think this is the key thing today. Everyone is worried about that Liz Trust moment when she announced plans in a very short period when she was Prime Minister to grow
[00:02:14] the economy by cutting taxes. And it was uncosted without the involvement of the Office of Budget Responsibility who supposedly provide independent analysis of public finances. The bond market went crazy as a result. UK guilts were sold off.
[00:02:27] They lost so much value that pension funds had less capital than they needed. And the Bank of England had to step up to buy those bonds to get the prices back up again. So markets are driving the agenda even now. So political parties live in fear.
[00:02:43] So that's a bit of a bugger, isn't it, Steve? We'll talk about the various policies, but over arching through all of this, it's the city driving the economy and therefore driving the social agenda. Politicians only have so much room to move.
[00:02:55] And I'm sure that's just not a UK phenomenon. I'm sure it's the same the world over. Oh, it is. I mean, what I mean, people would know the phrase the military industrial complex. They probably wouldn't be aware that the first time it was added was by
[00:03:08] President Dwight D Eisenhower, ex-general Eisenhower when he was leaving office. And he talked about how the military industrial complex dominated policymaking in America at the time. This is back in the late 50s, early 60s. And now and then back in those days,
[00:03:24] the financial sector was quiescent. You had a very low level of private debt, historically speaking. And we've just been through the roaring 20s, the Great Depression and the Second World War. And then the aftermath to that. And in the aftermath, the banking sector was totally cowed
[00:03:44] because a large number of bankers had gone to jail, and justifiably so, in the aftermath of the stock market bubble crashing in 1929 through what's called the PCORA Commission. It literally put a lot of the bankers in jail, and that meant the banking sector did what it was
[00:04:00] told. Now you've got three times the level of private debt we had back at the end of the Second World War compared to the GDP. And it's now the bankers who tell the politicians
[00:04:10] what to do, which was the case during the 1920s. So is the issue that since then, we've now got so much more money invested. On the one side, we could say, well, let's follow
[00:04:23] modern monetary theory. Why don't we do that? Why don't we say it doesn't really matter how much government debt there is so long as things are reasonable, so long as it's sensible, and so long as it's not inflationary? Let's not worry too much about government debt. Let's
[00:04:36] do what Liz Truss wanted to do. And I can't tell you how much it hurts me to say that. But let's go for growth. Let's cut taxes. You can argue the best way forward, but just the
[00:04:48] general principle, let's not be too concerned about government debt. The reason we can't do that is because now there's so much money tied up because over time we have issued so many government bonds. That has become such a fundamental instrument within people's portfolios,
[00:05:07] investors' portfolios, and those investment portfolios are so huge now we are completely answerable to what the yield is on bonds, for example. So any movement which can be driven by an evaluation of government policy has everyone running scared?
[00:05:26] Not really. I mean, yes, that certainly happened with Liz Truss, but it was also the background of the increase in interest rates under the belief that the, again, mainstream economics teaches that you can reduce the rate of inflation by increasing
[00:05:42] the rate of interest. And what that actually did when you have long-dated bonds, so bonds of an order of more than 10 years, 25, 30 year government bonds, the increase in the interest rate reduces the value of the bonds. Not quite one for one, but it's fairly close.
[00:06:02] So if you have interest rates increasing by a factor of five, you push bond prices and long-term bond values down by a factor of three or something of that nature. So you think it's interest rates from the central bank rather than the volume of bonds?
[00:06:16] Interest rates are what pulverized bond prices initially, and then Truss comes in, and at that point because you already had fragility built in by what the Bank of England had done, then she added to that fragility and bang, you know,
[00:06:28] the let us last longer than Liz Truss. But fundamentally, the markets, this is actually, of all things, a very good, very brief, I've got to see if I can locate it again. I'll put
[00:06:39] it up on my Twitter feed and on Patreon and Substack. There's a very good little short video by the Reserve Bank of Australia explaining how they use their own capacity to buy and sell
[00:06:51] bonds to maintain the rate of interest within half a percent either side or quarter of a percent either side of the target rate they themselves have set. So it's quite standard that the Bank of England by buying and selling bonds can control the yield on the bonds,
[00:07:08] and that means the face value doesn't fall as dramatically as it could do. And but that was just, you know, by the bank dropping the ball by believing conventional economics about putting up interest rates to control inflation. They already put the economy
[00:07:25] in a beautifully fragile place, and all you've got to do is drop Liz Truss on top of it. Right, but now everyone's fearful that, you know, the same thing will happen again if they,
[00:07:32] if their spending gets out of control. So let me go, this is lifted from the Labour Party's website. You can't get too far on the website by the way. Every single page there you have to click something saying you don't want to donate right now,
[00:07:43] which gets me infuriating when you're sort of like going through. You almost feel like, well, okay. If I pay, will I lose this pop-up? But anyway, it's a bit like those, you know,
[00:07:55] do you want cookies? You know, we've got to get rid of that now. Surely that's one benefit of coming out of the European Union, isn't it? That we, you know, we lose that regulation,
[00:08:03] that we have to have that pop-up. Anyway, I digress. Here's what Labour says on their website. On the economy, they say growing the economy on secure foundations will be the number one mission of the next Labour government. Labour will deliver stability with iron discipline
[00:08:17] guided by strong fiscal rules, robust economic institutions and a new fiscal lock to ensure we never repeat the mini-budget that sent mortgage rates soaring. Sounds a bit like a Tory party manifesto, doesn't it? It's a Tory party manifesto. I mean, I love George Galloway's
[00:08:34] comment, which you can probably do for us better than I can, but he said that Labour and Conservatives are two sides of the same. Exactly, two cheeks of the same buttock. Yeah, exactly. Well, I mean, except, you know,
[00:08:48] once you get beyond that on this foundation of stability, we will deliver an investment and return to grow the reform, sorry, investment and reform to grow the economy, build 1.5 million homes, making work pay, creating a new national wealth fund
[00:09:03] and introducing a new industrial strategy. So let's go through all of those. When we need more homes, making work pay, presumably that means, you know, getting, making sure everyone's getting a fair pay for their work. Not sure about the national wealth fund,
[00:09:15] to take your ideas on that and in a new industrial strategy. Well, hell, you need one of those, don't you? You've actually got to give a sense of direction for the country. Yeah, I mean, there are certainly differences in how the two parties behave in power,
[00:09:26] but I think you can draw an analogy with the Liberal Party and the Labour Party, which for those who don't know Australian politics or the Conservative Party and the Labour Party of Australia, and it's certainly people were very glad to see the end of the Conservative
[00:09:41] Party in Australia, particularly with Scott Morrison, who was probably the worst farce of a prime minister the country's ever had. But nonetheless, the change in in and there've been some change in emphasis, but overall, they're still approving coal mines.
[00:09:55] There's still, you know, fiscal responsibility, blah, blah, blah. They have done, they've loosened the screws a bit, but not a lot. And my basic analogy, given the fact that both these all political parties are run by people who have swallowed economic theory,
[00:10:11] unfortunately, conventional economic theory. And what you have is the Conservative parties impose what we call neoliberal policies and are happy about it. And the Labour Party imposes neoliberal policies and apologises for it. But that's about the, you know, yes,
[00:10:27] there's a difference. I'd rather have Labour than Conservative in the UK, as I would rather have Labour than so-called Liberal in Australia. But fundamentally, they're still singing from the same hymn book. Yeah. And they're neck and neck in the polls of the latest news poll
[00:10:41] in Australia. 52-48, two party per feds. So Labour is still in the lead, but you know, it's close, isn't it? So they won't want to get out of step. So let's look at, OK,
[00:10:51] so they should be they should be less worried about the involvement of the financial markets. I mean, the financial markets. This is this is the one of the things that people don't realise is that this, you know, that the central obviously the central bank sets interest
[00:11:08] rates. That's why they've risen. There was no market pressure for rising interest rates over the last, you know, what, three years since they've since the Covid boom occurred. Rather, we had the Covid recession with the shortest recession in American economic history
[00:11:24] and probably also the UK. And now I've got the Covid boom afterwards because of the amount of government spending that was done. Now, that doesn't make a case for the modern monetary theory argument. The government boosts the economy by creating money by spending more than
[00:11:36] it gets back in deficits in taxation. I don't know what does. And the consequences. Exactly. But that's what gave us inflation as well, of course, didn't it? Because we have no no no no no. This is you'd have to say it's problematic.
[00:11:49] It enabled the inflation. There's a little I haven't yet written it up, but I wanted a little blog post where I'm going to take the National Rifle Association, you know, the line they make guns don't kill people, people kill people.
[00:12:01] Well, money supply doesn't put up interest rate, put up inflation rate, people put up the inflation rate. And when you see what actually caused the inflation and I did the disaggregation for the most recent book of about it's written, but hasn't it been
[00:12:15] published? That's one I'm serializing on my Patreon and sub stack blogs. When you look at what causes inflation, you can break it down to corporations putting increasing their markups, workers demanding higher money wages or a fall in productivity
[00:12:31] caused by things like, hey, Covid lockdowns, supply chain disruptions and so on. And when you when you factor the two which people can make a decision about are the first two markups and wages and only for about four or five quarters across the whole
[00:12:47] period of Covid. So, you know, if you take Covid starting at the beginning of 2020 and going through to now, then you have about 20, 15, 16 to 20 quarters of time only for three or four of those did wages rise faster than the rate of inflation
[00:13:03] for almost all the others and some of those as well. Markups. Markups. Right. OK, but why those markups? But the reason for those markups, the reason you can get away with those markups is because people have that ability to buy.
[00:13:14] You can't markup. That's why I see money as an enabler, but not a call. It enables markups. It amounts to the same thing, doesn't it? There was so much that people had the money to spend at the same time that we
[00:13:26] had a supply constraint because we, you know, devastated our supply chains. So the response to that was companies saying, oh, we can charge, you know, there's there's a cost of raw materials. People had the money to cover the cost of
[00:13:39] those raw materials where businesses said, well, well, we're at it. Just push the prices up a bit more because people seem willing to pay. And of course, we saw companies disappear as well. So there's less competition.
[00:13:49] So it's the same thing. Put a whole lot of money into the economy at the time when there's less ability to supply. And that's what gave us inflation. And what you're talking about is the mechanics of how that happened.
[00:14:01] So one of Rishi's promises was harving inflation, actually just on that. So did the central banks do the right thing then? Did they have any choice? I mean, they could have sat there. I mean, this is another thing I've done.
[00:14:13] You think it would have just sorted itself out? Yeah, I know the great interesting thing is like, you know, I'm about to launch a new software package called Ravel, which will be hopefully coming out this week or early next
[00:14:21] week. And as part of that, just putting the manual together, I decided to take a look at global rates of inflation and look at the countries that did best and have a guess which
[00:14:30] country did best in having the lowest rate of inflation and a faster return to low rates of inflation than any other. Well, Japan hardly got inflation at all. Japan had less inflation, true, but it also had, you see, did nothing.
[00:14:48] Absolutely nothing. No change. In fact, interest rates for most of the period of the I think at the end of it, they finally put rates up from minus one quarter of one percent to zero. Well, they actually want inflation in Japan as well because they haven't had it.
[00:14:58] They want inflation. That's right. Yeah. But what it meant was countries did nothing about the interest rate, had a faster return to pre-COVID period rates of inflation, the ones that panic and putting up the interest rates. Depends where you come from. It does depend where you come from.
[00:15:16] There are circumstances in, I mean, Japan has got the aging population. There hasn't been any wage push inflation and they are... There was no change in that trend around COVID. They didn't have a sudden rapid decrease in the rate of population growth
[00:15:31] across 2020 to 2024. The main difference is just that all the countries pumped large amounts of money into avoid a complete meltdown during COVID, which would have happened if we didn't have government money injected for that time. That would have been bankruptcies left, right
[00:15:45] in the center. So that worked, it did the right thing. But of course, I mean, there's more money in circulation and then markups were increased more by European and American firms than they were by Japanese. Now that's when you can say behavioral thing. And this is
[00:16:00] Isabella Webber's research is quite intriguing as well because the biggest rate of increase in government money supply was during the Second World War. There was almost no inflation. Why? Because they put John Kenneth Galbraith in charge of a prices commission
[00:16:15] and basically major firms didn't try to profiteer from the increased level of money demand in the domestic economy during the war, which is what happened during World War I. So Webber's... Webber's and we do the same thing. You want to control inflation, you stop firms putting up
[00:16:30] markups. Okay. Quick question then as we go to the break. Does that mean that... I mean, it surely shows that we do have to be concerned about inflation though. So if right now,
[00:16:42] Keir Starmer is to come in and say, oh, by the way, I'm going to spend a heap more of government money to try and correct all the ills of the past. There is... That could be an inflation risk, couldn't it?
[00:16:54] It can also be a boost to the GDP. And this is, I mean, Mariana Mazicuta made this case recently. They have all these politicians obsessing about the level of government debt, but not taking a look at... You're actually talking about not government debt in the absolute
[00:17:06] terms, but as a ratio to GDP. Now, if what you do undermines the capacity of the economy to grow, then you reduce your... You're actually in a paradox whereby trying to make the economy grow by cutting back government spending actually reduces GDP by more than it reduces
[00:17:23] government spending and you get a rise in the government debt to GDP ratio. Well, let's look at... Which... Yeah, exactly. And that's the problem we've faced, obviously, isn't it? We've been through austerity and we've been through
[00:17:33] a stagnant economy. So Rishi's five promises, he is the first few of them. Half inflation, it was 11% now it's down to 5%. So he's saying, tick, I did that. Well, Bank of England would say they did it. You say, well, actually no, it probably would have happened anyway.
[00:17:46] Grow the economy is his other promise. Not being doing very well... I love the fact that we just have to ignore the last 14 years and think that he's going to suddenly turn everything around. But anyway, it rose 0.1% over the whole of 2023. That's how fast the
[00:18:01] UK economy grew. And that is, by the way, with massive immigration. So that helped the economy grow. But Q4 saw a 0.3% rise. So there we are. He'll say, there we are. That's progress.
[00:18:12] It's starting to pick up now, but it's not a great deal. And then reduced debt is his other one. Well, it's 97% of GDP. It's been around that level since the pandemic, but it hasn't really come down before the pandemic. It was 80%. Do you think it matters
[00:18:26] what that figure is? Not at all. Not at all. And this is where MMT's case is completely correct. And I've done the accounting with Minsky to make the case. The amount of government debt
[00:18:35] outstanding is a record of how much government money has been created. So we have been a mixed fiat credit economy and people's inability of mainstream economists to understand money is why we have these stupid politics from both sides of the chamber. Yeah, I mean,
[00:18:49] there is a lot to be said, isn't there, for saying we are where we are? And let's not try, even if you believe that the government shouldn't carry so much debt, there's a
[00:18:56] lot to be said for, well, okay, let's try and not increase it too much from now on, if that was your philosophy. But the idea that no, let's go back and correct the mistakes of
[00:19:06] the past, if you saw it as a mistake, that's crazy thinking, isn't it? Because you're just completely hampering any ability to grow. Well, this is the crazy thing that, you know, we live in a monetary economy. When you look at the data, there hasn't been
[00:19:18] an economy that has sustained economic growth while its money supply has been falling. But what's being promised by both parties is to make the increase in government credit money as small as possible, until it's going to help you grow more rapidly. No, it's not.
[00:19:33] It's going to encourage people into more private debt if they feel willing to do that. And we've also got historically high levels of private debt, which matters far more. So people aren't and corporations aren't willing to borrow a great deal of money at the moment.
[00:19:45] So you're going to have stifling growth in fiat money, virtually no growth in credit money or no reliable, consistent growth in credit money. And you're going to have a stagnant economy. And it all comes down to not seeing the supply of money increase because you can't spend
[00:20:00] money if you don't have it. It's very complicated argument that one, isn't it? Can't spend the money if it's not there. All right, when we come back, let's look more at the promises on both sides. We've covered a bit of ground. It's the Debunking Economics podcast. We are
[00:20:14] looking at the UK election. Try not to get too bored because it has been quite tedious. I have to say there's just a few more weeks to go, though. And then it's all over and we
[00:20:23] get a new government possibly doing exactly the same thing. We'll be back in just a second. Just $15 a month. Give it a try at MintMobile.com. $45 upfront for three months plus taxes and fees. Promote for new customers for limited
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[00:21:26] visit plushcare.com slash weight loss. That's plushcare.com slash weight loss. This is the Debunking Economics podcast with Steve Keen and Phil Dobby. We are going through the rather tedious process this week of looking at the UK election,
[00:21:53] what's being promised and you know, basically the fact that we have two parties that in terms of their approach to the economy are very similar in that they feel like they can't spend more than that they are bringing in income tax or taxes generally. And that became part
[00:22:08] of the TV debate which we saw yesterday just as we were recording this, but a week ago as you're probably listening to this depending on whether you're listening to us on Patreon or Substack or whether you're getting the free version where it comes out a bit later.
[00:22:22] But look, let's look at some more of those pledges beyond finance. There's health and Rishi is saying that they are going to cut NHS waiting lists and he made a big point that they're coming down and they have. They've fallen 200,000 since September last year
[00:22:42] but they are still 300,000 more even with that loss of 200,000. There's still 300,000 more than when Rishi became Prime Minister and that waiting list is 4 million. So the waiting list is people who know that they need to have an operation done but they're
[00:22:56] waiting for an appointment in the hospital to get it done. It was 4 million people fitted that criteria in mid 2017. Now it's about 7.5 million, so close to double. And that's 10% of the population of the country.
[00:23:13] It is. I think there might be a bit of double counting in that you might be waiting. The same person might be waiting for two operations. Then look at the age profile and see that the very young or the very old
[00:23:25] who are mainly waiting, the ones waiting for surgery. So it's got to be like about it has to be something like at least a quarter if not more of people over time at age.
[00:23:34] Yeah well but then also we've got the whole number of people as well who are not being put you know economically active so people of working age who are not working and the
[00:23:44] reason for a lot of that is health. So a lot of it will be well I can't I've got this leg I'm waiting for my NHS treatment. So it's seven and a half million by the way when labor left them
[00:23:56] with it all in unit with the conservatives in charge the waiting list was 2 million. So it's gone from 2 million to seven and a half million in this government and then there's Ritchie Sunak saying well they're coming down now because they've come down by
[00:24:07] 200,000. Always just in time for the election yeah. But I mean there is an economic argument here isn't there? If you if you neglect spending money on health then you are going to pay for that in terms of the country's productivity. There will be people
[00:24:22] who just can't. This was the reason for phoning the NHS in the very first place. The health is not an individual issue it's yes individual person gets sick but it affects everybody both by transmission of diseases and things like pandemics and but also it means
[00:24:37] that you people are taken out of circulation and you know you don't see it as evidently in day-to-day life but you end up with supply constraints caused by the fact that you lack people particularly people with fairly specialized skills and if they're not there
[00:24:54] the machine can't be operated and bang you have a lower GDP. Yeah so the approach by Labour on this 40,000 more evening and weekend appointments each week paid for by cracking down on tax avoidance and non-DOMs. He's coming after the non-DOMs. That's Ritchie Sunak's wife. Yeah
[00:25:13] exactly she'll pay for almost all of this probably all by herself. So setting up shared waiting lists and collaboration between hospitals so it's a it's an operational thing trialling neighborhood health centers bringing together doctors district nurses care workers
[00:25:27] physiotherapists and mental health specialists under one roof you know bringing more I think generally the idea that whatever the service the more you can localize it we have been through this whole centralized approach haven't we and some of that makes sense so you know the idea
[00:25:43] that we've got these apps for example I don't talk to I'm on one tablet I have to take every day to do with blood pressure mainly from talking to you and they said you know you
[00:25:55] can either take the tablet or stop doing the podcast with Steve so I said well okay let's try the tablet. Red Pill versus the blue pill. You chose the red pill. The blue pill is much more
[00:26:06] exciting but that does increase your blood pressure doesn't it? So anyway the yeah no anyway where are we so yes using the app that's an efficiency and that's like a centralized efficiency but it then gets sent out to my local GP who just taps yes yes yes
[00:26:23] the idea that though you bring more back to the community seems like a sensible idea doesn't it whether you're talking about health or police we are living in a you know in a local geography
[00:26:32] you've got all localized services. Yeah I've seen the same thing in education in attempts to centralize and end up giving you more bureaucracy than service so like I don't have any complaint about that but it's you know they're both putting the same overall constraints
[00:26:45] on it that they're you know they don't believe they should run a deficit and that means they don't believe they should create fiat money and that's why I want to try to reframe this
[00:26:55] is not in terms of you know taxes and services and so on but if you live in a mixed fiat credit money system then to create fiat money the government has to run a deficit spend more than
[00:27:04] it gets back in tax ocean and if it tries not to do that then it's not creating fiat money and you have a lower rate of growth of the money supply more reliance upon credit and
[00:27:14] credit means people have to go into debt to get money whereas if they have a government spending more than it brings back into taxation they get their money without debt for themselves and you know it is just insanely infuriating to watch both sides of politics swallow first
[00:27:29] year economics and regurgitate a recession when there could be more stable economic growth and better services. Well young doctors are saying look we want a 30 percent is it 30 or 35 percent pay increase because that is how much we've lost over the last 14 years or whatever
[00:27:45] we want to get back to where we were so the government said yes we'll do that we'll create the money for that then I mean they might not do it in one shot but say over
[00:27:53] five years or whatever we saw them getting back to where they were that's extra money which is being pushed into the economy so what happens there those doctors then spend that money it
[00:28:01] gets it circulates in the economy that means more that they can buy more they so they add to they add to the consumption within the nation that helps to increase GDP I mean there's yeah it's harder and so the only argument would be well all that increased
[00:28:21] excess extra demand is not being met by supply and that's inflationary but they are paying that money to people who are then employed creating stuff so it's also invest more in the the the impact of this is why I like doing a dividing line between
[00:28:44] pre-neoliberal policies before the neoliberal period and after which pretty much is either started in 1975 all this neoliberal stuff was sold and it wasn't just about budget responsibility it was also this is going to lead to a faster rate of economic growth give
[00:28:59] more stuff to the private sector don't let the public sector have it you'll grow the economy more rapidly you look at the global rate of economic growth have developed the countries since between 55 and 75 and then 75 to now the rate of growth between those bad old days of
[00:29:16] 55 to 75 was twice what's being achieved now so even on their own grounds they've failed and the reason they've failed is because in a monetary production system you need money to be able to increase the level of production the growth of the money supply and they've been
[00:29:31] artificially restricting it by not understanding how you create fiat money it's it's ridiculously frustrating so I just know one party or the other is going to get in charge and do then and paul samuelson the economy when it needs to be maynard canes
[00:29:43] yeah exactly yeah which uh maynard canes is just a historic figure of no relevance it seems these days which is a bit bizarre for a labor party that is going to come in with a massive
[00:29:55] majority isn't it seems it seems bizarre why they wouldn't seize the opportunity but if you're putting money in if the government says well okay we're going to inject some money into
[00:30:03] the economy we're going to spend more than we tax and we are going to where's that money going to go to and we've got the choice they could say well okay let's support a few industries
[00:30:12] and give it to the private sector so a private sector company gets that cash the private then you do under it so that private sector company is going to say well you butte thanks for that uh we are going to push our you know we're going to make
[00:30:25] bigger margins now we're actually not going to reduce the price or produce more we're just going to subsidize ourselves with that government money and so that um you know so then that achieves very little but could could be inflationary if you give it to a doctor
[00:30:41] you're not changing the price of the end product are you because it's free and there's a real benefit to that isn't it if you offer it to a public service that's free there's no immediate inflationary impact you can argue well okay what happens is that money circulates
[00:30:55] if there's not the you know the ability to produce what needs to be consumed but in that first step there's no inflation because everything's free and you've boosted I mean this is one of the reasons that if the government should the government should run a
[00:31:08] deficit because it should create fiat money in a mixed fiat credit money economy and they go and say well how can the bureaucrats know what to spend things on you know you need individuals to make that decision fine you give the money to individuals students um doctors
[00:31:23] anything where whether you you provision of the service at the national level so education and health uh that then means the money that's that finances that is then spent by my god individual people and you therefore get you know you get the in that sense the best of
[00:31:40] both worlds you've got the the government providing money which is debt free for the individuals who receive it who then spend it on what they what they want and that provides cash flow to corporations which have excess capacity that when this is the standard all
[00:31:53] corporations except when you have things like the supply chain shocks will have excess capacity and that excess capacity can be employed and actually reduces the cost of production this is the other thing that when you when you've got to understand the micro as well as
[00:32:07] the macro when you look at the the myths that students get taught in in universities and high schools about their supply curve sloping up that's standard neoclassical belief it's in the the minds of sunak and and starmer and anybody who's you know done a anything
[00:32:22] resembling part of an undergraduate economics degree has swallowed that the real real world is that if you increase the volume of demand you reduce the per unit cost of production yeah so bleeding obvious for anyone who's worked in business you've got your you've
[00:32:37] got your you've got your fixed costs and you've got your your variable costs and if you want to bring down those variable costs you need to reach the next level up where you
[00:32:45] invest in more capital so that your variable cost can reduce your view reducing a fixed cost per unit of production while your variable cost per unit of cost and production remain constant or fall possibly fall if you're investing if you reach a level where you can invest in
[00:32:57] intriguingly this this particular empirical reality was confirmed by some of the most rabid neoclassicals on the planet kittiland and prescott two of the guys who gave us the real business cycle theory they looked at the impact using what's called a kalman filter to
[00:33:11] try to get trend removed from um cyclical variations and their conclusion was that increasing economic activity reduces the rate of inflation which of course is contrary to neoclassical theory and if we had it was actually a decent it actually was a decent
[00:33:26] intellectual discipline so we'd need to revise our theories but instead they ignore reality and go on pretending that increasing the level of demand will cause prices to rise ironically and in one sense because most people aren't aware of manufacturing
[00:33:39] increasing the level of demand means you have a higher level of capacity utilization and a lower per unit cost of production look we've got we'll have to do quick fire some because i don't want to miss out some of these things so what have we got the bin
[00:33:51] face and i want bin faces policies but still let's find out yeah well i'm just wanting to say so maybe we do more of this next week maybe we give another week to it because it's interesting some of the other stuff like abolishing inheritance tax increasing defense
[00:34:03] spending getting rid of ripoff university degrees what wish he wants to do with pensions but then on the other side you know labor is saying well you know what that what their plans are for education how they they see policing working but also privatizing
[00:34:18] renationalizing railways setting up great british energy a clean publicly owned clean power company so i feel like we can probably even we can generalize some of these concepts but maybe we should come and visit it next week because we're just there's a half hour discussion
[00:34:33] right there and we're out of time for this week i'm looking to see what the the monsteroving looney party of course was um you know a force in british politics i think it did come out of that
[00:34:43] monty python is not a comedy series it's a documentary it has become so hasn't it yeah so the so the monsteroving looney party came out of that election night special where they were
[00:35:06] at the looney party candidate was was standing there and since then has appeared you know in almost every single election so here are the proposals now the current looney party policy proposals um let's have a quick look we will reduce inflation by giving everyone
[00:35:22] free pins just to defray pins yeah to deflate i guess uh to make like i go to make trains safe conservative yeah okay to make trains safer we will fit them all with cushions on the front
[00:35:35] uh yeah i think they've had better policies than these i think to protect pets and people of a nervous disposition disposition we would introduce silent fireworks um we've done in red phone boxes will be converted to bijou accommodation to ease the housing shortage
[00:35:51] um to make things fairer we'll introduce a court of human lefts rather than human rights yeah feel like they could do the um what else have we got um in an effort to reduce the problems
[00:36:05] faced by the nhs it is proposed to reduce pregnancy from nine to seven months now there's a policy we can get behind i'll leave it at that it does mean you've got your chain change the
[00:36:19] physiology of the human being but you know nothing is impossible we've got economists trying to change the change the nature of money so that i suppose it's uh well exactly it's not so far-fetched is it the government helps finance the mainstream is is is behind
[00:36:33] a brick wall looney yeah exactly yeah exactly it just changed the name party stays the same with government help finance asa zenica should buy out fisa then as we would have the rights to
[00:36:44] viagra the economy might stay up for longer yeah well that's that's what it needs isn't it anyway there we are so let's do it again next week i know i don't want to dwell on the
[00:36:54] uk election for you know for too long but let's just look at some of the interesting ideas coming out of it the one thing i really want to talk about is this idea of great
[00:37:02] british energy you know is it and it gets back again to privatization versus nationalization and the other thing that's being discussed uh it hasn't been yet but i the word is it will be by
[00:37:13] the time this podcast is out which is abolishing inheritance tax so we can we can talk about that and ripping rip off university degrees you'll want to get your teeth stuck into that that
[00:37:22] actually might be a rishi sunak policy do you agree with steve so they'll get uh that'll confuse people but we'll do that next week we'll leave it there for now good to talk bye the debunking economics podcast host the ultimate backyard barbecue with whole foods market
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