Helen Swathmore

@HectorWMcNeill @ekonomissed That is remarkable. I don't think there is any other policy that can achieve this degree of policy adaptability to corporate conditions. Particularly important in British economy dominated by SMEs. This avoids the risks of shot in the dark "mission led" notions of growth.

Yes this point came up in feedback on the approach to RIO-3P as far back as 1981 largely from management consultants and a specific well-informed politician. In order to address this problem SEEL-Systems Engineering Economics Lab was set up to monitor applications on global networks in 1983. This was before W3 (the World Wide Web) and since then all forms of IT development solutions have been monitored and assessed. The solution is a cloud-based standard but highly adaptable to corporate input and output profiles by operating with "trading floors" for procurement (inputs) and sales (outputs) somewhat like the Amazon system. The Price Performance Ratio (PPR) is calculated automatically based on production line component profiles and associated sales, minus inventories made in any accounting period. A separate unit calculates the Price Performance Levy in real time to determine rebates or surcharges, again in real time so settlement is also in real time. For security the transaction records are reorded on Accumulogs which are block-chain type immutable records which prevent fraud but also safeguard corporate interests when any mistakes might be made in associated calculations or misallocations of inputs etc because of changes process input profiles. Normally any changes would be notified before they take place through process data profile updates. Additional optimization software would provide guidance to managers to maximise returns based on the simulation of the impacts of any projected prices on expected sales volumes associated with the income-price elasticity of demand, the expected margins net of the Price Performance Levy which depends upon the final PPR. These optimization applications are esentially operations research apps which today increasingly benefit from AI to arrive at final optimised options more quickly. As explained the PPR depends upon the degree of response of output prices to changes in input costs. The significant difference is that the tax authorities become agents in assisting companies become more competitive through a positive incentive. This can actually reduce levies as productivity rises and unit output prices decline generating a rise in constituent and workforce purchasing power and real incomes. In other words policy stimulates more rapid and generalised growth. The most important aspect is that unlike any other policy instruments PPRs are set by companies and these determine the Price Performance Levy (PPL) to be paid. No other policy provides this degree of risk-free freedom for companies to adapt to policy instrument values because companies can set these themselves in a way that contibutes to national growth. The government is not involved in the "calculation" issues because it does not possess the knowledge required to account for every company's circumstances. In term of security and counter-fraud standards, this is only possible with the appropriate data management support which in basic terms is increasingly transparent and with the evolution in IC technologies during the last periods is more robust and reliable.

MAKING PRODUCTIVITY WORK FOR BRITAIN Although the greater part of the solution to Britain's economic problems, including lowering the national debt, is to raise productivity, it is important to identify how to maximise the impact of productivity on our real incomes based growth. I refer to real incomes based growth to register the fact that growth requires: 1. A quantitative measurement of identified factors that increase the purchasing power of disposable incomes. 2. Mechanisms or policy instruments to bring this change about. MEASURING BASELINE PRODUCTIVITY The standard measurement of productivity is the quantity or value of output of a process per person each hour or total factor productivity as the quantity or value of output of all factors of production in a reference period. PRODUCTIVITY IMPACT The impact of the productivity of individual companies on the economy depends upon the quality of output and unit pricing decisions. By absorbing the gains from productivity such as reduced unit costs, by augmenting profits, shareholder value and executive bonuses can even mean inflationary output lowering the purchasing power of consumers. Lately some economists have associated this practice with the term “greedflation”. On the other hand, there is the option of taking advantage of lower unit costs to translate these into lower counter-inflationary prices benefitting consumers. Most inflation is cost-push inflation (I can cover this I another post) which has created the phenomenon of anticipatory pricing on the part of companies. This involves an automatic but logical financial response of the raising of output prices to compensate for rising costs to maintain profits, remain in business and safeguard employment as well as to build up cashflow in order to be able to afford the next period's production input requirements facing rising prices. In order for productivity to translate through into counter-inflationary pricing i.e. to reduce inflation or reduce prices absolutely, the unit price responses to rising input prices need to rise at a lower rate or in the opposite direction i.e. fall. This will reduce the margins per unit of output but generate higher purchasing power for consumers and a rise in their real disposable incomes. This is only possible if changes in productivity lower unit costs. Therefore, policy needs to provide incentives for companies to introduce changes to lower unit costs and to set prices at more competitive levels. Although reducing prices reduces margins this needs to be traded-off against higher sales volumes which result from the rise in consumption of lower priced goods. The quantitative measure of the degree to which total sales increase as a function of lowering unit prices is expressed or measured by the income-price elasticity of demand (ipEd) which measures the percentage rise in numbers of units sold as a result of a percentage fall in unit prices. The deciding factor is often the differences in the perceived quality and utility of goods or services concerned. This has become an important factor in the increasingly competitive ITC products such as mobiles. The advantage of lowering unit prices and raising quality is the resulting rise in market share nationally as well as facilitating sales abroad as exports and increasing sales through import substitution. THE PURCHASING POWER OF THE POUND In summary while there is much talk about “growth” which is afforded little support in terms of clarity of what this is, the fundamentally important process of growth is characterised by a rise in the value of the pound resulting from the British economy using productivity to eliminate inflation. This can raise the real incomes of the whole population because the pound in people’s pockets can purchase more goods and services because they are more accessible in terms of price. Unfortunately, the Bank of England’s management of monetary policy has witnessed a complete inability to eliminate inflation with the inflation rate between 1945 and now (2025) averaging roughly 3% or a 27% devaluation for each decade over the last eight decades. Clearly the purchasing power of the pound has been declining and this is because the monetary policy decision cycles have depressed growth because of austerity which has discouraged investment and rising productivity. WHY IS THERE AUSTERITY? Austerity has been a characteristic of monetary policy decision cycles because of the flawed monetary theory which makes use of interest rate rises to lower inflation. The impact of this is to raise financial costs thereby lowering purchasing power and real incomes of constituents creating difficult more austere conditions. Other attempts to stem inflation involve raising tax rates which have exactly the same effect as interest rates of reducing disposable incomes and therefore reducing real incomes. WHY IS INFLATION AN ISSUE? Inflation is a problem because it erodes the value of the currency and real incomes and yet the very policy instruments used to combat inflation, interest rates and taxation, only exacerbate the state of affairs by reducing real incomes still further during repetitive bouts of austerity. A BETTER WAY TO PROTECT REAL INCOMES After 50 years of a failure to eliminate inflation and prevent the drastic depreciation in the value of the pound it has become apparent that monetary and fiscal policies cannot control inflation without damaging real incomes. By far the most effective way to protect the value of he pound and real incomes is through productivity and a proactive management of price-setting to expand the growth in sales of better quality goods and services with more competitive prices since all constituents, including workforces, benefit. The issue is, however, to balance the returns to the constitutional actors of the state in terms of a higher value tax base, higher real incomes for society, adequate compensation for economic unit ownership and workforces and for the individual. The policy which aims to distribute the benefit of growth automatically through these constitutional actors has to be a constitutional economic policy. REAL INCOMES OBJECTIVE PRICE PERFORMANCE POLICY (RIO-3P) The only macroeconomic policy specifically designed to distribute the benefits of growth in a constitutional economics manner of RIO-3P. Price Performance Policy uses an indicator the Price Performance Ratio (PPR) to measure the effectiveness with which a company is able to exert control over output prices in relation to changes in input prices, thus, “price performance”. The higher the gains in standard measures of productivity the more able is a company to effectively reduce output prices and reduce inflation while augmenting consumer real incomes. In order to encourage a maximization of price reductions while ensuring margins are high enough to generate a compensatory income through the rise in sales (through the leverage of the income price elasticity of demand) corporate taxation is replaced by a Price Performance Levy (PPL) which provides rebates according to the value of the PPR attained. Basically, the lower the PPR value below unity (PPR<1.00) the greater the effective reduction in prices arising from productivity and therefore the greater the rebate or levy not paid. This leaves the companies with a better performance with higher net-of-Levy margins and significantly raised sales volumes. This costs the government nothing but the uncollected levy ensures a rising growth rate and state of national income making government policy the catalyst for a high growth rate free from austerity. Clearly the impact is for larger quantities of better quality and lower price goods and services to be sprung into the national market leading to a counter-inflationary growth in purchasing power and real incomes impacting all constituents and constituent actors by raising the purchasing power of their money holdings, including the tax base and state revenues. NATIONAL DEBT Our national debt saga, in terms of peacetime operations, started in 1973 when within 4 months of October in that year OPEC raised the price of petroleum and 6,000 derivatives used by all sectors of the economy by 290% of the pre-October price following a 70% rise in October. This resulted in an impossible to avoid plummet in productivity which endured several years in terms of its impact which was stagflation (rising inflation and unemployment) creating the very first borrowing requirement and deficit. From then on productivity, because of inappropriate monetary and fiscal policies has never recovered sufficiently to prevent annual deficits and the accumulating national debt. With the declining policy-induced devaluation of he pound the tax base and revenues have lost purchasing power. A diagram below shows this growth in national debt arising from this impact of the OPEC 1973 price embargo. This diagram does not include the two war debts, it only shows peacetime performance. REDUCING NATIONAL DEBT RIO-3P is the only macroeconomic policy which can alleviate the quandary of attempting to secure growth and reduce the national debt at the same time. This is quite impossible with the overbearing impact of monetary and fiscal policies whose dual impact is to lower growth and impede the rise in real incomes. A FINAL MESSAGE The link below is to Kaldor’s growth laws where we have added information on the additional benefits of productivity and RIO-3P, which can go a long way to solving a range of issues facing the British economy including the following benefits: · Decline or elimination of inflation · Increased price accessibility of goods and services · Rising real incomes across the board without changes in nominal incomes · Rise in the purchasing power of: o Wages o Savings o Corporate cash flow o Corporate margins o The tax base o Government revenue · Declining poverty · Rise in the value of the currency and its purchasing power · Rise in import substitution · Rise in exports · Rise in the balance of payments · Reduction in the “borrowing requirement” · Reduction in deficits · Reduction in national debt I also provide a link to a more detailed coverage of RIO-3P recently released. Kaldor’s growth laws and impact of RIO-3P: boolean.org.uk/library/Kaldor… RIO-3P more detailed recent release: boolean.org.uk/library/Real_I…

@HectorWMcNeill This seems to be a rational solution.

@HectorWMcNeill @MsParaDoxy BoE decisions, however, remain "independent" and wholly arbitrary, allowing the destructive more than a century of currency devaluation to continue unabated. This also needs attention.

@HectorWMcNeill @MsParaDoxy Hector, In your excellent post you state "....beware of emphasising too much "trust in government" with.... political parties in goverment allocating national public resources." This in particularly the case for MMT and fiscal authorities i.e. taxation, also a MMT thing. 1/2

@MsParaDoxy provided a link: ineteconomics.org/perspectives/b… to an article by Lyn Parramore entitled, "Meet the Hidden Architect Behind America's Racist Economics" which informs of the research of Nancy MacLean into the lesser known activities of James Buchanan, the developer of constitutional economics. I just noticed this because my own work is an extension of constitutional economics. Constitutional economics asserts that economic policy should support the interests of the state, society, economic units and individuals on the basis of agreeing moral laws and regulations in the form of public goods developed and agreed upon in a participatory manner on the basis of public choice. This spells out seemingly perfect elements and a structure for the operation of a democracy. It is also a fact that Buchanan openly expressed his cynicism of the motivations of representatives of any group or institution in a country being totally self-serving as opposed to the imagined upholding of mutual shared interests and, of course, those of constituents, the voting public. I, personally, took that to reflect a certain realism on Buchanan's part without realising that, according to Nancy MacLean, Buchanan had become financially supported by the Koch brothers to promote the interests of large corporations and coal industries, discrediting advancing environmental knowledge. But this involvement went a lot further. While Milton Friedman openly assisted the Pinochet government, Buchanan, apparantly did so in secret. Besides a worrying list of actual government cut backs in the USA resulting from heavy lobbying, the more insidious technique used to undermine democracy was to bring politicians into line and change the operational structures of political parties to serve large corporate benefactors as opposed to constituent needs. I would add that the phenomenon of Pacs has exacerbated the state of affairs. This is already a reality explaining a 12 years streak of inaction by the Conservatives and expulsion of One Nation MPs, and now, an even more than evident inability to respond to needs in a rational manner by the current Labour government. The 5th column working against the true interests of constituents are the very institutions for whom we vote, political parties. As Buchanan stated, their motivation is not what is on the label or what they put in their manifesto promises, they seek power to be gained by media support funded by their corporate benefactors to enjoy the status and compensation they desire frequently at odds to constituent interests. This is a warning for our opposition parties in the UK to beware of emphasising too much "trust in government" when, in reality there is no control over political parties who will take governmental decisions and allocate national public resources. Don't be misled. This danger applies equally to the economic paradigms of Keynesianism, monetarism and MMT. In 2007, I wrote a book favouring "politics without parties" or a system that supports independents as a way to dismount the unconstitutional influence of large corporations and to uphold the best tenets of constitutional economics. I thought this was an essential condition to avoid extremes 18 years ago. Today it has become an imperative. Along the same lines it is unlikely that large corporations will respond to calls to terminate lobbying and financial influence. On the other hand, the reality is that most of our employment and output is in the hands of over 5 million independent SMEs whose generally depressed circumstances are very much the result of inadequate financial services by the big 5 banks. As a result 80% are averse to external financial support for investment because of the perceived risks, resulting in difficulties in securing growth in productivity and higher incomes. Monetary policy which serves the interests of larger organizations while regularly creating a cycle of bouts of austerity inhibiting the ability to secure higher SME growth. Already the government is directly attacking the rural SME sector, farms, with an inheritance tax that will "preserve" higher cost and less efficient smaller farms while creating smaller higher cost operational units of larger farms forced to downsize and sell land to pay the exorbitant tax. This simply creates the ideal state of affairs for large hedge funds to asset strip the sector as inflation continues to maintain a diminishing terms of trade in agriculture of rising prices and stagnant ouput prices. This trend, over time, will put all of the smaller units out of business. The required policy is land consolidation initiatives. Just as I feel political independents hold out hope for our future, the solution seems to be to combine forces with the most independent compontents of the supply side economy in the form of SMEs. The coming period is one destined to involve the need for transparency, a banishment of naivity and application of hardheaded decisions to reap the rewards and promise of a participatory democracy upholding a constitutional economics.

@HectorWMcNeill @MsParaDoxy This is a very important post considering the flux in the state of affairs in political parties in the United Kingdom just now. What needs to be taken on board is that political parties have not served the interests of constituents in this country well at all.

@HectorWMcNeill It is very odd that with most people concerned about income levels being inadequate that the last thing economists talk about is incomes policies. It is refreshing to read something that appears to be well founded and more practical at last.

SOLVING BRITAIN'S REAL INCOMES PROBLEM The Real Incomes Approach or RIO-Real Incomes Objective economics is a supply side incomes policy. In the UK, incomes policies were abandoned after 1979 but were a common feature of the UK economic policy environment between 1945 and 1979. There were about 19 distinct incomes policies during that period. Usually they attempted to set rates of wage settlement increases and price rises. In other words, they were a supply side policy. In terms of enforcement they operated on a statutory, voluntary or public sector only basis. Most imagine that incomes policies "did not work" but our own reviews (George Boole Foundation) of publications and data indicate that some did manage to reduce inflation. We will be releasing a short report on this soon entitled, "Towards an Incomes Policy for Britain's Economic Recovery". However, all macroeconomic management systems (Keynesian, monetarist, Mundellian supply side economics and modern monetary theory) are centralised and rely on after-the-event reporting, usually based on corporate accounts and lagged market indicators, to monitor progress towards policy objectives. As a result, the predictability of policy decision outcomes are inexact because of the knowledge and calculation problem associated with the extreme heterogeneity of economic units. In other words, the ability of companies and their associated workforce to respond to centralised agreements is very variable. In order to remove this problem of centralised policy decisions imposing unfair differentials on companies and workforces, we developed the only decentralised supply side macroeconomic incomes policy proposal enabling companies and workforces respond according to their capabilities while ensuring a general rise in real wages. The RIO proposition is Price Performance Policy (3P) which makes use of a corporate level Information Management System (IMS). This system (Price Performance IMS) provides real time data on the response of participating company output prices to changes in aggregate unit costs of inputs. When one is dealing with the impact of inflation on real incomes or purchasing power, the normal measures of productivity are inadequate. This differential between input and output prices, or coefficient, is the Price Performance Ratio (PPR) and is a direct measure of the contribution of each company to the value or purchasing power of the currency. If a company has a PPR>1.00 it is depreciating the currency purchasing power by increasing inflation whereas if the PPR<1.00 the company is contributing to rising currency purchasing power by reducing inflation. PPIMS data informs the government in real time the actual weighted state of inflation as well as weighted state of real incomes or the purchasing power of all wages. PPIMS prevents fraud and “creative accounting” and registers transactions on Accumulogs (block chain immutable database records). Unlike previous incomes policies (1945-1979) under 3P, government is not involved in wage settlements or in establishing desired limits on rises in prices. This is achieved by replacing corporate tax by a Price Performance Levy (PPL) which provides rebates on the degree to which the PPR falls below unity (PPR<1.00) and adds surcharges to the degree that the PPR is greater than unity (PPR>1.00). As a result, there is a strong incentive for companies to increase their productivity to lower unit costs to be able to lower their PPRs. The essential difference to all previous incomes policies is that under 3P corporate profits rise as a function of their contribution to rises in real wages. There is, therefore, a movement away from zero-sum settlements to beneficial settlements based on mutual value added market transactions. The trend, unlike the monetary approach to inflation, is to minimise inflation and in a range of leading technologies create a leading edge characterised by falling prices. The PPIMS data can assist government adjust PPL rates to approximate zero inflation or a state of falling prices so as to enhance the purchasing power or value of the currency. The most attractive result of 3P is that government is not directly involved in wage settlements and where unions are involved in specific companies, they will have a more direct interest in productivity enhancement because the general impact is a general rise in the purchasing power of wages as a direct result of the rise in value of the currency. This new approach to macroeconomics is based on a "Value Theory of Money" as opposed to the seriously flawed "Quantity Theory of Money". Any questions or clarifications? Just ask or DM me. Otherwise there is a book, soon to be updated.

Hector McNeill is a really effective economist who comes up with practical solutions. This Grok assessment of his solutions compared to main policy options adds credibility to McNeill's unique approach to economics.

@zahra223344 @HectorWMcNeill @garyseconomics Yes it is well explained. The problem concerning the Chancellor is that her main adviser at the Treasury is an academic who confuses productivity with more output so growth proposals are efficiency neutral i.e. no growth!!

@HectorWMcNeill @garyseconomics I hope this is all explained in the book. If there is a potential solution, is the chancellor privy to such theories? She keeps wishing for growth without any propositions

This is NOT a left right issue

Gary, Tax doesn't pay wages. The solution might gain some support via taxing those with more assets but it is important to explain WHY this is happening to understand why this is not enough. Therefore encouraging people to become concerned about this reality without a firm plan of action as a solution, does not seem to be a particularly positive way to manage this issue. Just stating the problem is "income inequality" states the obvious but at the same time, jumps over the fundamental cause which, if removed, can help push things back the other way. Nicholas Kaldor had warned of this in 1966. The REASON this is happening was explained in 1976 predicting the decline in the British economy as a direct result of the Bank of England and governments applying what has become a flawed monetary theory in practice and thereby never eliminating inflation. Since this same dynamic raises asset prices at a faster rate than the rise in inflation in the prices of goods and services it is self-evident that policy helps asset holders become more wealthy and wage-earners poorer. Therefore, terminating the Bank of England destructive interest rate policies as well as the fiscal policies related to "money volume" or "demand control" is the first step in recovery. There is then a need to introduce policy instruments that guarantee rises in productivity through innovation to deliver competitive, and preferably, lower unit prices. To understand why this is of fundamental importance simply realise that this was how the Industrial Revolution took place making the UK the dominant world economy. After 50 years of the Bank of England pound depreciation treadmill this country lost most higher paying industrial/manufacturing jobs and we now have the second most negative balance of payments for goods on the planet and a massive low wage services sector. So, in short, this is why there is income inequality and growing poverty. In terms of a solution, no current conventional economic theory or policy be they Keynesian, monetarist, Mundellian supply side economics or modern monetary theory possess any policy instruments to stimulate productivity directly. RIO-Real Incomes Objective Economics is an extension of constitutional economics and its Price Performance Policy (3P) is one of the few propositions that can ensure positive and high growth to raise real wages and reduce poverty. If you would like to ask any queries about this, please do. To learn more about this please have a look at my book which will soon be extended and updated. Youcan also DM me.

There is indeed a rise in interest in what @garyeconomics (Gary Stevenson) has to say. I have observed his twists and turns in grappling with this issue and the advance in his thinking and conclusions with interest because I went through similar transition in 1975. I ended up with a specific solution in 1976 in the form of what is now called RIO-Real Incomes Objective Economics and a policy proposition Price performance Policy (3P). This included a review of monetary theory and the need to substitute the Quantity Theory of Money with a more relevant Value Theory of Money which includes assets. I very much encourage Gary in his efforts. However, it is notable that as an economist Gary has not yet identified the specific cause/causes of income inequality in explicit theoretical and policy terms nor has he come up with a structured quantified solution. an As a result, as far as I can gather, he is beginning to place emphasis on saying that income inequality is the cause of problems while purposely avoiding any focus on the actual causes and a solution or solution options. Although he is recently stating this is neither a “left” or “right” issue, I note that you recently included Gary's book in a book collection which you characterised as representing an integrated “left position”. But here again the same problem exists of pointing to self-evident problems but having no solutions other than to agitate. This might raise a popular awareness and voicing of this reality but this also requires some responsibility to have a road map and clear destination. Gary recently took a decision to not seek to analyse the actual “tax the rich” solutions justifying this because he suggested that this is a tax consultant technical issue (which it is not) but he wants to dedicate more effort to raising the issue of the existence of income inequality. Investing energy in this particular angle without a well-structured solution deemed to be practical and feasible is a bit like the crazed Brexit story where we have multitudes of agitated and disappointed people despondent about the results after so much “promise”. Indeed, the outcome of Brexit is closely related to this same topic and the “inequality of income” mantra is becoming an emotional issue, even on the part of Gary. It is connectedto Brexit because just as we became separated from the EU as "Global Britain" the same policy defects that continue to deepen income inequality are the very same policy defects that have deindustrialised Britain and landed us with the second most negative balance of payments for goods on the planet. I have no idea of the specific objectives of the media in not asking Gary obvious questions but rather concentrate on lively exchanges about trading. On the part of Novara Media’s two programmes with Gary, it is notable that no difficult questions were asked of Gary after all what does “taxing the rich” even mean and at least by now there should be some options on the table including quantifications of accessible assets and likely revenue yields. It thenhas to be explained just how taxing the rich will solve income inequality; government does not pay most wages. In a recent video Gary pointed to the fact that options will not be identified just now because they are likely to be criticised by interested parties but this is not a sound basis for not identifying them. It is no good building up awareness of a self-evident and serious issue without also providing people with a clearly defined solution. Gary has stated that the field of economics does not deal with income inequality when in fact this is the core state of affairs upon which the significant field of development economics is founded and directed. Development economics is very much concerned with policy design to change structures as opposed to fiddling around with interest rates and taxes. This might be why his lack of exposure to development economics is the reason why so far he has not come up with a practical solution and why I did. This is simply the result of a different types of economics exposure at university and applied development policy design experience in countries with significant income inequality.

Good points. Actually productivity stats i.e. output per person and total factor productivity, convey little of relevance simply because the distribution of wages, profits, margins and dividends since 1973 increasingly transferred the gains from productivity away from labour and to "shareholder value". As a result pricing removed any productivity "advantages". Although there is this myth that the private sector brings efficiency to the public sector, this same shareholder value issues crushes this claim. The only macroeconomic approach and policy that prevents this sort of nonsense is RIO-Real Incomes Objective Economics and Price Performance Policy (3P) which measures productivity by the response of output prices to input cost changes measured by the Price Performance Ratio (PPR). This causes companies to raise productivity and lower unit prices in order to secure lower coporate taxation. The effect is that the income-price elasticity of demand catapults lower-priced goods and services into the market raising the purchasing power of wages as a result of the rise in value of the currency (pound). To emphasise why public and private differentials in productivity do not really exist, 3P can be applied to private as well as public services.

IS TAXING THE RICH A SOLUTION? – PART 2 The last paragraph of Part 1 in this series stated: “In Part 2 I will explain why this accumulating national debt got going in 1973 and why, as a result of a failure to change both economic theory and policies to account for changed circumstances we face increasing income disparity and poverty and the call for government to tax the rich”. Between 1911 when Irving Fisher elaborated his version of the Quantity Theory of Money and 1973 this theory had been used to guide central bank monetary policy decisions related to money volumes and interest rates. In 1973, because many petroleum importers such as the UK supported Israel in military actions against Arab countries in relation to Palestine, OPEC imposed petroleum price sanctions that increased the price of petroleum seven-fold between 1973 and 1983. Although this was characterised as an “energy crisis”, in reality some 6,000 petroleum and natural gas derivatives used in all sectors of the economy underwent similar price increases. The general result was a worldwide stagflation, the combination of rising inflation with rising unemployment. This was a world wide phenomenon because many countries did not have national petroleum production so the inflation came from imported or exogenous inflation. A direct result of this was a response by companies, unable to lower their input costs were forced to raise their unit output prices to guarantee future activities and employment and to build up cash flow to be able to afford to purchase the next period’s inputs all facing rising prices. This type of response to rising input prices is “anticipatory pricing” where companies estimate input inflation trends to adjust prices upwards creating a generalised inflationary front or endogenous inflation. It is notable that neither Fisher or Friedman had contemplated either exogenous or endogenous inflation arising from such “cost-push” inflation. Fisher In 1911, Irving Fisher published an equation representing what he called the Quantity Theory of Money (QTM) which equates the product of Money volume (M) multiplied by the velocity of circulation (V) to the product of the average price of goods and services (P) and the quantities transacted (Y) or real income. M . V = P . Y Friedman Milton Friedman on repetitive occasions stated that inflation, the general rise in prices of goods and services is a “monetary phenomenon” and occurs if money volume rises faster that the levels of output. In rough terms this states that if M and Y rise at the same rate, then P will remain stable. The problem with this, is that it is not true. The stagflation crisis was proof that national monetary volume had no relevance to such a massive influx of cost-push inflation and the combined impact of anticipatory pricing. In other words, inflation was no longer a purely monetary phenomenon or caused by money volumes advancing at a rate that exceeded the growth in output. Friedman’s famous statement no longer applied and Fisher’s Quantity Theory could not account for this new reality because of lack of relevant variables. Inflation was caused by rising unit costs and by corporate responses to these rising costs by a rise in prices resulting from corporate price setting to maintain profits. Interest rates & the Bank of England The QTM suggests that by lowering money volume, inflation will fall. The reader by now will realise that this is not true but this is the logic of the Bank of England monetary policy committees. As a result, for some 50 years the Bank of England has been applying the wrong policy instrument to control inflation resulting in a pound purchasing power depreciation treadmill and declining real incomes. This is why the purchasing power of revenues declined with the purchasing power of the GDP against budgetary requirements to cover government’s growing commitments. The inevitable result has been an annual deficit starting, of course, in 1973. In constitutional terms the Bank of England operations have been abusive and fiscal policy, for the same reason of the currency purchasing power decline, has also become abusive spreading over into destructive decapitalization of productive units such as farms as a result of a retrograde farm inheritance tax In the next post, Part 3, I will explain how the UK economy can recover by abandoning the absurd policy "solutions" inherent in Keynesianism, monetarism, Mundellian supply side economics and modern monetary theory.

IS TAXING THE RICH THE SOLUTION? – PART 1 Several, some increasingly popular YouTubes, blogs and social media commentaries are proposing that there is a need to “Tax the Rich!” in order to secure enough revenue to fill in current gaps in the feasible “revenue take” from within the current GDP of the United Kingdom. In a flat earth national accounts balancing world, it is assumed that the economy is a zero-sum transactional arrangement where, by shifting sums of money based on the following types principal types of taxation: •a deduction from wages, rentier & corporate profits (income tax) •a value based on asset values (asset tax) •a transactional tax (VAT, sales tax) are supposed to fund government budgets. However, these combined with other levies, see diagram, are insufficient and being stretched to their limits because funding requirements are growing over time. In this short series, I will explain why the taxing the rich “solution” would at best be a temporary stop gap after which this problem will continue to get worse. Some YouTube, blog and social media presenters state they are economists having qualified in universities of renown in economics. But this is, I think, why they have not identified the actual problem. I have to state that studying economics at any university in the United Kingdom will not enlighten people to the issues at hand. I studied post graduate economics at the Faculty of Economics, Cambridge University and at the Department of Economics, Stanford University. It was only when I was faced with the practical problem of attempting to solve the stagflation crisis in 1975, that I realised that the economic theory and policy options I had been taught at both universities were wrong and when applied in practice prejudiced constituents, companies and the economy. I should add that the same flawed theories and policies still make up the content of current university courses on economics. This is why nothing has been done to balance the maldistribution of wealth so as to end up with an anthem of “Tax the Rich!” while completely ignoring the structural factors causing the problem in the first place. By coincidence with my initiating work on inflation in 1975, the deficiency in the “tax take” had already become apparent; it had started in 1973. In the 2024-2025 projections of the OBR the expected deficit is projected to be £127 billion (see diagram) but this is bound to be wrong because of things economists have not been taught. The graph below, ignoring the massive two war debts, shows the net additions of annual deficits to create an ever increasing national debt began with just £37 billion in 1973. In other words, we have faced the current fiscal deficit issue now for over 50 years but economic theory and practice has not been able to address this issue to eliminate it. In Part 2, I will explain why this accumulating national debt got going in 1973 and why, as a result of a failure to change both economic theory and policies to account for changed circumstances, we face increasing income disparity and poverty and the call for government to tax the rich. This solution, however is not sustainable, as I will explain, but there are feasible sustainable solutions which I will also explain.

The operational state of readiness of our nuclear weapons is not clear given the very recent public failure of that demonstration of Trident. In any case we do not have defence against hypersonics which would seem to be priority requirement. Since we do not seem to have an air defence system on par with world leaders in this field the use of a nuclear "deterrent" seems to be completely redundant. Ignoring the Biden Administration paranoia and really poor intel, in the end an objective and realistic strategic assessment of intent and motivations of possible "enemies" is seriously lacking.

A sensible response is to give serious consideration to the original Russian proposal for a mutual strategic security agreement to include UK, Europe and Russia so as to deliver on the "peace dividend" that was squandered by the "West:" in 1989+. This would avoid war and cost a lot less.

Ukraine has constantly tried to increase support for its campaign to expel their Russian speaking and ethnic Russian minority including killing them where NATO and UK have assisted with arms and training. Since most have now left taking their territory with them Ukraine needs to stop trying to drum up more violence by attempting to influence the formation of a European military force which is not needed. All that is needed is a mutual strategic security agreement with Russia and a neutral Ukraine. Less risk, lower cost and a lasting peace.

This is all nonsense. The objective needs to be lasting peace. Arrange a mutual strategic security agreement with Russia, UK & Europe. Make Ukraine neutral to everyone's benefit. Reap the "peace dividend" by terminating the exhorbitant waste of money on rip off priced useless armaments. Build a constructive peaceful future for our children and grandchildren.

This is the problem, the UK and EU have invested in a corrupt failed project and somehow believe throwing more money after bad will salvage something. It wont, it will simply depreciate the UK and EU economies to no possible benefit. It would be lower cost and risk to settle for a permanent mutual strategic security agreement with Russia to prevent any future conflicts. Ukraine can remain neutral.

@penheiro53 @implausibleblog £300 billion was the UK's losses alone due to sanctions backfiring as an energy price crisis and inflation. The rest are guestimates yet to be settled.

@MyLordBebo Yes diminishing the influence of paranoid warmongers is common sense if one desires a lasting peace.