I keep hearing people complain that the ‘mainstream media’ does not understand economics and that we’re talked down to as if everything must be explained as if the economy is a household. In this thread I explain all you (and they) need to know. Economics in one thread then....
More from Richard Murphy
There is a growing and numbing realisation of just how bad Sunak's budget really was. Worse, he’s even now saying that there is nothing he can do about poverty. This is a long thread to explain why he’s failing and what we can do about it if we want to change our politics.
For those who don’t want to read a long Twitter thread there is a blog version here. https://t.co/AuTdAr1f1n if you want a summary of the whole thread it’s this: the neoliberal thinking that all our main political parties subscribe to is now bankrupt. We need something new now.
Sunak faced a challenge this week. A winning Chancellor has to decide how to secure the support their party needs to win elections. In that case there will always be winners and losers in a budget. So Sunak had to make decisions.
However, it’s fair to say that decisions are always constrained. No budget has, I suspect, ever delivered precisely the policies any Chancellor has really wanted. That’s because all politicians are fantasists and reality has to be addressed as well in any budget.
The overwhelming realities that Sunak needed to address yesterday were really not hard to spot. First, there was the real economic chaos created by shortages in the economy. These are the result of Covid, Brexit and now war, but which heavily pre-dated the last.
For those who don’t want to read a long Twitter thread there is a blog version here. https://t.co/AuTdAr1f1n if you want a summary of the whole thread it’s this: the neoliberal thinking that all our main political parties subscribe to is now bankrupt. We need something new now.
Sunak faced a challenge this week. A winning Chancellor has to decide how to secure the support their party needs to win elections. In that case there will always be winners and losers in a budget. So Sunak had to make decisions.
However, it’s fair to say that decisions are always constrained. No budget has, I suspect, ever delivered precisely the policies any Chancellor has really wanted. That’s because all politicians are fantasists and reality has to be addressed as well in any budget.
The overwhelming realities that Sunak needed to address yesterday were really not hard to spot. First, there was the real economic chaos created by shortages in the economy. These are the result of Covid, Brexit and now war, but which heavily pre-dated the last.
More from Economy
EVs DO NOT EMIT MORE PM
Recently @OECD published a report about particulate matter (PM) from road transport. Newspaper headlines blared that electric vehicles where worse than combustion vehicles. That conclusion was wrong according to the report itself.
Let me show you.
The report (published december 7) can be found here: https://t.co/1HpicKexOt
It's main point is well taken: as cars get cleaner, fine particles emitted by brakes, tires and road surfaces will become more important.
The table comparing electric and combustion engines is on page 92. I took averages of low and high values to get the graph in the first tweet.
I merely took the averages. To get this.
I think it is a terrific report that pulls together a LOT of literature on fine particles that cars spew into the air and that make us sick.
We have ignored this problem for too long, and there's more here than simply exhaust!
Recently @OECD published a report about particulate matter (PM) from road transport. Newspaper headlines blared that electric vehicles where worse than combustion vehicles. That conclusion was wrong according to the report itself.
Let me show you.
![](https://pbs.twimg.com/media/Ep2JB3MXUAMkLNn.png)
The report (published december 7) can be found here: https://t.co/1HpicKexOt
![](https://pbs.twimg.com/media/Ep2J1qYW8AE8_h5.jpg)
It's main point is well taken: as cars get cleaner, fine particles emitted by brakes, tires and road surfaces will become more important.
The table comparing electric and combustion engines is on page 92. I took averages of low and high values to get the graph in the first tweet.
![](https://pbs.twimg.com/media/Ep2KSyMW8AEa56R.jpg)
I merely took the averages. To get this.
![](https://pbs.twimg.com/media/Ep2Kh5JWwAABjkD.png)
I think it is a terrific report that pulls together a LOT of literature on fine particles that cars spew into the air and that make us sick.
We have ignored this problem for too long, and there's more here than simply exhaust!
One of the hardest problems post-pandemic will be how to revive so-called "left behind" places.
Post-industrial towns, run-down suburbs, coastal communities - these places were already struggling before the crisis and have fared worst in the last year.
What should we do?
Today, @ukonward sets out the beginning of a plan to repair our social fabric. It follows our extensive research over the last year, expertly chaired by @jamesosh, and funded by @jrf_uk, @Shelter and @peoplesbiz.
https://t.co/d3T5uPwG9N
Before I get into recommendations, some findings from previous Onward research.
In 2018, we found 71% of people believe "community has declined in my lifetime"
In 2019, we found 65% would rather live in “a society that focuses on giving people more security” vs 35% for freedom
This was the basis for our identification of 'Workington Man' as the archetypal swing voter in 2019, and led us to predict (correctly) that large numbers of Red Wall seats could fall. A key driver was a desire for security, belonging and pride in place.
There is also a key regional dimension to this. We also tested people's affinity with the UK's direction of travel, across both cultural and economic dimensions - revealing the extraordinary spread below: London vs. the Rest.
https://t.co/HrorW4xaLp
Post-industrial towns, run-down suburbs, coastal communities - these places were already struggling before the crisis and have fared worst in the last year.
What should we do?
Today, @ukonward sets out the beginning of a plan to repair our social fabric. It follows our extensive research over the last year, expertly chaired by @jamesosh, and funded by @jrf_uk, @Shelter and @peoplesbiz.
https://t.co/d3T5uPwG9N
![](https://pbs.twimg.com/media/ErhPhN8XAAAptwn.jpg)
Before I get into recommendations, some findings from previous Onward research.
In 2018, we found 71% of people believe "community has declined in my lifetime"
In 2019, we found 65% would rather live in “a society that focuses on giving people more security” vs 35% for freedom
![](https://pbs.twimg.com/media/ErhRx1OW4AAuVXM.jpg)
This was the basis for our identification of 'Workington Man' as the archetypal swing voter in 2019, and led us to predict (correctly) that large numbers of Red Wall seats could fall. A key driver was a desire for security, belonging and pride in place.
![](https://pbs.twimg.com/media/ErhTfMuXAAEVRdc.jpg)
There is also a key regional dimension to this. We also tested people's affinity with the UK's direction of travel, across both cultural and economic dimensions - revealing the extraordinary spread below: London vs. the Rest.
https://t.co/HrorW4xaLp
![](https://pbs.twimg.com/media/ErhTdEpXIAEnEw1.jpg)
The argument for deficits & debt raising interest rates in the US is not increased credit risk, it is that interest rates are a function of economic fundamentals, flows & policy. Deficits/debt change those.
I can't tell if I'm agreeing or disagreeing with @jc_econ.
Increasing government spending or reducing taxes increases demand (or reduces saving). This raises the price of loanable funds or the interest rate.
In a dynamic context, more demand means a stronger economy, the central bank raises interest rates sooner, and long rates rise.
(As an aside, we are not close to the United States needing to worry about credit risk and the risks are more overstated than understated in most other advanced economies too. But credit risk is not always & everywhere irrelevant, just look at the UK in 1976 or Canada in 1994.)
Interest rates have fallen over the last 20 yrs while debt has risen. This does not necessarily mean that debt rising causes interest rates to fall. It could also mean that other things have happened at he same time that pushed down interest rates more than debt pushed them up.
The suspects for these "other things" include slower productivity growth, slower popln growth, higher inequality, less investment, etc. All of which either increase the supply of saving or reduce the demand for investment, reducing the equilibrium interest rate.
I can't tell if I'm agreeing or disagreeing with @jc_econ.
There is no relationship b/w deficits & interest rates in the US & many other advanced economies. Centuries of dynamic institution building underpin our reserve currency status that allows rates to be a function of economic fundamentals, flows & policy not credit risk 1/3
— Dr. Julia Coronado (@jc_econ) January 26, 2021
Increasing government spending or reducing taxes increases demand (or reduces saving). This raises the price of loanable funds or the interest rate.
In a dynamic context, more demand means a stronger economy, the central bank raises interest rates sooner, and long rates rise.
(As an aside, we are not close to the United States needing to worry about credit risk and the risks are more overstated than understated in most other advanced economies too. But credit risk is not always & everywhere irrelevant, just look at the UK in 1976 or Canada in 1994.)
Interest rates have fallen over the last 20 yrs while debt has risen. This does not necessarily mean that debt rising causes interest rates to fall. It could also mean that other things have happened at he same time that pushed down interest rates more than debt pushed them up.
The suspects for these "other things" include slower productivity growth, slower popln growth, higher inequality, less investment, etc. All of which either increase the supply of saving or reduce the demand for investment, reducing the equilibrium interest rate.
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I like this heuristic, and have a few which are similar in intent to it:
Hiring efficiency:
How long does it take, measured from initial expression of interest through offer of employment signed, for a typical candidate cold inbounding to the company?
What is the *theoretical minimum* for *any* candidate?
How long does it take, as a developer newly hired at the company:
* To get a fully credentialed machine issued to you
* To get a fully functional development environment on that machine which could push code to production immediately
* To solo ship one material quanta of work
How long does it take, from first idea floated to "It's on the Internet", to create a piece of marketing collateral.
(For bonus points: break down by ambitiousness / form factor.)
How many people have to say yes to do something which is clearly worth doing which costs $5,000 / $15,000 / $250,000 and has never been done before.
Here's how I'd measure the health of any tech company:
— Jeff Atwood (@codinghorror) October 25, 2018
How long, as measured from the inception of idea to the modified software arriving in the user's hands, does it take to roll out a *1 word copy change* in your primary product?
Hiring efficiency:
How long does it take, measured from initial expression of interest through offer of employment signed, for a typical candidate cold inbounding to the company?
What is the *theoretical minimum* for *any* candidate?
How long does it take, as a developer newly hired at the company:
* To get a fully credentialed machine issued to you
* To get a fully functional development environment on that machine which could push code to production immediately
* To solo ship one material quanta of work
How long does it take, from first idea floated to "It's on the Internet", to create a piece of marketing collateral.
(For bonus points: break down by ambitiousness / form factor.)
How many people have to say yes to do something which is clearly worth doing which costs $5,000 / $15,000 / $250,000 and has never been done before.
1/x Fort Detrick History
Mr. Patrick, one of the chief scientists at the Army Biological Warfare Laboratories at Fort Detrick in Frederick, Md., held five classified US patents for the process of weaponizing anthrax.
2/x
Under Mr. Patrick’s direction, scientists at Fort Detrick developed a tularemia agent that, if disseminated by airplane, could cause casualties & sickness over 1000s mi². In a 10,000 mi² range, it had 90% casualty rate & 50% fatality rate
3/x His team explored Q fever, plague, & Venezuelan equine encephalitis, testing more than 20 anthrax strains to discern most lethal variety. Fort Detrick scientists used aerosol spray systems inside fountain pens, walking sticks, light bulbs, & even in 1953 Mercury exhaust pipes
4/x After retiring in 1986, Mr. Patrick remained one of the world’s foremost specialists on biological warfare & was a consultant to the CIA, FBI, & US military. He debriefed Soviet defector Ken Alibek, the deputy chief of the Soviet biowarfare program
https://t.co/sHqSaTSqtB
5/x Back in Time
In 1949 the Army created a small team of chemists at "Camp Detrick" called Special Operations Division. Its assignment was to find military uses for toxic bacteria. The coercive use of toxins was a new field, which fascinated Allen Dulles, later head of the CIA
Mr. Patrick, one of the chief scientists at the Army Biological Warfare Laboratories at Fort Detrick in Frederick, Md., held five classified US patents for the process of weaponizing anthrax.
2/x
Under Mr. Patrick’s direction, scientists at Fort Detrick developed a tularemia agent that, if disseminated by airplane, could cause casualties & sickness over 1000s mi². In a 10,000 mi² range, it had 90% casualty rate & 50% fatality rate
![](https://pbs.twimg.com/media/EXxITe3UwAMziPl.jpg)
3/x His team explored Q fever, plague, & Venezuelan equine encephalitis, testing more than 20 anthrax strains to discern most lethal variety. Fort Detrick scientists used aerosol spray systems inside fountain pens, walking sticks, light bulbs, & even in 1953 Mercury exhaust pipes
![](https://pbs.twimg.com/media/EXxJzCmUEAADV3N.jpg)
4/x After retiring in 1986, Mr. Patrick remained one of the world’s foremost specialists on biological warfare & was a consultant to the CIA, FBI, & US military. He debriefed Soviet defector Ken Alibek, the deputy chief of the Soviet biowarfare program
https://t.co/sHqSaTSqtB
![](https://pbs.twimg.com/media/EXxLB50UMAASBKY.jpg)
5/x Back in Time
In 1949 the Army created a small team of chemists at "Camp Detrick" called Special Operations Division. Its assignment was to find military uses for toxic bacteria. The coercive use of toxins was a new field, which fascinated Allen Dulles, later head of the CIA
![](https://pbs.twimg.com/media/EXxPCQOWoAY8ckc.png)