Crazy Money an Animation by Malcolm Henry

Malcolm Henry who normally blogs at Views from the Boatshed has produced an animation “Crazy Money: How The Rich Get Richer While The Rest Of Us Get Deeper In Debt.” The animation presents many actual monetary figures and is few years out of date, but it is unlikely the overall picture will have changed significantly since 2014. Malcolm has kindly agreed that we can link to it here at Progressive Pulse.

The actual figures are quite alarming. Malcolm has been notified that the video is being posted today and hopefully will have time to respond to comments.

I’m not sure if absolutely everything is correct and there are some areas which are subject to debate (From Richard Murphy: “I think the role of government in money creation is wrongly stated: this is a PM view. And I do not buy the negative interest rate to UBI argument: it’s curious but no more than that. I think it’s worth sharing but with a health warning attached”). As ever we welcome lively debate and constructive criticism at Progressive Pulse, I’m sure none of us know all the answers but I think it is a valuable contribution even if we might disagree about some of the details.

Comments

  1. Geoff Plant -

    it would be interesting to hear Malcolm’s reply to Richard Murphy’s comments

    1. Sean Danaher -

      Indeed. I’m hoping Malcolm will have time to comment. In broad terms I like the animation. Diagnosis is always easier than cure and the patient seems very sick; possibly terminally. I’m rather hoping the whole neoliberal edifice is so cancer ridden it will die, but the neoliberal narratives and memes seem so prevalent even in Universities that I despair sometimes.

    2. Malcolm Henry -

      Geoff,

      In response to Richard Murphy:

      1. The animation doesn’t attempt to explain the role that the government might have in the creation and destruction of money (MMT or its alternatives). It conforms, instead, the common perception that government spending is funded by a combination of taxation and borrowing.

      2. Richard will need to elaborate on his negative response to the negative interest/UBI proposition before I am able to make any constructive comment.

      1. Peter May -

        I suspect you meant “confirms” not “conforms”?
        And if so I wonder if you are now, three years on, more of the opinion that Positive Money or MMT are right that the government in effect spends money into existance – either by marketing bonds and so borrowing from the banks or spending directly?
        And that we spend and tax rather than tax and spend?

      2. Sean Danaher -

        Interesting. I thought Malcolm used the word “conforms” as the vast amount of money controlled by the banking sector and rate of interest extraction is a big enough idea; familiar to many Progressive Pulse readers but a revelation to the population as a whole. Adding another big idea such as the MMT concepts as “there is no such thing as taxpayers money” and “tax doesn’t pay for anything” would have simply been too much.

        @Malcolm, I seed if I can nudge Richard Murphy to respond but he is “insanely” busy at present. (knowing Richard he is insanely busy all the time but seems to thrive on it).

      3. Charles Adams -

        In the government circuit, it is always spend and tax. There is no need for bond sales. As we see with QE the bonds can be held on the BoEs account.

        The thing I liked about Malcolm’s video – apart from the great graphics – is how money can leak out into an unproductive financial sector. This is an instability that needs fixing e.g. via higher capital taxes.

      4. Malcolm Henry -

        I definitely meant “conforms” but omitted the following “to” by mistake. Apologies.

        At the time of making Crazy Money I was already comfortable with MMT’s concept of government spending necessarily coming before taxation but didn’t want to overload the audience with too many new concepts.

        The notion of circulation of money is commonly understood. Creation and destruction less so. But they are, in effect, the same thing: merely different ways of describing how money is introduced and removed from the productive economy.

        The Common Cashflow Fund that I describe in my book is presented as a circulatory mechanism but you could just as well say that the negative interest component is destroying money and the UBI component is creating it.

        The point is that we need to devise a mechanism that distributes spending money regularly and reliably to every nook and cranny of the economy, and also promotes the use of spare money to facilitate productive activity. Our current monetary system fails miserably in both respects.

      5. Peter May -

        Agreed.
        I think it was also an excellent plan to give figures on how much money leaks out of the productive economy. You could emphasise it even more by calling the territory outside the green boundary as the land of the 1% and the land of the 99% the territory within it….

      6. Charles Adams -

        Good points there. The main goal of money is to allow us to get on with doing productive stuff. I agree that it is important to ensure that the flow is distributed to all parts but we also need to ensure that these flows are productive, e.g. there is no point in a UBI if most of it flows straight into the hands of the landlord.

        Ultimately we have to ensure that power is more equally distributed such that it is not possible for one group to exploit another. Money is simple the accounting system that sits on top of power relationships.

      7. Peter May -

        Good points here too! Presumably income to the landlord would be outside the green boundary on the diagram, so lost to the ‘real’ economy. But thinking further I suppose if we still have private landlords then some UBI income is bound to flow into rentiers landlord coffers. As you say equal power distribution is important – so I fear the ‘Progressive Pulse’ challenge is how to sell this to the current electorate, who are generally so brainwashed into the ‘Neoliberal’ thought processs.

  2. Peter May -

    I like the emphasis on the idea that we’re not short of wealth, but we are short of money and that’s because we are always ‘exporting’ money out of the productive economy. It is a variation on the parasite ‘killing the host’.
    Negative Interest even if not used to pay for UBI is still an interesting idea to encourage people to invest money productively. Trouble is if cannot earn in a bank it could just all end up in share trading of second hand shares or even buy to let or high art. But negative interest might perhaps help to change the narrative?

  3. Malcolm Henry -

    “there is no point in a UBI if most of it flows straight into the hands of the landlord.”

    Agreed. And there’s no point in using negative interest to keep money moving if it inflates the prices of essential assets like housing.

    Changing from a system that prioritises money as something that we want to own (an asset) to a system that prioritises money as something that we want to use (a tool for facilitating productive activity) means that we will have to accept controls on the prices of essential assets like housing. In my book I propose making it illegal to provide a mortgage that is more than, say, 90% of the insurance value (i.e. the building cost) of the house, and similar controls on rent. There are plenty of other non-essential assets (art, gemstones, wine, etc.) that can be used as long term stores of value for those who lack the imagination or courage to invest their spare cash in productive activity.

    Such controls, along with UBI (which allows us to choose how and when we sell our labour), will go a long way to distributing power more evenly through our communities.

    1. Peter May -

      “Changing from a system that prioritises money as something that we want to own (an asset) to a system that prioritises money as something that we want to use (a tool for facilitating productive activity)” is an excellent key summary of what we all want. Thank you.
      I think that, once we know that (and of course where money comes from) the conversation is effectively about using taxes to modify commercial and individual behaviour.

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