The Duopoly of Money Creation

How is money created?

Fiat money is created from nothing on the basis of a promise – a promise to deliver goods or service in the future. Another word for promise is debt – I prefer promise. Only if we believe in these promises does money have value. The teacher promises to teach. The roofer promises to mend the roof. Money creation facilitates things getting done, but create too much too fast – by promising more than we can deliver – and it looses its value. Therein lies the problem.

Money is created either when the government spends, or when a bank makes a loan. We can think of government spending and bank loans as the beginning of two interconnected money circuits, see Figures below. The government and bank circuits form the duopoly of money creation.

The money circuit

After money is created it flows [1] through the economy and eventually is returned to the issuer. In the government circuit, money is returned to the government via the payment of tax, as in Figure 1. In the bank circuit, money is returned to the bank by the repayment of the loan, see Figure 2.

Figure 1: The government spend and tax circuit. The difference between spend and tax equals private sector saving and is known as the deficit. 

When all the money is returned the quantity of money goes back to zero except that in practice the rate of new money creation is higher than the rate of money cancellation, such that we hardly notice the creation and annihilation process and instead the total amount of money in the economy grows (imagine the lines in Figures 1 and 2 getting thicker over time). Ideally the growth in the money supply should match the growth in economic activity, such that prices remain roughly stable and we maintain confidence in the value of our promissory notes. Control of the rate of money creation and destruction in the government and banking circuits are known fiscal and monetary policy, respectively.

Figure 2: The bank circuit where loans create private debt.

Note that the government circuit is leaky, by design. People are allowed to save – hoard promises – and avoid tax. The part of the government spend that is saved leads to a deficit on the governments books (red in Figure 1). Savings can serve a useful purpose but it is odd that we tolerate other leaks, like lower taxes on capital gains and tax havens, I shall come back to leaks and the deficit in a later post.

Why two circuits?

The obvious question is, why do we need a duopoly? Why do we need both a government circuit and a banking circuit? Why do we need both fiscal and monetary policy? As money is a collective good, should we transfer all money creation powers to government and demote private banks to the role of intermediaries as some propose? Or could we hand over all money creation to private banks as the free market fundamentalists would prefer?

Many people are shocked to learn that banks and government are the source of all money, in particular, that banks create money. By allowing the equivalence of bank money and government money, the government and hence all of us underpin the banking circuit and so we have a democratic right to keep them under control and to take a share of their profits. Still banks do provide a useful service, and those looking for the failings of the modern world as a failure of this system of money miss the real culprits. The duopoly is optimally designed to meet our needs. We just need to manage it better.

The reason for the duopoly is relatively easy to understand. Money creation needs to serve both individual need and those of the country as a whole. The bank circuit exists to serve individuals, while the government circuit exists to provide services to everyone.

  • Two circuits are necessary because there are individuals (private) and collective (common or public) interests.

We do not really want government to get involved in private consumption like car loans and we do not really want the vested interests of private banks to extract rent from public need, so two separate dedicated money circuits are required.

Economists often call our collective interests public goods. The most familiar examples are security and defence, health and education. Education is a public good because its consumption is intended to benefit society as a whole and not only the individual receiving the education. We educate people to become engineers and doctors so that we can all benefit from their expertise in the future. Other examples of a public good include transport and energy – we build roads or power stations such there is a net benefit to everyone.

Democratic control of money creation

We can still ask why we need a separate money circuit to provide public goods? There are many good reasons, but perhaps most important of all is that we should be granted a say on our collective interests – this is the essence of democracy. We elect a government to manage our collective needs. Capitalism and democracy are also a duopoly – each with their dedicated money circuit. The capitalist banking circuit represents private interests but fails completely in the provision of public goods. The democratic government circuit fills the gap. The duopoly of capitalism and democracy exist in parallel to support and complement each other.

The failure of the private interest bank circuit to provide public goods is easiest to understand by looking at specific examples. For example in health care, the market solution is to operate on the patient offering to pay the most. Even worse, the market may deliberately create a scarcity in order to charge a higher price. A market cannot operate effectively in matters of life and death, as Kenneth Arrow – a highly-respected pioneer of neoclassical economics – wrote:

the laissez-faire solution for medicine is intolerable.

The government solution in health care take a long-term perspective and addresses the scarcity in trained doctors such that more patients can be treated. Markets only operate effectively if there is genuine competition. For example, we need at least two – preferably more – companies operating on every bus route in order to give commuters a real choice, but this just creates overcapacity and congestion. In situations where competition is not viable, where demand is unlimited like health, and supply delivers societal benefits then collective democratic control is the optimal solution.

What can go wrong?

The duopoly of individual (or private) and collective (or public) needs leads naturally to the duopoly of monetary and fiscal policy. Those looking for the failings of the modern world as a failure of the system of money miss the real culprits. The failure lies in the inability of politicians to regulate the banks and to appropriately use fiscal policy.

The art of economic management is to balance fiscal and monetary policy. An over dependence of one or other is doomed in the long term. Since 1980 both the US and UK abandoned this balanced approach that had worked well up to the oil crises of the `70s. Over reliance on the banking circuit and bank deregulation led eventually to the private debt bubble that burst in 2007-08. Rather then correct their mistake, politicians left it to the central bankers to sort out the mess. The bankers, limited to monetary tools, turned to quantitative easing, but nearly a decade on, with interest rates still stuck at their zero lower bound, we still look on aghast, waiting for someone to wake up to the complete failure of monetarism – if only the younger Milton Friedman could come back to explain it to us all. In 1969, he said [2]:

The available evidence . . . casts grave doubts on the possibility of producing any fine adjustments in economic activity by fine adjustments in monetary policy – at least in the present state of knowledge . . . There are thus serious limitations to the possibility of a discretionary monetary policy and much danger that such a policy may make matters worse rather than better.

In contrast, fiscal policy is a far more powerful, and some may say more dangerous, beast. The collective has an ability not available to any individual. Only the collective has a super charge card where all the spend comes back via tax – the teacher does not cost anything as long as the money spent on them is also spent. In fact, more likely is that the collective will make a profit on employing the teacher by crowding in more economic activity (a multiplier greater than 1). Fiscal policy is intended to get things done. Let’s get on with it!

[1] As Marcus von Skym says: the most important property of money is to flow.

[2] Milton Friedman and Walter W. Heller, Monetary vs. Fiscal Policy, W. W. Norton and Company Inc., New York 1969.

Is the Institute for Fiscal Studies on to something?

In a recent ‘Times’ article (republished on the IFS website)
Paul Johnson of the IFS  comments extensively on their recent report on UK living standards:

“..by far the biggest challenge to have reared its head over the past ten years or so … is the massive squeeze on incomes right across the population. After taking account of inflation, average earnings remain below where they were in 2008. That’s unique in at least 150 years.”

He continues:
“Increasing employment and dreadful earnings growth have put paid to another verity. Poverty is no longer overwhelmingly associated with lack of employment. The majority of those officially classified as poor live in a household where someone is in work. More than four in ten children in families where one parent works now fall below the poverty line.”
And further:
“Another profound change relates to what it means to be in the middle of the income distribution. The incomes of those in the middle are no further behind the top than they were 20 years ago. But today half of middle-income families with children live in a rented property. Less than a third did so in the mid 1990s. With the extension of in-work benefits they are also more reliant than before on welfare. In the mid-1990s both the rich and the middle were generally owner-occupiers dependent on their own earnings. Increasingly the renting, benefit-dependent middle earners have, and perhaps feel they have, more in common with the poor than with the rich.”

Although, as we have come to expect of the IFS, he goes off the rails at the end of the article, when he talks about tax revenues (that’s why I have quoted extensively to spare PP readers from having to read it throughout!) his comments are a pretty devastating critique of the current economic circumstances.

His conclusions suggest that Labour has an open goal on living standards. They also imply that the idea that you get more right wing as you age may, with so many still feeling the pinch for much longer, not be as pervasive as most imagined.

Labour’s remaining problem is Brexit on which they are giving mixed messages. A period of Labour silence would surely be advantageous in order to allow the Tories gradually to strangle themselves. It seems to be most unlikely that the government will be able to get its five Brexit bills through the Commons and Lords unscathed and it I would be unsurprising if the government fell at an early hurdle. Still, the longer the government lasts the clearer it will be that leaving the EU is a recipe for impoverishment of the nation and that will, by the day, be getting more obvious to voters. So when Labour seems to suggest that its Brexit policies will be practical and influenced by circumstances as they arise perhaps that is no bad thing.

Add to that the fact that Conservative voters are getting elderly and some will, like Brexit voters, be popping their clogs.

Time I think, is on Labour’s side.

The Bourbons would still be doing okay under English law

It has been a long time coming but it seems that at last leaseholds on new houses are to be banned. And ground rent on leasehold flats will apparently be able to be set only at peppercorn levels.

But there are still not any definite plans to help those already affected by the blatant rent extraction of selling what would and should be newly built freehold homes as leasehold.

As many of the freehold land owners seem to reside in tax havens, perhaps a start could be made by mandating that any rent payable to a company incorporated anywhere except the UK or the EU would not have the force of English law. And their agents – because they always have agents – should be required to disclose the details and addresses of landowners. So the shady companies of which, anecdotally, it seems there are quite a few, might just fade away. The others would have to declare themselves.

Indeed Property ownership in tax havens seems so widespread that even articles in the ‘Sunday Times’ earlier this month were highlighting how tenants resented exporting their rents and calling for realistic taxation of commercial property companies.

Once company names are revealed then it is surely up to the builders who sold on these streams of rents to the professional rent extractors, to themselves unwind the deal.

If the builders do not find they have the moral fibre to do so then, although retrospective laws are not usually to be encouraged, arbitrary doubling of ground rents and spurious fees for alterations are so completely contrary to natural justice, that I think a retrospective law would be justified. Such leasehold trickery certainly brings the law into disrepute and has no right to expect the legal system to be available for its enforcement.

Indeed it is at least arguable whether the agreements were freely and knowingly entered into in the first place and some conveyancing solicitors will surely end up being sued.

This deviousness only goes to further demonstrate the perversity in UK jurisdictions of treating the tenant and landlord relationship as equal.
On the Continent, whilst it is true that the codified Napoleonic legal system was based on Roman church law, at least it was modified by the French Revolution. They didn’t want the Bourbons back and ensured that the rent extractors did not get it all their own way. Consequently Continental laws have clear tenants rights and obligations for landlords and recognise that the landowners cannot be allowed the untrammelled power that is their natural advantage.

That revolution is long overdue for English law.

 

Positive Money – a good campaigning organisation, but with a missing link

‘Positive Money’ have a decent idea. Money should be created with the consent of the public. Governments that have served the financial sector must look instead to serve the public.

In this endeavour they want to set up a commitee to create it – rather like a Monetary Policy Commitee with extra powers, although in this case directly answerable to Parliament.

They point out that creating money is absolutley essential to society. It is.

And at the moment the big banks that create about 90% of it are self serving and do not have any view of how they should serve society. True again.

There is little doubt that Banks tend to create crises because they are so all embracing – every financial possibility is considered to be also their interest. The ill conceived idea that they should be kept absolutely as they are is rather like planting one variety of potato and supposing that blight will affect only an infinitessimal amount of the crop. You’d have to be delusionally confident or else just simply lucky. This is not a policy.

So Positive Money suggest that creating money should be considered one of the ‘separate’ powers:  Legislature, Executive, Judiciary  – and Money Creation.

This is certainly an arguable case.

So create the money independent of private PLC banks. Itself an interesting idea.

But if money creation is a separate power shouldn’t taxation be a separate power too? Or is there too much concentration on the money creation at the expense of the money destruction?

Should we further revise the Separation of Powers to give us the Legislature, Executive, Judiciary, Money Creation, and then also Money Destruction (this means, in effect, Taxation).

Yet shouldn’t the Department of Money Creation and Department of Money Destruction -surely basically the same department, perhaps be merged?

If they should, then surely we end up with Parliament? They’re in charge of tax and spend – or as we now know, spend and tax.

Parliament’s members are the people who really need to know where money comes from.

Positive Money propose doing another survey of MP’s, which is certainly good news, but is it not also time for an Ofsted style report on all prospective MP’s? Surely if MP’s are unaware of where the nation’s resources come from they shouldn’t be allowed to stand?

And of course Positive Money need themselves to understand that ‘Positive Tax’ is their corollary and also equally essential –indeed perhaps  more so.

 

‘Democracy in Chains’: a US export that’s not as new as some might claim

Ivan Horrocks

On Wednesday I read George Monbiot’s most recent column in The Guardian* in which he briefly discusses James McGill Buchanan, a man who features prominently in US historian Nancy MacLean’s new book, Democracy in Chains: The Deep History of the Radical Right’s Stealth Plan for America. As Monbiot notes, McLean’s book makes what has previously been largely invisible to the vast majority of people (including it has to be said many politicians) visible, and the title of his piece pulls no punches as to why: ‘A despot in disguise: one man’s mission to rip up democracy’. Monbiot continues with a sub-heading in which he notes that ‘…Buchanan’s vision of totalitarian capitalism has infected public policy in the US. Now it’s being exported.’

Now I’ll admit that I don’t often take issue with much that Monbiot writes, including his work on “rewilding” which gets him branded an extremist in many circles. But I do take issue with his claim that it’s only now that Buchanan’s vision of ‘totalitarian capitalism’ and the way this has infected public policy (and US politics in general it should be noted) is being exported elsewhere.

Why? Well, the answer to that is simple. As a mature student studying for a degree in public administration in the early 1990s one of the subjects covered was public choice theory, the development of a body of work in which, as Monbiot notes in his article, Buchanan played a central role. A leading book on the subject at the time was Peter Self’s Government by the Market? The Politics of Public Choice (Macmillan Press, 1993) in which the author details and critiques how the creation of the new public choice ideology came about, why, its goals and ambitions, and known and likely outcomes for the post-war model of social democracy.

As Self notes, public choice theory was indeed primarily a US development, although by the early 1990s its influence had spread, especially to English-speaking countries, and a prolific volume of work had been produced. In the US public choice theory had two strongholds: ‘…the Virginia School led by James Buchanan and Gordon Tullock, who founded the Public Choice Society in 1963, and the Chicago School, represented by such writers as Mancur Olson and George Stigler.’ (Self, 1993: 1). This body of work developed out from Anthony Downs’ ground breaking book of 1957, An Economic Theory of Democracy.

It’s not my intention to undertake a detailed review of public choice theory here, except to note that the underlying behavioural view – as for neo-classical economics – is that humans are primarily egoistic, rational, utility maximisers. Thus, Buchanan and Tullock (1962) rejected the traditionally accepted view of the difference between ‘political man’, supposedly concerned with public interest, and ‘economic man’ and private interests. Instead they argued ‘that it was reasonable to assume that his basic motives and interests will remain the same. What will change are the constraints and rules under which he operates, which will be critical for the rational calculation and pursuit of private interest.’ (Self, 1993: 2).

This ‘rational’ view does have profound consequences for how we view politics and indeed the construction and operation of political systems and economic and social relations in general, of course. Leaving that aside, for the purpose of this blog I want to focus on one succinct passage in which Self explains the emergence of public choice theory and the fundamental role it played in the new ideology of what in the 1990s was increasingly viewed as ‘government by the market’:

‘Mainstream public choice theories have been fused with market theories and converted into a powerful new ideology which has become politically dominant over the last two decades. This new ideology has overthrown or undercut the previous dominant ideology often described as the Keynesian-welfare state.

In both these cases the dominant ideology is a joint product of economic and political thought. The Keynesian-welfare state combination stressed the limitations and failures of market economics and beneficial capacities of the state for promoting both social welfare and economic prosperity. The new ideology reverses this approach and argues the general beneficence of markets and the many failures of politics. Public choice thought plays a vital part in this new synthesis because it claims to expose the grave intrinsic defects of the political process, especially compared to the merits of market choice. Without this demolition job on the role of government, market ideology could not have flourished in the 1980s.’
(Self, 1993: 56)

This then is where I take issue with Monbiot’s article, because the work of Buchanan and other advocates of public choice ideology is not a recent US export. Far from it. It has been infecting and thus impacting politics, government and public policy in the UK and elsewhere for decades. Nevertheless, Monbiot (following McLean’s argument) is correct in highlighting the more recent role billionaires such as the Charles Koch have played in funding entities that promote – usually by stealth – Buchanan’s/public choice forms of government and constitutionalism that effectively leave ‘democracy in chains’, as McLean so aptly puts it.

But again, it’s important to recognise how long this process has been going on. Thus, Self notes the role that so called “think tanks” played in the early transmission of public choice ideology and how they were usually funded either directly or indirectly by big business. Breaking with the independent tradition of organisations such as the Rand Corporation and Urban Institute, think tanks such as the Heritage Foundation and Hoover Institute (to name just two US example from many), and in the UK the Institute for Economic Affairs and Adam Smith Institute (ditto Canada’s Fraser Institute), all aggressively promote policy ideas and proposals based on public choice principles. (In his 2014 book, The Establishment, Owen Jones discusses the activity and impact on UK politics of several of the UK’s leading right wing/public choice think tanks).

In terms of influence and impact, Self notes  a number of examples from the 1980s of which I simply highlight one:

The Heritage Foundation specialised in detailed, closely argued policy proposals. When President Reagan took office, twenty Foundation ‘staffers’ joined his administration and he was greeted with a twenty volume, 3000 page report entitled ‘Mandate for Leadership’ filled with detailed recommendations for cutting down government and boosting defence. Four years later the Foundation could boost that 61% of its proposals had been implemented…and a new mandate was issued for Reagan’s second term with 1300 specific proposals.’ (Self, 1993: 66, citing The Nation, December 1984).

Although seen by many as at best incestuous and at worst verging on corrupt, over the decades since Peter Self’s book none of the influence/lobbying activity he reported has slowed or been curbed. Indeed, quite the reverse. The purveyors of public choice ideology have continued to evolve ever more ingenious ways to control and shape public policy that furthers their ideology and the interests of their benefactors. This is usually by stealth because it has been consistently shown that such ideas generally lack public support. Currently there’s no more egregious an example of this than the continuing attempts by US Republicans to pass legislation to repeal and replace (or just repeal) Obamacare, thus negatively impacting millions of US citizens, while simultaneously committing to tax cuts that will overwhelmingly benefit the already wealthy.

It’s somewhat ironic then, as retired US senator Barney Frank noted on MSNBC on Wednesday evening, that at the same time the behaviour and actions of President Trump demonstrate to everyone who dislikes government that there is, in fact, something worse than government: No government. Furthermore, through their actions many Republican politicians (ditto their Tory compatriots in the UK) also expose the fact that public choice ideology has never been about devising public policy that responds to public need.

Nor is there anything public – in the sense that most of us understand that term – about public choice theory and ideology. It’s actually a misnomer of the grandest order. For what public choice is really about is bowing down to that base and simplistic measure of humans as egoistical, rational, utility maximisers, and rewarding those that act accordingly.

*https://www.theguardian.com/commentisfree/2017/jul/19/despot-disguise-democracy-james-mcgill-buchanan-totalitarian-capitalism

‘Euro scritturali’ and why Italians shouldn’t issue them

Times seem hard in Italy.

Recent statistics show that those unable to purchase basic essentials, reached 4.7 million last year, or 7.9% of the Italian population and up from almost 1.7 million in 2006.

Two banks have been bailed out but by the Italian taxpayer rather than by the European Central bank, which has proved once again that the ECB has no intention of being a lender of last resort. And means that Italy’s government is operating without a sovereign currency. The reason for the Italian government taking the pain seems to be that the bank bondholders comprised mostly small individual savers who were perhaps too numerous to lose all their savings.

With all this troubling news it is less of a surprise to read that Italians have been creating their own money. Yes, they have been creating ‘scriptural’ Euros in such quantities that the Banca d’Italia has had to ask them to desist!

The Bank says that writing Scriptural Euros or “scriptwriting, is an activity allowed by law only to authorised persons, such as banks, electronic money institutions and other payment institutions. “

It seems that the Euro writers rely on the fact that there is a copyright symbol “©” on every Euro note which is a private, not a government symbol in Italian law. (They also appear on UK notes in case anyone was wondering. But that too is odd – people are unable to copy notes because they are copyright seems an odd control for counterfeiting money – but perhaps they think people would like to steal the pictures?)

So in effect scriptural Euro issuers were trying to include citizens as ‘authorised persons’.
Allegedly only one payment has been made: 25 Euros to Facebook for advertising – I’m unclear how it was accepted, but it was on the basis of ‘just this one occasion’….

Curiouser and curiouser.

And ironically, if the Banca d’Italia really had the right to create money it wouldn’t have to rely on Italy’s taxpayers.

Let’s hope that at least the admonishment to the citizenry helps more people to realise where money really comes from.

What’s the difference between a Yorkshireman and a Coconut?

I’m sure not all Yorkshiremen will excuse me but, as a former resident, I’m sure the ones worthy of the name will.

The answer is:- You can get a drink out of a coconut.

Perhaps that is why coconuts don’t flourish in Yorkshire.

Mind you, it turns out that the oil is the important part.

Does George Eustice, the Agriculture Minister, albeit a Cornishman, but still a (prosperous) farmer himself, realise this?

Because there seems a great appetite to think that there is major scope for import substitution when Britain leaves the EU.

George Eustice must realise that there is usually only one harvest a year and that crops and livestock do not grow overnight. His colleagues from the shires seem blissfully unaware, that, for example, about 30% of our lamb is exported – to the EU.

And even in Cornwall, although there may be a supply of tea there are no coconuts.

If farmers are to provide the food Britain needs they need, with just 20 months before potential ‘B’ day, to know precisely what they should be growing in order to earn a living.

And farmers might need to know that, for example, the  days are numbered for British Sugar and that coconuts are the future.

Indeed I think both are true even if we remain in the EU, but if the former may prove of some concern to East of England farmers the latter should be the concern rather for the British consumer.

Food and drink comprises the biggest section of EU regulation and yet, quite remarkably, there is no plan.

In the recent report by a combined Sussex, Cardiff and City Universities  Professor Lang, one of the contributors, said “UK food security and sustainability are now at stake. A food system which has an estimated three to five days of stocks cannot just walk away from the EU, which provides us with 31 per cent of our food. Anyone who thinks that this will be simple is ill-informed.”

And, he could have added, that all of that is based on a just in time ordering system.

When customs controls are reintroduced by the EU, even if the UK may, characteristically, choose not to afford them, then using the M2 as a lorry park is likely to become permanent.

Still, at least coconuts are more likely to come to Liverpool or Tilbury.

I think we have to conclude that food is one of many areas and also actually, probably the most important area where the government does not have the foggiest idea what it is doing. By failing to act now it is giving neither farmers nor their customers – us – any security.

This is a decidedly ill thought out way for the Government to run a country which is leaving a Customs Union. As a result the so called precariat is likely to comprise ever more members and will result in that same precariat becoming pervasive.

A sad indictment.

With a despairing heart, I return to to the more optimistic coconuts.

I cannot find anywhere in the EU that produces them.

So at least it is likely we will still be allowed the luxury of frying or roasting in coconut oil – and indeed organic supplies seem widely available.  Which is perhaps some recompense.

Perhaps this is a suitable way of encouraging ‘healthy life’ afficiandos to buy coconut oil to cook with, and in – if they aren’t already- and trying to encourage the spread of the good word.

When cooked, coconut oil doesn’t generally produce hydrogenated oils – so the oil you’re cooking in doesn’t change much. The table is below:

We can now even use lard without guilt.

In the past, I’ve consumed fish and chips with delicious chips cooked in lard. This was – and is now again – a tribute to Yorkshire, although, of course originally we were told that we should not allow lard, never mind appreciate the taste.

Now I’m much encouraged towards real food and just fry again – preferably in coconut oil – but local lard will certainly do!

Mr Trump just Wants to be Friends

There was a lovely cartoon, I think from a German newspaper, which I cannot unfortunately now trace, but it was a compelling scene. It showed the empty chairs around the table at the Paris climate change talks. They all had the country flags on the back of them, and in the long line of chairs inspection of the US’s uniquely styled empty seat revealed that it was in fact a high chair….

Looking at the rather excruciating images of Trump’s visit to Paris it seems to me that somebody who ought to be at ease internationally is clearly something of a little boy lost and so lacking  in self-awareness  that it shows.

The poor chap wants friends – even worse, he needs friends. As he might say, he needs friends so bad

If we look at his administration, he doesn’t seem to have filled all his cabinet posts even after six months in office. Many, if not most of those he has appointed are friends or friends of friends. He still uses his son-in-law as an advisor and his daughter came to occupy his seat for a short time at the G10.

He seems to have loved all the ceremony of the 14th July in Paris. Yet, having held hands with the UK Prime Minister in America he has reportedly got cold feet about a return visit to the UK because he doesn’t want demonstrations. He wants friends.

He’s gradually discovering that running America isn’t like being a Chief executive of a corporation, where you can sack those you don’t like never to hear from them again. In politics they crop up somewhere else and start criticising you. He doesn’t like that. He wants loyalty – that’s what friends are for. He tried to be friends with Macron – even not finally closing the door on the climate change agreement. The thought may well not survive a few weeks back in the US. But he just wanted to be friends.

Most of his prospective friends will have heard Lord Palmerston’s dictum that “England has no eternal friends, England has no perpetual enemies, England has only eternal and perpetual interests.” So the more the US President tries to acquire international friends the more they seem to recoil.

We know Trump had a difficult upbringing in the indulgent lap of luxury. He had a damaged childhood and his lack of psychological suitability for the task of President becomes ever more evident.

Still if Trump is unaware of Palmerston’s famous dictum then he is unlikely to have discovered the success of the accompanying gunboat diplomacy.

On balance perhaps we’re better off if Trump just wants to have friends.