Showing posts with label cash. Show all posts
Showing posts with label cash. Show all posts
Sunday 31 July 2022
Sunday 14 October 2018
What price the wisdom of Luke Johnson, when his own company Patisserie Valerie tanks?
Catherine Bennett in The Guardian
The Patisserie Valerie chief should look to himself before lecturing others again
The Patisserie Valerie chief should look to himself before lecturing others again
Self-styled ‘risk-taker’ Luke Johnson at a branch of Patisserie Valerie in London.
‘Unfortunately,” Luke Johnson wrote recently, “financial illiteracy permeates society from top to bottom. Too many ordinary people do not understand mortgages, pensions, insurance, loans or investing.”
Johnson, the entrepreneur whose biggest asset, Patisserie Valerie, now needs bailing out, was being generous. Even after the 2008 financial crisis confirmed that corporate incompetence warranted unwavering public scrutiny, too many ordinary people remain equally ignorant about the operations and capabilities of business leaders, even those, like Mr Johnson, whose influence extends far beyond his imperilled patisserie company.
Some of us, inexcusably, even struggle with the basic jargon of “black hole”. As in: “The owner of Patisserie Valerie has been plunged into financial crisis after it revealed a multimillion pound accounting black hole.” Is it the same sort of black hole that astonished managers at Carillion, following a “deterioration in cashflows”? Or an industry synonym for the “material shortfall” disclosed by the Patisserie Valerie board, “between the reported financial status and the current financial status of the business”.
Either way, does the black hole’s existence mean that Mr Johnson must also be financially illiterate? Or is that question better addressed to Patisserie Valerie’s finance chief, Chris Marsh, with whom Johnson has worked since 2006? Marsh was arrested by the police, then released on bail.
Regrettably, at the very moment when an ordinary person struggles to comprehend how £28m in May became minus £10m by October, and why one creditor, the HMRC, should be pursuing an unpaid tax bill of £1.4m – and what that tells us about the company’s leadership – it appears that Mr Johnson is taking a break from his weekly newspaper column. Its absence is the more acute, now that its author, expert on subjects such as red tape, Brexit and other people’s incompetence, has also fallen silent on Twitter; and his popular personal website seems, at the time of writing, to have vanished. With luck, it won’t be too long before he is sharing details of his mercy dash on Evan Davis’s The Bottom Line: “Providing insight into business from the people at the top.”
‘Unfortunately,” Luke Johnson wrote recently, “financial illiteracy permeates society from top to bottom. Too many ordinary people do not understand mortgages, pensions, insurance, loans or investing.”
Johnson, the entrepreneur whose biggest asset, Patisserie Valerie, now needs bailing out, was being generous. Even after the 2008 financial crisis confirmed that corporate incompetence warranted unwavering public scrutiny, too many ordinary people remain equally ignorant about the operations and capabilities of business leaders, even those, like Mr Johnson, whose influence extends far beyond his imperilled patisserie company.
Some of us, inexcusably, even struggle with the basic jargon of “black hole”. As in: “The owner of Patisserie Valerie has been plunged into financial crisis after it revealed a multimillion pound accounting black hole.” Is it the same sort of black hole that astonished managers at Carillion, following a “deterioration in cashflows”? Or an industry synonym for the “material shortfall” disclosed by the Patisserie Valerie board, “between the reported financial status and the current financial status of the business”.
Either way, does the black hole’s existence mean that Mr Johnson must also be financially illiterate? Or is that question better addressed to Patisserie Valerie’s finance chief, Chris Marsh, with whom Johnson has worked since 2006? Marsh was arrested by the police, then released on bail.
Regrettably, at the very moment when an ordinary person struggles to comprehend how £28m in May became minus £10m by October, and why one creditor, the HMRC, should be pursuing an unpaid tax bill of £1.4m – and what that tells us about the company’s leadership – it appears that Mr Johnson is taking a break from his weekly newspaper column. Its absence is the more acute, now that its author, expert on subjects such as red tape, Brexit and other people’s incompetence, has also fallen silent on Twitter; and his popular personal website seems, at the time of writing, to have vanished. With luck, it won’t be too long before he is sharing details of his mercy dash on Evan Davis’s The Bottom Line: “Providing insight into business from the people at the top.”
Happily, as others have noted, some of Mr Johnson’s earlier columns have addressed related issues such as, recently, “a business beginner’s guide to tried and tested swindles”. Watch out, he warns, for non-payment of creditors, dodgy advisers and attempts to overcomplicate things, so as to baffle the many people – unlike himself – who “do not understand the technicalities of investing or accounting”.
Inevitably, that widespread ignorance makes it hard to judge how much of Johnson’s wide-ranging, pre-existing advice, which has recently focused on Brexit, we can safely discard as, if not consistently hilarious, worthless. His chairmanship of Patisserie Valerie has, after all, repeatedly been cited, in the same way as Dyson’s profits and Tim Martin’s pubs, as the main reason to listen to him deprecate the EU, with his own achievements (pre-black hole), proving that “this is a great country in which to do business and prosper”.
Although Johnson is no different from other business celebrities, such as Dyson, Branson and Trump, in having parlayed business success into guru status, he has, more unusually, further set himself up as a kind of entrepreneur-moralist, with a biblical line in rebukes. Here he is, against – I think – overpaid government regulators: “Political leaders who want to foster world-beating companies must act decisively and, as with any transformation, slash off the gangrenous limbs without mercy.” Critics of rich people are warned: “Envy is a ruinous trait – as well as one of the deadly sins – and a sordid national characteristic.”
Inevitably, that widespread ignorance makes it hard to judge how much of Johnson’s wide-ranging, pre-existing advice, which has recently focused on Brexit, we can safely discard as, if not consistently hilarious, worthless. His chairmanship of Patisserie Valerie has, after all, repeatedly been cited, in the same way as Dyson’s profits and Tim Martin’s pubs, as the main reason to listen to him deprecate the EU, with his own achievements (pre-black hole), proving that “this is a great country in which to do business and prosper”.
Although Johnson is no different from other business celebrities, such as Dyson, Branson and Trump, in having parlayed business success into guru status, he has, more unusually, further set himself up as a kind of entrepreneur-moralist, with a biblical line in rebukes. Here he is, against – I think – overpaid government regulators: “Political leaders who want to foster world-beating companies must act decisively and, as with any transformation, slash off the gangrenous limbs without mercy.” Critics of rich people are warned: “Envy is a ruinous trait – as well as one of the deadly sins – and a sordid national characteristic.”
Like any half-decent moralist, he alternates rants with hints for personal salvation, through thrift, reliability and, again, financial literacy: “I am surprised how many senior managers I meet cannot read a cashflow statement.”
By way of authority, even Johnson’s less scorching capitalist homilies are littered with references to the usual suspects – Napoleon, Samuel Smiles and Marcus Aurelius – less usually, the scriptures and “the 19th-century philosopher Herbert Spencer”, not forgetting, shamelessly, Ayn Rand. “Those who possess willpower,” Johnson echoes, “seize the day and actively control their destiny.” Less gifted individuals are dismissed as lazy idiots, fools, inferiors who will never get the chance to close down a chain of well-regarded bookshops or, as now, bail out their own patisseries.
That Johnson should, on the back of this stuff, and the cake shops, have risen to yet greater prominence as a notable Vote Leave backer, his blessing sought by Theresa May, is perhaps no more absurd than, earlier, was David Cameron’s promotion of the Topshop brute, Philip Green, or elevation of JCB’s Anthony Bamford (previously fined by the EU). The myth of the disinterested entrepreneur-consultant seems ineradicable.
In Brexit, Johnson and his like-minded entrepreneurs have, however, discovered a yet more rewarding platform on which to portray their regulation-averse interests as a purely patriotic project.
Entrepreneurs, Johnson has written, on this favourite subject, are “the anarchists of the business world. Their mission is to overthrow the existing order.” Every entrepreneur is “a disruptor and a libertarian”, or would be “if the state sets a sensible framework and gets out of the way”. He explains that the word “chancer” properly describes risk-takers like him, who are willing to make mistakes, probably through excessive impetuosity, or as others might think of it, recklessness. “Probably the most common and devastating mistake I’ve made,” he wrote, “is to choose the wrong business partners.” As for abiding by the rules of the game: “It is the nature of risk-takers to be in a ferocious hurry to become successful, which frequently means cutting corners.”
Thus, even before last week’s disclosures about Patisserie Valerie, Johnson’s own columns amounted to the best possible case for ignoring the entrepreneur lobby on Brexit – indeed, on every subject other than their own, risk-taking genius.
By way of authority, even Johnson’s less scorching capitalist homilies are littered with references to the usual suspects – Napoleon, Samuel Smiles and Marcus Aurelius – less usually, the scriptures and “the 19th-century philosopher Herbert Spencer”, not forgetting, shamelessly, Ayn Rand. “Those who possess willpower,” Johnson echoes, “seize the day and actively control their destiny.” Less gifted individuals are dismissed as lazy idiots, fools, inferiors who will never get the chance to close down a chain of well-regarded bookshops or, as now, bail out their own patisseries.
That Johnson should, on the back of this stuff, and the cake shops, have risen to yet greater prominence as a notable Vote Leave backer, his blessing sought by Theresa May, is perhaps no more absurd than, earlier, was David Cameron’s promotion of the Topshop brute, Philip Green, or elevation of JCB’s Anthony Bamford (previously fined by the EU). The myth of the disinterested entrepreneur-consultant seems ineradicable.
In Brexit, Johnson and his like-minded entrepreneurs have, however, discovered a yet more rewarding platform on which to portray their regulation-averse interests as a purely patriotic project.
Entrepreneurs, Johnson has written, on this favourite subject, are “the anarchists of the business world. Their mission is to overthrow the existing order.” Every entrepreneur is “a disruptor and a libertarian”, or would be “if the state sets a sensible framework and gets out of the way”. He explains that the word “chancer” properly describes risk-takers like him, who are willing to make mistakes, probably through excessive impetuosity, or as others might think of it, recklessness. “Probably the most common and devastating mistake I’ve made,” he wrote, “is to choose the wrong business partners.” As for abiding by the rules of the game: “It is the nature of risk-takers to be in a ferocious hurry to become successful, which frequently means cutting corners.”
Thus, even before last week’s disclosures about Patisserie Valerie, Johnson’s own columns amounted to the best possible case for ignoring the entrepreneur lobby on Brexit – indeed, on every subject other than their own, risk-taking genius.
Monday 15 February 2016
Crime, terrorism and tax evasion: why banks are waging war on cash
Paul Mason in The Guardian
Governments would love to see the end of banknotes. But what would a cashless society mean for freedom?
Will contactless payment help usher out cash? Photograph: Bloomberg/Bloomberg via Getty Images
I can remember the moment I realised the era of cash could soon be over.
It was Australia Day on Bondi Beach in 2014. In a busy liquor store, a man wearing only swimming shorts, carrying only a mobile phone and a plastic card, was delaying other people’s transactions while he moved 50 Australian dollars into his current account on his phone so that he could buy beer. The 30-odd youngsters in the queue behind him barely murmured; they’d all been in the same predicament. I doubt there was a banknote or coin between them.
The possibility of a cashless society has come at us with a rush: contactless payment is so new that the little ping the machine makes can still feel magical. But in some shops, especially those that cater for the young, a customer reaching for a banknote already produces an automatic frown.
Among central bankers, that frown has become a scowl. There is a “war on cash” in the offing – but it has nothing to do with boosting our ease of payment or saving trees.
Consider the central banks’ anti-crisis measures so far. The first was to slash interest rates close to zero. Then, since you can’t slash them below zero, the banks turned to printing money to stimulate demand. But with global growth depressed, and a massive overhanging debt, quantitative easing (QE) is running out of steam.
Enter the era of negative interest rates: thanks to the effect of QE, tens of billions held in government bonds already yield interest rates that are effectively below zero. Now, central banks such as Japan and Sweden have begun to impose negative official interest rates.
The effect, for banks or long-term savers, is that by putting your money in a safe place – such as the central bank or a government bond – you automatically lose some of it.
Not surprisingly, these measures have led to the growing popularity of cash for people with any substantial savings. Bank of England research shows demand for cash has grown faster than GDP in many countries. So the central banks face a further challenge: how to impose negative interest rates on cash itself.
Technologically, you can’t. If people hold their savings as physical currency, it keeps its value – and in a period of deflation the spending power of hoarded cash increases, even as share prices and the value of bank deposits fall. Cash, in a situation like this, is king.
But the banks are ahead of us. Last September, the Bank of England’s chief economist, Andy Haldane, openly pondered ways of imposing negative interest rates on cash – ie shrinking its value automatically. You could invalidate random banknotes, using their serial numbers. There are £63bn worth of notes in circulation in the UK: if you wanted to lop 1% off that, you could simply cancel half of all fivers without warning. A second solution would be to establish an exchange rate between paper money and the digital money in our bank accounts. A fiver deposited at the bank might buy you a £4.95 credit in your account.
More radical still would be to outlaw cash. In Norway, two major banks no longer issue cash from branch offices. Last month, the biggest bank, DNB, publicly called for the government to outlaw cash.
Why would a central bank want to eliminate cash? For the same reason as you want to flatten interest rates to zero: to force people to spend or invest their money in the risky activities that revive growth, rather than hoarding it in the safest place.
Calls for the eradication of cash have been bolstered by evidence that high-value notes play a major role in crime, terrorism and tax evasion.
In a study for the Harvard Business School last week, former bank boss Peter Sands called for global elimination of the high-value note. Britain’s “monkey” – the £50 – is low-value compared with its foreign-currency equivalents, and constitutes a small proportion of the cash in circulation. By contrast, Japan’s 10,000-yen note (worth roughly £60) makes up a startling 92% of all cash in circulation; the Swiss 1,000-franc note (worth around £700) likewise. Sands wants an end to these notes plus the $100 bill, and the €500 note – known in underworld circles as the “Bin Laden”.
The advantages of a digital-only payment system to the user are clear: you can emerge from the surf in only your bathing shorts and proceed to buy beer, food, or even a small car, providing your balance is positive. The advantages to banks are also clear. Not only can all transactions be charged a fee, but bank runs are eliminated. There can be no repeat of the queues outside Northern Rock, nor of the Greek fiasco last summer, because there will be no ATMs, only a computer spreadsheet moving digital money around. The advantages to governments are also clear: all transactions can be taxed. Capital controls are implicit within the system.
But there are drawbacks, even for governments that would like to take absolute control of money transactions. First, resilience. If a cyber-attack or computer malfunction took down a digital-only payment system, there would be no cash reserves in households and businesses to fall back on. The second is more fundamental and concerns freedom. In most countries, the ability to take your cash out of the bank and to spend it anonymously is associated with many pleasurable activities – not all of which are illegal but which exist on the margins of society. How tens of thousands of club-goers would pay for their drugs each Saturday night is a non-trivial issue.
Nevertheless, the arrival of negative interest rates for banks, together with new rules allowing governments to bail-in – ie confiscate – deposits above a protected minimum, are certain to increase savers’ awareness of the value of cash, and will prompt calls in earnest for its abolition.
If it happens, it would be the ultimate demonstration of the power of finance over people. As for resistance? Go ahead and try. It may be the Queen’s head on a £50 note but the “promise to pay” is made above the signature of a Bank of England bureaucrat.
I can remember the moment I realised the era of cash could soon be over.
It was Australia Day on Bondi Beach in 2014. In a busy liquor store, a man wearing only swimming shorts, carrying only a mobile phone and a plastic card, was delaying other people’s transactions while he moved 50 Australian dollars into his current account on his phone so that he could buy beer. The 30-odd youngsters in the queue behind him barely murmured; they’d all been in the same predicament. I doubt there was a banknote or coin between them.
The possibility of a cashless society has come at us with a rush: contactless payment is so new that the little ping the machine makes can still feel magical. But in some shops, especially those that cater for the young, a customer reaching for a banknote already produces an automatic frown.
Among central bankers, that frown has become a scowl. There is a “war on cash” in the offing – but it has nothing to do with boosting our ease of payment or saving trees.
Consider the central banks’ anti-crisis measures so far. The first was to slash interest rates close to zero. Then, since you can’t slash them below zero, the banks turned to printing money to stimulate demand. But with global growth depressed, and a massive overhanging debt, quantitative easing (QE) is running out of steam.
Enter the era of negative interest rates: thanks to the effect of QE, tens of billions held in government bonds already yield interest rates that are effectively below zero. Now, central banks such as Japan and Sweden have begun to impose negative official interest rates.
The effect, for banks or long-term savers, is that by putting your money in a safe place – such as the central bank or a government bond – you automatically lose some of it.
Not surprisingly, these measures have led to the growing popularity of cash for people with any substantial savings. Bank of England research shows demand for cash has grown faster than GDP in many countries. So the central banks face a further challenge: how to impose negative interest rates on cash itself.
Technologically, you can’t. If people hold their savings as physical currency, it keeps its value – and in a period of deflation the spending power of hoarded cash increases, even as share prices and the value of bank deposits fall. Cash, in a situation like this, is king.
But the banks are ahead of us. Last September, the Bank of England’s chief economist, Andy Haldane, openly pondered ways of imposing negative interest rates on cash – ie shrinking its value automatically. You could invalidate random banknotes, using their serial numbers. There are £63bn worth of notes in circulation in the UK: if you wanted to lop 1% off that, you could simply cancel half of all fivers without warning. A second solution would be to establish an exchange rate between paper money and the digital money in our bank accounts. A fiver deposited at the bank might buy you a £4.95 credit in your account.
More radical still would be to outlaw cash. In Norway, two major banks no longer issue cash from branch offices. Last month, the biggest bank, DNB, publicly called for the government to outlaw cash.
Why would a central bank want to eliminate cash? For the same reason as you want to flatten interest rates to zero: to force people to spend or invest their money in the risky activities that revive growth, rather than hoarding it in the safest place.
Calls for the eradication of cash have been bolstered by evidence that high-value notes play a major role in crime, terrorism and tax evasion.
In a study for the Harvard Business School last week, former bank boss Peter Sands called for global elimination of the high-value note. Britain’s “monkey” – the £50 – is low-value compared with its foreign-currency equivalents, and constitutes a small proportion of the cash in circulation. By contrast, Japan’s 10,000-yen note (worth roughly £60) makes up a startling 92% of all cash in circulation; the Swiss 1,000-franc note (worth around £700) likewise. Sands wants an end to these notes plus the $100 bill, and the €500 note – known in underworld circles as the “Bin Laden”.
The advantages of a digital-only payment system to the user are clear: you can emerge from the surf in only your bathing shorts and proceed to buy beer, food, or even a small car, providing your balance is positive. The advantages to banks are also clear. Not only can all transactions be charged a fee, but bank runs are eliminated. There can be no repeat of the queues outside Northern Rock, nor of the Greek fiasco last summer, because there will be no ATMs, only a computer spreadsheet moving digital money around. The advantages to governments are also clear: all transactions can be taxed. Capital controls are implicit within the system.
But there are drawbacks, even for governments that would like to take absolute control of money transactions. First, resilience. If a cyber-attack or computer malfunction took down a digital-only payment system, there would be no cash reserves in households and businesses to fall back on. The second is more fundamental and concerns freedom. In most countries, the ability to take your cash out of the bank and to spend it anonymously is associated with many pleasurable activities – not all of which are illegal but which exist on the margins of society. How tens of thousands of club-goers would pay for their drugs each Saturday night is a non-trivial issue.
Nevertheless, the arrival of negative interest rates for banks, together with new rules allowing governments to bail-in – ie confiscate – deposits above a protected minimum, are certain to increase savers’ awareness of the value of cash, and will prompt calls in earnest for its abolition.
If it happens, it would be the ultimate demonstration of the power of finance over people. As for resistance? Go ahead and try. It may be the Queen’s head on a £50 note but the “promise to pay” is made above the signature of a Bank of England bureaucrat.
Tuesday 9 December 2014
Beware Russia’s links with Europe’s right
Moscow is handing cash to the Front National and others in order to exploit popular dissent against the European Union
It sounds like a chapter from a cheesy spy novel: former KGB agent, chucked out of Britain in the 80s, lends a large sum of money to a far-right European party. His goal? To undermine the European Union and consolidate ties between Moscow and the future possible leader of pro-Kremlin France.
In fact this is exactly what’s just happened. The founder of the Front National (FN), Jean-Marie Le Pen, borrowed €2m from a Cyprus-based company, Veronisa Holdings,owned by a flamboyant character and cold war operative called Yuri Kudimov.
Kudimov is a former KGB agent turned banker with close links to the Kremlin and the network of big money around it. Back in 1985 Kudimov was based in London. His cover story was that he was a journalist working for a Soviet newspaper; in 1985 the Thatcher government expelled him for alleged spying. (During the same period Vladimir Putin was a KGB officer in Dresden.)
In Paris, the FN confirmed last week that it had taken a whopping €9.4m (£7.4m) loan from the First Czech Russian bank in Moscow. This loan is logical enough. The FN’s leader, Marine Le Pen, makes no secret of her admiration for Putin; her party has links to senior Kremlin figures including Dmitry Rogozin, now Russia’s deputy prime minister, who in 2005 ran an anti-immigrant campaign under the slogan “Clean Up Moscow’s Trash”. Le Pen defended her decision to take the Kremlin money, complaining that she had been refused her access to capital: “What is scandalous here is that the French banks are not lending.” She also denied reports by the news website Mediapart, which broke the story, that the €9.4m was merely the first instalment of a bigger €40m loan.
The Russian money will fuel Marine Le Pen’s run for the French presidency in two years’ time. Nobody expects her to win, but the FN topped the polls in May’s European elections, winning an unprecedented 25% of the vote; Le Pen’s 25 new MEPs already form a pro-Russian bloc inside the European parliament.
In part, the Moscow loan can be understood as an act of minor and demonstrative revenge. It follows President François Hollande’s decision to postpone the delivery to Moscow of the first of two Mistral helicopter carriers, in a deal worth €1.2bn. His U-turn follows considerable western pressure, in the wake of Russia’s annexation of Crimea and its ongoing covert invasion of eastern Ukraine.
But there is also a more profound and sinister aspect to the Moscow cheque. Since at least 2009 Russia has actively cultivated links with the far right in eastern Europe. It has established ties with Hungary’s Jobbik, Slovakia’s far-right People’s party and Bulgaria’s nationalist, anti-EU Attack movement. Here, political elites have become increasingly sympathetic to pro-Putin views.
According to Political Capital, a Budapest-based research institute which first observed this trend, the Kremlin has recently been wooing the far-right in western Europe as well. In a report in March it argued that Russian influence in the affairs of the far right is now a “phenomenon seen all over Europe”. Moscow’s goal is to promote its economic and political interests – and in particular to ensure the EU remains heavily dependent on Russian gas.
In Soviet times the KGB used “active measures” to sponsor front organisations in the west including pro-Moscow communist parties. The Kremlin didn’t invent Europe’s far-right parties. But in an analogous way Moscow is now lending them support, political and financial, thereby boosting European neo-fascism.
In part this kinship is about ideology or, as Political Capital puts it, “post-communist neo-conservatism”. The European far right and the Kremlin are united by their hostility to the EU. Since becoming president for the third time in 2012, Putin has been busy promoting his vision for a rival Eurasian Union. This is an alternative political bloc meant to encompass now-independent Soviet republics, with Moscow rather than Brussels as the dominant pole.
The Kremlin has also discovered that the western political system is weak, permeable and susceptible to foreign cash. Putin has always believed that European politicians, like Russian ones, can be bought if the money is right. According to US diplomatic cables leaked in 2010, Silvio Berlusconi has benefited “personally and handsomely” from energy deals with Russia; the former German chancellor Gerhard Schröder, Putin’s greatest European ally, sits on the board of the Nord Steam Russian-German gas pipeline.
Far-right and rightwing British politicians, meanwhile, have also expressed their admiration for Russia’s ex-KGB president. In March Nigel Farage named Putin as the world leader he most admires, and praised the “brilliant” way “he handled the whole Syria thing”. In 2011 the BNP’s Nick Griffin went to Moscow to observe Russia’s Duma election. Afterwards he announced that “Russian elections are much fairer than Britain’s”. Last week Griffin tweeted praise for Russia Today, the Kremlin’s English-language TV propaganda news channel: “RT – For People Who Want the Truth”.
There are many ironies here. In his state of the nation address last Friday, Putin implicitly compared the west to Hitler, and said it was plotting Russia’s dismemberment and collapse. In March Putin defended his land-grab in Crimea by arguing he was rescuing the peninsula from Ukrainian “fascists”. A few weeks later a motley group of radical rightwing European populists turned up in Crimea to watch its hastily arranged “referendum”.
Tactically, Russia is exploiting the popular dissent against the EU – fuelled by both immigration and austerity. But as rightwing movements grow in influence across the continent, Europe must wake up to their insidious means of funding, or risk seeing its own institutions subverted.
Monday 28 January 2013
Tuesday 7 August 2012
Putting a price on the rivers and rain diminishes us all
Payments for 'ecosystem services' look like the prelude to the greatest privatisation since enclosure
Our rivers and natural resources are to be valued and commodified, a move that will benefit only the rich, argues George Monbiot. Photograph: Alamy
'The first man who, having enclosed a piece of ground, bethought himself of saying 'This is mine', and found people simple enough to believe him, was the real founder of civil society. From how many crimes, wars and murders, from how many horrors and misfortunes might not anyone have saved mankind, by pulling up the stakes, or filling up the ditch, and crying to his fellows, 'Beware of listening to this impostor; you are undone if you once forget that the fruits of the earth belong to us all, and the earth itself to nobody'."
Jean Jacques Rousseau would recognise this moment. Now it is not the land his impostors are enclosing, but the rest of the natural world. In many countries, especially the United Kingdom, nature is being valued and commodified so that it can be exchanged for cash.
The effort began in earnest under the last government. At a cost of £100,000, it commissioned a research company to produce a total annual price for England's ecosystems. After taking the money, the company reported – with a certain understatement – that this exercise was "theoretically challenging to complete, and considered by some not to be a theoretically sound endeavour". Some of the services provided by England's ecosystems, it pointed out, "may in fact be infinite in value".
This rare flash of common sense did nothing to discourage the current government from seeking first to put a price on nature, then to create a market in its disposal. The UK now has a natural capital committee, an Ecosystem Markets Task Force and an inspiring new lexicon. We don't call it nature any more: now the proper term is "natural capital". Natural processes have become "ecosystem services", as they exist only to serve us. Hills, forests and river catchments are now "green infrastructure", while biodiversity and habitats are "asset classes" within an "ecosystem market". All of them will be assigned a price, all of them will become exchangeable.
The argument in favour of this approach is coherent and plausible. Business currently treats the natural world as if it is worth nothing. Pricing nature and incorporating that price into the cost of goods and services creates an economic incentive for its protection. It certainly appeals to both business and the self-hating state. The Ecosystem Markets Task Force speaks of "substantial potential growth in nature-related markets – in the order of billions of pounds globally".
Commodification, economic growth, financial abstractions, corporate power: aren't these the processes driving the world's environmental crisis? Now we are told that to save the biosphere we need more of them.
Payments for ecosystem services look to me like the prelude to the greatest privatisation since Rousseau's encloser first made an exclusive claim to the land. The government has already begun describing land owners as the "providers" of ecosystem services, as if they had created the rain and the hills and the rivers and the wildlife that inhabits them. They are to be paid for these services, either by the government or by "users". It sounds like the plan for the NHS.
Land ownership since the time of the first impostor has involved the gradual accumulation of exclusive rights, which were seized from commoners. Payments for ecosystem services extend this encroachment by appointing the landlord as the owner and instigator of the wildlife, the water flow, the carbon cycle, the natural processes that were previously deemed to belong to everyone and no one.
But it doesn't end there. Once a resource has been commodified, speculators and traders step in. The Ecosystem Markets Task Force now talks of "harnessing City financial expertise to assess the ways that these blended revenue streams and securitisations enhance the ROI [return on investment] of an environmental bond". This gives you an idea of how far this process has gone – and of the gobbledegook it has begun to generate.
Already the government is developing the market for trading wildlife, by experimenting with what it calls biodiversity offsets. If a quarry company wants to destroy a rare meadow, for example, it can buy absolution by paying someone to create another somewhere else. The government warns that these offsets should be used only to compensate for "genuinely unavoidable damage" and "must not become a licence to destroy". But once the principle is established and the market is functioning, for how long do you reckon that line will hold? Nature, under this system, will become as fungible as everything else.
Like other aspects of neoliberalism, the commodification of nature forestalls democratic choice. No longer will we be able to argue that an ecosystem or a landscape should be protected because it affords us wonder and delight; we'll be told that its intrinsic value has already been calculated and, doubtless, that it turns out to be worth less than the other uses to which the land could be put. The market has spoken: end of debate.
All those messy, subjective matters, the motivating forces of democracy, will be resolved in a column of figures. Governments won't need to regulate; the market will make the decisions that politicians have ducked. But trade is a fickle master, and unresponsive to anyone except those with the money. The costing and sale of nature represents another transfer of power to corporations and the very rich.
It diminishes us, it diminishes nature. By turning the natural world into a subsidiary of the corporate economy, it reasserts the biblical doctrine of dominion. It slices the biosphere into component commodities: already the government's task force is talking of "unbundling" ecosystem services, a term borrowed from previous privatisations. This might make financial sense; it makes no ecological sense. The more we learn about the natural world, the more we discover that its functions cannot be safely disaggregated.
Rarely will the money to be made by protecting nature match the money to be made by destroying it. Nature offers low rates of return by comparison to other investments. If we allow the discussion to shift from values to value – from love to greed – we cede the natural world to the forces wrecking it. Pull up the stakes, fill in the ditch, we're being conned again.
Friday 13 July 2012
What is Quantitative Easing and does it work?
Mervyn King has turned our leaders into zombie puppets
Demand has not risen. Neither has production. Yet we have been duped into thinking that QE will kickstart the economy
‘This enormous sum does not exist and never has. It is not "printed" money or funny money. It is no money.' Photograph: Chris Radcliffe/AP
It must be the biggest confidence trick of all time. It is a cheat, a scam, a fiddle, a bankers' ramp, a revenge of big money against an ungrateful world. It is called quantitative easing, and nobody has a clue what it means. According to the Bank of England, the past four years have seen £325bn pumped into the British economy to kickstart growth, with another £50bn now on the way. This enormous sum does not exist and never has. It is not "printed" money or funny money. It is no money. The one silver bullet on which the coalition relies to pull Britain out of recession is a fiction.
I have spent the last year trying to find this money, if only because it seemed rather a lot – more than an entire annual take from income tax, VAT and corporation tax together. I have asked bankers, regulators, commentators, economists, and even trotted round to the Bank of England. Ask any of them after the £325bn and they stare at the ceiling or look at their shoes. Nobody knows. The money appears in no statistic of cash in circulation or on deposit. Bank balances have not altered. Demand has not risen. Production has not expanded.
Such professional and intellectual gullibility on a matter of national salvation is staggering. When Alistair Darling, as Labour chancellor, "pumped in" £75bn, he said it would stave off recession. George Osborne, then shadow chancellor, derided it as "the last resort of desperate governments", and Vince Cable said Britain was going down the road to Harare and hyperinflation. Yet when these two men came to power, they were overnight converts. They became zombie puppets of the Bank of England and its boss, Sir Mervyn King.
We know what QE is supposed to do. The Bank "buys back" the government bonds (or gilts) that were previously sold to banks. Since gilts are as good as cash, this merely replaces an interest-bearing bond with actual cash on the asset side of a bank's balance sheet. It is a paper transaction, moving sums from the bonds column to the cash column.
In theory, the banks have an interest in lending that cash at a profit to the public, or to companies. But that depends on buoyant demand and on finding businesses and individuals whose credit is secure. This is not the case when demand is stagnating. In addition, the banks are sitting on bad debts that need covering, and regulators are telling them to keep higher cash reserves. The banks duly sit on the cash or use it to buy more gilts. The money goes round in circles, collecting fees. It is like Irish truckers moving goods back and forth over the Northern Ireland border, picking up European Union bungs each time they pass customs.
The Bank of England quarterly bulletin is full of QE theology. Its report on a recent conference on the subject is pure angels on pinheads. There is talk of QE leaking from banks into equities and thus "growth", hence the brief surge in equity and commodity prices in the early days of the policy. But bank lending to businesses fell steadily throughout, and consumer demand stalled. As for the Bank of England's theory that "things would have been worse" without QE, where is the proof? The only thing worse would have been bankers' fees.
Osborne and Cable still utter strangled cries for banks to do "more lending to small and medium-sized businesses". They formulate endless schemes to "kickstart the economy". They know that none of these works, but we still have such flops as Project Merlin, theregional growth fund and the business growth fund. The British economy is in a classicKeynesian liquidity trap. It is starved of demand, but nothing is done to boost it.
Some unease over QE is detectable. Darling admitted in an interview as long ago as 2009 that "nobody really knows" whether QE made any difference. The Bank of England monetary policy committee, the Vatican of QE, saw one departing member, Kate Barker, admit in 2010 that QE "might not have a significant impact on the economy". Faisal Islam of Channel 4 published a survey of sceptics in Prospect magazine last winter, quoting the Southampton pundit, Richard Werner, as regarding British QE as "a sham".
The Bank of England loves QE because it is a policy under its control. It opposes genuine reflation as possibly leading to runaway inflation – hardly Britain's top economic problem just now. But the governor himself is in denial. He appears genuinely to believe that QE is "putting money directly into the wider economy" and that "the one word we need to hang on to … is patience". He has brainwashed the Commons Treasury select committee to this effect. It is like watching a patient haemorrhaging blood on the operating table and telling him to wait for a new hospital.
If the government really wanted to inject cash into the economy, it would address the liquidity trap head-on. It would order the Bank of England to add, say, £1,000 to the current account of every adult citizen as a "people's bonus". Such an injection would not depend on Bank discretion. It would not await a government infrastructure project or a business wanting to invest. It would instantly transfuse between £30bn and £40bn of cash into the demand side of the economy.
This need have no impact on Osborne's borrowing targets or deficit, since it would be new money. The chancellor would declare the bonus "off-limits", an emergency stimulus to growth. It might push up some prices and suck in some imports. It might seem to reward the feckless as well as the thrifty. But it would do what the government claims it wants to do – that is, "inject money into the economy".
Opposition to doing this seems to be not practical but moral. It is basically about class. To bankers and politicians, giving cash to ordinary people is vulgar and indulgent. So they pretend. They pretend to pump money into the economy through lending, but do not even do that. They pretend to give money to banks, but in fact nothing is injected anywhere.
When Britain devalued its way out of the last great economic recession in 1931, a bewildered Labour chancellor, Philip Snowden, wailed that: "Nobody told us we could do that." Nobody seems to have told David Cameron and George Osborne that you cannot kickstart growth by using QE, only by really pumping real money into the real economy. They have been duped by the greatest bankers' swindle on earth.
Saturday 12 November 2011
China's richest keep firm eye on exit door
By Olivia Chung
HONG KONG - "Get rich - then get out" is the life message being grasped by China's wealthiest citizens two decades after former leader Deng Xiaoping supposedly declared that "to get rich is glorious".
About 60% of rich Chinese people intend to migrate from China, according to a report jointly released by the Hurun Report, which also publishes an annual China rich list, and the Bank of China. A separate study by US-based Bain & Company and China Merchants Bank in April of 2,600 high-net worth individuals - those who hold more than 10 million yuan (US$1.6 million) in individual investable assets (excluding primary residences and assets of poor liquidity) - found that about 60% of those interviewed had completed immigration applications to other countries or had plans to do so.
About 14% of the rich Chinese people, each of whom has a net asset of more than 60 million yuan, said they had either already moved overseas or applied to do so, according to the Hurun findings, which were based on one-on-one interviews with 980 rich Chinese people in 18 mainland cities from May to September.
Another 46% said they planned to emigrate within three years, variously citing higher-quality education available for their children overseas, better healthcare, concerns about the security of their assets on the mainland and hopes for a better life in retirement.
The most favorable destinations by rich Chinese is the US, with 40% of respondents claiming it was their first choice, followed by Canada and Singapore. Encouraging them in their quest, the United States continues to lower its threshold for businesspersons’ immigration.
Some 70% of the 4,218 visas issued under the US Immigrant Investor Program, known as EB-5 visas, issued in 2009 were applicants from China, data from the US Department of State show. In 2010, more than 70,000 Chinese applicants obtained permanent residency in the US, accounting for 7% of total applicants, placing second behind only Mexican applicants, according to the US Department of Homeland Security.
Canada allocated more than 1,000 of its targeted 2,055 immigrant investors to Chinese people in 2009 and last year, 2,020 Chinese applicants obtained permanent residency in Canada through investment, accounting for 62.6% of the total immigrant investors to Canada, data from Citizenship and Immigration Canada showed.
Kathy Cheng, an investment immigration consultant based in Shenzhen, next to Hong Kong, attributed the popularity of the US to it not having a cap on its investment visa program. The minimum amount required for investment immigration to the US is $500,000, and among all destinations that offer investment immigration, the US is alone in not imposing a quota.
“Recently, the US is trying to overhaul the immigration laws to attract rich or high-skilled foreigners. The moves have attracted the attention of some wealthy Chinese, who can afford to live elsewhere," she said to Asia Times Online by telephone.
Two US senators, Democratic Chuck Schumer and Republican Mike Lee, last month introduced a bill that would give residence visas to foreigners who spend at least US$500,000 to buy houses in the country. The proposal would allow foreigners immigrating to the United States to bring a spouse and any children under the age of 18. The provision would create visas that are separate from current programs so as to not displace anyone waiting for other visas.
The US Ambassador to China, Gary Locke, the former US commerce secretary who took on his latest post in August, said the US will make its investment and commercial environment as open and appealing as possible to increase Chinese investment in the US to create more jobs for Americans, which is the foremost priority of the Barack Obama administration.
"We will help Chinese companies and entrepreneurs better understand the benefits and ease of investing in the US by establishing factories, facilities, operations and offices," Locke told US business leaders in Beijing in September.
In May, President Obama said the US needs to overhaul its immigration laws to secure high-tech foreign talent to address a shortages of scientists and experts in the high-technology sector. In the same month, the Obama administration extended the Optional Practical Training program to allow students graduating in fields that include soil microbiology, pharmaceuticals and medical informatics, to be able to find a job or work in the US for up to 29 months (instead of 12) after graduation.
New York City Mayor Michael Bloomberg said recently at a Council on Foreign Relations event in Washington, that to spur job growth, the US should allow foreign graduates from US universities to obtain green cards (permanent residency), ending caps on visas for highly skilled workers, and setting green-card limits based on the country's economic needs not an immigrant's family ties.
Of the 980 people interviewed by Hurun Report and the BOC, about 35% said they have assets overseas, which on an average accounted for 19% of their total assets; 32% of those surveyed said they have invested overseas with a view to emigrate and half said they did so mainly for the sake of their children's education.
A mainlander who has manganese mines in his home province of Guangxi said he was applying to emigrate to Canada from his home region in southeast Guangxi, mainly due to take advantage of better education overseas for his two-year-old son.
"An increasing number of parents in China prefer their children to receive education overseas instead of with the examination-oriented education system in China," said the mine owner, who asked not to be identified.
However, a source close to him said the mine owner had assets worth millions of dollars and "underground" businesses; given changeable government policies, emigration was the best way of protecting some of this wealth.
"Despite Beijing's currency rules, the wealthy have many ways to move their money out of the country. Besides, part of his money comes from smuggling, though his business is far smaller than Lai Changxing," said the source.
Lai Changxing was extradited to China from Canada in July after a 12-year exile there. He is expected to face charges for smuggling to a value of US$10 billion, bribery and tax evasion.
Under Beijing's capital rules, anyone leaving China can carry with them a maximum of 20,000 yuan (US$3,100) or the equivalent of US$5,000 in foreign currency. However, it is commonly known that wealthy Chinese are free to leave the country with briefcases full of cash.
Ye Tan, an independent economist and commentator in Beijing, said the growing gap between the rich and the poor in the mainland, which has aroused discontent among the less well off, has made some of the wealthy feel uncomfortable.
"The lack of security sense about the safety of their assets among Chinese wealthy is like a huge black cloud hanging over their heads," Ye was quoted as saying in the Hurun survey report.
China has 960,000 "yuan millionaires" with personal wealth of 10 million yuan (US$1.5 million) or more, according to the GroupM Knowledge - Hurun Wealth Report 2011. The figure is up 9.7% from a year earlier. China has 60,000 "super rich' with 100 million yuan or more, up 9% on a year earlier.
Average monthly income in China is only about 2,000 yuan, despite double-digit economic growth for about the past three decades.
China's Gini coefficient, a commonly used measure of wealth inequality, reached 0.47 in China last year, according to the National Development and Reform Commission, above the international warning level of 0.4, which is considered to be the level that could trigger social unrest.
Sunday 28 August 2011
British Tourism
http://giffenman-miscellania.blogspot.com/2011/08/uk-tourists-beware-cambridge-hospital.html
Thursday 25 August 2011
UK TOURISTS BEWARE – Cambridge Hospital Staff Demand Instant Money from Sick and Ailing Indian Tourist
Cambridge Hospital Staff Demand Instant Money from Sick and Ailing Indian Tourist
The UK likes to portray itself as a friendly and inviting place for tourists. Its visa regime informs tourists who possess medical insurance that in case of an emergency they will receive adequate medical treatment without any need to pay the money upfront. But this is not true in reality as the following story illustrates.
VM, aged 73, is an Indian tourist visiting her family in Cambridge UK since June 2011. On Thursday 18 Aug she was admitted to Cambridge's famous Addenbrooke's hospital for an emergency illness and she received good medical care. Her medical insurers contacted the hospital on Friday 19 August in order to confirm her medical insurance cover and to guarantee payment. Yet on Tuesday 23 August and Wednesday 24 August VM received a rude shock in her hospital bed. Staff from the finance department beseiged her sick bed and demanded that she sign a carte blanche document agreeing to pay any/all charges the NHS may levy for her treatment. When it was pointed out that her insurance company was willing to offer a payment guarantee for her treatment they refused to listen and threatened to deport the tourist.
This issue becomes even more important as London prepares to invite tourists for the 2012 Olympic games. As the following article shows, NHS hospitals have made it a policy to use such high handed behaviour to extort cash from patients in their ailing beds.
http://www.dailymail.co.uk/news/article-562980/Foreigners-asked-produce-cash-hospital-beds-crackdown-health-tourists.html
In short if this behaviour is allowed to continue, if a luckless tourist finds himself in an NHS hospital s/he will not only have to hope to get better soon in a foreign land, but also try to figure out how to arrange large amounts of cash to fob of the finance staff of these hospitals.
You have been warned, visit the UK only if you or your relatives have large amounts of instant cash. Else you and your relatives will be in peril should you have a medical emergency as NHS hospitals fail to honour the legal commitment made when you obtained your visa.
THE DAILY MAIL ARTICLE
Foreigners asked to produce cash in their hospital beds in crackdown on 'health tourists'
By OLINKA KOSTERLast updated at 17:54 30 April 2008
A hospital is pioneering a "get tough" attitude on health tourists - by throwing them out of hospital before their treatment is complete unless they pay up.
It means that foreigners who travel to Britain to get free care on the NHS will now be asked to produce cash or a credit card at their hospital bed.
The new approach has already saved the West Middlesex University Hospital in Isleworth up to £700,000 a year. Its proximity to Heathrow Airport makes it a particular target for immigrants.
If all hospitals did the same, the NHS could recoup tens of millions of pounds a year from health tourists.
Scroll down for more...
Crackdown: West Middlessex University Hospital is getting tough on illegal 'health tourists'"We will discharge a patient before they are well," he insisted.
"We will discharge a patient when they are stable, when we have provided what we have to provide - the minimum benchmark.
"Generally, within the first 48 hours after admission they will be given a price on how much, roughly, their treatment is going to cost.
"If I'm interviewing an inpatient I will be at that patient's bedside and I will ask them there and then for a visa, MasterCard, debit card, or cash. We don't take cheques."
Under the current system, anyone who needs emergency care, such as for a heart attack or accident and emergency treatment after an accident, does not have to pay.
But patients not eligible for free care who attempt to use the NHS for ongoing care or treatment that is not immediately necessary have to pay.
These so-called health tourists normally receive a bill on departure from hospital - but only an estimated 30 per cent of the money is recovered.
Under the pilot scheme, they will be asked to pay at their hospital bed for non-emergency care, or told to leave.
However, they would only be discharged after three consultants have agreed their condition is stable.
In the case of a heart attack victim, NHS patients would normally stay in hospital for 10 days. But anyone not eligible for free care could be asked to leave after 48 hours if they are judged stable.
Most patients told to leave did so willingly, Mr Finlay added - but not all of them.
"I've had two death threats, I've been held up against a wall, I've been grabbed round the throat, I've been manhandled by relatives - verbal abuse is almost day-to-day," he said.
"You have to have a very thick skin."
Last year, a secret Government report based on figures from 12 NHS trusts suggested that the bill for treating health tourists was at least £62million a year.
This did not include the cost of treating foreigners entitled to free healthcare, such as asylum seekers and students.
Health tourists not entitled to free treatment include pregnant women who arrive on holiday visas and give birth here.
Many foreign HIV sufferers also target UK hospitals for treatment, the study from 2005 revealed.
In the case of an HIV patient, a clinical decision would be made as to whether emergency care was needed.
At the time the figures were revealed, Conservative MP Ben Wallace said hospitals appeared to be pursuing a "don't ask, don't charge and don't chase policy".
Cash-strapped hospitals are being pushed further into debt because they are failing to claim the millions owed to them by those abusing the system.
As well as the West Middlesex University Hospital, the Leeds Teaching Hospitals NHS Trust and the Luton and Dunstable NHS Foundation Trust have been chosen to take part in the pilot scheme because their catchment areas contain both a "major point of entry to the UK" and a large proportion of asylum seekers.
Mr Finlay said his methods had received an enthusiastic response from across Whitehall - and saved the trust between £600,000 and £700,000-a-year.
"They think it is a fantastic idea, a solution to a relatively new problem," he said.
"It is up to the Department of Health to see how brave they will be to use innovative ways to tackle health tourism."
A spokesman for the Department of Health said: "It is important that those who are not entitled to NHS services pay for any they receive.
"The Government is currently reviewing access to primary and secondary care for all foreign nationals.
"In doing this we must take into account the implications of any such decisions on the key preventative and public health responsibilities of the NHS.
"We always treat people and do not charge them for emergency treatment, but the thinking behind the pilot schemes is that the NHS is there first and foremost for people who live here."
Wednesday 12 March 2008
PSBR or PSNCR
PSNCR - Explanation
The PSNCR - public sector net cash requirement - used to be called the PSBR - the public sector borrowing requirement. They are the same thing. They measure the amount the government has to borrow to meet all its expenditure commitments. Governments frequently spend more than they are earning in tax revenue, and so have to borrow to plug the gap.
There are two ways to measure the value of the PSNCR. The first is to look at the PSNCR as an amount of money - usually in billions of pounds (£bn). This is useful as a measure, but we may also want to consider how significant this figure is in the overall context of the economy. £5bn sounds a lot of money (and we would all like a share of it !), but in terms of the overall level of GDP it is fairly insignificant. So the other way to measure the PSNCR is as a percentage of GDP.
The PSNCR tends to vary with the trade cycle. This happens because as the level of growth changes the governments expenditure and tax revenue will also change automatically. For example, imagine the economy is going into recession. As people lose their jobs, incomes fall and this means less income tax. They will also spend less which means the government gets less from VAT and other indirect taxes. At the same time they will need to be paid benefits, and this means an increase in government expenditure. The overall effect of the recession therefore has been to increase the PSNCR.
PSNCR and the Trade Cycle - Why does it vary?
The PSNCR tends to change along with the state of the economy. When things are going well and the economy is booming, the PSNCR will tend to be falling (unless the government is going mad spending on other things!). This is because a booming economy means low unemployment and low unemployment means less spending on benefits. Not only that, but when people are employed they will spend more, and this will boost VAT and other indirect tax receipts.
The impact of a recession on the PSNCR will be the opposite. Increasing unemployment means more spending on benefits, increasing the level of government expenditure. Unemployed people don't pay income tax, and others may find their incomes falling. The combination of these two effects means that the government receives less income tax. Spending also will fall as people have less money and are more reluctant to spend what they do have because of uncertainty about the future. As spending falls so does the government's revenue from indirect taxes
So boom periods should help to lower the PSNCR, while recessions and economic slowdown will tend to push it back up again.
PSNCR Theories - Cyclical or Structural - What determines it?
Theory 1 (PSNCR and the trade cycle) shows that the PSNCR will tend to vary with the economic cycle. If this happens over a number of years and the PSNCR fluctuates around an average value of zero, then the government doesn't need to worry about it too much. A recession may increase it, but the onset of recovery will help it fall again. If this is the case then the PSNCR is termed a cyclical PSNCR.
However, it will often be the case that the value that the PSNCR fluctuates around is far from zero. This means that the government is borrowing all the time. In other words, it is borrowing over the long term. Where this happens, this part of the PSNCR is termed a structural PSNCR. Governments do need to worry more about a structural PSNCR as it is a long-term one, and they need to think about how they can reduce it. They have two main alternatives:
If they don't do either of these, there will be a permanent PSNCR and the national debt
- Increase taxes
- Reduce government expenditure
PSNCR and the Money Supply - The effect of borrowing on the money supply
If the PSNCR is high, this means that the government is spending much more than it is receiving in tax revenue. It follows then that it is putting more money into the banking system (from its spending) than it is taking out of it (from taxes). This will increase the money supply in the economy. This may be undesirable as many economists believe that excessive money supply growth will cause inflation. This is a view held particularly by Monetarist economists and Classical economists.
The aim of governments should therefore be to keep the value of the PSNCR down to help keep money supply growth down.
PSNCR and the National Debt - How indebted are we?
The national debt is the total amount of borrowing accumulated by the government that is still outstanding. It is the total amount that the government owes to individuals and institutions.
Think of the national debt as the level of water in a tank. Each year the government borrows more. The amount it borrows is the PSNCR. This is equivalent to a tap filling up the tank - the amount of water (debt) is growing. However, at the same time, the government pays off some of its debts each year. This is like water flowing out of the tank.
If the amount flowing into the tank (the PSNCR) is greater than the amount going out (debt paid off), then the water level (the national debt) will rise. If on the other hand the amount flowing into the tank (the PSNCR) is smaller than the amount going out (debt paid off), then the water level (the national debt) will fall.
The diagram below shows this:
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