back to article So Quantitative Easing in the eurozone is working, then?

Much as some of us love international biz editor Ambrose Evans-Pritchard over in The Torygraph, it is true that he can occasionally get a little bit excited about whatever it is that he's spotted. His latest revelation about how eurozone money supply is growing is a case in point. Evans-Pritchard is looking at this information …

  1. h4rm0ny

    I'm really starting to wonder what strings Worstall had to pull in order to get his polemics regularly featured on a tech news site. They always follow the same pattern - Worstall apparently reads something of a political or economic viewpoint he doesn't like (typically this is any economist more famous than himself that puts forward any view remotely more nuanced than remove all trade barriers and the market will solve everything). He then uses El Reg as a private platform to show everyone what is wrong with the article he has just read and most of us haven't. It makes me wonder if this is what I sound like when I start lecturing people on how a KB should 1024 bytes, not 1000.

    Is Worstall part-owner of El Reg or something? Is there some reason a tech news site becomes his private platform everytime he reads something he doesn't like? Most of us make do with the letters page of the Economist.

    1. Anonymous Coward
      Anonymous Coward

      He's an expert on something, so, understandably the journo's at The Reg are awed and put him on a pedestal.

    2. Anonymous Coward
      Anonymous Coward

      I don't have a clue about how one gets a journalist steady gig. The part I do know is that many of these topics were rather heatedly under "debate" when I returned to the university in 1993. I was a maths, stats, and comp. sci. guy the first time around, spent a career in the Navy mostly as a field engineer, and somehow drifted off in the dismal science. Econometrics but also every other field as I ran through them all (skipped Marxism, could have taught it). I had more than a few "debates" with my instructors which involved numerous appeals to authority (their side) vs. data analyses of historical events (my side).

      Just background for the point that twenty-two years later, the same brigades in the mainstream press, more than five, regularly have a go at one another. I find Tim's "chalk talk" more interesting and often relevant to the tech sector which is interesting in another way. "Silicon Valley" is right next door and bizaare in more dimensions than I can manipulate mentally describes the political-economy.

      As for letters to "The Economist", they've been disappointing since the late '90's. One more impact from the WWW I expect.

    3. GrumpyOldBloke

      Any economic analysis of QE that does not acknowledge the debt based nature of this unbacked privately issued river of gold and the problem of the interest payment is meaningless. While interest rates in the EU are somewhere around zero, once this tax payer funded bailout of the financial system is finished and we've all done with competitive devaluations of our currencies then the interest rates will rise. Those will be the rates at which the taxpayer will labour to pay for this theft of value. It is also dodgy relying on pseudo scientific analysis of a market environment when the market is now so sick or rigged that price discovery mechanisms are meaningless. The explosive increase in the money supply without the creation of corresponding units of value driven by demand is simply market fraud. Private European banking dynasties will do very well out of this - and that is the plan.

      A little inflation does not grease the economy. Inflation is the price we all pay for allowing private individuals and corporations the right to counterfeit sovereign currency. Because money created as debt must be paid back with more money (interest) created as debt then there is no option but to steal someone else’s money or inflate your own. Deflation is merely the chickens coming home to roost - the credit card is maxed out. The real problem being that the profits of private central banks fall when the serfs are not able to pay and of course the destruction of political careers when people realise that none of the money in circulation is theirs. That the previous expansion of the money supply created by work was really just an expansion of debt, that the value has been stolen and the money now counts for nothing.

      1. SuccessCase

        "Because money created as debt must be paid back with more money (interest) created as debt then there is no option but to steal someone else’s money or inflate your own."

        Here's a non economist, layman's take on this.

        Interesting use of the word "more" there which shows your being uneccessaily melodramatic. The money created as debt and interest paid are on different sides of the balance sheet, so the word "more" doesn't really apply. So yes the cost is the interest paid, the benefit is monetary liquidity. So the interest paid is akin to the cost of buying oil and paying over the odds for servicing the engine which you have to do because you allowed it to run dry.

        The money created as debt is lubricating the engine, so that's a good thing right. Whilst I'm no economist I do understand a nations finances, unlike a companies finances are like a balance sheet, but where - amongst other things - there is a factor, growth, that it gets fed in from a special account where the feeding tube is invisible and that we are only ever getting a best guess as to how much has been fed in (good of course but not good if you like the certainty of double entry bookkeeping)

        The interesting bit with macro economics, it seems to me is that this opaque feeding tube (powered by they way by private enterprise and the workforce in private enterprise), means there is a feedback loop. If growth slows, it can choke off the working economy. Sometimes borrowing can be used to keep the economy moving so it doesn't lose momentum. All the political debate really pivots around this and how to "use" this knowledge. Do it well and there's the potential for a kind of slingshot effect (though that imagery is actually far too strong).

        It seems to me centre right economists say ok there 's this feeding tube and were never sure how much has come in, but we know it's a specific amount and we have to be respectful of the balance sheet. Whereas leftist economists tend to say, borrow, puff up the economy, it keeps things moving so the real engine of the economy keeps moving without stall. Have confidence the growth will continue. Behave too much like accountants (knowing the cost of everything and the value of nothing) and you will kill the economy. And actually most economists, left leaning and right leaning, see this mechanism has a role to play.

        So when you say payment of interest on QE is stealing someone else's money, is demanding all travellers in the bus pay extra because the engine needed an extra service stealing money (when we all own the bus)? Incompetence by the person in charge, yes, but is the garage stealing? We want our bus to work and the garage are doing the work so no.

        You also say "or inflate your own" as a way to denigrate current liabilities that have to be paid as a cost of QE. Well if you have produced money as debt, then you aren't cheating the balance sheet. The reason for doing quantitative easing is distinct from just printing money, is precisely so that doesn't occur.

        I'm a realist. I don't believe in magic money trees. Money is a token of value which ultimately has some real basis in real assets and real work capability. Print money and you are watering down the value of each unit. Problem is, there is a lag. Money as tokens of value is worth what people believe it is worth and it may take time for the belief to adjust especially if the people are unaware of the extent of the printing of money. But adjust it will. So the BoE has to keep (liquid) money supply (one component of our national assets) in proportion to a balance sheet, the total value of which we are not quite sure.

        So there is natural inflation which is a consequence of the market hedging against miscalculations in the rate of growth and consequent mismatches in money supply. This is ok, as natural consequence of unavoidable uncertainty and not knowing the variation in the value of your assets (not knowing quite how diluted they are if at all) and isn't indicative of an economic malaise. However if you print money, inflation occurs unnaturally as actors in the market hedge further to protect the value of their assets, which they *know* are being watered down, but just not by how much. Put simply you have paid x to produce and sell y, but while it's sitting in the shelf, the value of you liquid assets is being eroded so you edge the price up to protect yourself. As there is more uncertainty you hedge harder and build in greater margin for error. All your suppliers are doing the same, so the cost of x is also increasing by an uncertain amount. There's a name for that. A positive feedback loop. In this context most unwelcome.

        Now quantitative easing increases the money supply, and can cause inflation if the authorities get it wrong (are wrongly guessing the rate of growth). But that isn't its intention. It isn't a necessary consequence. However if you simply print money, as a realist (e.g. One who believes there is a real value to the balance sheet even if we are never quite sure exactly what that value is) then you have to believe inflation *will* be a direct result.

        So actually if you are arguing for unrestrained, Corbyn style, printing of money (which I suspect you are), then you believe in magic money trees and think you can get something for nothing.

        1. GrumpyOldBloke

          Interesting use of the word "more" - yes because more money is required. In our debt based system money is borrowed into existence and destroyed when it is paid back. Because the principle is destroyed when paid back you need more money for the interest - more money than was created when the loan was drawn. The interest, which has also been borrowed into existence, can be recycled a few times but is destroyed when the loan that created it is paid back. QE is the stated hope that if money is cheap enough it will encourage people to borrow even more (fractional reserve multiplier) and offset the liquidity problem caused by deleveraging (paying back and thereby destroying money) during austere times. The problem is that during austere times people do not have the confidence or capacity to borrow so all this free liquidity stays at the top where it is used for speculation and asset accumulation by the few but paid for in central bank debt by the many. You suggest that this does not cheat the balance sheet - that depends on who you are and whether you are securing the full value of the debt (taxpayer) or playing in fields of leveraged money across borders (banker). It also depends on where the securities that drive the system derive from (local or international). What Corbyn is arguing for is not the unrestrained printing of money - which is the path we are on now - but the realisation that the debt based system is a ponzi that can only end in tears and that we should incorporate a value based system - in Corbyn's case that value is infrastructure. This is not without precedent. Adolf Hitler did the same thing and took Germany from an economic basic case to a world super power in about 5 years. Obviously that didn't sit well with those of us on the debt based system and war ensued.

          1. GrumpyOldBloke

            Sorry - principal

          2. Diogenes

            But there is an issue with infrastructure - it needs to be a) operated , b) maintained, c) paid for and d) will become obsolete as it is being built

            As unemployment relief in the '20s & '30s (everybody forgets the recession Churchill created in the Empire in the early '20s) in many states of Australia many may hundreds of miles of railway line were laid in rural areas to allow farmers to more easily get their produce to market - yes useful, and using rail as transport was the conventional wisdom . Many of these lines were under 30kms long. None ever covered its working expenses, the interest on the loan, let alone cost of construction.

            To use Tim's restaurant analogy the new branches were the extra "covers" but there was little or no corresponding increase in the number of wagons or locomotives(the plates and cutlery) so these became worn out faster and added major inefficiencies on the trunk lines and required a whole new expenditure on workshops).

            In NSW the government, which owned the railway, tried to maintain its monopoly position by passing legislation that made it illegal to offer a regular road service where a train ran (even if only once a week), yet farmers still preferred to load the produce on a truck & drive to the largest major town & ship from there (SWMBO could go the shops as well).

            Most of these lines were closed over the last 30 years, and the rail map looks remarkably like it did in 1919. We are still paying these lines off.

            What bits of infrastructure could become "game changing" and improve productivity, and/or drive down overall costs/improve quality of life in the community in the medium to long term such as London's new Crossrail or in Australia the NBN ?. In NSW our beloved Premier wants to spend a billion and a half (which means 3 billion) on rebuilding 3 stadia - hey its infrastructure so it must be good,

          3. Frank Bough

            ww3

            So when we run out of debt-based money (ie credit) to pay for our new infrastructure, you're fine with us seizing what we need at gun point? How very modern of you.

      2. Zog_but_not_the_first Silver badge

        @GrumpyOldBloke

        Quite.

        I can only asume the downvotes are from Canary Wharf.

      3. P. Lee Silver badge

        While GrumpyOldBloke's analysis of who benefits and why may be open to question, I have to agree that there is a fundamental flaw in economic policy when it thinks that playing with money can fix problems. The problems are created because the money system stops reflecting real value being produced. Then we get re-adjustments when people stop believing in the game.

        Our problem is debt. We've overspent and now we have to pay. Perhaps the previous expansion was fake and now the debt has to be paid. What if there is no "expansion in the economy"? What if the pie is not getting larger? Maybe it really is static. Maybe all those rising stock prices are not because people think the stock is worth it, but because with zero interest rates, anything is better than nothing and money is leaving the money markets looking for somewhere to go - stocks. Perhaps those higher corporate profits are hiding the fact that lots of people have been made redundant from high paying jobs and are now low earners.

        Am I pessimistic? Well yes. I saw IT providing great gains in productivity through automation, then networking... but not anymore. When the great IT companies stop being IBM, DEC, Sun et al who provide business automation, R&D into much better tech; and start to become Google (looking for stuff which already exists) Facebook (cat pictures) and Twitter (speaks for itself); when we don't need more capabilities, but want things lighter and shinier; then we know we've no longer got much to contribute. Even all the server activity is about consolidation and catering to end-devices which are too feeble to do their own processing, by design. We aren't doing more anymore. All that network bandwidth going on streaming because we don't want people to have access to things without advertising being inserted. So much resource dedicated to stopping things being efficient. Moving to rental and usage models because resources are too plentiful for the IT industry to cope with. IT is becoming a parasite, not making business processes better, faster, cheaper, but merely extracting more rent for the same things we could do before. Shinier than before, perhaps, not not particularly more effective, not in a way which means we can produce more stuff.

        The GFC, inflation, the Greek crisis, its all just symptomatic of corrupt minds given the tools and ability to hide, for a while, the consequences of their actions. The fact that we seem to get the same result, no matter who is elected should give us pause for thought about the current state of Western philosophical underpinnings and morality. What is it about our worldview that always seems to produce this result in those in power? Why is it that the great outcry over Ashley Madison is over privacy, not integrity? The moral aspect of it is seen mostly as foolish and in terms of a laughing-stock of techno-incompetance. Where are the laments over integrity, of acting rightly even when no-one can see you? Could it be that the lack of this in our society also drives the sub-prime strategy, the accounting cover-ups, the desire to buy votes by spending other people's money which they don't even have? It's just risk management after all and the risk of being caught is small.

        1. Doctor Syntax Silver badge

          "I saw IT providing great gains in productivity"

          There is, of course, the argument that a lot of IT has reduced productivity, Powerpoint addiction being one such example.

        2. LucreLout Silver badge

          @P.Lee

          As one who writes software purely to juggle money, I can understand your sentiment. However, there are people within our wider field that are working on cutting edge image enhancement for medical scanners, for example, who really are making the world a better place. Widespread drone automation could be used in a weaponised manner, but it could equally be used for search and rescue operations over difficult terrain.

          IT is just a toolset. How it gets used depends in part upon the ethics and motivations of those in the industry, but moreso on the ethics and motivations of those to whom we report - the business, in that sense, who control the agenda.

      4. Quip

        greasing the economy

        Inflation does grease the economy. As should be obvious to anyone reading this site, there are a lot of things you can buy now that were not around say 20 years ago. If you were earning the same today as then and all your costs were the same where would you find the spare income for all those new toys? In effect the cost of what you continue to buy has to fall in order to make room for new stuff, or you need to be paid more without increasing the costs of what you buy. Inflation is a sleight of hand that makes those transitions palatable. And also encourages you to invest your saving rather than keep your money in a mattress.

      5. Anonymous Blowhard

        "Any economic analysis of QE that does not acknowledge the debt based nature of this unbacked privately issued river of gold and the problem of the interest payment is meaningless."

        QE may be "debt based", but it isn't "unbacked"; governments are effectively "backing" the investment from QE with future earnings (taxation) in exactly the same way that a company or individual may borrow money based on their capacity for future earnings (wages for individuals and profits for companies).

        The main risk with QE is that the government is effectively acting as lender and borrower, so they need to have restraint and balance the improvement they can make to the current economic situation with the impact on the future economy.

      6. Youngone
        Flame

        Also @ GrumpyOldBloke

        Quite right. This looks an awful lot like Danegeld to me.

    4. Ken Hagan Gold badge

      I have no problem with this. Whether it is intended or not, one of the messages coming through from Tim's articles is that macro-economics is very *young* science and it is still perfectly possible that everything you ever learned about it at school will turn out to be wrong. Big names from only a few decades back are now taken with a pinch of salt.

      You don't get that with physics or chemistry. It's pretty rare with biology, although Nature is a big tease and it has been fun to watch Lamarckism (er, I mean, epigenetics) re-appear in the years since I was actually taught how stupid it was. Computing is even younger, but we know the basic building blocks (since we built them) and so we can quite easily figure out which results from other disciplines (maths, language, ...) are applicable in any situation.

      Macroeconomics is still at a stage where the interesting new results *can* be explained to a mathematically minded lay audience. It is ideal material for a site that claims to cover all aspects of science and technology for an audience that is willing to read articles with equations in them.

      1. a_yank_lurker Silver badge

        Economics, "The Dismal Science", has had a long recognized problems in idealizing information flow and human behavior. The first fails to recognize that information is not known instantly in any real system. Individuals know bits, often important to them, but not all relevant bits. One knows what is in the pantry and knows what they want but they do not the inventory at the store. Also, as evens occur people react with their best navel gaze of the future, which by definition is unknown.

      2. phil dude
        Boffin

        peer review and repeatability

        The reasons why the scientific method has prevailed as the major engine of human advancement, is the ability to retest any and every experiment as new technologies and theories come along.

        Biology is very complex and fiddly, mostly repeatable (given enough time).

        Economics is complex, and does not have a good foundation in experiment - well, certainly not to the same degree.....

        The reason why physics, for example, uses a lot of mathematics is because it gives the *wrong* answer if you don't use enough (mathematics that is). Even the approximations are rigorously bounded (e.g. Newton vs Einstein).

        Economics is largely madey-uppy because the mathematical models are insufficiently predictive. If there is one thing you learn in the study of mathematics and statistics, it is that humans have lousy intuition, and the interpretation of model limitations is paramount. Video games would not look as good without it!!!

        When you add the concept of partial differential equations to account for time-delays inherent in all reality based models (like we use in the sciences) you get a much better idea of the boundaries of the representative phases space, and the behaviour of the economic system as a point in this plane.

        Don't trust any article that gives you an average without a variance for the distribution it is calculated .

        Don't trust any economics article without the the differential equations and conditions being used to model the system....

        P.

      3. Geoffrey W

        RE: "macro-economics is very *young* science "

        I sometimes find Mr Worstall's articles to be interesting and so enjoy looking to see what it is he's offering this time; alternatively I sometimes find him annoying and always find his support of UKIP a bit risible. Nevertheless he's worth checking out. I would argue though that Economics, macro or otherwise, is not a science and my old economics professor would back me up on this as that's precisely what he would teach. Economics is not an immutable law of nature unmoved by human nature or behaviour and unswerving in its course. Rather it stems entirely from human nature and behaviour and, unfortunately, that includes all the bad traits we have. Its an abstract pseudo science, much like the social sciences, that exists almost entirely in our own heads and only exists because we will it so.

        Perhaps.

        Perhaps not.

        If I felt in the mood we could argue about this till the cows come home. There is no wrong, and there is no right. Theres just todays fashion, which you can bet there will be be someone exploiting and making a killing on while it lasts. Thats the only immutable thing here.

        1. Tim Worstal

          Well, sorta:

          "Economics is not an immutable law of nature unmoved by human nature or behaviour and unswerving in its course. Rather it stems entirely from human nature and behaviour and, unfortunately, that includes all the bad traits we have. Its an abstract pseudo science, much like the social sciences, that exists almost entirely in our own heads and only exists because we will it so."

          It's really trying to describe human behaviour so obviously it has a number of faults because so does our behaviour. Next weekend's piece is an (maybe even interesting) look at some new research into exactly this.

          1. Geoffrey W
            Happy

            @ Tim RE: Next weekends article...

            That may indeed be interesting and I will certainly read it. I'm confident that, being Tim, you will also be able to come up with something to annoy me. :-)

      4. Alan Brown Silver badge

        "it is still perfectly possible that everything you ever learned about it at school will turn out to be wrong"

        Market economic simply doesn't work the way anyone expects and not at all logically (a huge chunk of what goes on is emotional/herd reaction to stimuli)

        During the days of stagflation, Maggie and friends were frantically pulling money out of circulation but inflation rates simply kept going up.

        The problem is that governments are not the only ones able to magic money out of thin air (or magically delete it) and if you're going to embark on a path of QE then you have to be magicking it up faster than the banks are magicking it away.

    5. Lyndon Hills 1

      Presumably El Reg uses various analytics, and the number of comments per article is obviously easy to measure. I would think that if Tim's articles attracted few comments, and low page views, they would dropped like the proverbial.

      Indeed, by reading and then posting your comment, you're probably doing your bit to ensure that the articles keep coming.

      Economics isn't my field, but I think the articles are still interesting to read, and they mostly seem to generate some debate - higher quality than the Windows/Mac/Linux wars at that.

    6. Frenchie Lad

      Keep Tim

      I for one want these articles to keep flowing. I need some sort of enlightening explanation of the shenanigans that our monetary authorities get up to.

      Tim could you comment on the ideas floated in the book: "La guerre des monnaies - La Chine et le nouvel ordre mondial" by Hongbing Song. Unfortunately it's not available in English but the general gist is that the Rothchilds/Bilkenberg meetings operate a financial hegemony that effectively enslaves governments?

      Keep up the articles.

      1. Tim Worstal

        Re: Keep Tim

        "According to the book, the western countries in general and the US in particular are controlled by a clique of international bankers, which use currency manipulation (hence the title) to gain wealth by first loaning money in USD to developing nations and then shorting their currency. The Japanese Lost decade, the 1997 Asian Financial Crisis, the Latin American financial crisis and others are attributed to this cause. It also claims that the Rothschild Family has the wealth of 5 trillion dollars whereas Bill Gates only has 40 billion dollars.[14]

        Song also is of the opinion that the famous U.S. central bank, the Federal Reserve, is not a department of state functions, but several private banks operated by the private sector, and that these private banks are loyal to the ubiquitous Rothschild family."

        I would file this along with the Grey Alien Lizards n'stuff. Without having read any more than the Wiki piece on it. On the grounds that it's hardly new for someone to be saying "It's all the Jooos!"

        1. Zog_but_not_the_first Silver badge

          Re: Keep Tim

          Pre-Snowden I would have agreed with you Tim. Now?

        2. Anonymous Coward
          Anonymous Coward

          Re: Keep Tim

          The rothschilds are the banks, it was quite a basic idea really, the jooos as you put it were the only religion allowed to lend money to people so they did and made a profit, nothing wrong with that however when the pesky locals decided they didn't want to pay them back they were persecuted (lots of examples of this throughout history even in Britain somewhere around 1000ad if I remember right) so the idea was that you had a family and you put your children in different countries moving the gold around so if those pesky locals tried to get out of paying you back then it wouldn't work because the gold(money/debt) wasn't in the one place. This in my opinion is how the current banking system came into existence. Whether this makes any difference to you or me is not really a problem however to dismiss the idea as grey alien lizard stuff is a bit silly because the facts are all there. It makes no difference to me and I don't have any problem whatsoever with jooos however to have a banking system controlled by one family does pose certain potential issues, there is also a conflict of issues with regards to the media as simple searches reveals strong links between media outlets and said rothschilds, e.g. BBC directors married to said family but I'll just be dismissed as a tin foil hat wearing conspiracy theorist who has issues with our lizard overlords. Considering their wealth you would assume that the Rothschilds would be mentioned in the media however they are never mentioned except on one occasion that I know of and it was during real housewives of new york (god awful show my partner watches about very very wealthy women who bitch at each other) and it went along the lines of "Who do you think you are? The rothschilds?". In summary I really don't care about the who the what or the why, as long as the world is fair and just I'll just happily plod along.

          Edit: I enjoy your articles and the different perspectives they give on the economy, please keep them coming.

          1. Anonymous Coward
            Anonymous Coward

            Re: Keep Tim

            Here is an excellent, extensive documentary of the origins of our financial system and those that control it to this day.

            https://www.youtube.com/watch?v=vSSlP-sE_vI

          2. Anonymous Coward
            Anonymous Coward

            Re: Keep Tim

            This is for the two clowns that downvoted my comment.

            https://en.wikipedia.org/wiki/Marcus_Agius

            Which is more logical?

            A. Banks and financial institutions just appeared overnight and were not connected in anyway shape or form with each other or between countries?

            B. The banks just like anything else in a capitalist society evolved since babylonian times...

            C. The reverend Al green was right.

            My only criticism is, yes I may be anonymous however if you disagree with my opinion or thoughts then please say why, that's life, you have an opinion unless you use iMicrogooglespotifuck™

            1. Anonymous Coward
              Anonymous Coward

              Re: Keep Tim

              I'm guessing some people on here belong to the chipping norton set...

          3. DaveDaveDave

            Re: Keep Tim

            "Considering their wealth you would assume that the Rothschilds would be mentioned in the media "

            What you're missing here is that this stuff's all a lie. The Rothschilds are not extraordinarily rich, simple as that. Between them the family is worth maybe single digit billions. Yes, that's certainly absolutely loaded by our standards, but it's not even close to the richest people on the planet.

            It's true that at one point the Rothschilds were a particularly prominent banking family in the Anglo-Saxon culture. That was at about the beginning of the 20th century. A whole load of antisemitic propaganda was created around that time - by people like Hitler's inspiration, Henry Ford - about the Rothschilds, and as it's aged, it's become more and more obviously crackpot.

            1. Anonymous Coward
              Anonymous Coward

              Re: Keep Tim

              "It's true that at one point the Rothschilds were a particularly prominent banking family in the Anglo-Saxon culture. That was at about the beginning of the 20th century"

              Earlier than that, as they helped Britain acquire the Suez Canal.

              The Rothschilds are part of the establishment, and that's the nearest to a conspiracy theory you need to get. Their religion, or lack of it, is rather irrelevant. As you rightly say, what strikes one about them is how extremely English they are, right down to the entomology and the working for MI6.

            2. Anonymous Coward
              Anonymous Coward

              Re: Keep Tim

              "What you're missing here is that this stuff's all a lie. The Rothschilds are not extraordinarily rich, simple as that. Between them the family is worth maybe single digit billions. Yes, that's certainly absolutely loaded by our standards, but it's not even close to the richest people on the planet.

              It's true that at one point the Rothschilds were a particularly prominent banking family in the Anglo-Saxon culture. That was at about the beginning of the 20th century."

              So when and how did they lose their money?

              1. DaveDaveDave

                Re: Keep Tim

                "So when and how did [the Rothschilds] lose their money?"

                They didn't, so much as they've been overtaken by others. Seems to happen regularly when it comes to the ultra-rich (contra Piketty), because families like the Rockefellers are also no longer as relatively rich as they were when they were the richest in the world.

                Don't get me wrong, the Rothschilds are still very rich, and as with others like them have the connections to get their kids into top jobs/sinecures. But they're not notably so on a global scale. Their familial wealth is of the order of hundreds of millions or single-digit billions, not trillions like the conspiracy theories claim. They don't own the Fed or the BoE, that's pure fantasy. They're no more than a rich family who used to be much more important.

    7. This post has been deleted by its author

      1. John H Woods Silver badge

        Consistent K

        ""1.44MB", just because weenie programmers are wedded to this bizarre shibboleth, but can't even use it consistently." -- pnony

        1.44MB is an excellent choice if you want to complain about lack of consistency because the M is neither mebi nor mega but kibi-kilo (or kilo-kibi)!

        (512 bytes per sector x 18 sectors per track x 80 tracks per side x 2 sides = 1440 x 1024)

        1. tom dial Silver badge

          Re: Consistent K

          Or 1.47 MB (1,474,560 Bytes). That the norm is 1.44 suggests that in addition to such as memory, where the sensible unit is based on something like physical address lines, it makes sense for the K, M, G, and T units to be based on integer powers of 2 in computer contexts where they map to power of two based memory. Use of powers of 10 seems to be largely a marketing technique used for consumer storage devices; "80 GB" or "320 GB" EIDE consumer devices tend to store nearly the same number of bytes as 73 - 75 GB or 300 GB SCSI server drives.

      2. Charles Manning

        Why 1024 == k

        Because real programmers have sixteen fingers.

    8. Johnnydub99

      Playing the man

      So you don't have any rebuttal to the points he raise, so you attack the man.

      Here have a biscuit.

    9. Paul Crawford Silver badge

      @h4rm0ny Re: kB

      The only place where 1024 makes sense for defining 'kilo' is when the attribute is addressed by a binary array. So really only RAM/EPROM/etc with an integer number of address lines are used and no sane designer would leave part of a decoder to unassigned storage.

      For everything else k = 1000 is the sane choice for us creatures with 10 digits that originally assisted our counting and became the basis of our number representation. It is used for kilometres, kilograms, kilobits, kilowrists, etc.

      The weasel-worded aspect is when talking about storage and some assume that k/M/G/T are all 1024 and forget that for both SI and marketing reasons they will be 1000. Oh, and not to forget the overheads in a file system...

      1. IHateWearingATie

        Only on El Reg...

        ...would you have a thread discussing the theory of money that is interspersed (spelling?) with posts arguing on how to correctly identify the capacity of a floppy disc :)

        1. Naselus

          Re: Only on El Reg...

          "...would you have a thread discussing the theory of money that is interspersed (spelling?) with posts arguing on how to correctly identify the capacity of a floppy disc :)"

          Personally, I'm wondering how many of the younger readers are confused about what the significance of 1.44MB is supposed to be.

          1. Gazareth

            Re: Only on El Reg...

            @Naselus

            Or why anybody'd be bothered by such a small, insignificant unit of data as a Megabyte ;)

    10. Solmyr ibn Wali Barad

      @h4rm0ny

      What did Tim do now? Ruined somebody's scientific consensus?

      While I do not necessarily agree with all his arguments (and a good thing it is too, something about freedom of opinion or somesuch), I'll never support calls to silence him. Or calls to silence you, should these ever rise.

      Please, everybody, keep writing. We may not know where a word of wisdom may land, we may not know what kind of fruit might it bear someday, if ever, but that shouldn't keep us from trying to say wise things once in a while.

    11. Anonymous Coward
      Anonymous Coward

      @h4rm0ny

      "any view remotely more nuanced than remove all trade barriers and the market will solve everything"

      We get that you don't like what he writes, but I don't remember him writing any such thing, ever. He's in favour of markets, but to function efficiently and fairly markets need quite a bit of regulation. Which is the job of governments.

      This is my view of it, not Worsall's, but creating efficient and fair markets is a pretty big job (especially with all the sellers trying to put their thumbs on the scales and all the buyers trying to shave the currency). Trade barriers make it more difficult to create fair and efficient markets and add to government bureaucracy, so where possible they should be dismantled as part of the overall effort. I think that is a little more nuanced than "remove all trade barriers and the market will solve everything."

    12. LucreLout Silver badge

      @Harmony

      I'm really starting to wonder what strings Worstall had to pull in order to get his polemics regularly featured on a tech news site.

      I'll take Worstalls work over Pottys polemics any day of the week. I can't quite understand how someone with no enterprise level experience, for whom the industry beings and ends in mom & pop small shops, is regualrly given bandwidth to write articles with all the depth and critical thinking I'd expect of a typical "Page 3 Stunna".

      Thankfully, we all like different things. Some people prefer Tim, others Trevor. El Reg sells advertising space in both their works, but Worstalls regularly produce more ad revenue (based unscientifically on the number of comments per article). That, I suspect, is the crux of the matter.

    13. Schlimnitz

      Clue: Count the comments.

  2. SuccessCase

    "Much as some of us love international biz editor Ambrose Evans-Pritchard over in The Torygraph, it is true that he can occasionally get a little bit excited about whatever it is that he's spotted."

    Ha, that's so true. I'm not an economist and, probably for that reason, find him impressive to read. He has authoritative economist patter down to a T. Yet over the months and then years, it becomes apparent his prognostications are utter, utter drivel. He spies a problem with the economy and then sees it as this kind of thread on a jumper, pulling on which portends the destruction of the jumper and "oh oh, the other end is attached to a black hole we are negligently dragging into our solar system" Whereas in truth, apart from on very rare occasions, even economies run by tax and spend lefties have a lot of negative feedback loops which tend keep things self righting. In short he sees every economy as like a house of cards, when it seems to me, economies are like my garden, often messy, sometimes (rarely) close to critical but almost invariably, thanks to nature, alive.

    1. Nick Kew
      Facepalm

      Grinding axes ...

      Someone spotted grinding axes in a Worstall article a couple of weeks back.

      Now if Worstall occassionally grinds an axe, AEP runs a FTSE-100 business grinding axes for every woodcutter and dwarven warrior in fantasyland. I have only to see his name on an article (especially one on Europe), and I don't bother reading it because I already know what it says.

      1. Anonymous Coward
        Anonymous Coward

        Re: Grinding axes ...

        "and I don't bother reading it because I already know what it says."

        Back in the late 90s the Telegraph-reading MD of our company was convinced by it that (a) the Euro would be dead in a year and so there was no point in having a Euro account and (b) this Internet thing would soon blow over and we would be back to telephones and fax machines. This may explain why I have never bothered reading the Telegraph since about 1997.

        1. Tom 38 Silver badge

          Re: Grinding axes ...

          This may explain why I have never bothered reading the Telegraph since about 1997.

          This runs the risk of living within an echo chamber. I think it is useful to read even the diatribes, as long as you can recognise it as such. When I was a student and had much more time on my hands to read, each of us in the house would have obligations to buy a different paper, so we had all the broadsheets and most of the tabloids at hand to (I think we skipped Star and Sport..)

  3. graeme leggett

    not for me - but that's my problem not yours

    I can't follow this sort of heavy economic theory, so it went whoosh overhead.

    Still variety in all things is good, so don't stop including economics-based articles.

  4. scrubber

    QE magically avoids inflation ...

    ... because we don't include asset price inflation in the headline numbers.

    e.g. While the economy is still very fragile shares reached record highs.

    1. DavCrav Silver badge

      Re: QE magically avoids inflation ...

      "QE magically avoids inflation ...

      ... because we don't include asset price inflation in the headline numbers.

      e.g. While the economy is still very fragile shares reached record highs."

      I think that's a good thing. Inflation is meant to represent cost of living. So mortgage repayments should maybe be in there, but this has the problem that raising interest rates to dampen inflation actually causes inflation in the short term, so we like to separate those out and just have two rates. We might also like to separate out other things and have a collection of inflation numbers, representing sectors of society, but fundamentally, inflation measure how fast prices are rising in the economy.

      Things like bonds and shares are not goods and services in the real economy, and so shouldn't be contained in a measure of inflation: they are not consumed, and are merely traded, so increases in their prices, while they can cause problems for an economy, don't factor in to this magic MV=PQ equation that we learn at school.

      1. Anonymous Coward
        Anonymous Coward

        Re: QE magically avoids inflation ...

        "mortgage repayments should maybe be in there, but this has the problem that raising interest rates to dampen inflation actually causes inflation in the short term"

        Then it should simply include the average price of a house - or the average cost of renting one.

        There can surely be little more essential than having somewhere to live.

    2. LucreLout Silver badge

      Re: QE magically avoids inflation ...

      @Scrubber

      While the economy is still very fragile shares reached record highs.

      It's not just shares. Supercar prices are higher than a sniffer dog searching the Motley Crue tour bus.

      Unwinding QE will be very difficult. I have a half suspicion that what will actually happen is that the bonds will be held to maturity rather than sold back to market, and that some or all of the money will leak out into the Treasury a few decades from now.

  5. J.G.Harston Silver badge

    I like Tim's articles because he's essentially approaching economics as an engineer, and this is essentially an engineering site. He sees things and points out: hold on, it works like this because of the underpinning maths; where other people say, no it will work like this because pink bunnies!

    1. Werner McGoole

      Interesting observation

      I, too, have noticed that some people can look at how a system is constructed and instantly see how it will function. They tend to be engineers and scientists. Software engineers are especially adept at spotting where the system design is broken and likely to go wrong. They also have a good nose for when a functioning system isn't working as intended and the steps likely to fix it. Years of bug-fixing probably accounts for this.

      OTOH, there are also plenty of people who can't see the most obvious malfunction coming down the tracks, never mind the more subtle ones. They also see problems where none exist. The "law of unintended consequences" is a phrase invented for these people. Unfortunately, they tend to be economists and politicians.

      Not enough people recognise that a law or an economic policy is a system design that needs to be scrutinised by people who understand systems.

      1. Alan Brown Silver badge

        Re: Interesting observation

        > The "law of unintended consequences" is a phrase invented for these people. Unfortunately, they tend to be economists and politicians.

        Moving money around and making basic operational decisions are fairly simple tasks. It's easy to get good at them by rote and easier still to vastly overestimate your own ability and wisdom as a result.

        Engineers/techies are no strangers to having things break. We know we're not gods and so we're more cautious for the most part. We also see what human nature does to the best laid plans of men and mice, so expect to see things bent out of shape by people simply wanting to see what happens next.

    2. Paul Crawford Silver badge

      I also like Tim's articles, even though I often disagree with some of his positions on free markets, etc.

      Same with several other who write for El Reg, mostly they write sense, sometimes they fit my socio-economic views, other times they don't. But I'm not here to have my views confirmed, I want to see other arguments as I might be wrong or ill-informed and only by listening and thinking will anyone advance.

      1. Naughtyhorse

        Agree 99%

        the exception being lewis, who, I notice, one is not permitted to criticise any more...

        <rejected>

        1. Dan 55 Silver badge

          Re: Agree 99%

          Just Lewis? I'm sure there's Another One...

          1. Naughtyhorse

            Re: Agree 99%

            well yes, he's a given.

      2. John H Woods Silver badge

        "I also like Tim's articles, even though I often disagree with some of his positions on free markets, etc."

        Absolutely ... almost the opposite of my politics ... or so I thought. But, inspired by Mr Worstall, I actually read Adam Smith, and realized that almost everything I thought was wrong with free market capitalism was because the markets aren't actually free enough. I should emphasize this means in terms of competition; Adam Smith does not seem to have been particularly against regulation, rather the opposite: that government regulation (e.g. anti-cartel regulation) is absolutely essential but within that competition should be as unfettered as possible.

    3. Anonymous Coward
      Anonymous Coward

      "it will work like this because pink bunnies"

      Part of the problem is that there is a disconnect between the stock, bond and commodity markets on the one hand and the functioning economy on the other. The airgap in the disconnect is the pink bunnies - or rather, the less savoury aspects of human nature.

      They are important, but sadly the psychopaths are in charge of the casino, so the chance that things will get fixed is quite remote.

      1. Esme

        Re: "it will work like this because pink bunnies"

        Yep, Arnaut, that's my major niggle with the current economic system - that it so heavily rewards the psychopaths gambling with everyone's money based on little more than their reading of each other's emotions. Which I suspect is because the entire system is predicated on the assumption of individual greed, so those with the most to play with tend to be those with the most greed in their personalities.

        Which is not a system I either like, nor does it make much sense to me (yep, by nature I'm a stuff me into a lab and keep the pizzas coming type - I KNOW I'm a tad unworldly in some respects, but honestly, those of you who aren't supposed to be so sometimes seem to accept what to me seems the stupefyingly insane as 'normal'). Trying to think in such a way as to make better sense of it all actually hurts, which is why I like reading what Tim has to say so I can get some kind of insight into the madness out there.

        I'd be very interested to hear from Tim why he thinks we haven't got a situation where there's (near) full employment in the UK with everyone working shorter hours than they did 30 years ago (which to me should be the sane result of increasing automation and computerisation), instead of the fewer in work working just as long, if not longer than they used to. And also why, given that finding work has become increasingly hard over the last 30 odd years, economists seem to think there have been multiple recessions rather than one ginormous long one (which is how it feels to me and friends of similar age, for the most part).

        Gah. Economics. I always feel so dirty after contemplating it instead of physics! 8-} (heads off back into own private universe for a bit :-} )

        1. Tim Worstal

          Re: "it will work like this because pink bunnies"

          "I'd be very interested to hear from Tim why he thinks we haven't got a situation where there's (near) full employment in the UK with everyone working shorter hours than they did 30 years ago (which to me should be the sane result of increasing automation and computerisation), instead of the fewer in work working just as long, if not longer than they used to."

          Hans Roslin is an interesting guy here, Ja Hoon Chang also alludes to it. There has been a reduction in working hours, both recently and over the past century. But the reduction has mostly been in the unpaid household work that we do, not the paid market work that we do. We do have more leisure time.

          "And also why, given that finding work has become increasingly hard over the last 30 odd years, economists seem to think there have been multiple recessions rather than one ginormous long one (which is how it feels to me and friends of similar age, for the most part)."

          Pissarides got his Nobel for work on this. We've two different effects going on. One is that we've got much better communications now, so it should be easier to look or a job. But we've also got increased specialisation in jobs. So it takes longer to find that round hole for the round peg. The two together contribute to "frictional unemployment". That's the amount that we're going to have as people move about between jobs (we might also point to ever heavier HR nonsense as meaning it takes longer to actually get hired).

          Better comms should mean frictional unemployment goes down, increased specialisation up. The general view is that specialisation has been the greater effect. So, full employment today is 4-5% unemployment, a level which is the 1950s would have been thought of as a huge unemployment problem.

          1. Esme

            Re: "it will work like this because pink bunnies"

            @Tim Worstal - thank you Tim! Hmmn, I'd take issue with the response to the first of those, as I was talking specifically about paid employment. Haven't seen any shortening in hours, and we do have higher unemployment. Point taken regarding housework, though I can say from personal experience the reduction hasn't been sufficient to make much difference in my life. The big leap there, so far as I can tell, happened in the previous generation.

            Second point, really, I suppose boils down to how one categorises things. So far as I'm concerned, we still haven't recovered from the recession that started when I was a teenager and the Conservatives were plastering billboards with posters saying 'Labour isn't working; one million unemployed'. Now bearing in mind I take issue with BOTH the Conservatives and Labour (and always have done, despite my generally leftish leanings), that would seem to me that we're still not out of that recession yet, because ability to find a job so as to acquire an income is, in practical terms, what defines a recession to the average person in the street. Anything else, from where I'm sitting, just looks like the City folk moaning because they only made one million in bonuses this year instead of two million, ie; so far removed from the reality around me as to be effectively a fantasy world, albeit one which can, annoyingly, have nasty effects on the reality I live in.

  6. ScissorHands
    Paris Hilton

    Blind spots...

    As much as people who kneel on the altar of St. Milton of Friedman would like to have us believe, no planks were sawn through on the Keynesian side of Economics. The only reason Keynesian recipes were not used is that Keynes is now a censored word in the structures of power because it leads to a reinforcement of the place of the State in the global economy, and we can't have that... ("harrumph! Imagine that, as if the State was useful for something..."). All that this "Keynes allergy" has demonstrated is that even a broken clock can be right two times a day, but an intervention on keynesian principles from the beginning of the Great Recession would have allowed a faster recovery, not only on the timing of the recovery but also on the rate of recovery, avoiding a lot of unnecessary suffering - more milk and less moo.

    1. Nick Kew

      Re: Blind spots...

      Keynes must be spinning in his grave at some of what's been done in his name in recent years. Remember it was a dose of Keynesian (or should I say Ballsian) stimulus around 2004/5 (in the world's #1 Financial capital - so it spread far and wide) that transformed what could've been a regular recession into a couple of years of continued bubble followed by an almighty crash. Go back and look at Gordon Brown's rhetoric: the clue lies in the subtle addition of the phrase "over the economic cycle" to words about government borrowing.

      China's stimulus looks more like legitimate keynesianism, but I'd be out of my depth trying to say anything meaningful about it.

    2. Anonymous Coward
      Anonymous Coward

      Re: Blind spots...

      We followed the Keynsian playbook over here. Hell, W. even got some policies Obama wanted done legislated before he took office. The needle was stuck on that left peg. Bernanke and co. tried another approach and it may actually do something positive. There's still too much hand-waving involved in what's done when/why/where/how to suit my tastes. My niche is experimental design (every discipline, every school) and trying to set up real experiments would be awful hard on the test subjects (let alone single/double-blind, stratified,...). What does stand though is the Keynesian lever was pulled and it broke off the gate (valve).

      BTW: Adding a bit of historical context is that every business cycle downturn can be traced back to alterations to the credit system (rules/laws) by Congress or by direction of Congress (there's a difference). That last humdinger spanned forty years in the making. I was taking American Economic History at the same time as Business Cycle Theory when I noticed it. Tyros playing with nuclear weapons.

    3. Johnnydub99

      Re: Blind spots...

      " The only reason Keynesian recipes were not used is that Keynes is now a censored word in the structures of power"

      Er no. The simple reason is that Keynes advocating saving in the good times to be able to spend in the bad, thus evening out the economic cycle a bit. No western government ever does the saving bit.

      The political left latch onto Keynes, as they see the spending bit and go see, we're justified in ever increasing spending. That simply isn't what Keynes proposed.

      1. h4rm0ny

        Re: Blind spots...

        >>"Er no. The simple reason is that Keynes advocating saving in the good times to be able to spend in the bad, thus evening out the economic cycle a bit. No western government ever does the saving bit."

        The economy requires a lot of study just to understand the fundamentals and the theory of the common models. Ergo, most people don't understand the economy in more than a superficial way and are dependent on experts to set their expectations. Given that no government ever wants to argue to the populace why we can't have something important (more teachers, repair a hospital, whatever), the populace never receives any advice to the contrary of spend what we have (or more commonly this past two decades, what we don't have).

        Though of course that doesn't mean we can't criticize some of what the money is spent on (Giant US Defence Budget, I'm looking at you).

    4. Anonymous Coward
      Anonymous Coward

      Re: Blind spots...

      "..........an intervention on keynesian principles from the beginning of the Great Recession would have allowed a faster recovery, not only on the timing of the recovery but also on the rate of recovery, avoiding a lot of unnecessary suffering......"

      Maybe it would have resulted in a faster recovery, but I'm really not sure that it would have avoided a lot of unnecessary suffering. I for one would have lost my house for certain and a large number of businesses would have hit the wall. The slower recovery may be prolonging the pain a little, but the pain was nowhere near as bad as it might have been in the first place. QE basically smooths out the peaks and troughs.

    5. LucreLout Silver badge

      Re: Blind spots...

      @ScissorHands

      but an intervention on keynesian principles from the beginning of the Great Recession would have allowed a faster recovery

      Unfortunately, a Keynsian intervention would have to have happened in 1999, which was the year Gordon Brown let rip the debt expansion and profligate state spending wholly unneccessary in the economic boom we were beginning.

      Keynes requires, yes you read that right, requires, that the state spend less than it takes in taxes during the up phase of the boom such that it may spend more than it takes in taxes during the down slope. The bit the lefties always, always get wrong is the saving during the upswing part.

      ETA: @Johnnydub99 - Having read a bit further I see you've articulated the exact same sentiments as I, only you've done so in a far more eloquent manner. Have an upvote Sir.

  7. IvoryT

    My (limited) understanding is that QE is a temporary redistribution of money to nudge behaviour and tweak a few stats, but that the global economy is dominated by grotesque and exponentially increasing levels of national debt - an economic San Andreas Fault.

    1. Greg 16

      Don't forget the grotesque and exponentially increasing levels of wealth. The debt doesn't seem quite so bad then.

    2. Anonymous Coward
      Anonymous Coward

      "grotesque and exponentially increasing levels of national debt"

      In Russia the nomenklatura simply looted the assets and sold them off, becoming rich in the process. In the West, governments gave away assets to their mates, and the transfer of assets from governments (and by extension the people) to the kleptarchs is built into a far from transparent economic system. The effect is more or less the same everywhere.

  8. David Roberts
    Coat

    Fiat currency?

    As a Baby Boomer I can't help associating "fiat" with something initially cheap and shiny which loses value at an alarming rate, becomes frighteningly unreliable, and quite soon corrodes away to something almost valueless where the ongoing maintenance costs far outweigh any residual value.

    I hope this has no relation whatsoever to the currency of the same name.

    1. Richard 12 Silver badge

      Re: Fiat currency?

      No, it's worse than that.

      A "Fiat currency" has value because we agree it has value.

      We agree it has value primarily because our (respective) government(s) say it does.

      If enough people lose confidence in our governments, the value of the money falls (exchange rate changes). If it falls far/fast enough, everyone loses confidence in it and suddenly it's no longer of any value at all.

      This is what happened in Zimbabwe.

    2. Ken Hagan Gold badge
      Unhappy

      Re: Fiat currency?

      Both names are taken from the Latin for "manufactured", so it's all down to whether the manufacturer knew what they were doing. I suspect we know more about making cars than we do about macro-economics.

      1. DavCrav Silver badge

        Re: Fiat currency?

        "Both names are taken from the Latin for "manufactured", so it's all down to whether the manufacturer knew what they were doing. I suspect we know more about making cars than we do about macro-economics."

        FIAT = Fabbrica Italiana Automobili Torino. Do you have any evidence that it was a play on words, like the PATRIOT act, for example? I did a brief Google search but found none.

        And fiat in Latin is more "let it be done" than manufactured, hence the English word "fiat", which is where fiat currency actually comes from.

        This comment is more just in case people assume your facts were correct; I wasn't trying to denigrate the joke. Also, Nylon doesn't come from New York and London, humans don't only use 10% of their brain, they always use 100% of it, and everybody has known the world was round for thousands of years: they actually knew how big it was, which is why everyone thought Columbus was stupid, and he was, because he would have died if America wasn't there. You aren't supposed to prick sausages before cooking, you actually attract more flies with vinegar than with honey, and more English words fail the 'i before e except after c' rule than pass it.

        1. Vic

          Re: Fiat currency?

          humans don't only use 10% of their brain, they always use 100% of it

          You've clearly not met some of the people I've worked with over the years...

          Vic.

          1. Anonymous Coward
            Anonymous Coward

            100% of fuck-all...

            ...is fuck nothing.

            You don't need economics for dismal results; the average workplace crafts them too

        2. Ken Hagan Gold badge

          Re: Fiat currency?

          "This comment is more just in case people assume your facts were correct; I wasn't trying to denigrate the joke."

          Ta. I plead over-eagerness to make a joke for the strained translation. (I'm happy calling money that is legislated into existence "manufactured", but less happy calling a car "done".)

          I stand corrected on the acronym, which I'd forgotten about, but the idea that it was a play on words is not just me (see, for example, http://blog.oxforddictionaries.com/2012/10/automotive-etymologies/). I suppose I'd need to point to some remarks from the company's founders before I could say it was intended, though. Your Nylon example is a perfect example of how some words lend themselves quite easily to backronyms.

          1. DavCrav Silver badge

            Re: Fiat currency?

            "but the idea that it was a play on words is not just me (see, for example, ..."

            That's an interesting link, thanks for it. I couldn't find it when I looked. It has no references, alas, but some of the reasons for other car companies are clear. I'm a bit concerned about their reasoning for Jaguar (formerly the Swallow Sidecar Company) changing its name from SS Cars. A direct contemporaneous quotation from the founder: "Unlike S.S. the name Jaguar is distinctive and cannot be connected or confused with any similar foreign name.", in the Times suggests that reasoning, but the date of this change -- March 1945 -- suggests that it wasn't the German SS that they were trying to avoid, as presumably the SS were well known in Britain before 1945. However, I'm not much of a historian, and am not willing to put in the hours looking through archives at the BL or Bod to become one.

            1. DaveDaveDave

              Re: Fiat currency?

              As far as Jaguar's name change from SS goes, don't forget that car production stopped during the war. They were never called SS Motors after 1939, basically.

    3. Lyndon Hills 1

      Re: Fiat currency?

      initially cheap and shiny which loses value at an alarming rate

      My first thought was how like a mobile phone, but it applies to any computer, and from my younger years, exactly how buying a new car was perceived (perhaps without the cheap bit).

  9. Will 28

    When do we get to win?

    I might have ranted about this before, but there's something nagging me about all this economic policy. When times are hard we all need to tighten up our belts and accept that pay rises and improvements to our wealth are not realistic. Then as times improve, the banks increase interest rates to stave off the risk of "inflation busting pay rises".

    I know Tim's argument has been that we dictate our pay by providing that level of value for our work, but I can't help but feel that there's economic policy stacked against us here. It's further aggrevated by the fact that those interest rate increases haven't staved off the inflation busting pay rises of the FTSE board room members, something the ASI came out in defence of.

    Sorry, rant over. Interesting article Tim.

    1. Ken Hagan Gold badge

      Re: When do we get to win?

      You're still here, aren't you?

      Natural Selection is often characterised as "survival of the fittest", but it is rather better described as "non-survival of the least fit". NS and free-market economics are ways (well, the same way) of moving the centre of a statistical distribution to the right by systematically removing data points from the left-hand end. You "win" (move rightwards) simply, and only, by staying in the game. There are no medals.

      I suppose this is implied by the bit in Tim's article where he describes the benefits of a small amount of inflation. In any economy, there are always a few people who are getting paid less this year than last, because their work is less useful. They are moving left. Inflation is like moving the x-axis scale to the left at roughly the same speed so that everyone feels better about that.

      1. John H Woods Silver badge

        "You're still here, aren't you?"

        Mentioning natural selection here confuses me and, in any case, I would disagree with the (equivalent) definitions you have offered. What is the 'systematic removal of the points on the left hand side'? Is it people starving to death? Skills becoming less valuable? Increases in minimum wage? I would argue the first isn't natural selection because it's about entities not traits, the second isn't because it's not about heritable traits and the third isn't because it doesn't appear to be related to natural selection at all.

        Surely winning and losing, economically, are easy to define. One is winning either if one's relative standard of living is increasing or, if it remains the same in relation to others, one's absolute standard of living is improving (even if one remains on the left hand side). It is perfectly possible, relatively speaking, for only a minority of the population to be winning, as there's no guarantee the distribution will remain the same shape.

        1. Ken Hagan Gold badge

          Re: "You're still here, aren't you?"

          "What is the 'systematic removal of the points on the left hand side'? Is it people starving to death?"

          In the past, removal meant just that. In these more enlightened times it tends to be companies going out of business and their employees having to find new jobs. It is systematic in the sense that it is not random.

          It is about traits if you accept that your position on the distribution depends on something you are or do and that future companies can adopt the more effective policies or business models from the right-hand side of the distribution. I'm not too bothered about whether these traits are passed down a particular line of inheritance. Apparently Nature isn't too bothered about that either, since epigenetic traits have presumably operated for as long as genetic ones and the rise of humanity over the last ten thousand years has been largely memetic.

          I would still call this last example /natural/ selection rather than a process of design, since we became the dominant species long before we had any idea that we were the dominant species and the cynic in me would argue that we still don't govern or plan in a rational manner at the highest level. In fact, those of a more apocalyptic bent would argue the very opposite -- that our inability to create or implement a sustainable way of life will be the cause of our own natural selection. (For the record, I disagree with that viewpoint as well.)

    2. DavCrav Silver badge

      Re: When do we get to win?

      "When do we get to win?"

      Compare your standard of living to those of twenty and forty years ago. Easy way to do this: watch a TV show from that era. Somewhere life got a lot better, but it isn't always obvious where. Much of the improvement is what £1 can buy you. Just take computers for example: I bought my first IBM PC in 1998, for £1000, and it has a 133MHz processor, 16MB of RAM and 1.6GB hard drive space. A decade before that I had a Spectrum 128K +2, which boasted an integrated tape deck, plastic keys rather than rubber keys, and more than twice as much RAM as its predecessor, at 128KB rather than 48KB.

      So what do we see now: a normal desktop PC costs about £500ish, so prices have halved. But obviously a computer is not twice as cheap as it was then, it's a tiny fraction of the price that it was in 1988: the sector has experienced deflation of 99% or more.

      My new fridge-freezer arrives tomorrow, after fifteen years or so with the last one. The one I'm buying cost the same price as the one I have, but uses half the energy. My vacuum cleaner cost the same as the first Dyson my family bought a long time ago, but this one cleans the floors by itself.

      This is where the quality of life improves, not through pay rises leading to being able to buy more of the same stuff, but through improvement to the things that we buy.

      1. Anonymous Coward
        Anonymous Coward

        Re: When do we get to win?

        "My vacuum cleaner cost the same as the first Dyson my family bought" - there's your problem: your family bought a Dyson, and not a proper vac, like a Numatic.

      2. Will 28

        Re: When do we get to win?

        I understand the whole hedonic adjustment thing. I suppose I'm more pointing towards inequality, but more specifically how the current economic policies appear to be motivated by keeping wages down. This comes back to my point, when is there a time when they should go up? We never get a "times are good, lets reward you" moment. Only times are bad so we must stagnate, or times are good, so we must slow things.

        1. Tim Worstal

          Re: When do we get to win?

          Full employment is what drives wages up.

        2. LucreLout Silver badge

          Re: When do we get to win?

          @Will 28.

          I understand the whole hedonic adjustment thing

          Then you should understand why you've already won. I know, I know, it doesn't always feel like that, but look at this objectively for a sec.

          Today you can buy a faster car than an 80s rich mans Ferrari (308) for around one years pre-tax minimum wage.

          Today you can get pretty well any fruit or veg at any time of year. Not so much in the 70s, regardless of wealth, and not at all prior to then.

          You could be in New York tonight, in time to go out for a drink for a few hundred quid. Not something available to the richest of rich people a hundred years ago.

          I suppose I'm more pointing towards inequality, but more specifically how the current economic policies appear to be motivated by keeping wages down

          Lets split these into two points, because they are very different things.

          Equality of outcome you can't ever have. Some people are just smarter, better with money, luckier, or harder working than others. Equality of opportunity you'll never get due to human nature.

          An example, if I may. My boss earns more than I, at least 25% more in fact. He's prioritising spending money on a bigger house, better holidays, and an unending procession of newer and flashier cars. I'm prioritising my childrens education. His view is that having had girls "They'll just get married and give up work so what's the point?" - not a view I subscribe to myself. Assuming education is a beneficial differentiator, he's moved the next generation of his own family from what should have been a position of advantage over mine to one that isn't.

          And so to wages. Wage increases above the rate of inflation must feed back into the rate of inflation: more money chasing the same goods/services. New spending opportunities mitigate that to an extent, but lead to greater inequality - Kids can buy a lot more music today than ever before and its a much slicker process, leading to greater concentrations of wealth amongst the successful - See Taylor Swift for evidence of this.

          Average wage rises can at best track average economic growth, but within that there will be a great deal of distortions due to supply and demand.

  10. Rusty 1
    WTF?

    Next time on Tim Worstall...

    How I found David Icke and never looked back. It's reptiles all the way forward!

  11. Steve Knox

    The Devil's in the Details

    And there's always sections of the economy where real wages should be falling.

    I think everyone agrees that some real wages should be falling. The problem is, which ones?

    This problem is compounded by the fact that many of those whose real wages should* be falling are in positions of extreme influence over which wages actually do fall. In short, while most wages are sticky downward, there is a specific set of wages that are sticky upward. The net result is disparity.

    * By popular opinion, at least.

  12. Innocent-Bystander*

    Apile of Turd Shined to Perfection

    This reads like the "intellectual" underpinnings of 100 years of failed economic policy.

    QE is theft. Plain and simple. Every unit of unbacked credit emitted into the money supply without a proportional increase in economic output reduces the purchasing power of all units of currency already in circulation. It also happens to not work, as we have seen for the last 8 years, or the last 20, if you want to go as far east as Japan. We have tried, the world over and in the last 2 months it's all started toppling over, just as predicted by those who know better than the author of this central banking blowjob piece.

    Monetary stimulus is idiotic. It is a blunt instrument that applies across all sectors of the economy (even healthy sectors), creating asset bubbles that inevitably blow up, calling for more easing to mask the credit destruction driven deflation with increases in the money supply.

    There is a simple answer to economic collapse: do nothing. Go back to 1919-1920 for an example. The economy slid into a depression and within 18 months the smoke cleared and we had the roaring 20's. Doing what the article advocates 7 years after 2008 we are still on a road to nowhere.

    Keynes' father should have pulled out in time.

    1. Anonymous Coward
      Anonymous Coward

      Re: Apile of Turd Shined to Perfection

      "QE is theft. Plain and simple. Every unit of unbacked credit emitted into the money supply without a proportional increase in economic output reduces the purchasing power of all units of currency already in circulation"

      I do like the smell of strict monetarism in the morning. Now please can we have all the arguments about measuring the size of the economy and economic output needed to support it?

      Your 1919-20 example is a bit like the data of the global warming deniers that conveniently starts just after a warming period1; you ignore the interesting events of the previous 7 years (WW1 effectively started in the Balkans around 1912) and the macro-political events that were happening in the 1919-22 timeframe.

      1I'm sure to be downvoted for that reference but then the Venn diagram of "strict monetarists" and "AGW deniers" probably has a very high degree of overlap, with the Daily Telegraph readership firmly in the intersection.

      1. Anonymous Coward
        Anonymous Coward

        Re: Apile of Turd Shined to Perfection

        Yep, downvoted, because that's exactly what the warmenistas do as well, carefully chose start and end periods to cover up the shakiness of the data. And let's not get started on the models and hand tuned back-fitting....

        Venn overlaps, yes, between the "all warming is catastrophic" crowd and the socialist "punish society for my ills" brigade.

        But you're not wrong in general except that the 1919-20 IS the "forgotten" downturn, because conventional (for the time) hands off economics resolved the issue rapidly. Circumstances matter.

    2. chris 48

      Re: Apile of Turd Shined to Perfection

      "100 years of failed economic policy"

      So you think we're worse off now than we were in 1915? This argument is so obviously false, it baffles me that it keeps getting made.

      We're the richest people ever, unemployment is relatively low, gdp is (despite austerity) somehow higher than it was at the hight of the spending and debt fueled boom in 2008.

      http://www.ons.gov.uk/ons/rel/elmr/gdp-and-the-labour-market/q2-2015--quarterly-update/sum-q2-2015.html

      If you feel like you're not winning, it's only due to huge inflation of expectations.

  13. This post has been deleted by its author

  14. Any mouse Cow turd

    Personally, I can't see the issue with deflation. As DavCrav points out it has been happening for years as efficiencies have increased. But instead of letting the proletariat keep and spend that additional money saved and thus improve their standard of living or saving it for later the people in charge manipulate the economy to inflate prices elsewhere.

    I get the issue with debt never being inflated away but if everything else gets cheaper then we have more left over to pay off the debt. But if we do that, and things are getting cheaper due to deflation then the banks are screwed since we would no longer require to get into debt as often to make those big purchases.

    I have yet to see an economics article complaining about the effect of low cost airlines or computer cost reductions or the "discount" supermarkets on living standards. Personally these effects have given me increased disposable income to spend elsewhere.

    How about a currency based on energy?

    1. Vic

      I get the issue with debt never being inflated away but if everything else gets cheaper then we have more left over to pay off the debt

      You're assuming that wages stay the same. If that were to happen, then employers have the same outgoing, but less income - so they go bust. That leaves lots of people unemployed, so nothing with which to pay off any debts.

      Alternatively, wages decrease in line with deflation - so there is no more money left over.

      Vic.

    2. Richard 12 Silver badge

      The issue with deflation

      Is that it encourages hoarding and discourages investment.

      Example:

      If you believe that an item X that you desire but don't need yet will be cheaper in 6 months time than it is now, then you are likely to wait those 6 months.

      You'll only buy it now if you're desperate or otherwise unable to wait.

      If everything is going to be cheaper in six months, then everyone waits as long as they can before buying anything.

      This badly affects the cashflow of companies selling the stuff, and it's cashflow that really kills companies (not debt or liabilities). So unemployment goes up, and all kinds of other bad juju.

      1. Steve Knox

        Re: The issue with deflation

        Interesting example.

        How does that apply in the tech sector, where (absent catastrophe like what happened to the few HDD plants a few years back), pretty much everything will be cheaper in six months, almost everything is desired but not needed, and yet purchases aren't deferred indefinitely?

        1. Anonymous Coward
          Anonymous Coward

          Re: The issue with deflation

          Until fairly recently the tech sector did feature pseudo-need, in that new versions of software relied upon more powerful computers. So keeping up with the gamesing Joneses meant periodic hardware refreshes, as did moving up MS Office versions (side-note: our MS resellers were devious b'stards, giving a free upgrade to senior execs, who promptly starting generating documents in the newest file format that nobody else could work with. In vain IS reset their defaults to the older file format but the "Some features may be disabled" warning so troubled the execs that a few weeks later the company rolled over and ponied up for a site-wide upgrade, and then started piecemeal replacements of older machines suffering from this final straw).

          In the past few years this pressure has seemingly slackened: more users are keeping machines beyond the 2-3 year cycle (I sure am: I'd like my 5-year-old machine to be faster and I surely always will, but for the first time I always seem to have some free drive space and the games I like play well enough, so I'm looking at small upgrades rather than junking the whole box) And what do we see? Headlines full of rack-and-ruin from the manufacturers, industry giants dropping out of sectors, etc, i.e. feels rather like a microcosm of deflation.

        2. DaveDaveDave

          Re: The issue with deflation

          "pretty much everything will be cheaper in six months, almost everything is desired but not needed, and yet purchases aren't deferred indefinitely?"

          If I buy a tool for my work which costs £1k, and earn £10k with it this year, the fact that next year I could buy it for £500 isn't relevant. If it's next week, it is. The trade-off between time waited and money saved is a pretty obvious one.

          Now, simply substitute 'utility' for the money earned working with the tool. That could be enjoyment, it could be employment, it could be whatever a person wants it to be. They're capable of weighing up one against the other, having regard to their purchasing power over time.

    3. DaveDaveDave

      Deflation

      Deflation seems to be widely misunderstood. Things getting cheaper is not deflation. The same number of currency units buying more of something at the same (real terms) price is. In other words, deflation is about a change in the value of money, not in the cost of goods.

      Measures of inflation like CPI/RPI are a proxy, not inflation itself. As such, one needs to look at them and note that e.g. electronics have been getting much cheaper, and try to have a basket of goods which consists of things like e.g. bread which are at a much later stage of development when it comes to things like production methods.

    4. LucreLout Silver badge

      @Any mouse Cow turd

      I have yet to see an economics article complaining about the effect of low cost airlines or computer cost reductions or the "discount" supermarkets on living standards. Personally these effects have given me increased disposable income to spend elsewhere.

      From what I can find quickly, the average wage of a stewardess was about 2000 USD per month in 1987 http://davidcard.berkeley.edu/papers/airline%20labor%20earnings.pdf

      Throwing on a bout of inflation brings us to about 4200 USD. Now stuffing that through an FX calculator gets us to 2751 GBP. The average today according to payscale is currently just north of 1200 GBP.

      Things then, may not have been great for the European trolley dolly. The increased disposable income you enjoy has come from the wage premium once demanded by air crew. Discount supermarkets similarly pass along to you what was once the income of the farmer. You sir, are then the fat cat of which you speak.

  15. Bernard

    Questions

    Two hypotheticals I'm keen for your take on.

    1) Now it looks clear that essentially negative interest rates are a policy lever for governments to use do you think it's a sustainable long term option for them? Eg could we see a situation where zero interest rate plus varying degrees of QE become the norm to deal with the business cycle?

    2) if my simplification that QE essentially amounts to a negative interest rate is accurate has anyone done any work to determine what volume of printing correlates with a half point rate reduction?

    1. Tim Worstal

      Re: Questions

      1) Long term, no. General view is that QE producing negative rates (-ish, -ish) is viable in extremis but we'd much rather get back to a bit of inflation and positive real and nominal rates.

      Could (*could!*) just be because that's what everyone learned but general view is it would be better.

      2) No one really knows yet. It's the sort of thing original research papers are currently being written about.

  16. Trollslayer Silver badge

    Odd topic for El Reg

    But I find it very interesting.

    This affects all of us so I look forward ot reading these articles.

  17. Howard Hanek
    Happy

    New Secret Formula

    Working together in their secret facility in the basement of the Swiss Gnome Guild Hall (where they weave those reds hats) Central Bankers and leading economists have developed the world's new reserve currency. It has yet to be named but it's best described as the monetary version of 'flubber' with the ability to bounce incredibly high.........The obvious transportation and distribution problems require radical modifications to the existing system.

  18. G Mac
    Meh

    Inflation prediction please - versus just the measures..

    "That is, QE is working."

    The entire exercise is to get inflation going a bit. What is the prediction when this will occur (vs. saying it is occurring because all the indirect measures say it will)?

    It is much to ask for some predictive power here...

    1. G Mac

      Re: Inflation prediction please - update 1

      Latest in:

      "Eurozone Inflation Slows Unexpectedly in August"

      http://www.wsj.com/articles/eurozone-inflation-falls-unexpectedly-in-august-1442396224

      "As I've said around and about before now the biggest economic lesson from the recent Great Recession is that one of the fundamental planks of Keynesian fiscal theory has been sawn through."

      By the way, Keynes just called and wants his plank back.

      Maybe you should take a peek over the MMTers shoulders on why this happened...

      1. G Mac

        Re: Inflation prediction please - update 2

        Latest in:

        "Euro zone inflation turns negative in Sept"

        http://www.reuters.com/article/2015/09/30/us-global-forex-idUSKCN0RT2ZD20150930

        Now Keynes is really pissed about that plank.

        I have no doubt that those still pushing the wheelbarrow of this article (mathiness proof = inflation, even when no inflation turns up) will now say something like 'oh it would of been worse without QE'. Which is just moving the goalposts post ante. This whole article said inflation was going to be much greater...

        1. G Mac

          Re: Inflation prediction please - update 3

          Latest in:

          "Euro-Area Spell of Sub-Zero Inflation Ends as Unemployment Falls"

          http://www.bloomberg.com/news/articles/2015-10-30/euro-area-spell-of-sub-zero-inflation-ends-as-unemployment-falls

          So SUCCESS!!!! From -0.1 to 0.0 - that must count as a major coup for the projection made by the article. Not.

          What is annoying is that by making the pronouncement that all that is needed is QE and 'proving' it via this post's math, it has frozen policy in place. That is, it becomes a wait and see versus doing something Keynesian/stimulus (and the ECB doing more QE, which may be the new definition of insanity).

          Of course we are talking about the EU, so providing stimulus via Euro-area action is a tall order to get agreement. But taking it off the table because of an ideological "QE works" without any evidence is not correct.

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