The reality of how money is created | LARS P. SYLL

A great article backed up with a challenging image

Everything we know is not just wrong – it’s backwards. When banks make loans, they create money. This is because money is really just an IOU. The role of the central bank is to preside over a legal order that effectively grants banks the exclusive right to create IOUs of a certain kind, ones that the government will recognise as legal tender by its willingness to accept them in payment of taxes.

Source: The reality of how money is created | LARS P. SYLL

Economics vs. reality

With thanks to Lars P Syll for this argument about how far we should go to make economic models.  He concludes:

It is better to be vaguely right than precisely wrong

economics_versus_reality-e1431153441673Denicolò and Zanchettin, in an article published by the prestigious Economic Journal, claim to have shown among other things that “stronger patent protection may reduce innovation and growth.” As a…

Source: Economics vs. reality

Why are the boomers so angry?

No, its not really about Borrowing, but I have just spotted this article and was fascinated by the possibility that older people have just decided to kill their golden goose.

Flip Chart Fairy Tales

A quote about Brexit supporters by a friend of mine last week attracted a lot of attention when I stuck it on Twitter yesterday.

This is the last ‘fuck you’ from the baby boomers. They took the secure corporate and government jobs with the guaranteed pay rises and final salary pension schemes and benefitted from property they bought cheap and sold dear. They burnt the bridges behind them by colluding with the dismantling of the very things that had brought them prosperity. Their last act will be to burn the economy before they die.

It even made the Independent. Some people were offended by it but, for the majority of those who commented, it seemed to strike a chord, suggesting there is at least a grain of truth in it.

It is certainly true that the pollsters are recording the highest support for Brexit among older voters. YouGov data

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The bonus puzzle | LARS P. SYLL

Sometimes I come across something that makes me wonder.  This is one of those somethings.  Perhaps bankers bonuses exist because they can get them, not because they help make banks more profitable?

Diane Coyle has an excellent article in the FT about an apparent puzzle. Why do executives get incentive bonuses (extra pay on meeting some target), but most workers do not? Her article is based ar…

Source: The bonus puzzle | LARS P. SYLL

Tell the IMF to count the cost of public-private partnerships – Jubilee Debt Campaign UK

The International Monetary Fund is reviewing its framework for judging whether countries have a debt crisis. But currently, the huge hidden costs of public-private partnerships are not included.

Source: Tell the IMF to count the cost of public-private partnerships – Jubilee Debt Campaign UK

What’s the point of economists?

Just had to reference this article from Economia – the magazine for Chartered Accountants.

It starts off by saying that economists only get things right about 4 times out of 10.  If I have read the grade boundaries issued by one of the exam boards correctly that would have been enough to get a grade F at GCSE economics units 11 and 12.  And if we use the lower mark “3 or 4 times” offered later in the article it is barely even enough for a grade G.

It then goes on to say economics is not a black and white science – but then what is?  Even the physics of light has to take account of colour.

The profession is likened to a sports coach who cannot guarantee a win even by putting out the best team possible.  Except that economists do not seem to get the sack for repeated poor performance.

Or economists should be likened to medics who would not be able to predict when you are going to get ill but should be able to advise you how to get better.  Except that economists do not seem to be able to agree on a course of treatment – should we spend our way out of recession or should we cut back on public expenditure to balance the books.  Or should we do a George Osborne and try a bit of both – cut back on public expenditure till it hurts and still borrow more.

And then the article talks about the benefit of hindsight giving us 20/20 vision.  But again I am not sure that it does, as economists don’t seem to be able to agree whether they should have been expected to predict the 2008 financial crisis.

But perhaps I am biased in my thinking that economics is not science if we follow the Oxford dictionaries definition:

The intellectual and practical activity encompassing the systematic study of the structure and behaviour of the physical and natural world through observation and experiment

It is included as a social science:

The scientific study of human society and social relationships

which attempts to use scientific methodology but is severely limited because it is not easy (or even legal) to experiment on human society and relationships – so that it is limited to observation without being able to test any theories about how economics works.

Noam Chomsky on Europe’s Refugee Crisis and the Endless Greek Debt Drama |

OK this is not just about the debt crisis but…

Professor Noam Chomsky talks about Europe’s refugee crisis and the Greek debt drama in an exclusive interview.


Europe is torn apart as there is no end to the arrival of ever greater number of refugees and migrants, while many European countries, especially in the south, continue facing severe economic problems such as unacceptable unemployment levels, high debt-to-GDP ratios, and increasing poverty and exclusion for their youths.


What does the world’s leading public intellectual, renowned MIT linguist, philosopher and social critic Noam Chomsky, author of over 100 books and thousands of articles, think about current developments in Europe?

Source: Noam Chomsky on Europe’s Refugee Crisis and the Endless Greek Debt Drama |