A very British disease

The desire to judge people's motives rather than addressing their needs is a “British disease”. We have been suffering from it for hundreds of years, cycling endlessly through repeated cycles of generosity and harshness. Each cycle ends in public outrage and an abrupt reversal: but the memory eventually fades, and the disease reappears in a new form. In this post, I outline the tragic history of Britain's repeated attempts to "categorise the poor".

For centuries, successive British social systems have recognised that there are people who cannot work, whether because they are too young, too old, too ill or too infirm. These people need to be provided for by others – in the first instance families, but where family support networks break down, support must be provided by the wider community.

And for centuries, successive British social systems have also recognised the existence of people who are perfectly capable of working but are not doing so. Most of these people…

Velocity Matters

An accounting identity does not indicate the direction of causation. Not ever.

I’ve been caught out on this a few times myself, usually when I am trying to deduce something useful from national accounting equations. But I’m merely a writer. People actually involved in the formulation of policy should know better.

Here’s an attempt by people who should know better to try to infer the direction of causation from an identity. On the St. Louis Federal Reserve’s blog site is this post by Yi Wen and Maria Arias. It purports to show that the reason why three rounds of QE in the US have failed to raise inflation is because the velocity of money has collapsed. And they then come up with some reasons why velocity has collapsed, though sadly no ideas about what to do about it.

Their argument is based on the familiar Quantity Theory of Money:


where M is the monetary base M0, P is the price level, Y is real GDP, and V is the velocity of money. Sometimes real economic output Q is use…

Arithmetic for Austrians

This piece grew from a number of conversations with people of Austrian economic persuasion, mostly Bitcoiners and goldbugs (which these days seem mysteriously to have converged). I thought of calling this "Monetarism for goldbugs", but decided to preserve the mathematical slant of the previous pieces in this series. But it's monetary arithmetic, of course. And as Austrians tend to obsess about "sound money", it is specifically soundmonetary arithmetic.

(Note: Someone has pointed out on Twitter that the arithmetic in this piece is considerably more advanced than the equations themselves suggest. If you are bit rusty on the mathematics of change, I suggest reading the first piece in this series, Calculus for Journalists). 

Inflation is complicated

As "sound money" seems to mean "no inflation", let's start by defining what we mean by inflation.

In mainstream economics, "inflation" usually means a general increase in the level of…

The Bitcoin Standard - a critical review

For over a century now, the world has lacked a genuinely international means of payment. This is partly due to decisions made at the Bretton Woods conference in 1944, when the US dollar was adopted as the principal international settlement currency, rather than John Maynard Keynes's suggestion of an independent global currency that he called "bancor". Although the Bretton Woods gold-backed structure ended in 1971, the US dollar became ever more dominant.

In 2008, the dollar's global reach enabled an American financial crisis to spread to the entire world, causing a deep recession and long-lasting malaise. Ever since, there has been a deep longing for a more stable international financial system, one which didn't depend on debt, wasn't dominated by the US and was immune to political whims. Some have called for a new Bretton Woods, or even for the return of the classical gold standard.

Bitcoin emerged from the financial crisis as a fledgling international dig…