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Ann Pettifor, the economist and critic of modern finance, explains clearly what money is, where it comes from, and how it is currently controlled. She shows how an improved understanding of money and finance can build more just and productive economies.


PRIME is an economic think-tank that promotes understanding of the nature of credit, and its role in determining macroeconomic outcomes. Fundamental to our approach is an implicit and explicit restoration of ethics in relation to money and credit.

Examining Fortress Britain

By Susanna Mitchell, 12th April 2014

The heated debate that presently surrounds the issue of immigration in rich migrant-receiving countries overlaps with many disagreeable practices and attitudes – xenophobia, racism, exploitation, injustice and greed to mention but a few. This is profoundly damaging to social cohesion and global cooperation, but it also incorporates a long term economic incoherence that is truly astounding, and in many countries (the UK included) creates policies that make economic nonsense even in the short and mid-term.

Immigration policies in the UK are especially irrational in this regard, and appear designed simply to reflect and generate popular misconceptions for the sake of party political advantage, with immigration painted as a damaging factor in the country’s economy. In fact, in straight fiscal terms, the majority of available studies for the UK over the past decade have all concluded that immigrants’ contribution to government revenue was higher than their share of government expenditure.

There can, of course, be problems associated with social provision at grassroots level, but these could be managed by proper distribution of the extra government resources generated by migration as a whole.

Continue reading… ›

Deregulation and deficit disorders

By Jeremy Smith, 11th April 2014

In PRIME, we think that far too much attention has been paid to the annual government budget “deficit” in isolation, and far too little to the fact that it is by growing economic activity – not by austerity – that deficits fall, at a time when there is obvious spare capacity in the economy.  And with unemployment still over 7%, historically a high figure, and inflation falling to levels that make deflation the greater concern, it is nonsense to claim that we are near the limits of spare capacity.

But given the political attention given to budget deficits as such, we feel it is worth looking more closely at the historical record.  And lo and behold, we find that the worst record by far – until the financial crisis of 2008 – was under Conservative governments. We also find that the principal driver of high deficits is deregulation of the finance sector.  Continue reading… ›

Does recalculating GDP make Nigeria better off?

By Shaun Richards, 7th April 2014

Over the weekend something extraordinary took place in Lagos, Nigeria. Indeed fans of Nigeria are likely to regard it as analagous to the “something wonderful” of the Film 2001 A Space Odyssey. Let me hand over for a moment to the Statistician-General Dr. Yemi Kale:

  A 59.5% increase in 2010 Nominal GDP (Gross Domestic Product): In 2010, the rebased nominal GDP represented an increase of 59.5% over the nominal GDP using the old base year, 69.10% in 2011, 75.58% in 2012, and 89.22% in 2013 (forecast).

 As you can see this represented an extraordinary change which if we move into monetary amounts rather than percentages gives us this:

 The rebased estimates indicate that the nominal GDP for Nigeria was much larger than previously estimated. In 2010, the rebased nominal GDP stood at N54,204,795.12m, N63,258,579.01m in 2011, N71,186,534.89m in 2012 and (forecast to be) N80,222,128.32m in 2013. This translates to $US 360, 644.01million in 2010, $US 408,805.60 million in 2011, $US 453,966.81m in 2012 and $US 509,970.14 million in 2013.

 The announcement was well trailed and expected but what was by no means expected was the size of it, as the majority of estimates were in the range 40-60% as opposed to the 89% of 2013. Continue reading… ›

Financial repression, Matt Stoller version

By Jeremy Smith, 7th April 2014

I am really not sure how I had missed it in my research, but I have only just turned up an excellent piece by Matt Stoller unmasking “financial repression” as a meme for the rentier class.  It appeared in Naked Capitalism on 28th December 2011.  28th December? Maybe that’s why I missed it! It is well worth revisiting, however, adding as it does to Paul Krugman’s critique of yesterday – and my Open Democracy article (dare I repeat) of recent weeks.  He – like me more recently – was stirred to write his piece due to the amazingly broad definition of financial repression given by our old ‘friends’ Reinhart and Sbrancia in their paper “the liquidation of government debt” (2011):

“Financial repression includes directed lending to government by captive domestic audiences (such as pension funds), explicit or implicit caps on interest rates, regulation of cross-border capital movements, and (generally) a tighter connection between government and banks.”

Stoller responded:

“In other words, financial repression means doing things rentiers hate, like preventing them from moving their capital anywhere in the world at a moment’s notice, stopping them from engaging in predatory lending and usury, directing investment to national priorities (like public investment, war, health care and education, a safety net, etc), and regulating banks so they don’t become casinos.  Continue reading… ›

Who are the newly self-employed?

By Jeremy Smith, 6th April 2014

Back on 19th March, we pointed out (“The Great Leap Forward of the self-employed”) that

 Something odd happened in the UK labour market in recent months. The total workforce grew over the last year by 459,000, and over the last quarter by 105,000.  But over the last year, the number of employees has risen by 198,000, while the number of self-employed has leapt by 285,000 – a huge 6.8%.

 We also said that most of this huge increase in the self-employed (211,000) had come in the last Quarter to Nov-Jan 2014. Both genders have increased substantially, but the % growth in women self-employed is slightly higher, though not in absolute terms. We thought it worth looking a little deeper into the numbers.  Continue reading… ›

Krugman on inflation, "financial repression" and the 1%

By Jeremy Smith, 6th April 2014

Paul Krugman’s blog of today is called “Oligarchy and Monetary Policy” and is well worth a read. He starts out:

Monetary policy isn’t really technocratic and politically neutral; moderate inflation may be good for employment, especially when you’re trying to work off a debt overhang, but it’s bad for the 0.1%. And that fact ends up exerting a huge influence on the discussion.

Then he goes unfashionably into (brave stuff!) a partial defence of the 1970s:

“My side of the debate has made a point of explaining why this situation is nothing like the 70s. But ask a different question: how did the 70s get framed as the ultimate bad time? For sure they weren’t good — but the really bad times for ordinary working families were the big recessions, which took place under Reagan, to some extent under Bush I, and above all after the financial crisis…

But there were some people for whom the 70s really were the worst of times — namely, owners of financial assets.”

Continue reading… ›

The UK economy is booming but what about the trade deficit and house prices?

by Shaun Richards, 1st April 2014

Tucked away in the official statistics on the UK economy on Friday was further evidence that the UK mini-boom remains at full steam ahead. This came from an update on the largest sector of the UK economy which is services.

The Index of Services increased by 3.2% in January 2014 compared with January 2013.

If we look at a shorter time comparison, the numbers indicated an acceleration in what was already a substantial rate of growth.

The latest Index of Services estimates show that output increased by 0.4% between December 2013 and January 2014, following an increase of 0.3% between November 2013 and December 2013. Continue reading… ›

New from PRIME: Bringing money back from "the underworld"

by Douglas Coe and Ann Pettifor, 20th March 2014

The Bank of England has performed a vital service with two articles on the nature of money in their latest Quarterly Bulletin. Its economists have confirmed that most of the money in the modern economy is created by private banks making loans. Rather than banks lending out deposits that are placed with them, the act of lending itself creates deposits. Banks, it turns out, are not simply intermediaries lending out money that savers deposit with them. The money multiplier process is an incorrect account of the lending process; and bank lending is not constrained by reserves.

Moreover the Bank emphasises that this is “the reverse of the sequence typically described in textbooks”. Let us be clear here: this is not a failure of some textbooks; it is a failure of virtually all textbooks.

In this latest in PRIME’s series of analytic pieces, Coe and Pettifor explore the implications for the economics profession of the Bank of England’s two articles. Click here to view the full analysis.

The Great Leap Forward of the self-employed

By Jeremy Smith, 19th March 2014

Something odd happened in the UK labour market in recent months.  The total workforce grew over the last year by 459,000, and over the last quarter by 105,000.

But over the last year, the number of employees has risen by 198,000, while the number of self-employed has leapt by 285,000 – a huge 6.8%.

And most of this huge increase in the self-employed has come in the last Quarter, according to the ONS statistics – the quarter on quarter increase was 211,000, or a stunning 5%.  It applies to men and women, though the growth in women self-employed is slightly higher.

Even more remarkable, this last-quarter leap in the self-employed took place while the number of employees actually fell by 60,000.

Continue reading… ›

‘Green QE’ is possible – says the governor of the Bank of England.

by Anne Henow, 19th March 2014

In response to a letter from MP Caroline Lucas, Bank of England governor Mark Carney hinted in the Financial times today that the Bank of England could potentially invest in a programme of ‘Green Quantitative Easing’.

The idea of ‘Green QE’ is that the Bank of England would – with the agreement of the government – buy bonds from e.g. the Green Investment Bank, which could then use the financing to subsidise low carbon projects.

With this move Carney confirms that the “Green New Deal” is technically possible. Caroline Lucas MP and members of the Green New Deal Group (including PRIME director Ann Pettifor) made ‘Green QE’ part of a larger set of policy recommendations for tackling the triple crunch of the financial crisis, climate change and insecure energy supplies. Continue reading… ›