18 Jan 2016

Economics humour

Mainstream economists predicted none of the last five recessions.

Heterodox economists predicted all ten of the last five recessions.

9 Jan 2016

Economic Metaphors

This is an idea that could do with expanding on, but I've been reading Mark Johnson's book The Body in the Mind about the mechanics of metaphors and it occurred to me that economists are using a metaphor drawn from biology for the economy, i.e. homoeostatic regulation of an organism. Hence the focus on equilibria and and growth. An organism has a number of internal systems that are used to maintain our internal milieu within an optimum range: for example blood glucose, oxygen, and carbon dioxide levels, blood pressure, temperature etc.

At the moment we're hearing a lot about "external shocks" and the potential impact of them. This language is consistent with seeing the economy as a self-contained system that relates to other self-contained systems.

Heterodox economists (effectively) argue that the economy is not (metaphorically) an organism whose goal is homoeostasis, but (metaphorically) a complex inorganic system, like the climate which is subject to chaotic behaviour and has not goals. The economy must therefore be treated as though it is a large complex system like weather rather than an organism like ourselves.

Of course climate is also directly mediated by living things as well. If we had no biosphere the climate on earth would be very different. This idea has long been established by the independent chemist James Lovelock in his Gaia Hypothesis, but also in his work for NASA designing experiments to detect life on Mars. The easiest experiment according to Lovelock would be to look at the atmosphere of Mars through a telescope and use spectroscopy to determine the chemical composition of it. A sign of life would be a composition incompatible with a simple chemical equilibrium. For example mere chemical processes would not allow the earth's atmosphere to sustain its 21% oxygen content. Oxygen is highly reactive and would quickly disappear from our atmosphere if photosynthesising plants and bacteria were not constantly replenishing it. A chemical equilibrium would look very different from the biological equilibrium that we currently experience.

Free Market enthusiasts argue that markets would be self-regulating if only we left them to it. Of course markets are usually only partially free because governments interfere with their functioning. Large corporations also manipulate markets, for example by ganging up to set prices instead of competing. In fact any market participant with any power seeks to distort the market to their own benefit as a matter of course. So the Free Market is really only a superficial Newtonian view of markets. We need a relativistic view in which each player in the market distorts the local fabric of the economy proportionally according how much wealth they hold and/or create. In this view no market is free because to be a participant in a market is to distort it, in an analogous way to the distortion of spacetime by masses in Einstein's description of the universe.

As it happens we've seen a number of free market experiments, one of the most remarkable was Iraq where the post-invasion economy was set up according to pure Free Market doctrines. And Iraq is now a failed state, because all the players sought actively to distort the market from the get-go and some were dedicated to destroying it. Similar failures all around the world have yet to deter Free Market ideologues from their belief system.  Ironically the Free Market proponents in Europe and the UK are also dedicated to anti-liberal regulation of the lives of citizens and using campaigns of psychological manipulation (aka nudging) to try to change behaviour in directions they approve of. It one accepts a government handout it seems to be assumed that one gives up all claim to liberty and hands over responsibility for one's life to the government.

Heterodox economists argue that no sensible physicist would treat a system as complex as an economy as homoeostatic (my word) because nowadays they have sophisticated methods for dealing with complex inorganic systems via the mathematics of complexity and chaos. This is quite a good argument until one reflects on just how complex the average cell is. Cells are made up of millions of large molecules, including tens of thousands of different kinds of proteins, produced and distributed by a highly sophisticated logistical system, powered by little power-plants (mitochondria) which are former free-living bacteria, and all to a blue print of nuclear DNA containing complex instructions in molecules folded for space saving most of the time. And all this is capable of reproducing itself. Trillions of these cells make up our body and its various systems - 80 billion neurons in the brain, plus another 100 million in the gut for example. No physicist would treat the body as a complex inorganic system because living organisms defy the physics of complexity and maintain themselves at or around an equilibrium.

In fact a homoeostatic organism, such as ourselves, is not such a bad metaphor after all. We circulate various commodities and currencies, process imports and exports, and do everything that an economy does, all with the aim of individual homoeostasis which leads to growth and reproduction. There is an isomorphism, as Johnson puts it, between an economy and an organism that allows the metaphor to work. In this model wealth is energy, it is exchanged in the form of tokens (e.g. glucose or ADP molecules), and circulates around. Debts can be created, for example, by anaerobic metabolism, but must be repaid. And so on.

So it is really madness as economists like Steve Keen suggest to think of the economy as tending to equilibrium? After all that is exactly what our bodies do. Why not model the economy as though it were an organism?

31 Dec 2015

The Economics of Flooding

The central narrative of the recent floods in Ireland and Britain is based on the severe weather. In fact a number of changes have happened that have contributed to the failure of flood defences.

1. Failure to Dredge.

The European Water Framework Directive in 2000 has stopped virtually stopped dredging of rivers and made disposal of spoils extremely expensive by reclassifying it as hazardous waste. The blog of the right-wing think-tank, the Adam Smith Institute, discussed this problem on the 29th. They cite this:
But all this changed with the creation of the Environment Agency in 1997 and when we adopted the European Water Framework Directive in 2000. No longer were the authorities charged with a duty to prevent flooding. Instead, the emphasis shifted, in an astonishing reversal of policy, to a primary obligation to achieve ‘good ecological status’ for our national rivers. This is defined as being as close as possible to ‘undisturbed natural conditions’.
‘Heavily modified waters’, which include rivers dredged or embanked to prevent flooding, cannot, by definition, ever satisfy the terms of the directive.
So, in order to comply with the obligations imposed on us by the EU we had to stop dredging and embanking and allow rivers to ‘re-connect with their floodplains’, as the currently fashionable jargon has it.
The upshot is that rivers now hold less water because they are shallower. This drastically increases the risk of flooding. The failure to dredge is not a new issue.

2. Clearing of Watersheds

The burning and draining of grouse moors upstream from towns in Yorkshire including York and Hebden Bridge. This issue was explored by George Monbiot in the Guardian Newspaper.
In 2002 Walshaw Moor, a 6,500-acre grouse shooting estate upstream of Hebden Bridge, was bought by the retail tycoon Richard Bannister. Satellite images before and after [right] show a transformation of the land: a great intensification of burning and draining. These activities raise the number of grouse, which in turns raises the amount (running into thousands per person per day) people will pay to shoot them.
When one destroys the vegetation on the moors and at the same time improves the drainage, any rain that falls rapidly makes it's way into the major water ways. With the kind of heavy rain that we have been experiencing in the last two weeks this means flash floods as the banks of the rivers are over-topped.

It appears that the government has collaborated in this, or at least not acted to prevent it.
For several years campaigners in Hebden Bridge have been begging the government to stop the drainage and burning of the grouse moors upstream. 

3. Cuts to spending on the construction of flood defences.

Finally as left-wing commentator Owen Jones explains, also in the Guardian, that the government has cut spending on flood defences in order to contribute to "living within our means" as the Chancellor puts it.
As official documents now show, the government’s own advisory board recently pointed out that a lack of funds would leave northern communities at risk of floods. One £180m floods defence project was scrapped in Leeds, for example.
By failing to improve flood defences the government has allowed this crisis to happen. Instead of spending the money on prevention they are now spending it on mitigation. And if they can find it now, then why could they not find it before? Part of the reason is that it shifts the risk to the public sector.

Also the government gets no credit for getting it right. If flood defences work there is no news story. Disasters make the news, disasters averted do not. Thus, rather cynically, the government gets more credit for flood relief than for flood defence, and most of the costs of the disaster are born by insurance companies, whereas only the government contributes to flood defence. Unfortunately people who were flooded last year are now unable to get insurance. So who pays for the damage?

Jones segues into a more general critique of the government's response to climate change. They have cancelled subsidies for green alternatives to energy production and let the contract for building a nuclear power station to the Chinese rather than investing in local businesses.


So yes, we are having extreme weather at the moment. But the government has not taken appropriate action to prevent flooding, indeed it has been negligent and recalcitrant in taking the actions necessary to prevent exactly the kind of disasters that have wrecked this Christmas for many people in the North.

This is the problem with ideologically driven policy. It ignores reality and legislates on the basis of a fantasy world. It's important that we place the blame for the failure of flood defences where it lies - squarely with the government. The previous government are certainly complicit, but the current government have made things considerably worse.

UPDATE 3 Jan 2016

For an alternate view on the best approach to flooding see this article in today's Independent (via ). The approach of a town called Pickering, North Yorkshire adopted an approach to flooding that slowed rain's passage from surface to waterways using a series of "leaky" dams.
They built 167 leaky dams of logs and branches – which let normal flows through but restrict and slow down high ones – in the becks above the town; added 187 lesser obstructions, made of bales of heather and fulfilling the same purpose, in smaller drains and gullies; and planted 29 hectares of woodland. And, after much bureaucratic tangling, they built a bund, to store up to 120,000 cubic metres of floodwater, releasing it slowly through a culvert. 
Note however that the second point above the clearing of grouse moors is still problematic. Pickering partly alleviated their problem by planting vegetation. On the grouse moors the drains are designed to rapidly deliver rain to the larger waterways. Pickering took the opposite approach with their leaky dams, slowing the progress of water so that they avoided the flash floods than inundated other towns in Yorkshire.

What is interesting about this is that it is a much cheaper that modern flood defences which are often in the form of solid barriers, which work well up the point of failure and then fail catastrophically. The system used in Pickering could fail more graciously because less was riding on any one structure - distributing the flood defences upstream rather than focussing efforts on the flood plane itself demonstrates an important principle when it comes to defending against natural processes.

A nuanced discussion of the pros and cons and applicability on a larger scale follow. A rare case of some well researched and presented journalism.

30 Dec 2015

Moralising Tories Exposed as Racists

Interesting to see the news this morning about secret cabinet documents revealing deeply racist attitudes in the Thatcher government.
Oliver Letwin: Minister apologises after newly-released papers reveal 'racist' attitude towards black rioters. Independent.
I'm not sure why the Inde has placed racist in scare quotes. The attitude in the memo is straightforwardly racist.

That the Tories blame everything on "bad character" rather than, say, the effects of colonialism or slavery or just the prejudice and hatred that immigrants experienced in Britain is also telling.

On one hand its an example of the Attribution Fallacy that blames bad behaviour on bad intention or character. Something that social psychologists showed was wrong decades ago. This is part of the baleful legacy of Freud and his Romantic view of humanity - that we are all driven only by internal urges and that our environment does not shape us. This is totally wrong. Environment is at least as important as intention in shaping behaviour. Western Buddhists are also deeply affected by Freud's fallacy, sometimes more so since they seem to gel with our own preoccupations with self (though of course we paradoxically deny the existence of the object of our obsession).

It is also a classic aspect of conservative morality to see the poor and people of colour as basically immoral - no matter that the conservatives helped to make them poor (both now and in the past). That poor people of colour are lower down the scale of the conservative's (1985) value system doesn't really tell us anything new, I suppose, but it does nicely punctuate the point I was making last week about colonialism and attitudes to the colonised and enslaved. Letwin seemed to be saying that at least the poor white English people knew their place and stoically accepted the harsh conditions imposed on them, whereas by fighting back the black residents of London were doing something terrible. The class system requires that the oppressed stay oppressed, that everyone knows their place. And that is one of the major problems with immigrants - they don't understand the class system and so they don't stay in their place. Similarly trades unions were upsetting the balance of power and had to be put back in their place.

The question is, have things really changed in the intervening 30 years? On the surface the politicians seem to have changed their tune, but many of the social problems caused by poverty, lack of affordable housing, jobs and opportunities etc remain, suggesting that they have not been addressed.

The fact that Britain and Europe seem to be leaning to the political right these days is not an encouraging sign of a bright future ahead.

22 Dec 2015

Household Debt is Soaring

The Indepedent is today reporting figures from the Office for Budget Responsibility.
The OBR statistics showed households spent £68.9bn less than they earned in 2009-10. The figure fell to £67bn in 2010-11, £35.7bn in 2011-12 and £27bn in 2012-13. The following year Britain’s families went into the red to the tune of £12.4bn, rising to £29.4bn in 2014-15.

The OBR projects that households will spend £40bn more than they earn this year (2015-16), increasing to £40.4bn in 2016-17, £43.9bn in 2017-18, £48.6bn in 2018-19 and £49.5bn in 2019-20. Total household borrowing is set to reach £222bn over the lifetime of this parliament.
And what this tells us is that present level of GDP growth is unsustainable. We are heading for another balance sheet recession as explained so eloquently by Richard Koo (see video below). What will happen is that at some point consumer spending is going to slow drastically as households switch from spending borrowed money to focussing on paying down debt.

When consumers stop spending then retail will slow drastically. The dominoes will begin to fall. The government is committed to not preventing this. In fact by helping to inflate asset prices, particularly housing, they are contributing to the problem. 

27 Nov 2015

George Osborne's Use of Non-linear Warfare

A pattern has emerged in how the Chancellor announces policy. First he seeds the media with stories of massive changes, usually cuts in spending. An uproar erupts in the media. Then key policies he announces on the day are different from those he first talked about. As this video outlines, the way politics is being run these days draws on ideas from the conceptual art world in order to confuse the electorate into inactivity.

Adam Curtis on Charlie Brooker's 2014 Wipe.

What George Osborne seems to be doing is drawing on a concept, outlined in the video, invented by one of Vladimir Putin's advisors, and known as non-linear war. By feeding contradictory information to the media Osborne not only keeps his opposition off guard but be confuses analysts. So for example in the recent budget statement he forced through massive cuts in government spending on local services and welfare, but the media were focussed on small increases in spending for the NHS and Police where cuts had been flagged.

This can work partly because of a pattern in how the media reports politics. Firstly the government put out a press release about a forthcoming announcement, often with the full text of what will be said. This is duly reported in the form "the Chancellor will say...". Then they report on the day  "Today, the Chancellor said..." . And finally the next day they report it in retrospect usually with some commentary.

This works fine if the three instances are all saying the same thing. But Osborne plays the system by shifting his position.
  • Tomorrow I will make swinging cuts so the government can live within its means.
  • Today I am making some cuts though less than announced and some increases
  • Yesterday I increased government spending based on projected revenue increases. 
In point of fact the Autumn Statement contained some of the largest cuts in government spending in history. Local governments will be slashing budgets for libraries and other local services. We've already seen David Cameron lobbying his local Council against cutting services despite shrinking budgets. The basic amenities will begin to collapse over the next few years.

If we are to live within our means, as Mr Osborne argues that we should, then the time to announce spending increases would be after government revenues had actually gone up, not on the basis of predictions that are wrong more often than not. However, he is able to leverage these predictions to produce wildly conflicting statements and thus wrong foot any critics of the government. Now he can meet accusations of the negative impact of cuts by saying "what cuts?". In any case the idea that the national economy is like a household budget is another piece of misinformation.

Another feature of the government's use of non-linear warfare is their repeated misuse of statistics, which I have logged here: Conservatives caught making up statistics. Flooding the media with misinformation helps to maintain confusion - the focus goes to the accuracy of the figures rather than the policies. That is if the media bother to follow up on the misinformation at all. A lot of the time the UK media simply reproduce government press releases with no effort to check facts. 

Throughout the last government we saw the Tories repeating the statement that Labour grossly overspent and caused the financial crisis - this meme is repeated endlessly in the comments sections of the UK's online newspapers. On the left-wing papers there is a constant stream of right-wing trolls repeating this and other government propaganda. What we get from the Tories is lies and more lies.

In fact the Labour government did what George Osborne did this week - they spent projected rises in income, based on projections and 20 years of almost uninterrupted GDP growth because of the massive boost to GDP from deregulating the finance industry. Unfortunately, not only did that income not materialise, but the world's banking system started to collapse and required propping up. It was the latter than accounted for the bulk of increased government spending right at the end of Labour's time in office. But Labour themselves were totally ineffective at communicating this and remain so. It boggles the mind that Labour have simply conceded the field when it comes to economy and allow the Tories to make all the plays. It seems like even Labour belief the Tory propaganda about the economy!

The end result of all this conflicting information is that we are confused about the facts, bewildered by the stories in the media, and unable to make good decisions about what the government is doing. The information we get is deliberately confusing because that leaves George Osborne in power as we are unable to be decisive. This is the man who desires to be Prime Minister after David Cameron, who has already admitted that he will not contest the next election. 

The government is at war with the electorate - a non-linear war that leaves them free to arrange the country to suit them and their cronies. Middle-England is convinced that this is the best of all possible worlds even though they are losing all their local services in the process. Poor England know it is not good because they seem to be paying for the bulk of the cuts. And all the while the 1% are getting wealthier. CEO salaries continue to buck the trend and rise. Those local council cuts will almost certainly not affect executive salaries. It's a kind of class war, but not coming from the proletariat, but from the plutocrats aided and organised by middle-managers.

10 Nov 2015

Conservatives caught making up statistics

Ministerial Code of Conduct: 1.2.c.
It is of paramount importance that Ministers give accurate and truthful information to Parliament, correcting any inadvertent error at the earliest opportunity. Ministers who knowingly mislead Parliament will be expected to offer their resignation to the Prime Minister;
Once again our Prime Minister is in the news for using dodgy statistics. This is a regular story in the British press, but no one ever seems to connect up the stories. So, what follows is the beginnings of a list of news stories about the Conservative (and Labour) leaders being caught out lying and using dodgy statistics. Just for the record.

Nov 2015

David Cameron, there aren't 70,000 moderate fighters in Syria - and whoever heard of a moderate with a Kalashnikov, anyway? "Telling the House of Commons about the 70,000 “moderate” fighters deployed in Syria was not just lying in the sense that Tony Blair lied – because Blair persuaded himself to believe in his own dishonesty – but something approaching burlesque. It was whimsy – ridiculous, comic, grotesque, ludicrous. It came close to a unique form of tragic pantomime. " The Independent.
David Cameron's 'Unofficial' Migration Stats On EU Migrants Rubbished By Experts. Huffington Post

Oct 2015
David Cameron REFUSES to answer if he lied about Lord Ashcroft’s ‘nom dom’ tax statusVox Political 

Jeremy Hunt could be SACKED for 'misleading' public over weekend hospital deaths. DAVID CAMERON could be forced to sack Jeremy Hunt after the health secretary allegedly misled Parliament - and the public - over weekend hospital death figures. The Tory minister has continually said 11,000 extra deaths occurred in 2013-2014 as a result of admission to hospital over the weekend - but has omitted the next part of the research report he is quoting which says "to assume they are avoidable would be rash and misleading". Express

Mar 2015
David Cameron's numbers problem: From NHS spending to immigration caps – how the Tories can't get their figures straight. Five stats that show you shouldn't always take the Conservatives at face value - Independent.

Oct 2014
Cameron 'rebuked' over debt claims. David Cameron has been handed another thinly-veiled rebuke by the statistics watchdog for claiming that Britain has been "paying down its debts".
Labour lodged a complaint about the Prime Minister's loose use of language after he used his Tory conference speech to hail progress in turning round the country's finances. - Daily Mail

Sep 2014
David Cameron strongly rebuked for making false claims about immigration. In July, the Prime Minister wrote in a newspaper that “while most new jobs used to go to foreign workers, in the past year more than three-quarters have gone to British workers”. Newspaper watchdog the Press Complaints Commission ruled his claim was “baseless”. It added: “The statistics to which the PM referred had been significantly misrepresented.” Mirror

Aug 2014
David Cameron has been rebuked for claiming that the majority of new jobs created last year were taken by UK nationals when figures for new jobs are not collected by the official statistics body. - Guardian

Feb 2014
Coalition rebuked again by UK Statistics Authority- this time on flood defence spending
Statistics head Andrew Dilnot says a Treasury graph on infrastructure left readers with "a false impression of the relative size of investment between sectors". - New Statesman
George Osborne rebuked for boasting he halved £1.7bn EU surcharge. Treasury committee stops short of saying chancellor misled parliament by claiming he won the bill reduction when the surcharge was halved by the UK’s automatic rebate. Guardian

June 2013
Senior Conservative ministers have been rebuked for attempting to cover up Government statistics showing one of their key housing policies is not working. - Independent

May 2013
Duncan Smith rebuked by ONS for misuse of benefit statistics. The claim that 8,000 people moved into work as a result of the benefit cap is "unsupported by the official statistics", says the UK Statistics Authority. - New Statesman. Also "Lies, damned lies and Iain Duncan Smith" examines the pattern of lying. - Guardian
"Grant Shapps rebuked by UK Statistics Authority for misrepresenting benefit figures. Yet another Conservative politician is caught making it up." - New Statesman.

Apr 2013
Iain Duncan Smith "Around 1 million people have been stuck on a working-age benefit for at least three out of the past four years, despite being judged capable of preparing or looking for work."
"As The Guardian, and separately, Full Fact, explain here, that claim relies on an extreme sleight of hand." - The Economist

Feb 2013:
“David Cameron has received a reprimand from the official statistics watchdog over his claim that the government was "paying down Britain's debts". - Guardian

Dec 2012
Osborne “The good news is that we are in government after 13 years of a disastrous Labour administration that brought our country to the brink of bankruptcy.” - Conservative Party website
The UK was never at risk of bankruptcy. Office for Budget Responsibility chief Robert Chote dismisses the “danger of insolvency”. New Statesman.

"The UK Statistics Authority upheld a complaint by Labour about government claims the NHS budget had increased in real-terms in the past two years. The watchdog found the best-available Treasury data suggested real-terms health spending was lower in 2011-12 than in 2009-10 " - BBC

Oct 2012
“David Cameron has been corrected by the Treasury’s own forecaster over claims that cuts in public spending are not reducing economic growth. The Office for Budget Responsibility told the Prime Minister that it does believe that cutting public spending will reduce economic growth in the short term” - Huffington Post
Andrew Dilnot, Chair of the UK Statistics Authority, has today expressed ‘concern’ about claims made by the Department for Education (DfE) on the UK’s supposed slump in international school achievement league tables. - Full Fact

Apr 2012
The home secretary [Theresa May] is under fire for failing to comply with a high court order to bring an asylum seeker who is in hiding in Azerbaijan back to Britain. The Border Agency forcibly removed the man, a Turkish national, from the UK in March despite a court order being issued before he boarded the plane preventing officials from deporting him. - Guardian

Jan 2012
Iain Duncan Smith and the Department of Work and Pensions have been accused of publishing misleading immigration figures that were "highly vulnerable to misinterpretation". - Huffington Post 

Feb 2010
The chair of the UK Statistics Authority has told shadow home secretary Chris Grayling he "must take issue" with claims made by the Tories. 
He warned they were "likely to mislead the public" if they compared two sets of statistics without explaining they were collected in different ways. - Sky News

See also the UK Statistics Authority list of correspondence with the govt. http://www.statisticsauthority.gov.uk/reports---correspondence/correspondence/index.html

10 Jul 2015

Why Do The Poor Not Revolt?

The question of why the poor don't do something about rising inequality in the UK came up on Twitter today. To my mind the comedian Simon Evans got to the heart of the matter when he responded to Russell Brand's call to revolution. So I've been posting this clip. Many a true word was said in jest.

8 Jul 2015

How Money is Created

One of the things that seems to be very difficult for people to grasp is the idea of how money is created. So I noted that we see a lot of German people complaining that their tax euros have been lent to Greece. But that money lent to Greece does not come from tax dollars, or savings, or Germany's wealth. The loans create entirely new money. And when the loan is repaid that money ceases to exist.

The Bank of England was one of the first central banks to create money in this way - from the time it was created in the 17th century. Staff from the  Bank’s Monetary Analysis Directorate have prepared a paper explaining this form of money creation. They note:
"Whenever a bank makes a loan, it simultaneously creates a matching deposit in the borrower’s bank account, thereby creating new money."
 It is vitally important that we understand this. Part of the problem in 2007 was that banks had made too many loans and created too much money. When the sub-prime mortgage scam erupted what happened was that many people defaulted on their loans at once. It was not capital that was wiped out in this situation, it was the revenue stream of the rent that people were paying for the loan. We call this "interest" but it is a form of rent, especially in relation to the other products of the factors of production: wages from labour; and profit from capital. Rent is what is paid for use of a resource. And banks certainly see the loans they make as assets. So some companies, such as Lehman's brothers found their revenue stream curtailed. This meant that although Lehman's had many assets (loans) they did not have enough money coming in (rent) in order to pay their own creditors. So they went bankrupt. But that meant that rent the bank was paying also suddenly stopped.

The other reason it's important to understand the creation of money is that it is the rationale behind the idea of the Debt Jubilee. If the money of a bank loan was simply created out of nothing, and will return to nothing when it's paid off, then forgiving such a debt costs nobody anything. Except that the revenue stream gets cut off or reduced. Since a default amounts to the same thing, but creates all kind of illwill and political tension it is better to get ahead of it and arrange debt relief. This has happened many times in Europe.

You would think that any creditor with half a brain would be happier with some repayment than none. So a deal to repay less or slower would be preferable to a default in which there is no repayment. But this is not what we are seeing happening in Greece. The ECB and EU are demanding all or nothing. And if nothing they plan to force Greece out of the Eurozone (which as far as I can tell is illegal, because there is no provision for it in the treaty establishing the EZ).

But this view of money creation helps to explain why Greece's creditors don't have much to lose any more. They have been using the last five years to ensure that their income stream from rents on imaginary money is securely coming from elsewhere. So that when Greece defaults it won't cause a contagion of the kind that happened in the USA in 2007. Had they been concerned about the loss of revenue from Greece any more they would be more willing to negotiate. They literally have nothing to lose. And they also know that if they renegotiate the repayment schedule with Greece other nations, where their revenue streams come from, might also want to renegotiate. And there are a lot of countries overburdened with debt and implementing austerity programs that were the condition for the loans.

Understanding how money is created is a basic piece of information for intelligent participation in civil life. Lack of understanding is currently being preyed upon by Neoliberal governments to create narratives that promote their interests over the interests of the citizenry. We're being lied to on a regular basis.