The Ricardian Equivalence Hypothesis

Sometimes you write a nice whimsical blogpost about how money isn't very much like ice-cream but could be more so and you think that's that and start to wonder about what to write for next week's post (maybe a nice poem about a juggler who falls in love with a knight or something) when 'ding' you notice that someone has left a comment.

Now, I don't get a lot of comments on my blog (even when I set fiendishly difficult riddles in mock Old Norse verse patterns for my readers to solve) so you can imagine how excited I was to read a response to my daydream of time-limited money being dropped into everyone's bank accounts. And then how disappointed I was to read that there are people out there that don't believe that ice-cream money would save the economy after all, in the words of 'JR':

Your theory sounds wonderful, but (and mostly to play devil's advocate), surely if you gave every person in England a £10,000 windfall, most of them would spend it repaying a loan they took out from the bank (or on the things they would have bought anyway, so they can pay the 'other' money back to the bank instead), so all the "spare" money would end up with the banks anyway? JR 

Incidentally, I meant to mention last week that the government of the UK has spent £200 billion on Quantitative Easing in the current crisis, had that money gone directly to the people that would have been a whopping £3,166 each! JR has ruined this statistic by making my figure look paltry next to his one.

A healthy economic community is one where each pound keeps getting spent and even when it winds up in the bank, the bank lends it out again. And, even though there isn't anything like enough cash for everyone to have all their money at once, everyone pretends there is and carries on sharing the same few pounds. You see this in action if you work in a bar, where you keep getting the same ratty fiver handed back to you. In a healthy economic community that fiver has got ratty because it has been through the tills and paypackets of so many local businesses.

If a government gave the money directly to the people some of it would become the useful type of money described in the previous paragraph. If the money had a time-limit on it (i.e the initial receiver can't just leave it in the bank) all of it would. 

I'm not sure that JR's argument holds even in the classic helicopter drop of giving everyone extra cash. We are not all rational actors who notice, a la David Ricardo, that this money can't just appear from nowhere, government bonds have to be repaid, taxes are going to go up, I better save my money. A lot of people would just think: 'Woohoo! free money! I'm going to buy a motorbike!' 

Ice-cream money

I overheard a mother explaining money to her kid in terms of ice cream. If you don't have any and you see everyone else eating it it makes you upset. But if you have too much then it can make you unhappy. The trick is to have some in the freezer so, when you fancy it, you can have a small amount as a treat.

That's sweet, I thought. I'll remember that. Then I got to thinking that money really should be more like ice cream.

Too much money should make you physically sick.

You should be allowed to make your own money, but it should be really difficult and, no matter how much you churn it, never quite resemble the real thing.

Money should be of great interest to children, but as you grow older you should lose the taste for it except on really hot days or when someone gets you some as a surprise and you remember that you really quite like it.

Money should melt unless you spend it quickly.

This last idea has frequently been suggested by economists (e.g. Oxford economics professor Simon Wren-Lewis) as an alternative to quantitative easing (QE). QE involves inventing money and giving it to your banker friends and hoping they will share it with businesses (hint: they won't) who will use it to pay staff (hint: they won't either) who will spend money (hint: even if it gets to them they will probably put it in a bank because they'll need savings when they lose their job) to get the economy moving. 

QE doesn't really work, for the reasons hinted at above. An alternative is helicopter money. Whereby money is invented, as above, but given straight to the people (figuratively 'dropped out of a helicopter'). To stop people squirreling this money away for a rainy proverbial, the free cash is time-limited. Unspent, it melts away - like ice-cream.

Hint for the second riddle of Heithrek

As nobody has yet been able to solve my riddle, here is a clue:

The question is in the answer.

The Riddles of Heithrek

Three days into the New Year and I've made up my mind what my resolution is to be. This year I am going to read more of the Norse Sagas. When I was Xmas shopping, I came across a volume of Old Norse poems (rather sexily subtitled - "The most important non-Skaldic verse not included in the poetic Edda"). As I'm sure you can imagine, I was immediately hooked and spent most of the festive period engrossed in these beautiful ancient lays, songs, oaths and curses.

The poems describe another world, a world wreathed in bloody war and mystical incantation, where Gods disguise themselves as men to trick confident kings and grandmothers curse cruel tormentors. But they are tales my ancestors would have been familiar with and I have a sense that these stories are my birthright and that I have been denied them until this chance discovery at a second-hand bookstall.

Don't worry, I don't think I'm a reincarnation of Eric Bloody-axe or anything. It's just that these poems were shaped by the geography and mythic pre-history of Northern Europe lots of them reference events and people from Britain - my homeland. And I find myself a little angry that the stories I was taught in school reflected the geography and mythic pre-history of the near Middle East.   

The Bible stories are great, but they belong to another land, another people. The Riddles of Heithrek and the Curse of Busla resonate in another, more personal way.

Here are two riddles, one set by Othin (disguised as Gestumblindi) for king Heithrek to solve. And one set by Finnginn (disguised as Gestumblindi) for you to solve.

Have again would I    that which I had yesterday;
         Hear now what I had:
Hamperer of men,    hinderer of words,
         Yet speech it speeds
Aright read now    this riddle Heithrek!

Saw I a scroll    the scrivener scribed;
         Where read I this roll?
The earliest ink    at the end was eyed,
         And at the top, today's
Aright read now    this riddle Heithrek!

All guesses in the comments below please! (correct answers should be formatted in the liothahattr or "chant meter" and begin "Good is thy riddle, Finnginn, and guessed it is...")

The State of Us

Here are my predictions for my 2014 social media status updates. I was going to give it a clever title that was a homophonic pun on media that included the words 'me' and 'year' but I decided that looked silly.

January

Is hanging

Can't get this banging out of my head

Will definitely be staying in bed today

Definitely not drinking for 

the rest of the month (except for

Jen's birthday...

And Maria's birthday...

And weekends don't count...

Nor do Wednesdays)

February

Thanks for all those birthday messages

Younger People:

      You are right!

      I am looking/acting/feeling very old

Older People:

      You are right!

      I don't know how lucky I am 

      To look/act/feel so young

March

Is willing winter over now

Is certain it was warmer this time last year

Has had it pointed out by fifty pedants that last spring was the coldest spring since records began

April

Some thoughts on Easter:

      Too concerned about cavities for chocolate eggs

      Too incredulous for church

May

Is venturing outside for fun not necessity 

Is ankle-deep in bluebells

Has dipped a toe in the grey North Sea

(will give it a couple of months before

offering any further body parts)

June

Is off on holiday :)

Is back to work today :(

July

Is barbecuing

And drinking beer

With friends on sunny Sunday

Is skipping work

Due to dodgy tum

And hangover and sunburn

August

Some thoughts on festivals:

      Three days no sleep was more appealing once

      Three sleeps a day is more appealing now

September

Still feel Back-to-School

Although I haven't been to school

for years, I still get stage-fright dreams

and homework anxiety in September

October

Is all partied and pumpkined out

November

Photographs of moustaches

December

Xmas I expect

It all seems very distant and harder to predict 

      

An Xmas Parable

The sub-militant atheist in me vividly recalls a school assembly being given by Mr Baker - a zealot through and through, he was a Christian and a PE teacher - wherein he expounded on a few reasons why one should never, ever use the term Xmas for Christmas. 

If I recall correctly, and nobody can check, these all boiled down to the same couple of points: - Christmas was about Christ, not about X and it was offensive to Christians to use X to represent the name of the anointed one. 

The assembly sticks in my mind however as it was one of the first times that I heard (and dismissed as stupid) a Straw Man argument. I didn't know then that the fallacy had a name. I just sensed something not quite right. A Straw Man is a rhetorical technique whereby one presents a version of an opponent's argument that is easily refuted (i.e. 'knocked down' geddit?)and uses that refutation to bolster ones own position. 

Or, as Mr Baker put it (obviously, I paraphrase):

"It has been argued that it is fine to use Xmas for Christmas because the X represents the Cross on which Jesus was crucified. But look closely at the shape of the X and compare it to the cross on which the Romans crucified Christ. They are different. And anyway Jesus was executed at Easter and Christmas is about celebrating his birth. So you would be wrong to write Xmas in your Christmas cards!"

I vowed that day never to write the word Christmas when Xmas would do instead (i.e. in every single context apart from this one). In my more militant days, I used to cross out Christ and replace it with an X in cards with a pre-printed message.

St Peter getting crucified on an X shaped cross.

That's my Xmas anecdote for this year. Have a very merry Xmas everyone!

On Chess

It's world championship season in my favourite game. Chess. It's quite an unsexy word - Chess - heavy on the sibilants. I like the opening sneeze of a consonant cluster, the burp of a central voiced vowel and the challenging hiss at its close. Chess is one of the few nouns that is truly noncount - it can't be pluralised in any circumstances. To me, this property reflects the game's universality and something of the paradox that although there are incalculably many possible games, there is only one chess.

My ambition for this week is to get a tweet read out by the commentators on the official FIDE live stream. I may have started too boldly, asking, "does this championship represent the death of combination chess?" My point being that in the hypermodern game the Grandmasters spend the whole time adopting positions that prevent their opponents making combinations (ie imaginative sequences of moves that lead to an advantage).

Back in the nineties, I fell in love with televised chess when nerdy English Grandmaster Nigel Short challenged surly Russian polymath Garry Kasparov. Kasparov thrashed him with brilliantly inspired combinations that inspired me to play the Sicilian defense as black for over a decade (these days I prefer Alekhine's). Kasparov went on to become a sort of enfant terrible in Russian politics - standing up to the billionaire oligarchs that have feasted on the rich spoils of the collapse of Sovietism. Short became an olive farmer.

Magnus Carlsen vs Viswanathan Anand has been billed as the 22 year old Norwegian Wunderkind taking on the old guard of the Indian academies. But there haven't been the predicted fireworks. The first four games in the current championship have all been draws. I nipped out to get a haircut during the middlegame today and nobody made a move whilst I was gone.