How Might I Be Wrong?

What-if-you-re-right-and-they-re-wrong-T-ShirtsOne of the best questions I was asked, after a presentation involving a fair bit of MMT, was: ‘How might this be wrong?’ It’s just the right question. We should always entertain healthy suspicion about theories that can’t be extended to explain the possibility of their own falsity.

With regard to the operational realities of spending and debt, I can’t see how MMT could be wrong (see my post – Macroeconomic Theory and Operational Reality). So where it might go wrong is in the morals it draws from these operational realities, morals about how policy can and should be implemented. Mainstream and non-MMT heterodox economists sometimes express frustration on this point: ‘Yes, yes, of course that’s how the operations work; of course that’s how accounting works; but surely that can’t be enough to prove your whole case!’

Take, for instance, the big perspective-shift at the heart of MMT – its Copernican turn. Government debt is just non-government sector net saving. If the government has a big debt, it follows, from identity, that the non-government sector has a big fund of accumulated savings. People like having savings – they don’t want their savings to be wiped out – yet they’re always calling for the government to reduce its debt. Contradiction.

Well what moral do we draw from this? We should definitely stop confusing ourselves by describing one and the same thing with two labels, one that makes it look desirable and one that makes it look undesirable. Because government ‘debt’ is so unlike other sorts of debt, it’s the ‘debt’ description that has to go; just call it ‘non-government sector savings’.

The state spends by injecting new financial assets into the economy – either cash (reserves) or bonds. The reserves and the bonds are liabilities of the central bank and the treasury, but from the non-government sector’s point of view they’re both savings instruments – stores of value, if you like. There are interesting questions to be asked about whether the state should really provide this full range of savings instruments (Neil Wilson and Bill Mitchell have recently written excellent blogs on this). Why have the bonds? Many people insist that issuing reserves is inflationary in a way that issuing bonds isn’t. I have no idea why, since bonds generate as much spending power as reserves. But anyway, that’s what the net reserves or bonds injected by the government when it deficit spends are: savings instruments for the non-government sector. So far, so right.

Here is where it might go wrong. The MMT moral from this is that the state should provide sufficient public savings instruments to allow the economy to run at full capacity without generating private debt crises. This could be the wrong moral.

I think a hardline Austrian-type economist, for instance, would say that there is no such thing as a propensity to save; there is only a propensity to defer consumption. To accumulate financial assets is to indicate a desire for consumption in the future. Saving just means not spending all your income. So one reason people ‘save’ is that they aren’t sufficiently enticed by any of the goods currently on offer. They’re saving up for something better.

In that case, there’s an argument that the government shouldn’t accommodate private savings desires. Think of it this way. A company borrows £1 million to make some stuff, and people only buy £500,000 worth of the stuff, because they’re saving up for something better. The company is now £500,000 in debt, and the consumers have £500,000 in savings. Effectively, the company’s debt is the savings instrument for the consumers. The company needs to clear that debt, so in the ideal case it will break down its unsold inventories and try again to make the stuff people really want – the stuff they’re saving up to buy. The debt imposed on the company by the consumers’ saving is a market signal: it’s how the: ‘I don’t want that’ expressed by consumer saving gets converted to the: ‘make something else’ expressed by the company’s debt.

Now suppose the government interferes by running a deficit of £500,000. Maybe it buys the company’s unsold inventories. Or maybe it pays the consumers; they might as well now buy up all the unsold inventories, since they’ll still have £500,000 left over to buy what they really want. The problem is that the company has lost all incentive to produce what the consumers really want. It’s no longer in debt. As far as it’s concerned, its business was a success. It’ll just keep making the stuff people don’t want instead of the stuff they do want. So the government deficit blocks the market signal. The ‘I don’t want that’ of consumer saving gets absorbed into the government deficit instead of channelling through to a ‘make something else’ of company debt. People get what they want less, when they could’ve had what they want more. Suboptimal.

On that story, it is conceded that government deficit spending is merely the public provision of a savings instrument. But a different moral is drawn from the MMT moral. On this Austrian story, the moral is that the government can but shouldn’t provide a public savings instrument – not even in the form of non-interest bearing excess reserve balances. Doing so blocks an important market signal. Of course if people are saving for other reasons – as an insurance against uncertainty, for instance – then there’s no reason the government shouldn’t accommodate that. But can we tell which is which?

Naturally, I think the story is completely implausible. It’s full of implicit assumptions about human desire, the nature of capitalism, and the way businesses actually work. It is too sanguine about the enormous suffering a prolonged savings glut can cause before any ‘natural’ recovery occurs, if it ever does. But it is how MMT might be wrong. It’s the best I can do anyway.


56 thoughts on “How Might I Be Wrong?

  1. NeilW

    The reason it is simplistic of course is that you only have one firm in your thought experiment. Once you have more than one firm of the same size in a marketplace then you have *competition* and it is sufficient competition between multiple firms that ensures the signals are roughly aligned with what people want. That’s because it becomes a bubbling froth of businesses being created, destroyed and permanently ‘pivoting’ – much like piranhas on a feeding frenzy.

    Of course that means that you have to be happy with firms going bust when they make a mistake and have mechanisms to handle the employment fall out when that happens. Classical Keynesian theory tries to prop up failing businesses (think British Leyland), and ‘sound finance’ is all about making sure employment is linked to ‘business confidence’ (aka insufficient competition to eliminate rentiers and duff ideas).

    MMT, of course, presents a superior solution to the lack of employment problem that means that businesses can be exposed to the full heat of competition with no demand issues.

    1. axdouglas Post author

      Ok, but even with competition, if the savings of ‘the consumers’ are government debt rather than debts of businesses, aren’t businesses still under a little less market pressure?

      1. NeilW

        That’s assuming the answer. To get savings you have to have earnings, to have earnings you have to have a job (overall). The dynamic ebb and flow of businesses coming and going shuffles out the weakest who then have to spend their savings to survive or get jobs with the firms that have survived. Which is another reason why government doesn’t offer your old wage, just a living wage – otherwise you end up with an individual version of British Leyland.

        It’s another one of those situations where static analysis leads to the wrong view, and where dynamic analysis would show how the feedback operates within the aggregation. To show you I’d need to build a moving model visualisation. Words just don’t cut the mustard.

        And that’s precisely the reason I put up Dijkstra’s quote in my last blog. Humans are great at static relations, but utterly hopeless at visualising complex dynamic asynchronous feedback systems.

        I’m hopeless at it, and it’s sort of my job!

      2. axdouglas Post author

        How can we build this model? And how can you do it without running into the n-squared problem you mentioned?

      3. IDG

        There is now the computational power to build those models (there has been for a while). It has to be done through multi-agent simulations, it just needs a wider adoption from economics and stop using the wrong mathematical tools for the job.

        The basis and the tech is there, if you got good assumptions on how the agents behave then the model can be adjusted and have predictive power even. Dynamic models like this are used everyday in biology, climate, physics, chemistry, etc. there is no epistemic issues against doing this for the economy.

        The way to solve n-squared problems is through abstraction and intelligent algorithm design (heuristics). That’s basically how humans deal with any form of complexity and increasingly dense networks.

  2. mrkemail2

    I would say you need to eliminate rent seeking that results in accumulated savings. True, only a portion is spent, but this results in power.
    Govt should always offset excess savings but at the same time try to reduce these savings by taxing away economic rent, even if it results in no or little extra “fiscal space.”

    1. Tom Hickey

      Right. I am a non-economist MMT proponent and I think that rent and rent-seeking is an area that needs addressing, especially when disparity of wealth and income are now to the fore socially, politically and economically. Bernie Sanders is focusing his US presidential campaign on it, for example, and do so rather successfully judging from the number so far.

      The claim of conventional economics is that everyone is just is paid what they are worth in terms of marginal productivity, so the asymmetry of wealth and income is a result of everyone receiving just deserts.

      This ignores the effect of economic rent and rent-seeking that conventional economics either assumes way or obscures.

      According to MMT the deficit increases tax credits as government liabilities in the hands of non-government and the public debt is the accumulated deficits less debt reduction through surpluses. The public debt is used tax credits held by non-government, which, being transferable, are in demand for future payment of taxes.

      These accumulated as yet unused tax credits constitute net financial assets of non-government. They are net of non-government credit in that the liability lies with government.

      Governments generally provide tax credits in excess of taxes for several reasons, provisioning public projects and programs and providing currency for commerce and “save assets” for non-government saving.

      While there may be arguments for government providing safe assets for saving, when economic rent is brought into the analysis, a question arises as to how much of the saving is from productive contribution and how much from unearned gain derived from rent-seeking.

      Clearly, government should not be creating an incentive for rent-seeking since rent-extraction is inefficient and parasitical on circular flow due to demand leakage. Shouldn’t economic rent be taxed away where it is found to exist in order to decrease the incentive for rent-seeking and increase economic efficiency. This might also have an effect on inequality of wealth and income.

      I would like to see more MMT-based analysis of this in order to counter the objection that MMT accommodates rent-seeking by accommodating changing saving desire fiscally.

      1. mrkemail2

        “MMT accommodates rent-seeking by accommodating changing saving desire fiscally.”
        I think you are merging two issues here. Govt should always accommodate private sector net savings. To do otherwise is like cutting your foot off because it itches and you keep having to scratch it.
        But yes land and rent-seeking and private property rights are just completely ignored! These are major parts of capitalism!
        Profits and how they originate are also ignored. What is capitalism without profits?
        Otherwise agree. I think my view are pretty much similar as yours except less anarchist.
        MMT might be better rebranded as “How capitalism works”? Any thoughts?
        I suggest perhaps Alex could do this as a new book 🙂

      2. NeilW


        Rent seeking in MMT is reduced and eliminated by correcting the income distribution process a-priori.

        In other words the rentiers have to get hold of the money by providing services to the people that first get the money – the bottom half of society.

      3. Tom Hickey

        “I think you are merging two issues here. Govt should always accommodate private sector net savings. To do otherwise is like cutting your foot off because it itches and you keep having to scratch it.”


        But yes land and rent-seeking and private property rights are just completely ignored! These are major parts of capitalism!”

        Under conventional assumptions there very little economic rent to be wrung out and everyone is rewarded fairly for contribution. Gains from speculation are not really rent because they are required for markets to function in an orderly fashion and they are “earnd” by assuming risk.

        I call BS.

        Read Peter Thiel. He makes the argument that capitalism is all about rent-seeking rather than competition on a level playing field where firm profit tends to zero. He says that no savvy entrepreneur would enter a field like that.

        Government needs to prevent rent-seeking to the degree possible by ensuring a level playing field and perfect competition in order to minimize the opportunity for rent-seeking and tax away what gets through the filter, which, btw, is in accord with both neoclassical and Austrian economics. It’s one of the few legitimate functions of govern wrt market in their view.

        Far from a radical idea this is supposed to be the basis of economic liberalism aka “capitalism.”

      4. Tom Hickey

        @ Neil

        “Rent seeking in MMT is reduced and eliminated by correcting the income distribution process a-priori.

        In other words the rentiers have to get hold of the money by providing services to the people that first get the money – the bottom half of society.”

        If that is the case then it needs at least one article, addressing the issue of rent and rent-seeking, since this is a frequent objection to adopting MMT. I know of no MMT-based reference that counters this objection. I would be grateful if you can provide a citation.

      5. Marko

        NeilW ,
        “In other words the rentiers have to get hold of the money by providing services to the people that first get the money – the bottom half of society. ”

        The MMT argument has to have more meat on the bones in this area , because a casual glance at the last few decades of data tells a different story. Deficit spending in the 80s and 2000s did no big favors for the bottom 90% , while the 95-2000 period of relative austerity was the best period for broad wage gains since the 70s , due to the tight labor markets.

        MMTers need to explain that it’s entirely possible for the aggregate private sector to be swimming in surplus while the bottom 90% of that same group is increasingly taking on debt just to get by.

        If the other needed policy changes ( like a true full-employment mandate ) are not epoxied irreversibly to the MMT piece , not much will be accomplished.

  3. Brian Romanchuk

    The government is supposed to accommodate the savings desires up to the point of hitting the desired level of inflation. If there is insufficient demand, the price level would fall. An Austrian would probably disagree with that, but they do not really have a convincing theory of inflation. (It may exist somewhere in some author’s writings, but all I have come across are crude quantity theory of money views, or else denial that we can even define the price level.)

    1. Tom Hickey

      As I understand the Austrian theory of inflation any increase in the money supply is inflationary, and most of them take that to mean an increase in the monetary base. So they shouldn’t object to “debt-financed deficits” since the MB stays the same after the reserve drain, which under current rules must occur prior to spending temporally so that the Treasury account can be credited to spend.

      They object to most any public spending on the grounds that it distorts “economic calculation,” which is the bane of “socialism” in their view. And of course, the object to “debt-financed deficit spending” because that is just future taxation as they see it. They claim it’s a back door route to raising taxes without legislating a tax hike directly.

      1. John Hobgood

        Are you sure we aren’t mixing Austrian with austereian here Tom? As I understand it, austereians simply hijacked bits and pieces from the Austrian school to hash together such heady stuff as “Rational Man” (Rational Expectations, et ewww). You know, that guy that doesn’t exist and who magically has no observer sullying his magical qualities.

  4. Ben Johannson

    I think a hardline Austrian-type economist, for instance, would say that there is no such thing as a propensity to save; there is only a propensity to defer consumption. To accumulate financial assets is to indicate a desire for consumption in the future.

    Austrians fail to account for the effects of uncertainty in liquidity preference or to differentiate the varying motives. When you save money to buy a piano this is deferred consumption, because you’re waiting until you’ve accumulated sufficient financial assets rather than taking out a loan for a purchase now. It’s a specific act with a specific goal.

    But saving in the Keynesian sense is intended to hedge against an uncertain future so as to maximize one’s options or reduce risks to one’s financial wealth. There is no consumption goal in such an act; rather the goal is avoidance of consumption or investment because we cannot know what may come about.

  5. Thomas Bergbusch

    Even with multiple firms and competition, I am not aware that there is any certainty that sufficient competition between multiple firms ensures that price signals are roughly aligned with what people want (even less what the NEED). It seems to me that they may just be collectively “choosing” the better of different highly sub-optimal outcomes, and it is entirely plausible that the most optimal outcomes lie entirely outside of market mechanisms in some system of direct government provision of goods and services. Why do humans need significant consumer choices? Why should they be allowed savings, when Government can provide lifelong entitlements to all their needs? By taxing back sufficient savings, does not the Crown guarantee that people will effectively provision the public purpose? And anyway, there is the issue of false consciousness: there would be little advertising if it did not exist. Since it does exist, and given the challenges of resource depletion and climate change, why should one care where a product has greater market value, when the social cost of its production may well be greater than that of an inferior good?

  6. warren mosler

    In the first instance the purpose of the monetary system is to provision the govt.

    In that context taxation functions to create unemployment- people looking for work paid in the gov’s currency. And only two things can happen with the gov funds they earn if employed- pay taxes or not pay taxes aka ‘save’. That is, taxation causes people to seek paid work to be able to pay taxes and to save gov funds.

    gov can then spend its own currency- a simple tax credit- to provision itself.

    If it hasn’t spent enough to hire those its tax caused to be unemployed, the evidence is residual unemployment.

    That is, (at the macro level) unemployment is the evidence the deficit is too small. The taxation created more unemployment than govt wanted to employ.

    1. mrkemail2

      “That is, (at the macro level) unemployment is the evidence the deficit is too small. ”
      Disagree. That means that SPENDING is too small in general to employ real resources.
      See Clinton debt boom and savings run down in the late 90s resulted in low une
      Govt lending (in addition to spending) can create output and employment.
      Savings run down can only sustain growth for so long though.

    2. Bob

      Ah, I see what you mean now? With surplus say, if the govt ran an even bigger surplus or tried to it would result in unemployment?

  7. mrkemail2

    What about “Cantillon Effects” in money creation. This is my major problem with MMT.
    “In Essai, Cantillon provided an advanced version of John Locke’s quantity theory of money, focusing on relative inflation and the velocity of money.[61] Cantillon suggested that inflation occurs gradually and that the new supply of money has a localised effect on inflation, effectively originating the concept of non-neutral money.[62] Furthermore, he posited that the original recipients of new money enjoy higher standards of living at the expense of later recipients.[63] The concept of relative inflation, or a disproportionate rise in prices among different goods in an economy, is now known as the Cantillon effect.[64] Cantillon also considered changes in the velocity of money (quantity of exchanges made within a specific amount of time) influential on prices, although not to the same degree as changes in the quantity of money.[65] “

  8. mrkemail2

    Here is a good example of the “Cantillon effect” criticism. Especially the last bit.
    Look up “Robert Cantillon” Alex. His views on mercantilism are also interesting.
    “Say we have a downturn in which, for the sake of argument, spare resources exist. So a project gets done and the money gets paid out. And then, the economy recovers (perhaps because of pump-priming nature of the investment stimulus itself) so that there ceases to be spare capacity. Then what? You don’t take another project off the shelf so that you avoid over-straining the available resources with new PQE investment, fine, but what about the money paid out on the completed projects? That is still circulating, and that is where the inflation comes from.”

    1. axdouglas Post author

      Thanks. I mentioned Cantillon in a draft of my book (which is largely historical), but I had to cut it out.

      Lerner responds directly to this criticism somewhere. His answer is that if you get to full capacity, then you need to tax more, to drain out money and prevent inflation. With a progressive tax code, this can happen automatically as incomes rise. The key point is that the taxes aren’t hurting anyone in real terms, since the value of the incomes if left untaxed would be inflated away.

      1. mrkemail2

        Agreed. But it is arguably misleading that MMT says “cost of spending is real resources it uses” PERHAPS. There are more costs due to secondary spending – the “respending.”

    2. Tom Hickey

      Cantillon effect applies mostly to credit extension for asset purchases rather than government spending, although that happens, too, in particular from cronyism and corruption. For example, in a contraction, credit standards are raised and only the deep pocket can borrow to to buy at the bottom and on the way up initially. The wealth effect and increase in fictitious capital can fuel inflation as full employment is reached by adding to demand.

      It’s related to economic rent and rent-seeking.

  9. Pingback: Mice, Men, Money, and Freedom | Origin of Specious

  10. gastro george

    “Saving just means not spending all your income. So one reason people ‘save’ is that they aren’t sufficiently enticed by any of the goods currently on offer. They’re saving up for something better.”

    More than this. Saving can also become a requirement as an insurance policy. For example, if you can’t live on a state pension, then you need savings to top it up. As you know, there’s a rather large industry based around the fear of having to live off our meagre state pension. There’s an equivalent saving for “a rainy day”, i.e. other uncertainties.

    So you could say that one way of reducing savings would be to increase social security. It shouldn’t be surprising that our propensity to save has increased as life and employment have become more precarious, and the government social security net weaker.

    1. axdouglas Post author

      Yeah, that’s why I wrote this part: “Of course if people are saving for other reasons – as an insurance against uncertainty, for instance – then there’s no reason the government shouldn’t accommodate that. “

      1. gastro george

        Sorry, explanation/emphasis fail. My counter-intuitive was that, if you want to reduce savings (= reduce the deficit), then there is an argument to increase government expenditure on social security (in the broadest sense).

      2. gastro george

        The reverse argument probably sounds better. That, if you’re seeking to reduce the deficit, social security cuts are ineffective, as people (even those who are not affected by the cuts) will tend to try to save more to counter the effects of added insecurity.

    1. axdouglas Post author

      I’m not sure what sort of rent seeking you’re talking about. But no MMT person would say, as you allege: “Rent seeking is not a problem because they save the money, right?” Saying that the budget deficit should accommodate people’s desire to save out of their income is one thing. Saying that it doesn’t matter how people make their income is completely different.

      MMT also wouldn’t say that people trafficking isn’t a problem, so long as the traffickers save their income.

      1. Tom Hickey

        I’m not sure of that, Alex. There isn’t much discussion about rent seeking among MMT economists not because they don’t see it as important, but because they see the first priority as implementing MMT policy to achieve full employment, price stability and growth simultaneously as the “holy grail” of macro as political economy.

        I brought up the perception that rent seeking as such is more or less ignored in MMT because it is a frequently raised objection and so far, no MMT economists have addressed it specifically, as far as I know.

        In a reply to my comment about this at his place when he was still taking comments and graciously responding to them, Warren Mosler indicated that he was open to taxing land rent but believed that a better approach to other forms of rent seeking like monopoly rent and financial rent was reform that precluded rent extraction in the first place.

        I would like to see a paper addressing it specifically that can be cited in response to objections based on accommodating saving desire also accommodating rent seeking behavior, which typically come from the left, whose proposals would be benefited by understanding MMT and implementing policy base on this understanding.

        There are answers consistent with MMT, of course. I would like to see them addressed authoritatively.

      2. axdouglas Post author

        Fair enough, Tom. MMT does have an answer to what I think is the worst form of rent-seeking in our economy, namely rent-seeking by employers. When there’s a scarcity of jobs, employers extract rent as the premium of productivity over wages.

        The buffer stock antidote that MMT proposes to this sort of rent-seeking is easy to generalise. I’ve proposed a housing buffer stock in places like London, where I live.

      3. mrkemail2

        “I’ve proposed a housing buffer stock in places like London, where I live.”
        Have you never heard of agglomeration?
        More people = higher land prices.
        More homes = more people
        More homes = higher home prices

        Just look at real life! Look at land prices in Manhattan London or Tokyo!

      4. axdouglas Post author

        That’s not the only driver. Prices have risen in London out of all proportion to the increase in housing stock and population. I’m not a Positive Money supporter, but this graph isn’t wrong:

        What’s driving the price inflation is lending, not land scarcity due to population increase (you can hardly see the population growth and growth in housing stock at the bottom of that graph). But increased lending feeds on the expectation of rising prices, and you’d kill off that expectations channel with a buffer stock policy.

        In cases where the price driver is land scarcity, you should impose a land value tax. But you don’t need MMT to tell you that; it’s obvious.

      5. mrkemail2

        The point being, housing is only unaffordable because the rental value of land is capitalised into the selling price of land.
        If you introduce rent controls, this caps the capitalised value. Same with LVT.
        It is not due to a shortage of housing and a buffer stock of housing will do nothing to stop lending.

      6. mrkemail2

        “and you’d kill off that expectations channel with a buffer stock policy.”
        You’d think so. But you wouldn’t.
        Because Agglomeration.
        It’s counterintuitive.

      7. mrkemail2

        Alex, sorry I disagree with your housing buffer.
        The problem isn’t lack of housing, the last time that happened to push up prices was in the late 1940s.
        Won’t work. Can’t work.
        The housing “market” is different from other goods as you are buying the buildings (and improvements) and a location.
        Owning land is like owning shares in a monopoly water company.
        It is a monopoly still.
        The location value is being privately collected as rent and mortgage interest, and it is created by all of us.

      8. axdouglas Post author

        Look, I don’t disagree that your Ricardian story holds in many cases. I don’t think it’s the main driver in London. As I said, it looks a lot more like a demand side thing, driven by credit expansion.

        You pointed me towards evidence from other countries and previous periods, but I need more evidence that your Ricardian story explains what’s happening in London now. So far I still think it looks like a credit driven asset boom.

      9. mrkemail2

        London is partially being driven partially by Help to Buy, the bubble may pop when they cap on this is cut.
        Anyway, thanks for the discussion 🙂
        “You pointed me towards evidence from other countries and previous periods, but I need more evidence that your Ricardian story explains what’s happening in London now. So far I still think it looks like a credit driven asset boom.”
        I agree – it is credit driven. I agree with you! HALF of new bank lending is on existing buildings.

      10. mrkemail2

        The other thing is I am skeptical of “expectations” theories.
        But you may want a housing buffer for other reasons. It is not a bad idea. You could build social housing offered at low rents.
        I don’t disagree with it, just not for THIS purpose.

    2. Tom Hickey

      While a land value tax would address the issue of land rent, I think that the fast appreciating values in some areas like London where “hot money” from dubious sources is being stored, especially in RE, an LTV may not be the sole approach. There may need to be more oversight of money laundering. The City has a terrible reputation on this as the world center for hot money owing to institutional laxity if not outright criminality. In addition, Warren Mosler has proposed regulating the amount that banks can lend on collateral like RE. Credit extension involves drawing income forward, on one hand, and on the other, liquefying collateral.

      1. mrkemail2

        Alex, check out the housebuilding and house price stats for the 70’s and you will see that a time of unprecedented building of houses coincided with an unprecedented boom in house prices, which rather suggests that another construction boom would have the same effect.
        Also Ireland and Spain.
        “There may need to be more oversight of money laundering. ”
        May? Absolutely damn certain more like.
        Think of LVT as “vault tax” on property 😉

      2. axdouglas Post author


        What you need for laundering is a situation where nobody’s head turns, no matter how much people spend. Casinos are good for that reason. London property even better. The last place I rented was a small flat way out of town. It sold for half a million pounds. Nobody batted an eyelid. A launderer’s paradise.

        Stopping banks taking those assets as collateral would help a lot. So would shutting down secondary markets. So would LVT. So would a housing buffer stock. The government looks at those proposals and says: ‘I know what will work. Doing absolutely nothing.’

  11. mrkemail2

    There are thought to be about 700,000 “long-term empty” homes in the UK, calculated from local authority council tax data.

    ■ 22,000 of these are in London, down from 44,000 in 2004.

    ■ About 2% of homes in Kensington and Chelsea fall into this category, the 11th highest in the country. The top 10 are all in the north of England.

    ■ Foreign buyers accounted for 20% of all sales in Kensington and Chelsea in the four years to 2014, according to the Department for Business. For new properties, however, the figure is about 75%. This compares with Savills’s figure of 7% for foreign buyers across Greater London.

    ■ Savills estimates that two thirds of foreign buyers are investors.

    ■ In total, there are more than two million foreign owners of property in Britain.

    ■ In Camden, north London, a surcharge of 50% on council tax on homes left empty for more than two years has led to a 40% reduction in the number of empty homes.


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