This morning's short video has now been published. In it, I suggest that when people ask “Where did the money go?” they should instead be asking “Who has broken their promise to pay?” because that is almost always what has really happened.
When money is just a promise to pay, it disappears when someone breaks their promise. Usually, the mystery is no deeper than that.
You can view the video here.
The transcript is:
Where did the money go?
It's a question that I'm often asked when anything goes wrong in the economy. The price of a share crashes. Property falls. Something else goes wrong.
“Where did the money go?”
And then people say, “Follow the money”. All of which is nonsense because there is no physical reality to money.
Money is just a promise to pay. Somebody says they will pay you so much for a share and then a few days later they say “Sorry, I'm going to pay you a lot less for that share now “and people say “Where did the money go?”
There was no money there. There was just a promise to pay and the person who made that promise has now broken it.
The promise has disappeared.
You are disappointed.
But where did the money go? Well, it went into the wastepaper bin where your bad dreams go. It was all a myth. It wasn't true that there was ever any money. It disappeared because it wasn't there.
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Where did the money go?
“The wealth of the UK’s billionaires has skyrocketed by over 1000% between 1990 and 2022, ballooning by around £600bn.”
https://equalitytrust.org.uk/news/press-release/equality-trust-finds-1000-increase-billionaire-wealth/
“.. UK billionaire numbers up by 20% since pandemic”
https://www.theguardian.com/news/2022/dec/19/call-for-wealth-tax-as-uk-billionaire-numbers-up-by-20-since-pandemic
“the number of young earners surpassing the £1 million mark has reached 830”
https://www.thetimes.com/uk/article/rise-of-the-young-millionaires-britons-under-30-break-income-record-x0cw35060
“The Henley Private Wealth Migration report found that 128,000 millionaires are set to relocate this year, beating last year’s record by 8,000.”
https://edition.cnn.com/2024/06/18/business/uk-millionaires-loss-record/index.html
Contrast with:
“In 2022/23 approximately 2.99 million people used a foodbank in the United Kingdom,”
https://www.statista.com/statistics/382695/uk-foodbank-users/
Thanks
Where does the money go ? Here’s but a tiny story of spending public resources well.
We pay slightly more tax on income in Scotland, and this trivial revenue difference is often talked up by Tories who think it a disincentive to their PR construct of tax burdens punishing “hard working families” and a stick with which to beat the SNP/Greens.
Incidentally the research on Scottish tax migration, where the wealthy shift south suggests that only 5% have responded to their marginally increased income tax bills by considering relocation. Andy Summers at the LSE is the expert.
I’ve had a free over 60s travel pass for some years and will be using it on Monday for the hundred mile trip to Glasgow.
Scotgov also have various subsidies on Scotrail, and buses, with a range of free and/or discounted passes for 5-22 year olds.
There’s also a new “Kids for a Quid” initiative where there are day returns for up to 4 kids for £1 with an accompanying adult off peak.
Ideal for families on lower incomes to manage a day away as they won’t be able to afford a holiday.
Now shifting people on to public transport is absolutely essential to meet net zero targets, especially students and youngsters, as it reduces carbon footprints and assists modifying travel habits longer term.
There is also a small but valuable ‘levelling up’ effect in a government subsidising the use of public transport, to lower income deciles.
The dismal Tory campaign of trying to insist that lower and lower taxes are the absolute priority for most people entirely ignores the services and benefits public expenditure aims to provide.
The underlying far right mindset is of Mises and the rabid free marketeers, where private is always better than public, and competitive pricing is crucial to satisfy their supply/demand utopia.
While Eilidh is on a day trip to Largs, with an ice cream at Nardini’s, the world’s plutocrats and oligarchs continue to whinge at everything that might reduce their accumulating wealth.
So where did these fleeing millionaires go?
The Henley article begs some questions. It mentions Australia, Canada and the USA, Germany and France where ‘the ranks of the wealthy have grown”. Did they grow from indigenous residents or people moving there? Germany and France( especially) have higher levels of taxation than we do. The IFS comparison has a difference of 0.3% between the UK -the higher-and Canada. Australia and the US significantly less.
The projected ‘burden’ for 2027-28 is quite a lot higher so perhaps they are acting on that?
It also suggests there are other factors. And do many of them relocate again within a few years?
And I find different figures for the percentage of GDP taken in tax.
https://ifs.org.uk/taxlab/taxlab-key-questions/how-do-uk-tax-revenues-compare-internationally
My sense of people using the phrase “where has all the money gone?” is that it is a cri de coeur at the apparent impunity with which money has been extracted, defrauded, purloined from the public space. In a properly functioning democracy with appropriate legislation against exploitation, the Thames Water debacle; the covid VIP lanes enriching mates for literally nothing; the increased tax take with no apparent benefit to public services would not have happened.
People wonder why government can’t get the ill gotten gains back – and it comes across that actually the government doesn’t want to – “because they are all in it for themselves”.
So my belief is that the phrase is a metaphor for people’s despair at the current state of the UK and its governance rather than you interpretation.
Money isn’t a ‘thing’ but has functions, based on debt (promise to pay) and accounting, as so much of your writing reiterates.
In the case of a share, there’s no promise to pay: only a right (usually at the end of the queue of creditors) to divide the assets of a business; and in the interim, a proportion of any agreed distribution of profits or reserves.
As I see it, however, the differences in money’s functions introduce the confusion about it’s ‘disappearance’: when it’s the accounting unit quantifying a defined obligation, there’s enforcement (‘legal tender’ on a banknote being a simple case, in one way; but more commonly, a digital entry such as in a bank account or conversely a loan or credit card debt, payable by enforcement – ultimately dependent on state/judicial force; or finally by violence).
But when it’s an unenforceable expectation of obligation (where obligation doesn’t actually exist, but is really just a hoped-for payment based on the current idea of the realisable value of an asset – real estate, shares, traded bonds with some time before maturity at par…) – this seems to be how the ‘where did the money go?’ question arises; and the popular confusion that “I put my money into this but now it’s gone.”
No, you didn’t put your money ‘into’ anything: you used money in one form to discharge an obligation to someone with the rights over an asset when you had those rights transferred to you. So your money went to them, at that moment. You now hold something else (real or virtual) which you hope someone else MAY want to acquire in the future, perhaps for more than you paid for it, but possibly for less, maybe a lot less, or not at all.
As you say, the money was never ‘in’ anything.
More than simply semantics, it’s an error of the mental model of what money is.