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Monetarism & The Real Economy

Release date: January, 2022.

This 2022 edition of BENECON traces the development of macroeconomic theory and practice between 1929 and today but with an emphasis on the decisions and outcomes affecting the British economy.

The evident divergence of macroeconomic policy from the constitutional needs of the majority of wage-earners intensified in the 1970s when Denis Healey opted to abandon Keynesianism for monetarism in 1975. The conditions of an unnecessary IMF loan in 1976 intensified these conditions even further. Being supportive of the ideological bent of the governments of Margaret Thatcher, monetarism was even further intensified leading to a steady erosion of British industry and manufacturing.

In 1973, the IMF under a management favouring the political objectives of the OPEC petroleum price hikes, combined with stringent international loan conditions, modeled on the loan to the UK in 1976, led to a prolongation of slumpflation by something like 20 years and a progressive decline in worldwide wage-earner real incomes.

A growing obsession of politically influential asset holders demanding increasing injections of money into the economy intensified in the 1980s with government policies that increased the financialization through regulatory relaxation and rising monetary injections into the economy. The growth in offshore investments following the failure of the Bretton Woods agreement and exit from the Gold Standard, over time, led to a hollowing out of British industry and manufacturing and an inability of the country to maintain a positive balance in payments in goods.

In Europe, the country to resist this type of policy-induced decadence was Germany where the political class has a better strategic grasp of the importance of national industry and manufacturing as the foundation of real economic growth. Until recently, Germany had a positive trade balance greater than that of China. In Q2 2021 the USA and the UK had trade balances of -$190 billion and -$12 billion respectively whereas Germany and China had trade balances of $87 billion and $55 billion, respectively. These very poor performances of the UK and USA are the result of seriously defective monetary policies which have never provided the types of incentive necessary to maintain their industry and manufacturing sectors. Germany succeeded in achieving this performance with higher average wage rates ($52,000 against UK's $42,000).

There are significant structural issues in the UK which go beyond its inept macroeconomic policies.

This edition explains why the theory applied in taking decisions on monetary policy is flawed. This is established on the basis of an easy to understand analysis comparing the outcome of quantitative easing. This demonstrates convincingly that the Quantity Theory of Money has no relationship to real events; it never has done. This also explains why quantitative easing did not turn out as expected but exacerbated an already dire state of the economy. In this context the role of the Bank of England in promoting quantitative easing is reviewed taking into account the recent Lords Economic Affairs Committee evidence and report entitled, "Quantitative easing: A dangerous obsession?" Certainly the more detailed analysis in this edition supports the conclusion of one of the providers of evidence that quantitative easing is a policy without a theory. This is complemented by a more detailed critique of the "central bank narrative".

In a sub-section entitled, "The validation of policy theories", in Section 6, the logic of decision analysis is applied and in a few sentences dismounts convincingly the Quantity Theory of Money from its perch in the temple of monetarism. It is notable that both of the main British political parties, Conservative and Labour, do not come off well in a transparent assessment of their economic management of the economy. Indeed, the surprising but very apparent adherence of both parties to monetarism and its faulty logic, is exposed as the reason for the decline of the British economy over the last 50 years. Having identified crucial gaps in monetarist theory and derived practice, this edition addresses these gaps on the basis of logical propositions across critical economic and constitutional functions. It points to the required theory and policies to bring the British economy back onto a sustainable growth path. In an environment of political economic stasis, feeding on the conviction that "there is no alternative", this edition raises the potential sights of national economic ambition by providing practical steps to jettison the current state of policy ineptitude.

A list of contents is provided below.

Please note that the final contents may vary according to final editing and content recommendations received in the internal review process.

This publication will be available in printed and electronic formats.


Executive Summary


Constitution and economics

Freedom of expression in word and action

Constitutional economics

Private and public goods

Monetarism and the Real Economy


The general components of the economy

The Real Economy

The Physical Resources Economy

The Assets Economy

The Financial Assets Economy

The Human Resources Economy

Real Incomes

Real Economic Growth

The Say Model


Economic growth, real and nominal

Human capital, tacit and explicit knowledge

Tacit and explicit knowledge

The development of tacit knowledge by medical practitioners

The learning curve

Entrepreneurialism and the delivery of results

Scale of operations

The cost of living and economic growth

Real incomes & currency value

Innovation and real incomes

Endogenous and exogenous money

Economic structural transformation


Demand-pull inflation

Cost-push inflation.

Speculative asset inflation


Goods and service price deflation

Asset price deflation



Keynesianism & the Quantity Theory of Money

Money sources, volumes and the Quantity Theory of Money

The Cambridge equation

What prices are referred to here?

Something is wrong with this identity

In the meantime, during this period

Claude Shannon and George Boole

How did Shannon work this out?

Blind spots

Wright’s Law



Turmoil and adjustments 1944-1965

Imperial preference

United States strategy

Bretton Woods

Contemporary analysis

The rise of the American Empire

Post-war Britain 1945-1965

The stages of economic growth

Economic mechanisms, the slide into oblivion

Britain’s hegemonic cycles & publication date of “The Stages of Economic Growth”

World systems, cycles and warfare

An inaugural lecture

A warning

A route into the study of economics

Our learning curve

The farmer’s learning curve

Economic incentives

Biomedical considerations and policy design

In the meantime, during this period

The discipline of decision analysis

Systems engineering


From circuit switching to transistors

SIMULA 1 and Object-Oriented Programming

Moore’s Law

Packet switching




Further turmoil and the turning of the tide in the 1970s

The unstable craft in an increasingly choppy sea

Unanswered question

From a national strategy to mutual suicide pact


The role of the IMF in maintaining high petroleum prices

Pattern of behaviour

Extending the slumpflation crisis

The possible reason for the IMF behaviour

Getting in on the act

Going in the wrong direction

Witteveen and the British economy

Interest rates as a monetary policy instrument

Spreading the word

The New York Mercantile Exchange (Nymex) and Petroleum

Invincible, audacious decisions, coke-heads and hookers

Futures markets


Market driven hedging

Heady optimism, hedge funds and assets

The corruption of futures markets

Post Gold Standard gold prices

Unanswered questions

Policy development responses

Supply side economics

Real Incomes Policy

The performance of other Bretton Woods institutions

Safer options

Climate change, income disparity and sustainability

No effective response to criticisms

Loss of control

The reshaping of monetary policy

The reshaping of foreign policy

In the meantime, during this period

From integrated circuits to microprocessors

Databases and queries



The monetary cascade 1980-2000


The decline in ethical decisions

Real incomes depreciation treadmill

Avoiding a dollar run by replacing a gold rush by an asset price rush

A dangerous addiction

The destruction of the Say Model

The 1981 Budget

Economies are always in a state of disequilibrium

“Ideas” concerning the National Health Service

Taming the media by changing truths

The City and the Bank of England independence

The Clause IV moment

The Private Financialization of Health provisions

Project scale, staffing deficiencies

Britain’s State -of-the-Art Tacit & Explicit Knowledge

in the Industrial Arts

In the meantime, during this period

5th Generation

The leap of faith into knowledge engineering and artificial intelligence

Prognos & General Technology Systems Limited

Learning systems

Hand held computer communications

Locational-state theory


The global network


Racal, Vodafone and China Telecom

World Wide Web

The “Onshore Engineering Club” initiative

Other UK gaps and needs



2000 to 2022 and the proof that monetary theory is flawed

The grey market

Alan Greenspan’s 2000 address

The Bank of England, quantitative easing and the death of the QTM

Thrift and savings

The option of sanctions and people’s quantitative easing

Fraudsters escape criminal charges

Quantitative easing as a dangerous addiction

The semantics of Bank independence

Range of evidence

Comments on 5 aspects of the central bank narrative

Why QE is a policy without a theory

The real economy

The validation of policy theories

Quantitative easing and real incomes

Adding the asset classes to the QTM

Asset loading

Where goods and services inflation come from

Modern Monetary Theory

In the meantime, during this period

5th Generation

The results of a leap of faith into artificial intelligence

Social media

Social media issues

The emerging platform economies

Gig work and accelerated downward spiral in real wages

Doing evil and the deconstruction of objective facts

Blockchain and Bitcoin

Bitcoin, assets or a medium of exchange?

Scalability and speed of resolution issues

Bitcoin as official national currency

Bitcoin as exchange medium and asset revisited



Constitutional impacts of monetarism and QE in particular

Modes of income generation

Wage-earner constituent sources of income

Input to supply side production of goods and services

Asset holder and asset transaction constituent sources of income

Inputs to asset trading

Why are these income lines different?

The real income effects of income sources

Policy impacts on nominal and real income disparity

Constitutional implications of income sources

Employment, electoral significance & the nature of economic value in the UK

Law and governance

20 General elections



Britain’s main strategic gap

The British technical education scene

Working against the odds

Working against even greater odds

The Dockyard School

Border-line cases

Intelligence tests

Lamentable priorities

STEM – Science, Technology, Engineering & Mathematics



Summary analysis

The nature of real growth

The implications of not sustaining real growth

Stages of growth

The main systematic deficiencies and gaps

Democracy, constitution, politics and parties


The next decade 2022-2032

Public choice

Managing priors

Policies that address our principal needs

A constitutional economy

The essential elements of an alternative economic theory and policy

The principles policy design

The Aggregate Demand Model

Production, Accessibility and Consumption Model

Policy traction, effectiveness & efficiency

Target mechanism

Constitutional aspects of freedom of choice

Public choice

Financial regulations

Decision analysis briefs for public choice

A Real Incomes Policy DAB

Decision Analysis Brief on a Real Incomes Policy

Gaps created by conventional policies

Gaps created by government revenue seeking

The balance of payments

Gaps created by existing accounting regulations

Gaps created by centralized policy decisions and operations

The issue of policy traction

Constraints facing policy movements

Operational governance needs

Fiscal neutrality and transitions

Operational corporate needs

Operational constituent needs

Main operational objectives that policy needs to support

Policy targets


Policy instruments linked to productivity and competitive prices

Policy performance instrument: Price Performance Ratio

Lowering risk

Risk and productivity

A devolved strategic plan

The mapping out of strategic corporate options based on PPR

Secondary incentive auxiliary policy instrument

The Price Performance Levy

Strategic options map for current and future net incomes

Gaining policy traction

Normal parameters of natural growth

Disequilibrium for growth

Balance of payments and foreign trade

Import substitution

Operational principles:

Regulations, security and compliance

Extension services

Enterprise planning

Corporate choice:

Devolved administrations

International perspectives

Corporate taxation

Tax rebates

Clause IV revisited

A contemporary interpretation

Realizations ignored

Labour’s policy Archipelago

Wisdom, received and realized

Ownership of the means of production

Corporations, family firms, cooperatives and mutual

Launching RIP

Technology transfer

Production circles

Life-long learning

The cynical build-up of expectations destined for disappointment

Disenchantment with political parties

The electoral reform roundabout

Power to the people 143 The shortcomings of “Power to the people”

Democracy without parties


Experience with political parties:


The Price Performance Ratio

The origins of inflation

Measuring the contribution of supply side company to inflation


Deflation 148 Desirable & Undesirable States

Innovation target zones

Price Performance Ratios (PPRs) associated with different unit input value movements & movements in unit output prices

The role of business rules in policy

Why the Real Incomes Approach is different

Income disparity

Making the application of business rules a success


The Price Performance Levy

Policy - distribution of aggregate real incomes through a Price Performance Levy

Examples of Price Performance Levies

Power functions (intensification)

Some PPL power functions applied to a basic levy of 20%.

Slide or i-d functions (increments or decrements)


Top countries in the global Balance of Payments League

Annex 5

Bottom countries in the lowest global Balance of Payments League

Annex 6

Power Report 157 Foreword

Power to the People Executive Summary and Recommendations

Analysis of the Problem of Disengagement

The Myth of Apathy

Red Herrings

The Reality

The Rise of New Citizens

The Response to the Problem of Disengagement

Rebalancing Power


Real Parties and True Elections


Downloading Power


Annex 7

Noland’s principles of public life

1. The Seven Principles of Public Life

1.1 Selflessness

1.2 Integrity

1.3 Objectivity

1.4 Accountability

1.5 Openness

1.6 Honesty

1.7 Leadership

Author’s profile

Title: Monetarism and the real economy
Main cover title: BENECON 2022
Date: Q1, 2022
Author: Hector W. McNeill, M.A.(Cantab), D.A.S. (Cantab), M.A. (Stanford)
Production: Decision Analysis Group, SEEL-Systems Engineering Economics Lab.,
a division of The George Boole Foundation Limited
Publisher; Hambrook Publishing Company, Portsmouth, Hampshire, United Kingdom
Copyright © 1975-2022, Hector Wetherell McNeill
ISBN: 978-0-907833-59-8