Tuesday, 15 November 2022

Morgan Godfery is an idiot

Morgan Godfery: idiot, hack, or wanker? You decide.
[Pic borrowed from here]

Morgan Godfery, who is a 'senior lecturer' at the Otago Business School, has been publishing screeds against the "obscene" profits companies have been making in these inflationary times:

In a country where inflation is running at 7.2%, [he says] and the cost of living continues to increase, multibillion-dollar profit-making is obscene.
So says Mr Godfery.

In fact, it would be bizarre if companies in these inflationary times were not making inflated profits. That is, after all, one of the effects of inflation on businesses -- that their profits are generally overstated by that very inflation that everyone faces. 

It's not that complicated to understand why: For most businesses, this is because their costs are generally incurred before their revenue -- which means they have bought inventory and supplies in a cheaper market, and are selling into what (to them) looks like a more lucrative one. 

So revenue is higher. Except it's actually not, it only looks that way. Because they also have to buy new supplies in this more highly-priced market. Which means their cost structures are way higher than they look (that is, if all you know about accounting is the sort of simple stuff that people like Mr Godfery do only to balance their expense accounts.) 

Which is why those mega-profits Mr Godfery denounces are actually illusory -- false profits, if you lkie -- and why even without the sort of Windfall Profits Tax Mr Godfery et al are calling for, companies are already paying higher taxes than they would be otherwise, already making doing business for them much harder.

Yes, it's true that in our present-day monetary setup banks (of whom Mr Godfery exercises much of his spleen) have a virtual licence to print money -- which does help underpin all their profits, let alone these record ones. But that's an inevitable function of the present-day monetary setup of fiat money, in which banks are essentially borrowing new money into existence -- a system of which Mr Godfery and his ilk are loudly in favour. (But let me know if they start talking about returning to commodity money.)

Of course, it's possible that Mr Godfery is not an idiot, and is already well aware of these basic economic facts -- especially since he is a highly-paid lecturer at a prestigious Business School. As such a highly-paid and learned fellow, it's even possible that he knows that Adam Smith was on to this very thing nearly 250 years ago, when he observed that record profits such as those Mr Godfery bewails are not at all the sign of a resilient economy that can be squeezed dry at the behest of a prestigious Business School lecturer and a gaggle of Green MPs, but instead are an inflationary effect of reckless money creation caused by government -- such high profits not being a sign of prosperity, warned Smith, but a sign of an economy "going fast to ruin."

Being a learned fellow, of course, it is just possible that Mr Godfery does knows all this and is just pretending to be an ignoramus; that he knows exactly what happens to business profits in inflationary times, and is simply pretending not to know; and that, when he does say stuff this ignorant, that he's just joining the Crowd Risible to talk up plans to eat the rich for a confiscatory Windfall Profits Tax on anyone who makes money in these imminently ruinous economic times.

In which case, it's possible that he's not an idiot at all. But just a hack.

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