Thanks to everybody who took part in last week's Fun Online Poll, results as follows:
Which factor has more impact on the rent that a landlord can charge?
What tenants are willing and able to pay - 86%
The interest that the landlord has to pay - 14%
Good. Eighty-six per cent of you chose the correct answer. I'd be interested to hear why anybody thinks that the amount of interest that landlords have to pay is a factor.
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After yesterday's long and tiring thread, I establish that a lot of people (honourable exceptions: Lola, Bayard, Former Tory, and one of the Anon's) will believe any old nonsense they read in the papers or which politicians say, and confuse anything with anything.
The core assumption behind that post is that the Bank of England is a UK government department; it is owned by the UK government; it is controlled by the UK government and Banking Acts passed by the UK government; its senior officials are appointed by the UK government; the UK government decides what the inflation target is which the Bank of England has to achieve (ha!); it has to pay its profits to the UK government (i.e. to HM Treasury) and so on and so forth.
But a couple of people (here and elsewhere) genuinely seem to believe that it isn't. I sha'n't waste your time with links to all this, because no doubt there are conspiracy web site which maintain that the Bank of England is a privately owned and independent company. The fact that the Bank of England is run for the benefit of a narrow clique (i.e. bankers, landowners etc), or that this same narrow clique tells the UK government which monetary and fiscal policies to adopt is a separate issue.
So that's this week's Fun Online Poll: "Is the Bank of England owned and controlled by the UK Government?"
Vote here or use the widget in the sidebar.
Monday, 24 January 2011
Fun Online Polls: Rents & The Bank of England
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11 comments:
From Wikipedia:
"The Bank was privately owned and operated from its foundation in 1694. It was subordinated to the Treasury after 1931 in making policy and was nationalised in 1946.
In 1997 it became an independent public organisation, wholly owned by the Government, with independence in setting monetary policy."
Which means, I think, that "yes" is the right answer, but it wasn't always. It is interesting to speculate how different things would be if the changes of 1931, 1946 and 1997 had not been made. Not a lot, I'd guess.
The theme of the thread was not the ownership of the BoE it was the Statement "you can not owe money to yourself"
The Treasury cannot dip into the coffers of the BoE to retreive the money after a bond payment has been made so therefore the concept of the Treasury oweing money to itself is wrong.
Den, you can say what you like.
AFAIAC, BoE and DMO and HMT are all departments of each other and/or parts of the UK government.
Now, I'm not sure what level of reality you are operating on, but let's remind ourselves of where we are:
1. One department of HMT (the Bank of England) has purchased bonds from UK banks. These bonds were originally issued by another department of HMT (the Debt Management Office).
2. The BoE has bonds (assets) in its safe.
3. The DMO records those bonds as liabilties.
4. As a completely separate issue, the BoE has real liabilities to the outside world, i.e. commercial bank reserves, but I am not talking about these.
Do you genuinely believe that the BoE sends its crack team up the corridor to the DMO every six months to solemnly demand payment of £4 billion interest; which the BoE then adds to its profits and pays to HMT as a dividend, and which HMT then gives back to the DMO to enable it to pay the interest?
Now, maybe they do, but would it make any difference to the outside world if they didn't? No of course not.
So, to paraphrase "HMT can very much dip into the BoE's money because HMT OWNS the BoE".
As ever, I take it you are completely unfamiliar with accounting for groups of companies under the same ownership, where intra-group debts are simply netted off on consolidation?
Without googling
(1) What institution is this, and
(2) Is it owned and controlled by the UK government?
"We have two main objectives: to benefit the taxpayer by paying the revenue from our assets directly to the Treasury; and to enhance the value of ... and the income it generates."
D, one of your favourite topics is pointing out that Crown Estates does not belong to The Queen, it belongs to the UK government.
In which you are quite correct, of course, and in which you face the same uphill struggle as I do pointing out that as BoE and DMO are two sub-departments of HM Treasury, any liabilities between the two can be completely ignored.
OK - I'll bite.
I was one of the 14% arguing for the Interest The Landlord Has To Pay
(I was tired, I was young, I needed the money? Ok?)
I'll even grant you that the 86% have the right answer in the long term, and I'll also grant that the 86% are the rational ones.
The reason I'm was going with the 14% is that society isn't rational.
People aren't rational.
In the short term, landlords will bid whatever rent they feel thay have to charge, to make the property make a return, and the tenants, in the absence of being able to instantly come up with the deposit needed to buy, will have to suffer the increased rent. The tenant's only alternative (in the short-term) is to live on the streets.
It's only short-term, and after a year, the tenant will save a deposit and buy, and rents will fall. So the 86% will give the right answer.
It's the same principle as the population model of foxes and rabbits (Google it). Only two variables, and immediately an unstable solution arises.
MA, that is a reasonably good answer, but you overlook that some landlords own outright (and have no cash interest cost), some have small mortgages, and some have large mortgages (and of those pay high interest rates and some might pay interest rates).
For example (from real life), our previous landlady had bought at the peak of the market with little own equity and had high interest costs. Another house round the corner (broadly comparable) came up for rent for a lot less money (because the owner owns it outright, bought it donkey's years ago, no mortgage etc).
We told the previous landlady that she was taking the piss on the rent, and that if she didn't drop ot we'd move. She actually came up with the line "I need to charge £x to cover the mortgage" so we moved out. The house then stood empty for a year-and-a-half until she managed to shift it at a small loss.
It's the same with their income tax. Most landlords pay no tax (high interest cost or they conveniently forget to declare income, or are exempt like a charity or pension fund). Do you think that taxpaying landlords charge higher rents that those that pay tax?
Or imagine a well built and a badly built house. The latter has high repair costs - can the owner of the high-cost property charge a higher rent?
The answer in each case is "No".
Tenants will not pay any more than the property is worth. The choice is not "rent this home or sleep on the streets", the choice is "rent this or rent somewhere smaller".
So while landlords and landowners collectively are a monopoly, this does not mean that they can charge what they like because they act as a cartel (see also OPEC, De Beers etc) and the only way they can jack up prices in the long run is by restricting supply (which they do, of course, separate topic).
MW
Do we own the Bank of England? I don't know but..
If yes, who are the BoE nominees?
Do they charge us interest?
NBC, I have no idea, nobody does, but they sure as heck aren't going to run off with £200 billion of UK gilts.
What's a nominee? ISTR I bought a house off a bunch of them once.
B, a nominee is a bare trusteee, i.e. he is registered as legal owner of something that belongs to and is under control of somebody else.
i.e. if you and thousands of others own shares in ABC plc via an ISA or PEP with XYZ Bank, instead of there being thousands of share certificates, there's just one registered shareholder, XYZ Bank Nominees Limited which collects the dividends in one big cheque from ABC plc and then dishes them out to thousands of individual accounts.
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