People at The Guardian clearly know nothing about economics

From The Guardian:

House prices in Spain fell by 11.2% in July, the biggest monthly fall since March last year. Overall prices have fallen by 31% since the financial crisis hit in 2008. Spain has an estimated 2 million unsold homes.

Prices have slumped across the board and even in the big cities they are down 11.8% and 11% on the Mediterranean coast. The biggest falls have been in the Balearics and Canary Islands where prices declined in July by 14%. The government's decision to raise VAT from 4% to 10% on house purchases as of next year is expected to depress the market still further.

Why would VAT on house sales have any effect on prices? Don't they know that in Home-Owner-Ist economics:

1. It is impossible to make landowners bear a tax; they always pass it on as higher prices or higher rents. So if VAT on housing goes up 6%, then prices should go up by 6% and not down. This is why LVT supporters are misguided fools: instead of increasing taxes on landlords they would inadvertently increase the rent bills of tenants.

2. VAT is a harmless tax on 'consumption' on feckless consumers who go round consuming stuff and thereby destroying wealth; the tax is paid in full by the consumer to help atone for his wickedness and does not affect suppliers who merely add it to their prices. Why the heck Greggs plc was complaining about a possible increase in VAT on some of its wares was never established.

More QE idiocy

Spotted by Bob E in The Telegraph:

Michael Saunders, UK economist at Citi, said the Government could use the “accumulated profits from quantitative easing (QE) to finance a special temporary tax cut for a year or two”. According to official figures, the “potential profit” by February 2013 from QE to the Bank is £20.7bn – more than enough to knock 2.5p off income tax for a year...

The Bank is sitting on QE profits because it bought gilts with money it has effectively printed.(1) The gilts pay interest which is collected from the Government. Although the arrangement means the funds are effectively moved (2) from one arm of government to another,(3) it is still recorded as a normal payment... (4)

“The UK approach appears to differ from that in the US, where the Federal Reserve deposits its earnings into the Treasury’s account each week,” Mr Saunders said (5).

That's disappointing. Michael Saunders is usually quite sensible.

1) Not true. The BoE pays for gilts by crediting the commercial banks' deposit accounts with itself, on which it, the BoE, pays 0.5% interest.

2) Are they? How can you move money from one place to the same place?

3) The interest is not even shuffled between two branches of government, it's shuffled between two sub-departments of the BoE, which in turn is a sub-department of HM Treasury which in turn is a department of the government.

4) Who records it as a normal payment? Yes, it's true that the government's total, consolidated interest bill has gone down under QE - relative to what it would have been without QE - because instead of paying 2% or 3% or 4% on the gilts they bought back (and effectively cancelled - you cannot owe yourself money) the government (via the BoE) is now paying 0.5% interest - for the time being.

On the other hand, the government has to pay interest on £500-odd billion it borrowed and pissed up the wall over the past few years, so overall our interest bill has gone up, not down. There is no profit, there is a massive loss, it's just that the loss is not quite as big as it otherwise would have been had they been even stupider.

That's like boasting about having made £100 profit by buying something you don't need in the sales for £400 instead of £500. Truth is, you've lost £400.

5) The BoE also ultimately pays over all its "profits" (rather bizarrely, it seems to pay corporation tax first) to the government and is reimbursed all its "losses" by the government. Whether it does it weekly or annually doesn't make the slightest difference.

What all these bankers conveniently overlook is that the BoE was set up by the government for the sole purpose of borrowing money from people in order to finance the construction of the Royal Navy, it was, in modern parlance "The Debt Management Office" and it was an expense item not a profit making operation.

It's not true until they deny it

From The Daily Mirror:

A number of parks in a town are to be declared "designated smokefree sites". Signs will go up at entrances to 13 parks and playing fields in Blackpool, Lancashire, to warn visitors that children need protecting from smoking in open air....

A Department of Health spokeswoman said: "There are no plans to extend the law to cover outside areas."

Ah fuck.

Should we treat bansturbation as a medical condition?

Bob E spotted an acute case of the syndrome in America's Science Daily:

A sedentary lifestyle is a common cause of obesity, and excessive body weight and fat in turn are considered catalysts for diabetes, high blood pressure, joint damage and other serious health problems. But what if lack of exercise itself were treated as a medical condition?

..."I would argue that physical inactivity is the root cause of many of the common problems that we have," Dr. Joyner says. "If we were to medicalize it, we could then develop a way, just like we've done for addiction, cigarettes and other things, to give people treatments, and lifelong treatments, that focus on behavioral modifications and physical activity. And then we can take public health measures, like we did for smoking, drunken driving and other things, to limit physical inactivity and promote physical activity."

Moving home during the summer holidays is such a drag

From RICS' survey:

Activity slowed further in July, with the weak picture exacerbated by the start of the school holidays.

???

I can understand why the Homeys make up excuses like prices being too bloody high, first time buyers struggling to save up a deposit, Wills and Kate thingy, riots, bad weather, Diamond thingy, good weather, football World thingy, Olympics thingy etc blah blah, those are all reasons why people might be temporarily distracted from "showing aspiration", "getting a foot on the property ladder", and "building up capital" but aren't the summer months (i.e. June to August) normally the months with most sales and purchases?

Obviously my memory isn't what it used to be, so before some pedant catches me out, I'd better check the actual monthly sales/purchase figures according to a reliable source like HM Revenue & Customs hadn't I? Ah, right...If that chart looks a bit higgedly piggedly, we can smoothe it a bit by using a three-month moving average, in which case July and August are the peak months.

Well, what can you expect from a tenant?

From The Daily Mail:

The highest court in Massachusetts rejected the appeal of a British man convicted of killing his wife and baby daughter in their rented home, saying in its decision released today that warrantless searches of the home were justified because those inside might have been in danger.

But apart from that, did you enjoy the deep-fried bananas?

From The Daily Mail:

A Thai senator accidentally shot his cousin dead with a submachine gun during a family meal in a restaurant, police have said.

Boonsong Kowawisarat fatally injured Chanakarn Detkard, 46, when he mistakenly fired the 9mm Uzi as he tried to put it away after placing it on the table. Chanakarn, who worked as the senator's secretary, suffered a bullet wound to the stomach and died on the way to hospital, according to local police.

If at first you don't succeed...

... fail, fail again.

Bob E has put together a list of some of the DoublePlusGood headlines on the DCLG's website:

November 2010: Shapps: We're lifting burdens from the backs of builders

March 2011: Grant Shapps offers "Build Now, Pay Later" deal to developers

April 2011: Growth plan to transform empty offices into new homes

June 2011: Government plans release of public land to build 100,000 homes

July 2011: Government announces new Affordable Homes Programme set to exceed expectations

December 2011: Grant Shapps launches £420m fund to get Britain building again in 2012

June 2012: Grant Shapps: Builders back the NewBuy Guarantee

The sum total effect of all this lifting, paying later, transforming, releasing, exceeding, launching and guaranteeing has of course been precisely zilch. New housing completions are hovering around the 100,000 level, just as the Tory voters were promised before the last general election.

But never mind, there's always time for another wizard "they own land, give them money" wheeze:

Ministers are to help developers build 200,000 homes which have been placed on hold, in an attempt to stimulate the economy...

Official figures show that local authorities have granted planning permission for more than 480,000 building plots in recent years. But work is only progressing on 136,700 of them. Development has been shelved at more than 81,000 sites and suspended or delayed at 226,000.

Many of the developments were given permission only on condition that they provide amenities for the community. But such deals are no longer viable because house prices have fallen, Mr Pickles believes. The brokers he is sending will renegotiate them to take account of the deteriorating economic climate.

There are various things which could result from this:

- the developers do indeed complete projects and bank larger gains, having being absolved of market risk;

- the developers play poker and mothball all developments on the assumption that they'll be able to get even better discounts on their s106 agreements;

- the developers continue to play for time; the reason the developments were mothballed is because they are waiting for an upturn in land prices.

- the developers assume that the Tories meant it seriously about not granting any planning permission in future, in which case they have every interest in using up their stock of 480,000 build permits as slowly as possible.

- there is a theory that new construction has stalled because banks are now unwilling to lend. If this is true, then again, nothing will come of this. I personally doubt that it is true; if a developer already owns the sites and has planning he's already earned the bulk of his profits (or paid the bulk of his cost of sales). They only need to borrow a bit of extra money to get their developments finished and sold, and that money can be repaid within a year or so out of the sales proceeds. This is not particularly risky from the banks' point of view.

Fun Online Polls: The Olympics Legacy

The responses to last week's Fun Online Poll were as follows:

Under what fictitious name is Taiwan listed in the Olympics medals table?

Chinese Taipei - 63%
Taipei - 16%
Republic of China - 11%
Taipei Province - 10%

Well done to the eagle-eyed 63%.

Taipei is the name of the capital city of Taiwan, whose official name (i.e. the name that the government uses on its forms) is Republic of China (as distinct from The People's Republic of China) so those two names aren't fictitious. I made up "Taipei Province", that one is just as fictitious as "Chinese Taipei".
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I'm very impressed with the way that successful athletes in Team GB made the most of their fifteen minutes of fame to promote their hobby horses and the way that politicians and newspapers jumped on the bandwagon (if they hadn't started the meme in the first place, you never know with these things).

So which is/was your favourite Olympic bandwagon?

Vote here or use the widget in the sidebar.

My favourite is of course Michael Gove's: Liberate school children from the tyranny of under-employed geography teachers. If they use those playing fields to build housing, then local kids will have a shorter walk to school and hence more time to lie in bed, do their homework, play on the internet etc. It's all good.

A heartbeat away from being a caricature of Paul Ryan