Economic Myths: Governments don't issue currency.

Dinero, having pointed out quite correctly that "There is no objective reason to give a special status to the government. That is political view not an accounting view" then went a step too far:

Governments don't issue currency. It's a myth.

No, they do and it's not a myth.

Currency is mainly deposits that are created by the credit system and governments borrow deposits that allready exist i.e. the Bond market.

Private sector borrowing comes first in the process creating deposits then the government taxes or borrows those deposits.

Again, nope.

The general rule that "loans create deposits" applies to the government just as much as it does to banks or anybody else.

Borrowing money, taking out a mortgage, printing notes, minting coins, running up credit, issuing currency or signing IOUs, leaving bills unpaid etc. are all shades of the same thing and there are the same two sides to each of them - the issuer/borrower has a financial LIABILITY and the holder of the mortgage, bank notes, bank deposit, IOU etc. has a financial ASSET. It always nets off to precisely zero.

So the government can pay people with coins and notes, bank deposits, new bonds, or simply pay a supplier over an extended credit period. It is all shades of the same thing. It does not need to borrow a penny beforehand. It is the expenditure which creates the liability and asset, collectively referred to as "money".
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As a quite separate matter, having printed or issued currency, the government also claws back or unprints money by collecting taxes (to prevent price inflation and to regulate/meddle with the economy).

Consider - the government could collect taxes in cash and then distribute the same very same physical cash to its employees, suppliers and pensioners. Or it could pay out with freshly printed and minted cash, then collect taxes in physical cash and throw the bank notes in a furnace and melt down the coins.

It makes absolutely no difference. Indeed, the government could do one without the other, or more of one that the other.
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Dinero adds: "Government borrowing does not create money."

No it doesn't, but I never said it did. Read the post.

What I said was that government SPENDING creates money, in the same way as government TAXATION destroys money.

That's a pleasant surprise.

From the BBC:

A British Social Attitudes survey published by the government last week suggests that most people in England (56%) are now supportive of house building in their local area, up from 28% in 2010.

The proportion of people who say they are opposed to new homes in their neighbourhood has fallen from 46% in 2010 to 21% in 2014.

Economic Myths: "The purchasing power of the pound has fallen by 235 times in a hundred years"

On the face of it, this factoid trotted out by the gold bugs at MoneyWeek is quite true, it implies that average price inflation over the last hundred years was 5.3% per annum.

But that ignores the compound interest which £1 would have earned in the meantime. By and large, and in the grander scheme of things, the interest you can earn is equal to annual price inflation, sometimes a bit more, sometimes a bit less.

So if you'd stuck £1 in the bank a century ago and allowed the interest to roll up, you'd have about £235 and what you'd be able to buy with it today is much the same as what you'd have been able to buy with £1 a century ago.

And there are two further caveats:

1. The downward trend in the real price of manufactured goods. You can get a pretty decent TV or a mobile phone/camera/music player for £235 nowadays, you would not have been able to buy anything near as cool for £1 a century ago. Maybe a wind up 'phonograph' or something? Even if your compound interest less tax deducted is 'only' £100, you can still get a lot more manufactured for your money.

2. The upward trend in the real cost of land. Rents back in 1910 were between three and five shillings a week, so £1 was one or two months rent; nowadays £235 is more like one or two weeks rent (although the quality of rented accommodation is much better).

So all in all, so what? It is not price inflation itself which robs savers, it is negative real interest rates.

Nigel Farage is running out of things to blame on immigration.

From The Daily Telegraph:

Britons are so ill at ease with levels of immigration in their towns that their children do not play football with their neighbours in the streets, Nigel Farage has said.

Had he said that there are some small parts of the country where women get hassled for wearing western clothing, fair play, that is true, but this is just being silly.

Via The Boiling Frog.

The building itself probably only has scrap value.

From The Daily Mail:

A mansion on London's Billionaire's Row which was built by the owner of the Tate and Lyle sugar empire has sold for £25million - just a quarter of its original asking price.

Heath Hall on The Bishops Avenue in Hampstead, north London, a 24,000 sq/ft trophy home set in a plot of around 2.5-acres, was put on the market three years ago for £100 million.

If you look on Google maps, the plot appears to be about 100 yds x 120 yds, is nearly rectangular, with a road along the back for the houses behind.

So you could build a row of about fifteen nice big terraced houses along the front (on The Bishops Avenue itself) and another ten along the back, with off street parking for two or three cars in front and decent sized back gardens (by London standards).

You can sell each finished house for (say) £1.5 million (Zoopla's Z-Index for that postcode is just under £1 million), knock off a couple of hundred thousand for the cost of building it, £1 million for the land (£25 million ÷ 25), the rest is your profit margin, Bob's your uncle.

Daily Mail on top form

Spotted by Pyotr Wasik (who I still assume is Flashman) in The Daily Mail:

[Complete and utter bastard] Andreas Lubitz was signed off by two different doctors for the day of the Germanwings disaster but failed to tell his employers, it has been reported...

It also emerged today that his parents only discovered that their son was a mass murderer just minutes before the bombshell press conference by prosecutors in Marseille. His mother, a piano teacher, and father, a successful businessman, were understood to be in the French city at the time of the announcement, but kept separate from the victims' relatives...

The couple's £400,00 two-storey detached home in Montabaur, a town 40 miles from Bonn where Lubitz is thought to have grown up, was also searched by detectives.

Still Alice In Wonderland

From imdb and imdb:

On a golden afternoon, Alice Howland, a renowned linguistics professor who is happily married with three grown children, follows a White Rabbit who disappears down a nearby rabbit hole.

Her life begins to change when she tumbles into the burrow - and starts to forget words and then more in the merry, topsy-turvy world of Wonderland!

Memorable songs and whimsical escapades highlight Alice's Early-onset Alzheimer's Disease, which culminates in a terminal degenerative encounter with the Queen of Hearts.

Alice struggles to not only to fight the inner decay, but to make the most of her remaining time with friends, family - and an army of playing cards!

"Computers, a host of TV channels and smart phones: The simple indoor pleasures missed out on by yesterday's children"

From The Daily Mail:

They are the traditional childhood pastimes which often see children spending hours safely in front of a screen instead of coming home drenched and muddy after jumping in puddles, injured from falling out of a tree or picking up nasty infections from mud pies.

The dubious pleasures of playing outside are disappearing - as children choose to stay indoors playing video games rather than go out to make sandcastles and daisy chains. Dozens of indoor pursuits that now define childhood are activities that yesterday's children never had the chance to try...

David Hardy, spokesman for the Electro Attractions Group which carried out the survey, said:

"Nowadays, children have much more to keep them amused - computers, a host of TV channels and smart phones - something older generations didn't have. As a result, youngsters don't have to get dirty in the mud and puddles, be bored stupid by fresh air or get beaten up by bigger boys in the park.

"Forcing your children to suffer these traditional activities occasionally can be a great way of reminding them just how great it is simply sitting in front of a computer or TV screen.

"But that's about it, really. You've made one daisy chain, you've made 'em all, frankly."

Tories and Labour - both deliciously wrong on tax, as usual.

From City AM:

Labour and the Conservatives will today lock horns over the levels of tax imposed on companies, as business takes centre stage in the fiercely contested General Election campaign.

Real policy differences or Indian Bicycle Marketing?

Labour will announce today that, if elected, the party’s first Budget will cut business rates, in a move they say will be worth an average of £400 for 1.5m small businesses.

Pandering to the landowners. Boo.

During a visit to a small business, Balls will say: “Under the Tories, higher business rates have cost firms an average of £1,500 a year and are an ever bigger part of their tax burden. So instead of another corporation tax cut for large comp­anies which helps fewer than one in 10 firms, we will cut and then freeze business rates for small firms instead.”

What the Tories have proposed, quite sensibly, is to have a flat rate of corporation tax of 20% for all limited companies, instead of 20% for small ones and 21% for large ones.

Yet the Tories argue that such a move would equate to a one per cent rise in corporation tax, as it would mean reversing a cut from 21 per cent to 20 per cent that will come into force tomorrow.

No, keeping the rate at 21% is not a rise, it is simply not a reduction.

Treasury minister David Gauke said: “You have it now in black and white – Ed Miliband and Ed Balls will whack up corporation tax in their first budget. This would be the first time corporation tax has risen in over 40 years.”

Keeping the rate the same is not exactly "whacking up" corporation tax, is it? Sticking 2.5% on VAT or 2% on National Insurance, that's closer to "whacking" and that was the Lib Cons who did that (the fact that Labour would probably have done it had they won in 2010 is neither here nor).

But he is lying.

My trusty tax tables tell me that until 2006 or so, Labour experimented with corporation tax rates of 0% and 10% for very small companies and 19% for small/medium sized companies (a stupid idea if there ever was one).

Nonetheless and despite that bloody great lie, the Tories win this one on points. Cutting and simplifying corporation tax is clearly better than reducing business rates. But no mention of the biggest taxes on business (rather than on 'business owners') which are VAT and NIC.

What we need with business rates is a revaluation, which is due to happen in 2017 and which will solve a lot of problems...

BNP Paribas Real Estate predicts that following the 2017 re-evaluation, the Uniform Business Rate – the multiplier used to calculate rate payers’ bills – will rise to a record 50p in the pound England, earning the government £26bn. It named retailers in Leeds and Bristol as likely winners from the next revaluation, with their bills likely to fall by 40 and 20 per cent respectively.

Mayfair and other prime West End offices are also set to benefit with no change in their rental values since the peak in 2008. However, retailers on Bond Street and Oxford Street face rises of 60 and 40 per cent. Offices in King’s Cross face a 79 per cent rise in rents.

Community generated land values.

All from today's Evening Standard:

Exhibit One (no link)

State schools in London risk becoming victims of their own success by pushing house prices up so high that teachers cannot afford to live near them, a senior mayor has warned.

Exhibit Two

A popular vegetarian restaurant is set to close after 40 years of trade in Covent Garden because the owners cannot afford to pay spiralling rent prices.

Food For Thought, in Neal Street, runs as a co-operative and counts celebrities and West End stars as regular customers.

Exhibit Three

The West End’s historic Chinatown will “disappear in five years” as oriental restaurants are squeezed out by rising rents and soaring property prices, traders said today.

The cheap and cheerful grid of streets lined with red lanterns and restaurants between Leicester Square and Soho have been popular with theatre-goers, office workers, late-night revellers and tourists since the 1950s.

Landlords Shaftesbury PLC, which owns 71 premises in the area, saw profits grow by almost 50 per cent in the six months to the end of March 2014.

A spokesman for Shaftesbury said: “The company, whose ownership in Chinatown has been built up over 50 years, has demonstrated a long-term commitment to supporting the local community through its strategy of creating lively, prosperous and interesting destinations in the West End for visitors, those working in the area and residents."

Exhibit Four

A run-down row of Edwardian villas once home to a community of squatters has been restored after decades of neglect — with some flats now up for rent at more than £3,000 a month.

The six blocks in Rushcroft Road, Brixton, were seized back by Lambeth council during violent clashes in 2013. During the eviction, squatters, some of whom had lived there rent-free for more than 30 years, fought with bailiffs, with furniture set ablaze in the street.

The 47 properties have been gutted and renovated in a project funded by the sale of half the block to private developers for a reported £2.5 million.