Reader's Letter Of The Week

It was in this week's City AM, but those have already gone to recycling so I can't give credit to the original author.

The gist of it was that there's no point squealing (The Guardian and The Daily Mailexpressgraph making common cause for once) that the UK government has decided to allow a foreign-owned business to print UK passports instead of British business De La Rue.

De La Rue don't just print UK bank notes  and passports. As the self same Guardian points out:

De La Rue also prints money for Qatar, Kuwait, the Bahamas and the Seychelles, among others...

As well as UK passports, the company manufactures identity documents and e-passports for countries as far apart as Trinidad and Tobago, Qatar and Afghanistan. On occasion it also uses its printing presses to make special-edition bank notes. A Star Wars note issued in support of the Together For Short Lives charity raised more than £185,000 in an eBay auction in November.

If all those countries followed the preferences of their own Guardian/Daily Mailexpressgraph protectionist tendencies, then De La Rue would be in real trouble.

Killer Arguments Against LVT, Not (437)

Patrick Hutton left this comment half way down a thread on Peter Thiel balking at the high rents in Silicon Valley:

An important apologerap* is the response to "won't a LVT exacerbate the high rent problem?" I know there'll be face palms of frustration at this question. But it's one we need to be able to answer off the cuff.

* That was a typo, PH explains what he meant in the comments.

I never replied to that comment because I haven't come up with anything pithy yet, despite having mulled it over for the past week.

Agreed, we are pretty certain that in absolute £-s-d terms, rental values will be much higher under an LVT-only system. Any reduction in taxes on output and earnings grows the economy (= higher rents) and rents will increase to soak up the tax saving.

Two counter-arguments why people in the productive sector will be better off are:

1. Instead of average earners in high wage areas paying 40% of their gross income in tax and then 40% of their net income in rent, leaving them with 36% of gross income as disposable, they will be paying 60% of their new, higher gross income in rent/LVT, leaving them with 40% of their higher gross income as disposable.

2. At present, landlords (and banks/depositors) collect rent (and mortgage interest) and spend it on themselves without actually producing anything, meaning a huge net cost to the productive sector. LVT is just the government collecting rent, of course, but most of it (assuming a reasonably efficient and honest government) will be recycled back to 'everybody' and most of 'everybody' are in the productive sector. Collectively, we will all be owner-occupiers.

So even though people in the very high wage areas might be paying 60% rent/LVT instead of 40% taxes on earnings, they'll be getting a lot of that extra 20% back in one way or another.

Neither of which is very pithy or off the cuff, I'm afraid. I'm sure some of you can do far better.

Trump v Amazon: War of the Rentseekers?

An interesting take from axios.com:

Trump’s deep-seated antipathy toward Amazon surfaces when discussing tax policy and antitrust cases. The president would love to clip CEO Jeff Bezos’ wings. But he doesn’t have a plan to make that happen.

Behind the president's thinking: Trump's wealthy friends tell him Amazon is destroying their businesses. His real estate buddies tell him — and he agrees — that Amazon is killing shopping malls and brick-and-mortar retailers.

And hopefully Dubai Intl Airport will decline into insignificance like Gander Intl Airport did.

From Traveller.com:

The first non-stop commercial flight between Australia and the UK has touched down in London. QF9 arrived at 5.02am local time on Sunday morning after a 17-hour long-haul from Perth.

A bit of aviation history:

Construction of the airport began in 1936 and it was opened in 1938, with its first landing on January 11 of that year, by Captain Douglas Fraser flying a Fox Moth of Imperial Airways. Within a few years it had four runways and was the largest airport in the world. Its official name until 1949 was Newfoundland Airport...

Gander is near the great circle route between cities of the U.S. East Coast and London. Starting in the 1940s it was a refueling stop for transatlantic flights to Scotland, Ireland and beyond, and continued in this role through the early 1960s and in some cases into the 1990s...

With the advent of jets with longer range in the 1960s, most flights no longer needed to refuel. Gander has decreased in importance, but it remains the home of Gander Control, one of the two air traffic controls (the other being Shanwick Oceanic Control in western Ireland) which direct the high-level airways of the North Atlantic.

Dubai is the modern equivalent of Gander. Flights have to stop there to refuel and most passengers never leave the airport.

What will happen to the rental value of land in Dubai? It declines - that rental value now accrues to airports at end destinations and their hinterlands as they will be more easily accessible.

Ricketty - Again!

Came across this post from Piketty. As it happens I am interested in Tobin and have signed up to Robin Hood. So I am not against using fiscal means (transaction tax) to try to control the banks. If that is what he means. Rather, it is this concluding paragraph that fills me with despair. He says:

'The political strategy which consists in transforming the wealth tax into a property tax (impôt sur la fortune immobilière), to avoid a complete suppression of the wealth tax, quite frankly leaves me speechless. There is no logical reason to levy a higher tax on a person who invests their fortune in a house or a property rather than in a financial portfolio, a yacht or any other type of good. We can only hope that elected members remember that they were not elected to be part of this kind of farce.'

My god - Mr Ricketty. Logical reason? How about Land and Rents are not merely 'Capital' for starters!

Another car hits house story

From the BBC:

Two members of a family suffered broken bones when a car ploughed into their home as they sat watching television.

Robert Beattie, his wife Mel and 15-year-old daughter Tash were sitting in their living room when the car smashed into the house. The woman and girl are recovering in hospital following Friday's crash.

A 26-year-old man from Worcester has been arrested on suspicion of causing serious injury by dangerous driving and released under investigation.

The road is easy enough to find on Google Maps, the house appears to be the one on the right as you turn in from Battenhall Road. So exactly the location most likely to be hit by a car.

Today I have been mostly...

... turning three old pallets into this. There's plenty more firewood in piles at the back (from a small tree we chopped down) but I can't be bothered schlepping it all over:

"Kerching!" shouted the Scottish Association of Smoke Alarm Installers

From the BBC:

Housing Minister Kevin Stewart said :

"Fires and fatalities from fires are decreasing but even one death is one too many*. Scotland already has rigorous standards for smoke and fire alarms developed over time, with the highest standard currently applied to new-build and private rented housing.

"The tragic events at Grenfell Tower last year emphasised how important building and fire safety is, which is why we brought forward our consultation on this issue. Now everyone will benefit from the same level of protection, whether you own your home, or rent from a social or private landlord."

In practical terms, the law will require private homes to;

* have at least one smoke alarm installed in the room most frequently used
* have at least one smoke alarm in spaces such as hallways and landings
* have at least one heat alarm in every kitchen
* have a carbon monoxide detector

In addition, there will be a 10-year age limit for alarms and all alarms will have to be ceiling-mounted, and should be interlinked.

* While an individual death is a tragedy and burning to death or dying of smoke inhalation is a pretty horrid way to go, there has to be some commonsense here. Last year, 36 people died in fires in their homes in Scotland.

Guesswork: Maybe all the extra alarms will halve the number of deaths, call it 18 lives saved a year. Multiply two million owner-occupied dwellings by £100 for installation = £200 million and amortise over ten years = £20 million a year. Average cost per life saved, over £1 million.

I once read that the UK government has its own arbitrary figure for the value of one life saved, and it was a lot less than £1 million, in other words, if some safety measure saves one life a year and costs £1 million, they wouldn't make it mandatory.

"Peter Thiel gripes about San Francisco rents"

The man is brutal, but brutally honest:

Outspoken venture capitalist Peter Thiel has trouble finding many people who agree with him in the Bay Area these days, but at a speech Thursday at the Economic Club of New York, Thiel may finally have found common ground with the average San Franciscan by railing against skyrocketing rents.

When asked about the future of the tech industry, Thiel speculated that the lure of Silicon Valley may no longer be enough to overcome the pain of punishing housing costs.

“At what point is this a feature and what point is this a bug?” asked Thiel, admitting that “it’s a feature if [...] everyone has to be where everyone is, where all the ideas are, where the capital is” and thus creating an enormous network.

Thiel also asked, “At some point does it just get so expensive that it doesn’t quite work, that you have to very quickly make money just to pay the rents?”

The venture capitalist complained that most of the money he invests in new companies these days goes not into product development but instead “to landlords, to commercial real estate.” He even referred to Silicon Valley landlords as “urban slumlords.”

Correct, that's called "agglomeration effects" which is what drives rental values.

His options are:

1. Relocate somewhere cheaper. Rents will be lower in the middle of nowhere, but he will find it more difficult to do business there. Over time, the economy and population in his chosen middle of nowhere should grow and mature, making it easier to do business but the rents will go up to match. So that doesn't solve his problem.

2. If you can't beat 'em, join 'em. If he first buys up the land on which to build Peter Thiel City, he wins on both sides of the equation.

3. Fight the system and campaign to shift taxes from output, employment and profits (and in his case, capital gains) onto land values.
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In reply to Lola's comment/question, see here Peter Thiel on Henry George, I think he has mentioned Henry George favourably on a few occasions, but usually as an aside or when prompted.

Lex Luthor bought the houses on the other side of the road...

... but he couldn't get sign off for nuclear weapons from Health and Safety, so engineered a few high tides instead.