Thursday 31 August 2017

More Brexit LOLZ

From City AM:

Retail industry experts have warned gaps could appear on supermarket shelves if the government does not secure the right customs agreements and infrastructure investment required to prepare the UK for Brexit, retail experts have warned.

That's nonsense for a start.

Supermarket shelves are pretty much the most valuable and coveted space of all, which is why supermarkets effectively rent shelf space to food producers. They's be stupid to leave them empty, they'll just display something else instead (i.e. home-grown food).

A lot of stuff on supermarket shelves is from outside the EU and that manages to get here OK...

In a report highlighting the changes the UK will face on leaving the Customs Union, the British Retail Consortium (BRC) said the government must not "underestimate the complexity and scale of the challenge" the transition poses...

The trade body has estimated that customs declarations could rise in number by between 55m and 255m per year, and that an extra 180,000 companies could be filing declarations for the first time, if the UK leaves the EU on the terms set by the World Trade Organisation.

In addition, ports must be ready to handle a higher throughput of regulatory documents after Brexit to avoid delays.

Hey, let's not bother with all this regulatory crap. Of course we have to have spot checks at borders, that's what they're there for, but can't we just continue on the assumption that if something is good enough for the EU market it is good enough for ours and just wave it through?

Wednesday 30 August 2017

Killer Arguments Against LVT, Not (421)

A slightly more coherent one from the comments at Sackerson's:

Like most of our age, I can remember the introduction of poll tax. At the time council tax (rates) was going through the roof and had no bearing on demands or ability to pay.

Sadly the poll tax was equally badly implemented, yet if it had been implemented fairly it would have been a much fairer alternative and much better understood. The poor implementation and the "poll tax riots" by all those who never paid bugger all for the services they received scuppered the tax.

We are now faced with council tax that now that the brakes have been taken off go the same way as rates. What is basically wrong with council tax/rates is that only roughly 38% - and that was from the chief accountant in Suffolk twenty years ago - actually pay the tax; the reasons are all there to see but too long-winded to go into now, but in essence there was nothing wrong with the poll tax if it had been properly administered. After all this current tax is to pay for services enjoyed by all but less than half contribute!

The second half is incorrect. I don't know what the collection rates for Council Tax were twenty years ago, but unsurprisingly, collection rates are actually close to 100% and jsut about every home is liable for Council Tax.

He defeats his own argument in favour of a Poll Tax by saying that Domestic Rates had "no bearing on demands or ability to pay". A Poll Tax would have even less correlation with ability to pay. Most low income people own or rent lower value homes and smaller households own or rent smaller homes (or at least could choose to do so), so under Domestic Rates/LVT, the tax payable is nearly always affordable.

As we well know, riots aside, Poll Taxes are very difficult to enforce and collect, there's no way you can "implement it properly", let alone fairly. And they are antithetical to having a welfare system, before we try and collect a separate tax from low income people, it's much easier just to reduce their benefits/old age pension.

But the fundamental misconception is the idea that the government should charge for services provided to 'people' generally, especially if people are compelled to use those services or compelled to pay for something which they might not use. So charging individuals who choose to apply for a passport = OK, but if we had compulsory ID cards, then charging for them = not OK or charging people a fraction of the cost of upkeep of a local park (which they might or might not use) = not OK.


The government (or 'the state' or 'society') is the ultimate arbiter on who owns which bits of land and provides the framework within which rents can arise in the first place. So it should charge for benefits accruing to land (or landowners). Who generates the rental value? Everybody and nobody, so to whom does it belong? Everybody and nobody, but short of throwing the proceeds into the North Sea, the government might as well spend it on things which benefit everybody (welfare payments, health, education, whatever), or which benefit the economy in general.

It's impossible to spend money in a way which benefits everybody equally because a lot of the benefits of 'good' government spending or action lead to higher rental values (roads benefit or burden some bits of land and leave most others unaffected). But that doesn't matter because that extra value can be recycled back into the system (and the owners of the burdened land get a tax cut to compensate them).

Killer Arguments Against LVT, Not (420)

From a thread on the YPP Facebook group:

Will Smithy: [Land Value Tax] was one bit of the manifesto i didn't hugely agree with, VAT i believe is a fairly progressive tax as the more you spend the more you pay. I was very interested in all the VAT ideas because thats a great way to transfer wealth. I've read some interesting articles proposing raising VAT to 40% and ridding all other tax's and they offer just as convincing an argument as yours...

Maths isn't his strong point, he appears to think that government spending adds up to 170% of government spending:

Old peoples pensions and those who require regular medical attention thats 80% of the governments budget gone, the remaining UBI would be such a tiny amount it wouldn't be useful... I would be interested to see your numbers, you must have cut something pretty big because 90% of Government spending wouldn't really change under UBI i.e. Schools, NHS, Defence Transport, Agriculture, Debt payments.

[He then debunks a claim which we never made]

I just cannot see LVT providing £750B a year, so i think other tax's will be necessary. [My VAT proposal] aims to put money back into peoples pockets which puts money back into the economy for people to spend on other business's so the aim is the similar even if it does embrace VAT.

Wealth inequality is an argument in favour of VAT and against LVT, apparently:

Many people will go through life not owning a house but still paying plenty of tax

Asks a dumb question:

Would you like to see LVT paid annually or on death? I've seen both suggested.

He doesn't like the answer and shows his lack of financial savvy:

I just don't understand how it could work done annually. I mean i own a house i'm renting out to pay of my mortgage before i move in, but at the moment i get £1,600 Rent and pay £1,700 mortgage each month, i don't know how i could pay a monthly LVT ontop. Especially if for any reason i wasn't employed for a month or so.

He doesn't understand tax incidence:

Would rents just rocket up 2x to cover this?

He decides they would, despite Mark Foster explaining tax incidence to him:

For many low income people doubling rent would be much more significant than removing their tax.

All i can see is articles talking about why its good not how it would apply.

I refer him to the KLN blog, he now goes full Homey on us:

Only just started reading it, but already you've upped my tax from around 3.5k a year to £10,0000. I can imagine later in the reading i will find I'm not worthy of owning land and should be forced to sell to somebody earning more.

If he only pays £3,500 a year tax (income tax, NIC, VAT, council tax) then his earnings can't be much more than £10,000 a year. How did he manage to persuade the bank to lend him well over half a million quid? Like all his sums, it doesn't add up.

I don't understand why rents wouldn't rise by the exact amount of lvt in any area. I cannot find any example of any country who have tried this. The housing stock doesn't increase and demand doesn't decrease, it would just hurt the poorest.

Progressive taxing has shielded the poorest from most of the tax burden but I'm there's nothing to protect them from rent rises. And the transition would see too many people declaring bankruptcy,

There would be no public benefit for poorer people to sell their homes to richer people.

Scott Grant and Mark Foster step in again, to no avail and are brushed aside, he gets rantier:

I believe rents are indeed elastic, people NEED to live in London, i pay 50% of my salary in rent i could pay more. Likewise i could and would just raise my rent to compensate the last money. Anybody in North London would be paying a tax of £40,000 - £60,000.00 a year... you would just case an insane crash.

Might as well call for just renationalising all property and redistributing it based on your wish's if your planning to bankrupt everybody with a mortgage. I am now firmly in the opinion this would be a terrible idea and it seems the rest of the world is with me because nobody is pursuing this policy.

I point out for the second or third time that LVT is a straight swap for VAT and NIC. If people can afford to pay VAT and NIC they it must be pretty obvious that most can afford to pay LVT instead.

He plucks another figure out of the air and then claims it's wrong:

People spend nowhere near 20% of their income on VAT, so thats a silly comment

He refuses to accept that the YPP proposal under discussion would retain income tax.

I was all for the idea of taxing wealth ownership instead of wealth creation but i would do it though big inheritance tax's. I don't believe it would be unfair to tax somebody's estate at 90%, but a 3% LVT a year could end up meaning you owe more than your assets and millionaire renting wouldn't be putting in a fair share.

If 50% of the country would be bankrupt by a country decision, then its the governments responsibility to make sure it doesn't happen. theres an easy argument that its not for the greater good.

I just don't understand how anybody with a mortgage wouldn't go bankrupt, I have a Tiny Tiny Tiny mortage and i would be bankrupt i can only assume that means anybody with a larger mortgage would too.

It would even mean out government would default on its debt because our 1.8Trillion debt wouldn't be secured by 10Trillion in property anymore.

(I can't make head or tail of this next musing, but include it for the LOLZ: i wonder how much extra money the government could make if they just stopped making it perfectly legal / acceptable to pass your house onto your kids entirely tax free as long as you gift it to them.

I step in again: Rents would go up as other taxes are cut. The LVT is no more dramatic than higher mortgage interest rates, which most people can afford out of the VAT and NIC they save.

Despite doubling the rent he charges his tenants to cover the LVT, he won't be able to afford the LVT.  That's like the missing homes conundrum. Apparently he earns so little that his VAT and NIC savings will be negligible, but once he's paid off the mortgage he will earn more and the savings will kick in:

Sure, once my mortgage is paid i would have no problem paying a LVT, its just why fuck everyone with a mortgage. Isn't there a better why to implement without having to fuck over one part of society... any implementation of LVT would hit anybody with a mortgage hardest.

Perhaps you can think of a way to mitigate this and then more people might come round to liking your idea... You will mainly be hurting those who have just come out of what you are describing. First time buyers not hitting people who benefitted from Skyrocketing land prices. (my parents home went up 1,200% in value from 1990 - 2015)

I try numbers yet again which he completely ignores:

Avg FTB couple, home value to income ratio = 4, times 3% LVT minus existing council tax = 11% more of income in tax.

NIC plus vat is about 30% of earnings = 30% less of income in tax.

Overall, net disposable income after tax up by >20% or so.

That is not hurting, that is a massively helping.

He ignores that completely of course.

Tuesday 29 August 2017

Fun Online Polls: Protest marches; students and immigration targets

The results to last fortnight's Fun Online Poll were as follows:

What's the correct response if people with whom you disagree organise a march?

Ignore them, hope they get bored and perhaps organise your own event a few weeks later - 84%
Organise a violent counter-protest to ensure maximum coverage and encourage them even more - 9%
Other, please specify - 8%

Good, I was with the majority on that. People don't seem to get the "other, please specify" option, it got eight votes but only three people left comments, heck knows what the other five were voting for.

Thanks to everybody who took part (104 voters).
Just to change the topic a bit, let's look at the whole mess that Ms T May is making of immigration targets, in particular how students from overseas fit in.

The debate seems to jumble three topics;

a) whether we should have immigration targets at all (large employers against; nationalists and low-paid Brits in favour);

b) whether overseas students should be included. One the one hand, they pay top dollar to be here and should be welcomed like any other high-spending tourists IMHO; on the other, some of them overstay their visas (again, whether that is acceptable or not depends on your point of view)

c) what the actual figure for over-stayers is. For some reason the lefties (see linked article from NS) seem to think that the fact that the true number of over-stayers is very small (allegedly) is a reason to exclude them. Logic fail - if the number is so small, it doesn't matter whether they are included or not (seeing as the official target is a made-up number to start with, which the Tories have no intention of actually delivering).

So that's this week's Fun Online Poll.

Vote here or use the widget in the sidebar.

Monday 28 August 2017

Daily Mail on top form

From The Daily Mail:

'Mother' is arrested over murder of boy, two, who was found dead in an empty house as a man, 31, is held in police custody...

Officers were called to the £700-a-month two-bedroom rented property at around 12.05am yesterday to reports of a domestic incident.

Sunday 27 August 2017

Trigger's bench

The weather's far too nice for intellectual effort so I did this instead:

Saturday 26 August 2017

Daily Mail on top form

Multi-millionaire stockbrocker, 62, bludgeoned his sleeping wife to death on New Year's Day then hanged himself in the barn of their £1.2m farmhouse after she demanded a divorce

Thursday 24 August 2017

Thanks to the EU, scientists could flee Germany in the 1930s.

From The Evening Standard:

We should learn from post-war Britain, when scientists from abroad made this country a research superpower.

The article then lists some examples of famous scientists who fled Germany for England (primarily to Oxford colleges, of course) in the 1930s. You can't blame the author of the article for the by-line - post 1945, scientists went to the USA.

If British universities are to thrive for the next century, as they have done for the last, it is important to learn lessons from history... Of all the things that Brexit will deliver, let us all hope that it does not threaten scholarship, research and teaching. Things do not turn out well when that happens.

My* GCSE results

Art - B
Biology - A
Chemistry - A*
English language - B
English literature - C
German - B
History - B
Maths - A*
Physics - A

That's good enough to stay on and do his chosen A-levels, so it's good enough for me.

* Not literally mine obvs, but I was as nervous as The Lad when I said goodbye to him this morning.

Sunday 20 August 2017

"One in 10 adults owns second home, says think tank"

From the BBC:

At the other end of the scale, four in 10 own no property at all...

Those most likely to own a second home are baby-boomers, currently aged between 52 and 71. They also typically live in the south of England...

"Policy makers should consider what more can be done to ensure that home ownership doesn't become the preserve of the wealthy for generations to come," said Ms Gardiner.

The only thing which will sort this out is land value tax. Or at least a reintroduction of Georgism Lite, but that will take longer to have any effect.

If you're not prepared to support either of those, you might as well stop moaning. Ms Gardiner also makes the mistake of assuming that people own land because they are wealthy, when it is the other way round in most cases.

"It is a counter-intuitive idea"...

... says the BBC:

... but actually the economics textbooks do provide some support for the idea of unilateral trade liberalisation.

Patrick Minford on top form, Bremoaners on top form, BBC at its quietly biased best.

Ms Ebell's own research showed that if the UK left the single market but made unilateral trade deals with major developing economies...

A trade deal is of necessity bi- or multilateral. No such thing as a unilateral one.

Thursday 17 August 2017

Reader's Letter Of The Day

From The Metro:

Regarding the axing of the £200 million London Garden Bridge [MetroTalk, Wed]. We have lots of bridges. Stick some of those giant plant pots on them and, hey presto, you have a Garden Bridge* at a fraction of the cost.

Elle, London.

Should read "several Garden Bridges", but the point stands.

Wednesday 16 August 2017

Big Ben row - there's an easy solution or two.

From The Daily Mail:

The Prime Minister urged an 'urgent' review of the plans for renovating the Elizabeth Tower amid mounting anger... The Commons unveiled details of the renovation project on Monday, saying that health and safety concerns meant the bongs would not sound regularly again until 2021...

Speaking on a visit to the Queen Elizabeth aircraft carrier in Portsmouth after returning from holiday, Mrs May said: 'Of course we want to ensure people's safety at work but it can't be right for Big Ben to be silent for four years. And I hope that the Speaker, as the chairman of the House of Commons commission, will look into this urgently so that we can ensure that we can continue to hear Big Ben through those four years.'

I can imagine that construction workers don't want to be subjected to the sound of Big Ben every fifteen minutes for an entire shift for months or years, which is why they intend to disable the bell first, fair enough.

But to keep the traditionalists happy, why not just discreetly mount loud speakers somewhere on the tower away from people are working (shifting the loud speakers around as necessary) and play a recording? I assume the tower will be covered in scaffolding, so easy to mount and hide large loud speakers. Point them outwards, stick some decent sound proofing behind them, everybody's happy. Most people have only ever heard recordings of the bell so won't notice the difference.

My colleague at work had a slightly more radical suggestion - just employ construction workers who are deaf.

Top euphemising by the French

Emailed in by MBK from The Times:

A teenage girl was killed and four people were seriously injured when a man drove a car on to the terrace of a pizza restaurant near Paris last night.

Police said that it was a deliberate act but they did not suspect terrorism, adding that they believed the man was under the influence of drugs…

The driver of the grey BMW, a 32-year-old French national, was arrested at the scene in Sept-Sorts, 40 miles east of Paris… He told police he had weapons in the car, according to the radio station RTL.

Eric de Valroger, deputy regional prosecutor, said it was “highly probable” the driver was on drugs and deliberately rammed the car into those at the restaurant.

UPDATE Surprise, surprise, it appears that the driver was just a complete arsehole, rather than one with religious motives.

Tuesday 15 August 2017

Poor interpretation of statistics of the day.

From City AM:

New research seen by City A.M. has shown that most British househunters are snubbing new-build homes in favour of older properties…

But in a survey of 2,000 UK adults, 81 per cent said they were not keen on the prospect of living in a new-build, while 79 per cent thought the government should focus more on supporting the refurbishment of traditional properties.

Efforts to solve the housing crisis have resulted in a record 162,880 new homes being built over the past year. But 1.4m properties are currently empty across the UK, a 20-year high.

1. Define "new build". If it means completed in the last few months and for sale to the first occupant, it's about half a percent of the housing stock. So if 19% are happy to live there, that is quite enough demand and irrelevant.

2. People might not like "new builds" because they

a) are smaller than older ones, or built to lower standards (the old housing which was low standard has largely been demolished or refurbed since) and

b) older homes tend to be in the more desirable spots (either because that was the most obvious place to build them or the town has grown up around them) and new greenfield housing estates are a bit bleak for the first few years until shops, kids nurseries etc open up and buses are re-routed.

So it's not comparing like with like. The pricing mechanism will sort that out.
Also from City AM:

Taxpayers already dish out almost £5bn annually to the [railway] industry, despite the fact a relatively small number of people use the railways. Office for National Statistics (ONS) figures show households on average spend just £3.60 per week on rail travel, compared with over £30 on the operation of personal transport.

Actually, support for rail users is incredibly regressive too. The bottom fifth of households by income spend on average just £1 per week on rail. This compares with £11.20 for the top decile. Little surprise then that ONS stats show that the bottom fifth of households obtain £26 in rail subsidies per year, on average, compared with £173 for the richest. 

It stands to reason that increasing taxpayer support would exacerbate this regressive effect, with measures such as freezing rail fares or limiting increases effectively taking from working taxpayers to give to the rich.

His argument is, subsidies for rail transport are wrong, with which I would largely agree (I'm not quoting the bits I agree with). But the factoids he quotes do not particularly support his argument.

1. A small number of people commute by train because it is largely a south-east/London thing. Much higher population densities make railway more viable. In turn, while going by train is more expensive than by car (on a per mile basis), with higher population densities/land values, you need to focus more on efficient use of available land. So overall the extra cost of running a train network is less than the cost of the land that roads and car parks would use, so it is still a saving to the economy as a whole.

2. The statistic on lower earners spending less on trains is also facile. Firstly you can strip out the south-east/London effect. And nobody is going to pay thousands for an annual travel card to go and do a minimum wage job miles away. But it's worth it if you are commuting to a higher paid job.

3. Lower earning non-rail users are *not* subsidising higher earning rail users. Subsidies come out of tax, and higher earners pay a lot more tax. So it's higher earning non-rail users who are subsidising higher earning rail users.

4. For example, my wife and I spend about £4,000 a year on our London Transport travel cards and earn a fair whack between us. Half TFL's budget is from ticket sales and the other half is from subsidies out of taxes we pay. AFAICS, if they abolish the subsidy, double ticket prices and give us a tax cut, we would end up better off, with the upside that the trains would be less crowded. Sounds good to me (out of narrow self-interest) but that's not much consolation to all the people doing low paid jobs in London, who would clearly end up worse off. If the extra taxes I pay go on reducing travel costs for all the burger flippers and office cleaners in London, then that seems like a fair trade-off to me - but that is the very thing he opposes.

5. From a Georgist point of view, his statement that subsidies are "effectively taking from working taxpayers to give to the rich" is quite true if you mean that taxes on output and employment are spent on subsidising rail fares, which in turn boost land values in areas with a good rail network, which end up in the pockets of landowners. But I'm sure that's not how he meant it.

Pessimistic warning on the back of a learner driver's car

Monday 14 August 2017

Fun Online Polls: The Big Ship; Charlottesville

The results to last fortnight's Fun Online Poll were as follows:

When did The Big Ship sail on the Ally-ally-oh?

The Nineteenth of September - 12%
The Last Day of September - 83%
Other, please specify - 5% (3 votes)

Derek had the best answer - it sailed on the 19th of September and sank on the last day of September, source. OK, the dates are out but at least that way the words make sense.
This week's Fun Online Poll concerns last weekend's unpleasantness:

On Saturday the president condemned hatred and violence “on many sides” in his remarks, but did not directly single out the white supremacists, whose attempt to hold a major rally in Charlottesville, Virginia resulted in the governor, Terry McAuliffe, a Democrat, calling a state of emergency. Disorder including clashes with counter-protesters left more than 30 injured.

That's the key word here - counter-protestors. We observe that the president didn't single out the group who were trying to stifle other people's freedom to organise a rally/march either. Quite correctly, he remained above the fray. One wonders what sort of a frenzy The Guardian would be in if left-wingers had legitimately organised a rally/march and some right wing nutters had turned up to physically intimidate and attack them.

And so that's this week's Fun Online Poll:

"What's the correct response if people with whom you disagree organise a rally/march?"

Vote here or use the widget in the sidebar.

Sunday 13 August 2017

Daily Mail on top form

Police search £365,000 home of man in his 20s arrested over murder of dog walker

UPDATE The original Daily Mail report of the murder of a week ago helpfully includes a picture of the victim's house but does not mention what it is worth.

Saturday 12 August 2017

The clue is in the name

Spotted in a Moneyweek article about leaseholds, entitled "Money-for-nothing clauses will have to go":

In 2016 the average ground rent for new-build properties was £371 and £327 for older properties..... Keep in mind that that this is a fee for which nothing is received in return.

Er, isn't that why it's called rent?

The article also produced a lot of wailing on behalf of poor homeowners who were too stupid or lazy to check just why their new house was quite so affordably priced. They must have thought the developers were doing it out of the kindness of their hearts.

"What is more concerning is that as many as 100,000 leaseholders will have signed agreements that will see their ground rent double every ten years,.."

Well more fool them, either they didn't read what they were signing or they didn't "do the math".

Of course, once again, the government is expected to step in and protect people from their own cupidity.

Tory MP nails it.

From The Daily Mail:

Tory MP brands British universities 'self-serving cartels' as he quits Bath over vice-chancellor's £450,000-a-year paycheck

Friday 11 August 2017

An easy day's work for the courtroom sketch artist.

Scroll down to the picture in this fine Daily Mail article.

Disappointingly, no mention of what their house is worth. It's in north west London so must be a few bob.

Infrastrucure - chickens and eggs.

Lola, in a comment on Bayard's post:

"The Skye Bridge both confirm and confounds my contention that infrastructure spending comes after economic growth."

It does both, it's chicken and egg. From the point of view of an individual or a business, everything that everybody else does or provides is "infrastructure".

Sticking with the car example: there are car manufacturers, petrol stations, car mechanics, motorists and roads. The motorist needs all four things, he couldn't care less whether the government/taxpayer or private businesses provides the cars, petrol, repairs and roads. The car manufacturer doesn't care whether it's government/private sector demanding cars, or providing roads, petrol, repairs. Ditto the petrol stations and so on.

Which also illustrates that supply creates demand - not necessarily for the thing itself, but demand for complementary stuff, and the more complementary stuff there is, the more demand there will be for the thing which sparked it off in the first place.

The Skye bridge is, from the point of view of the traveller, vastly preferable to taking the ferry. On a static basis, it is difficult to justify spending £25 million of taxpayers' finest (yes I know it was a PPI PFI job but the taxpayer ended up paying for it) on a lovely bridge for 10,000 inhabitant = £25,000 each. Either take the ferry or move to the mainland.

But that's not the end of the matter.

The bridge (especially now it is toll free) has led to a surge in tourism. If the local NIMBYs don't succeed in choking this off, then with the benefit of hindsight, the bridge does justify itself. £25 million x ten percent amortisation/running costs a year ÷ 150,000 tourists a year = £17 per extra tourist, which looks like a great deal from Skye's point of view, the average tourist will spend a lot more than that.

And those tourists create extra demand for all sorts of things, which in turn creates demand for other things and so on, hopefully in a virtuous circle.

If only there were some elegant way of clawing back the £25 million via the tax system...

Wednesday 9 August 2017

Speed, bonny car...

Skye has a problem: it has become a victim of its own success as a tourist destination, and the some locals are unsurprisingly, suggesting that some taxpayers' money should be sent their way to try and help them sort things out. Others are talking about a "tourist tax".

Wait a minute though, how do those tourists get to Skye? Over the Skye Bridge of course. Surely it would be an easier solution to put a toll on the bridge and exempt residents from it. That way you'd get fewer tourists and the money raised could be put towards alleviating the problems caused by them.

Nothing so simple: the bridge was built under PFI and the resulting high tolls caused a revolt amongst the islanders which eventually resulted in the Scottish government buying out the operators of the bridge (who naturally made a large profit from it) and lifting the tolls. So it is unlikely that the tolls will be put back on the bridge any time soon.

There is none as stupid as the one who refuses to learn.

From the BBC:

"[Former finance minister Alistair Darling] said banks today were much better capitalised than in 2007 and regulators "more sharp and ready to intervene".

But he warned the next crisis was likely to come from "somewhere unexpected and from causes that haven't yet been identified".

"The biggest danger is complacency. And of course in a few years' time when institutional memories start to fade, and the people around have all gone and retired, then that's where the risk occurs."

There's no mystery at all, financial crises are caused by leveraged land speculation (or speculating in some other monopoly right or natural resource).

Doesn't everybody know this?

We can argue about how reliable the 18-year cycle is, or draw up a short-ish list of things other than land which have been behind certain credit bubbles, but that's just details.

All this "regulation" won't make the slightest bit of difference, banks' own capital was so dwindlingly small last time, it doesn't matter whether they've doubled it or trebled it, it is still dwindlingly small.

Tuesday 8 August 2017

"Wealthy San Francisco residents lose private street over tax bill"

Here's the background for many an interesting thought experiment, from the BBC:

Residents of a San Francisco private street where homes sell for millions of dollars have had the street itself bought from under them.

Presidio Terrace is now owned by two investors, Tina Lam and Michael Cheng, who snapped up the private road for about $90,000 (£69,039, €76,203).

The street - parking, pathways and all - was sold by the city over a $14-a-year tax which went unpaid for decades. Wealthy residents say they knew nothing about the sale until it was done.

(Clearly, in administrative terms, this was pretty appalling behaviour by the "city". If nothing else they should have first identified and contacted the beneficial owners of the street - the 'homeowners association', who are not exactly difficult to track down - and if they failed to pay the tax arrears, then as a quid pro quo, at least pay them the $90,000 proceeds less $944 outstanding tax, but hey.)

We are where we are.

The result is that residents no longer own the road, pavements, trees, or any of the common land - and might have to pay its new owners for parking.

The terrace, an oval-shaped private compound, is seen as one of the expensive city's most prestigious addresses.

Let's assume that the new owners own the street absolutely and can do what they like with it. The street itself is not of interest, it is the ransom value that matters.

Forget charging for on-street parking (the plots are big enough for plenty of off-street parking), the new owners can go the whole hog and do some text-book rent-seeking by setting up a toll booth at the entrance to the cul de sac.

The classic example of rent-seeking, according to Robert Shiller, is that of a feudal lord who installs a chain across a river that flows through his land and then hires a collector to charge passing boats a fee (or rent of the section of the river for a few minutes) to lower the chain. 

There is nothing productive about the chain or the collector. The lord has made no improvements to the river and is helping nobody in any way, directly or indirectly, except himself. All he is doing is finding a way to make money from something that used to be free.

If the average rental value of a house there is $300,000 a year, the average house has three occupants and the average occupant needs to access the outside world one hundred times a year, that means each time they pass they toll booth, they would be prepared to pay up to something like $500 ($300,000 a year). This reduces the net rent that the owner of an individual home can charge to more or less $zero.

In other words, in a Faux Libertarian free market, with thirty homes on the street the potential ransom value of the street is $9 million dollars a year, capitalised at 3% that's $300 million.

If the current residents refuse to pay up and abandon their homes, so what? There will only be on bidder for the vacant homes, so Ms Lam and Mr Cheng now own thirty lovely homes. They can parcel them up with the street and sell them for $300 million again.

(This is all something that Land-Value-Tax Man would sort out in his afternoon off, but it's nice watching one gang of 'property investors' being pitched against another).

Monday 7 August 2017

A veritable feast of Home-Owner-Ist double standards...

... for those who like that sort of thing, in The Telegraph:

Operating in the murky world of “strategic land” promotion, these firms prepare sites for development by doing the time-consuming work of gaining planning permission. It is then sold on “shovel-ready” to housebuilders...

According to Simon Hodson, head of residential land at JLL, while an average acre of agricultural land may sell for £5,000 to £10,000, land with planning permission for residential development is normally worth £1m-4m per acre, depending on its location and the amount of infrastructure and preparation needed before building.

It's The Telegraph and their ilk who insist on measures which push up land prices, are they so surprised when others try and cash in? If they wanted, we could put them all out of business tomorrow by collecting taxes from land values instead of employment and output, but that would go against Rule One.

These companies will then take a cut of 10-30pc of the sale value, depending on the size of the site. This means that the murky underbelly of the land market is highly profitable: in the year ending March 31 2016, Gladman made a pre-tax profit of £11.6m, while Gallagher’s was £79m in the year to June 30 2016.

So one group goes through the strain, hassle and expense of getting planning and banks 10-30% of the sale value and they are the baddies in the piece. Why no ire for the large landowners who take no risk, do precisely nothing and bank the other 70-90%?

When promoting land, these companies will seldom purchase it upfront, but instead either pay the owner an option for exclusive rights... The options don’t need to be registered anywhere, and they are not obliged to detail their deals in their results.

That's quite simply not true.

The approach of many of these land businesses put them in the crosshairs of “Not in my back yard” residents. Local newspapers are full of references to acrimonious planning meetings caused by Gladman’s plans.

NIMBYs oppose all new development, regardless who is behind it.

Late last year the former Archbishop of Canterbury, Lord Carey, accused Gladman’s firm of “reflecting the worst features of capitalism” when it applied for planning permission opposite his Berkshire home, disrupting his plans to sell up.

What was that bit about "do unto others"?

... by charging a premium for a clean site that’s ready to be built on, it forces developers to increase house prices to recoup the high outlay on land, while cutting the viability of building affordable homes.

“Land promoters deliberately pump the cost of land higher and higher, then reap the rewards when they sell it,” says Catharine Banks, policy officer at Shelter.

Nope. The actual builder starts with the ultimate likely selling price, then deducts build costs, the cost of "infrastructure and preparation" (as explained in the second paragraph above!!) and hoped for profit margin. The price he'll pay for actual land is a balancing figure.

Friday 4 August 2017

"How about an armadillo story?"

Asks Ralph, and submits this this splendid article to get the ball rolling:

A Texas man was wounded after he fired a gun at an armadillo in his yard and the bullet ricocheted back to hit him in his face, the county sheriff said Friday... The animal's hard shell deflected at least one of three bullets, which then struck the man's jaw, he said.

They couldn't find the animal afterwards, so I suppose it's possible that he missed all three times and the bullet which hit him had actually richoted off some other hard surface, but hey, that's not such a heart warming tale.

The lunatics have taken over the asylum.

From the BBC:

The governor of the Bank of England has said the banking sector could double in size but still needs tough regulation.

Mark Carney told the Guardian the financial sector could be worth 20 times the UK's economic output in 25 years.

He said: "If the UK financial system thrives in a post-Brexit world... it will be 15 to 20 times GDP in another quarter of century. Well then you really have to hold your nerve and keep the focus."

What he is talking about is gross assets, not net assets. In other words, if you add up the 'loans' made by all individual banks in the UK, it adds up to something like £7 trillion (five times GDP). This is wildly exaggerated as two-thirds of that is inter-bank stuff and made-up figures.

So if all UK banks were to merge into one large bank, the gross lending to the non-financial sector is about £2 trillion (a tad more than one times GDP). If you then deduct all bank liabilities (mainly deposits but also bonds), the true net worth is pretty much close to zero (balancing figure between two large unknowns).

Nonetheless, doubling the gross lending and borrowing is a superbly shit idea.

He said: "We have a financial system that is [now] ten times the size of this economy… It brings many strengths, it brings a million jobs, it pays 11% of tax revenue, it is the biggest export industry by some token... all good things.

The million jobs is a made-up number. There is a minority with truly essential/irreducible jobs (staff at the bank counter, people who fill up cash machines and people who keep the software working, a few loan officers to check the bona fides of borrowers) and the rest are completely superfluous.

The "11% of tax revenue" is another made-up number. Most of what banks collect is just rent from the productive economy, they are not adding anything much to it. If they were to collect less rent, the amount of tax they pay goes down but people would have more money to spend on other stuff which would generate the same amount of tax. We might as well levy income tax on burglars and say that they pay 1% of tax revenue.

We could go further and deduct the value of the government guarantee for banks, which has been calculated as being approx. equal to the total amount of tax that banks pay.

Thursday 3 August 2017

They own land! Give them money!

Who bears the burden of tariffs?

The debate raged somewhat inconclusively in the comments to yesterday's post.

Short answer is, nobody really knows - is it the exporter in the other country (who has to accept lower net selling prices) or is it the consumer in the importing country (who has to pay higher gross selling prices) or some combination of both? Similarly, tariffs must lead to a lower volume of trade, which doesn't just hurt the exporter and the consumer but has bad knock-on effects all round (which are nigh impossible to measure).

You can't generalise, except to say that a tax is borne by the less elastic factor - supplier or consumer. So domestic VAT is almost entirely borne by the supplier. I can choose whether to spend my hard-earned on taking the family to a local restaurant for a meal, or to the local cinema to see a film (so demand for either is highly elastic); the local cinema owner can't just turn off his screens and start serving meals and vice versa (inelastic).

(It puzzles me that the protectionists get so het up about WTO "standard tariffs" which average around 5% while ignoring the immensely more damaging effects of our domestic tariff (VAT) which is 20%, but hey.)

A factory in China bashing out TV sets for sale world-wide has, from its point of view, more or less infinite demand. If one or the other country puts a tariff on Chinese TV sets, well what do they care? The tariff is borne by the consumer in the importing country (especially if there are no domestic TV manufacturers). If volumes drop, the Chinese TV factory will switch to making radios or hair dryers or something else which suffers lower tariffs or which they can sell to non-tariff countries.

Compare that with tobacco companies. Demand is price inelastic (addictive), suppliers supply internationally so supply is elastic. Tobacco duties are passed on more or less 100% to the consumer, the domestic government collects it and producers (domestic or foreign) aren't really affected at all (barring from the small reduction in volumes).

Then we get to comparative advantage, which brings a third party into the mix - the domestic producer who is at a small cost disadvantage. If the tariff on the cheaper foreign product is larger then the cost difference, the cost is borne by consumer (higher price) and foreign producer (lower volume); a large part of the benefit of the tariff goes to the domestic producer (higher price and lower volume).

And so on.

Corruption and the Regulated Interventionist State

It's surprising what you find when browsing the interweb over the lunchtime sarnie.  This, for example.  I quote (apologies for the length).

A far stronger explanation can be found in the relationship between the level of corruption in society and the degree of government intervention in the marketplace. In a generally free market society, government is limited to the protection of the citizenry’s life, liberty, and honestly acquired property. The rule of law is transparent and assures impartial justice for all. Any other functions taken on by the government are few in number, such as a variety of public works projects.

Under these circumstances, government officials have few regulatory or redistributive responsibilities, and therefore they have few special favors, privileges, benefits, or dispensations to “sell” to some in the private sector at the expense of others in society. The smaller the range of government activities, therefore, the less politicians or bureaucrats have to sell to voters and special interest groups. And the smaller the incentive or need for citizens to have to bribe government officials to allow them to peacefully go about their private business and personal affairs.

On the other hand, the very nature of the regulated economy in the interventionist state is to short-circuit the free market. The interventionist state goes beyond protecting people’s lives and property. Those in power in the interventionist state intervene by using government authority to influence the outcomes of the market through the application of political force.

The government taxes the public and has huge sums of money to disburse to various programs and projects. It imposes licensing and regulatory restrictions on free and open competition. It transfers great amounts of income and wealth to different groups through sundry “redistributive” schemes. It controls how and for what purpose people may use and dispose of their own property. It paternalistically imposes legal standards influencing the ways we may live, learn, associate, and interact with others around us.

Those in the government who wield these powers hold the fate of virtually everyone in their decision-making hands. It is inevitable that those drawn to employment in the political arena [and their bureaucratic Satraps] often will see the potential for personal gain in how and for whose benefit or harm they apply their vast life-determining decrees and decisions. Some will be attracted to such “public service” because they are motivated by ideological visions they dream of imposing for the “good of humanity.”

In short the bureaucratic state is out for personal gain.  Well who'd thunk it?  Incentives matter and bureaucrats incentives are entirely skewed towards doing more bureaucracy. And when like the FCA (for example) they have effectively zero democratic, legal or financial accountability and no skin in the game, they become entirely self serving.

Wednesday 2 August 2017

Daily Mail on top form

Emailed in by MBK from the Daily Mail

A doctor has been charged with 118 sexual offences including sexually assaulting a girl under 13.

It is alleged that Dr Manish Shah, 47, assaulted 54 victims at a surgery in Havering, east London, between June 2004 and July 2013, when he was first arrested...

Shah, who speaks Hindi and Gujarati in addition to English and was not born in the UK, lives in a detached house in an upmarket area of Romford, East London, where the average home costs more than £800,000.

Land Registry records show that he bought the property for £305,000 in 1999.

"The perfect trade deal"

Spotted by Lola at The Adam Smith Institute:

We would, and we have here and elsewhere, go further and offer the design of the perfect trade deal:

1.There will be no tariff or non-tariff barriers on imports into the UK.

2.Imports will be regulated in exactly the same manner as domestic production.

3.You can do what you like.

4.Err, that’s it.

Now that we've solved the entirety of Britain's trade stance before breakfast we'll get on with the more difficult things later in the day.

The Sage in the comments claims that #2 is a kind of non-tariff barrier. Yes it is, but there is such a thing as *sensible* regulations, i.e. health and safety stuff like cars having to pass an MOT; you can't import nuclear weapons and so on.

Tuesday 1 August 2017

"Farmer in his 60s is trampled to death by a bull in an accident in his fields in North Yorkshire"

That's the second one today, from The Daily Mail:

* At around 3.20pm yesterday, police were called to a field south of Hutton Rudby

* Paramedics also attended to try to resuscitate the man, who was in his 60s

* Police Inspector Dave Murray said: 'Police are investigating this tragic incident'

Not sure what the police are going to do - question all the cattle to find the guilty party and then sentence it to death?

As a mark of respect, the Mail do not say what his farmhouse is worth.

The basic unit of government accounting...

From City AM:

The bank levy and bank surcharge, both introduced by Tory former chancellor George Osborne, raised nearly £17bn in the six years up to 2016-17 (enough to fund the starting salaries of around 60,000 nurses and 60,000 police officers for each of those years).

I ought to do more posts on this, people use this tiresome analogy all the time.

The calculation looks about right. £3 billion a year ÷ 120,000 nurses/coppers = £25,000, but what it actually highlights is the dwindingly small amount of money which the UK government actually spends on police and nurse's salaries (about half a million in total @ £30,000 each = £18 bn a year, less than 3% of total government spending.

It'd be much more fun if they left the poor old nurses and coppers alone and compared receipts from a randomly selected tax like the bank levy/bank surcharge with a less wholesome spending line, for example "enough to fund the UK's annual subsidies to agricultural landowners like James Dyson",  "enough to buy over a hundred F-35B Lightning II Joint Strike Fighters" or "enough to pay for 100 miles of high speed railway".

"Teenager, 19, dies after being crushed by a BULL in a horror accident on a remote farming property"

From The Daily Mail:

*Teenager, 19, died after being crushed by a bull on Monday morning

*The accident occurred on a farming property in Esperance, Western Australia

*The woman was struck into a fence railing by the bull, police said

There are lots of superfluous words in the headline, which distract from the underlying tragedy.