Tuesday, 3 February 2009
Monday, 2 February 2009
Fakecharity of the day
The Telegraph runs an article headed "Childhood ruined by 'me-first' society, landmark report claims"
Right, this is becoming routine by now ... yada, yada, skim read the article until you get to this... "Bob Reitemeier, the chief executive of The Children's Society, which carried out the inquiry, said: 'This landmark report is a wake-up call to us all...'"
Next, go to www.charity-commission.gov.uk. Type in Children's Society, click the top one on the list (*yawn*), click 'View accounts', scroll down through the most recent accounts as far as the 'Financial Review' (page 19 - sometimes they put this information in the Notes after the proper income & expenditure statement, sometimes they hide it in the cash flow statement), skim read a bit further ... yada, yada ... here we go:
'Income from charitable activities' (local and central government) increased by £0.2Million to £9.3Million as government commissioning arrangements began to settle down.
Right. Next. Every now and then you find that one of these do-gooding bodies is actually funded by people who believe in it, but three times out of four it's a quango.
Counter-intuitive (4)
As we know, recessions tend to trigger protectionism. Mark's Any pointed out that the whole British job for British workers row that has flared up is tilting at windmills, to which I commented "While I am rabidly anti-EU, I can also see that international labour mobility is probably a good thing...".
Turning to Obama Bin Laden's call to "Buy American", Tim W compiled a list of people who were against the idea over at the ASI 'Blog. The ever readable Karl Denninger (an opponent of bail outs; a proponent of debt-for-equity swaps and as far from protectionist as you can get), came up with a good argument in favour of "Buy American".
To summarise, "... a big part of the current mess [is] a direct consequence of the mercantilism of China, India and many other "low-cost" producers in the world... Global free trade eh? Uh, not quite. These same nations have a hodge-podge of subsidies for local producers for their economy, thereby making import from us either uneconomic or, when they can't manage it that way, they put procedural, capital control and other hurdles up that make "free trade" a joke going the other direction. "Buy American" is perfectly legitimate for government spending in an economic stimulus bill. After all, is not the essential purpose of such a bill to stimulate OUR economy? It is not to stimulate the economy of CHINA, is it?"
Fair enough. On the one hand, if some producer is prepared to sell goods at below cost (which with China is undoubtedly the case), the response should either be "Great! Bring it on!" or the importing government could just slap import duties on the goods equivalent to the subsidy at the other end to level the playing field.
If you believe in free trade, we could allow those subsidised goods to come in without tarrifs, which surely frees up our own economy to shift to higher value stuff? As somebody once said, 'they sell us a hundred million shirts, we sell them one Airbus'. The problem is of course that not only did China and Japan export like maniacs, but they did it on credit - they lent a lot of the proceeds straight back to Western countries. That's why those two countries now hold one-third of global currency reserves.
If the West had had the good sense to invest that money in high tech stuff, then we would have benefitted doubly from the deal. The problem is, we didn't - governments allowed all the cheap credit to go into a property price bubble that doesn't add one dollar, one pound or one Euro to our economic output.
Hmm. But, as DBC Reed explained, diverting cheap credit away from land speculation and into more productive activities is actually quite simple...
I've learned something new today
VMR left this comment on my Fun Online Poll: "The MPC never set interest rates, they just followed 3 month Libor with a 1-2 month delay. As soon as they tried to control it, Libor went its own way. The MPC has no clothes."
Cutting and pasting the relevant data from The Bank of England's Statistical Interactive Database into a spreadsheet gives us the following chart comparing monthly averages of Three month LIBOR and the Official Base Rate since January 2000 (click to enlarge):
The data on monthly average Three month LIBOR goes back to January 1978, the relationship seems to have held ever since then, having only broken down in the last year or so (click to enlarge):
All the more reason to disband the Monetary Policy Committee, I suppose (currently slightly ahead on 40% of the votes).
Sunday, 1 February 2009
Fun online poll results: For a given level of taxation ...
Here are the final results to the simple question:
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For a given level of taxation (the lower the better, obviously), would you prefer:
Low and stable house prices; lower taxes on incomes; and a steadily growing economy? 87%
Wildly fluctuating house prices; higher taxes on incomes; and a boom-bubble-bust economy? 13%
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Believe me, the choice is that simple.
Some days I wake up hard as a hard right, free-marketeer and think "Why should 'wealth creators' - from the shelf-stacker or production-line worker all the way up to the innovators, entrepreneurs and the investors who make their new ventures possible - pay any tax on their incomes whatsoever? But we need taxes to pay for the core functions of the State. As nobody is forced to own houses or buildings or land in the UK - and landowners can hardly be said to be 'wealth creators' on a par with the shelf stackers etc. - a tax thereon would be a voluntary tax, and probably enough to cover the cost of those core functions."
Other times, I think "Maybe - besides paying for the core functions - we as a society are happy to chuck in a bit of redistribution as well, from the healthy to the sick; from the high earners to the low earners; from the working age to the elderly ..." but if you are going to go that far, why not add "... and from the property owners to the tenants."?
Whatever your point of view, it is quite clear from the past few decades that property price booms are not just the precusors to, but also the cause of the subsequent recessions (which a tax on property values would help prevent); and that high taxes on income (with the implied subsidy to property ownership) are in and of themselves bad things.
So the answer must be, a shift - however modest - from taxing production and incomes* to taxing land values. In case you think I asked a leading question, I ran three parallel Fun Online Polls last April that led to the same conclusion (albeit on a lower turn-out).
* Please don't waffle on about "taxing consumption". A straight user-charge on scarce resources is a 'consumption tax', fair enough. But a general tax on spending - like Value Added Tax - is just a cleverly disguised turnover tax on the value that the producer creates. With the narrow exception of land values, you cannot have 'consumption' without having 'production'. That's the beauty of it - you can tax spending or value received without deterring production.
"Non-essential flights"
This is another one of those pat phrases that people like to trot out to refer to something that can be universally regarded as A Bad Thing, a bit like people turning up their noses at "'urban sprawl", despite the fact that ninety per cent of us choose to live in urban or suburban areas.
But what on earth does it mean? It is perfectly possible to imagine a world without air travel. For example, had there been many more plane crashes in the early years then aeroplanes might have gone out of fashion in the same way as airships did after The Hindenburg crashed. Or there might have been better lobbying from the shipping and rail industries, and so on. In that case, can it be said that any single (non-military) flight is 'essential'?
But conversely, can it be said that any flight is truly non-essential?
A surprising amount of perishable goods are transported by air, epecially flowers, exotic vegetables from land-locked African countries with little infrastructure apart from an airstrip*. The produce may hardly be 'essential' to the rich consumer in the West, but that income is 'essential' for the grower in Africa.
Yer average Brit could survive without his week or two away in a nice, hot Mediterranean country (given exchange rate movements, it looks like a lot will have to manage without this year), so is that 'essential'? Perhaps not, but what about the economies of the Canary Islands or Malta or Cuba (OK, that's in the Caribbean), without air travel, their income from tourism, a large part of their GDP, would more or less disappear, so is each flight not 'essential' to their economy?
I suppose I could ask whether it is 'essential' for actresses to fly from London to Los Angeles to attend an award ceremony, not really, I suppose, but if that actress can further her career and future income by doing so, why shouldn't she?
Just sayin', is all.
* It is broadly accepted that the total CO2 emissions are often a lot less than what they would have been had the same produce been grown in electrically heated and lighted greenhouses in Europe, but that still does not answer the question of whether that produce is 'essential', of course it isn't - we could live off potatoes and do without flowers.
Fun Online Poll: What should the Bank of England do next?
I'll interpret the results of last week's poll later on, but this week's Fun Online Poll (prompted by Alice Cook) is something on which every politician and commentator seem to have an opinion, while ignoring the more fundamental point:
What should the Bank of England's Monetary Policy Committee do at its next meeting? (click link to vote or use widget in sidebar)
The first three options are the usual ones:
* Cut the base rate
* Keep the base rate at 1.5%
* Increase the base rate
What nobody seems to seriously consider is the fourth option:
* Disband itself and allow the markets to set interest rates
*rant*
I think that the notion that the MPC is 'independent' and only 'targets inflation' has now been completely and utterly debunked. Money supply was rising at ten per cent a year for the past few years, which they masked by simply moving the target from the Retail Price Index (that included mortgage repayments) to the Consumer Price Index (that excluded it), and even the old RPI didn't really reflect the insane increases in house prices.
Back in early 2008, when inflation was a worry but house prices had started sliding, the Governor of the Bank of England told the MP's Treasury Committee "I would like to see CPI include house prices in some form", but now that there is a risk of deflation (which tumbling house prices would exaggerate) there's no talk of it any more.
Further, we gave up trying to control exchange rates in the 1970s (bar a brief and unhappy interlude between 1990 and 1992), so who in their right minds believes that a committee of nine lacklustre appointees can possibly set an interest rate once a month for the next month in advance that somehow optimises anything? In the real world, interest rates change by the hour or by the minute, not by the month.
We also know that interest rates on savings accounts are less than one per cent in many cases, but credit card rates are over twenty per cent; similarly the interest rate that people have to pay on tracker rate mortgages depends as much on when they took out the loan as on the base rate itself (the spread over the base rate having increased almost as quickly as the base rate has fallen); apart from that, each borrower's mortgage rate is determined by how much equity he has left in his property.
None of this bears any relation to the number that the MPC might or might not scribble on their press releases next Thursday, remembering always that the interest rate that the BoE charges banks for borrowing is quite a different rate altogether...
*/rant*
