Teresa May - Reader Poll

1. Trying to wreck Brexit?

2. Completely f*****g useless?

3. Just stupid?

4. Is absolutely lovely and fragrant and trying to do the Best for Britain?

Absolute and relative values

Example One - Ted Heath. Having stoked the house price bubble in the early 1970s (the top of an eighteen year cycle), UK governments then had to spend five years deflating the house price bubble, but to avoid people noticing so much, what they did was create massive wage and price inflation; the correspondingly high interest rates kept house prices at the same absolute nominal level, but after five years wages (and all other prices) had doubled, so in relative terms, house prices had halved.

(Let's not get bogged down in precise dates and amounts, it is the principle that matters.)
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Example Two - people say a weakness of the Council Tax system is that it is based on 1991 values; in some areas nominal house prices have 'only' increased threefold since then, in others they have increased tenfold. Which leads people to say that there should be a revaluation.

As a matter of fact, because of the way the Council Tax system operates mathematically, a full revaluation to 2018 values would make little difference. This is because each local council has to collect a certain arbitrary £ amount. So let's imagine an area where all homes are worth roughly the same amount (a suburb consisting of three-bed semi-detached houses). In that area, the tax per home is simply the total £ amount divided by the number of homes. It does not matter whether you use 1991 value of £80,000 each or 2018 value of £320,000 each.

Clearly, there will be less valuable and more valuable homes in any local council area, but it is only relative values that matter. So if the selling prices of all homes in an area have increased by a similar percentage since 1991, the final bills will be much the same.
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Example Three - some time at the start of the Tory-Lib Dem coalition in 2010, a senior Tory (I can't track down exactly which one) said that one of their goals for government was to ensure that house prices would increase slower than wages, i.e. that in relative terms, housing would become more affordable.

UPDATE: RS in the comments points out it was their Housing Minister, who at the time went under the name Grant Shapps, who "spoke of a 'rational' market in which house prices fell in real terms, by increasing by less than earnings."
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Example Four - I had a heated discussion with another Georgist recently (he has posting rights on this blog so is free to put his side of the argument). He said that 'we' want to keep house prices (i.e. land prices) as low as possible. For sure we do, but my point was that to placate the Homeys, we must make the point that absolute house prices would not fall if the tax shift were done properly.

If absolute house prices stay the same and disposable incomes go up (so houses are much cheaper in relative terms), then everybody's reasonably happy. It must be clear that selling prices are largely determined by credit availability i.e. banks willingness to lend and borrowers willingness to borrow i.e. borrower's ability to repay mortgages. As first time buyer disposable incomes would be significantly higher (the LVT on the homes they buy would be half as much as the reduction in taxes on their output and earnings, not to mention the boost to the economy), the tax shift can be easily be tweaked so that house prices do not fall at all.

We ended up agreeing to disagree, but I like writing things down for posterity.

Dark fluid: this bit doesn't make sense

From Space Daily:

The preamble:

Our best theoretical model can only explain 5% of the universe. The remaining 95% is famously [what sort of justification is that?] made up almost entirely of invisible, unknown material dubbed dark energy and dark matter. So even though there are a billion trillion stars in the observable universe, they are actually extremely rare.

The two mysterious dark substances can only be inferred from gravitational effects. Dark matter may be an invisible material, but it exerts a gravitational force on surrounding matter that we can measure. Dark energy is a repulsive force that makes the universe expand at an accelerating rate.

The two have always been treated as separate phenomena. But my new study, published in Astronomy and Astrophysics, suggests they may both be part of the same strange concept - a single, unified "dark fluid" of negative masses.

Jolly good, now here's the logic...

Negative masses are a hypothetical form of matter that would have a type of negative gravity - repelling all other material around them. Unlike familiar positive mass matter, if a negative mass was pushed, it would accelerate towards you rather than away from you...

My model shows that the surrounding repulsive force from dark fluid can also hold a galaxy together. The gravity from the positive mass galaxy attracts negative masses from all directions, and as the negative mass fluid comes nearer to the galaxy it in turn exerts a stronger repulsive force onto the galaxy that allows it to spin at higher speeds without flying apart.

That's a poor explanation. How can positive mass attract negative mass, but negative mass repel positive mass? Either the two repel each other (being mirror images)... or the two effects would cancel each other out.
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Greater minds than mine reckon that there's no such thing as gravity anyway: space-time is bent by mass and objects travel 'downwards' to where time is passing more slowly (where there is more mass slowing time down). Just like a log which is floating down a river will come to rest in a static pool on the bank of the river if given half the chance.

So negative mass would just have the same effect on matter with negative mass. The logical conclusion would be that matter with positive mass would perceive time as passing more quickly if it were near negative mass, leading to the repulsive effect.

And what if you manage to force negative and positive mass matter together and mix it together, does it then have zero mass?

Clean Brexit 'Cliff Edge' Fallacy

The fallacy of the 'cliff edge' when (if?) we leave the EU without a 'deal' with it.

Evidence 1.  Chat with major insurer underwriting admin. bod in Major Corporates business.  They are targeting having all their contracts sorted out to accommodate EU and UK law by 1st January 2019

Evidence 2. M&G sorting out their funds https://www.mandg.co.uk/investor/articles/reminder-planned-fund-suspensions/

I just bet that all those supposedly 'fragile' supply chains will also be sorted out well in time as well.

Markets always eventually sort out the chaos caused by bureaucrats - if they are left alone to do so.

Today's statement of the obvious

From the BBC:

Bush was almost certainly the last US president to have fought in World War II.

Killer Arguments Against LVT, Not (450)

Two equal and opposite ones:

1. Landlords will just pass on the tax to their tenants.

2. House prices will fall, people will be trapped in nequity, banks will go bankrupt, world will come to an end etc.
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Clearly, if 1 is true, then house prices would be unaffected, as the net income/benefit from owning one is unchanged.

So at least one of them is untrue, or the truth is somewhere in the middle. Maybe rents would go up a bit and house prices down a bit.

(Also, falling house prices would A Good Thing overall and any transitional issues could easily be smoothed out, but let's assume it's A Bad Thing.)

Having thought about it for a while, prediction 1 will, after the event *appear* to have been correct - provided there are equal and opposite cuts to VAT and National Insurance (and minor taxes like Council Tax).

Rents are set by the disposable incomes of tenants who are in work; an average tenant household would have £15,000 more disposable income, so we can assume that rents would increase to soak up half that, which (coincidentally) would cover the LVT on an average rented home.

This is neither A Good Thing nor A Bad Thing, nor is it an argument against (tenants would still end up a lot better off; landlords would not lose out).

We can therefore safely conclude that KLN 2 is quite simply not true (regardless of whether it would be A Good Thing or A Bad Thing):

a. If net rents stay the same, then the price which landlords would be willing to pay for a home would also be unaffected.

b. It's mortgage lending which is the main driver of house prices. Buyers are in a borrowing arms race and whoever is prepared to borrow the most gets the home, banks are willing to lend up to an 'affordability' pain threshold i.e. mortgage repayments should leave borrowers enough to live on plus a bit of a cushion.

Borrowers' disposable incomes, even after deducting the LVT they will be paying, will be considerably higher, so if anything, the amounts which banks would be willing to lend will go up, meaning that it is possible (but unlikely) that house prices would actually go up slightly.

c. Clearly, if most people's disposable income goes up, then some other people's income will go down, i.e. semi-retired and retired in more valuable homes. But such people are unlikely to be taking out mortgages as banks don't like repayment periods which extend into people's retirements.

Therefore, their fall in disposable income has zero influence on house prices, they will be trading down to minimise their LVT bills and free up cash i.e. the opposite of taking out a mortgage to trade up.

Remainer non-logic

PaulC 156 here:

And the fact that the average polls are showing a swing toward remain does the case no harm.

More especially so as the majority of those who've died since the referendum would have been leavers and the majority of those formerly too young to vote are remainers. So the Young People get to decide. Can't be too bad can it!

It is quite true that older people were more likely to have voted Leave and younger people more likely Remain.

It is also true that a few hundred thousand of the older people who voted Leave two-and-a-half years ago have since died, and a few hundred thousand more younger people, who are more likely to vote Leave, are now eligible to vote.

So another Referendum is a slam dunk for Remain then?

What this ignores is that a few hundred thousand middle aged people who voted Remain last time will have crossed the Rubicon and would vote Leave if there were another Referendum; it all cancels out neatly.

"Sir David Attenborough: Climate change our greatest threat"

From the BBC:

The naturalist Sir David Attenborough has said climate change is humanity's greatest threat in thousands of years. The broadcaster said it could lead to the collapse of civilisations and the extinction of "much of the natural world".

He's right, but for the wrong reasons.

It appears that we are teetering towards the next Ice Age (h/t paulc156). When that starts - in a few centuries or a few millennia - the outcome will be far, far worse (for mankind) than anything that the Warmenists have dreamed up:

With grim inevitability...

From the BBC:

If MPs don't back Theresa May's Brexit deal there could be another EU referendum, Michael Gove has said.

The leading cabinet Brexiteer said Mrs May's deal was not perfect - but if MPs did not vote it through on 11 December there was a risk of "no Brexit at all". He told the BBC's Andrew Marr show there may now be a Commons majority for another referendum.

Which is what I expected to happen all along.

Heck knows what Gove's motivation is here - on the one hand, he wants to appear loyal to May by backing her deal, his wording implies that he thinks that having another Referendum is A Bad Idea.
We know of course that a majority of MPs are Remainers who would be delighted at having the result of the previous Referendum declared null and void and having another go at Project Fear (which backfired on them so spectacularly last time).

So this is a motivation for MPs to vote against May's deal, which from May's point of view looks like a fail, but actually from her point of view it's a win (she campaigned for Remain). Assuming that Gove is still a Leaver some twisted opposite logic applies.

My cover for this year's Xmas CD