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Tim Worstall

Allen Stanford\’s defence

I\’ve forgotten.

Stanford first began complaining of “extensive retrograde amnesia” from the jailhouse attack sometime after he arrived at Butner in February, according to the prosecutors’ filing. “Stanford has recently repeatedly claimed being ‘completely amnestic to his life prior to the assault, stating that 59 years were stolen,’” Costa said in the filing, citing the Butner report.

Stanford claimed to be unable to recall life events “including his romantic encounters with various female partners, past vacation and holiday activities with his children, visits with famous politicians, as well as details of his business and banking operations,” Costa said. Stanford claimed family members had to “educate” him about his previous life, and the former billionaire “indicated feeling bad after being informed by his family that he was known as a ‘womanizer,’” Costa said, citing the Butner report.

Snigger.

You know those hundreds of billions thrown at the Wall Street banks?

Made a profit.

CBO estimates that the net cost to the federal government of the TARP’s transactions, including the cost of grants for mortgage programs that have not been made yet, will amount to $34 billion. CBO’s analysis reflects transactions completed, outstanding, and anticipated as of November 15, 2011.

That cost stems largely from assistance to American International Group (AIG), aid to the automotive industry, and grant programs aimed at avoiding home foreclosures: CBO estimates a cost of $59 billion for providing those three types of assistance.

But not all of the TARP’s transactions will end up costing the government money. The program’s other transactions with financial institutions will, taken together, yield a net gain to the federal government of about $25 billion, in CBO’s estimation.

AIG, GM and Chrylser, that\’s where the losses are.

The banksters aid, turned a profit.

Remind me what those idiots are doing in Zucotti Park again?

Women suing the undercover police

I do have to admit that I don\’t quite get this.

Birnberg Peirce and partners have commenced legal action against the Metropolitan Police on behalf of eight women who were deceived into having long term intimate relationships with undercover police officers.

The five undercover officers* were all engaged in infiltrating environmental and social justice campaign groups between the mid 1980\’s and 2010 and had relationships with the women lasting from seven months and the longest spanning nine years.

The women assert that the actions of the undercover officers breached their rights as protected by the European Convention on Human Rights, including Article 3 (no one shall be subject to inhumane and degrading treatment) and Article 8 (respect for private and family life, including the right to form relationships without unjustified interference by the state).

The women are also bringing claims for deceit, assault, misfeasance in public office and negligence, and seek to highlight and prevent the continuation of psychological, emotional and sexual abuse of campaigners and others by undercover police officers.

That the women are hurt, have been in some sense betrayed, yes, I get that.

But this is men lying to get women into bed. Naughty, shouldn\’t be done, but trying to make it illegal rather upends the human experience doesn\’t it?

Portuguese plumbing

So, the wifie didn\’t sleep well. Feeling a bit Meh.

\”I\’m off for a deep hot bath. Maybe then I\’ll feel like doing the housework\”.

\”OK, although having the bath before the work is interesting….\”

An hour later. Wifie on sofa.

\”Didn\’t the bath make you feel better?\”

\”Yes, but how can I clean the floors without hot water?\”

Umm…

No, I\’m old enough and wise enough to know that technocratic solutions to boiling water are not what is called for here.

For Hugo Hadlow

Who asks about my views on what actually should be done about the euro crisis.

OK, we have two entirely different things here, the short and the long term. They\’re all tied up with each other, of course, but they are different things and need different answers.

1) Short term.

A falling, at least a rapidly falling, money supply is a sufficient occurence to have a recession shading into a recession. It is not a necessary one, there are other ways that people can fuck up to cause these. It is however sufficient, even if not necessary.

Money supply in the periphery countries, in the Latin/Southern eurozone countries is falling rapidly. I\’ve seen numbers like 17% and 24% for Portugal and or Italy.

This will cause recession/depression, the implosion of the banking systems, vast and massive decreases in the living standards of the population.

This is, if you\’d like to label it, the Milton Friedman analysis of the Great Depression itself.

The solution is not to allow the money supply to fall. The central bank must, as the Fed and BoE did not last time around but have this, and as the ECB is still refusing to do, print money, hand it to any bank that asks and simply get on with it.

This is lender of Last Resort style stuff and is the reason that we actually have a central bank with the ability to print money.

Austerity, reining in government spending, all being good little Germans, none of these matter at this point, have any effect at all on what is happening. They\’re all irrelevant at the one to three month timescales we\’re talking about. As are politics, fiscal responsibility pacts, jury rigged eurobonds and all the rest.

2) Long term.

The euro simply is not an optimal currency area. It is possible that it could become one, in a few decades, if the southern/Latin/periphery countries all had the supply side revolutions they so desperately need. Fiscal austerity can get them there: depress living standards enough and even Italian pharmacists will allow a bit more free market.

Similarly, it is possible to deal with the alarming disparity in the productivity of labour. What the Germans did for example, a decade long grinding down of wages while investing heavily in the education/capital goods that increase productivity. Except that the gaps are large enough that this will take two to three decades.

It\’s even possible to do this through Keynesian stimulus (yes, I know, spit, spit) although not in the manner Keynesians think of it. Fiscal stimulus to bring about growth won\’t do it. Fiscal or monetary stimulus that increase German/Dutch/Finnish etc inflation, particularly and especially wage inflation, over and above Portuguese/Italian/Greek etc would do it. We\’d need a nice 2 or more % gap in that labour costs inflation rate (which will have to fight against the general tide of improving labour productivity anyway, so nominal will be higher than this) for a decade or two.

If anyone can think of how to engineer that please let everyone know, we\’d all love to hear it. Can\’t think of any mechanism that applies to all of the eurozone that will achieve this, specifically higher northern wage inflation than southern.

Or we could have full fiscal union, make the EU like the US Federal Government. That does mean being ruled by Brussels for evermore. It\’s also true that very serious US economists have estimated that it took the US some two centuries to become an optimal currency are by this method. Probably wouldn\’t take as long in a modern economy but think of having solved it this way by 2050 or so.

Maybe.

Or, break up the euro, return to national currencies and let the currency devaluation take the strain.

Of these long term solutions I personally benefit from the supply side/differential inflation/full fiscal union methods. I earn in $ and £  and the worse the economy gets the better off I get relative to those around me.

I very definitely lose from the break up the euro one. I own property in Portugal that would fall substantially in value were that to happen.

Thus my recommendations for policy action.

Get on with printing to sort out the short term money supply thing. Break up the currency to deal with the long term. On that latter, yes, it is indeed possible to find all sorts of economic orthodoxy to say that we shouldn\’t do that. And, quite frankly, fuck orthodoxy when you\’re going to condemn a hundred million or more to three decades of grinding austerity.

Economics, even economic orthodoxy, is a tool, not a Bible.

Thus sayeth The Worstall. Largely cribbed from Milton Friedman/Scott Sumner/Ambrose Evans Pritchard. Those  three roughly cribbing from the one previous in the list.

This is going to be absolutely fascinating

As Ritchie says:

A little over a year ago UK Uncut began its protests, and the world looked on, bemused. Unsurprisingly, I wasn’t: I knew they’d hit the zeitgeist, although they and Occupy have done so in ways I could never have imagined. It’s been my pleasure to support both movements in the last year.

Tomorrow is a mass day of action by UK Uncut. Vodafone remains a rightful target. And the pressure is working. As the Mail reports:

Deals struck with the tax authorities to wipe billions of pounds off company bills are to be investigated by a former high court judge.

Sir Andrew Park will scrutinise the tax settlements of ten companies – including Vodafone and Goldman Sachs – following allegations that agreements were made between the firms and Her Majesty’s Revenue and Customs to write off unpaid tax bills.

That’s the good news.

And it’s the right news we need to hear.

It is the news we need to hear. Absolutely correct.

Sir Andrew knows what he\’s talking about on tax.

called to the Bar Lincoln\’s Inn 1964, bencher 1986, in practice at Revenue Bar 1965-97, recorder of the Crown Ct 1989-95, judge of the High Ct of Justice (Chancery Div) 1997-2006

Now I\’ve my colours pretty much nailed to the mast on this subject, as has Ritchie. It\’s going to be terribly exciting to find out who is right, isn\’t it?

Further, the Public Accounts Committee report on the subject was apparently leaked to The Times for this morning. Anyone actually cough up for that paper and want to tell us what it says?

How America is strangling the state

Sounds like a bloody good idea but Jeff Sachs is against it for some reason.

He\’s also, for an economist, remarkably slapdash with his figures.

Outlays on public services and investments other than health care and pensions have been badly squeezed.  Non-security discretionary programmes, including education, early childhood development, energy, environment, roads, power, ports, dams, training, science, Nasa, technology, the judiciary and much more, have been hard hit. In the late 1970s, 5-6 per cent of national income was directed to these areas.  Reagan slashed that to a mere 2-3 per cent of national income.

Complete and total bollocks. That is Federal spending on these matters. The idea that the US spends only 2% of GDP on education alone, let alone the rag bag of other things, is absurd. Complete loonie tunes.

Republicans claim that America’s low taxes and small government have spared it from the European disease. This claim is utterly false. The US is vastly outperformed by the high-tax-and-spend countries of northern Europe: Denmark, Finland, Germany, the Netherlands, Norway and Sweden.

Cockweasel lies. Tom compare solely US Federal expenditures with all levels expenditures of other countries is just bollocks. And we should note that the health care, schools etc systems in Denmark qand Sweden (the two I know about) are funded at the local level, not the national. Actually, just as they are in the US for education.

These countries tax heavily but also spend efficiently. They buy superb public health, quality childcare, proficient public education, quality infrastructure, and remarkable social equality. The results are lower unemployment rates, smaller budget deficits, much lower poverty and smaller trade deficits than in the US. These countries also enjoy higher intergenerational social mobility, life expectancy and life satisfaction than the US.

Now that part is true: and the fact that they do it through Lander, counties, communes, rather than through the national government might be a useful lesson to learn. Mr. Economist.

No Sir Simon, No

I believe you\’ve got your history a little telescoped here.

The fact that no remedy has seemed to work has had remarkably little impact on policy. During the Depression Milton Friedman\’s call for an increase in money supply proved ineffective when that increase was merely hoarded by stricken banks. Thus pumping up the banks is exactly what the Bank of England is doing today: to the same minimal effect.

During the Depression Friedman was a newly minted MA. He wasn\’t calling for and certainly no one would have been listening to any such calls. His great innovation of the period was in fact the invention of with holding (or PAYE as we call it) for income tax. Something he came to regard as a very large mistake in fact.

And, err, the Fed didn\’t pump up the money supply at the time and the banks didn\’t hoard the money.

It is his work with Anna Schwartz, published in the 60s, which actually analyses what was done and what should have been done and leads us to thinking that we should pump the banks full of money in such circumstances.

You might think this is all pedantry but it\’s really rather important. If the banks had been pumped full of money and we\’d still had the Depression then that would indicate that pumping the banks full of money was not a solution for falling into a Depression. Thus not a solution for us now. However, they weren\’t, so it still might be: we\’ll obviously have to wait and see whether it\’s a sufficient solution.

Likewise in the 1920s and 1930s governments that forced national budgets into balance through austerity saved their banks, but exacerbated stagnation and slump.

Nope, banks fell over all over the place. Austerity, along with that not expanded money supply, helped cause this.

Sweden nationalised, divided and recapitalised its banks.

And, let us remember, promptly privatised them again.

Yes, shareholders should lose everything when their management screws up. That\’s capitalism. But get the banks back into the private sector: otherwise all lending decisions are going to be about who you know in politics: one of the fastest known methods of entirely corrupting the entire political system.

The question is not what history says but who is listening.

Erm actually, I think it\’s that Santayana thing: who actually remembers it. For mis-remembering it is really quite dangerous….you know, thinking that in the 30s the money supply was hugely expanded but the banks just sat on hte money for example?

 

Amusing Froggie Nonsense

French policymakers were angered last week when Standard and Poor’s, a ratings agency, threatened to downgrade eurozone nations — including France — if leaders did not act urgently to address the single currency crisis.

But in an interview with Le Télégramme, a French regional newspaper, Mr Noyer said the downgrade did not appear “justified in regard to the economic fundamentals”.

“Otherwise, they should start by downgrading Britain which has more deficits, as much debt, more inflation, less growth than us and whose credit is collapsing,” he added.

Yes, and Brtiain also has it\’s own printing press. So we cannot in fact run out of money. We do not have to default: we can inflate the debt away.

Agreed, the creditors will still lose their money but that\’s not quite what the ratings agencies are measuring.

That the Head of the Bank of France doesn\’t get this (or chooses to not let on that he does) shows one of the problems that the whole eurozone has. The denial of basic economic truths.

In which we shoot down one of Ritchie\’s assertions

That figure is the share of US national income that goes to workers as wages rather than to investors as profits and interest. It has fallen to its lowest level since records began after the second world war and is part of the reason why incomes at the top – which tend to be earned from capital – have risen so much. If wages were at their postwar average share of 63 per cent, workers would earn an extra $740bn this year, about $5,000 per worker, according to FT calculations.

OK, well, the FT gets that wrong because income and profits are not the binary division of national income. But us profits as a share have indeed been rising, so we\’ll, for the moment, let them get away with that.

However, Ritchie then goes on to comment that:

And you wonder why people are angry? They know the system is abusing them, because it is. And they know that this is straightforward exploitation. Because it is.

And it’s worse in the UK. Our labour share is 53% (from memory).

No wonder Occupy resonates.

Now, where’s the Labour Party?

And it is indeed true that the labour share of income in the UK is down. However, as before, it\’s not actually a binary division into labour and capital shares. It\’s labour, sales taxes, subsidies, self employment income and employers\’ national insurance plus the return to capital. Some of self-employment income is profits and some isn\’t, so adjustments should be made for that. Ooooh, lookie here:

There are only a few countries
where the profit share seems to have lacked an upward trend: Belgium, the Netherlands,
Portugal, Sweden and the United Kingdom (bottom panel of Figure 1).

That\’s after the adjustment.

So, if the labour share of income has fallen but the profit share hasn\’t risen, what has happened?

Well, obviously, employers\’ national insurance has risen and so has VAT.

Have employers\’ national insurance and VAT risen? Why, yes, they have.

That\’s where that missing part of labour income has gone: in taxes, to government.

 

 

Wll there\’s your problem then

So, CEO pay has rebounded after a year of decline followed by a year of stagnation. But with median increases in remuneration of the order of 35 to 40%, the real question is: were the increases justified by performance? In order to determine this – and take the long view – I looked at pay movements and stock price performance over the last three years.

The decline in the economy in 2008 and 2009 outstripped the decline in CEO pay, by considerable amounts. In 2008, for example, the Russell 3000 Index was down by 37.3%; total realized pay (this includes salary, bonus and realized equity pay such as stock option profits) for CEOs fell by 6.34%.

But in 2010, when stock prices had begun to recover, the increase in CEO pay has outstripped the rise in share values. The Russell 3000 was up by 16.93%, but CEO pay went up by 27.19%. This differential, which always seems in favor of CEO pay, should give shareholders – whose investments are not subject to the same economic cushion – pause for thought.

OK, so let\’s think about it then.

However, it is profits made on the exercise of stock options that continue to drive today\’s largest pay packages and largest increases as grants made nine and 10 years ago (when options were much more popular) continue to mature. Eight of the top 10 highest paid CEOs made the list because of option profits.

So there\’s your problem then. You\’re measuring executive compensation over a three year performance period at the same time as you say that the major determinant is share options over an 8-10 year performance period.

Now go away and do your research properly you ghastly little boy.

On the meaning of localism

Strange:

Clegg\’s announcement, ironically, came shortly after local government secretary Eric Pickles made clear that, after two years of a council tax freeze in England, he will intervene if authorities approve rises above 3.5% next year. Using new legislation, he will order local referendums to get approval from electors for any increase above this level. Localism? Forget it.

Is there some trange version of lefty land where asking the locals is not localism?

Mr John Band to the courtesy phone please, Calling Mr. John Band

This column is complete and total garbage.

I\’ve lost count of the number of rows I\’ve had about that, many in public, one live on telly, during which the broadcaster Jonathan Maitland said this was a problem of education: if she knew how to shop better she would have been able to afford a more balanced diet. This is total tripe (which, although famously cheap because it is famously disgusting, is still probably more expensive than a Big Mac); certainly, you could shop differently with the same money and win the approval of nutritionist Gillian McKeith, but if your aim is to avoid being hungry, you could not do that more cheaply.

I understand this strenuous avoidance of reality. Once you accept that crap food is an economic, not a moral choice, you have to accept a whole raft of unpleasant outcomes as a function of deprivation, not an illustration of a lack of backbone. You have to accept that 24,000 \”lifestyle-related\” yearly deaths from diabetes are related not to sloth but to poverty. Sure, it\’s still a lifestyle, but it\’s not a choice. You have to accept that the education agenda against obesity – vegetables and regular exercise – will never work (that should be obvious, just by looking at the data or, failing that, just by looking around).

It is vastly cheaper in terms of money to eat non-processed foods. According to t\’internet this is 540 calories. For £2.39. This being a Big Mac.

Which is hugely expensive when compared to what can be done with a bit of bulk buying/cooking. Rice, onions, garlic, peas, sweetcorn maybe, add some ham (Iceland does big packs of, what 800 grammes of good ham offcuts for £1.75?) and you could feed 4 people as much as they wanted to stuff down their faces of risotto (or risotto like at least) for well under a tenner.

There really is a reason that things like pizza, stews, risottos, spaghetti, curries, pilafs and so on exist. They\’re peasant food: lots of calories with enough (but not much more to be honest) protein and vitamins, some taste (the whole point of the cooking methods is to give them that taste) and above all, they\’re cheap.

What they\’re not though is instant. They\’re absolutely fabulous if you\’re cash poor, not so much if you\’re time poor.

But that\’s a very different matter, isn\’t it?

Damn, you can even make a hamburger, chips and beans with it, a soup and a pudding for what MaccyD\’s charges you for the Big Mac alone. And there\’s absolutely nothing at all nutritionally wrong with a hamburger made from real identifiable meat and bread that has actually been within sight of wheat.

There are parts of the world where bad nutrition certainly is an economic matter. This is simply not true of the UK.

My word, we are lucky today

Bryony Gordon:

A \’Big Man\’ chucked a teenager off a ScotRail train, but perhaps the real problem was the ticket inspector.

It\’s the train company\’s fault, petty bureaucracy gone mad.

Julie Bindel:

The \’big man\’, the fare-dodger and the right time to intervene

Intervening is community in action except when it\’s vigilantes.

Still, I know the problem. Something\’s in the news and you\’ve space to fill. As long as you can add a twist (and a couple of personal stories, as both do) that\’ll be fine. Doesn\’t actually matter much what you fill the space with, as long as that white gap between the ads gets covered in print she\’ll be fine.

This columnist business isn\’t quite as glamorous as some seem to think….

Mr Right does not exist, poll finds

Fancy that.

Three in four women believe there is no such thing as the perfect man

So only 25% of British women are entirely deluded then. For, being human, there is no such thing as perfection. And we\’ll leave aside whether there is in fact such a thing as the perfect woman.

It is rather to be hoped that those 25% of women who are deluded have a considerable overalp with those 25% who do not marry.

Fascinating point by Ritchie

This is unsurprising. Switzerland deliberately created banking secrecy in 1934 to assist those evading tax in their home jurisdictions. Whether or not this was acceptable in 1934 does not matter: it is wholly unacceptable now.

That\’s right. The world is entirely free of thieving governments who would murder people for their money, isn\’t it? Not a single dictatorship on the planet and never will be ever again.

To make the UK into even more of a tax haven than it already is would only increase our isolation from Europe, as it would effectively be a declaration of economic warfare on the already tax-starved economies of the EU.

The average is that some 40-50% of all economic activity ends up in the maws of government in those countries. We can call this many things but \”tax starvation\” ain\’t one of them.

In contrast, the UK badly needs high corporate tax revenues from businesses capable of generating large numbers of jobs, as employees alone are currently unable to fund the social services they require – hence the need for a serious tax contribution from their employers.

He\’s really still not got this tax incidence thing, has he?

All corporate taxes fall on households in the end. Companies might be convenient places to get cash from but they are not the people actually carrying the economic burden. It is some combination of shareholders, workers and consumers that are carrying the burden: those getting the social services which they are unable to fund.

What Ritchie\’s done there is prove that social services are too expensive. Well done that man.