Ignorant is still ignorant, isn’t it?

Boeing shares hit another record high after the company boosted its quarterly dividend by a fifth and announced a $18bn share buyback programme.

A business fuelled by the world’s wealthiest people (you have to be to travel, and I am personally aware of this) and the defence sector is returning vast sums of cash to shareholders rather than invest it in new products, services and training with the aim of lifting the share price in the short term to, no doubt, trigger executive share price related incentive scheme payouts that will massively and wholly disproportionately increase the reward of a few in the company at cost to all the rest and society at large.

If you want to know why modern capitalism does not work, that’s why. It’s called rentierism by management. It’s rampant. It’s corrupting. And it’s undermining the way our economy and society works.

So, what happens to the money once it is outside Boeing? Those shareholders can either invest it or spend it, there’s nothing else they can do with it, is there?

What, we should demand that money stay inside extant companies so that only things done by extant companies gain investment?

It’s simply a putridly stupid complaint by the Senior Lecturer here.

Anyone see the steam rising from Ely?

But is it feasible to tax corporate profits in the country of destination? And is it legitimate? In 2014 Michael Devereux and I set out the reasons why we think it is both.

That Devereux is being praised for laying out a method of beating tax dodging would be bad enough. But that he’s being credited with inventing the idea will cause an explosion:

In 2008 a paper by professors Michael Devereux at Oxford University, Alan Auerbach at the University of California, Berkeley, and Helen Simpson at Bristol University came up with a new solution: what if we taxed profits in the country where the customers are? Their idea was to tax corporations at the least movable point of the production chain, at a point that corporations could not shift or manipulate.

It’s still a shitty idea of course.

Isn’t Ritchie just great on his knowledge of tax systems?

I admit that I have been saying this for a long time. I have always argued that the 12.5% tax rate was like the ‘Sale’ sign on a shop window: it was an invitation to come in to see what deals were on offer, and Ireland had them aplenty. Now those deals, from that with Apple onwards, are unravelling. What is apparent is that the Irish economy is geared around a foolish tax arrangement that lets profits flow through, but not stay in the country. Paul Krugman has rightly called the result ‘Leprechaun economics’.

The Apple deal is nothing at all to do with 12.5%. Rather, they’ve a territorial tax system.

Sigh.

Something I missed earlier

To better understand elite migration across state lines, I analysed tax return data from every million-dollar income-earner in the United States. The dataset includes 3.7 million top-earning individuals, who collectively filed more than 45 million tax returns over more than a dozen years – showing where millionaires live and where they move to.

And it turns out that place still matters for the rich – much more so than we might think.

Only about 2.4% of US-based millionaires change their state of residence in a given year. Interstate migration is actually more common among the US middle class, and almost twice as common among its poorest residents, who have an annual interstate migration rate of 4.5%.

This is, of course, what we could expect. It’s easy to move when you have very little, or when you’re young. It gets harder the older you get. And incidentally, as he finds, when people do move then it’s to the sun, and not for low tax. Again, there’s nothing new in that.

But what does that mean? It means we can tax wealth because the rich stay put.

And we can have progressive taxation.

The arguments over: the facts are what matters. Now let’s get on with it.

The Senior Lecturer needs to add one more thing. If you itemise your tax return, something you’d expect high earners to be doing, then your state and local tax bills are deductible from your federal one. Meaning that tax rates don’t vary all that much even across the different taxing jurisdictions in the US. It looks like this might get killed in the current tax bill:

Will the Republican tax bill devastate America’s bluest states? That’s the impression you’d get from two recent op-eds in the New York Times, the first by a pair of liberal academics, and the second by a conservative policy analyst, both of which castigate Republicans for drastically shrinking the state and local tax deduction, also known as SALT. Ray Dalio, the legendary hedge fund investor, argues that curbing SALT will cause more millionaires and billionaires to flee high-tax states for low-tax states, thus causing a severe revenue crunch in the former.

Hmm, maybe taxes do make people move?

This is just so wonderful from the Senior Lecturer

So wonderful that I actually agree with him:

Lastly, let me be clear that to measure productivity across the most able, or only those at work, is a particularly futile exercise that clearly suggests that you think only those undertaking some particular activities in society are of worth. We are not just a working population in the UK. We are a population as a whole. If you think productivity measures have changed because we have rising employment that offers opprtunity to some previously denied it then it is not productivity that is at fault, but it is the measurement that is to blame. Those people now at work were previously in the population but denied the chance of employment. If that meant they were excluded from productivity calculations as a result that just shows that the calculations were wrong: the measure should have always been across those able and willing to work, and not just those able to find it. It would seem that you are unable to appreciate this obvious point and yet as a politician you are meant to represent all in society and not just those at work.

Indeed, let us measure these things over the population, not by those in work.

When we do we find that France has a higher output per hour worked – as people keep whining about when we discuss productivity. And when we measure over the whole population, as we do when we look at GDP per capita, we find that that for the UK is higher than that in France.

Or, as is the standard neoliberal baby-eater comment about European productivity levels, their numbers look good because the marginally productive aren’t working and here they are.

Hmm. D’ye think that Ritchie has the nous to realise what he’s just said?

Pure bollocks again

Trump’s tax reforms – designed to enrich Apple by at least $47 billion

We can’t enrich a company. We can only enrich those who own it, buy from it, sell to it or work in it. Incidence.

Of course the Senior Lecturer will never admit this because that would then mean studying the incidence of who pays taxes.

That is a reasonable question to ask. That’s because this whole plan is premised on the idea that if rates are reduced then business will invest more, jobs will be created, and growth will follow. There is, however, implicit in that assumption another, even more implicit, assumption, which is that Americans pay the tax that they owe already.

No, it’s not implicit at all. But it gets better:

As they note, in the US just 81.7% of the taxes that are owed are actually paid. Admittedly not every tax is considered, but all the important ones are. The research covers individual income, corporation income, employment, estate, and excise taxes.

The amounts lost are staggering

Excellent, so reduce tax rates because humans do react to incentives. Lower taxes aren’t worth the risk of jail to avoid/evade so therefore fewer people will. The tax gap falls with lower tax rates. Lower tax rates will reduce the tax gap. Ritchie wants to reduce the tax gap – why isn’t Ritchie in favour of lower taxes?

If only there were an economist about

I confirm that they do just that. As I noted recently, corporate profits make up 67% of the GDP of the Isle of Man. For comparison, they make up 21% of the profit of the United Kingdom, which might reasonably be used as a benchmark.

Eh?

Corporate profit as a % ge of GP is to be compared to corporate profit as a % ge of profit?

Whut?

No doubt we’ll be told that corporate profits are 21% of UK GDP, it’s just a typo. But even that’s not true, that’s the capital share in the economy. Which isn’t, really isn’t, the same as the corporate profit share.

Ain’t this great?

A Labour-controlled council has been urged to invest part of its £250 million pension fund overseas because of “political risk” associated with Labour policies if Jeremy Corbyn becomes prime minister.

Camden council said that it had been advised by London CIV that it would be “imprudent” to expose London pension funds to infrastructure investments that were entirely UK-focused because of risk associated with a programme of renationalisation. Labour pledged in its manifesto this year that it would bring rail, mail and utilities back under public ownership.

That the Senior Lecturer gets ahold of your pension is a risk, isn’t it?

How to kill investment bubbles

I disagree with the BIS on the issue of interest rates though: they’d like more rises to kill off bubbles. I think significantly more direct action is required that actually tackles the issue and does not penalise ordinary people yet again for something not of their creation. So, significant rises in corporation tax for large companies; wealth taxes; a variable rate financial transaction tax with a rate that rises in periods of financial volatility and more action on bank capital are required, now. These might work. Interest rate rises will just push households into default.

Hmm.

So Robert Shiller tells us that more speculation, the ability of people to sell short in futures and options markets, is what kills bubbles. The Senior Lecturer tells us that we must reduce speculation in order to kill bubbles.

One has the Nobel for economics the other teaches economics in a British university. Isn’t the British student getting a good deal.

Isn’t economics supposed to be about the unseen?

There are only three possible outcomes from this tax reform.

The first is companies will have more retained profit.

The second is that they don’t invest it, but do share buy-backs instead.

And the third is that the wealthiest in the US will get wealthier at cost to everyone else as a result.

What happens then? What’s the next effect?

The wealthy either spend the money, increasing demand, or the wealthy invest the money, increasing both the productive capacity of the society and demand.

Sure, we can argue about how effective this is but to ignore it means you’re not doing economics.

Ritchie and Bitcoin

Now there’s a surprise. A tax haven is promoting the use of cryptocurrencies whose use is untraceable

The entire point of the blockchain is that every transaction, ever, is traceable.

It might be anonymous, at least until it meets the rest of the financial system, but it really is traceable. Because that’s what the blockchain is, a listing of all and every transactions ever.

Well, that puts bitcoin to bed then

Richard Murphy says:
December 1 2017 at 7:29 am
That, of course, is another reason why it is not a currency. It is not debt.

What is debt? A claim upon assets or effort, no?

Can assets and or effort be bought with bitcoin?

So it’s debt, right?

It takes real skill to get things even more wrong than David Graeber on the subject of money.

Richard Murphy says:
December 1 2017 at 8:44 am
But you can only buy turnips because someone is willing to give you sterling for Bitcoin

Fact

You can only buy turnips with sterling because someone is willing to sell swedes for sterling. Sigh.

sasha says:
December 1 2017 at 8:12 am
“On your c4iteria (sic) anything that can be exchanged is a currency and that is not true ”
Entirely true. As long as there is a shared confidence that it can be freely exchanged for items of value it fulfils all the requirements of a currency. This is decided not by banks & not by governments but by the users. The single criteria is confidence.

Reply
Richard Murphy says:
December 1 2017 at 8:41 am
And it is precisely because such confidence does not exist that only state backed currencies (secured by future taxation revenues) exist in the modern world

That people – however misguided – are willing to exchange 9,000 of the state backed currency for one of the non-state backed would seem to be an interesting example of which way the confidence is running, no?

The Senior Lecturer tells us that the pound sterling is a con trick

If the value of a single unit of a supposed currency varies between $9,000 and $11,000 in a day then it is not a currency because it lacks one of the essential characteristics: it is not a store of value.

Let’s call it a con trick instead.

Hmm:

Sterling’s fall following the ERM exit did trigger an export recovery, says Kit Juckes at Société Générale. It plunged nearly 35 per cent against the dollar in the six months after Black Wednesday, driving up export volumes and wiping out the trade deficit. Its decline “sowed the seeds of a better economy”.

Or:

Value of the pound in your pocket declines by over 90% since 1973

Unless we want to place entirely too much weight upon “day” we’d have to conclude that fiat money is a con trick, wouldn’t we?

And there’s the other way of looking at this too. The value of the $ has varied by some 20% in a day. Thus it’s not a store of value, is it?

Remember, this man teaches economics in a British university.

Isn’t this an interesting thought?

The claim that Corbyn threatens business is nonsense. He plans a government that will spend to invest. That is unambiguously good for business, and it pays for itself by delivering productivity growth, higher wages and so more taxes. Only a banker could fail to understand that.

Or anyone who notes that 300 years of government investment hasn’t managed to pay off the national debt……

” Just as current wealth inequality is unambiguously harmful,”

Proof please? Swedish wealth inequality is higher than our. Is that harmful?

Well done to the Senior Lecturer here

A chapter in a book based upon this:

All are extraordinary suggestions for extraordinary times. Economic, policy and intellectual elites of a variety of stripes are deeply concerned and troubled.
The common thread is demand deficiency. As Yanis Varoufakis has noted there is a shortfall in investment, particularly in the things we need most such as environmentally friendly sustainable new technologies, infrastructure projects and research and development, all of which suffer from progressively shortening financial time horizons. The consequence is that investment in the very things that do most to generate productivity, growth and meaningful long term work, are at risk in an age of asset management.

Too little investment is a demand deficiency now, is it?

The very simple solution to the Irish Brexit problem. We all lie through our teeth

A Mr. Murphy opines:

The result is, though, that at present it is very hard to see what progress there can now be on any talks with the EU. Liam Fox says we will leave the customs union and single market, as a matter of fact. And as a matter of fact that requires a hard border between the Republic and Northern Ireland.

But as a matter of fact the DUP says it will not have that border.

And in reality it is perfectly obvious that such a border is not deliverable. Three hundred road crossings and the lack of any physical sign of where the border might be along most of its length makes that obvious.

Just as it is obvious that the DUP demand that Northern Ireland have no special status different from the rest of the UK is in any way consistent with the demand for no border with the Republic.

These are, to be blunt, issues that cannot be resolved by any amount of negotiation. There is no such thing as a non-border when the whole point of Brexit was that there should be one. And yet there is no way there can be a hard border. And there is no way there can be the arrangement the DUP demands.

And nor is there any way that border controls on flights and ferry crossings between the North and the rest of the UK cannot happen in future if there is no border between the Republic and the North, as the DUP demand. Like it or not that’s because without controls between the North and the rest of the UK in that situation there would be no border for migration between the EU and the UK. In other words the DUP simply cannot say borders are unacceptable anywhere and leave Brexit in any sense meaningful in the eyes of all those who voted for it because they thought migration the issue it was meant to control.

What this means is that, like it or not, the Irish question is now at the core of the Brexit debate. And nor can it be deferred. No trade deal overcomes it, most especially if the UK is adamant about leaving the customs union and single market. Any such departure leaves both the Republic and the DUP in impossible situations. And that leaves not just the UK government in an impossible situation, but also without a majority since it is dependent upon the DUP for that. It leaves us, then, without a government at all.

As a result the fact is that the 2016 Brexit vote may have been as significant an issue for Ireland and the rest of the UK as the 1916 rising, one hundred years earlier. And in both cases, and just a few years later, a solution to a border issue has to be found or the consequences will, I fear, be very long lasting indeed.

The solution is simplicity itself.

Lie.

The big lie, truly monstrous.

Sure and now isn’t that a hard border? Can’t yez see the signs insisting that if you cross it you must check in with the nearest constabulary or you’re being a very bad boy indeed? And why wouldn’t that be enough for yez? And sure we’ll do some checks on the gombeen men as well.

And then tell everyone else to fuck off, right royally.