November 2011

Presented without comment

Director

Jon Thorisson
Eva Joly Institute,
Dunhagi 19
107 Reykjavik,
Iceland

TEL: 00354 821 99 54
E-mail:[email protected]This e-mail address is being protected from spambots. You need JavaScript enabled to view it

Board of directors

Advisory board

World on track for nearly 11-degree temperature rise

Umm, really?

The chief economist for the International Energy Agency said Monday that current global energy consumption levels put the Earth on a trajectory to warm by 6 degrees Celsius (10.8 degrees Fahrenheit) above pre-industrial levels by 2100, an outcome he called “a catastrophe for all of us.”Fatih Birol spoke as as delegates from nearly 200 countries convened the opening day of annual U.N. climate talks in Durban, South Africa.

Sirsly?

He\’s assuming 840 ppm CO2 is he?

Anyone care to explain where this prediction is coming from?

Mrs TUC General Secretary Will be Surprised

However, speaking from the picket lines outside St Pancras Hospital in London, TUC General Secretary Brenda Barber said public sector pensioners were being plundered to tackle the financial crisis.

Not that there\’s anything wrong with gender reassignment you understand, but the Mrs. probably didn\’t expect this when Brendan left for the hospital yesterday morning.

Of course, it could just be the Aussie subs……

 

Spotted by Dick P.

Polly still gets this wrong

and property is greatly undertaxed compared with other countries.

This simply is not true.

Property tax as a percentage of total tax collected by the country.

The UK collects 11.9% of total tax revenue from taxes on property. This is the highest in the OECD and some twice the OECD average of 5.8%.

It might be that we tax property badly, that we don\’t tax really expensive property enough, all sorts of things might be wrong with the system. But it simply isn\’t true that we tax property lightly compared with other countries. Quite the opposite.

True, we don\’t have capital gains on first houses, we don\’t tax imputed rents for owner occupiers. But we do get over £25 billion each in domestic and business rates (except for one spot in Norfolk) and yes, those are taxes on property.

It\’s also fun to see Ritchie\’s figures mangled even more than he himself manages:

while some £25bn is evaded and £70bn avoided.

Other way around…..

Another comment at Murph\’s

Compare and contrast two statements.

Richard Murphy: “We can never solve all crime”

Richard Murphy: “Yes I am saying there isn’t an efficient level of crime”

If we can never solve all crime then there is a level of crime that it is efficient to have. Only if we can solve (or prevent, clean up, stop) all crime can it be efficient to do so.

If we cannot solve all crime then we have to make a decision about which bits we’re not going to solve: otherwise we will be devoting ever more resources to solving that last bit of crime even while we know that we cannot in fact reach the goal.

Thus there is an efficient level of crime to accept that we have.

And in today\’s Ritchie we get…..

When private sector financial services have so obviously failed and when the private sector is sitting on tens, if not, hundreds of billions of cash it has not a clue what to do with it is very obvious that paying the private sector to manage the projects we need to fund our economy, to allocate the investments that small business needs and to set long term economic priorities, on which subject they have no expertise or experience since all have been reduced to the decision making ability of the market trader, would be economic madness.

That’s why I argue we need to ensure that some of the wall of money sent into pension funds each year – just a quarter of it – be diverted instead into making real investment for the benefit of the future of this country so that those for whom those funds are supposedly invested have the prospect of a job until retirement. Second, they need to see that they’ve invested in something that their children can use and therefore pay them for – because that’s the basis for the fundamental economic contract which almost all private sector pension fund arrangements now quite explicitly ignore.

There is at the core of our economy a void right now. It’s a void because there is no demand. It’s a void because there are no new jobs. It’s a void because there’s no real investment. And there’s a void because there’s no real thinking on how to solve all three problems at once without breaking the bank.

It\’s lovely, isn\’t it? Just spend the money on the things I think are important and your pensions? No worries!

But, as ever, he\’s missing the damn point. Our question isn\’t \”where does the money come from?\” its\’ \”how does the money make money?\”.

So, let\’s agree, there\’s lots of pension money, lots of corporate money, out there not doing very much.

We\’d like it to be doing quite a lot so agreed, let\’s think about ways that we can get it to do so.

Ritchie\’s offering is the Underpants Gnomes.

1) Force Them!

2) ???

3) Profit!

There\’s no mechanism, no part 2), which allows profit to be made after we\’ve forced them to stick the money into these infrastructure investments. So forcing them won\’t lead to 3) the profts.

However, we could set up a 2), a structure for them to profit. We could allow tolls on roads. That\’s only an example you understand….but we\’ve got to provide the 2) for the plan to be able to work.

As we have done for windmills for example: yes, leave aside whether they\’re sensible at all and look just at how they did get the private money into them.

They set up a ways, ROCs and FiTs, so that we had a step 2) so that they could make money. At which point we didn\’t have to force anyone at all: in fact, we\’ve had to limit access to those profits as the wall of money came charging in.

All of which is why Ritchie\’s scheme is insane: there\’s no step 2) in his plan and if there is a step 2) then you don\’t need to do the forcing.

On the same subject but in a different piece he gives us:

Second, let’s get real: most small businesses employ just one person – and that’s the owner. there’s nothing wrong with that. But candidly it only suits some people, those not inclined to it should not try it, and those who are naturally tend to do it anyway. We don’t need to encourage entrepreneurship.

Oh, good. We\’ve just abolished incentives and their effects at the margin. but yes, I keep forgetting. Ritchie doesn\’t believe neo-classical economics so he doesn\’t believe that things happen at the margin, does he?

But jobs need to be taxed, fairly and properly so let’s not ask for tax favours for small business.

Jobs need to be taxed? What?

I can get incomes need to be taxed, get capital returns need to be taxed, but jobs? This is the man who says that unemployment is one of the great crimes of our times and he wants to tax jobs? Eh?

And capital could come in then as a flexible profit and equity sharing arrangement with lenders – as is really needed, with much less complexity than now.

Erm, if you\’re in a profit sharing and equity relationship then you\’re not in one with a lender. You\’re in one with an investor. Lending is debt, investing is equity.

And let’s not pretend that banks and business angels are going to supply this new capital – a new state invetsment bank needs to do that – funded using 25% of all pension contributions paid in this country as a condition of the tax releif  given on them. This would transform small buisiness capuital. We wouldn’t be making a few million avaiulable as Osborne wants: we’d make all the capital needed available.

And there it is: your pension is now going to be invested in the capital of start ups. Essentially, he\’s insisting that you get your pension through the medium of venture capital. Something which is going to be really, really, interesting, given his hatred of markets in second hand securities. Because without those secondary markets you can\’t sell out to buy an annuity, can you? Can\’t realise the capital value of your investments?

And this just in from the PCS paymasters:

And lastly as a matter of course make sure tax offices are open in all population centres of more than 30,000 people so people can go for HMRC advice whenever they need it.

Isn\’t that just amazingly lovely?

There\’s around 12,000 post offices for 65 million people: 5,000 people to a post office. So we need a tax office for 30,000 people. That\’s 2,000 tax offices then.

As of 2009 HMRC had 75,000 or so staff.

To staff a tax office (so you can drop in at any time! would require evening working etc) you\’re going to need, what, 5 or 6 people? Ah, no, sorry, forgot, 20 -30, eh? Manager, couple of junior managers, they\’ll have personal staff, need back office peeps, diversity training, that special person who teaches them how to mumble on the phone.

Yes, I think he might have managed it! Come up with a proposal to double the number of jobs for PCS members.

Amazing really: Ritchie\’s just so damn cheap, isn\’t he? Selling out for so little?

Ritchie in the newspapers

I do hope he\’s being misquoted here:

This week I spoke to Richard Murphy, the economist and tax expert, whose new book has the self-explanatory title The Courageous State and brims with imaginative thinking. Using pension funds for national investment, he told me, could be done much more efficiently than the Osborne plan. In exchange for the vast sums granted in pension tax relief – £38bn at the last count – we could be compelling funds to put money into the very infrastructure projects the government is so keen on – and with no need for a mouthwatering rate of return to draw them in.

Your pension would be compelled to invest in infrastructure projects. At less than exotically wonderful returns. Doesn\’t that just fill you with joy?

The same logic, he says, applies to credit easing, the roundabout method Osborne is using to persuade banks to supply businesses with money. Again, were we to insist on a quid pro quo for pension tax relief we could channel funds into a national investment bank and send credit directly to those businesses.

Again, your pension would be compelled to invest in loans to those businesses which  a politically directed national investment bank would find worthwhile.

Note that both of these are designed as loans: a perfect way to lose money. Inflation, you will note, is at 5% or so and long term interest rates at 3% or so. Your pension will be compelled to invest in something that loses you money.

If he\’s not beingmisquoted then Ritchie\’s making the same mistake he does so often. The aim isn\’t to find the money to do things. We know there\’s vast sums of money sitting in pension funds and on corporate balance sheets. The aim is to create a structure in which it is worthwhile to use this money to do these things. We\’ve got to create a revenue stream from these \”investments\”, a revenue stream which makes people want to make the investments with the money that is already there.

Once that revenue stream has been created (say, tolls on roads) then people will happily invest the money to get the revenue. Forcing people into losing money isn\’t the way: tempting them by offering a potential profit is.

 

Well, yes Mr. Chakrabortty

What\’s happened to England\’s rugby team this autumn is obviously not just about money. But it\’s an excellent example of something free marketeers often ignore, but that research proves: that adopting a market system does encourage people to think about cash and their individual wellbeing.

Indeed this is very true. Market incentives do change behaviour.

Now imagine a healthcare system in which the sick are treated by staff increasingly encouraged by successive governments to see themselves as providers in a market. Care doesn\’t necessarily get worse, but it does change – and in ways that patients might not like.

Yes, indeed, let us think of this.

So, let us ponder the English rugby team of 2011. Let us compare it to the England rugby team of 1991, when it was indeed still an amatuer (hmm, OK, shamatuer) game.

Let us place the England team of 2011 on the field against the England team of 1991. We\’ll use a time machine to bring the old team here at their playing ages, not their current ones. But everything else stays the same: fitness levels, tactics, training periods, etc.

Who will win? I think we know the answer to that, don\’t we? The 2011 team will walk all over the 1991 team. Heck, I\’d back the 2011 Italian team to walk all over the 1971 Lions, let alone the Welsh 2011 to beat the glory days of 70s Welsh rugby.

So, the quality of output has increased in this move to market incentives: and we expect what to happen as we introduce market incentives into health care?

Well, I for one would expect the quality of output to rise to similar to those other health care systems that have a modicum of market incentives in them. You know, the French, German etc etc, health care systems?

Do note, perfectly willing to agree that one can go too far: relying entirely upon private health insurance as in the US system seems not to work so well. Relying upon private health savings accounts plus government run catastrophic health insurance (roughly the Singapore model) seems to work extremely well.

All markets all the time markets is not the solution to every problem we as humans encounter. But a fit of the vapours over some markets some of the time markets, where such has been proven to work elsewhere, is not the solution to any of the problems we as humans encounter.

So how do you make 150 tonnes of toast?

Overnight, by a motorway?

A cleanup operation is under way after a tanker carrying more than 20 tonnes of yeast extract – believed to be Marmite – overturned on a busy motorway.

Average serving of Marmite, 4 grammes, so 250,000 servings to the tonne. Average weight of slice of bread, around 30 grammes, so 7.5 tonnes toast per tonne Marmite or 150 tonnes of toast needed overall.

And for extra marks, how many soft boiled eggs will you need to dip the Marmite soldiers in?

Please show your workings.

Umm, is this close enough to hte new maths to make it into a GCSE paper?

There\’s a solution to this but you\’re not going to like it

I came away thinking it was a splendid place, and also reflecting how much England suffered in the 20th century from its metropolitan bias. A healthy country needs strong provinces such as England had in the Victorian Age, the exceptional century in its history, when so much of the cultural and intellectual vitality of the nation was to be found in the North and Midlands rather than in London.

Make public transport, the railways, heck, make private transport, the motorways, worse.

Such cultural and intellectual vitality depends upon clustering. And clustering just isn\’t going to happen in Bristol when London is 90 minutes max by train. And the better the transport networks, the greater the distance that can be travelled in the magic time period (which could be what, 2 hours, three?) then the more that vitality will cluster in one place, the more that one place will suck it out of those places that it can be sucked out of.

Not even the Victorians believed that Reading, Slough or Clapham were going to create vibrant intellectual spaces of their own. It was obvious that people would travel into London, to the great national concentrations for that. And the better the transport system the larger the area over which we can hear that great sucking sound.

Provincial revival depends upon bad transport connections with London, not good: a lesson for the HS2 peeps there perhaps?

Whoops, sorry, the quote is from Allan Massie.

 

America, Georgia, really has changed

These Herman Cain shagging women accusations.

Actually, in at least one case, an accusation of sexual assault on a white woman.

100 years ago they would have lynched Cain even for the allegation. Today they\’re still mulling over whether he should be a Presidential candidate.

Yes, it\’s still possible to see \”black man as voracious sexual predator\” (you might have to squint hard but you can see it in some of the reactions) but I would submit that this is an advance, that the place has got better over the past century.

Here\’s how to solve the eurozone crisis

As Ambrose points out:

The three main gauges – M1, M2, and M3 – have each begun to decline in absolute terms after slowing sharply over the Autumn.

The broad M3 measure tracked closely by the European Central Bank as an early warning indicator shrank last month by €59bn to €9.78 trillion, a sign that Europe\’s long-feared credit squeeze is underway as banks retrench to meet tougher capital requirements.

The ECB is allowing to happen what the Fed allowed to happen in the US in 1930-32.

This is fixable though. What we need to do is get 100 copies of this book.

A Monetary History of the United States, 1867-1960
Milton Friedman & Anna Jacobson Schwartz

We then collect the 100 top Euro- politicians/ECB bankers/German deflationists etc and we sit them down with said book. Under armed guard. With a gallows or two in the corner. And we insist that they read and understand the book. At the end of the first day we start to ask questions.

\”So, who still believes that austerity is the way to solve a liquidity crisis?\”

The first hand or two that goes up, we hang them then instruct the others to return to study of the book.

Repeat and rinse until finally someone stands up and agrees that actually, the central bank printing money is the way that you deal with a falling money supply and a liquidity crisis.

We might have to keep going until we get a majority of our 100 to agree: we might get down to three sensible people and 97 corpses, you never know.

But I am finding it very difficult indeed to think of any other way that we\’re going to get this very basic point across.

We are not, have not been for months in fact, in a political crisis and we\’re not even in a debt crisis any more. This is a monetary crisis, one that can be solved, simply and quickly, by monetary means. But only if we actually go and use those monetary means at our disposal. And yes, bastard stupid ignorant politicians who stand in the way of this solution, gallows are too kind for them.

 

The new Elvis Costello Boxed Set

“Unfortunately, we at www.elviscostello.com find ourselves unable to recommend this lovely item to you as the price appears to be either a misprint or a satire.”

“If you should really want to buy something special for your loved one at this time of seasonal giving, we can whole-heartedly recommend Ambassadors of Jazz [by] Louis Armstrong,\” the singer went on, pointing out that the Armstrong box set offers 10 albums for the same price as the Spinning Songbook.

He added: “Frankly, the music is vastly superior.”

Am I the only one to think that there\’s something very English about that statement?

Ritchie responds!

And given his well known editorial policy I\’ll repeat my comment there here:

\”Let’s be explicit about what he’s saying here: he’s explicitly condoning crime. He’s saying we should simply allow it. He says we’re better off for this criminal conduct.\”

Not quite. I\’m saying we\’re better off by ignoring rather than attempting to eradicate this last amount of crime. Something we actually do all the time: we don\’t send out detective squads to catch jaywalkers, don\’t have riot police making sure late night drinkers put the burger wrappers in the bin. We chase and prosecute crime according to the resources that have to be spent to do so and the benefits we get from having done so.

As to the maths of the example above. Say it\’s cash in hand no VAT work (which a lot of it is). Pre-cracking down on the tax evasion there\’s £10 billion of economic activity going on. Post-crackdown there\’s that £2.33 billion in revenue, yes there is. But there\’s also only £6 billion in total economic activity. Is £2.33 in tax revenue worth the loss of £4 in economic activity? Clearly possible to have different views on this but I would argue probably not.

If the numbers change, we get £2.33 in tax revenue and only a £1 reduction in activity…..or let\’s say for each £1 in revenue we get only a 30 p reduction in economic activity (which is about what the tax deadweight costs are for an economy like ours) then perhaps I would argue for the crackdown.

But not when a crackdown would make us all, in aggregate, poorer, no, probably not.

So Jackie Ashley praises UKIP and Ritchie says

Beyond the passionate intensity of Ukip and the far left, nobody is speaking with boldness and clarity about how to deal with a eurozone collapse. The [r]est lack all conviction.

So that\’s Our Jackie then.

It’s clear what we need.

Would they now step forward, please? It will take some courage to do so – to say what they think, and to say they’ll act on it – but that’s exactly what we’re asking for from politicians.

Is that too much to ask? Surely, not?

It has to be said, the idea of Ritchie turning up to UKIP meetings does disturb. But we\’ll accept his vote nonetheless, despite our being neo-liberals.