Saturday, 23 September 2017

Steve Keen on top form.

Spotted by Lola at Open Democracy:

For a while, this bargain felt win-win for both sides: as the Bank of England recently acknowledged, bank lending creates money at the same time as it creates debt (McLeay, Radia et al. 2014). This money is then spent, either to buy assets, or goods and services. It therefore adds to total demand, and to incomes and capital gains. So, as banks created “money from nothing”, and the UK private sector spent that money that it got for doing nothing, prosperity seemed to abound...

But you can’t have very high levels of credit-based demand without the corollary of an ever-increasing level of debt relative to income. More and more of income is required to service this debt, cutting into spending on goods and services. The turnover of existing money slows down, reducing aggregate demand from actual work, while increasing the dependence on credit.


Aren't those two things opposites? Either credit/debt increases GDP or it reduces it.

As a matter of fact, in the real world it does neither to any great degree.

1. Most of the (increase in) debt is mortgages, which is just an alternative to paying rent. The inevitable transfer of spending power from tenant/borrower to landlord/depositor is pretty much unchanged.

2. A small part of (the increase in) overall household debts (maybe one-eighth?) is credit cards and personal loans used for buying other stuff. This merely brings forward spending a few months or years. Somebody who wants a new car can save up for a few years or he can buy one on HP, take out finance lease, personal contract payment etc (these are all pretty much the same in economic terms). But that person will probably never own more then one car at any one time. Most of that net-extra spending is in the past - the bloke who bought a car on HP two or three years ago is spending less of his current income on other stuff because he is still paying off the HP instalments.

3. It all averages out anyway, yes, increasing levels of debt seem to go hand in hand with extra GDP, until the credit bubble pops, and then we lose GDP. Chances are, the overall long term trend would be much the same if mortgages and house prices were capped somehow (although that would be a good thing in and of itself).

Clearly, Keen's overall point that the whole economy has been hijacked by the banks is correct, he's just very vague on the details.

Friday, 22 September 2017

Daily Mail on top form

Haunting video shows tragic French nanny, 21, giggling with son of Boyzone founder months before her burned body was discovered at £1m home as boy's mother is charged with her murder

"Uber London loses licence to operate"

Same old, same old, one bunch of monopolists fighting another.

I use public transport in London (which is excellent and far faster than cabs), so I'm not too bothered, but on behalf of all the people who like using Uber (and all the drivers who have registered with them) I hope that Uber can bounce back from this - like they always seem to do.

The interesting bit in the original version of the article (since removed) was a reference to TfL's recent changes to licensing fees.

TfL explain here:

The Capital's private hire industry has grown dramatically, from 65,000 licensed drivers in 2013/14, to more than 116,000 today. The number of vehicles has increased from 50,000 to 88,000 over the same period. With this growth, there has been a substantial increase in the cost of ensuring private hire operators fulfil their licensing obligations and in tackling illegal activity to keep passengers safe...

The total projected cost for licensing, enforcement and compliance for the taxi and private hire trades over the next five years is £209m. The law allows the recovery of costs incurred for licensing, regulatory and enforcement activity through the licence fee process. All money generated through the process has to be spent on such activity...

Previously a 'small' operator, with no more than two vehicles, would pay £1,488 and a 'standard' operator - those with more than two vehicles, regardless of the size of its fleet - would pay £2,826 for a licence lasting five years.

The new fee structure, approved by the TfL Finance Committee, will replace the existing two 'tiers' with eight; with charges ranging from around £2,000 for a five year licence for those with 10 vehicles or fewer, to £464,000 per year for the largest operator. This would ensure the licence fee structure for private hire operators reflects the costs of compliance activity according to the scale of each operator.


Point 1. How inefficient is TfL? They've got to do about 204,000 checks a year (total drivers plus cars). £209 million ÷ by 5 years ÷ 204,000 checks = £200 per check. How long can it take to check that a car has MOT, is taxed and insured? How long can it take to do check that a driver doesn't have a criminal conviction for a violent offence (about the only thing that can possibly be relevant)? How does that cost £200 a pop?

Point 2. What sort of maniac designed the charges to be a barrier to entry like that? A small operator pays a considerably higher fee per driver/per car than a large one. It's not quite as extreme under the new system as the old system, but what's wrong with a flat charge per car or per driver?

Point 3. If TfL wants money from taxi drivers, how about imposing a charge to reflect all the privileges they get, like parking in front of stations and being able to use bus lanes?

Final point, and I've no hard evidence for this, but I've noticed that if you see a London taxi going at full tilt, it is usually empty; if you see one dawdling along, it is usually carrying passengers. Could this be because they can charge for time spent (in addition to charging for distance)? They've every incentive to behave like this i.e. provide a poorer service.

"Why a consumption tax may not make any sense at all"

A splendid article, spotted by BenJamin' in the Nigerian Government & Business Journal (but equally applicable to all countries):

The devil in the (accounting) details – and the economic effects: You often hear calls out there — mostly from Right economists but also from some on the Left — for a consumption tax in the U.S. As presented, it’s a super-simple idea: tally your income, subtract your saving, and what’s left is your consumption. You pay taxes on that.

We want to encourage thrifty saving and discourage profligate consumption, so what’s not to like?

Lots...


Worth a read in full. No point trying to summarise but he points out that the measurement, administration and enforcement will be a nightmare; "the empirics over many decades bear that out: higher saving rates have pretty much nothing to do with investment rates"* and finishes off by explaining why such taxes (for example VAT) are a huge drag on the real economy.

When people promote this idea I always try to make the very same points but they are just brushed aside.

* As I have explained before, household "saving" and business "investment" are two more or less completely different things, one has very little to do with the other.

Daily Mail on top form

Pop star's ex-girlfriend, 34, is held on suspicion of killing 21-year-old French au pair and 'burning her body in garden of £1m Edwardian home'

Thursday, 21 September 2017

We did basic logic at school.

Me, a few days ago:

Rather counter-intuitively, government issued 'money' does not require any asset-backing whatsoever, all the government needs is a system of whereby people HAVE TO hand those notes back to the government which effectively 'unprints' them again. The mistake that the Weimar Republic et al made was not taxing enough.

There followed a lively discussion where people desperately tried to disprove this truism by giving examples of lots of other things that are used as money.

Bayard finished with this supposed killer counter-argument:

For a currency to have value, it simply has to be generally accepted for the payment of debts.

Correct.

The government doesn't have to be involved.

Correct.

There are loads of examples of this: cowrie shells, cigarettes, Maria Theresa dollars, LETS, C18th private currencies, the ones previously mentioned, etc etc.

Correct. But so what?

We did basic logic at school, as well as Venn diagrams. I remember the teacher saying things like "Milk is a drink. But not all drinks are milk. And milk isn't always used for drinking."

In other words, you can't disprove that milk is a drink by saying that whiskey is a drink. And just because people drink milk doesn't mean it can't be used for other things (like making other dairy products).

So let's go back to Bayard's argument part 1:

For a currency to have value, it simply has to be generally accepted for the payment of debts.

Government printed money (be it paper or electronic) has value because it can be used for payment of tax debts. This is why it has value, which is exactly what I said. Those other things are also used as money for various reasons entirely irrelevant to the discussion.

Take a Bond Bug, they are truly shit cars, but you have to pay about £8,000 for one in good nick. Or you could buy a brand new one of these for about £8,000.

So we have two "cars", both worth about £8,000. The Bond Bug has scarcity/sentimental/novelty value. The other has four seats, airbags and a decent stereo. Same basic thing, same value/price, but for totally different reasons. You can't disprove that Bond Bugs sell for about £8,000 by comparing them with a brand new Kia Picanto or vice versa.

Wednesday, 20 September 2017

"We didn't waste all our money on mobile 'phones. We rolled up our sleeves and paid off the mortgage."

From the Resolution Foundation report, emailed in by OnTheOtherHand:

Crucially, we show how barriers to entry have increased dramatically, not least from rising house prices: with the average young family today having to save for 19 years to accumulate enough for a typical deposit compared to just 3 years a generation ago, it is small wonder that home ownership rates have tumbled...

On average millennials spend 23 per cent of their income on housing compared to the 17 per cent baby boomers spent at the same age, and the 8 per cent of the silent generation [those born between 1926 and 1945].


The dig about mobile 'phones is stupid anyway. They keep inventing new stuff and making stuff cheaper, and people keep spending money on what's now available/affordable. From our grandparents or great-grandparents' point of view, the generations after them "wasted" their money on televisions, washing machines, fridges, cars, holidays abroad etc.

Tuesday, 19 September 2017

Another one of those "cow attacks dog-walker" incidents

From Cornwall Live:

A mum-of-two said she thought she was going to die as a cow charged at and then repeatedly stamped on her.

Sharyn Partridge is now urging people to be on their guard after she was “battered” by the animal in Clearbrook, near Yelverton, on Saturday afternoon. Sharyn was left with significant bruising and said that a stranger called Dave, who scared the animal away when he pulled up in his van, saved her life..


And what triggered the attack..?

Tesco worker Miss Partridge, from Barne Barton, was returning to her car after taking her 12-year-old Jack Russell Suki for a walk when the drama unfolded...

“On the other side of the road I could see this black and white cow and a baby black cow coming up. They were trailing behind the others. She was making a noise and then a brown cow turned up. She was obviously calling the other cows. I thought I should just stand still with the dog.”

A few seconds later, the cow charged towards the helpless mum...

Monday, 18 September 2017

Daily Mail on top form

From The Daily Mail:

Man, 25, charged with murder after brutally stabbing his MOTHER, 50, to death in supermodel Gemma Ward's Sydney house - as police investigate whether Ice was involved
* Lanell Latta's body was discovered at a home on Sydney's Northern Beaches
* Police were called to the home owned by supermodel Gemma Ward at 10.45am
* Neighbours of the woman recall hearing screams coming from the house
* Ms Latta's son, Joel Woszatka, 25, was arrested by police in a nearby street
* He has been charged with his mother's murder and assault causing bodily harm
* Home was purchased by Ms Ward for $1.6m last year and has been rented out

Fun Online Polls: Man-made climate change & Have you turned on the central heating yet?

The results to last week's Fun Online Poll were as follows:

Are this year's strong hurricanes and Indian monsoon evidence of man-made climate change?

Yes - 10%
No - 90%


Thanks to all 114 who took part and 8 who re-Tweeted. I'm with the majority on this. It'd be bloody embarrassing if it turned out to be true.

Rapscallion in the comments linked to this fine article.
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Sticking with the weather, the Daily Mash republished their article on central heating, as it seems to do this time every year*.

So that's this week's Fun Online Poll:

"Have you turned on the central heating yet?"

Vote here or use the widget in the sidebar.

* One recurring article we haven't seen this year is Ryanair switching to its winter schedule and blaming the reduction in the number of flights on high airport taxes. They've got themselves in to a whole different mess this year.