The European Central Bank [ECB] are still not concentrating on GDP, but the highly flawed CPI including oil and VAT that they are trying to hold well below 2% will inevitably produce the sort of slow GDP growth that will inevitably produce recession. The ECB is not at the zero bound. Over the past few years they’ve been repeatedly steering Euro zone inflation through conventional policies of raising and lowering the short term interest rate.
Euro zone tight money is keeping Euro zone GDP flat, and that’s a sufficient condition for a recession. Yes, they may also have supply-side problems, but that’s beside the point. Tight money is a sufficient condition for recession. They can adopt a policy of 4% GDP growth if they want to; they simply don’t want to. Until that dynamic changes, the Euro zone will continue to under-perform.
Friday, 24 May 2013
Thursday, 23 May 2013
Risk aversion
Definition:
A description of an investor who, when faced with two investments with a similar expected return (but different risks), will prefer the one with the lower risk.
Explanation:
A risk-averse investor dislikes risk, and therefore will stay away from adding high-risk stocks or investments to their portfolio and in turn will often lose out on higher rates of return. Investors looking for "safer" investments will generally stick to index funds and government bonds, which generally have lower returns.
Question:
Are our banks heading in this direction and is it good news?
Banks today are being told to risk less, save more, because of the financial crisis of 2008, and because today's view is that banks should not be like casinos. So will banks go back to investing in only government bonds? I doubt it.
The basic idea of a bank is to take in deposits, keep some as cash and use the rest to earn for the bank. The model is still sound, what needs to happen and is not happening is the control of people and not the banks. The people employed are the ones that need to be managed in the future in a way that allows banks to continue, and that is up to law makers, the government. I have seen no action in this direction so far and that needs to change.
A description of an investor who, when faced with two investments with a similar expected return (but different risks), will prefer the one with the lower risk.
Explanation:
A risk-averse investor dislikes risk, and therefore will stay away from adding high-risk stocks or investments to their portfolio and in turn will often lose out on higher rates of return. Investors looking for "safer" investments will generally stick to index funds and government bonds, which generally have lower returns.
Question:
Are our banks heading in this direction and is it good news?
Banks today are being told to risk less, save more, because of the financial crisis of 2008, and because today's view is that banks should not be like casinos. So will banks go back to investing in only government bonds? I doubt it.
The basic idea of a bank is to take in deposits, keep some as cash and use the rest to earn for the bank. The model is still sound, what needs to happen and is not happening is the control of people and not the banks. The people employed are the ones that need to be managed in the future in a way that allows banks to continue, and that is up to law makers, the government. I have seen no action in this direction so far and that needs to change.
Wednesday, 22 May 2013
Apple's tax avoidance
Here are a few quotes from the US congressional report into Apple:
"Apple Inc established an offshore subsidiary, Apple Operations International, which from 2009 to 2012 reported net income of $30bn, but declined to declare any tax residence, filed no corporate income tax return and paid no corporate income taxes to any national government for five years."
"It is as though a bunch of alien techies arrived from Mars, sold us $30bn (£19.6bn) worth of smartphones and laptops, and then took all the moolah up to the stratosphere, where they simply circled the earth."
According to the senators on the Permanent Subcommitte on Investigations, Apple transferred offshore into low-tax countries the economic rights to its intellectual property - its valuable and usually patentable knowhow - with the result that it avoided around $10bn (£6.5bn) of US tax every year (what the senators characterise as $44bn, or £29bn, of US tax avoidance over the past four years).
The senators point out that Apple has continued to accumulate vast amounts of cash in places other than the US, and those cash holdings now exceed an eye-popping $102bn (£67bn). In the US, for example, corporate tax generated 32.1% of all federal taxes in 1952. Today that proportion has fallen to a puny 8.9%. Similar trends of corporate taxes generating a shrinking share of the state's costs hold in the UK.
Some would argue, the desire of Apple and other multinationals to minimise the taxes they pay in the US, or anywhere for that matter, may be rational for them individually but is bonkers for them collectively, since over time it will erode the very infrastructure of the global economy which allows them to thrive.
"Apple Inc established an offshore subsidiary, Apple Operations International, which from 2009 to 2012 reported net income of $30bn, but declined to declare any tax residence, filed no corporate income tax return and paid no corporate income taxes to any national government for five years."
"It is as though a bunch of alien techies arrived from Mars, sold us $30bn (£19.6bn) worth of smartphones and laptops, and then took all the moolah up to the stratosphere, where they simply circled the earth."
According to the senators on the Permanent Subcommitte on Investigations, Apple transferred offshore into low-tax countries the economic rights to its intellectual property - its valuable and usually patentable knowhow - with the result that it avoided around $10bn (£6.5bn) of US tax every year (what the senators characterise as $44bn, or £29bn, of US tax avoidance over the past four years).
The senators point out that Apple has continued to accumulate vast amounts of cash in places other than the US, and those cash holdings now exceed an eye-popping $102bn (£67bn). In the US, for example, corporate tax generated 32.1% of all federal taxes in 1952. Today that proportion has fallen to a puny 8.9%. Similar trends of corporate taxes generating a shrinking share of the state's costs hold in the UK.
Some would argue, the desire of Apple and other multinationals to minimise the taxes they pay in the US, or anywhere for that matter, may be rational for them individually but is bonkers for them collectively, since over time it will erode the very infrastructure of the global economy which allows them to thrive.
Tuesday, 21 May 2013
The good news
I do not care what happens to Chris Huhne or Vicky Pryce, both prominent members of the rotten, arrogant elite who have helped to wreck my country. However I mention them because unlike most people sent to prison their release got as much publicity as their sentencing.
Even the BBC could not ignore the fact that their sentences [eight months, but they served only two] were actual, deliberate official lies. Almost all prison sentences are. Nobody seems to have thought about what this means. What sort of state orders its judges to utter falsehoods as part of their conditions of employment?
And what sort of media have let this festival of lying go unchallenged for so long?
Crime statistics are fiddled by the authorities. These are the same sorts of people who think children are growing cleverer because they get more high grades in GCSEs and A-levels.
Can they now please address their complaints to Steve Williams, chairman of the Police Federation, who last week revealed that pressure was being placed on frontline officers to minimise recorded crime?
Even the BBC could not ignore the fact that their sentences [eight months, but they served only two] were actual, deliberate official lies. Almost all prison sentences are. Nobody seems to have thought about what this means. What sort of state orders its judges to utter falsehoods as part of their conditions of employment?
And what sort of media have let this festival of lying go unchallenged for so long?
Crime statistics are fiddled by the authorities. These are the same sorts of people who think children are growing cleverer because they get more high grades in GCSEs and A-levels.
Can they now please address their complaints to Steve Williams, chairman of the Police Federation, who last week revealed that pressure was being placed on frontline officers to minimise recorded crime?
Monday, 20 May 2013
Swivel eyed loons
The Conservative factions are warring so zealously over Europe that a formal split in the party is no longer unthinkable
Faced with an unprecedented revolt against the government's programme by its own MPs, we were told that David Cameron was "relaxed". When more than half of his backbenchers went ahead and defied him, and senior members of the cabinet declared in public that they were with the rebels in spirit, his spokespeople announced that the prime minister was "profoundly relaxed". So when the Tory party completely devours itself, Number 10 will presumably tell us that David Cameron is "totally soporific".
According to the Spectator, which specialises in navigating this crazy maze, there are "eight key Eurosceptic factions" in the Tory party. It is highly reminiscent of the leftwing groupuscules that flourished in the 1980s, immiserating the lives of Labour leaders and doing so much damage to that party's electoral prospects. As is the way with zealots, their demands become increasingly surreal.
Faced with an unprecedented revolt against the government's programme by its own MPs, we were told that David Cameron was "relaxed". When more than half of his backbenchers went ahead and defied him, and senior members of the cabinet declared in public that they were with the rebels in spirit, his spokespeople announced that the prime minister was "profoundly relaxed". So when the Tory party completely devours itself, Number 10 will presumably tell us that David Cameron is "totally soporific".
According to the Spectator, which specialises in navigating this crazy maze, there are "eight key Eurosceptic factions" in the Tory party. It is highly reminiscent of the leftwing groupuscules that flourished in the 1980s, immiserating the lives of Labour leaders and doing so much damage to that party's electoral prospects. As is the way with zealots, their demands become increasingly surreal.
Friday, 17 May 2013
Time for Ed to lead
Once again the Labour party is being spared embarrassment by Tory divisions over Europe. It is a familiar pattern. When the Conservatives are quiet and organised the spotlight falls on Ed Miliband. He appears to mumble or fluff his lines. The script isn’t gripping the audience. Labour MPs shuffle uncomfortably in their seats. It all starts to look a bit awkward. And then everyone’s attention is distracted by fighting somewhere off to the right of the stage, an unseemly scuffle that looks as if it might end up with David Cameron falling on his backside or being dragged into the wings never to return.
Yet there is another familiar cycle that afflicts the Labour side. It is the pattern of doubt over the viability of Miliband’s bid for power being filtered through the urge to remove Ed Balls from the shadow Treasury brief. The argument is well-rehearsed and has two pillars.
First is the belief that Labour will not persuade wavering voters that it has something fresh and exciting to say about the economy (a pre-condition for victory) as long as the man delivering its main economic message is perceived as an incarnation of the politics and fiscal strategy of Gordon Brown. The second concern is that Balls is congenitally opposed to any public rehearsal of ideas for reforming the way government and the state function; that he is a classic Treasury centraliser and sceptical about the need to urge innovation in the public sector.
The real tension is both subtler and more profound. It is between the need to defend Labour’s legacy of investment in public services and the impulse to imagine different ways of effecting social change. It is the dilemma of how to rehabilitate the abstract principle that government can be the citizen’s friend while also attacking the current government as a menace to society.
The uselessness of the coalition is coming to be seen not just as a measure of Cameron’s deficiency, but of Miliband’s inability to press home an advantage.
Yet there is another familiar cycle that afflicts the Labour side. It is the pattern of doubt over the viability of Miliband’s bid for power being filtered through the urge to remove Ed Balls from the shadow Treasury brief. The argument is well-rehearsed and has two pillars.
First is the belief that Labour will not persuade wavering voters that it has something fresh and exciting to say about the economy (a pre-condition for victory) as long as the man delivering its main economic message is perceived as an incarnation of the politics and fiscal strategy of Gordon Brown. The second concern is that Balls is congenitally opposed to any public rehearsal of ideas for reforming the way government and the state function; that he is a classic Treasury centraliser and sceptical about the need to urge innovation in the public sector.
The real tension is both subtler and more profound. It is between the need to defend Labour’s legacy of investment in public services and the impulse to imagine different ways of effecting social change. It is the dilemma of how to rehabilitate the abstract principle that government can be the citizen’s friend while also attacking the current government as a menace to society.
The uselessness of the coalition is coming to be seen not just as a measure of Cameron’s deficiency, but of Miliband’s inability to press home an advantage.
Thursday, 16 May 2013
Europe split has more history
Ed Miliband has had much fun mocking the Tories' divisions over Europe, but his party now faces some of its own. A new group "Labour for a Referendum" will be launched with the aim of forcing Miliband to commit to holding an in / out vote on EU membership after the next election. The organisation has the support of 15 Labour MPs, including Keith Vaz [a former Europe minister] and former Northern Ireland spokesman Jim Dowd.
It is worth remembering, that it was once Labour, not the Conservatives, that was most divided over Europe. The 1975 referendum on EEC membership was called by Harold Wilson after his cabinet proved unable to agree a joint position [Wilson subsequently suspended collective ministerial responsibility and allowed ministers to campaign for either side, an option that David Cameron may well be forced to consider] and Michael Foot's support for withdrawal was one of the main causes of the SDP split in 1981.
This weeks launch is a reminder that those divisions have not entirely been consigned to history. While the Tories are now split between 'inners' and 'outers', in Labour the fundamental europhile-eurosceptic divide persists.
It is worth remembering, that it was once Labour, not the Conservatives, that was most divided over Europe. The 1975 referendum on EEC membership was called by Harold Wilson after his cabinet proved unable to agree a joint position [Wilson subsequently suspended collective ministerial responsibility and allowed ministers to campaign for either side, an option that David Cameron may well be forced to consider] and Michael Foot's support for withdrawal was one of the main causes of the SDP split in 1981.
This weeks launch is a reminder that those divisions have not entirely been consigned to history. While the Tories are now split between 'inners' and 'outers', in Labour the fundamental europhile-eurosceptic divide persists.
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