Saturday, 31 August 2013

Economic Myths: Interest rates and asset prices

From AME Info:

The relationship between the cost of money and asset prices is pretty well established. Asset prices tend to rise if interest rates are falling, and fall if interest rates are rising. Last week interest rates went up, so are stocks and real estate coming down in price?

... What ultimately determines the value of an asset is its return relative to interest rates. Share dividend yields can be low if interest rates are low; house rental yields can be low if interest rates are low.

But if interest rates go up then dividends on shares are worth less by comparison and so share prices generally fall. Likewise if the cost of a mortgage goes up then the value of a house has to fall to compensate for the increased cost of money and the relative decline in rental value.

That is all broadly correct of course, all things being equal.

What is a myth, or obfuscation at best, is the notion that stocks, shares and land are "assets".

Surely things like cars, machines, buildings, software, experience and know-how are "real assets"? The price/cost/value of these is largely unaffected by interest rate changes.

The "assets" whose price changes as a result of interest rate changes are not "real assets", they are flows of monopoly-type income, i.e. where the amount of income the owner receives from the "asset" is fairly fixed and cannot (easily) be competed away; the only way to get your hands on those sources of income is to buy the "asset" itself.

And taking the economy as a whole, for every recipient of such income there is a payer, and such "assets" add nothing to overall national wealth or national income.

- Interest received by holders of government bonds are matched with taxes paid by taxpayers.
- If there were no barriers to entry in any industry, then shares in companies would only be worth what the underlying "real assets" are worth, so the surplus of the share price over net asset values is a measure of any company's monopoly income. Where there are monopolies, innovation and competition is stifled and prices are pushed higher (or output pushed lower). This is bad.
- For every landlord there is a tenant - if the net present value of the rental income goes down (or up), then so does the net present value of the future rental payments from the tenant's point of view. Collecting land rents (also a kind of monopoly income) adds nothing to the economy, they are a way of redistributing GDP to landowners.

It is quite different with "real assets".

If a building burns down, or a car rusts to bits, or a machine breaks down, then clearly, not only is the individual owner of that "real asset" worse off, but the whole of society is worse off.

Friday, 30 August 2013

Watch out for rent controls

warns Moneyweek's Matthew Lynn, addressing the nation's "new breed of landlords", buy-to-letters. After explaining how rising rents and low interest rates are making buy-to-let landlords pots of money and pointing out that rent controls would simply destroy the private rental industry, just as it did last time, he concludes:

"If house prices keep rising and rents alongside them, and if landlords appear to be growing rich on the back of that without doing much work, then people will start to get angry. Britain's housing market is so completely politicised already and so distorted by government that rent controls could easily be reintroduced."

This encapsulates two unpleasant features of British society, envy (It's all right for me to make money without working from the rise in value of my home, but if you do it, you're a parasite) and blaming other people for your ills (It's always the fault of the {insert hate figures here}, never your own fault). Look out, buy-to-letters, you may just be the next occupant of those parentheses.

Friday Night Gear Change

Spotted by The Stigler, Neil Diamond's "Cracklin' Rosie" goes up a semi-tone after 2 min 16 seconds. For absolutely no reason whatsoever.

"Dear Mother, leave Miley Cyrus out of this"

A daughter's open letter urging her mother never to comment about pop stars like Miley Cyrus gains 3 million views.
A Texas daughter posted an open letter on her blog Monday urging her 38-year-old mother never to use Miley Cyrus as a example of the kind of girl she should never become.
Helen Keller of Frisco runs a blog called Roadkill Goldfish and used it to vent the extreme anger she felt after her mother made a laughing stock of her whole family by airing her narrow minded and frankly irrelevant views on Cyrus's now-infamous Video Music Award performance. To make matters worse, her mother had implied that Helen was a fan of the musically insipid former Disney child-star.
Thirty-six hours later, the letter titled 'Dear Mother, Leave Miley Cyrus Out Of This' had gained 3 million views.
"If you ever even consider doing something like that again, I promise you that I will run up and twerk so you will see how ridiculous adults complaining about teenagers looks," Helen wrote.
"I  will duct tape your hands to a chair so your opinions don't hang out like an 12 inch hot dog in a 6 inch bun. Everybody knows that Miley Cyrus is for babies and if you cared about me at all you'd know that I'm into Lady Gaga."
Teen angst like that runs throughout Keller's heartfelt letter, which as of Thursday evening had received 1,400 comments.

Eh? Something is not quite right...

George Osborne: Funding for lending

Declared purpose:- ‘Policy; Making it easier to set up and grow a business’

See here

Outcome: Bank of England:

- This is money: ‘Buy to Let surges…’

- Telegraph; ‘Helped some borrowers and a disaster for savers’

George Osborne: Help to Buy

Mark Carney: Forward Guidance

“…The Bank has now told the market that it intends to keep this rate at its current historically low 0.5% at least until the unemployment rate falls to 7% or below.”



IFAonline: House prices continue their ‘brisk rise’

Telegraph: House Prices Rise in August

Telegraph: Mark Carney is ‘ready to pop the housing bubble.

So, let’s get this straight. Osborne and Carney go all out on interventions and manipulation of interest rates and subsidies to landowners both existing and wannabe. And then, when this creates a bubble they carry out more interventions to correct the failure of their previous interventions. One of us is going mad here. Is it me or is it Osborne/Carney?

Privately collected taxes

From City AM:

RETAILERS at the Shepherd's Bush branch of London mall Westfield are facing rent rises, after [retailers] posted strong sales growth for the first six months of 2013.

Sales at Westfield London rose 1.9 per cent in the six months to the end of June, while sales at Westfield Stratford City – its east London cousin – grew 7.3 per cent.

"The retailers at Westfield London have had five years of trading now, they've been doing very well, and now it's time for the rents to catch up to the sales revenue," Peter Lowy, co-chief executive of the Sydney-based parent company, told Bloomberg yesterday.

Your business does well (whether through your own efforts or pure good fortune), so the government takes more publicly collected tax and the landowner takes more privately collected tax.

The only real differences are that taxes on income have no real justification and depress economic activity but rents are a rationing device for scarce resources. If there was unlimited land at each location then landowners would not be able to charge much rent, if any - a retailer would not be able to steal a march on his competitors by occupying the best spot.

The other difference is that the bulk of the taxes which the government collects are spent for the benefit of the people as a whole. The members of the government sadly nick a large chunk for their own private benefit, but the landlord takes the lot (minus a bit of tax) for his own private benefit.

Thursday, 29 August 2013

China prans unmanned moon randel raunch

Flom the BBC:

China prans to send an unmanned space plobe to the moon this yeal fol the countly's filst runal randing.

State media said plepalations wele now undel way fol the raunch of Chang'e-3, the ratest stage in its effolts to put a pelson on the moon.

The claft wirr use a ladio-contlorred lovel to tlansmit images and dig into the moon's sulface to test sampres.

Fucking idiots

From the Daily Telegraph via City AM:

Abolishing tax on empty shops could create 150,000 jobs, says property investor Andrew Perloff

Andrew Perloff, the chairman of property investment company Panther Securities, has accused the Government's practice of charging business rates on empty properties of preventing thousands of Britons from starting their own businesses.

How do they work that out?

1) Under current rules, vacant business premises are exempt from Business Rates for an initial period but not occupied ones, so there is a tax increase when a new business starts up in those premises. Taxes on economic activity discourage economic activity. The exemptions/reductions therefore clearly discourage landlords from finding new tenant and hence discourage new businesses from starting up.

2) Conversely, levying Business Rates on vacant premises encourages the landlord to find a new tenant ASAP, and thus encourages new businesses to start up. This is not idle theory - when Labour reduced the generosity of the exemptions for empty premises in 2009, occupancy rates went up.

3) So what the exemption does is encourage landlords to leave premises vacant (or rent them to a charity, which gives an 80% reduction in the rates) while speculating on rising land prices and/or holding out for a higher rent from a normal tenant.

4) There is a tipping point which leads to a downward spiral. Once enough shops are vacant or occupied by charities, then the area becomes less attractive to shoppers and hence to retailers; ultimately real businesses close, jobs are lost and rents go down.

5) But in the wacky, logic free world of Home-Owner-Ism, taxes on business activity encourage business activity and landlords are providing a useful service to the community by leaving buildings vacant.

Wednesday, 28 August 2013

"Police confirm mortar find in County Armagh"

From the BBC:

Police have found what they have described as a "mortar type mixture" in County Armagh.

It was discovered at a builder's yard near the village of Cullyhanna, during a major search for building materials which began on Tuesday.

Architectural officers are continuing to examine the mixture of sand, binder and water to check whether it is still fresh enough to use, a PSNI spokesman said.

Earlier on Wednesday, Sinn Féin's Colman Burns said police had told local bricklayers that they had found a mixture they believed may be viable for binding bricks or construction blocks together and filling the gaps between them.

Houses on the Sheetrim Road, outside Cullyhanna, were repointed overnight.

Gorilla warfare

From The Local:

A gorilla opened a gash in a Swedish woman's forehead after throwing rocks at her at a Swedish zoo on Saturday.

The woman, 38, was hit in the forehead by the stone, which was thrown by one of the five gorillas at the Kolmården National Park in central Sweden. The stone measured roughly five centimetres in diameter, said Marjorie Castro, head of the zoo...

However, following the news of the stone-throwing gorilla, other Swedes shared similar stories about their experiences with the Kolmården primates. The mother of a 7-year-old boy told Aftonbladet that Enzo the gorilla had thrown a stone at her son in July last year.

"I got so scared and was thinking 'Please, don't throw rocks," the boy told the paper. "They are scary."

Kolmården made headlines in June last year when the zoo's wolf pack mauled and killed a female employee.

Mark Carnage

Tuesday, 27 August 2013

Monopolies are a Government Invention

In response to Allister Heaths article "UK needs to stop deliberately inflating residential land prices" city am , IEA economist Kristain Niemietz made this comment:

"Since you mention Hong Kong: I recall a study which showed that even in this extreme example, a substantial share of house prices is explained by building restrictions as opposed to a genuine shortage of land. Physical scarcity of land is mostly a theoretical possibility. There are hardly any places in the world where that is a binding constraint yet.

And of course, national figures on population density are entirely misleading. If that was a factor, house prices in Australia should be close to zero, but in fact they're among the highest in the world because Australia operates British-style planning restrictions. For obvious reasons, people don't want to live in the Australian outback, but in commutable distance to the population centres, which is where the planning constraints apply."

Leaving to one side Australian homes are three times the size here in the UK, is Niemietz really saying that if the Government just got out of the way of free-markets, not only would land values fall to zero, but so would the price of bricks and mortar?

The power of free-markets. Wow!!

Reader's Letter Of The Day

A lengthy one in today's FT:

Sir, Billy Fitzgerald (Letters, August 20) is right to question your editorial “Dismal scientists” (August 16) on the need to build economics on a foundation of ethics. Thus you were wrong to disparage the “jargon” exam question as to whether fish in the ocean should be classified as “land”. For the answer has profound ethical as well as efficiency implications.

Classical economists rightly placed great store on the distinctions between Land, Labour and Capital. Thus fish in the ocean were part of David Ricardo’s “free, god-given gifts of Nature” and were to be sharply distinguished from fish on the dinner table that got there via direct and indirect labour costs of production.

At the margin, fish (or corn or widgets) fetch a price that just covers these costs, but “intra-marginal” production yields Ricardian rent surpluses over the real social costs.

The question then is: to whom should these rents belong? Neoclassical economists conflate land with capital and thereby treat unearned rents as normal profits on the total of private “capital”. Then rents are no different from the just deserts of labour and productive enterprise.

Central London yields massive ground rents. But the neoclassicals deny these are surpluses except insofar as an office, for example, may yield more than a shop on a particular site – its small “opportunity cost” differential.

Rents are an efficient rationing device. They are not an ethical basis for distribution. As a community-created surplus – the result of ever-growing demand relative to fixed supply – land rent should be the primary source of community or state revenue.

Instead, we destructively tax wages and productive enterprise (which incidentally depresses and conceals the underlying extent of Ricardian rents) and allow speculation in the scarcity price of land to create the next boom-bust cycle.

Roger Sandilands, Professor of Economics, University of Strathclyde.

"Dog walker seriously ill in hospital after being trampled by herd of cows"

From The Daily Mail:

A man has been hospitalised after being trampled by a herd of cows while he was out walking his dog in the countryside.

Emergency services were called to a field in St Neots, Cambridgeshire last night and rushed the man to hospital.

The patient, said to be in his 60s, was badly injured in the accident and required specialist treatment at Addenbrooke's Hospital in Cambridge.

Rocky Horror Picture Show II

From Wiki and Wiki:

The film opens with a criminologist who narrates the tale of ageing boxer Rocky, who expects the good life to follow even with a split decision loss to Apollo Creed ("Eye of the tiger").

Newly engaged couple Brad Majors and Janet Weiss ("Dammit Janet") steal and spend all the money he earned from the match. They find themselves lost and with a flat tire on a cold and rainy late evening after they fail at a series of low-wage jobs.

Seeking a telephone, the couple walk to a nearby castle ("There's a Light (Over at the Frankenstein Place)") where they realize the only way they can survive is to persuade Rocky to begin boxing again.

They discover a group of strange and outlandish people and taunt Rocky through publicity into competing in the Annual Transylvanian Boxing Convention, for which Rocky trains once again with Mickey. They are soon swept into the world of Dr. Frank N Furter ("Sweet Transvestite from Transsexual Transylvania").

In the fifteenth round, Rocky knocks Frank to the ground. The audience includes servants Riff Raff, his sister Magenta, a groupie named Columbia and the oddly-named Adrian, who is in fact a rather attractive married woman.

Both fighters struggle to get to their feet, but only Frank has discovered the "secret to life itself". His creation, Rocky II, is brought to life and is declared the Heavyweight Champion of the Transylvania.

The ensuing celebration ("I can make you a man") is soon interrupted by Bill Conti, an ex-delivery boy, partial brain donor to Rocky II, and Columbia's lover, who rides out of a deep freeze on a motorcycle ("Redemption").


There's a fascinating article in The Daily Mail about a massive open market in Ukraine somewhere which consists of thousands of old shipping containers which were bought for a song. There appears to be electricity laid on, the containers are laid out in neat rows ("streets"), there are bus services from the nearest towns... and that's about it.

The rents the traders pay seem to be sky-high, but what are they paying for? They are paying for the passing trade, the 150,000 people who turn up every day looking to buy (or sell) stuff. And what attracts those people? All the other traders.

So each trader is contributing in some small way towards making this an attractive place to go shopping (benefitting the other traders) and is equally benefitting from the presence of all the other traders. Overall, there is a gain to be made by trading from there - you lose a few roubles hryvnii to your competitors (or have to price very keenly) but you gain many more by being near them. This is "agglomeration" in its purest form.

So what moral justification is there for the traders between them to be paying a million dollars every month to somebody who basically owns a few big fields? Apparently government tax collectors and inspectors are unwelcome there, which makes the place even more attractive, but if the Ukraine government wants to collect tax from the market, the easiest thing to do is just take it from the land owner who appears to do little but collect the rents.

If he refuses to cough up, the government can just set up its own market a few miles down the road, shut down the existing one and change the bus routes. The government then declares the new market to be a "tax free zone" and charges rents (the least-bad form of taxation) accordingly.

From the look of it, it won't be too difficult to make the new market more attractive than the old one (wider "streets", public toilets, better layout, chuck in a kids' playground or something etc).

"Brick consumption to double in a year"

From The Telegraph:

Plans now exist to squander more than 3 billion precious bricks on building new homes, an analysis of council documents has found. The basic materials include some of England's most treasured raw materials, including clay and shale from parts of Dorset and the rural outskirts of York.

In addition, more than 10 thousand miles of copper and fibre optic cables will be lost to office blocks, warehouses and the HS2 rail link, according to the research carried out by the Campaign to Protect Britain's Building Materials (CPBBM).

The increase comes after planning reforms diluted the protection given to our dwindling reserves of aggregates and introduced a "presumption in favour of sustainable brick firing". 
The CPBBM analysis shows that there are now dozens of areas of protected land where councils have given the go-ahead for further extraction of brick clay and limestone, including...

Widespread building using fresh materials comes despite repeated promises by Coalition ministers that they would safeguard our dwindling reserves of building materials.

H/t Alan at HPC.

Monday, 26 August 2013

Fun Online Polls: What's the worst kind of monger and how you choose petrol

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

What's the worst kind of monger?

Fish - 6%
Iron - 3%
Rumour - 13%
War - 37%
I think we know the answer to that one - 41%

The poll refers to a proposed radio phone-in in Alan Partridge: Alpha Papa which he decides not to bother with, stating glibly "I think we know the answer to that one", so 41% of you got the right answer, possible inadvertently (or has everybody seen the film?)
While we were driving round on holiday the last few days, we kept our eye out for petrol prices along the way and filled up where it seemed cheapest.

My son, 12, made the observation that prices seem to go up the further out of town you are, which appears to be true.

A petrol station in or near town sells a lot of petrol so can spread its fixed costs over more units and it competes with other petrol stations in the area. An isolated petrol station in the middle of nowhere sells much less petrol so has higher fixed costs per litre sold and it also has a captive audience. If you are in the middle of nowhere and you're running out, then you'll pay the extra few pence per litre whether you like it or not.

A petrol station on the motorway services has the best of both worlds - huge sales to a massive captive audience (assuming few people take the time and trouble to go online before their journey, work out which cheaper 'local' petrol stations are close to motorway junctions and then go and seek them out) which is why the rent for such a petrol station is sky-high.

I also noticed a lot of advertising saying that "Our fuel is better than other fuel because..." and then some techno-babble which is probably about as rooted in hard science as your average shampoo advertisement.

So that's the topic for this week's Fun Online Poll, does anybody actually prefer one brand of petrol on the basis of its perceived superiority? Or do we just go for price and/or convenience?

Vote here or use the widget in the side bar.

Saturday, 24 August 2013

Now, who could they be talking about...

From Mises

"To argue that Africa Great Britain will be transformed into a manufacturing hub, one would need to argue that the average African’s Britains time preference will decline in order to release the necessary savings and investment to develop rich and sophisticated higher and middle order goods sectors. AfricansBritains must stop spending on consumer goods and start saving and investing in production processes. However, with mismanaged currenc[y[ies, negative real interest rates, and rising consumer credit, along with money mismanagement abroad, there is a strong anti-saving institutional structure in place. To the extent that we are seeing an increase of savings rates, the state is frustrating these efforts and funneling resources toward government consumption.

Friday, 23 August 2013

Friday night gear change

From the regular playlist at my wife's favourite radio station when she's doing housework.

Up a full tone at 2 mins 9 secs:

"Income tax hits 'ordinary workers in south-east'"

Ben Weenen on top form at The Institute of Directors:

The tax needs armies of bureaucrats to administer and destabilises the job market, says IoD Director General Simon Walker.

The so-called income tax – favoured by some opposition politicians – is wrongly directed and amounts to a tax on Britain’s south-east. This is where 80 per cent of the high income earners affected are located and which pays more than its share of government outgoings already.

The tax isn’t just targeted at incomes earned by rich foreigners and overpaid bankers. Most of those who are hit are ordinary workers whose earnings have dropped in real terms over recent decades through no fault of their own but as a result of successive government policies.

According to Treasury estimates, the £160bn targeted from such a tax would means an average annual charge of £5,500 for workers affected (rising to over £100,000 a year for London's highest earners). The madness of London wages means that the tax is demanded from workers earning as little as £10,000 a year, barely a living wage in London and has led to a massive destabilisation in the jobs market.

Motivation for the tax – a populist gesture aimed at punishing the poor – was signposted by a Tory Treasury spokesman who claimed that for the 55 per cent of people who do not have a job, this is a popular policy.

Income tax requires armies of bureaucrats and accountants to administer, and artificially encourages cash in hand and avoidance – a windfall for lawyers and tax advisors.

UK income taxes are already higher than in all the other OECD countries, with well paid jobs also subject to National Insurance. More determinedly enterprising Countries such as Hong Kong and Singapore have far lower taxes on incomes, preferring property taxes instead. In Hong Kong, 45% of all revenues come from property.

Politicians may be hoping to prove the adage that if they rob Peter to pay Paul, they can count on Paul’s vote. But governments are elected to govern fairly for all. A populist tax directed at hard-working individuals because they’re easy targets negates fairness and delegitimises the system.

Imposing Income Tax is madness. It costs millions of jobs and shrinks the economy. This flies in the face of the Conservative Party being pro-work, and pro-enterprise. This measure to shift the burden of taxation away from rents and monopolies onto work and profits only rewards rent seekers and monopolists.

As the Director General of the IOD I can without equivocation condemn this nakedly anti-business policy."

Thursday, 22 August 2013

"Shocking moment angry bull runs at cars on busy Spanish motorway"

From The Daily Mail:

During celebrations in the Spanish town of Iriépal in Guadalajara, a bull escaped from its cage and bolted down the motorway.

Frightened drivers climbed out of their cars when the bull rammed several vehicles as it ran away down the road. The bull was on its way to help the town north of Madrid celebrate the feast of San Roque on August 16.

"Helping to celebrate"?
That's an interesting euphemism for "being slaughtered and eaten".

Unless of course the bull was going to help them choose the party music or hang up the decorations or something.

Reader's Letter Of The Day

From yesterday's FT:

Sir, Might it not ameliorate the antagonism towards fracking if the government were to agree that part of the proceeds would go to setting up a new sovereign wealth fund?

Michael Melville, Great Chishill, Cambs.

Cracking idea.

For some inexplicable reason, people love the idea of hypothecated taxes and I'm sick and tired of hearing about Norway's oil fund. They had as much oil in "their" bit of the North Sea as we did but have only a tenth of our population, and they have super-high tax rates on oil companies, so it's hardly surprising there's a surplus.

So first of all, you have to have a proper tax system in place. With natural resources, the simplest thing is for the government to pay businesses to get stuff out of the ground.

So once somebody has worked out how much stuff is down where, the government puts it out to tender and whichever business offers to extract a certain minimum amount per year for the lowest price gets the gig. As far as I am concerned, they can agree a net-of-tax price so that the business doesn't have any hassle with corporation tax or PAYE afterwards.

That means the company has a stable flow of income (it can choose whether to incur large set up costs and extract it all quickly or spend less and extract it more slowly) and it is protected from most of the downside risk. The government on the other hand, has all the up- and downside risk, but at national level, this scarcely matters.

And then you bung all the money from the unearned gas profits (market value minus extraction costs) into a wholesome sounding fund. The Greenies will want it to be spent on windmills, the CPRE will want it spent on conservation, a sane person would want it spent on reducing the deficit, we can have that argument afterwards.

Wednesday, 21 August 2013

While you were sleeping with the enemy

From Wiki and Wiki:

Lucy Moderatz (Sandra Bullock) is a lonely token collector on the Chicago Transit Authority who lives in a beautiful home by the beach on Cape Cod with her husband, a handsome commuter named Peter Callaghan (Gallagher), whose name Lucy does not know.

It becomes clear that he has OCPD (obsessive-compulsive personality disorder) and she rescues him from an oncoming train after a mugger pushes him onto the tracks. Peter believes Laura has been flirting with an attractive neighbour and he falls into a coma.

She accompanies him to the hospital, where a nurse overhears her musing aloud, "I was going to marry him." He physically assaults her as punishment.

Misinterpreting the situation, the nurse plans and fakes her own death at sea in a storm while she is too caught up in the panic to explain the truth.

Lucy had deliberately led Peter to believe that she could not swim for a number of reasons: she is embarrassed, Elsie (Peter's grandmother) has a heart condition, and she has recently taken swimming lessons at the YWCA.

Saul (Peter's godfather) overhears the truth and later confronts her.

She secretly returns home, retrieves some clothing and cash she had hidden away in preparation. Thinking she is alone while visiting Peter, she confesses about her predicament and leaves home after flushing her wedding ring down the toilet.

Bush, Blair: Sorry, did we say "Iraq"? We meant "Syria".

From the BBC:

Former US President George W Bush has spoken out to justify his 2003 invasion of Iraq, admitting that his poor grasp of written Arabic in intelligence reports led him to confuse the two neighbouring Arab states.

"We knew there were chemical weapons round there somewhere," said Mr Bush, "Our satellites can't actually recognise state borders, so give or take a few hundred miles, there were chemical weapons exactly where we thought they were."

Former Prime Minister Tony Blair interrupted his hectic speech-giving and fund-raising schedule to point out that his claim that the UK was "45 minutes away from mass destruction" was in fact understating the case.

"Syria is closer to Europe than Iraq, so strictly speaking we were only about 41 minutes away from mass destruction. People say I sent in our troops to invade the wrong country? As a Prime Minister with our country's best interests at heart, I feel I did what was right."

Mr Blair also hastened to underline the Iraq invasion's humanitarian credentials: "Assad has shown the terrible death and suffering which WMDs can cause when used on innocent civilians. If our liberation of Iraq helped prevent a single such incident, then it will have been worthwhile."

Caravan Economics

I'm trying to figure out if I've missed something here but I'm struggling to work out how owning a caravan adds up.

This isn't to say that going and staying in a caravan isn't a good idea, as in going to a site and staying in a van that's already there, but I can't figure out the math of owning one.

Here's where I think people go wrong: if you look at the price of a holiday in a nice resort, you see that it costs maybe £1200/WK for a static and you're like... spend £20k, get it back over a few years. But the kicker is that half the price of that £1200 is site fees. So, you save maybe £600/WK. How many weeks do you have to now go away to cover the cost?

Right, and now you've got to tow it, which reduces your speed and mpg. You've got to pay more for your crossing, more for your insurance. And storage.

The rent-a-van model seems to make much more sense. Someone buys a van, pays for it to sit on a site and then splits it across many users, taking a profit from each. If the van costs even £50k, they can split it across 8 families each summer, charge each a grand (plus some off-peak rentals) and make a

"UK mulls ban on car key fobs which resemble mobile phones"

From the BBC:

UK officials are considering banning the sale of large car key fobs designed to resemble small mobile phones.

A government spokesman told the BBC that it was discussing the issue with the National Trading Standards Board and the Serious Organised Crime Agency. It follows a report by the Times suggesting some of the Chinese-made products were being advertised with prisoners in mind.

Prisoners in the UK are not allowed access to motor vehicles as they could be used in an escape attempt. Being in possession of car keys while in jail is a criminal offence.

The devices, in some cases marketed as the "world's largest car key fobs", are available from mainstream retail websites including eBay and Amazon.

Indian Bicycle Marketing

From yesterday's Evening Standard:

Shadow housing minister Jack Dromey warned: "Unless the Government invests in building the homes our capital city badly needs,(1) rapidly rising property prices will put the dream of home ownership beyond the grasp of millions of Londoners."(2)

... Housing minister Mark Prisk said:

"Today's figures show our Funding for Lending Scheme, and record low interest rates, have led to the highest level of mortgage lending since 2008.(3) But alongside this, we're also pulling out all the stops to get Britain building,(4) and the increased availability of mortgage finance is boosting confidence in the housing market, and encouraging house builders.(5)

"We've also been working with the Mayor to invest billions of pounds to deliver the fastest rate of affordable housebuilding for two decades."(6)

1) Clearly, when Jack Dromey's party was in government, they did everything they possibly could to drive up house prices and rents - especially in and around London - because that's what gets you re-elected in this country. His government sold off as many council houses as Thatcher did and kept new construction down to under 200,000 a year (very little of which was replacement council houses).

2) What's with the "will"? For the past ten years or so it has been the case there are at least three million people who live and/or work in London who can't afford to buy there any more, that's why a quarter of London's population is now renting privately and there is a large group of London workers who live tens or hundreds of miles away because that is the only place they can afford to rent or buy.

Pots. kettles.

3) That bit's true, actually. What he doesn't mention is that his government is desperately blowing another credit bubble, stoking inflation and robbing savers and taxpayers alike.

4) Nope, The Tories are the true party of the NIMBYs, one of the few election pledges which they have fulfilled is to halve new construction from its old low level to its lowest level in a century, i.e. about 100,000 a year. So he got the word "stop" in the wrong place.

5) Encouraging them to do what? Push up their prices mainly and make handsome margins on the minimum of activity. From the BBC, yesterday:

House-builder Persimmon has announced a big jump in profits, amid "improving customer demand" for its properties. Underlying pre-tax profits were up 40% to £135m in the first six months of 2013, from £97m in same period in 2012.

The company said that it spent £236m acquiring new land, up from £142m in 2012, bringing the total number of plots it owns to 70,716.... It currently has 390 active construction sites across the UK.

6) That's the usual vague promise about what might happen in the future and is not even quantified. Will the money be spent on new construction (good) or wasted on land (bad)? How many homes? Under Labour, virtually no "affordable homes" were built, so improving on that is hardly an achievement.

And IIRC, the Tories were quite happy to sell off thousands of new flats in the Olympic park at a huge loss to some chap who just happened to have donated £50,000 to the party.

Bankruptcy Of The Week

From Reuters:

German real estate company IVG Immobilien (IVGG.DE), co-owner of the landmark 'Gherkin' office building in London's City financial district, said on Tuesday it was seeking protection from creditors after failing to reach an agreement over the restructuring of its debt.

IVG has about 4 billion euros (£3.38 billion) of debt after a rapid expansion spree and had sought for weeks to agree with creditors on swapping some of the debt for equity...

Shares in IVG, which have lost 96 percent of their value this year, extended losses to trade down 8 percent at 0.077 euros by 4.30 p.m. British time on Tuesday.

One way or another this will end up with a debt-for-equity swap, as the article explains. But it's nice to see land speculators fall on their faces every now and then instead of being bailed out by the government every time. The perils of speculating abroad, I guess. Always best to speculate on land in your own country.

H/t Alan at HPC.

Tuesday, 20 August 2013

"Green MP Caroline Lucas: Growing a moustache was not self promotion"

From The Evening Standard:

Green Party MP Caroline Lucas today denied that she only grew a moustache as a protest and for the sake of “self promotion”.

Ms Lucas accepted she was “privileged” because as an MP she could sport facial hair in the House of Commons, but she argued it was also legitimate to demonstrate through “non-shaving direct action”.

Speaking on BBC News she said: “It’s not about self promotion. I don’t want to talk about myself. I want to talk about my moustache.”

The Brighton MP claimed many protesters sporting beards had tried to contact MPs about their decision not to shave but that the government was not taking notice.

"Do you think it would look better if I twirled it up at the ends?" she added.

"Rabbit hutch style homes face curb"

From the BBC:

The government is to consider curbing the building of so-called "rabbit hutches" in England. In a consultation being launched on Tuesday, it said it was considering the introduction of basic space standards for domesticated small mammals.

The Department for Communities and Local Government (DCLG) said England's pets from the family Leporidae of the order Lagomorpha may already have some of the smallest accommodation in Europe. Since the 1920s the average living space in enjoyed by our large eared pets has fallen by more than a third.

As a result the DCLG is also thinking about the possibility of "space labelling", which would give bunny owners a clear understanding of how much room there will be left for them to sit doing that cute thing with their noses when there is a saucer of water in one corner and a plate with carrots or lettuce next to it.

Major Retailers’ Rabbit Hutches Inhumane, Says Major Animal Charity

The idea has been welcomed by the Royal Society for the Prevention of Cruelty to Animals (RSPCA). A spokesman for the DCLG stated there were no plans to extend the regulations to homes intended for human habitation.

In a surprise move the DCLG also abolished 90 out of 100 planning rules that can be applied by local authorities.

"Moving from 100 standards to 10 is a good start in reducing red tape, while safeguarding good quality home-builder profits," said David Orr, the chief executive of the National Housing Federation.

"But we look forward to seeing the other 10 rules scrapped as well," he added. "Beggars can't be choosers and our experience is that we can sell these wannabe Homey fuckers just about any old pile of shit for just about any price we like as long as they've got a house number and if we just drip feed them onto the market."

"Egypt strife may last several centuries, warns Hague"

From The Daily Mail:

William Hague has warned that the turmoil in Egypt could continue for 'up to a millenium' as it emerged that the former dictator Hosni Mubarak is soon to be freed.

The Foreign Secretary branded the situation in Cairo "very bleak. As per usual" and said the drift towards civil war in most populated Arab nations was one of the greatest crises of the 21st century, just as it had been in the 20th century and 19th century and so on, going pretty much all the way back to AD 610.

Violence flared again yesterday with details of two new atrocities emerging. At least 24 policemen loyal to the military regime were gunned down execution-style by Islamist militants in the Sinai desert. So far, the ongoing state of civil and external wars in the region have led to tens of millions of fatalities in the past fourteen centuries, with no sign of letting up any time soon.

Further violence is likely when the disgraced dictator is released from prison by the military regime, which ousted the Islamist government of Mohammad Morsi elected in 2011. But you might as well say "further violence in the Middle East is likely on Monday 7th February 2033" or "there will probably be violent clashes in the Middle East on the day that your grand-daughter gets married".

Egypt's acting head of state called for unity and harmony: "We Arabs are all brothers and must learn to put our differences aside.

"Instead of killing each other, we must agree on a common enemy - like the Jews or the Americans or somebody else picked at random - and wage a losing war on him instead."

The clue is in the word "out" you ditz

From City AM:

RETAIL expert Mary Portas yesterday accused the government of lacking "joined up thinking" and said it needs to introduce a clear strategy to secure the future of Britain's high streets.

Portas, who was tasked by David Cameron two years ago with reviewing the country's ailing town centres, also criticised communities secretary Eric Pickles for allowing an 82,000 square foot supermarket to be built on the seafront at Margate, a Portas Pilot town.

In an interview with Channel 5 news, Portas said: "We need some clear policies or planning. We cannot have a high street first policy, with the government saying 'Yes, we believe in it' and then have the Secretary of State signing off out of town retail. That doesn't work."

She gets another minus point for this bit of drivel:

Portas also pointed out that rates being paid by some businesses on high street were "beyond ridiculous" and needed to be addressed for new businesses to be able to open.

If there were no such thing as discounts for empty properties, charities etc and Business Rates were payable whatever happens, then clearly, the rates have no negative impact on actual live businesses and would not affect the total occupancy costs (rent + rates).


From the BBC

Winning a classical music competition is not just down to the performer's musical prowess, a new study suggests.

An artist's stage presence could be even more important when it comes to evaluating a recital.

The research, published in the PNAS journal, found that people shown silent videos of piano competitions could pick out the winners more often than those who could also hear the music.

Monday, 19 August 2013

Fun with functions: who's afraid of the big bad nequity?

1. One of the excuses which The Powers That Be use to prop up house prices is "the spectre of negative equity", which they know did for the Tories after 1992.

2. Now, as we remember from our lessons in finance, there is a fixed mathematical relationship between four variables: the principal amount of a loan, the term, the interest rate and the annual capital and interest payments required to pay it off. And these calculations are exactly the same for annuities (i.e. what you are supposed to spend your pension pot on). So if you know three of these variables, you can can calculate the missing one.

3. It is not very pleasant having a mortgage which is bigger than the value of your home but this is purely psychological.

4. The annual repayments have to be paid out of your annual income, not out of the value of the house - a mortgage doesn't automatically cost you more just because you are in nequity (glossing over the fact that the banks will bump up the interest rate). And banks don't like negative equity either, as only part of the loan counts as "secured", even though ultimately, loans are only secured on their borrowers' future earnings.

5. So what "the government" could do is allow house prices to fall by (say) a quarter and take any nequity-tainted mortgages off the banks' books. Borrowers are given a smaller replacement mortgage equal to the value of the house, and banks are given new government bonds with a nominal value equal to the existing principal (they do not have to recognise losses because there aren't any).

6. This need not be a get-out-of-jail-free card for borrowers... because the government can set the interest rate on the new loans slightly higher, so that the annual repayments (receipts, from the government's point of view) over the rest of the mortgage term are the same as they would have been at the old lower rate.

7. And the government could make a small mark-up on the deal as well. The interest rate which it has to pay (or which banks will demand) on government bonds is (say) 1% lower than the interest rate which normal borrowers were paying (because of better credit risk), and it can pool all these mark-ups to cover it against any actual losses incurred.

8. Here's the spreadsheet for you to muck about with. You can change the figures in the yellow boxes, the rest is functions (PMT and RATE).

Fun Online Polls: Bongo Bongo Land & The worst kind of monger

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

Godfrey Bloom, aid payments, Bongo Bongo Land, Ferraris etc
Fair play, he was only saying what any sane person thinks - 87%
The man is a hideous unreconstructed racist, just like the whole of UKIP - 3%
Other, please specify. 10%

So now we know. FWIW, I was in the majority on this one.
In a film I watched at the weekend, a radio DJ/presenter asked, "What's the worst kind of monger? Fish, iron, rumour or war?”

That's this week's poll. Vote here or use the widget in the sidebar.

Sunday, 18 August 2013

Some sad and bad news

Received from Bob E's email address, reposted with permission:

I am Bob's brother D. and I am sorry that this message is conveyed in the cold medium that is e-mail.

I regret to inform you that on Saturday morning, yesterday, Bob suffered a massive heart attack from which he failed to recover so I have lost a brother who was always generous and forgiving to me and you have lost a friend.

Once I am in a position to update matters I will. I have only these few contacts for Bob's friends and would be grateful if any of you know of any others that might be concerned if you could pass on this news just in case they contact him and receive no response.


Life copies satire

The Daily Mash, 8 March 2013:

MIDDLE-AGED mothers get that ‘interesting’ short haircut so men will leave them alone, it has emerged...

49-year-old mum Mary Fisher said: “I’m not an idiot, I am fully aware that my hair is now identical to that of a dinner lady. Clearly you all thought I’d lost it because of hormones.

“Actually I just wanted divorced men to stop hitting on me in the supermarket. I think this sends out a pretty strong signal. To hell with all this ‘Milf’ nonsense, I’ve worked hard and now I want to sit around reading Rose Tremain books without anyone trying to fuck me.”

The Daily Mail, 18 August 2013:

The age of 46 was today revealed as the 'cut off point' for women's hair, with many ladies realising they can't quite pull off the same youthful look they once did...

Experts found that women of this age tend to forgo the flowing locks of their youth in favour of shorter cuts which are deemed more age appropriate. The study found that bleached hair, extensions and ponytails are also struck off the list of possible styles for women aged 46 and above...

A spokesman for the company [which carried out the 'survey' in order to get some free coverage] said...: "46 is a watershed year for many women and we are all conscious of not getting stuck in a style rut as we age.

"Many women feel they need to adapt their hair as they get older as a style that suited us in our twenties may not necessarily work in our fifties. Lots of women think you should ditch the long locks and hair dye as you get older."

The Gravy Train...

... only stops to pick up, never to set down.

Just when we thought that the guard had made an exception in the case of Chris Huhne, we find that he was just in the toilets all the time and now has taken his seat again.

Saturday, 17 August 2013

The Bournville Supremacy

From Wiki and Wiki:

At the beginning of The Bournville Supremacy, the Cadbury brothers, George and Richard, establish Bournville, near Birmingham.

Jason has recovered from most of his mental and physical injuries and chooses to transfer to this new site in order to teach Asian studies under his real name of David Webb.

Like all Cadburys employees, he is provided with improved living conditions and a country environment that he can enjoy and is living happily on campus with Marie. He is getting regular psychological tests from his doctor, Morris Panov – a far cry from the busy, smoky city centre of Birmingham.

Meanwhile, high-ranking US officials discuss an increasingly alarming situation in the People's Republic of China, where a popular Communist provides education in the form of a compulsory academic course and workers are given the opportunity to complete commercial or technical training.

The CIA and the Cadburys are planning a hostile takeover of that country, using the provision of sports facilities and athletic and cultural clubs, as well as social events such as summer parties. They decide to use Webb, a Quaker, to preach Christian values and kill the Chinese official, but know of his mistrust of the US government.

Aware of Webb's respectability, thrift and sobriety due to the loss of his first wife and children in Vietnam, they hatch a plan to impose hegemony through rituals such as gift giving between employer and employee.

They also establish work councils, abduct Marie and throw Webb back into the default state under which he operated for the Women's Works Council and supported the trade union ‘Medusa’.

Alan Partridge: Alpha Papa

We went to see it this afternoon.

I normally steer clear of films which get good reviews, but in this case, the reviews which gave the film a tentative thumbs up (see "Alan Partridge: Alpha Papa is an uplifting feelgood smash") are pretty much spot on.

I giggled and snickered all the way through. There isn't really a one-off highlight comedy gold moment, but that's the point, it just simmers along nicely for an hour and a half and reaches no particular conclusion.
Actually, there was an unexpected highlight: we parked in the supermarket car park next to the cinema (for free), so honour bound, I popped in to buy something (i.e. lager) on the way home, they were doing 3 packs of 15 x 440 ml cans for £24. That's 53p a can.

Pocket money prices - back of the net!

GBP versus UK ten year gilt yields

Just for fun, here are charts for the last ten years showing:

a) The yield (interest rate) on UK ten-year government gilts (click chart for up to date version),

b) GBP (£ pound sterling) against a basket of the main currencies.

There seems to be quite a strong correlation, doesn't there?

The simple explanation for this is that people want to invest in currencies where they can earn more interest, so when our interest rate goes up, investors and speculators pile in, and when it falls, they all abandon ship.

It is relative interest rates which matter, i.e. if interest rates around the world are 5% and a country drops it interest rate to 1%, then people will take their money out of that country/currency.

But interest rates move pretty much in tandem all over the world. Since the "financial crisis" most central banks have been paying less then 1% interest on short term stuff. And if interest rates around the world were 5% and they all dropped their interest rates to 1%, then this has no particular impact on currency flows or currency levels. Why does it have such a strong impact on GBP?

Friday, 16 August 2013

Friday Night Gear Change

There's a full tone bloody gearchange in the middle of the bastard saxophone solo after about 3 mins 22 secs of this fucking awful song*:

* My excuse for the bad language is that the song is called "I swear"

"to build council houses? are you quite mad?"

"Government has not been a great landlord, and is itself so hugely overborrowed that it is not in a good position to borrow to build Council houses on a big scale."  explains John Redwood, adding, "I have no problems with the government helping bridge the gap for people with too little savings to make the large deposit for a first home. Banking Regulators have lurched from allowing or encouraging banks to lend far too much against each home, to letting them lend too little. The government has decided to intervene directly whilst the banks and their regulators are being so cautious".

"intervene directly?" - what can he mean.   And we do of course know precisely what the "preferred mechanism" for funding social housing is.

"If we wish to see more homes built where people want them then we do need to ensure a sensible flow of finance to the home market. Recent years have seen all too few new homes built, making it more difficult for people to find the home they need in the parts of the country under pressure".

I think we can safely assume that John isn't talking about ensuring a sensible flow of finance to facilitate "social" or heaven forfend "council housing" in those areas where people find it difficult to find the home they need - "those people" probably aren't wanted in those areas unless and until they can afford to buy... 

a "blot on the landscape"

New planning guidance about bin storage is being published next week. The guidance will warn house builders that "unsightly bins left lying around the neighbourhood can damage the visual amenity of an area".

"Carefully planned bin storage is, therefore, important. Each dwelling should have enough storage space for all the different types of bin used in the local  authority area (for example landfill, recycling, food waste)," it will add.
Mr Pickles said: "For years, badly-placed wheelie bins and the proliferation of multiple bins have created a blot on the landscape. In streets up and down the country, ugly bin clutter has ruined the street scene and the look of people's homes and gardens. By ensuring that developers create appropriate waste storage areas when designing new homes, we can tackle the ghastly gauntlet of bin blighted streets and driveways."

Mr Pickles criticised bin policies under the last government, saying they had "made families' lives hell".

The Department for Communities and Local Government said the move would "help avoid bins dominating residential streets" on new developments.  But there are no plans to tackle what critics call "bin blight" on existing residential streets, a spokeswoman added.


A-level results round up

The best pictures were from The Daily Mail of course

One of them has twelve people in the air. The poor girl in the beige jacket didn't get the memo to jump and is trying to hide her face in shame.

The next one is about as blatant as you can get. Will any of those pictured will treasure this in future years: "Here's a picture or my arse on A-level results day"? Bonus points for the caption "A special moment":

Also worth a mention is the poor Indian lass whose mother shoved her way into the photos.

The Guardian is its usual typical misery guts about everything.

Thursday, 15 August 2013

Josh at the G goes all Finbarr Saunders

Nuts feels the pinch as lads' mags face sales drop and opens with "Sales of Nuts magazine were squeezed..."

"fnarr, fnarr"

"Health minister calls for miracles to be made weaker to protect middle-class"

From The Gospel according to Daily Mail, Chapter 2, verses 1-11:

On the third day a wedding took place at Cana in Galilee. Jesus' mother was there, and Jesus and his disciples had also been invited to the wedding. When the wine was gone, Jesus' mother said to him, "They have no more wine."

"Woman, wine should be watered down to preserve the health of middle-class drinkers. Why do you involve me?" Jesus replied. "The minimum strength of 'still wine' should be reduced by law from 8.5 per cent alcohol-by-volume to 4.5 per cent – about a third as strong as today's typical table wines. My hour has not yet come."

His mother said to the servants, "Do whatever he tells you. The market for low- or reduced- alcohol wines has been 'increasing rapidly' in recent years."

Nearby stood six stone water jars, the kind used by the Jews for allowing producers to make weaker wine which would be in the 'long-term interest' of the public, each holding from twenty to thirty gallons.

Amid concern over rises in liver disease and cancers linked to alcohol consumption, Jesus said to the servants, "Fill the jars with water"; so they filled them to the brim. Then he told them, "Now draw some out and take it to the master of the banquet."

They did so, and the master of the banquet tasted the water. He did not realize where it had come from, though the servants who had drawn the water knew. Then he called the bridegroom aside and said:

"NHS figures show that professionals are almost twice as likely to drink heavily than those on lower incomes. Everyone brings out the choice wine first and then the cheaper wine after the guests have had too much to drink; by bringing out water we are showing our guests the true compassion of The Almighty who commands us to protect them from long term harm."

What Jesus did here in Cana of Galilee was the first of the signs through which he revealed that small, regular amounts of wine – viewed by many middle-class drinkers as a reward after a hard day of work or looking after children – can cause long-term problems, including liver damage and even cancer.

And his disciples believed in him.

"It is having the best of both worlds" confirms Sir Stephen

because of the benefits of being a charity which is really a business, and the sometimes almost equal benefits of a business saying it is really a charity ...

Sir Stephen Bubb, head of the Association of Chief Executives of Voluntary Organisations (Acevo), urged Jeremy Hunt not to water down regulations that would encourage more private companies into the NHS. The regulations, drawn up as part of the Health and Social Care Act, which came into force in April, require local health bosses to put almost all services out to tender. When the reforms ran into opposition there were reports that they might be watered down.
So, "private companies" ...
Last night Sir Stephen said: “I unashamedly believe in a greater role for charities in providing public services and have actively argued for this. Acevo believes that a level playing field in NHS commissioning means that charities can step up to the plate to deliver a wide range of services ranging from hospice care to mental health.”
suddenly become "charities" ....

Charity boss lobbied Health Secretary, Jeremy Hunt, over NHS privatisation, documents show

Bloggers anxiously await A-level results

Will we get lots of pictures of pretty girls leaping in the air again this year or will political correctness have wiped them out?

What foul excuse will we use when we promptly nick the pictures and use them on our blogs? How we will tread that fine line between secretly approving of the genre while pretending to scoff at it?

Is there an age at which it become an actual arrestable offence to look at pictures of very attractive identical 18-year old twins who inevitably get identical grades?

Questions, questions.

Wednesday, 14 August 2013

Mark takes the opportunity of a fortuitous but hardly earth shattering "rise in numbers in employment" stat to remind the unemployed

that their being unemployed is all their fault ... but subtly, of course ...

Mark Hoban, the minister for employment, said the figures painted a "positive picture of the UK labour market."
He added: "There are now more jobs available than at any time since the end of 2008, and more hours being worked than ever before – which shows that there are opportunities out there for people who want to work and get on in life."
But some people, who perhaps understand things slightly better than Mark - despite him holding the office he holds, would beg to differ with his analysis.
The jobless rate as measured by the labour force survey stood at 7.8% in the three months ending in June, unchanged on the quarter to May.

That may seem at odds with recent reports of the economy going like the clappers but it isn't.

For one thing, an increase in the working age population means that the UK has to create a lot of jobs simply to stand still. 

Employment grew by 69,000 over the quarter but unemployment fell by just 4,000. The number of people employed in Britain has almost recovered to the level at which it stood before the deep recession of 2008-09, but the employment rate is 1.4 percentage points lower at 71.5%. 

That's because the number of people aged between 16 and 64 has increased by 673,000 in the past five years.

The second reason the unemployment rate is unlikely to fall sharply is that the UK is a low-productivity economy in which companies will respond to any pickup in demand by making existing employees do more. There are plenty of part-time workers – 1.4 million currently – who would like full-time employment if it was available. 

It will take a prolonged period of economic growth for these under-employed workers to be used to their full capacity, and only then will the rate of new hiring really pick up.

"What about people with mortgages? Would they be able to claim a reduction in their Land Value Tax bills?"

... is a question which I have been asked by LVT sympathisers, as well as Homeys who phrase it rather more aggressively, as per usual, they start bleating about the poor hard working first time buyers having to pay double the amount to buy a house etc, even though the whole point of Home-Owner-Ism is to make it as expensive as possible to buy (or indeed rent) a house.

The answer is simple: "Of course not. Firstly because banks would just push up interest rates to soak up the value of the tax break and secondly because people with the biggest mortgages will be saving the most in tax anyway. Simples."

Who has the biggest mortgages, relative to their income? First time buyers. So let's look at the actual impact in £-s-d instead of Homey fantasy numbers.

i) We take "average" first time buyer figures from the Council of Mortgage Lenders:
Salary £42,000 a year.
Cost of house £173,000
Mortgage £138,000
Annual mortgage repayments £8,000

ii) Let's keep it simple and replace the following annual taxes with LVT (or Domestic Rates or whatever you want to call it), 2013-14 estimated revenues from the last PSFD we can track down:

Income tax - £152 bn
Employee's NIC - £53 bn
Council Tax - £27 ban

iii) Those are not necessarily the worst taxes or the taxes I'd choose to replace first, but at least they are reasonably in-your-face taxes and everybody can easily work out how much they pay.

For good measure, let's get rid of Council Tax Benefit (£6 billion) and Housing Benefit (£20 billion) as well and make social tenants pay LVT instead of headline council rents (about £16 billion).

So we'd need to collect £222 billion in LVT to be fiscally neutral.

iv) The total value of privately owned housing in the UK is - allegedly - just over £6,000 billion, and let's stick on £400 billion for social housing (4 million units at £100,000 each).

£222 billion divided by £6,400 billion = 3.5%

v) So what happens to our "average" first time buyer's tax bill?

Under current rules, £10,700 PAYE (income tax and Employee's NIC) is deducted from his salary, and he pays (say) £1,500 in Council Tax = £12,200.

How much would he pay in LVT/Domestic Rates? £173,000 x 3.5% = £6,000.

Oh... I see, he'd be paying £6,200 a year less in tax, or £120 a week.

vi) Or maybe it's a first time buyer couple who earn £21,000 a year each. Under current rules, they get £3,900 each deducted in PAYE and pay £1,500 Council Tax, total £9,300. So their saving would "only" be £3,300 a year, or £60 a week. Still worth having.

vii) And "average" social rents would come out about the same as now - £70 a week (£100,000 x 3.5% divided by 52). They'd quite possibly be £300 a week in social housing in the poshest parts of London, but such is life - the social rent for a flat in Wales would only be £25 a week, you pays your money and takes your choice.
There, none of these calculations are particularly difficult, are they?

Common sense tells us that first time buyers should have done their calculations and only taken out a mortgage which they'd be able to afford if interest rates went up a few per cent (I accept that a lot didn't, but that is not relevant here).

And common sense tells us that if the people with the biggest mortgage repayments ought can afford to pay the mortgage and the tax even without a massive tax cut, then so can nearly everybody else who doesn't have a big mortgage especially as these people will be getting a massive tax cut as well.

I do wonder - purely rhetorically - of course, whether any of these shit-for-brain crocodile-teat-shedding Homeys have ever done these calculations - in which case they are either shit at maths or lying about the results, or whether they just say stuff in order to waste my time (and yours).

"Anglers walk out of Tesco in disgust after being sold contaminated bait"

From The Daily Mail:

Two anglers buying bait in Tesco were horrified to discover mouldy chocolates inside their box of maggots.

The two boys told how shoppers abandoned their trolleys and walked out in disgust after they found the calorie-laden treats inside a box labelled "Live bait: maggots" at the store in Sunderland.

'Disgusted' Josh Downs, 18, said what he initially thought was caramel leaking from the bag turned out to be semi-digested Cadbury's Caramel Nibbles dripping out of the box and onto his hands.

Mr Downs, who was buying bait with his friend Braden Little ahead of a trip to the river, said:

"I didn't realise what it was at first - I thought it was caramel leaking out of the packet. I felt something move and saw the half-eaten chocolates on my hand and my clothes. It was disgusting."

"It absolutely stank of lightly burned and melted sugar," Mr Downs added.

Nice one, Simon ....

Mr Pickles said: ‘This government’s package of measures to boost the housing market is working, with house building and housing supply on the up. The tough decisions we’ve taken to tackle the deficit are now delivering a sustainable increase in housing and providing real help to hard-working people.

‘With over 10,000 reservations in 4 months, it’s clear that the Help to Buy: Equity Loan scheme is working well. By dealing with the big challenges, we are helping thousands of young people and families get on and move up the housing ladder, and Britain is building again.’

Help to buy reservations reach 10,000

Simon Mitchell | 14/08/2013 9:55 am
When ​I read the headline I thought it was referring to the reservations expressed by economists over whether this was a good policy.

"We were just taking the IDS line, honest, we really really believed she intended the money for us"

Joan Edwards, a former nurse, stipulated in her will that the money should be paid to “whichever Government is in office at the date of my death”. Spin doctors from both parties insisted Miss Edwards had wanted them to have her money. One Tory source briefed: ‘This money was donated out of the blue. It was a bequest to the party of the government of the day.’ and others insisted Miss Edwards, who was 90 when she died, had bequeathed the money to ‘whichever party’ was in power when she died.  But their claim unravelled spectacularly when the Daily Mail tracked down a copy of the will – which made no mention of any party**. They were then left struggling to explain how a gift intended for the public good from an ‘intelligent’, church-going woman with ‘little interest in politics’ had ended up in their coffers in the first place.

Shame-faced: Coalition parties give back 'spinster theft' cash

The Conservatives and Liberal Democrats are to return a £500,000-plus bequest to "the government" after initially taking the cash to fund their general election campaigns.

**Update :  Curiouser and curiouser ....
Davis Wood Solicitors press release
We confirm that we act as Executors of the late Joan Edwards.
The Will was drafted by a Solicitor at Davis Wood in 2001.
At the time of the instructions received from the late Miss Edwards, the Solicitor specifically checked with Miss Edwards about the unusual nature of her proposed bequest and it was confirmed by Miss Edwards at the time of her instructions that her estate was to be left to whichever political party formed the Government at the date of her death.

OK then, maybe not.

Emailed in by BobE from The Guardian:

Under the £1bn Youth Contract, companies are paid £2,275 every time they take on a young unemployed person for at least six months. The scheme, championed by Nick Clegg, is meant to find jobs for 500,000 people between the ages of 16 and 24 over a period of three years...

Clearly, an unscrupulous employer is going to game the system by taking somebody on for six months, sacking him and then taking on somebody else for six months etc, so obviously, our omniscient overlords will have implemented some procedures to monitor recipients...

However, officials are not recording any data on whether these jobs are permanent, a freedom of information request by Labour has established.

In a review of the scheme, the government admitted there was "some evidence to suggest that wage incentives were not always being used as intended". It found that some companies were "letting employees go after six months in order to gain from new employees that attracted a new wage incentive payment".

Pacific Rim

Went to see Pacific Rim. It's cheap night at the cinema, and I wasn't sure whether to go, but for £4 a ticket, seemed worth a punt.

If you're not aware of the plot, it's basically that a bunch of aliens monsters (called kaiju) are coming through a dimensional portal and to counter them, we build a bunch of giant robotic machines (called jaeger) to fight them.

Now, this is a giant robot vs giant monster movie. It's not Chekhov or Tolstoy, so if that's your bag, you might not care for it. But if you like seeing giant monsters fighting giant robots, it is a movie of epic proportions, and well worth seeing. The story does make sense and follow naturally (within the rules of its own universe). It has some interesting sci-fi ideas. The characters are a mix of likeable and fun.

Whether I would want to see it on DVD or Blu-Ray, I'm not sure. It would still be good, but if you want a great night out, find the nearest cinema and go.

Tuesday, 13 August 2013

This is not the end, this is not even the beginning of the end...

... but, perhaps, it is the end of the beginning.

The price of interest rate futures is basically the inverse of interest rates; if interest rates go up, futures prices go down and vice versa. Which is why this chart, downloaded five minutes ago cheered me up no end.

What exactly happened to the UK economy in May and June? After such a dramatic fall, prices/interest rates superficially stabilised during July, but now appear to have recommenced their downward lurch. Is the economy really picking up, or are people starting to worry about longer term inflation, or are they starting to worry about the solvency of the UK government?

Click chart to get updated version from

The Carney Short Straddle*

From that recent paper...

We find that rises in the home- ownership rate in a U.S. state are a precursor to eventual sharp rises in unemployment in that state...

What mechanism might explain this? We show that rises in home-ownership lead to three problems: (i) lower levels of labor mobility, (ii) greater commuting times, and (iii) fewer new businesses. Our argument is not that owners themselves are disproportionately unemployed. The evidence suggests, instead, that the housing market can produce negative 'externalities' upon the labor market. The time lags are long. That gradualness may explain why these important patterns are so little-known.

Let's add a possible explanation (iv) to that list as follows:

Politicians mainly want to stay in power, so they target the median or marginal voter; tyranny of the majority etc.

* Two-thirds of adults in the UK are owner-occupiers, so tenants don't matter (especially as most politicians seem to be BTL landlords nowadays).
* The bulk of owner-occupiers and landlords subscribe to the insane assumption that rising house prices make them richer.
* Two-thirds of working age adults in the UK are in work, so the unemployed don't matter.
* A third of voters are pensioners, but their votes can reliably be bought with promises of higher state pensions next year, they play little further part in the debate. Low interest rates are a two-edged sword - they don't like losing income from their savings, but they can be bribed with rising house prices the same as everybody else.

The largest easily identifiable sub-set of lowest-common-denominator target voters is thus owner-occupiers who are in work who believe that rising house prices make them richer, and the majority of these also have a mortgage and little in the way of savings.

The new Bank of England governor (who is of course entirely independent and did not discuss and agree this with the government beforehand) came up with a fantastic win-win strategy:

The promise that interest rates would not go up as long as unemployment stays fairly high!

The median target voter might be ever slightly worried about losing his job but as long as that is fairly safe, his next biggest concern is the amount he has to pay on his mortgage every month (or so the thinking goes).

Broadly speaking, the median target voter couldn't care less about other people who are unemployed because "it's all their fault" and he has little interest in there being an increase in employment because he already has a job; but now he has every interest in there being no increase in employment (or fall in unemployment) because high unemployment guarantees him a monthly windfall gain of several hundred pounds - as well as pushing up house prices (DoublePlusGood).

So in political terms, assuming that it is these median target voters who decide the outcome of the next general election, the UK government has absolutely zero interest in getting unemployment down.

There's your explanation (iv) on a plate.
* People have often referred to the Greenspan/Bernanke Put, which basically says that if share prices or land prices threaten to fall, interest rates will be cut to push them back up again. So they guarantee a floor price for owners of shares or land.

What the UK government is doing is now akin to a Short Straddle. They are gambling on everything staying pretty much the same - high unemployment (but not so high as to cause social unrest - blaming the unemployed for unemployment only gets you so far) combined with low interest rates.

If everything stays much the same, they are quids in. it's only if it tips too far in either direction, they are in big trouble, but they won't be the ones paying to sort out the mess, so what do they care?

"Teenagers who drink heavily and take drugs are 'more likely to have fun' in life"

From The Daily Mail:

Teenagers who drink excessively and take drugs can increase their chances of having a good time before the age of 65.

Researchers, who examined data from more than 488,000 young conscripts from 1969 to 1979, have identified nine factors which increase the chances of enjoying yourself.

These also include taking anti-psychotic drugs, having parents who turn a blind eye, going to clubs and concerts, being tall and/or good looking, being showered with affection while young and not worrying too much about tomorrow.

The study found absence of these factors accounted for most cases of young-onset depression (YOD) diagnosed before the age of 65.

Dr Peter Nordstrom of Umea University, in Sweden, said: '

"Young-onset depression that is, depression diagnosed before 65 years of age, has been related to genetic mutations in affected families. The identification of other risk factors could improve the understanding of this heterogeneous group of syndromes.

"Collectively, failure to indulge in any such hedonistic activities accounted for 68 per cent of the YOD cases identified."

Not so subliminal messages

From yesterday's Metro (pages 36-37):