The Furrowed Brow
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I have a discussion topic for folks. I don't claim to have an answer to it, but I'm interested in other people's opinions:
"Is it possible to design a fair tax system? If so, how would it be structured?"
FF (1):
I thought income tax was just meant to be imposed for the duration of the Napoleonic War? Are we still paying that off? Surely we've seen off the little lad by now?
On another topic, I hear that "ministers" will today call for the introductioon of genetically modified crops in the UK. One reason I heard for this was to increase yields.
Surely long before we get to that stage, we should stop paying farmers to "set aside" fields to prevent the surpluses of food we used to get.
I suspect that the real reason for this is just pressure from our "partners" in the special relationship, who have been getting increasingly frustrated that they can't sell their GM foods in the UK.
1st furrow - the daily email. "Five people were killed after a car pursued by police drove the wrong way down a motorway" 2 hours before the email arrived the ipcc made it clear the police did not pursue the car down the motorway. I know the email is a bit ambiguous but, let's face it, it shouldn't be.
2nd furrow - "we are also looking at the psychology of banking." why not look at the psychology of reporting banking. Many of those people in queues outsides Northern Rock Banks are pointing the finger at the media for stoking up the story. Even at the weekend the internet was highlighted, causing a mini-stampeed and slowing down general internet access for everyone. If, when this all cools down and customers find they need not have panicked, will they then turn on the media for any penalty costs incurred by removing their cash at short notice?
#1: "Is it possible to design a fair tax system?
Fair to whom Fearless? At the moment the tax system is pretty fair to the rich and we have the National Lottery to mop up any excess cash that the poor may still have in their pockets.
Fair to me would be a tax credit for all that earnings related N.I. I paid since the 1970s. When I came to claim my earnings related unemployment pay in the 1990's I found it had been abolished and I would get the princely sum of 拢40 per week. Just going to one interview cost me more than that. Now they are doing the same with SERPS.
First let's get a democracy like Switzerland and then we might get a fair tax system.
There were many gasps of shock and despair this morning on our Norwich bound train when it was reported that the mother of Natasha Coombs (who died on the railway line at Manningtree five weeks ago) was found dead on the same stretch of line.
We are all stunned and very sad. Later it will again be necessary to address the issue of 'care and support for the families of traumatic incidents'.
Zimbabwe - bashing right across the media today.
Its quite eay folks. You colonise a country, bow to political pressure and grant independence, then bleed the place dry of capital and bring the place to its knees. Then you install a client government willing to agree that you whites own all the land, factories, mines etc. and the trick is done.
Better still if you can find a few whites 'who fought Ian Smith' or 'Roy Welenski' over UDI to add a veneer of respectability to your capmpaign to wreck the incumbent post colonial government.
No wonder RSA is so chary of nationalising its own assets. Mandela would be an official target of Bush's war on terror in days. (What was it John Bolton said, about US interests being more important than demcracy itself/ Think what the US is like toward communist and democratic South America).
Instead of the 'Rhodesian' (just so they know who they are) farmers running off to Mozambique to set up the same White Farmers' Autarchies why don't they stay and help as hired managers?
And why don't their realtions and descendents take their turns in the mines and the factories? Is it 'cos they is white?
Whether you or your parents fought Vervoort or shot him or dug up a cricket pitch or played on a rebel tour the same rules apply. If your lineage has been taking it easy for generations its your turn to do the manual work.
Forget your own heroism or that of your ancestors. If its yor turn, its your turn. Would you treat the NUM miners' descendents any differently from the Nottinghamshire UDM (?) descendents?
Incidently getting the descendents of the 1066 influx of Norman-French aristos to do their share of the manual work here would be only fair wouldn't it?
Or are they excused 'cos they've got titiles?
I can hear the cry of 'Get the sjamboks out, there's one of those commies about!'
Dave Baldwin (3)
Agree on both counts. And in both cases it seems to me that someone thinks it makes a better story, so sells more papers/ gets more people to listen Radio 4 or whatever.
I also worry about the prevalence of 'after' when they mean 'while' or 'during'. I'm sure I heard that five people died 'after' their cars collided head on - they actually died when, or as, the cars collided.
re: banking - not many readers interested in 'Bank continues trading normally' stories, I'm afraid. So chuck in a few panics and frenzies, that'll get them interested.
Sid the Pedant
Banking not interesting??
I posted this to Newsnight. Posting there to such an insensitive site (so that posters replying to each other is almost impossible and no focused discussions ever emege) makes one realise just how good this PM blog is !!!!
There's a 'this morning' update below;
Oh, dear, do we HAVE to endure these constant attempts of Stephanie Flanders to appear CLEVER?
Its a 3 step procedure
1. She holds that the subject is far too ocomplicated for the likes of you and I
2. She shows us some fellows who know about this stuff - experts
3. she offers us a consideration that not even these really clever people have thought of.
The other day 3. was covered by Knight and uncertainty. An odd position to take - one might describe it as the Impossibility of markets - when Flanders overall position was that we merely face a few local difficulties
Tonight we get Black and Scoles at 2.. Oh dear, these models all come up with the wrong answer if expectations change.
Which is of course what happens during bubbles, crashes and credit squeezes.
So the 'cleverness' of these models is a bit like the cleverness of a physiologist or a brain specialist in analysing the effects of boxing. Its still boxing and the animal spirits still dominate everything even if an expert with 20 20 hindsight can explain every physical detail - including huge changes in the elan of the boxers. but for round by round analysis and for a prediction as to who is going to win, they are useless.
So those clever clogs chaps Flanders interviewed are bluffing. Beleive me, bluffing. They are percentatage players.
If you plan to sell something to France for 100 pounds in 3 months time, they'll take a split position to guaranteee you against currency fluctutions - 100 pounds worth of Euros and... pounds (!). They are not taking a risk. They'll charge you 5 percent. You'll buy if you're worried about bigger currency movements against you than that.
How uninteresting is that?
So we get the coup de grace from Flanders. Different people she tells us take different positions in the marke. Which she can't explain 'cos all are using Black and Scholes moidels which don't model animal spirits.
So.. go BACK to PPE school, Flanders, its those Keynesian animal spirits that make the difference. They are useful as an explanation 'cos they prove how right it is to replace markets with administered systems under democratic control.
Now a little history and we'll get somewhere. King is completely anti Marxist (Ask his colleague Nuti (at B'ham))
So he has no understanding that the whole financial system is dishonest. (Bear with me!!!) Marx said 'Theft takes place at the point of production'
We now know it takes place at the point where the Masters of the Universe OVERVALUE their own assets (Under-price risk as King would put it. But for him its a technical question not a moral one)
So we arrive at the truth.
King could not believe (to quote ex MPC memeber WIlhelm Buiter) that the bankers were regardiing each other with fear and loathing.
He could not believe that each of them thinks, as they do, that all the others are lying about their asset position. Or capable of it.
For King since there is a proper pricing regime (set of prices) in financial assets the only problem is to find it and implement it.
However this would require the work of nothing more than a few cost accountants paid 30k a year.
That is not how the financial system is. It is a system that runs on the overpricing of assets owned by a small number of people. If we all owned equal shares in the system there would be no point inflating assets.
The system then is one run on, and designed to implement, asset inflation.
And every banker whom King met last night knows it.
Crises occur when collectively these Masters of the Universe all think the game is up and that everyone knows that they are working a con.
Then they have a huge crisis of guilt (fear and loathing of each other). Then they either find a scapegoat (Enron, Northern Rock) or they crash and burn
Clearly their realism frightened King.
So he released funds that would not have reached Northern Rock anyway.
So after all he's said why has he released them? That is the question he cannot answer in terms of his belief that his job is to avoid banker moral hazard (dishonesty)
He has released the funds because the dishonesty runs so deep in the banking and financial sector that it is the only way (all bankers then believing there is some money available)the bankers and financiers can feel safe. IT is an attempt to avert the crisis to come.
Their dishonesty extends of course to the stock market and their persisitent over valuation of stock. High prices supported by the 大象传媒. (Do you remember the expert you had on saying of this 'correction' (as it was called a few weeks ago)would not see the FTSE below 6,500? Its still not back to that!! Those false opinions you hire are designed to keep markets bouyant so that financiers salaries, bonuses and your 大象传媒 pension can be keep huge and loans made by the super irch against stock to finance their luxury spending. (Rising stocks become a Widow's Cruse)
The bankers are irretrievably wedded to their own dishonesties which need to be rooted out root and branch.
I humbly submit to you that King is not equipped to do that job and so he has surrendered to the bankers.
Update:
King's decision to make the money available to the BANKS now must mean he has suddenly realised that there is a MAJOR problem amongst them.
The offer of money DOES encourage more risky lending. (Borrowig money for such ventures becomes cheaper).
Despite King, Nor-Roc depositors WERE sitting at home worrying about NR's borrow - lend structure.
This is fundamentally about honesty. The main problem is that the BANKERS do not regard other bankers as honest.
The problem for King is that he cannot distinguish between a good system that can be marred by dishonesty and a system that RELIES on disnonesty for its functioning.
The first is how King sees the financial system and no doubt has experience of dishonesty in such cases.
But it is the second case that we have here. Individuals, even dishonest ones, can be very shocked to find that the system they operate in is inherently dishonest - and no noe in the system can be trusted or is trusted by anyone else.
Can anyone tell me exactly how the Bank of England et al 'inject money into the money markets'? I have this naive picture of a big syringe....
TPO (6) You may be an observer of the results, but the cause is not always what it appears to be.
We observe that the sun moves across the sky from "East" to "West", but with deeper knowledge we learn that it does not.
Try looking at some of the few media outlets RM hasn't closed down. Remember the Daily News?
I think the country should be referred to as Rhodesia until Mugabe has gone. I blame him entirely for the current condition of his country. It has been independent for quite a bit longer than even the decades he's been in power. As for Mr. Blair, well, that's one thing for which he cannot be blamed.
"In an effort to curb malicious comment posting by abusive users, I've enabled a feature that requires a weblog commenter to wait a short amount of time before being able to post again. Please try to post your comment again in a short while. Thanks for your patience."
Dear "I", would it be possible to state the length of that "Short time", to save us all a lot of irritation? You see, if I wait 2 minutes and that's not long enough, I may try waiting another "Short time", e.g. 2.5 minutes. If the period is 3 minutes, I could save myself 2 or more sends...
Actually Sid (7), it is quite possible that the people died "after" the car crash. They may receive injuries "during" the crash from which they fail to recover; either at the scene, whilst being transported or after arriving at hospital. If you want to be pedantic, you are going to have try harder than that. ;o)
H.
Mac (8) Being a listener to PM and the World Tonight I'm afraid I have no idea who is this Stephanie Flanders at whom you direct your ire.
A little ?" (see picture at namelink)
PRESIDENT UNVEILS OUR NEW STRATEGY IN IRAQ
You may want to join him.
WORLD NEWS
With Approval Numbers Stuck At 30%, Japanese PM Shinzo Abe Steps Down 鈥淣o leader can govern with such low ratings,鈥 he says.
Former Pakistani PM Returns, Is Arrested, Deported to Saudi Arabia
His luggage ends up in Kuwait.
Study: Iraq War Has Increased
Terrorism 607%
Another good reason to invade Iran.
ALSO IN THE NEWS . . .
Dubai Skyscraper Now World's Tallest
Will house offices for former Bush Administration officials fleeing prosecution in 2009.
Salaaaam
ed
this passionate observer @6 wrote:
"Zimbabwe - bashing right across the media today."
Hmmm. I went and looked at the papers, and they were being unpleasant not about the starving, maltreated citizens of that country, with whom there was a great deal of sympathy, but about its current regime.
Perhaps that ought to be changed to "Mugabe-bashing".
It's hard to see how railing against people who have been dead for a while (nine hundred years or more in some cases) will help the kids dying for lack of food *today* in a country whose leader isn't exactly one of the finest in the world. I would like to know, though, what the indigenous population of that country ought to be doing to make things a bit less dire in Zimbabwe.
*Are* there any ways to deal with this sort of oppression, short of careful murder?
Actually, Humph (11) - I saw the pictures. Yes, I know some things happen after other things - but 'after' seems to have replaced 'when' entirely. That is my objection. I bet at least one of the people in that crash died WHEN the cars collided.
Sid
Fearless Fred - your tax question, I suspect, is almost unanswerable, since you will never get complete agreement about what fairness means.
It seems to me that one of the least 'fair' aspects of tax is the arbitrary imposition of bands at different levels. Fairness would require smoother mechanisms, I'd say - but they'd probably be too complex to administer.
I'd say more, but I'm supposed to be getting ready to go to a wedding ...
Sid
What stands revealed with great clarity by recent events in financial markets is the general point that market forces only "work" so long as they ensure profits for the private sector.
If these profits are threatened, then the relevant unprofitable assets - whether bank deposits, railway tracks or anything else - are effectively nationalised or renationalised.
Once they have been restored to profitability at the taxpayer's expense, they are passed back to the private sector.
The "market economy," in short, is a myth. What we have is a profit economy unhesitatingly supported by state action and public money whenever it gets itself into difficulties.
What stands revealed with great clarity by recent events in financial markets is the general point that market forces only "work" so long as they ensure profits for the private sector.
If these profits are threatened, then the relevant unprofitable assets - whether bank deposits, railway tracks or anything else - are effectively nationalised or renationalised.
Once they have been restored to profitability at the taxpayer's expense, they are passed back to the private sector.
The "market economy," in short, is a myth. What we have is a profit economy unhesitatingly supported by state action and public money whenever it gets itself into difficulties.
The way in which the US and the UK destroy democracy if it is in their 'strategic interest' so to do is well known. Pilger has traced attacks on democracy by the US in South America, Africa, Asia and of course the Middle East. Indeed only a few days ago Eddie Mair on Radio 4's PM elicited the answer 'Because it is not in America's strategic interest' to the question 'Why are you not supporting democracy in Pakistan?'
It is commonplace that countries are 'entitled' to be nastier when dealing with foreign powers than when treating their own citizens, if only because the international laws governing such behaviour are only partial.
Unfortunately it looks as though we are moving in to an era when that is no longer true. Things may be about to get very nasty indeed here.
To see this we first need to rehearse the ACADEMIC counterparts to the Janus strategic attitudes that the US and the UK have towards other country's democracies.
A series of Theorems known as the Impossibility Theorems purport to show that the only way majority rule can be made 'rational' (the theorists word) is by allocating all decision making to one (wo)man - a dictator. The theorists also claim that majority rule societies can never be cleared of the charge of political dishonesty, again unless power and authority in the society shifts from majorities to one person only. Finally it is claimed that no society can have an adequate set of rights for everyone - the best that can be hoped for is a full set of rights for just one party. Dictatorship is then the only procedure satisfying the demands of these theorists.
The theorists themselves are by no means nonentity nowhere-man economists. Arrow (see The Arrow Impossibility Theorem) won a Nobel Prize for the theorem. Theorists here have in the past 40 years dominated several English university economics and political philosophy departments.
The body of theory is simply used internationally. Post grads from democracies the US and UK don't like and dictatorships they do like are taught this stuff and advisers parachuted in to these societies come equipped with it. If the dictator is 'trouble' or if the democracy is compliant these theorems are put to one side and instead the full US - UK pro democracy top level propaganda machine is switched on on their direction.
The theorems CAN be answered and refuted fully. You will not find such ripostes in the literature however. What you will find is rather feeble replies to the theorems - which of course add in sum to the power and authority of the theorems themselves.
I have suggested above that these theorems may one day come home to roost here, and there are signs that this may be starting to happen.
In the late '70s and early '80s Mervyn King was Professor of Investment at Birmingham University. The Professor of Mathematical Economics in this rather small department was Professor Pattaniak. Prasanta's contribution to the body of Impossibility Theory is in showing how no conceivable voting system (except the degenerate 'voting' case of dictatorship - one man, one voter as it were!) can guarantee that the society is deciding its future honestly and fairly.
(Paradoxically in extending the subject in the way he has he allows us to glimpse the proper resolution of the theorems).
When King first broached the idea of a Monetary Policy Committee at Birmingham he was asked about the effect of the Theorems on the way this group would take decisions. Which side of the Janus face would his committee show to the world?
Would it be pro democracy and be 'vulnerable' to 'dishonest' decision making and 'irrational' decisions or would it be a front organisation for King's individual dictatorial decisions?
The answer that emerged looks awkward to say the least for King now.
It is common place within the theory that certain sorts of preference patterns escape the Theorems.
Opinions about what the interest rate should be may fall in that class.
For a given interest rate if every member thinks
a) it should remain as it is or
b) it should be raise and lowering it would be worse or
c) it should be lowered and raising it would be worse.
then the Theorems need not apply.
(A MPC member is not allowed to think ' The current interest rate is wrong. It is an ambiguous signal. It would be better if it were either raised sharply or lowered sharply. Either clear unambiguous signal would be better for the markets than our current malaise'. Then the theorems would apply and someone on the committee would turn out to be taking all the decisions in effect. (Some cunning could disguise this of course)) I am speaking as of one who took the theorems seriously - as King does, publishing a number of such theorems in the academic journal he was editing at the time.
Now however King is part of a three person committee, comprising himself from the Bank, someone from the Treasury and someone from the FSA.
Decisions are to made by this triumvirate like those related to Northern Rock. Should nothing be done, should just financial support be given, should the Bank just encourage market solutions like Northern Rock being taken over or should it do all it can offering guarantees and market encouragement?
Sadly these sorts of decisions allow the sorts of preferences, by the Governor, the Treasury official and the FSA honcho, which generate the Theorems.
This little cabal is in danger of heeding Kings experience in the theory of committees in Birmingham and becoming dictatorial.
It has not been lost on 'Impossibility Theorists' that King is demanding absolute secrecy for the decisions he takes.
The irony is that with the secrecy intense enough and with him as dictator of his policy cabal we still cannot be sure that the public announcements that ARE made will be honest. For the committee/cabal will be honest one with another since KIng's decision will be dictatorial. But that decision might entail announcements which are 'for the public good' rather than the whole truth.
As King said recently 'I promise that I will always do what I should do' which leaves open of course the possibility that he thinks that the public interest lies in the public only being told what is 'good' for them.
I suggest King would emerge as the dictator of this group because partly of his stance at Birmingham where he was very keen that the then SSRC and other academic financial intermediaries should know he was in absolute charge.
The other day in the Select Committee hearing he was asked 'Who's in charge?' in respect of bank decisions about Northern Rock, clearly those Birmingham days came back to him. It is not I think an exaggeration to say he shouted back ''In charge?' What do you mean? Define 'In charge'!' to a somewhat surprised committee member.
The Janus face of the US and the UK towards democracy sometimes makes plain speaking difficult for the exponents of both views.
King was clearly caught between two stalls. On the one hand his own view that the new Committee should be run rationally, completely secretly or covertly as he describes it, and his own early induction into the theory of Impossibility Theorems. On the other he was before a Select Committee - the public face of democracy here in England and very far from the academic worlds he trained in where Impossibility Theory describes a respectable political view. And to re-iterate provides a rationale, a justification for dictatorship over democracy, over majority voting, rights and honesty.
The line it is drawn, The curse cast.
King says the British people cannot be trusted with transparency in the banking system. The Bank of England cannot, according to King, tell the British people the truth. The banks should not tell the British people the truth.
Ordinary people cannot be trusted with the truth. Our system of government is too sensitive, too fragile to allow government officials to tell the people the truth.
In the 1960s when Keynesian economics ruled the West, free market economists like Milton Friedman, Hayek, Kirzner et al were regarded as a joke holed up in ivory towers in Chicago and educational institutes in London. Markets might have their uses abroad - in development theory for example - but at home Britain was to be forever Keynesian.
With the advent of Thatcher the time had come for those 'ridiculous' 'inconsistent' ideas. Keynesianism, government driven, democracy driven economics was put to the sword and privatisation swept all before it.
Now some important academics strut their stuff talking about the inadequacies of democracy itself which they justify by Impossibility Theory. Their theories are made use of abroad by the US and UK where democracy is inconvenient to them (Latin America) and where dictatorship is convenient to them (Saudi, Pakistan etc) If their time, and the time of their ideas ever comes here in England, God help us all.
Mr. Mervyn King, Governor of the Bank of England, calling for less democracy, less openness is a straw in the wind. We have learnt this week to be on our guard for GUBERNATORIAL moral hazard - where a governor helps depositors at Northern Rock but not shareholders even though they are taking the same risk, where covert dealings to replace bank lending which somehow the banks are not to know about is proposed, where the governor can spend 14 billion pounds of your money secretly.
But we have also got a whiff of something worse. A hint, no more than that, that the time of Impossibility is coming, Just as King remembered his background in Impossibility Theory at Birmingham in a crisis - his - so the prospect that some 'democratically elected' Premier might do the same in the future looks significantly more likely after King's performance this week.