Monday, 12 December 2016

Don't blame Capitalism for Underinvestment

Massive increase in state spending over the past 40+ years - as measured in relation to GDP - has resulted in less disposable income, less saving and as a consequence less investment in most 'Western' economies. The greater part of state spending is earmarked for miscellaneous free goodies, so-called 'social' services that are nothing else than consumption.

Monday, 31 October 2016

Free Trade Doctrine hits the buffers

Adam Smith may have left us a nice homely with his illustration of free trade benefits (selling nails to Portugal in exchange for wine). And there certainly is an element of truth in it. Exchanging goods and services with others DOES bring benefits to both, domestically and internationally.
But one can take this doctrine too far. When societies that are on a completely different level of development are suddenly brought into the pictures (China, India etc) one cannot allow them to compete on an unconstrained basis and accept them as equals in the marketplace.

ECB blabbering

"Taken together, the ECB's current policy settings are appropriate and are clearly providing the support required to sustain the recovery," Coeure said, adding that support will stay in place "until inflation is sustainably adjusting to our objective."
Well, Benoit Coeure - a signed-up member of the unelected Eurocracy ruling over us and stealing from all hard-working savers in the Eu(rozone) - utters another non-sensical and contradictory statement.
What does he mean by 'recovery'? it probably means economic GROWTH, but then he seems to indicate that inflation is 'their' objective? So would that mean inflation running at 2, 3 or more percent would be 'success', whatever the level of growth?

Tuesday, 20 September 2016

Crusade against Saving

Taking their cue from 'Saint Maynard' the political and economic 'Elites' that rule Western Societies wage a merciless war against Saving, and by implication against individuals that want to manage their own affairs responsibly. The ulterior motive may be to make people completely dependent on the Welfare states that countless bureaucrats are employed to administer.
Given that most economies sail along at a positive rate of growth - albeit not much above zero - and that inflation/deflation can safely be allowed to fluctuate around the zero mark (plus or minus 2 percent should not mean the end of the world by any stretch of the imagination ) it is not obvious why 'QE a outrance' should be on the policy menu at all.
Has a strange form of hysteria taken hold of Central Bankers and their camp followers in Media, Academia and Politics?
Why would it be morally acceptable to steal from savers and give to borrowers when - for thousands of years - saving was to be held in high esteem and spending/borrowing was to be discouraged?

Tuesday, 28 June 2016

Clueless Economists

It is pathetic, even irresponsible, to predict gloom and doom for the UK now that a majority has voted to leave the EU. he self-appointed experts in academia, think tanks and the media would be well-advised to come up with constructive suggestions about how to make Brexit work. Just being besides the EU member states does not mean that being in some sort of political/economic/social club is mandatory to have a successful society. There are plenty of examples to the contrary - too numerous to mention, we know them all. Shame on the Financial Times and Martin Wolf in drumming up discontent and confusion and playing into the hands of the mob who is unwilling to accept a democratic choice.

Thursday, 26 May 2016

DIY Pension Investing - like DIY Brain Surgery

The idea that the average person should be wholly/predominately responsible to save for his/her retirement is laughable. It may appeal to doctrinaire free market advocates and it certainly appeals to the providers of the many 'products' that are supposed to provide for a care-free retirement.
But much better for the state to provide a sufficient pension. Longevity and investment risks are truly shared, between all citizens and all generations. Costs are very low - no pass the parcel investment games, no expensive admin (everyone gets the same pension, higher rate taxpayers give back more than those in a low tax bracket or not liable to any income tax). This is to some extent akin to the currently debated 'Guaranteed basic income', but only applied to those already retired.

Anyone who has tried to manage his own investment portfolio will understand how difficult investing is. Even so-called professionals time and again mess up, highly acclaimed 'Masters of the Universe' in the Hedge Fund industry often produce lamentable investment returns. So pushing the masses into the investment game means they are supposed to do the equivalent of Brain Surgery on themselves.

By all means encourage people to save, but this part of their retirement provision should not benefit from overly generous tax benefits (that mostly flow to those already enjoying high incomes) and also be free from all other regulatory and bureaucratic restrictions. These additional nest-eggs can help to provide a more comfortable old age than the universal state pension will be able to provide.

48% of Americans saving for retirement are pretty sure they have no idea what they are doing (Business Insider)

Report on the Economic Well-Being of U.S. Households in 2015
(Federal Reserve)

Wednesday, 18 May 2016

IPO excess contributes to Inequality

Talk of 'Shareholder Capitalism' is muted these days. The great unwashed public - thanks to the services for their fiduciaries in the asset management and private banking industry - is only allowed in at extortionate levels of company valuations when the insiders are ready to cash in their chips. No wonder Inequality is rising inexorably - helped by the mantra that those selling a business should be treated with kid's gloves by the tax authorities. Not content with paying a lower tax on share sales than the average employee pays on the earnings he derives from actually providing hard work there is often a tax shelter in the form of (sham) 'trusts' or offshore companies that reduce the tax burden even further - if there is any tax paid at all. Given the secrecy that shrouds individual tax returns we will never know the true picture.
The recent IPO of CMC Markets here in London illustrates the sorry state of affairs. The Public is allowed in at a generous multiple of the capital that is actually invested in the business. So the return that the savers can expect to get from their (risky) investment is burdened by a big disadvantage right at the start. But the greater Fool theory is alive and kicking, every fund manager thinks he can outwit his competitors and offload shares before they take a turn for the worse. Due to the lack of a minimum holding period before capital gains tax is due (zero for institutional fiduciaries in any case) the shares can be flipped the second they start trading in the aftermarket. Talk of sustainable capitalism.
So it is no surprise that the main beneficiary of these non-sensical arrangements goes out and buys himself a modest mansion for all of £ 42 million that he has cashed in from the public. So watch out for the next purchase, a yacht or country pad maybe?

Tuesday, 5 April 2016

Why is Europe rich, Africa poor?

There is a serious confusion between cause and effect in this post. The author blames Africa's poverty on the lack of 'regional and internationalist' institutions but forgets that Europe was prosperous long before these (IMF? OECD? EU?) were created.

Friday, 15 January 2016

Self-driving Cars - unintended consequences

The Industry, led by oligopolistic firms, it trying to push the idea of self-driving 'autonomous' cars (Robot-Car sounds off putting I guess) on an unsuspecting public that - as usual - has no say in this. But despite all the (paid for with backhanders?) enthusiasm in a gullible press three questions need to be answered: (1) Is it not the case that a lot of people LOVE to drive their cars? (2) Apart from the question of battery life, how long the re-loading takes and whether or not there are enough loading stations - where is all the electricity coming from? England already is threatened with an Electricity crisis and the additional demand (if ALL cars and trucks switch to e-cars) would be enormous. (3) Governments in many countries would loose a major source of revenue, how is it going to be replaced?
So dear Google etal, what are your answers?