Tuesday, October 14, 2008

Two Cheers for Government Back Downs

So the fight for 42 days detention without trial has been abandoned, the plan for secret trials dumped as well. What next?

McCain – Is He Really Out of the Race?

Betfair is offering 5/1 on a McCain victory. That seems a bit steep for a two horse race. Sure he is behind, sure Palin is appalling the East Coast liberal media and the BBC, but 5/1?

Tempting odds for a value bet. When you drill down in some of the most likely to vote groups, McCain is strong, older voters for instance. Even if almost all Hollywood stars are voting for The One, they are not that numerically strong. Do you really think this going be a wipe-out for the Republicans?

Monday, October 13, 2008

Where’s Our Bail-Out? The Bankers Got Theirs…

Now Brown is bailing out the bankers with the taxpayers money the question Guido wants to answered is: Where is our bail-out?

Billions in future tax payments are being risked to bankers. They are supposed to pay back the debt to the Treasury when things pick up. Hopefully.

The economy won’t pick up until the housing market picks up. Kick-starting the housing market is going to take one helluva kick. In America Obama is talking about a 90-day moratorium on home repossessions and McCain is advocating government-backed mortgage rescheduling, another policy idea doing the rounds is giving home buyers $15,000 tax relief, effectively making a mortgage deposit tax deductible.

Something glaring that strikes Guido as unfair in the British tax system* is that whereas the bank corporations will be able to deduct loan interest payments from their tax bills, individuals can’t. Why not bail-out homeowners too by making their mortgage interest payments tax deductible? Consumers are feeling the pinch, if they could claim the same tax relief that the bankers will, they would spend it and boost the economy. Boosting the economy is key to keeping the recession short. Unlike the banker bail-out this isn’t a handout from taxpayers, it lets taxpayers keep their money flowing into the economy.

*Gordon took away mortgage interest tax relief in 1999.

UPDATE : The comments below from some call this proposal neo-Keynesian, suggest it would re-flate the housing bubble and call it a middle-class subsidy.

The idea that people should be taxed less to promote spending growth is pretty straight forward. Keeping people’s earnings in their pocket to spend promotes growth in a much healthier way than the government taxing their earnings more to spend inefficiently. Some people fetishisise taxes as if they were a good thing in and of themselves. The property market is not going to bubble again in our lifetimes, have no fear. A subsidy is what public sector tenants have, taking less in taxes off people is not subsidising them.

Lehman Derivatives Defusing Safely

The unwinding of Lehman’s credit default swaps appears to be going well. Market nervousness about systemic risk was said to be at the heart of banks hoarding cash, no financial detonations have been reported. Market authorities reckon the net losses could be as low as $6 billion. Hardly anything…

Mandy’s Chinky Drinky Kidney Linky

Peter Mandelson drank Chinese milk 9 days before his kidney problems surfaced. He flamboyantly drank a glass in front of the Chinese media to “show his support for the Chinese dairy industry” which has been hit child poisoning contamination disasters.

Premier Wen Jiabao said he was very moved when he saw Peter Mandelson drinking a cup of Chinese milk on Friday to show his trust in China-made products. “It’s because he not only sees the present, but the future as well,” Wen said. Oh dear…

Hat-tip : Shanghaiist

Good Morning Shareholders

How is that Lloyds, a seemingly well run and conservatively managed bank, has in the space of few weeks gone from being solid and unexposed to the U.S. mortgage market to being nationalised by the government? One wonders if the chairman now regrets meeting Jonah Brown at that party…

Trevor Kavanagh this morning points out that the collapse of Britain’s banks was not inevitable, “it hasn’t happened in Canada, Australia or Sweden”. So much for Britain being uniquely placed to weather the financial storm. Gordon designed the regulatory system, Gordon allowed the property bubble to inflate. Gordon’s bubble has now popped.

Gordon is spinning that he is leading the world, either he is delusional or deliberately lying, in Europe they are calling the EU-wide rescue plan the “Sarkozy solution”. If any country can honestly claim leadership, it is actually Sweden, the EU plan being based on a nineties solution to a Swedish banking crisis. Gordon, for some reason, needs us to believe he is saving the world.

Sunday, October 12, 2008

Rich & Mark’s Monday Morning View

+++ Sky : HBOS LLOYDS DEAL "IS OFF" ++++++ Pesto : HBOS LLOYDS DEAL "IS STILL ON" +++

Hutton & Polly v Mises & Milton

Listening to Will Hutton and Polly Toynbee you would think they were actually monetary economists when in reality they are just soundbite savvy talking heads spouting the latest fashions of the metropolitan media elite. Both property millionaires in their own right, three-houses-Polly and Hutton have substantial family stakes in the property market. If they had such great economic foresight would they have got so badly caught out? Rumours circulate as to the viability of Mrs Hutton’s extensive property portfolio.

Toynbee has now realised that Gordon is staying and that her flirtation with David Miliband was just a passing fancy. Her tune has changed, now saying (once again) that Brown is the man for our times when only weeks ago she was telling the cabinet they were spineless not to get rid of him. Laughable.

Polly’s advice and economic genius is as suspect and as reliable as her loyalty to whichever politician she is championing this month. At the beginning of the year she was still loyal to Gordon and chiding Cameron for his new year message which she claimed

smacks of callow point-scoring, with his five repetitions of “Labour’s hopeless” – and it will look even thinner in retrospect in a year’s time if Brown has steered through economic rapids without most voters feeling any adverse effect.

She was confidently predicting

A minor slowdown with neither inflation* nor unemployment rising will see Brown’s old “no boom or bust” boasts triumph this time next year.

Guido suggests we leave Polly and Will to their studio soundbites and ignore their siren voices – they have been advocating their brand of redistributive social democracy as the solution to everything for decades. If policy makers are looking for guidance on avoiding a depression (alas a recession is upon us already) they should dust off the works of Ludwig von Mises and Milton Friedman – Mises wrote the seminalThe Theory of Money and Credit. If this book had been read by more central bankers outside the Bundesbank we would not be in this mess. Guido once listened to an LSE lecture by a Bundesbank board member speaking in reverential tones about Mises’ thinking. He is the high priest of monetary theory.

If history is not to repeat itself then reading Friedman’sThe Great Contraction, 1929-1933should be a priority. If you think this is irrelevant to the state we are in you should note that the current Federal Reserve chairman, Ben Bernanke, pays tribute to this work and is quoted in the introduction to the current edition. Whereas Mises is heavy going, Friedman and Schwartz are essential reading.

Guido can summarise the primary policy response to the situation we are in succintly : cut interest rates, to lessen the pain of the inevitable reckoning.

Saturday, October 11, 2008

Guardianistas Frozen Cash

The Guardian Diary mocked the Daily Express for recommending investing in Icesave last week on the very same day that the firm collapsed.

Those in ice-houses should be careful, for only a fortnight earlier where was the so smug and told-you-so financial pages of the Guardian telling readers to put their hard earned savings?

Harvey Jones picked ten of the best places to put your cash, guess which was his number one destination?

Do you need a clue? You’re getting colder….


Seen Elsewhere

9 Mansion Tax Questions for Ed Balls | TPA
Politicians are Lying to You About Immigration | Alex Wickham
Give Journalists Public Interest Defence in Law | Guardian
Cameron is Going to Have to Deal With UKIP | Dan Hodges
Opinions on Key Issues By Constituency | Red Box
Britain Irrelevant Inside EU | Dan Hannan
Cameron Heading for Fall on Europe | Rachel Sylvester
Lords Speaker Spends £350 on Two Mile Limo Ride | Sun
Shapps Slaps Down Barroso “Propaganda” | City AM
Bookies v Pollsters: What We Learned From IndyRef | Paddy Power
Guido’s Column | Sun


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Chris Bryant talks to the Times Diary about a famous gay actor:

“I don’t think I’ve had sex with him. He says we had sex in Clapham. I’m fairly certain I’ve never had sex south of the river”



Progressive Inclusion Champion says:

Great to hear Carswell call for inclusive policies and that UKIP must stand for first and second generation immigrants as much as the English.


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