Archive for December, 2012

Disarming America

Wednesday, December 26th, 2012

From Australia

The shocking killings of children, teachers and fire fighters which have traumatised America, are not unique to that country. A crazed attack by a rampaging gunman can happen anywhere, even in the best ordered and most enlightened societies, as Norwegians know to their terrible cost. The difference is that in America these numbing assaults on the innocent occur more often, almost regularly. The other difference is that as a Constitutional right, almost the entire civilian population is legally armed. There is no other country in the world to enshrine in its statutes such an arrangement, nor to have so powerful a lobby to defend its virtues.

The issue inflames passions and splits the country. Many, probably most, want some kind of gun control. The NRA leads the argument against and wants none. The control argument is that public institutions will be safer if arms are reduced; the NRA argues that they will only be truly safe if protected by armed guards. These two positions are irreconcilable, following the pattern of other social and economic arguments, now polarising and paralysing much of US politics today. In the case of guns, the scale of the problem is monumental. There are almost as many legal guns in America as there are people.

Even if agreement were reached to institute some degree of control, it would be likely to make only a marginal difference in the short to medium term, with an effect more symbolic than real. To do the job of bringing America into line with practice in all other advanced democracies, would require the full and compulsory disarming of the civilian population. Not only would an industry be pulverised with the loss of thousands of jobs, but a complete culture change involving the re-evaluation of the notion of individual freedom, would be required by a consenting population. This, in modern America, more politically polarised than at any point since the 1850s, is simply not going to happen. The only other way would be to disarm the population by force. That will not happen either.

America will have to brace itself for more sorrow. Like the profligate banks, the gun culture is just too big to tackle. Yet.

The Euro: What Now?

Monday, December 24th, 2012

From Australia

Many commentators, including this blog, did not expect the euro to end 2012 in one piece. It seemed likely that some major re-configuration would be required to set the single currency onto a secure path and that might include some weaker members dropping out. Instead what has happened is that just enough has been done to stop a partial collapse, whilst nowhere near enough has been done to end the crisis, nor to re-establish economic growth in the EU.

Nevertheless three critical points indicate that the chances of the euro surviving are now a shade greater than it failing. The first is that Germany has learned that it cannot just lay down its own law and demand everybody fall in line without becoming associated with a new form of tyrannical economic repression. Second Germans do not want to become a hated people once again, however much they want a hard currency.  Third, little by little, the German position thaws in the weak sun of an occasional Merkel smile of sympathy for the plight of her struggling spendthrift neighbours to the south.

Facing Euroland there are now two prospects. Twenty years of severe austerity and meagre growth, accompanied by significant popular unrest and political instability. Or a fresh start. This means a dramatic political re-engineering project to create a pan euro financial executive to direct economic policy in all euro countries based on democratic principles, armed with tax raising powers and the means to collect the money from those who never pay. It also requires a financial initiative on the scale of the post war Marshall Plan, involving QE to buy in vast tranches of national debt for cancellation, coupled to massive investment in industry, infrastructure, jobs, technology and education.

If restive populations get the economic boost , they will vote for the loss of sovereignty and the imposition of fiscal discipline. They will know if they do not Germany will lose patience and walk away. The paymaster will be gone. Then they really will be in trouble.

View From Australia

Wednesday, December 19th, 2012

This blog is visiting family in Australia for the Christmas period and will not be posting regularly.

Belfast Unrest

Sunday, December 9th, 2012

To those who live on the mainland of Britain, the sectarian tensions of Northern Ireland are hard to understand, not because of their complexity, but because of their ability to inflame. This is Westminster’s, rather than Belfast’s, fault. For far too many decades successive British governments have been unwilling to face down the loyalists in all their many manifestations, and read them the riot act.

What should be said is this. When you wish to join a club or a similar organisation, the applicants do not set the rules of the club; they undertake to abide by them. Therefore loyalists need to be told in very tough and uncompromising language, since they understand no other, that loyalty to prejudice and provocation are not qualities recognised as valid for inclusion within the borders of the United Kingdom.  Marching through residential areas predominantly occupied by Catholics in order to rub their noses in the consequences of the Protestant victory at the Battle of the Boyne centuries ago, is a calculated insult which would never be permitted on the mainland, any more than the dozens of other ways in which these so called loyalists have chosen to assert themselves in a litany of flagrant and abusive practices and discrimination, which they glorify as their culture.

Loyalist leaders, including agitators and paramilitaries, should be assembled and told that either this culture is at once amended to fall into line with all the practices, customs and laws of the rest of the Kingdom to which they pledge their allegiance, or they will be flung out. A referendum held in the whole of the UK, to cast Ulster to the mercy of Dublin would be carried with ease, if loyalists now setting about provoking the collapse of the peace process through their yobbish demonstrations, flag waving and whatever, succeed in turning the clock back.

Moderate loyalist leaders know that. They need to get busy to restore normality.

The Autumn Statement: The Morning After

Thursday, December 6th, 2012

George Osborne did well in the Commons yesterday and Ed Balls did badly. That, however, is not that. Those who have time to unpick who said what, may find that in Ball’s halting and at times confused delivery, there was an element of truth. They may also find in Osborne’s polished and confident performance a good deal of smoke, mirrors and spin, some clever accounting and a reliance on forecasts, every one of which has thus far proved wrong. This is why Fitch has issued a warning that GB’s coveted triple A rating is looking weak.  A downgrade would be a shock to this government, and would blow away whatever fading chances of its re-election remain.

Nevertheless not all is going Labour’s way. Balls gets it right when he says, as everybody does, that you cannot get out of a debt crisis without growth and the sum of all Osborne’s packages add up to little more than tinkering at the edges, enough to keep the show on the road but not enough to get to a better place. After that, the Labour shadow chancellor is so much hot air, because he would do no more than tinker in a different way, whist spending and borrowing more in the process. Nobody steps forward to say with conviction that such an approach would work any better. If you take account of the scale of the problems, nothing thus far advanced by anyone, is of the substance to make a real and effective difference.

Until they do we are looking at many years of austerity, with meagre growth leading to economic decline, from which it is not even clear that a meaningful recovery, using the current inadequate plan, is actually possible, however long you wait.

Osborne’s Autumn Statement: It Will Not Work

Wednesday, December 5th, 2012

When Osborne stands up in the House of Commons today, three realities will be in play. The first is that although it is not working out as planned, the UK economy is under better control than most others laid low by the crisis. The second is the plan can never solve the underlying problem, although it will keep the economy from sinking. The third is no other plan presently being promulgated, based on the repair of the old system, will work either.

The economic model has been destroyed by a borrowing binge and asset inflation, especially property, to the point where gross deformity exists and correcting one part now causes issues in another. It is like being in a hut with a leaky roof with five holes and only three buckets to catch the drips. Always two holes will be dripping onto the occupants. Arguments abound as to who deserves to get wet.

At the heart of the problem of the UK economy are not issues of welfare benefits or tax avoidance, nor even unemployment and economic stagnation. These are all symptoms. The problems are too much debt, too little money and a Byzantine tax system which fails to deliver enough revenue to pay the bills. Add to this a currency historically over-valued, which compounds the difficulty by sucking in imports of consumer durables and inhibiting exports of all but luxury brands or cutting edge technology. Until radical ideas are put forward to deal with these things, nothing much is going to change.

Reform of eduction, health and welfare are worthy. Reform of the financial model is vital. The project is beyond the scope of this blog at this time, but a hint may be found in looking at QE and where it could go and buying back government debt and how that has helped. A read of the last post will fill in some gaps.

George Osborne: The Numbers Are Closing In

Monday, December 3rd, 2012

It is not all bad news. There is a significant shift of jobs from the public to the private sector and the economy is just growing, but only just. Whatever the spin, things have not gone according to Plan A. Unfortunately only Ed Balls has undiminished confidence that Plan B would have fared better. The truth is neither can work sufficiently well for the scale of the financial calamity, which ended the West’s boom with the biggest bust in history, well outside the experience of officials and politicians and beyond an agreed analysis by economists. Nevertheless experience teaches, and over the last five years since the first warnings of the credit crunch in 2007, we should have been able to learn quite a bit. This blog certainly has.

The first thing we have learned is that the crisis was a debt crisis, but not only a debt crisis. It was also a crisis of cash. The West had none left; it was all in the East. Within the debt crisis is the need to stop debt rising by keeping expenditures and revenues in balance. The second is to grow the economy to pay off the debts. If the problem had been understood when it was still of manageable proportions, this would have been straightforward. It was not understood until the whole financial system was on the brink of implosion. Something much more dramatic is required. Both the bank of England, The US Federal Reserve and the Treasury now understand this, and have cautiously used QE to boost the money supply; in the case of the Fed, now on a regular monthly basis.

Essentially two things have to be done before any recovery can be orchestrated. The first is to buy back government debt with new money, so as to reduce the national debt burden. This has happened in the UK. The second is to use new money to kick start the economy with massive investment in new house building, to the tune of a million units in three years, and other shovel ready infrastructure and construction projects. The effect on the government’s revenue stream of all the new jobs would be dramatic. Unfortunately this has not happened. Yet.

When it does taxation re-structuring will be the third element requiring Whitehall thinking caps, currently moth eaten and fusty, to be dusted down and donned. With a surging economy there is a risk of ample money fuelling inflation. Taxation is the method by which the supply is choked off, if needed. To be effective the taxation system has to be unambiguous, simple and cheap to collect. The present arrangements are none of these things.

Nobody should pay income tax below the national average earnings currently a shade over £25000 per year. Above that there should be one single rate of about 35%, payable by everyone with no allowances at all. Corporation tax should be abolished and replaced with a tax on turnover paid by every company regardless of profits, tax domicile, nationality, location of head office or whatever. If the money is taken in the UK, UK tax is paid. This could be a very small percentage, because very large volumes would be involved, but the concept of profit having to do with taxation would be ended. Capital gains would be taxed as income in the year in which they occurred, divided by the years over which the asset had been held prior to sale, for individuals, and as revenue for businesses.

As part of the mopping up operation, a career counselling and retraining programme could be offered to the multitude of accountants and lawyers engaged in the tax avoidance industry, since their dark arts would become redundant and to practice them a crime.

Whether you call this a plan A, B, or C matters not. The key point is, it is a Plan. And it would work.

Book Promotion:The Judas Cross

Monday, December 3rd, 2012

Now available on Kindle, a new edition of my page turning  psycho thriller, set in a English village in the 1920’s, awash with vintage characters and dark secrets, will keep you engrossed whenever and wherever you have time to escape into a world of sex, murder and the dark forces of evil. Download from Amazon now! You will not be disappointed!

Leveson And Press Freedom

Sunday, December 2nd, 2012

Lord justice Leveson has given his verdict. It has created something of a problem for the Tory party. The majority backs Cameron in opposing the idea of voluntary regulation enshrined in a suitable statute; a minority of Tory MPs back Leveson. Add those pro Leveson Tories to all the Lib Dems and Labour, who also back Leveson, and Cameron is in a minority in the Commons. Moreover the public is generally fed up with MPs, the press and bankers and would back any measure to curb all or any of them. Today is added the suggestion that to curb the press in any way by some legal authority, would infringe their human rights. Whose human rights? Phone hackers? What about the victims? The trouble with the Human Rights Act is that it is taken as a licence by campaigners and pressure groups to prefer the guilty over the innocent.

At the heart of all this, and by all this we mean not just Leveson, but Hillsborough, Bloody Sunday, Savile et al, is the absence of a proper set of rules, by which society and the nation in all its constituent parts, functions, which are clear, clear cut and universally available. The reason that every other country on earth bar two others, has a written constitution, is because without one, the conduct of modern national life is near impossible, free of an endless procession of disputes, inquiries and bits of corrective legislation, requiring the constant attendance of expensive lawyers, which in turn creates a huge harvest of opportunity for adversarial litigation.

Definitions of issues such as freedom of expression, the press and human rights are set firm within a codified constitution, which also requires of the free, the fulfilment of obligations for the public good. Without such an instrument at the foundation of the state, power lies in the hands of the few, who manipulate it for their own benefit, rarely in the interests, but often to the detriment, of the many.

Sooner or later the United kingdom will have to have a grown up discussion about this fundamental subject, presently inhibited by a peculiar taboo. Nobody ever speaks of it.