Via this website is a list of the ten most annoying taxes. I am not sure if I agree with the rankings, but still.
The website does seem to have many attractive features (absolutely! Ed).
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One issue that does not appear to have provoked a lot of discussion, at least not yet, is how the government bailouts and encouragement of mega mergers between struggling banks has created a banking industry that is, if not monopolistic in its structure, then pretty damn close to so being. Now – as I once argued four years ago (gulp!) – the fact that a firm such as a computer software house or bank is big is not, by itself, harmful. One should not confuse bigness with control over the consumer. A lot of anti-trust laws – which I believe often create more harm than they supposedly solve – are based on the mistaken idea that a firm’s being big is somehow proof of malign intent and that bigness, is, ipso facto, harmful. Well it all depends how the firm got to be big in the first place, and whether it retains its market size by continuing to offer good products that people want. For a firm to stay big at a time when barriers to entry in certain fields are being slashed by new technologies such as the internet, confusing bigness with lack of competition is a serious mistake. Now turning to the banks, it is clear that the mergers between the likes of UK’s Lloyds and HBOS, or Bank of America and Merrill, or Wells Fargo and Wachovia, have produced a number of large banking groups with the state acting very much as the encourager of such mergers, rather than, as might have been in the case when anti-trust lawyers were on the prowl, hostile to them or at the very least, skeptical. As free marketeers like to point out, monopolies that are supported by state powers and privileges are harmful, while those that arise out of a dynamic market process tend not to be, since state-backed monopolies are the least likely to fall prey to new, nimbler competitors. Without state support, even supposedly invincible big firms, such as IBM, Ford or for that matter, Microsoft, can find their market share eroded by a newcomer. One of the reasons why I actually favour free banking and competition in money is that it might create more banks and give the established banking sector a much-needed dose of competitive pressure. I am pleased to see that the likes of Tesco’s, the supermarket chain, is getting into banking. That is good news for the consumer, hopefully, although the haters of Big Retail might complain. In the UK, for example, Lloyds Group, after its acquisition of HBOS, controls almost 45 per cent of the UK mortgage market. Any new entrants that can put that behemoth under pressure are to be welcomed. April 7th, 2009 | 54 comments - (Comments are closed)
 I am not suggesting by any means that the gold standard was perfect, but if we judge it by its record, it achieved much better price stability than the disastrous inconvertible paper money standard that replaced it. Unfortunately, in the twentieth century the gold standard came to be seen as a pointless constraint against the issue – or, rather, over-issue – of currency. Economists argued that the Bank of England should be free to issue whatever amount of currency it (or its political masters) wanted. The old idea that the gold standard imposed a useful discipline against the over-issue of currency was discarded as out of date. Keynes famously told us that the gold standard was a relic of a barbarous age, and reassured us that modern governments were much too sophisticated to debase the currency. Modern governments were not like impecunious Roman emperors or medieval kings. The results were catastrophic, but Keynes was right about one thing. Modern governments were not like Roman emperors or medieval kings: they were much worse, and produced much greater inflation rates than their predecessors ever managed to achieve. There is a limit to how much inflation you can create by clipping the edges of your coins and putting them back into circulation, but the sky’s the limit when you can just speed up the printing press or add additional zeroes to your notes. – a characteristically forthright moment from Kevin Dowd’s Chris Tame Memorial Lecture entitled Lessons from the Financial Crisis: A Libertarian Perspective, delivered on March 17th, already reported on here by Johnathan Pearce, now published by the Libertarian Alliance as Economic Notes No. 111, printable out as a .pdf but (more to the point for bloggers) copiable and pastable as an .html April 5th, 2009 | 40 comments - (Comments are closed)
The political atmosphere in Britain is rather peculiar just now. One of the more interesting things to ask of public opinion at any particular moment is: Who exactly does public opinion think are the people who are most blatantly and most undervedly robbing us. It was a decisive fact about the 1979 general election that public opinon’s answer then was: The Unions. It was a decisive fact about the next big electoral upheaval, in 1997, that public opinion’s answer then was: the Conservative Party. Now, public opinion seems to be arriving at another answer to the who-are-the-biggest-plunderers? question. It seems to be deciding that the answer now is: Members of Paliament of all parties. If this opinion solidifies in time for the next general election, it will be very interesting to see what it does to the Conservative vote in particular. What if all the major parties do worse? Since they have all done so badly, this would make sense, I think. But surely the plunderings now being contrived and the further plunderings being attempted by the people who are politically well above the average MP in the plunder pecking order make the petty pilferings of our Members of Parliament look very petty indeed. Has any MP put in a claim for even so much as one billion pounds, to pay for a second West Indian island? If so, I missed the news. It’s almost as if the powers that be want the mere MPs to take all the blame for everything. It’s all a dastardly establishment plot, orchestrated by evil pseudo-libertarian Guido Fawkes! Of course, it could just be that regular people can get a handle on the fraudulent expenses claims of MPs, because these are the kinds of amounts they deal with themselves, and sometimes even pilfer themselves with morally questionable expenses claims of their own. On the other hand, the sums of money being slung at dodgy banks and political-donation-wielding bankers, and now being further unleashed by “monetary easing”, well, these are just way beyond all normal experience. Pile up all those bank notes and they reach far off into the Solar System, or deep into our own galaxy, or the next, or to some such unimaginable never-land. (Thus also does a council planning committee debate a patio extension for an hour and a half, before letting an oil refinery through without further discussion, that being another insight, to add to this one, that we owe to Professor C. Northcote Parkinson.) Speaking of the really serious plunderings that are now being perpetrated, by those at the Obama/Brown level of operations, the other odd thing I have been reading lately, this time said by commentators like Peter Oborne and Fraser Nelson, is that Mr Brown is bad, because he is not stealing as much money as he is pretending to steal, in order to “stimulate” (the new word for wreck) the world economy. Oh Mr Brown claims to be stealing a thousand gazillion pounds! He would, wouldn’t he? But in fact it’s only a hundred gazillion pounds, because he has counted most of the gazillions in question twice or even three or four times. Most of the gazillions he is now promising to steal anew have either been stolen already or won’t be stolen at all. Bad Mr Brown! But surely this is a case where words on their own are greatly to be preferred to words followed by or accompanied by actions. Our best hope now is that, when Obama and Brown and the rest of them promise that they are now taking decisive, radical and above all very big and very expensive actions of various kinds to save the world, they are lying. Heaven help us all if they are telling the truth. April 5th, 2009 | 12 comments - (Comments are closed)
Last September, I went walking in the Scottish Highlands with a good friend. My friend and I were booked on different flights leaving Edinburgh airport for London on Sunday evening. My friend then had a connecting flight at Heathrow to Hong Kong and then on to Sydney, so he was particularly eager not to miss his flight. Therefore, I dropped him off at the airport terminal before I went looking for a petrol station to refuel the rental car before returning it to the airport and checking in for my own flight. The “Where the expletive is the nearest petrol station” dance before returning a rental car to an airport car rental office is one I know well, but this one wasn’t too bad. After driving a few kilometres down the M9 I saw a station on the other side of the road, so I exited the motorway at the next junction, crossed the bridge across the motorway, and found… Well, I found myself myself in a new and better world, actually. It was an office park, but not just any office park. There was a big sign with an RBS logo, lots of gleaming buildings, water features (both active and passive), corporate sculpture, and the general sense of the intense self-regard held by the people who had had this place built. Clearly, RBS had decided that it needed a new, gleaming head office from which to run its überimportant global operations, and had had this Dr No like compound built near Edinburgh airport, where its highly sophisticated heart could beat, without any interruption or disturbance from reality. RBS’s dedicated motorway junction made it easy for these great bankers to come and go to and from wherever their business now was. I am sure there were also fancy gyms, day care centres, cafes and Lord knows what in the complex. Having worked in international finance myself, this kind of arrangement is not that unheard of, particularly for banks that are big fish in whichever smaller pond that they originate from. I can think of one or two Spanish banks that have even more Dr No-like headquarters on the outskirts of Madrid. Usually the offices of the same organisations in major financial centres are much more normal – RBS has its London offices in a rather boring but shiny block near Liverpool Street Station. However, to enter such a complex in Madrid, one faces barbed wire fences, metal detectors, ID checks, men in overly fancy uniforms, and probably finger prints and Iris scans. In Scotland on a Sunday afternoon I was able to drive into the complex by accident, and get lost in the private roads between the fancy new buildings. There were a few security guards around, and I suspect that if I had got out of my car and walked near any of the buildings I may have been challenged, but driving around for a few minutes led to little interest. Eventually I found the entrance ramp to the motorway, which was on the other side of the complex to the exit, so it seemed it was not possible to use the RBS offices to turn around without driving through the private office park. I then refuelled my car and drove back to Edinburgh airport. However, that of Micklethwait’s laws that says that any company that builds a new and ultra-fancy office is doomed, whereas an important company that is still operating out of grimy offices in Basingstoke is probably okay very manifestly holds, I think. April 3rd, 2009 | 25 comments - (Comments are closed)
So how long before not even the mainstream media can pretend this lunacy is not going to spread economic catastrophe far and wide? My guess is they will move from cheerleaders to tut tutting sages of rectitude seamlessly in a few years without the slightest sense of irony. This will probably happen about the same time the mainstream media more or less stops existing in any meaningful sense. The collective democratically sanctified derangement on display sure does help harden the heart when people start complaining about the economic hardship they find themselves in. A friend of mine said “Ordinary people do not deserve what is happening to them”. “Sure, except for all the people who voted for any one of the main parties,” was my reply. They are getting exactly what they voted for, good and hard, and there is a trillion more of it coming down the pipeline that will wash away all our savings. April 3rd, 2009 | 17 comments - (Comments are closed)
Let it not be said that the politicians gathering to celebrate an orgy (er, steady on, Ed) of Keynesian delinqency and transnational socialism are letting this current financial crisis go to waste. The G20 countries have agreed to a crackdown on those pestilential things, tax havens. I have defended them before and will do so again. What we are seeing is a determined effort to create a global tax cartel. Cartels, unless backed by brute force, tend to break down eventually. The G20 are making lots of blood-curdling threats about sanctions and so forth. What is Germany or Italy going to do – invade Switzerland? Good luck with that, gentlemen. At the root of the hatred of tax havens is a hatred of freedom, pure and simple. If you believe a democratically elected government, say, can seize the wealth of a portion of its citizens, then you will believe that that minority can be more or less robbed, held hostage and prevented from going abroad. Socialists such as Richard Murphy believe that if 51 per cent of my fellow citizens want to help themselves to the contents of my bank account, then I am being “undemocratic” and a bad citizen if I choose to park my cash in the Caymans or wherever. Well, why not go the whole distance and require anyone who has an offshore bank account either to close it or be forced to get an exit visa if they wish to do so? We may be already reaching that point. If, on the other hand, you believe people are entitled to their property regardless of what their fellow electors think, then tax havens – “haven” is a place of safety, remember- are an important escape route and bulwark against looters. When politicians want to shut down places of safety in a time of crisis, it is well to be cynical about the motives of those involved. Especially if they happen to be such characters as Gordon Brown or Barack Obama. The sheer cynicsm of it all is breathtaking. Whatever the cause of the current financial crisis, I think it is pretty fair to say that it did not originate in tax havens. Switzerland, in fact, has been hammered by the crisis; its biggest wealth manager, UBS, has lost an estimated $49 billion in write-downs connected to the US sub-prime disaster. The $50 billion Ponzi scheme fraud of Bernard Madoff happened onshore, right under the noses of the SEC, rather than in some far-flung island in the South Pacific. The huge losses incurred by banks have been nothing whatever to do with so-called “tax leakage”. And in the US, there is already a tax haven, known as the state of Delaware. And the UK has been – well until recently – a tax haven on certain definitions. Ditto places such as Ireland or even Belgium. Rant over. Thanks for your patience. April 2nd, 2009 | 32 comments - (Comments are closed)
“The Federal Reserve…along with other central banks, is a legal counterfeiter.” Paul Kasriel, economist at Northern Trust, the US bank. He is in favour of all this “quantitative easing”, by the way, but he is far too honest an economist not to identify what that euphemism actually stands for. And he predicts that it certainly will trigger inflation later on. April 2nd, 2009 | 5 comments - (Comments are closed)
Two splendid snippets facing each other in today’s print edition of the Times. First Chris Ayres’s Los Angeles notebook:
And more substantially, Daniel Finkelstein on anti-capitalists:
He is really not doing them a disservice. The common motivation is a sort of snobbish distain about vulgar ways of enjoying the material world; and the same thing finds its head in the circles of power, too, as a sort of neo-puritan obsession with work, regulation and oversight of individuals to make sure that no-one is getting away with the sin of unapproved lifestyle. April 1st, 2009 | 16 comments - (Comments are closed)
My post below on the experience of Scottish banking before 1845 – when the rules were changed by the-then UK government of Robert Peel – elicited a lot of great comments. It turns out that the Lawrence White paper that I mentioned had been savaged fairly thoroughly by Murray Rothbard. Rothbard’s paper is immensely detailed and shows what a thorough economic historian Rothbard was. Briefly put, he says that White has misinterpreted the Scottish banking experience by not distinguishing between free banks that operated 100 per cent reserve requirements linked to gold, and those that were simply free banks without such specie requirements. (Rothbard was an advocate of such metal-backed money). This inevitably raises that old friend of ours, fractional reserve banking, which Rothbard described as essentially a fraud. Now in trying to make up my mind on FRB, it seems to me that so long as the holder of bank notes is made aware that the note has been issued by an FRB, rather than a 100-percent reserves one, then what is the problem? It is a bit like the argument about limited liability corporations that vex some libertarians such as Sean Gabb of the Libertarian Alliance. Surely, if I transact with a LL company and knowingly do so, then such consent is what counts. LL companies could, conceivably, exist even without special government legislation, although they might not last as long as LL firms do now. (Here is a rejoinder to Gabb on LL). Same with FRB: if there is commercial deposit insurance and customers know the score, I fail to see why the existence of fractional banking should necessarily lead to disaster. Or is there something I am missing in this debate? At first blush, some might consider all this to be a bit arcane. It is anything but. Explaining how banks work now, and how they can be made to work much better as a result of competition and basic rules, will go some way, I hope, to destroying misconceptions. Such misunderstandings that exist at the moment only play into the hands of those who want to bring the free market order down. Such as those folk protesting at the G20 summit in London today. I will be in the area on business. I might take some photos and post them up later if they are any good. Update: I was in the Docklands area. Nothing much going on while I was there. April 1st, 2009 | 49 comments - (Comments are closed)
Those good people at the Institute of Economic Affairs have put this fine study of free banking, as it existed in Scotland until the middle of the 19th Century, back into print. It is examined in great detail, with lots of figures and examples of how these banks operated, how many bank failures there were, and so forth. There are a few equations but nothing that should faze all but the most mathematically challenged. Historical scholarship of this detail and depth is vital. It is as vital, in fact, as those studies that showed that in Victorian Britain, before the Welfare State came along, Britain already had an extensive network of mutual aid societies. Without this historical memory, it becomes easier for politicians to sell the lie that the solution to X or Y lies in ever bigger government. Readers can either read the pdf for free or, if it is tough on the eyesight, as it is for me, readers can get a publication-on-demand sorted out for just £10. I do not suggest that free banking is necessarily the panacea for the current troubles. But it seems to me that a point lost on the anti-globalistas as well as many of the other critics of the current financial system is that they fail to grasp how banking, as it is practised in most instances today, has deviated from a genuine example of laissez faire capitalism. What we need is sound money, administered by banks operating under the constant blast of competition in proving the soundness of that money. When you think about it, it is not very hard to grasp the idea, is it? March 31st, 2009 | 30 comments - (Comments are closed)
The President of France is threatening to walk out of the G20 gabfest this week if the countries cannot agree on stricter regulation of the world’s financial markets. Of course, Mr Sarkozy buys into the fantasy that what has happened shows the failure of “unregulated capitalism”. If only he would walk out of the conference, which is likely to involve further layers of largely useless and counter-productive rules and meaningless communiques, not to mention disrupt London, provide a focus point for tens of thousands of anti-globalistas, and cost Londoners a ton of money in policing and disruption. Go on Sarko, do it for les enfants. March 31st, 2009 | 10 comments - (Comments are closed)
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