Posts by Tim Worstal

Re: Sorry for the rant, but...

"If gold was the basis of the money supply (and was not used in a fractional reserve system), there would be no reduction of the money supply because it would all be real, physical stuff sat there in the vaults. You can't reduce the money supply of gold unless it is destroyed or lost."

True, but that also means you can't increase it. And an expanding economy does need an increase in the money supply. So it's a bit swings and roundabouts.

And I'm very taken by the Cowperthwaite story. I even used it in the obituary of his (not at anywhere grand like the Telegraph of course) I wrote.

Re: The 1930s

"Is it just me or are Tim's articles getting really good these days?"

Most kind.....now to have that word with hte editor about freelance rates....

Re: HOW IT WORKS *

"Part of this design was exactly that, though I think he'd recommended 25% as a minimum."

This is the "fiscal union" you see bandied about. So, when one region becomes a cropper and another doesn't (for whatever reason mind) you want less to be paid in taxes from that region and more to be spent by government. You want to be able to vary this by perhaps 3-5% of GDP. It's just the same as running deficit or budget surplus in a nation, same old Keynesian stuff, it's just happening to a region not the entire area within the single currency.

And things like taxes, social benefits, that are 15-25% of the government budget just about do that for you.

some region craps out so less is taken out in income tax, profits tax, VAT, and also more goes in in unemployment benefit, pensions still get paid etc. And so we can get that 3-5% variation through these "automatic stabilisers".

Great. But that does mean that the money has got to flow through Brussels. At that 15-25% of GDP. And that really does mean tha tthe Germans will be paying Greek pensions: which is rather whhere we came in, isn't it?

Re: HOW IT WORKS *

"The member economies of the EZ are very different , but are they very much more different than (say) California and Michigan,"

Much more different.

And the US has federal fiscal policy to temper the monetary stuff, the EU doesn't. We'd need to be feeding 15-20% of GDP through Brussels to get that sort of effect that the US has.

Re: Is this how it's done?

Well, no, not really. Because if you don't buy the stock yourself then there's no gain. And if there's no attempt to gain then there's no crime.

Re: RNLI

The RoI think is easy enough: back at founding it was all the UK. and it covers the I of Man as well: which it should do of course, because that's where it was really founded. But Lord of Man's Lifeboat Service doesn't have quite the same ring (that being what the Queen is when she's there).

Trinity House (the lighthouses) was also, at least until recently, all British Isles for the same historical reason, the date of founding.

Re: RNLI

Top notch there, top notch.

And the only economic story I know is that the RNLI did take government funds at some point. Really not sure whether that was 1970s or 1870s tho;. But they soon stopped. They found that they were losing more than £1 in donations for every £1 they were getting from government.

Re: Logical management?

But it's necessary to show that corporations are utterly focussed on that short term. And I've not really seen any evidence of it. As far as I can tell the human organisations with the longest planning horizons are still those large corporations. Exxon, Shell, etc, take on projects with 40 year lifespans, plan out to 50 and 60 years into the future.

Other than pension actuaries I don't actually know of anyone else who is that long term.

Re: 5000 years

Indeed....and one of the earlier and more interesting examples of economics beating whatever the politicians might care to enact. Wages went up because labour was more scarce, the law be damned

Re: 5000 years

"It is interesting to speculate what will happen when a virus appears that is as lethal as Ebola and as infectious as influenza."

Wages go up. That is what happened with the Black Death....

Re: Big Society

"So for those of us who live in cities or large towns (the great majority) voluntary solutions will not work because there are too many people."

Possibly. Although it's remarkable how small the actual living unit is, even in those large towns. Neighbourhoods really do exist.

As to how to determine what will and will not work all I can suggest is the suck it and see approach.

Re: Revolutionary Stuff

"The community limitations of 2 to 3 thousand have been broken by social media / internetworking,"

I think to an extent that is true. One of the times when I agree with Marx: the means of production determine social relations. So, new technologies can change the optimal sizes of organisations, say.

Entirely happy with that.

How much that change changes things I'm not all that sure. That we can all Twatter each other is true, but I would need some serious convincing that this makes, say, organising the management of deep sea fishing stocks easier.

Re: QE

Not quite. The purpose of QE is to make people stop holding government debt and go and buy corporate debt. Thus lowering the yield/price companies have to pay for borrowings. This will/should increase their willingness to invest.

The aim is to get growth from the investment channel, not the consumption one.

Re: QE

"Was it simply that all Germans believe that inflation (even 2.1% inflation) causes Nazis?"

I'm not sure I would try to explain it to Angela in exactly those words but pretty much, yes.

I would perhaps more gently point out that the Bundesbank hasn't quite caught up with Milton Friedman's pioneering research (this really was where he made his academic bones, along with Anna Schwartz) in A Monetary History of the United States. Umm, 1963 I think?

The Federal Reserve *caused* the Depression. Not just didn't alleviate it, but made it happen. And the German insistence that that's not what happened is why it's all been so much worse in the eurozone.

And that really is about it I'm afraid. The Bundesbank, and thus much of the ECB, is about 60 years behind the intellectual curve.

Re: off-topic article request - Grexit

Indeed it is. Somewhere in there

Re: The Truth of the Matter is this...

Umm, no, not really. Life expectancy of the lower classes at birth was about that, sure. But life expectancy of someone at 14 or 16, about when they would start work and be paying taxes for a future pension, was rather higher....

Re: @Tim Worstall

That's about right. But then I applaud them for doing it (not the hypocrisy of course). Because people tax dodging lowers (yes, lowers) the rates the rest of us have to pay. Government watches people avoiding and realises that they'd better not raise rates because more will do so.....

Re: It''s simple?

"Any profits paid to individuals would be taxed at their normal tax rate. "

That's pretty much what some countries do do. And pretty much everyone does that with interest.

Re: off-topic article request - Grexit

I can certainly do that. The problem is of course that the story is moving so much that anything I write today for publication tomorrow will be out of date.

I might also not be quite, exactly, the right person, as I'm an extremist even by Ukipper standards. Thinking as I do that the EU itself is a bad idea, let alone the euro. So my conclusion is pretty much ordained.

Will add it to the queue though, won't be this week: might work best as a counter-factual once we see what the deal is going to be.

Re: Laffer Curve

Yes....true about the rate. It's really only there to make the point about geese and ganders. Very high rates for rich people are counter-productive. And so are very high rates for poor people.

Re: So how didn't he get it?

Pretty much it. And Pellinor is a tax lawyer by profession.....

Re: Interesting writeup

Economic incidence of a tax and cash incidence of a tax are not the same thing. Your employer hands over the cheque for your income tax with held. Anyone think that your employer pays your income tax?

The economic incidence of business rates is on the landlord.

And of course Davedavedave has beaten me to it. And the friction argument has some merit but that's at the margin, not the main point.

Re: The Truth of the Matter is this...

Necessary to be a little careful about that Greek "debt burden". Because there's two different things here.

There's the total amount: €320 billion or so. Which is indeed unpayable in any conventional sense.

Then there's the actual cash flow: Around 2% of GDP, rather lower than most other EU nations.

For the debt burden has been alleviated. We all understand that a 50 year mortgage at 0.1% is much easier to pay than a 10 year one at 5%. And the maturities of the Greek debt have been pushed out (up to 50 years on some of it). and the interest rate cut to the bone (some tiny number of basis points about Euribor I think). The net effect of which is that the net present value of that debt is about half the headline figure.

If we're honest about it Greece could pay that debt back. Without all that much of a squeeze. Simply because the terms are so favourable.

If only the place had it's own monetary policy so that it could get growth going again.....

Re: Interesting writeup

Business rates are really paid by the landlord, not the renter.

The shop is "worth" x to the person renting it. That's what they're willing to pay, in total, for the use of it. Whether 1% of x or 50% of x goes in tax or rent doesn't make any difference to that perceived worth.

The landlord cares a great deal about what that percentage is.

Tax credits is a difficult subject really.Paper of mine discusses it here:

http://www.adamsmith.org/research/reports/abolish-the-poor/

Benefits that are paid only conditional upon being in work *could* be subsidies to employers. Benefits that are not subject to a work requirement *cannot* be, in fact they operate to raise wages, not reduce them.

As it happens the general view is that some 25 to 30% of working tax credits does end up as a subsidy to employers. but the influence of the benefits system as a whole is very definitely to raise wages.

Re: Totally off topic, but...

Well, I know Anthony reasonably well, have done a number of trades with him, and wrote the MMTA standard contract for scandium (one of the rare earths) for him when he was Chairman there.

So, of course, he's entirely correct.

I might change a little of the nuance but not all that much.

Re: Congratulations

Hmm, Aly's analysis is rather different. Real wages for the workers rose considerably.

Re: Congratulations

"As for the monospony, you can get that with an oligospony as well. They conspire to milk the consumers dry and only then fight for what's left, and you end up with cartel behavior."

That's monopoly or oligopoly you're talking about there, control of supply. What Marx was (rightly) much more worried about was monopsony, a single buyer. In this case, a monopoly purchaser of labour, who would then be able to determine wages.

Delightfully, the only place this has ever happened was in Soviet states and boy, was Marx right, labour got screwed big time.

"Well, unregulated, capitalism WILL" which is why even classical liberals like me are just fine with regulatory action to break up monopolies.

Re: Algorithmic trading

That could be true. But it wouldn't be HFT. High Frequency Trading. What you're describing there is using an algo to decide what to invest in. About as scary as people using Excel to analyse stock prices really.

Re: Congratulations

Marx's analysis of some stuff was pretty good. He did understand both Ricardo and Smith a lot better than many moderns for example. I'm certainly guided by some Marxian (ie, influenced by, rather than swallowing the kool aid) stuff. For example, all this robots will take all our jobs stuff. OK, that's what Marx saw as the incredible efficiency of future capitalism, meaning that economic scarcity stops being something we have to worry about. At which point true communism can occur. OK with me.

And I often use his description of how and why wages rise: in the absence of both a reserve army of the unemployed and also monopsony (what he called monopoly capitalism) then wages will rise with productivity as capitalists compete for access for that scarce labour from which they make their profits. It was from this that he derived his warnings about monopoly capitalism.

Of course some of his predictions are looney tunes ....like, say, the idea that monopoly capitalism is inevitable, rather than just something to be aware of and thus avoid.

Re: Algorithmic trading

"HFT" and "investing" or choosing stocks are two entirely different things. The investing bit is, say (quick, quick, think of an analogy!) fueling a car on diesel or petrol, as appropriate. HFT affects the method of the fueling: are you pouring cans of stuff in or have you got a pump there?

Not quite right but it is like that. HFT is a method of stuff being traded around. what is being traded, or by whom, is a different thing.

Re: There was I thinking....

FTSE is a fun one. Because some 50% or so of the total UK stock market is foreign owned. More of FTSE is. So, we could think that this is evidence of people not having that domestic bias. Or we could look to your point, that many are foreign companies simply listed in London, and think of it as evidence of that domestic bias.

Your choice.

Re: Congratulations

Partly in response to, I think it was you, being less than impressed with my Smith in another piece recently.

Re: Algorithmic trading

Well, HFT makes absolutely no difference at all to investment allocations. To the trading of them, yes, and almost entirely beneficial at that level. But *what* people invest in almost entirely unaffected by HFT.

Re: Prizes

One thought that did occur is that this is all aimed at the US to begin with. And obviously the illiterate are going to be the poor in that society. So, microprizes, yes, say grocery coupons?

Re: I don't think you're mad

The EIC's an interesting example, yes. I would put it over in the box marked "we don't want the people making the rules and the people running the business to be the same people" myself.

Re: English translation please...?

I prefer to think of myself as an auteur, rather than author. I believe that means that you must adjust your reality to mine, not the other way around.