Labour In Vain

Two hefty items in Bank Underground offer thoughts from people involved in the Bank of England, but only expressing their view of course.

On Friday 10 July, Alastair Cunningham and Glynn Jones ask the question "Does business intelligence still point to labour market slack" which suggests that out there is a continuing mismatch  between the skills needed and what is available to hire.

The article concludes:

Quote:

As a result, we believe that there is little – if any – slack remaining in the labour market and that the potentially inflationary impact of a tightening labour market is therefore being offset by other factors.

These might include compositional changes within the workforce, lack lustre productivity growth, softer hiring intentions, constrained margins and the impact of low CPI inflation on pay bargaining.

That matters because it suggests a risk that wage inflation will pick up more sharply if and when any of these factors ‘wash out’.

Unquote.

The article might answer a question in the item  "Fancy A Pint" of  Wednesday, 8 July which has comment on what our Higher Education system is supposed to be doing or rather not doing .

In the Bank blog on Wednesday 8 July there was an article in which Rhiannon Sowerbutts and Peter Zimmerman ask a fair question "Who benefits from the implicit subsidy to too big to fail banks"?  Their analysis concludes:

Quote:

The available evidence implies that most of the implicit subsidy benefits senior bank employees and shareholders.

The structure of credit markets suggests that not much of the benefit is passed on to creditors and customers.

But further empirical investigation is needed in order to come to any definite conclusions.

Unquote.

Surprise, surprise?

Giving And Taking

There was an old refrain, commonly sung by men in bars having had a few, to the tune of "Onward Christian Soldiers".  It went, "Lloyd George knew my father, my father knew Lloyd George" repeated until the end of the tune.  It was alleged to reflect on his many personal amours and their consequences.

In many minds the question of Inheritance Tax is linked to Lloyd George, picture above, arising from the 1909 Peoples Budget and the political controversies of the time.  His drive as Chancellor of the Exchequer in the Liberal Government at the time is said to be the beginning of our modern welfare state.

It is rather more complicated than that as this brief Wikipedia summary indicates and this only refers to modern times.  As long ago as 1215 the propertied class objected strongly to Good King John's attempts to raise enough tax to keep the government going and wardships of the time were part of the problem.

Ever since there has been an uneasy and often bitter history of taxing property and the handing on of rights etc. to later generations.  With the votes being given to lower classes who once rarely had much if any property or wealth it was inevitable that they would want to make those with it pay.

In the later 20th Century the idea of allowing as many as possible to own their homes had widened the issues, especially when inflation of prices runs well ahead of changes to the levels of taxation.

Mr. and Mrs Average who bought their semi-detached house in a nice London suburb for £15,000 when that was a lot of money may now be sitting on a million or more at current prices that has made them very taxable, despite the problem that the money can only be realised on sale.

When you add to that those in the private sector with a few savings for pensions etc. and it all takes it further.  There are a lot of them and their families and this kind of issue is critical to their voting habits and ambitions.  They do not like the idea of paying a large chunk of it in tax.

More to the point the financial services sector has been doing deals and making arrangements for the wealthy for some time now, around the same period as the idea of owning your own home.  I suspect there are few really wealthy left who have left themselves vulnerable.  There may be some, foolish or just unlucky who might get caught but not many.

What has been happening is that more and more people have been arranging their affairs to reduce, in fact minimise, their tax liabilities for inheritance.  This has grown from being a cottage industry to being a key part of the finance sector.  Again, there are those who have failed to do it but they are shrinking in number.

All the old arguments about Inheritance fortunes and monies now are of less and less relevance.  What does matter is a Treasury needing more and more loot to stave off borrowing and finding less and less places to get it that are reliable.  At the moment their political bosses are reluctant to touch property.

The result is what is called a "giveaway" or popular tax reduction when in fact most of those who might have paid it have legally avoided doing so.  So if you cannot get the tax in somewhere or other you have to cut the spending.  The statue above seems to show Lloyd George giving with one hand with the other putting something in the pocket.

It is not going to get better.  Now whatever happened to Lloyd George and his once mighty Liberal Party?  Was it something that went wrong in a Coalition?

Up Greeks And At 'Em

Mr. Farage is not to everyone's taste but there are times when he does hit form.  This is one of them:

Speech on Greece is stirring stuff to the European Parliament and to Mr. Tsipras, who was present.

It lasts four minutes and twenty five seconds from the Zero Hedge blog.

If he isn't careful, the Greek Army will take over and put him in charge.

After all they have a lot more tanks than most countries and know how to use them, thanks to German money and suppliers.

Try this if the above is not enough for something rather riper and suggesting that Greece is only the beginning of the return of the world to the pre-industrial age.

Hat tip to The Automatic Earth where it was tucked away at the bottom of the listing.

Fancy A Pint?

Lord Bilimoria has opened up to declare that the Budget should invest more in Higher Education.  Checking the bio' in Wikipedia says that he has been top man for the Indian firm Cobra Beer.

Memory tells me that students tend to drink a lot of beer.  This is what people call a "vested interest" and suggests that this member of our new nobility is doing a bit of lobbying on the side.

The bigger question is "what do you mean by "investment" but I will skip the deep analysis of the many meanings of this word.  When it comes to politicians who are also in big business you may assume that to them it is what they say it is, especially when from wealthy families with a military background.

A more sober look at the economics of Higher Education (HE) by The Mises Institute says that in recent decades the HE spending has created a bubble that is still inflating.  Bubbles create winners and losers and bad bubbles mean a lot of very bad losers.  This rule seems to apply just as much to HE as anything else.

This article relates to the USA, but the essential principles apply in any state where HE has been expanded rapidly as a matter of social policy and as a means of reducing unemployment among the young.  In general it has not been challenged because it is seen as "good".

There is an inherent difficulty in that the HE has been expanded on the basis of work structures and technology of the recent past.  But change has been so rapid that much of the HE now on offer relates to that past meaning that many qualifying are left with skills for which there is either none or a reducing market.

If what we see and hear are any guide it is not going to get any better, if anything it is getting much worse. There are fiasco's at present in other sectors.  The UK government has a lot to say about apprenticeships and training for the non HE sector.

But the huge changes involving Ofqual, the awarding agencies and the trainers now current are going to result in thousands under training being deemed as failures because the computer systems cannot transfer personal details from one new system to another.

To return to HE, a major feature of current UK provision is the number of overseas students imported for financial reasons as much as anything.  One major source is India.

So Lord Bilimoria is wanting us to inflate the HE sector more rapidly on that basis to deal with the overseas students, many from India, at a time when the actual reality of the labour markets is that most of them will never realise any economic benefit.

Who are losers as well as the masses of unlucky young saddled with debt and no prospects having lost years of potential real work experience and other opportunities?  The UK taxpayers are one and more HE along with the import of students is a part of the other major bubble, property, in that whole districts of many place are now student enclaves.

The fortunes of the noble Lord are likely to be invested in more than the beer firm or old family assets.  Could some of them, I wonder be in property and perhaps buy to let?

7/7

The events of the 7th July 2005 and the shock of the terrorist attacks meant for us some immediate decisions.  At the time we were making regular visits to London and had a full diary.  Did we give up on all this or did we refuse to let it do so?

We decided to go ahead.  Whether we were being bone headed or not is a matter of opinion.  But we grew up at a time when people had to go on with their lives despite daily serious risks.

So on the 8th July we were at The Barbican having followed our usual routine in a quiet City and the auditorium had many vacant seats.  On the 10th we were up again, this time Covent Garden, again with seats left vacant despite the prices.

Also, we followed routine on the 10th, as this meant a spell in the Embankment Gardens we ate our packed meal under the statue of Robert Burns, picture above, a man who believed in freedoms and signed the Book of Condolence there.

For the Proms season, and 2005 was one where we were on the front row of the Arena on The Last Night, the security was heavy and at the Albert Hall it was problematical.  The "intelligence" and "security" aspects there raised some real and worrying questions.

What was disturbing was that the security people rather than just doing the job with awareness  and being alive to subtleties seemed to be aping the conduct of characters in bad quality film and TV.

I hope things have improved since then.

Greece

The debacle that has occurred in Greece is extensively covered on the web and to a far less extent in the media.

Why is it that in an age when we know so much about the past we have learned so little from history, or even attempted to understand it?

Independence Revised

Unknown to the people of the USA and members of Congress, President Obama has quietly put an end to an ancient wrong.  He has sworn allegiance to HM The Queen in a brief ceremony that reinstates the USA as a devolved entity within the United Kingdom.

This follows the meetings held by Nicola Sturgeon of Scotland with US and IMF officials in Washington in which personal discussions clarified a number of matters relating to the EU and other obligations as well as a fireside chat between David Cameron and The President.

In Whitehall an in depth study of the various Euro treaties had concluded that certain clauses because of their inconsistencies left open the opportunity for former colonies and territories to be allowed should they re-engage as part of the UK.

The effect is that not only the original thirteen colonies are covered but all the territories etc. that they later controlled.  As the spear head of the expansion to the West was substantially led by Scots and Irish this allows the USA as it is be part of Europe.  This is said to have a number of advantages to all parties.

One is population control in the USA and a New Manifest Destiny.  Because of the imminent water shortages and crop reductions it is imperative to redirect population increase from the USA to elsewhere, indeed reduction will occur but now can be managed.

The base line figure for future population is said to be between 120 and 150 million, large enough to service an advanced leading world economy and a related military commitment to retain security.  This could be achieved by returning the surplus to Europe and other places under the terms of the Schengen Agreement.

Also, if the poorer elements were relocated to area of family or group origin then in the USA average earnings, wealth and productivity would all increase sharply with the related consumption and market benefits and reduced calls on benefit expenses.

On the other hand the return of Hispanics to Spain will give a boost to their economy, albeit on a different basis.  The same can be argued for other parts of Europe where policy is that large scale population growth is wanted to allow boosting public spending to procure differing benefits in other ways.

In Scotland, for example, the open door policy coupled with US returnees would soon increase the population to a level greater than that of England with the accompanying political effects bearing on the economic.

Takeover of all Scottish land rights and state re-allocation to create a self sufficient localised croft economy would be paid for by allowing each croft its own wind turbine exporting surplus energy to England who will pay for the installations.

The Scandinavian issue is more complicated.  But it is felt possible that the Norwegian capital fund and long standing state facilities in other nations might accommodate a five fold increase.  With modern systems the search for food that drove people to the USA would no long apply, according to the food processor industry.

There are a number of other population groups.  The large Italian proportion could well return to Italy, albeit the loss of the Mafia might have some effects difficult to foresee.  For other peoples of Europe, there could be localised issues in the Balkans, notably Greece.

It is Germany, however, where a problem might arise.  This might be dealt with by dispersal on a farm by farm basis reminiscent of the former idea of returning Germany to an agrarian economy.

Other sectors of the population will need action on a case by case policy which will entail flexibility.  The African could be given the option of staying or going to a location preferred. For the unknowns or difficult cases the obvious solution is to provide state sponsored transport to Australia.

One small change is that the "Star Spangled Banner" will be dropped and "Lillibullero" will replace it, version according to choice, see Wikipedia.