Tuesday 19 June 2012

Illusions And Delusions Of Grandeur

On Wednesday 6 June, this blog in “The Government Is To Grow Turkeys” mentioned the idea of “Growth Bonds” being a kind of latter day “War Bonds” of unhappy memory.  It has taken nearly a fortnight, but today one of the Red Gobblers of the Left, Polly Toynbee has declared her support for the notion.

At the same time a division of opinion has arisen between our David Cameron, the Wayne Rooney of politics and President Francois Hollande, the Eric Cantona of the French.  It is that Dave suggests that increased taxes on the rich will have them fleeing to London for shelter, perhaps emulating the Huguenots’ of the past.

Francois demurs as the French do and claims that true patriots amongst the rich will pay up, perhaps crying “Aux Armes, Citoyens” on their way to the tax office.  Alas, for both of them, all the French rich that could move their wealth have long gone, perhaps crying “Marchons, marchons” as they did so.

A quick look at a map of Europe might suggest why.  Monaco is an enclave of France, not too far along the road from St, Tropez, Cannes or Nice and you can meet a good class of Russian there these days, albeit some of them have British hangers-on from Westminster on their yachts from time to time.

To the north is Luxembourg, recently featured because of its lovely tax wheeze for UK corporations in need of mega bonuses.  To the east is a larger place called Switzerland and to the south a smaller one, Andorra

These places are not stand alone entities.  They are part of a complicated network of other locations offering substantial tax advantages.  One key part of this is the City of London.  So much of the off shore French money may well be going through London in any case as it flits from one computer to another.

But Cameron is not thinking of this kind of investment.  To nobody’s surprise he is talking about the London property market.  As the UK does not have a property tax as such this is one advantage. 

Others are the ability to evade Stamp Duty, the paying of Council Tax, in any case loaded in favour of high value properties or indeed the need for the registration in the UK to divulge the real owner.  Add to that the real matter of which Probate Law and inheritance issues might apply the UK has great advantages.

In this context what Polly is proposing is fully in support of all this.  Basically, Growth Bonds will enable the Government to extract loans at one rate of interest to allow Quantitative Easing to banks at a lower one, who will buy up many of the bonds, thereby instantly reducing their liabilities, with the taxpayer as security.

Along with this will the encouragement of lending for “Growth”.  The major field for this will be housing and other sectors of the property market, which is where we came in.  The chattering classes as a whole are heavily committed to property. 

If Polly were to reveal her holdings of wealth we could then judge if she is one of them.  There is no more chance of that than finding out where David’s money is.  As for Francois it is claimed that he owns some flats on the Cote d’Azur but that story was quickly buried.

There is one major snag to all this.  Polly has said that Europe is awash with wealth that can be used as the backing for such bonds.  But that “wealth” is denominated in money terms. 

Indeed, much of it is invented, or fiat money and beyond that a host of financial instruments based on that illusionary money constitutes a huge theoretical “wealth”. that is supported by only a small proportion of identifiable holdings.

Everything else, property, savings, investments, goods, services and everything relates to its money value.  If the money values collapse, one way or another, then the “invented” wealth simply evaporates and what might be real wealth is sharply reduced both in money and real value.

This might be about to happen.  In the meantime at the G20 meeting in Mexico, one of the most corrupt and criminal states on the planet, Europe is blaming America for the problems.  As America is already blaming Europe it is understandable.  That not only both are to blame but a lot of others as well they are all wasting their breath.

“The charter of thy worth gives thee releasing;
My bonds in thee are all determinate.
For how do I hold thee but by thy granting?”

Shakespeare had property in Stratford upon Avon, some of it burned down later following a major fire that swept through the town.

1 comment:

  1. "one of the Red Gobblers of the Left, Polly Toynbee"

    Ha ha - well at least that phrase made me smile this morning.