I love the concluding sentence from this article from the Telegraph. UK passport controls were relaxed because the French authorities were complaining about congestion.
Bureaucratic necessity wins out every time.
All but the most cursory checks were abandoned on passengers on British-registered coaches as they arrived at Dover, Britain's biggest port.
Instead of passports being scanned electronically, border guards checked that the picture matched the holder. It means they were not cross-checked to a computer database to establish if the holder was a wanted terrorist, criminal or immigration offender.
The policy was in place for four years after being introduced when Labour was in power, but never disclosed to Parliament.
It was implemented because the French complained about congestion in Calais caused by backlogs at passport control.
Sunday, 13 November 2011
Friday, 11 November 2011
The crazy US housing downturn
It is only when we look at long term data on housing starts that we begin to understand the magnitude of the crash that has befallen the US housing market. Currently, new home housing starts are at the their lowest level in fifty years.
Furthermore, the downturn has been far more prolonged than any previous downturn.
The current economic crisis is unique in so many ways.
UK population projections; there will be more of us, and we will be much older
The ONS has produced an alarming population projection. With a decade or so, the UK will be home to at least 70 million people.
Over the last couple of decades, around half of the growth in the population has come from migration. Suppose, for a moment, that the UK economy continues to stagnate, while emerging market and low income countries continue to grow rapidly. What would happen if migration flows were to dry up?
Currently, there is a clamour to reduce migration. Our much beloved Home Secretary - Teresa May - finds herself in trouble on this very issue. Notwithstanding the passport chaos from this summer, it is getting harder for people to move to the UK.
The indigenous UK population tends to be much older than the new arrivals. If migrants fail to arrive, then the ratio of workers to pensioners could well be much lower than the ones suggested in this short video.
But be careful for what you wish for. If the migrants stop coming, who will do the work and pay taxes to maintain those generous state pensions?
Thursday, 10 November 2011
Eurozone breakup draws closer
Who would have thought that the future of the Euro depended on a lecherous old geriatric?
Yesterday, Berlusconi resigned. Today, Italian borrowing costs soared. 10-year bond yields are now well above the 7 percent - a level at which the Italian fiscal position is unsustainable. Thus, the lesson of today was about the bankruptcy of the Italian political system. As bad as he was, Sleazy Silvio was still a better option than any other Italian politician. He was the best Italy had to offer.
While the rest of us are learning about the appalling limitations of Italian politics, that old bore - Jose Manuel Barroso - issued yet another "stern warning" about the impeding dangers of a collapsing single currency. He has been issuing press releases on this theme for at least four years. He calls for concerted action to protect the Euro, organizes a high level meeting amoun Eurozone leaders, and yet the situation just keeps getting worse.
Barroso's fear that the Eurozone will implode is now rapidly turning into a reality. According to Reuters, French and German officials are already working on an exit plan for insolvent Eurozone members.French President Nicolas Sarkozy implied that a breakup was the best course for Europe when he advocated a two-speed Europe. Northern euro zone countries would "accelerate and deepen integration", while the Southern laggards would be ejected.
Meanwhile, over in Frankfort, the ECB are desperately buying up Italian bonds. It is a forlorn attempt to stabilize financial markets and keep Italian rates down. However, it is a failing strategy. Italian bond rates keep rising; Europe slides ever closer to the abyss.
As the abyss beckons, one horrifying reality is beginning to emerge - there is nothing anyone can do to save Italy. After four years of bailouts, the world has finally produced a financial crisis that can not be resolved by a handout to financial institutions. This isn't a case of "too big to fail". There isn't enough money in the world to save Italy.
After Italy, who is next? Already, that fearful disease - financial contagion - has fingered another potential victim. French interest rates have begun to rise.
Yesterday, Berlusconi resigned. Today, Italian borrowing costs soared. 10-year bond yields are now well above the 7 percent - a level at which the Italian fiscal position is unsustainable. Thus, the lesson of today was about the bankruptcy of the Italian political system. As bad as he was, Sleazy Silvio was still a better option than any other Italian politician. He was the best Italy had to offer.
While the rest of us are learning about the appalling limitations of Italian politics, that old bore - Jose Manuel Barroso - issued yet another "stern warning" about the impeding dangers of a collapsing single currency. He has been issuing press releases on this theme for at least four years. He calls for concerted action to protect the Euro, organizes a high level meeting amoun Eurozone leaders, and yet the situation just keeps getting worse.
Barroso's fear that the Eurozone will implode is now rapidly turning into a reality. According to Reuters, French and German officials are already working on an exit plan for insolvent Eurozone members.French President Nicolas Sarkozy implied that a breakup was the best course for Europe when he advocated a two-speed Europe. Northern euro zone countries would "accelerate and deepen integration", while the Southern laggards would be ejected.
Meanwhile, over in Frankfort, the ECB are desperately buying up Italian bonds. It is a forlorn attempt to stabilize financial markets and keep Italian rates down. However, it is a failing strategy. Italian bond rates keep rising; Europe slides ever closer to the abyss.
As the abyss beckons, one horrifying reality is beginning to emerge - there is nothing anyone can do to save Italy. After four years of bailouts, the world has finally produced a financial crisis that can not be resolved by a handout to financial institutions. This isn't a case of "too big to fail". There isn't enough money in the world to save Italy.
After Italy, who is next? Already, that fearful disease - financial contagion - has fingered another potential victim. French interest rates have begun to rise.
Wednesday, 9 November 2011
So farewell then Mr Berlusconi
Mr Berlusconi seemed - in equal measure - both a repulsive and comical figure. Over the last two years, his personal life has become increasingly bizarre and shameless. Italy deserves better. It is a relief to hear that he is finally resigning. It should have happened sooner, but better now than next week, or some other long overdue moment in the future.
Nevertheless, there is a danger that one reads too much into his departure. When reporting on Italy, the mainstream media have often blended Mr Berlusconi's outrageous personal lifestyle, and his contempt for the Italian public with Italy is rapidly deteriorating economic situation. Likewise, financial markets welcomed the news of the Italian prime minister's impending resignation. The implication seems to be that Berlusconi's exit both lowers public sector default risk and increases the profitability of Italian publicly traded firms - a proposition that seems rather implausible when explicitly articulated.
The Italian economy continues to be in a parlous state and Mr Berlusconi's departure changes nothing. The public sector debt stock sits at about 120 percent of GDP. The economy has barely grown in a decade. Italy is rapidly ageing population. It has a sclerotic and overregulated private sector. Its judicial system is barely functioning. These problems did not suddenly emerge when Mr Berlusconi became Prime Minister. They will not disappear when he finally leaves office.
It takes decades of government mismanagement to build up a deficit of 120 percent of GDP. This number is a ratio comprising of nominal debt and nominal GDP. Notwithstanding the mathematics behind ratios, as a rough approximation, it would take about 24 years for a fiscal deficit of five percent per year to build up a debt stock of this magnitude.
When Berlusconi first became prime minister, the Italian debt stock was already over 100 percent of GDP. His great achievement was to stabilise the debt at roughly the level he inherited when entering office. He didn't improve things much, but neither did he make matters worse.
So farewell Mr Berlusconi, you inherited a mess when you first became prime minister, and you leave a mess for your successor.
Italy remains on the edge of a meltdown.
Nevertheless, there is a danger that one reads too much into his departure. When reporting on Italy, the mainstream media have often blended Mr Berlusconi's outrageous personal lifestyle, and his contempt for the Italian public with Italy is rapidly deteriorating economic situation. Likewise, financial markets welcomed the news of the Italian prime minister's impending resignation. The implication seems to be that Berlusconi's exit both lowers public sector default risk and increases the profitability of Italian publicly traded firms - a proposition that seems rather implausible when explicitly articulated.
The Italian economy continues to be in a parlous state and Mr Berlusconi's departure changes nothing. The public sector debt stock sits at about 120 percent of GDP. The economy has barely grown in a decade. Italy is rapidly ageing population. It has a sclerotic and overregulated private sector. Its judicial system is barely functioning. These problems did not suddenly emerge when Mr Berlusconi became Prime Minister. They will not disappear when he finally leaves office.
It takes decades of government mismanagement to build up a deficit of 120 percent of GDP. This number is a ratio comprising of nominal debt and nominal GDP. Notwithstanding the mathematics behind ratios, as a rough approximation, it would take about 24 years for a fiscal deficit of five percent per year to build up a debt stock of this magnitude.
When Berlusconi first became prime minister, the Italian debt stock was already over 100 percent of GDP. His great achievement was to stabilise the debt at roughly the level he inherited when entering office. He didn't improve things much, but neither did he make matters worse.
So farewell Mr Berlusconi, you inherited a mess when you first became prime minister, and you leave a mess for your successor.
Italy remains on the edge of a meltdown.
Monday, 7 November 2011
Lets make up some new money - it will make us happy
Jim Lacey - professor of strategic studies at the US Marine Corps War College - was recently walking through the Occupy Wall Street camp in New York. He noticed an interesting development in monetary theory.
As luck would have it, though, many of them will not have to worry about money for much longer, as several OWS occupiers had the answer to everyone’s financial problems. This innovative group, all sporting $4-bill badges, claimed to have reimagined money. Intrigued, I asked how such a reimagination worked. In short, it seems that people are to create money as they need it for their own happiness and the happiness of others.
This I liked, as I have a wonderful imagination and a deep need to use my money so as to increase my own happiness. I promptly imagined a page of my notebook into $10,000 and gave it to one of the $4 lapel-badge ladies.
She looked at the sheet of paper and smiled at me. So far, so good. I then asked for her laptop and told her she could keep the $8,000 change I was due so as to further increase her own happiness. She quickly turned away, taking her laptop with her and leaving me short $10,000 of reimagined money.
I assume the system has some kinks that the revolution will figure out as it goes.
Before we all snicker at the naivety of the $4 demonstrators, isn't this the same idea that the Bank of England is pursuing? Aren't they printing money to try to make us happy?
As luck would have it, though, many of them will not have to worry about money for much longer, as several OWS occupiers had the answer to everyone’s financial problems. This innovative group, all sporting $4-bill badges, claimed to have reimagined money. Intrigued, I asked how such a reimagination worked. In short, it seems that people are to create money as they need it for their own happiness and the happiness of others.
This I liked, as I have a wonderful imagination and a deep need to use my money so as to increase my own happiness. I promptly imagined a page of my notebook into $10,000 and gave it to one of the $4 lapel-badge ladies.
She looked at the sheet of paper and smiled at me. So far, so good. I then asked for her laptop and told her she could keep the $8,000 change I was due so as to further increase her own happiness. She quickly turned away, taking her laptop with her and leaving me short $10,000 of reimagined money.
I assume the system has some kinks that the revolution will figure out as it goes.
Before we all snicker at the naivety of the $4 demonstrators, isn't this the same idea that the Bank of England is pursuing? Aren't they printing money to try to make us happy?
Sunday, 6 November 2011
UK Public Expenditure - Where Does The Money Go?
During the last fiscal year, the UK government spent £691 billion. Where did the money go? Most of it went on social benefits, health and education. Interest payments took up a sizable chunk, despite the Bank of England's attempts to keep rates low. Public investment was also a hefty number.
If Her Majesty's Government is going to make a sizable reduction in public expenditure, there is little point looking for savings among the other items. We could abolish the foreign office (FCO), stop offering AID to poor countries and leave the EC, and the savings would quite limited. However, we might get somewhere if we abolished Scotland, Wales and Northern Ireland.
Saturday, 5 November 2011
Tuesday, 1 November 2011
A referendum on austerity
The Greeks will be allowed to vote on their austerity package. A curious idea; will they vote for lower social spending, public sector wage cuts and reduced pensions? Or will they go with a fantasy that Greece is richer than it really is?
How would Britain vote if such a referendum were held here?
How would Britain vote if such a referendum were held here?
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