Category Archives: Economy

Happy Days Are Here Again In … La-La Land

Britain, Debt, Economy, Government, Inflation

Across the pond, U.K. Chancellor of the Exchequer George Osborne is singing from the Bush and Obama hymn sheet. A neo- Keynesian naturally, Osborne is intent on excessive spending as a model of economic growth. What better way than a housing bubble to bring about that brief burst of spending before the bust?

Tightening credit conditions and foreclosures signal to this man (counter-intuitively, of course) that it is time for the debt-laden borrower to borrow more money he can’t repay; that it is time for those who do not spend money they don’t have, to subsidize those who do.

It’s all good, promises Bloomberg.com:

Osborne yesterday pledged 3.5 billion pounds ($5.3 billion) to help buyers of new homes with loans of as much as 20 percent of the property’s value, broadening an existing program beyond first-time purchasers. He also announced a plan to guarantee as much as 130 billion pounds of new mortgages to fuel demand from purchasers with limited cash for a deposit.

At least the chancellor delivered a 2013 budget. At a glance, here are “the key points of Chancellor George Osborne’s Budget,” via BBC News (a doff of the hat to our friend in the UK):

FUEL, ALCOHOL AND CIGARETTES
September’s 3p fuel duty rise scrapped
April’s 3p rise in beer duty scrapped. Instead, beer duty to be cut by 1p
Annual inflation +2% rise in beer duty to be ended but “duty escalator” to remain in place for wine, cider and spirits
Cigarette duties unchanged – continuing to rise by inflation +5%

INCOME TAX
Limit at which people start paying tax to be raised to £10,000 in 2014 – a year earlier than planned

HOUSING
Shared equity schemes extended, with interest-free loans for homebuyers up to 20% of value of new-build properties
Bank guarantees to underpin £130bn of new mortgage lending for three years from 2014

STATE OF THE ECONOMY
Growth forecast for 2013 halved to 0.6% from 1.2% in December
Office for Budget Responsibility watchdog predicts UK will escape recession this year
Growth predicted to be 1.8% in 2014; 2.3% in 2015; 2.7% in 2016 and 2.8% in 2017.

BORROWING
Borrowing of £114bn this year, up from previous £108bn forecast
Borrowing set to fall to £108bn, £97bn and £87bn, £61bn and £42bn in subsequent years
Borrowing as share of GDP to fall from 7.4% in 2013-14 to 5% in 2015-16
Debt as a share of GDP to increase from 75.9% in 2012-13 to 85.6% in 2016-17

SPENDING AND PAY
Most government departments to see budgets cut by 1% in each of next two years
Schools and NHS will be protected
£11.5bn in further cuts earmarked in 2015-16 Spending Review, up from £10bn
1% cap on public sector pay extended to 2015-16 and limits on “progression” pay rises in the sector
Military to be exempt from “progression” pay limits.
Proceeds of Libor banking fines to be given to good military causes, including Combat Stress charity

JOBS
600,000 more jobs expected this year than at same time last year
Claimant count to fall by 60,000

TRANSPORT AND INFRASTRUCTURE
An extra £15bn for new road, rail and construction projects by 2020, starting with £3bn in 2015-16

HELP FOR BUSINESS
Corporation tax to be cut by 1% to 20% in 2015
New employment allowance to cut National Insurance bills cut by £2,000 for every firm
450,000 small firms will pay no employer National Insurance
Government procurement from small firms to rise fivefold
Tax relief for investment in social enterprises
Stamp duty axed on shares traded on growth markets like Aim.
Tax avoidance and evasion measures, including agreements with Isle of Man, Guernsey and Jersey, aimed at recouping £3bn in unpaid taxes

ENERGY AND THE ENVIRONMENT
Tax incentives for ultra low-emission cars
Pottery industry in Midlands to be exempt from climate change levy
Tax allowances for investment in shale gas

INFLATION
2% Bank of England inflation target to stay in place
Bank remit to be changed to focus on growth as well as inflation

PENSIONERS
Single flat-rate pension of £144 a week brought forward a year to 2016
Cap on social care costs confirmed

FAMILIES
20% tax relief on childcare up to £6,000 per child from 2015
£5,000 payments for those who lost money on Equitable Life policies bought before 1992. Extra money for those on low incomes

US Already Inflicts ‘Deposit Taxes In Disguise’

Business, Debt, Democracy, Economy, Federal Reserve Bank, Inflation

“Savers Pay for Spenders,” our March 19 BAB post on Cyprus, asked:

WHY is state-sanctioned theft from Cypriot savers any different to your paycheck being docked for statutory payroll tax deductions?
WHY is state-sanctioned theft from Cypriot savers any different in principle to the statutory theft called the income tax; and, in particular, from the progressive income tax, where the rich (“savers”) are penalized for the sins of the rest?
As to taxes on assets: Property taxes, taxes on investments—why are these seizures of private property any different in principle to the lunge on Cypriot savings accounts the bankers and bureaucrats of Europe have made?
You’d think the US doesn’t tax assets. It does. And how are the taxes above different in principle from a bank deposit levy?

Today comes the news, (via Forbes), that Cyprus and its puppet masters have agreed that, “the Popular Bank of Cyprus (Laiki Bank) will wind down” [presumably this is journo babble for “close”].

Laiki Bank deposits above 100,000 euros—which aren’t protected by EU law—will be frozen and used to pay for the deal. The frozen accounts are expected to yield 4.2 billion euros ($5.5 billion), and account holders will see an estimated 30% to 40% haircut on assets. Far greater than the original 9.9% levy.

“Haircut” is yet more journo mumbo-jumbo. The correct word is “theft.” Large-scale robbery of private property.

Financier Peter Schiff completes the thought expressed in this post’s lede, above—and shared by every clear thinking libertarian. This is all a formality—a more in-your-face lunge for private property :

…isn’t inflation, which allows governments to pay off debt through the creation of new money that transfers purchasing power from savers to borrowers, just a deposit tax in disguise? (Read more about Japan’s plan to do just that). British citizens of all means have been living with such a three percent stealth tax for the past three years, and it is expected to stay that high for at least two more years. Yet a one-time tax of 6.75% in Cyprus is seen as the ultimate act of betrayal?
Many are lamenting that Cyprus’ membership in the EU prevents it from devaluing its own currency to get out of the jam. How would such a course be morally superior? Taking actual losses on deposits is no different than taking losses through devaluation and inflation. Both result in the loss of purchasing power. Asking for a depositor haircut at least deals with the problem honestly and immediately. Although it’s not quite as honest, devaluation can also be effective.

UPDATED: Savers Pay For Spenders

Debt, Economy, EU, Europe, Federal Reserve Bank, Private Property, Socialism

Cypriot officials had colluded with euro-zone Kleptocrats in order to raid individual savings accounts in their country to pay for their profligacy.

If the little guy did this—you or I—we’d be in the big house.

Other than that it is theft, seizing private property to pay for “public” debt punishes the economically righteous, who squirreled away for a rainy day (RETIREMENT). Observe how state policies, in addition to generally being immoral, invariably help invert conventional morality.

The right of private property notwithstanding, why should savers pay for spenders?

However, ask yourself this:

WHY is state-sanctioned theft from Cypriot savers any different to your paycheck being docked for statutory payroll tax deductions?

WHY is state-sanctioned theft from Cypriot savers any different in principle to the statutory theft called the income tax; and, in particular, from the progressive income tax, where the rich (“savers”) are penalized for the sins of the rest?

As to taxes on assets: Property taxes, taxes on investments—why are these seizures of private property any different in principle to the lunge on Cypriot savings accounts the bankers and bureaucrats of Europe have made?

You’d think the US doesn’t tax assets. It does. And how are the taxes above different in principle from a bank deposit levy?

UPDATE (3/20): From Vox Day:

One of the many unintended consequences of the Cyprus situation is that many people are finally beginning to understand that money they deposit into a bank is no longer their money. It’s one thing to have some vague notion of what a fractional reserve system is, it’s another to realize that with every deposit, you are making what amounts to an interest-free loan to some of the shadiest and shakiest entities on the planet.

UPDATED: The Balanced Budget Deception (‘Debt? What’s That,’ Says The Ass With Ears)

Conservatism, Constitution, Debt, Economy, Federalism, Founding Fathers, Individual Rights, libertarianism, Republicans, Rights, Taxation

At least those who tout the Republican budgetary version of a decrease in the increase in spending are no longer claiming to downsize the government.

So proud was Sean Hannity of Paul Ryan’s latest budget iteration that he boasted that, while it increases spending by trillions, it still manages to shave off $4.64 trillion in increases.

According to the Washington Examiner, the current spending trajectory will see “federal government outlays … rise from $3.61 trillion this year to $5.77 trillion in 2023, for a cumulative 10-year total of $46.1 trillion in federal spending.”

“Under Ryan’s new budget, federal spending would reach just $4.95 trillion in 2023, for a 10-year total of $41.46 trillion. That’s $4.64 trillion in deficit savings, which is a good start,” conclude the Examiner editors.

House Budget Committee Chairman Paul Ryan has dusted off last year’s budget, tweaked it a bit and resubmitted it to Republican applause.

Lauding so-called “balanced budget” initiatives is laughable. The real problem is that the quest to “balance federal spending and taxes” is meaningless. It does nothing to stop the federal government from raising taxes as it increases spending and grows in scope and size, ad infinitum.

Ultimately, “A balanced-budget requirement implies is that government has the constitutional right to spend as much as it takes in; that government is permitted to waste however much revenue it can extract from wealth producers, and that the bums must merely bring into balance what was stolen (taxes) with what is squandered (spending).”

“The Powers Delegated to the Federal Government are Few and Defined.” A return to the 18 or so functions the Constitution delegates to the federal government would be a much better start. This requires that entire departments be shuttered.

UPDATE: Scrap everything I’ve just said (NOT). This just in from the president: “There is no debt crisis.”

Without reading what TAWE (“The Ass With Ears”) has said, you know that, to dismiss a $16.5 trillion debt, you have to think that “macroeconomics and microeconomic are two separate solitudes, governed by different laws.”

To say such a stupid thing as TAWE has said, “You have to to believe that the values and virtues ordinary mortals hold themselves to don’t apply to government; that the laws of economics are NOT natural, but political, laws.”

“We don’t have an immediate crisis in terms of debt,” President Obama told ABC News correspondent George Stephanopoulos this week.

In uttering such a fatuity, BHO showed that he has no regard for or knowledge of what Thomas Jefferson was warning about, when he said:

“The greatest danger came from the possibility of legislators plunging citizens into debt. We must not let our rulers load us with perpetual debt. We must make our election between economy and liberty, or profusion and servitude.”