Peter Schiff on Government Regulation and Taxation

An excellent video on the outlook of the US economy, the principles remain equally valid over this side of the pond. 

 

The other day saw thousands of protesters take to the streets of London demanding less/no spending cuts whilst "anarchists" tagged shop fronts with "tax the rich" slogans.  Not surprisingly in their haste to win the prize for the most monotonous slogan they all totally missed the fact that you can't have it both ways.  There should be no doubt that the current level of nation debt needs addressing, its either deal with it now or pay back even more later.  Failure to do so by cutting government expenditure requires higher taxes, which would result in even less revenue generated by the private sector and an even more stagnant economy, a situation which will be unavoidable if we don't deal with this problem soon.

Others have suggested that we could grow our way out of the deficit (and no, stimulus doesn't count) and whilst that seems great in theory the fact of the matter is that the only effective way to encourage growth is to reduce the burden on businesses and allow people to save & invest.  George Osbourn's recent budget failed to make any of the necessary adjustments to the regulatory system to improve business opportunities and he probably can't; reductions in taxation will increase the deficit in the short term, adding to the debt and interest levels.  Doing this and praying that the economy picks up before the next election is too large a political gamble for our masters to take.

To summarise, there simply isn't a politically workable alternative to spending cuts that doesn't cause more damage in the middle/long term.  Whilst a rolling back of the tax and regulatory systems would significantly improve the situation (by generating substantial employment and tax revenue), the current "bash the bankers" and "down with evil corporations" attitudes disincentivizes the government from making such "radical" and necessary changes, something these protesters should probably starting thinking about.

Budget 2011

So exiting...

The promise of a slight alleviation in petrol prices, misguided views on inflation (rather than recognising the problems with money supply & interest rates), failure to realise that governments can't stimulate actual growth, pitiful tax breaks bribes to keep the public in line, failure to recognise the damage of NI and business taxes, absolutely no attempt to deal with the national debt, all whilst labour & the BBC whine that the "cuts" go too far!  I think I've summed up the hole affair, time to see if my predictions are correct.

Surprise surprise, just switched onto the BBC news channel to find some fool (missed his name unfortunately) suggesting that the government needs to provide more stimulus, put money into peoples pockets so that they spend in high street stores, just to keep our retail sector alive.  Whilst I certainly have no issue with letting people keep their money, the suggestion that the government should apply stimulus to keep the economy going is utter nonsense.  You can throw as much paper at goods as you want but eventually TopShop will realise that they be better off with a box of toilet roll.  Real wealth comes from production, instead of throwing paper money around we need to remove barriers to growth; NI, corporation taxes, income tax (to get people spending/saving) & raise interest rates to encourage investment.

I much prefer the budget proposed by Eamonn Butler over at the Adam Smith Institute.

Essential Ways to Remain Free (part two)

So here is the no doubt much anticipated follow up to my original post, which looked at the importance of controlling your own wealth & wages.  I strongly argue that this next point is just as important to ensure your freedom; self-sufficiency.  The most basic & essential point is to be free from obligations and be able to provide for yourself.  Being dependant on the state or others for handouts certainly doesn't create a free individual, as this charity could easily disappear.  Being indebted to others is equally dangerous as they own part or potentially all of your production.

To put this point bluntly, if you require others to provide the necessities for your own life then they are in a very powerful position to take advantage.  Whilst I have no doubt that most people are interested in honourable trade agreements, when supply is squeezed there's a very good chance you will either be left without, or pay a substantial ransom for the goods you require if you can't produce them yourself.  Whilst it is obviously impossible to be totally self-producing in the modern age, most of us have no room or resources to keep livestock for example, there are many areas of our lives in which we could remove our dependency on others. 

Sticking with the topic of food there is no good reason so many of us are so heavily dependant on supermarket groceries when there is a variety of goods we could produce ourselves at minimal effort & cost.  Plus if we take the speculation on rising food shortages into account there is even more incentive to start producing some of your own goods rather than be left begging for the last cabbage at Tesco.

Self-sufficiency is not all about foods & goods, education and skills are equally important.  As I already stated, it is impossible/impractical for any one individual to produce absolutely everything they need with the limited resources the majority of us have. Therefore we need to be able to offer other individuals something of value in exchange, most people have a job which pays for their needs but learning additional skills can improve your total wealth.  Even if you do not actively exchange these skills with somebody else they can save you money, thereby increasing your wealth and improving your ability to remain free.  For example, learning to repair shoes, watches, electronic goods, etc will reduce the need to hire other professionals whilst also being a skill you could sell if you ever needed the extra revenue.

To summarise this point, the greater your ability to produce your own goods and the more useful resources (piles of cash won't do you much good if your neighbour needs their roof repairing) you have to trade with others the lower the risk of resorting to slavery/cheap labour in order to survive.  Whilst an apocalyptic every man for himself scenario is very unlikely, being more self-sufficient will save you a tidy sum & aid a more prosperous lifestyle.

Selling Off Britain

I caught up on the Channel 4 program 'Selling Off Britain' the other evening (which can still be seen on 4OD for another 23 days) in which I expected a rational public to offer up or vote for at least a few solutions to help pay back our massive national debt.

I wasn't expecting a spectacular result, after all many people are still convinced of the need to spend like cash is going out of fashion and that the state needs to run our important services, but what I witnessed was a total fucking failure.

 The audience were offered the choice of selling off government owned assets (such as leases on service stations and empty, unused land) at a profit of £5Bn or "posh property"/perks offered to MPs, judges and foreign diplomats at a profit of £500M.  There where a host of other suggestions in the program and on an online survey too, which I was too late to participate in, but the audience failed to approve a single penny's worth!  The online participants were slightly more willing to address the problem and conjured up on average £20Bn worth of assets to sell, with a rather amazing 85% voting to sell off parts of the NHS.

But even this is a pretty trivial sum compared with the current total estimate of over £2.3Trillion worth of debt we need to repay or the addition of another £167.9 billion this year.  I cannot understand why are we so unwilling to deal with this growing problem and why an audience applying to appear on a show like this failed to vote for a single suggestion.  Are we really that attached to the idea that our Foreign Ministers and judges should be living it up in country mansions whilst the majority of us work 9-5 servicing a debt they racked up?

Unite Against AV

I apologise for the lack of blogging, but I have been preoccupied by assignments for the past couple of weeks and a bout of deadly man-flu had me bed bound this weekend.

In my daily reading last week I noticed the BBC posted an interesting piece about the union's positions on the Alternative Vote referendum and since I haven't weighed in my opinion on this topic yet now seemed like a good time.

I have always seen democratic voting as slavery by paper; if 50.1% says so the other 49.9% must comply or else face retribution from the law makers.  Maybe in some "fairer" system you may require a 60% or 70% majority, but it eventually boils down to some group enforcing their will on another percentage of the population.

So regardless of AVs proposal whereby a party much reach "50%" of the vote to win, compared the 40%ish you probably require currently, it does not address the problem of compulsory obedience to the majority.

The only positive I have ever associated with the current system is that every participant has an equal vote, we could never find ourselves in an unfortunate position whereby some majority shareholder could run the country (although on reflection this is probably quite close to the truth).  Yet the AV system is set to eradicate this positive, by allowing people to place multiple votes.  Whilst voting in preference doesn't seem particularly damaging to this principle at first glace, essentially citizens voting for minor parties can have their vote changed and counted again if their candidate doesn't win.

For example, if I am a Labour voter and put them as my top candidate my vote will most likely only be counted once.  However someone who prefers the BNP, but wouldn't mind a Conservative MP either, can vote BNP first and Tory second.  If the BNP candidate is eliminated then the voters ballot is transferred to the Conservatives, giving them another vote they would not receive under the current system.

I perhaps wouldn't have a problem with a system which offered me 10 points to distribute amongst the candidates, as I could place my 10 points squarely in the lap of one candidate, or if I liked two parties offer them half of my vote each.  This way you would not see votes transferred (i.e. giving people multiple votes) but would still allow voters to state their preference for multiple ideologies.

George, You Too Can Call Free On (08008) 084000

Having just taken a look at the "World Debt Clock" it would appear that the United Kingdom is even worse shape than I thought.  Although I'm not exactly sure how accurate the statistics are, so take this post with a pinch of salt, but if this source is to be believe the UK has a higher public debt as a percentage of GDP than the United States, a country which is heading for face first into a currency crisis.

 We also have a higher debt percentage than Spain, a country which many expect will require a EU bailout at some point.  If we look at total public and private debt we have the highest percentage in the world bar Ireland (now the most indebted nation in the world), 4 times that of the USA & 1.5 times that of Portugal (the next suspected target for an EU bailout).

Whilst we aren't printing money, unlike the FED, thereby staving off total poverty for a little while longer, the UK still hasn't outlined any plans to deal with this problem.  As we all know public spending is still rising this year, the meagre cuts announced fail to actually address the debt problem, VAT and other tax increases are further damaging our nations ability to invest & produce, so what is the solution and does anyone honestly think that George Osbourne's next budget, which he claims will be "pro-growth", has any real solutions.

To be fair he does plan to borrow an idea from Thatcher and (re)introduce "enterprise zones" whereby certain locations will receive cuts in taxation and regulation in order to help stimulate investment.  My real question is that if they recognise the harm that government regulation and tax has on business then why not apply this theory and promote growth nation wide rather than in government allocated locations?

Even if George can somehow steer Britain back in to the winds of growth we still have to address the problems of public spending, reducing our deficit & maintaining the economy, majorly scaling back the state would be the best solution but obviously that won't happen, and overall I just can't see the welfare addicted public and spineless politicians keeping up the pace (if they can even get off the starting blocks).  Eventually the debt collectors will be hammering on the door of number 11 and it will be our wages and saving which will fill the treasuries empty piggy bank.