Negative Reality

Concerning alternatives to QE, this, from the Telegraph:

"Another concern is that the Bank’s £375bn Quantitative Easing scheme has pushed down the value of annuities - although the Bank has pointed out that the money printing programme has also bolstered the value of pension pots by boosting share prices, leaving people, ultimately, no worse off."

Makes my jaw drop.

QE has boosted the appearance of share prices. With printed money.

To make that balance out somehow, we have a government that's decided wages, workers rights, health care, education and services have to be slashed from public spending, and that taxes for just about everyone have to go up. At the same time .. hey? Guess what? Even if your printed money goes straight in to bonds, it's still inflationary!


It's just a blatant lie. "No worse off".

Oh hell in that case, why haven't we been printing billions every year since dot? I mean shit, everyone's better off or at least no worse for it right? ... Right? Why bother with Austerity at all if we could just print our way out of it with nobody any worse off whatsoever?

Sometimes something will leak out of the lofty halls of power that just stuns me with either it's intense stupidity or wilful ignorance. This is one of them.

Either the Bank of England is insanely delusional, or they think any old crap excuse will do because we're all a bunch of suckers.

Adjustment

Just going to home in on a gap in understanding for a few brief minutes.

Countless are the tweets declaring austerity as a war on the poor. However...

Walk with me in my twilight, unpopular thinking mode for a while.

It seems to me that what's happening is more of a readjustment. We understand now that money itself isn't behaving that well. It seems that those in wealthy positions of power tend to extort the system, often beyond the point of criminality to retain and gain wealth. It seems avenues of legal or potentially problematic but virtually untraceable tax avoidance are openly available for the £150k+ earning of the world, and often used.

That accounts for some of the individual abuses of the monetary system. Now lets layer on top corporate abuse. The scope is stunning. From insider & high frequency trading, to thousands of offshore tax havens. from the lowly picking up unpaid workers struggling to get off welfare, via the rent inflating landlords coining it in from the welfare state and blaming the soul that had to claim housing benefit, all the way up to government scale manipulation of currency markets, bond prices and lets not forget the power of political lobbying in cash for gain.

The vast array of abuses of money are laid out. So what's with this "War on the poor" thing? Well ... If only.

I see it more as the results of the system attempting to balance what a £ or $ is worth against the world but still within the terms of reference that nobody really cheats that much. It's a bogus assumption, but it's not a war on the poor in strict terms. It's a huge unsustainable cloud of debt and expectation for cash returns that hangs over all of us. At the moment it's adjustment time, and the huge hole in world finances is being adjusted by demolishing any and all support that was provided to the poor and ill. That all vanished. The heads full of money (breadheads?) will see it as simply unsustainable without question of why. The bottom line counts. Cut the deficits by cutting welfare. It's simple. But.

Yes ok, I can see that simplistic interpretation and why the money of the world protects it's interests that way, but it's simplistic and lives in a world of denial.

The system isn't working because it's being abused at any level you care to look at. Money in effect is being syphoned out towards large corporations and the rich list tax avoidance schemes faster than Mr & Ms Jones on the Clapham Omnibus can keep up. If you keep punishing Mr & Ms Jones for it ... disaster happens.

Ok. So I was wrong about expecting a market crash in 2010-11. I still think it would have happened i it wasn't for massive central bank / ECB intervention, but that's beside the point. We're here now. And here's what I'll cast out for now in my own limited sphere of knowledge.

The UK is going to be hit in April with cuts it didn't even know were coming. A huge number of people probably won't even realise where all the spare money has gone until June or July. Austerity cuts have been scheduled on a scale and depth beyond which even fairly switched on readers and observers will expect. I'm a cynical bugger, and even I'm caught out by finding new implications for the cuts about to start biting. Even smug little me is going to get a bigger bill or two come April, despite my best efforts.

So here's how I see it ...

The UK is in for a horrific 2013. The extent of which probably won't begin to bite home till late summer. By the time autumn swings around and official statistics have caught up, Britain will be already staring the kind of recession people have muttered about in the face. It won't just be a theoretical "As bad as the great depression" problem. It'll be here. Now. In pretty much everyone's face.

The British though are a docile race. It's fair to say the probability of civil disobedience on a massive scale will be much higher, but then again, the chances of the British getting of their arse's and doing anything about it are also reasonably slim. At this point though, we'll be diving back past "Poll Tax" riot potential in to new, uncharted realms.

The bad news is. Some of you will die as a result. I might be one of them. Cuts in healthcare will reduce life expectancy. The homeless can expect significantly shorter lifespans. Some of us will even commit suicide in the face of impossible odds. I'm afraid that all comes with the territory ... but .. while you die ..

Relax.

Smile.

It's not a war on the poor. It's simply a religious faith in money and it's protection taking precedence over life and humanity. The banks will be fine. Most the hedge funds will somehow survive. The core will survive. And .. that's all that matters ... right?

Ramble On

Today has had something rattling round my brain. It won't fit on twitter, so here, with my audience of zero, I'll log it instead.

Last night, Apple's share price fell around 10%, through the day there was no bounce at all, last I looked it was down around 12%. Everyone and his mothers brother has been ranting about $APPL on my slightly fiscal slanted twitter timeline for months. It's the saviour of America, responsible for a chunk of the GDP, a sure winner, tipped to reach over 1,000 share value. So I've heard. Well tonight it's around the 450-460 mark.

In theory, there should be a bunch of hedge funds and investors fantastically out of pocket. Confidence in America's entire stock market should have felt a bit of a tremor. But no. Something weird has happened. In general stocks have surged again. The dollar has barely felt any pain from it at all. It's almost as if nobody had any money in Apple at all, and nobody has suffered a loss.

It's nailed home to me the level of ... I don't whether to call it cognitive dissonance or double-think. In the world today. Lets call it double-think. Nicely Orwellian.

The markets are surging higher, finance ministers and politicians are proclaiming we are over the worst, that 2013 will see a return to expansion in Europe and America. Everything is fine. Europe is fixed. America doesn't have a debt problem. The world is fine.

Except it isn't. I only have my own perception of reality to go on, same as any of us. But I don't see the good times rolling. For the last 3 or 4 years in the UK, I've heard of countless employers laying off workers, the people I know are either trying to find better than temporary work (and failing), or stuck in low paid jobs with no hope of finding a better one. I also know of people who aren't technically unemployed, they either can't claim, or claiming and being forced in to a poverty job is less appealing than the cash in hand jobs they can get. I'm know I'm finding it harder to find new work to keep me going. I'm spending less than I was and caring more about finding a good deal than I was two or three years ago.

Town centres have slowly gained more vacant shops or pound stores where large chain stores used to be. I've suffered more crime against me in the last two years than I have for my entire lifespan before. People are talking about moving to much smaller housing because they can't afford where they are, one of them even to the point of only having bedrooms for the kids and sleeping on the sofa.

Of course some of this is my distorted perception. Maybe I've just been unlucky with the recent crime spree. But overall, I can't help get the feeling things are getting a lot worse on the ground ... from the plebs eye view.

Now I look back to the soaring stock markets and vast profits made by the banking sector ... and I ask ...

"From what?"

The system seems to be living in a dream. Like a cartoon coyote who doesn't realise it's run out of cliff yet. Today's schizophrenic reaction to Apple's loss in share price has really nailed it home to me. Either my perception of reality is horribly depressing and unfortunate, or the eventual crash is going to be totally horrific. Tonight I don't know which of those it is, but something is wrong somewhere.

Games games games

A few quieter days have passed. A bit of time for reflection. This time thought experiments in game playing.

This one at least in part prompted by the few measures Obama did manage to implement regarding gun control. First lets appreciate the extremes of emotion and potential solutions.

On one extreme we have the "no guns at all" lobby, at the other is the "arm everyone" brigade, in between of course a myriad of combinations and choices including indifference. For once, lets not dwell on who's right and who's wrong. The first point worth considering is that any person selected at random across that entire spectrum will agree they don't want another massacre of children. That's a pretty major revelation if you can disengage from your own passionate viewpoint for long enough. All parties agree on a final desirable result, the problem is consensus on how to get there.

So there's your game set up. Common desire to prevent atrocities. Wide range of view points. So ... what happens? A compromise deal is produced by Obama. It doesn't satisfy those wanting much tighter gun control, and it doesn't satisfy those that want to arm everyone. This is a recurring pattern and is a leading cause of "kicking the can" on all sorts of problems.

In a pseudo game theory sense. The legislation produced is a result of multiple conflicting pressures for different solutions to a common problem. In game theory, this happens fairly often. Rather than an optimal outcome, a fudged or sometimes even worse possible outcome is the result.

Does this matter?

Well, in many instances. No. Humankind has been muddling along with fudged middle ground solutions for a long long time, and is likely to for the foreseeable future. In most cases, compromise solutions will sort of work for long enough for the next crisis to be averted a few years, then we can repeat the process once more.

The times when it does matter, are when the compromise solution is still harmful to a significant population.

All good clean fun, and it's a handy framework to have. Enables one to sit back and take a wider view of many issues in the world ... but just before that smug feeling takes hold...

There's a problem. Compromise is achieved due to conflicting pressures. It's not ideal, but that tends to be the result. Now if you sit back comfortable in the knowledge that another mediocre solution will appear, a source of pressure is removed and the end result will be skewed towards the side that shouted loudest.

Knowing all of the above doesn't remove the need to campaign, educate and shout for what you believe is right. It just makes it feel a little more like being a hamster stuck on a never ending treadmill. Keep running hamsters. It's frustrating, often pointless and the end result is almost never what you wanted ... but that's the way it works.

Further down the sprial

Thoughts on crumbling empires.

This started from a bit of a thought experiment I've been tinkering with. I wondered if for a change, I'd have the guts to announce future predictions on what happens next in Europe and America. After batting the ideas around for a while, I realised I couldn't, but ... I could narrow it down.

I'm basing this on the concept of de-leveraging that's occurring in the world. It's not the banks rebalancing books to safe levels in particular, and the upper say 20% of America and Europe certainly aren't loosing much in the way of creature comforts. All the correction of unsustainable debt appears to be falling on the poorer end of society through tax hikes, food inflation, welfare and healthcare cuts. This is where the missing billions of correction to the system appear to be coming from.

Now I tried to guess how this would play out. A fair number of analysts are predicting a turn around for national finances in 2013. "We're through the worst" sort of thing. I don't buy that so much. In the UK cuts are only just starting to bite, in Spain and Greece lost tax revenue from the oceans of unemployed and an increasing unwillingness or inability to pay tax are undermining any recovery, and it's just beginning. As I see it, 2013 is the year when all the Austerity talked about in 2011 & 2012 is finally going to bite for millions.

There's a disconnect to contend with though. I'm not in the grand conspiracy theory set. I tend to think the elites, rich list, 1%, 10%, 20%, whatever you want to call them act more though two things. Greed and a lack of empathy. From earlier scribbles, you'll know I see greed as a human problem that covers the entire spectrum from those in poverty, right to the top. The lack of empathy is more of a kicker. The end result is that top say 15% of wealth in any country doesn't really have a clue what all the tax cuts and care cuts mean in real terms for millions of less well off people.

But... It's not only the 15% that will politically support and maintain any measures that preserve the status quo of the top, it's anyone who believes they are near that bracket (even when demonstrably the intended cuts will leave them or very close relatives worse off), and the lovely Mass Media. The likes of Fox News and the putrid Murdoch's of this world are in with the top percentile. Far too many uncritical thinkers just go along with the political spin, and at time down right lies from low grade media aimed at them. They won't even notice huge stories being skipped entirely by the press and media. When things get bad later, they'll blame Muslim's or the Polish or the Socialists, or the unemployed. Whatever Fox News and Co. aim the cross hairs at.

So we have a system of inequality that is trying very hard to maintain equilibrium, and *that's* why I can't predict much. Logically, you'd expect things to fall apart in to fiscal defaults, companies going bankrupt and social unrest. However, with the vast majority of money in the world selfishly protecting it's own interests, and a big chunk of the population blindly following the resulting rhetoric ...?

I see two options ... That's as good as I can get it.

Either the interests of the money effectively win. That is, the poor are ground further and further in to debt slavery and ill health. Inequality soars, but the state puts in place increasingly draconian policing and social control. Eventually it wouldn't matter if three major banks all did fail, or if every pension pot in the land got emptied. Once the oppression reaches a certain state, what's the public going to do about it even if the main stream media is kind enough to let them know about it?

Or! The more optimistic version. Things break before we find ourselves living as slaves in police states. Major losses are sustained by the financial sector and hit a big chunk of the 15% top end. I say optimistic. Actually it's almost as miserable as the other option. You could reasonably expect major social unrest and a period of huge political and financial uncertainty before things get any better.

Fun huh? Yup. That's how I see the two main potential outcomes of the current situation.

Oh wait.

Except...

War.

But who is brave enough to predict the next war in scale, location, involvement or scope?

Not me. But it is the other option.

Pots & Kettles

"Only in America could the rich - who pay 86% of income taxes - be accused of not paying their "fair share" by those who pay nothing."

That's a tweet that wandered past recently. I can't begin to reply to it in a tweet. So here I am in Blogger again.

Firstly, I was unaware that the top rate of income tax in America was 86%, perhaps because it's nothing like that much. A quick Wikipedia check suggests between 21% & 16% "Effective income and payroll tax rate".

Somebody is hyping that 86% a little. But lets ignore that and just nod our heads sagely and say "Hmm yes, the rich sure are liable for a lot of Income Tax on all that money".

Notice I use the word "liable". Unfortunately, the very rich end of any countries population can afford to use tax loopholes like offshore tax haven accounts, declaring spouses as employees, declaring business expenses, and evading tax liability in basically as many wonderful ways as their tax avoidance guru accountants can suggest to them. Since we are dealing with people in the $400,000+ income bracket here, such avoidance quickly adds up to tens of thousands of $ per person. Hundreds of thousands for the super rich. Add them all together and ... that's a fair few million / billion in lost tax revenue. Most of it legal.

The bottom end of the salary scale doesn't get as much chance to avoid tax legally, but lets face it, wherever you look on the income scale, people will be attempting to pay as little tax as possible. If it's taxed at source in your pay packet though like a vast majority of working Joe's and Joanne's, that's it. It's paid in full. No argument.

Right down at the bottom you get the black economy of cash in hand work. Add all of that lot up together and ... hey .. it's also a fair whack of cash. Although individually we're only talking about a few $100 to $1000 avoided, there are a lot more poor people than rich people. Figures are murky here. A big chunk of low paid workers still pay the income tax and just struggle on in life, so we can deduct that from lost tax. It seems likely that the total tax evasion of the lower classes is still a lot less than the massive sums avoided by the upper classes.

BUT.

The argument is screwed from the start. The problem is, if EVERYONE at the top, bottom and middle of society actually paid the taxes without either legal or illegal tax avoidance then the amount taxed on everyone could be less. The problem is all the loopholes and dodges, mainly at the upper end of tax avoidance, that get exploited and never dealt with.

And it also ignores the far bigger problem of corporate tax evasion. The entire loss in tax income across all income tax for all citizens of the US is far smaller than the loss in tax due to corporate tax evasion. That doesn't even get a mention.

You can spot this one in the current fiscal cliff farce talks in Washington. Yes it is pretty pointless talking about solving a trillion $ debt problem by increasing personal taxation on the wealthy. But nobody in government has the balls to say "Well actually, it's the companies and corporations we need to collect proper taxes from".

And that folks. Is capitalism at work. It owns the government, it maintains the loopholes and god forbid anyone should try and address the real problem because they'll threaten you all with job losses and economic recession if you even dare think about it.

See?

Wasn't going to fit in a tweet was it?

The Gun Debate (cynical version) MOAR GUNS!

If you ever wanted a study in flawed logic, some of the messages and debate coming out of America following the vile tragedy of the recent school shooting is a good place to start.

It stirs emotion. This is good. But...

I follow a bit of an eclectic bunch on Twitter even after my own selective preferences, so I see a weird and broad spectrum of reactions scroll past. Here we go!

On the far left are those who can't believe fellow Americans want to stick with free gun ownership. They look at gun death rates in countries with gun control and wonder why on earth people want them around. I'm with these guys. They are in a vocal minority.

Also on the far left are those that utterly mistrust the US Government. They want to keep any guns and rights they have to defend themselves against their own government. Many see a coming collapse in America and want to protect themselves when it does happen. This could be true. If you want to be a hero and you're sure you're right? Keep an illegal gun or two for the end of times.

A little way in from there are those arguing for a ban on assault rifles and semi-automatics (either or both). They argue this kind of tragedy can only occur with guns designed for relatively rapid fire, but they still want rifles, shotguns and many of them pistols. Some for reason of defence against criminals, some for the above reason of defence against the US government. I sort of get this. It would be a decent step in the right direction. I don't think it will stop the next school massacre though. A couple of handguns and clips full of ammo will do plenty of damage.

Moving to the right there is the argument that guns are not the problem, but a screening and mental health check of gun owners is required. There's a bit of a hole in this one. It seems the killer in this case took his guns from, and killed his mother. He wouldn't of had a mental health check. Here is where we start to depart from logic. This one is pure and simple "I want my guns! Blame and identify mentally ill people!" ... Little realising it's their guns that can be used by the loony and that health screening won't catch everyone who has a bad Monday.

Sadly also in here are those who jumped to identify asberger's as a mental health problem that caused the shooting. Just no. I'm not aware of any link for decades between asberger's syndrome and violence. Cut that crap out.

There's another one in here that it's violent video games that do it. Not the guns. Oh jeez. Really? Well ok. You run your own nation. Go ahead. Ban all violent video games. I bet you in a few months time even after a ban like that, another bunch of innocents will be shot and you'll be looking for something new to blame. This one really is insane. The kinds of violent video games they are talking about exist in all the gun control countries as well. They have death rates sub 20 per year. America is 9,000+?! Logic fail and again "I want my guns! Blame something else!".

[Yes. There is an argument for trying to persuade the public that age limit's on games mean something. Wandering off on my own view for a while, the same is true for DVD's. It seems to be trivial for parents now to ignore age ratings on video and games simply because they have an older child that wants to watch it or play it. I don't think that's right. I don't think the age ratings games and DVD's get are always right either, but it would be better to have parents try harder to enforce the guidance. Kid's are exposed to enough violence and stress via main stream broadcast media already. There are good reasons why we put time and money in to rating films and games. But I digress...]

Further right are those wanting to give all school staff bullet proof vests and concealed firearms to protect the children they send to school. Oh come on! MORE guns will solve gun crime? Every nursery teacher wants to be Rambo? Logic here has taken an acid trip but .. spot the meme yet? "I want my guns!"

And in an odd camp. All on it's own. Are those that simply say "They aren't taking my guns". These guys also say "I want my guns!"

There are some (mainly women I've noticed) who have decided they now need to buy and train with firearms out of fear. I can see the fear, of all the reasons, I can see the straight line logic at work on this one, but ... ouch. This was a mum who was shot and her guns taken to commit mass murder, and here's a bunch more women (people in general) motivated to go buy guns and keep them at home. This is the self-perpetuating "I want my guns" logic at work. It's fear. America wants guns because they live in fear? Possibly. It's still more guns though.

My own position can be expressed a little like this:
"Hey! Everyone in the UK. We've had gun control for ages, but it's clearly a restriction on our freedom. So all those in favour of everyone having a semi-auto handgun and an assault rifle raise a hand!". Looks around the room. Looks at America. No. That's not going to work here. We don't get classroom's full of children slaughtered with guns much, and we're pretty ok with that. Virtually nobody in the UK would even entertain the thought of adopting US gun culture.

I'd call that pretty clear cut from my "smug, self satisfied European outlook". Yup. We are smug. Our kids don't get shot at the rate of 30+ mass killings in schools since 1999. That's something to be smug about. I'm smug. I'm self satisfied, and the children are not getting shot.

Looking back at the spectrum of response in America to the idea of gun control? Change is going to be incredibly hard. I know Obama made some "we must change" noises. But I'm not seeing much in the way of substance yet. Cynical me also realises that we've seen so many multiple shooting incidents in America, why should this one change anything?

So .....

Innocent children died. Horribly. I can't imagine the fear and horror of the dead or of those who survived. I'd expect that kind of trauma to scar many of them for life. It's vile and disgusting.

The chances of America actually changing? Are minimal indeed. I hope. But I doubt. The vast majority of reactions boil down to "I want my guns!".

Sorry America. You want them? Then you get used to people dying by them, and incidents like 20 children being slaughtered should be page 12 news. It comes with the territory.