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Tuesday, 23 March 2010

The Silly Sex?

One of the most significant phenomena about formal academic Economics is how few women have been seen as significant contributors to the mass of fantasy-theory that passes for 'analysis' according to the perverse peer review system that protects the supposed integrity of the whole farrago.
Forty years ago Joan Robinson had her Cambridge chair, and Ursula Hicks was almost as distinguished as her husband [who was the first Brit to get the 'Nobel Prize' in Economics]. Now there is no British woman of comparable prestige in the 'economics profession'.
During the credit crunch the dreaded Harriet Harperson suggested that it would not have happened if women had been in charge of the affected institutions. The absence of women from the top jobs was conspicuous indeed; so for the main part her remark was trivialised as potty feminism.
What should be pointed out for the future is that the absence of women from the acknowledged top rank of Economists may be attributable to womens' common sense. It is harder for most women to inwardly to accept authoritatively-delivered nonsense than for men, who compromise much more readily - intellectually - to get on in their careers.
One can assume that economic studies will become truly scientific when women occupy top chairs: as women have long done in natural sciences. It may take a very long time, as the Economics ratpack are so well established.

Monday, 22 March 2010

What Growth?

As the countdown to the UK Budget for 2010 comes to an end, the City is pressing for the Chancellor to reduce his estimate for economic growth. This pushes down the projection for tax revenue, and makes cuts in spending more urgent and imperative.
The City is right to be cautious in its predictions: because the City is the most likely component of the economy to 'underperform' in revenue growth as the global economy settles down to a post-crisis mode of operation.
So long as the UK 'retail' banks are badgered by the FSA to strengthen their balance sheets, there is little flexibility to support industrial growth. Company dividends are increasing: because firms are hesitant to put their own cash into material investments when projections of consumer demand are weak. Companies with 'cash mountains' that pay low dividends [and therefore have low share prices] are highly susceptible to takeover; so a defensive strategy requires distribution to the existing shareholders. That keeps them sweet, and reduces the takeover risk.
This all indicates lower rather than higher activity in the 'real economy'; and any apparent growth in corporate turnovers is likely to reflect the inflationary tendency that is lurking in the economy.
There's little good news in this scenario!

Tuesday, 16 March 2010

EU Still Underestimates the British Problem

News media today [March 16] are agog with the fact that the EU Commission does not find the British strategy for resolving the public sector deficit to be satisfactory.
Moody's has again warned that the AAA rating on British public debt is under threat; but the fact that the agencies still give the UK this sort of rating reinforces the impression of their fundamental incompetence.

The big problem is not the size of the government's debt: that is resolvable by foul means - especially inflation - if push comes to shove.

 The crisis is really about what the government spends as compared to what the nation earns. When that cassette of the tax credit system went missing a few years ago, there were already twenty-five million names on it, of adults and children: virtualy all of whom also receive child benefits. There are more than four million public sector employees, many of whom qualify for tax credits and child benefits. There is a dozen million of old-age pensioners paid by the state. There are at least five million not-in-work among the adult population under 65, and over a million NEETS; plus a million in the universities and further education. Accept that there is double counting of those who are doubly or triply remunerated by the state, and you have a total of FORTY-EIGHT MILLION incomes being paid in full or in part by the state.

To pay those incomes, the recipients of the incomes all have to pay more and more taxes: as do those few taxpayers who receive no benfits. While millions would suffer only minor effects from the loss of small income supplements, tens of millions absolutely depend on the state, for all their income or the majority of it. This tax-and-spend whirligig is Gordon Brown's proud creation: he thinks it represents 'fairness' and the elimination of poverty for many of those millions. Anarchy looms if any significant number of those incomes is abolished or reduced significantly.

So how can a government make 'meaningful cuts' in state spending, and divert tax revenue to paying-back the public debt, without hacking at the real economy? The few independent earners who have no benfits pay taxes on their incomes and on their purchases to support the whirligig; and most of that money, once taken into the tax system, remains dizzily circulating through the benefits system to people who face constantly rising taxation.

That's what the politicians dare not admit to themselves, let alone to the electorate! The situation is far, far worse than any of them can understand. 

Friday, 12 March 2010

FSA Again Hits the Wrong Target

Hector Sants has decided, as one of his louder swansongs on leaving the FSA, to reduce the range and increase the costs of products for personal savers.
Nobody condones wantonly careless or deliberately deceptive mis-selling: but that is not the issue.
A bunch of bureaucrats wll doubtless rely on their employed actuaries to assess whether 'products' are viable: then undercover mystery shoppers will try to con agents into selling 'inappropriate' products to the people they purport to be.
Actuaries have an appalling record of getting the big picture wrong. They didn't notice the aging population for a whole generation down to the late 'nineties. Now, on the threshold of a massive inflation they are still advocating that the few remaining savers' assets should be put into bonds.
Fake identities never can act or think as real people.
The whole charade will make the fewer permitted product types more expensive because of the enhanced costs of the FSA employees and the compliance people in the firms.