What is that witch still doing here and why is Wallace being summoned to the Pentagon?

 Hi all,

So the vile witch who is currently pretending to be our prime minister has now lost another ideological soul mate and  senior cabinet minister -apparently at the behest of the real one Jeremy Hunt on a technicality - at this rate anyone who is in a similar vein might as well go now. It's not that I necessarily agree with these ideologues myself, but basically with all the u turns and willingness to throw anyone under the bus , it is quite clear that truss the witch will simply do anything to stay in power . Someone that supine doesn't deserve it , for to crave power for its own sake is SIMPLY wrong. What is she still doing here ? Just go!

People were of course warned by looking at that woman's profile , i.e. used to be lib dem, anti monarchy, remainer Crum brexiter now libertarian Thatcherite . Rubbish if I ever saw it. Nah she just wants the power and prestige and dam anything else.

Of more worrying concern is the news that our defence Secretary has been suddenly summoned to the Pentagon: previously he had a full diary and due to appear before the Defence Commitee. What is going on and what do our American friends know that required the defence Secretary to go in person ? Is Putin about to go nuclear? 

The official blurb is 

“The Defence Secretary is in Washington DC to discuss shared security concerns, including Ukraine.....

“He will be visiting his counterpart at the Pentagon and senior figures at the White House.”

But Armed Forces Minister James Heappey Has said on record that Wallace was meeting with his US counterpart for “the sort of conversations that [are] beyond belief really, the fact we are at a time when these sorts of conversations are necessary”.

God help us all!

A new Doomsday Book?

 Hi All,

With the Conservatives pretty much finished at the next election- it is a matter of how badly we loose- I think people must look at the opposition and see what horrors will be inflicted on us. 

 Labour are not much better.  They haven't as a party really changed since Corbyn, but the change is enough for respectable opinion. I initally thought that they would be constrained by the current crisis,  as while they like  to spend billions, they've got to be honest about the massive tax rises they are going to heap upon us just to 1) negate the cuts that are going to happen in the next two years and 2) to spend even more billions in their plans for the NHS etc. 

However rather than be honest with the public about the honest need if you want the dream of trying to fuel the NHS with cash, to raise income tax etc,  I can now see Labour turning this into the 'rich verses everyone else'. Alas the really super rich have good accountants and lawyers and will always find loop holes in such a complex tax system as ours .As ever it is the middle classes that will suffer.  Of course Jeremy Hunt will have taken all the low hanging fruit such as the stealth taxes or maybe even the triple lock of pensioners,  so one thinks Labour will go for broke and introduce a wealth tax, one of the left's dreams, I doubt this will be in the manifesto, but it will be the ultimate and probably greatest tax grab in history. 

A wealth or asset tax is a tax an things you own, rather than the income derived from it. In theory everything  physical is an asset, but there is little value in taxing a toaster, but more value in asset taxing gold bars (or even your gold/diamond wedding rings!).  In all likelyhood the easiest thing an asset tax could be applied to is property, but it could be extended to your savings, motor vehicles, or anything of actual physical value such as pet dogs and cats . 

In fact the Doomsday book of the 11th Century was written for that very reason- to asset the value of property for the new Norman rulers. You can imagine the amount of money that this will create for the government: the total UK property market in 2020 was calculated to be £7.5 trillion, whereas GDP was £2.4 trillion. If an asset tax was introduced on UK property  at 1%, this would raise £75 billion and at 10%, a massive  £750 billion, which would cover a huge portion of UK government expenditure. 

This would clearly have the left salivating at the thought of getting their hands on such a pile of cash. 

The trouble is that property is an illiquid asset and like most assets is subject to supply and demand. Furthermore the people owning property might be asset rich, but income poor. It is doubtful that a middle class family owning a £300,000 end of terrace will be able to stump up £3,000 or £30,000 at the blink of an eye, given all the other expenditures a household has to make, such as being able to afford what by that time would be an extremly expensive interest rate on the mortgage, even if so many millions are now renting and don't own their own home, then it is clear that landlords will simply pass on the cost of this tax to their tenants or if not they would probably be forced to sell the property. If enough do so at once it will of course make house prices and therefore the asset go down in value. 

But don't tell the left as they are going to turn this into all their envy and class war that they can think of to soak the rich, forgetting that there is a difference between being rich on paper and being rich in reality. 

coup d'état latest

 Hi all,

Interesting analysis from the telegraph as ever after our new Prime Minister Jeremy Hunt gave his first address in the house :

https://www.telegraph.co.uk/business/2022/10/17/jeremy-hunt-has-saved-day-must-not-lurch-austerity-overkill/

The past couple of days have basically been a political coup, albeit the British way of coup d'état  .

Have we learned nothing?

 Hi All,

It is of course zero surprise that the left is gloating over the current shambles of a government we have in the UK. A government which isn't conservative, but libertarian, which I guess is a post for another day.

Anyway, one thing is quite clear: the current government's tax cuts are going to have to be balanced with cuts to the public purse, despite the u-turn on the 45p higher tax rate. Liz Truss today said in Parliament that she wasn't going to do any cuts and she wants to continue with the 'growth strategy'. Good luck with that. In fact good luck would be that we don't have a full blown sovereign debt crisis and IMF bailout with the way these clowns are running the country. We've not learned that we in the UK are a middle of the road power and that means we have to have borrowing within a certain range and limit, even if the preference would be to balance the budget at 0 surplus or borrowing.

What the government should really be focusing on is not tax cuts for rich people and companies, but how our debt is going to be managed and at least the deficit reduced. Unfortunately for the past couple of years we believed we could go on borrowing like we are America. But we are not America and we cannot keep borrowing £100 billion a year and add billions more  as a long term strategic choice, via tax cuts or for that matter billions to public services without finding the money first. It is true during Covid we borrowed 3 x that amount, but that was acceptable as it was an emergency situation, wherein the economy was shut down, with the Bank of England supplying most of the cash for this, something which it can no longer do if it is to get inflation back under control.

Just like people say the energy price cap is an 'emergency response'. Which it is, but it could have been handled better, for example subsidies for a national insulation scheme and at the very least a public awareness campaign on how to cut down energy usage, without freezing this winter (which has been vetoed by Libertarian Truss as 'the nanny state', although it seems to me there is a difference between advise and compulsion, there was no suggestion of doing a Germany where there's a lot of measures now in place where you have to keep doors shut and lights off at certain times etc). 

Adding to this, the political left is gloating about all of this, but here is the rub: the market has turned against Truss because of the continual deficit and adding to that deficit, without signalling that it will cut elsewhere to reduce, if not balance, the budget. By the same token, the market will not tolerate the left's wish list of vastly increased public expenditure, unless it admits it will have to come with a price, that is if you want to increase public expenditure it will have to come with extra and increased taxes, which go beyond the usual stealth and indirect taxes. If we do get a labour government will we all be paying more tax. 

So the left are welcome to enjoy their brief bit of pleasure and gloating at what is an utterly insane government. But what comes around, turns around and when it is their turn, they will also be facing a lot of difficult and unpleasant choices. It may well be they inhereit a situation in which Liz Truss has been forced out , with a caretaker politician (Gove?) in power for 2 years, who has been forced to do severe austerity by the IMF, with any incoming government being expected to keep going with it, regardless of democracy (see Eurozone crisis). 

One final thought is that all of this may be a mute point because if the crisis in the pension fund world (these are the 'gold plated' final, but not totally funded, salary schemes now closed to most people) continues the government may have to do a 2008 and bail them out.  Younger Taxpayers bailing out those rich pensioners, while they themselves don't have final salaries. That would be another intergenerational mess. And what made this crisis? The Truss government's budget may have been the trigger, but the explosives were, like 2008, financial derivatives. Have we learned nothing?

Been busy !

 Hi All,

As people may or may not know the months of September /October are always busy because at this time of year, we have the Jewish 'high holidays'. We are on the last leg of a 'religious  marathon', having started on Sunday evening Sukkot or the festival of booths to be followed by the last bit Simchat Torah, which brings to an end the cycle of Torah readings or Parashah at Deuteronomy and begins the cycle anew starting at Genesis. 

Hope everyone is ok.

Shabbat Shalom!

 Hi All, 

Open thread .....

 And as president biden reminds us that we are at risk of nuclear war,  it's time for a parody song:

 

What is a carry trade?

 Hi All,

Someone asked me this at a recent dinner party, probably to catch me out...

A carry trade is borrowing in one currency and investing in another. The profit to be made is the difference between interest rates or the potential gain. 

For banks, the classical example is Japan, who was the king of carry trades woth $1 trillion, until the 2008 crash, when the trades began to unwind due to the lowering of interest rates in Europe, America and the UK. Banks would borrow in Japanese Yen, which came with a low interest rate and then lend this money in currencies that attracted a higher interest rate (such as the UK or another OECD nation). So the profit would be classical banking, or   the difference between borrowing at 1% and lending at 6 or 7%. 

For individuals a carry trade is using the entire limit of a 0% credit card before the interest is applied and investing it in either a saving account (little to no risk, but low rate) or if one wishes a higher, but riskier, return the stock or derivatives market.

A subset of the carry trade exists in the EU, which while it has the same currency has different yields for its bonds. In 2011 the ECB began one of its many LTRO (Long Term Refinancing Operations), which allowed Europe's banks to collectively borrow trillions, the collateral for these loans was of course  European government debt, but the ECB was not quite the ultra conservative Bundesbank as it accepted and did not discount or discriminate between member states .  The banks were able to use the bonds of Italy, Greece, Spain, Portugal, Ireland etc to get 100% of their face value,  which then they used to buy... more bonds of the same. why? Aside from the national pressure the  banking sectors in each country probably came under to buy 'our' debt, the capitalist insentive was the carry trade : the  interest rate spread (profit)  between the cost of borrowing from the ECB at 1%  (the carry) to these  bonds (Italy 5%, Greece 20%). 

Yom Kippur : El Nora Aila

 Hi All,

Sephardic liturgical poem :

"God of awe, God of might, God of awe, God of might,

Grant us pardon in this hour, As Thy gates are closed this night

We who few have been from yore Raise our eyes to heaven's height,

Trembling, fearful in our prayer, As Thy gates are closed this night.

Pouring out our soul we pray That the sentence Thou will write

Shall be one of pardoned sin, As Thy gates are closed this night.

God, our refuge strong and sure, Rescue us from dreadful plight;

Seal our destiny for joy, As Thy gates are closed this night.

Grant us favour, show us grace; But of all who wrest the right

And oppress, be Thou the judge, As Thy gates are closed this night.

Generations of our sires Strong in faith walked in Thy light.

As of old, renew our days,As Thy gates are closed this night.

Gather Judah's scattered flock Unto Zion's rebuilt site.

Bless this year with grace divine, As Thy are closed this night.

May we all, both old and young, Look for gladness and delight

In the many years to come, As Thy gates are closed this night.

Michael, Prince of Israel,Gabriel, Thy angels bright,

With Elijah, come, redeem, As Thy gates are closed this night."