It is Obvious

Chris Rick has got altogether too much to say

Archive for April, 2016

Come out of the cold

Posted by chrisrick13 on April 28, 2016

It is obvious: I’m a socialist

The powers that be, advised by the best economic brains around, have really got the world economy into good shape.  2007/2008 where we came close to the financial system collapsing.  We escaped with a mixture of low interest rates, QE, and foisting the debt on the shoulders of the public without him realising.

It gained breathing space.  Time to sort things out.  Seven years later the mess is worse.  The Euro is a bad enough mess.  Greece, despite the ‘help’ from the ECB and IMF is in a mess.  At the moment there is 90%+ employment and GDP growth in the 5% range as predicted by them (sic).  Japan has been doing a lot and getting almost the reverse of the results it predicted would happen.  Everywhere you look it seems that central banks are going into negative interest rates.  The Fed has not done that but it has forecast 3 or more interest rises this year and is trying to work out how it can say that there will be none and perhaps even a cut.

In short I don’t believe that any economist has any idea how to predict anything into the future.  It seems they rely on past economic theory that just does not apply today.  So why does anyone spend any time at all listening to any prediction about the economy of the UK if it leaves or stays in the EU.  Nobody has any idea.  Not even close.

But that is the point.  Brexit is not about economics.  It is about deciding whether we want to decide our own future as a nation or hand it over to someone else from another country.  Some of it is about immigration and inevitably racism.  I’m not there but a lot of people are.  The Labour party is working through that at the highest level now.

I have found myself liking Frank Field more and more.  Dammit he’s a socialist!  I have arrived at the point where I have seen so much of what he has written and done that I am interested in all that he has to say.  To my huge surprise he appeared on tv last week and he is an Outer!  It is not the flapping loonies that drive you away from a cause in their support but the people of substance with a track record that you are familiar with that draw you in.

It has been a while since I mentioned him…again.  Tony Benn is in the flapping loony class.  The man who suggested we start a sovereign wealth fund when we started dragging oil out of the North Sea.  He also had his 5 questions for any one in power here (again, again).

What power have you got?
Where did you get it from?
In whose interests do you exercise it?
To whom are you accountable?
And how can we get rid of you?

He further said: If you cannot get rid of the people who govern you, you do not live in a democratic system.

If only Saint Thatcher had said it.

Ask that question of Mario Draghi, Jean Claude Junker and the European Commissioners (if you could even name any and one is British)

That is why we should not be in the EU.

It is obvious: I’m a socialist – just kidding.

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Surprise, surpise!

Posted by chrisrick13 on April 12, 2016

It is obvious: I can predict the future
I sometimes think that those with power get together in the pub every evening and have a drinking competition to see who can run the most outrageous thing they can think of in front of the public and get away with it.

Today is inflation day. Only it isn’t…if you read the appropriate inflation number. My recommendation to you is that you stay with good old RPI. Been around a long time so enables you to look backwards. After all what is good enough for the governor of the BoE’s pension fund inflation rate is good enough for me.

I want to put a marker in the ground. It looks like inflation is going to go up over coming months and go up lots. The BoE in the guise of the MPC are charged with keeping inflation close to 2%.  Something they have failed to do over most of the last 7 years.  Everywhere I look the predictions are for rising inflation. The way to combat rising inflation is to raise interest rates and do it well in advance of the inflation rises.

So don’t you tell me, BoE, that the inflation rate rise is a surprise in 12 months time.

They will though.
It is obvious: I can predict the future so can the BoE but they pretend they can’t

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Here, hold this

Posted by chrisrick13 on April 10, 2016

It is obvious: I’m not a betting man

Do you remember Centre Point?  A huge tower block at the eastern end of Oxford Street.  In the 60/70s the owner got mightily angry with the rates that he was going to be charged by the GLC.  They would not negotiate so he left it empty and had to pay none.  London was denied a huge lump of much needed office space and housing.  Many year it just sat there, a huge embarrassment to the GLC.  The owner just had costs and no income.

The government is attacking buy-to-let landlords.  It has attacked and will continue to attack.  It sees it as an opportunity to get many millions of renters to vote for it at the next election.  More of them than there are landlords.  The other political parties will do the same.  The big fear at the moment is a right-to-buy scheme for private landlords and their tenants.

I often say here that mainly by luck I timed my second home perfectly.  Rolled in all the tax-breaks when making a loss then paid off the mortgage when they all ended and took the profits instead of interest or whatever on the money.  I know that nobody who bought after me has made a profit because they paid more for their house.  At best, like me, they are sitting on an un-realised capital gain.  Unlike the owner of Centre Point who realised his.  I just looked into buying another house in Dorset.  ‘Do the numbers’ is the mantra.  I worked out it would cost me £1,000 a month to own it.  At the end I would be a hostage to fortune on the sale and it would have to be a sale.  At the moment the government has just taken another 3% off that sale price, in total, not the profit.  Just before April there was a rush to buy houses before the 3% surcharge.  What now?  Buy-to-let landlords getting out while they can?  I think there will be plenty of that.  This will be a force to push house prices lower.

So why is the current rate of house inflation just nicely into double figures?  What is driving it up?  One factor is the government schemes to help first-time buyers.  They don’t help much but they are good publicity.  Any benefits are countered by price rises.  It’s called a market stupid!  What else might do it?  There are two factors working hard on this.  First with low rates mortgages are affordable at high multiples of a person’s income.  0.5% base rate is 4% points below the long-term average.  At that rate the house I looked at would cost me £3,000 a month.  I even paid 3 times that for a time which would cost me £9,000 a month!  The second factor is the lack of houses.  We are building houses at a rate that barely replaces old houses due for demolition.  An increase to a useful rate is simply not going to happen.  So the market operates again.

That leaves investing in property still a good bet for capital gains.  Mark Twain said to invest in land as they have stopped making it, indeed the opposite if you go and talk to a south-sea islander or someone in Bangladesh.  But it is exactly that: a bet.  Invest in property as they have stopped making it!

What can go wrong?  If you have a mortgage at the long term average rate you can see that movements might well balance out over a 30 year period.  Can you pay at double the rate for a few years?  If you can then it is unlikely that you will get to the state where you cannot afford to pay interest on your debt.  You will keep your house.  If you buy at the current 0.5% base rate the only way is up.  Can most people who have bought in the last 7 years afford a base rate 9 times the current rate (the long-term average) or even 18 times which was the average over the previous 20 years?  So all that can go wrong is the government being forced off 0.5% base rate.

That will take some forcing.  We had inflation at 5% for 3 years which is a lot more than the 2% the BoE was supposed to keep it at.  The BoE did nothing other than to say it would come down when it should have put up interest rates.  It will come though.  I suspect that the Conservatives might think they can keep it all going until the election and then turn it over to Labour to be the party that actually pushes the button.  There are plenty of opportunities for it to happen before then.  Dollar and Euro parity would be pretty hard to live with.

I’m a freeholder.  I hold property on behalf of the Queen.  Hope she doesn’t ever want it back.

It is obvious: I’m not a betting man but I bet I will have to be

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This is excellent

Posted by chrisrick13 on April 8, 2016

It is obvious: I’m fair

I am me and just me.  I earn money (or at least receive money).  I pay taxes as demanded by HMRC and if it is anything to go by I was overtaxed during the year and they are going to give me some back.  I wonder if they are doing that to everyone?  I rely on the social order maintained by the police, the health service, the armed forces, as I speak English and not German or Russian, the education service to get my degree and much more.

If I earn £50,000 a year or £500,000 a year my demands of the state are constant or very close to constant.  Maybe as I get older I will need more health.  So what is my fair share of tax.  Based on income it is inherently unfair compared to my demands at any level.  Surely if I pay my way that ought to be enough?  No?  I don’t think so either.  Some of what I pay is effectively an insurance policy.  I pay in and might take some out but there are plenty of people who will need to draw on it.  Many of those are deserving cases and many are not.  That is another discussion.  I accept that I pay into the insurance policy and am one of those likely not to use it overmuch.

What is my fair share of taxes?  Double what most people pay?  Three times?  A hundred times?  I’ll go along with any amount as long as it is applied in the same way to everyone else.  The question is: who decides?  It is not who watches the watchers but who decides the deciders.  Perhaps it is fair that the majority of people at the bottom end of earnings decide what the small number at high-end of earnings pay though their votes in an election.  Actually I don’t think so.  Dr. Laffer step forward.  As Labour discovered, you can tax the high paid to very high levels…and your tax take goes down.  It might irritate socialists beyond belief but there is a maximum tax take and there is little can be done to increase it.

Without inequality there is no incentive and people will quickly realise that putting themselves out for little reward has…little reward.  Perhaps someone should have dragged Shakespeare into an office:  Now Mr Shakespeare that’s 3 plays you written it’s about time you stopped – after all most people don’t write any.  Maybe someone should have a few harsh words with Einstein: Stop working!  The Special Theory of Relativity is enough.  Leave the General Theory to someone else.  Or maybe Newton: have you thought of taking up cider making?

There has to be a reason to excel.  If there isn’t then most people won’t.  I know it’s not fair!

It is obvious: I’m fair to myself.

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