Coppola Comment

This is a post I've been meaning to write for quite a while now. I've been aware for some time that there seem to be two distinct groups of people in the world of politics and economics, who see the world in fundamentally different ways and don't really understand each other. It's as if one group are landlings, only secure when they have hard land under their feet and terrified of drowning in deep water, and the other group are sea creatures, happy floating in an unstructured, boundary-less medium but parched and shrivelled on dry land. Today, I commented on an article in the Guardian . I agreed with some of  what the writer was saying, but was concerned about his factual errors and inaccurate statistics. This is not uncommon whenever I am reading articles by people of left-wing persuasion.  Forgive me: I do not mean to make a political point, and I do not intend this as criticism. But it seems to me that hard facts and figures don't sit well with many people whos...

This blog is my contribution to the debate about how much the 50p tax rate might have raised if it had ever got the chance, and how much in comparison the 45p tax rate could be expected to raise. And, of course, whether this has anything at all to do with the real reasons for tinkering with the top tax rates. The Office of Budget Responsibility's (OBR) estimates of the tax receipts from both the 50p and 45p tax rate are on p. 111 in their Economic Forecast  (pdf). The table refers to "forestalling" about the 50p rate, and "reverse forestalling" about the 45p rate, and provides estimated figures for both. "Forestalling" means bringing forward income in anticipation of a future tax rise, and "reverse forestalling" is delaying income in anticipation of a future tax cut. Both the 50p and 45p rates were announced a year before their introduction. It is hardly surprising that people who are able to vary the times at which they receive income - ...

Last night, S&P downgraded Greece to "selective default". This followed on from Fitch's description of Greece last week as in "restricted default". Both passed almost unnoticed, didn't they? No twitterstorms, no flash news reports, no extended analysis. Everyone knew some form of default was going to happen, no-one is at all surprised and it doesn't change anything. Markets have already priced in default anyway. So has Germany, if recent statements from the great and the good are to be believed. There was a short, bored statement from the Greek government last night and a slightly longer and equally bored statement from the Eurogroup president. The first sovereign "selective default" in history is a total non-event. Remarkable how things can change in a few short weeks. More important is today's announcement that ISDA will decide on Wednesday whether or not Greece's retrospective insertion of Collective Action Clauses (CACs) i...

The UK's Bank of England is on a splurge. It is spending newly-created money like it is going out of fashion. It is buying up the UK's own gilt-edged securities, which it is putting safely in a vault with the intention of selling them again sometime, maybe, if the mice haven't eaten them first. The institutional investors it buys those gilts from then go and spend that money, or they put it in a bank deposit account, or something. Anyway, one way or another that money finds its way into bank deposit accounts, simply because all money at some point comes to rest in a bank deposit account......So banks have higher deposit balances. Does that mean they lend more? No, it doesn't. Deposits don't belong to them - they are debt. What banks need is capital (because regulators insist they need it), and they haven't got enough of that. So although they are awash with deposits, they aren't lending, because lending uses capital. UPDATE - And because, as Ann Pettifor poi...

In a few posts recently , Richard Murphy argued that because the Bank of England is wholly owned by the Treasury, the government debt (gilts) that it has bought under the Quantitative Easing programme is effectively cancelled because it would be eliminated from both sides when the Bank of England's accounts were consolidated with the Treasury accounts. This is correct from an accounting point of view. It leaves a large cash liability on the Treasury's accounts which represents the additional base money now in circulation and is exactly equal to the amount of the debt purchased. But the debt itself disappears. Murphy's worked example showing how this works is here . But in the real world, things don't just disappear like that. Locked away in the Bank of England's vaults are a large number of pieces of gilt-edged paper. And tucked away in bank deposit accounts, or floating around somewhere in the financial system, is the additional money that the Bank of England c...

I've always said I won't comment on tax matters, as I am far from being an expert. But I really can't let this pass. The Tax Justice Network today produced its first podcast . It's a very jolly 15-minute broadcast, with jaunty music and a presenter who was obviously chosen for the fake cheeriness of her voice. I found it all rather patronising, rather like those awful radio adverts that the Child Tax Credits people produce from time to time - you know, the ones that make thinly-veiled threats to remove benefits if you don't tell them your circumstances have changed. But what bothers me far more is the dangerous inaccuracy of many of the statements made, and the unsupported allegations against companies, institutions (including the police) and individuals. If these allegations are true, they are dynamite. If they are false, they are also dynamite - for the Tax Justice Network. There are four claims in the podcast: 1) that Barclays only pays around 1% corpora...

As dawn broke on 21st February 2012, the leaders of the European Union announced that they had agreed terms for additional financial support to Greece to enable it to meet scheduled debt repayments on 20th March. European Union officials pronounced that "the European debt crisis is ended".  Light has dawned, the sun is shining and everything is rosy. Except it isn't.  Not one commentor on the dawn deal thinks that it solves anything. As the BBC Breakfast reporter said, all it does is "buy time". Time for what? Time will solve nothing. Even with this deal and a VERY large amount of economic luck, Greece's debt is only forecast to reduce to 120% of GDP by 2020, which for a country as poor as Greece looks unsustainable. And that assumes that Greece is able to return to growth in 2013 despite the extra cuts imposed in this deal, which are almost certain to deepen recession further. And it also assumes that Greece somehow manages to maintain a primary surplu...