18 Oct 2019

This is a follow up to “The crumbling social contract”, written in March 2017. A government that is answerable to the people who elected it has a critical peacetime power that depends entirely on its perceived legitimacy. The power to impose taxes. Where would all those generous spending promises come from if they didn’t have the right to confiscate our money? The UK Parliament’s obligation to pass all taxes into law was conceived as part of the 1689 Bill of Rights which constrained the power of the monarch (James II). The quid pro quo was that the populace would give their consent to be taxed. In practice this means that the people have to believe that the parliament represents them. The slogan “no taxation without representation” is associated with the American Revolution. The colonists objected to paying taxes to the British government which seemed to them, and which was subsequently to become, a foreign power. The debate over the 2016 EU referendum was sometimes claimed (by those who wanted to leave) to be a similar question. They take our money and spend it without consulting us very much. The slogan that helped to win the day was “Take back control”. I think that most of the British public were not particularly concerned about the money. Didn’t Mrs Thatcher get us a rebate once? The attempt by the Remain campaign to turn the referendum into an economic debate, though it continues to this day, was a failure. LOOTERS Recently, though, our MPs have been daring themselves to reinterpret the meaning of democratic representation. They are like looters in the aftermath of a riot. Someone else broke the windows. Surely reaching through and nicking something isn’t such a big crime? If I don’t, someone else will. Some have merely abandoned or if you prefer reinterpreted the manifestos on which their parties stood in 2017. Others have actually changed sides and not one has taken the honourable course of offering themselves back to their voters in a by-election. Every conceivable legal chance has been taken to force through, block, delay or reverse the result of the referendum. No doubt our MPs would say that all’s fair in...

15 Mar 2016

A STUPID ARGUMENT THAT YOU WILL CERTAINLY HEAR ENDLESSLY One of the most commonly and confidently asserted falsehoods is that markets hate uncertainty. Without uncertainty there would be nothing for markets to price. The pricing of assets is about probability. All questions of probability involve uncertainty. If you ever meet someone who believes in certainty sell them something because they will overpay. Politicians, particularly conservative or establishment ones, often try to scare voters with the unknown. In the current “Brexit” debate, the stayer camp is accused of conducting a Project Fear campaign. One of the central points of this argument is that foreign investors will be put off by the uncertainty that would result from Britain voting to leave the EU. This ignores the fact that almost everything in Britain already seems to be owned by foreigners. Politicians and other public commentators like to pretend that trophy assets are quintessentially British long after they have been sold off.  Witness the farcical outbreak of faux patriotism when a takeover of AstraZeneca by a U.S rival was suggested. The reason why there has been so much foreign investment in Britain is, ironically, politics. More specifically, it has been the lack of interference by politicians in ownership rights. British politicians do not, by and large, confiscate privately owned assets. The downside of this is that rather a large number of exotic individuals with wealth accumulated in dubious circumstances are attracted for this very reason. And there are more on the way, according to today’s news. “Ultra high-net-worth investors from Iran are poised to go on a buying spree of properties around the world – and London is likely to be the top location.”  City A.M. 15 March 2016 This is in many ways very annoying and even shameful unless you happen to be the legal vendor of an asset that has just been sold for a price beyond your greediest dreams. We can’t have it both ways, though it would be gratifying if there were some kind of effective test to verify that the funds used for the purchase had been lawfully acquired. This is supposed to be the function of money laundering laws but these appear...