Posts by Tim Worstal

Improved Apple Watches won't get more expensive? Hmmm

Re: Just a thought

I think there are some attempts to calculate inflation rates for different segments of the population, yes. They might even be by ONS, I'm not sure.

The general rule is that higher income people have higher inflation rates than lower income people. The richer you are the more services you consume, the poorer the more manufactures (and food, for this purpose, is a manufacture) as a portion of your income. And generally (over years and decades at least) services become more expensive relative to manufactures.

Re: Hmmm... smoke and mirrors?

"many are looking at working longer hours"

Not true across the population. We all have more leisure than any previous generations ever did.

Paid (or market) working hours for women are up, for men down. And unpaid (or household) working hours for both sexes are significantly down. The balance being fewer working hours and more leisure.

We're getting ever more stuff and working ever less to get it.

Re: Total compensation

"So because health insurance is so insanely expensive, and rising and employers have to pay it - that statistically is equivalent to rising wages?"

Not quite: it's rising compensation, definitely, but not quite rising wages.

Sir Terry remembered: Dickens' fire, Tolkien's imagination, and the wit of Wodehouse

The thing is

When one of the books was based upon something you know well the most absurd jokes were actually the true bits.

The Truth is the best satire of the newspaper business since Scoop and probably better. And in Making Money the truly absurd thing about all of the economics is that it's absolutely completely and totally correct.

Yes, even down to the hydraulic computer for modelling the economy.

http://en.wikipedia.org/wiki/MONIAC_Computer

Although, to be fair, it's only one half of the economics profession who thinks that if you can get the model right then it will affect the real economy.

$17,000 Apple Watch: Pointless bling, right? HA! You're WRONG

Re: Clickbait

" I remember the good old days, when if you opposed the Euro you were some kind of little-Englander, swivel-eyed loon, to be subtly insulted and patronised by our betters at the Guardian, BBC, Times and FT."

Well, of course, that is why I am a Ukipper. I even own a blazer.

"somehow beyond the pail"

The original of this is probably not allowed these days, but it was "beyond the pale". Nowt to do with skin colour though, although I guess that's how people would think of it these days. The "Pale of Dublin" was the area of Ireland under Anglo-Norman control. Beyond that was the gaelic wilderness. There be beasties sorta thing. And amusingly the most gaelic parts of Ireland were in Ulster, the areas that were covered by the Protestant Plantation of the 1600s (covered for that very reason of course). Sorry for the pedantry, just been reading about it.

Re: Christometer-

Yes, I was hoping that might catch. And Holy Toast is wondrous....

The voters hate Google. Heeeeyyyy... how about a 'Google Tax'?

Re: Going after big companies while exempting small

Yes, excellent point, and it also speaks to the VAT exemption point made above.

The EU is saying that you can have a zero rate of duty for small producers. That's not a problem (you can even justify it, how much does it cost in taxmen to collect a few hundred/thousand pounds a year each in a new and different tax from 500 farms?). But what you're not allowed to do is say "cider pays duty but we'll ignore the small fry".

Much the same as the VAT exemption: it's in law that turnover amount so that's fine. With te DPT they're not putting the exemption down on paper, just saying they'll not bother.

Re: Too Simplistic

Amazon's situation is a little different. Those warehouses. Under the standard double taxation treaties warehouses (and logistics chains etc) are expressly excluded as giving rise to the creation of a permanent establishment and thus a corporation tax liability.

Amazon is still being cute, of course it is, but it really does have the express letter of the law on its side on this particular point.

Re: Hmmm

"What about spurious and inflated licensing fees being charged purposely to ensure the UK entity never makes a profit?"

Wioth respect to hte tech companies that's not what actually happens. Well, it does in Ireland but that's an issue for their tax system, not ours. They're all selling into the UK from other EU countries. As above, under EU single market laws, that's just not even tax avoidances.

" Are they the same rate worldwide - and if not why not?"

Ah, if they're not then they would be in trouble, yes, transfer pricing rules would get them. And people are looking at this. Starbucks barnd royalties to that Dutch company for example. The EU found that Starbucks UK was being charged the same royalty rate as Starbucks franchises in other countries. So that's OK then.

"What about UK sales people working for a UK company and making the sale but handing off the agreement to be signed to an Irish company?"

That's a little more dodgy and and area where Google could, theoretically, come unstuck. Depends on how far down the line those UK based "sales engineers" go in "making" the sale. This is something that is being investigated/argued about right now and we'll just have to see how it turns out.

"For all intents and purposes the sales are being made in this country by a UK corporation but then completed by a third entity purely for tax avoidance."

As above, it's about how close that is to being true.

"At the moment both these are legitimate tax avoidance"

I tend to argue that tax avoidance is an attempt to reduce taxation. But once it passses therough the system there's actually no such thing as avoidance. Either you've obeyed the law as written, in which case it's tax compliance, or you haven't, so it's tax evasion.

" not sure they should be though."

And that is an entirely different matter. what "should" be is up to each of us to decide based on our ideas of fairness. That's not really something economics can help with.

The secret of Warren Buffett's success at Berkshire Hathaway

Re: A little knowlege is a dangerous thing.

"and just a tad obvious, to anyone who follows these things. "

Well, yes. But if I was writing for people whjo already knew all these things then I'd be writing in "Warren Buffett Analysis Weekly" rather than El Reg.........

Re: Money, it's a crime...

Sure, you can't use a loan as a capital reserve (with limits. Perpetual floating rate notes were issued by a few banks and were regulatory capital). But all banks do go and borrow what they lend.

They really do not just "create the money" in the basement. If a bank gives me a loan today then by 4 pm today (well, OK, it's a Sunday, pretend it's Monday) it must balance its books. Either other people have deposited enough in the bank (which, to the bank, is just borrowing money from them) or they must go out into the interbank market to borrow it from another bank.

Banks really do go and borrow the money they lend out.

Re: Money, it's a crime...

"Yes, it did. Fractional Reserve Lending allowed banks to be leveraged 25 or 30 to 1 in their mortgage lending."

No, leverage and FRB are not the same thing at all. FRB refers to what poetion of your deposits you can lend out (ie, what is the fractional reserve). Leverage is about how many multiples of your capital can you borrow to then lend out. The two just aren't the same thing.

"With Full Reserve Banking, the banks simply couldn't have issued so many mortgages."

That's true, with full reserve a bank couldn't make a single mortgage at all. Because it would only be able to lend out money on the terms that money was lent to it. Given that no one at all makes 30 year deposits in banks then a bank would never be able to offer a 30 year mortgage.

http://goldsilverworldscom.c.presscdn.com/wp-content/uploads/2012/07/M1_money_supply_vs_gold_price_1970-2012.gif

Yes, that's M1, base money. Notes and coins plus reserves at the central bank. Which is not "the money supply". M2, which I quoted, is closer to "the money supply". And standard monetarism (what I assume you mean by Austrian) regards M3 or possibly even M4 as the important variable (ie, M1 plus M2 plus bank accounts, deposits and near cash equivalents like credit card balances and so on and on). there were vast increases in M2-M4 in the 70s....and there was, as you note, inflation.

"OK, but: the US is a net exporter of corn and wheat. Diverting some of the production of corn and wheat to spiking gasoline with ethanol doesn't justify the sharp increase in food prices in the US."

What? We have a global price for grains. The wheat price in England is linked to that in France, the US, China, Ukraine. As Ricardo pointed out they'll be about the same price minus transport costs. So, if american start putting corn into cars then the global price of corn will rise. Including the American price of it.

"Cost of transportation in the US is correlated to the price of oil, because we do not have a railway infrastructure to speak of, and everything gets hauled by truck on highways."

My apologies, but are you dialing in from some alternate reality? The US has an absolutely superb railway infrastructure for hauling goods. Vastly more of US internal trade moves on the railways in the US than does anywhere in Europe for example (US, 2,500 billion tonne km as opposed to only 300 billion tonne km for the EU as a whole). It's passenger rail in the US which is pretty shitty. Which, given the distances, isn't all that surprising.

"Long-term, and in terms of ROI, fixed income markets outperorm equities markets."

Yep, you're definitely dialing in from some alternative reality. Over long periods stock beat bonds. Because inflation.

Re: Money, it's a crime...

"Really? No-one gets enriched by lending? What's the purpose of lending then? Is it social altruism perhaps? Do banks not charge interest - always above inflation - in order to extract a profit from lending?"

Bit of a leap there don't you think? He was talking about FRB. You are now talking about lending. You do know that full reserve banking, the opposite of FRB, would still have lending? Good, then we can't define lending as being unique to FRB then, can we?

And of course lending enriches. But we've already agreed that lending and FRB are not the same thing, haven't we? BTW, lending is not always done at rates above inflation. 70s Britian it most certainly wasn't for example.

"Fractional reserve lending contributed - in great part - to the credit derivatives bubble"

No, it didn't.

"subsequent crash of 2008"

Absolutely correct, it did. It's the great weakness of an FRB system, that a bank can be solvent but illiquid....and yet has millions of people all demanding their money back right now. It's also the source of the great value of FRB, which is that a system of FRB performs maturity transformation. It might be that your and my and 5 million other checking accounts have zero in them at the end of the month, but the average balance over the month is maybe £1,000 each and the bank is able to budle up those 5 million £1,000s and then lend them out as long term loans to industry and or mortgages.

As I say, both the point and the weakness of FRB.

"Same for MF Global and Jon Corzine - also of Goldman Sachs. There was no greed at play there."

I actually mention in the piece what happened at MF Global....

"The last time the US government imposed price controls was in the early '70's during the Nixon administration. It had no effect on inflation. Inflation still skyrocketed - mainly because of the oil shocks. Neo-classical Austrians hate that one."

Why would neo-classical Austrians (whoever they are, Austrians are not normally regarded as neo-classicals) hate that one? Both groups say that price controls don't work. Price controls didn't, as you note, work. Why would they hate what they think doesn't work not working?

"During Bush 43's administration, there was no increase in money supply,"

Eh? M2 (Money stock) went from 4,600 billion to 7,500 billion during Bush 43.

"yet there was significant inflation in basic consumer subsistence goods: food and energy."

Food and energy prices did rise, yes.

" Conveniently enough, food and energy prices are excluded from the US inflation calculations."

Not so. Food and energy, being more volatile in price than most other things, are excluded from "core inflation". The actual inflation rate, CPI or whatever, is core inflation plus food and energy.

" Neo-classical Austrians' explanation for food price increases in the US: "we can't explain it. It must have something to do with China and India eating more steak and frites and driving better cars". Seriously."

Not so much. The usual explanation is that some idiot decided to put corn into gas tanks as ethanol rather than into the food chain. Given that corn is the basic raw ingredient of a lot of food (pork as just one example) this raised food prices. Other food prices (wheat etc) also rose as people substituted away from corn.

And even if the China story was right, what's wrong with that? Higher demand for food means food prices rise. You do agree that demand affects prices, yes?

" We can all start our own Berkshire Hathaway, be miraculous investors and we'll all get rich. Right?"

At the end of the article I do sorta point out that no, we can't get rich the Warren Buffett way....

Post-pub nosh neckfiller: Smažený sýr

Not quite....

"I thought in Czecho, all food always came with beetroot? Red beetroot, white beetroot, yellow, orange, purple, striped, pickled, boiled, fried, roasted, mashed........but always bloody beetroot"

Dumplings. If it don't have dumplings then it ain't "proper" Czech. Well, so it seems up here in Northern Bohemia at least.

"Beetroot is actually relatively uncommon and used [properly] only in some specific meals."

Indeed.

As to making an English version of this.....strong blue cheese like a stilton, thoroughly soaked in port first. Then breadcrumb and fry......

Mummy, what's the point of Evgeny Morozov's tedious columns?

Re: Happily resorting to dogmatism :-)

"A Capitalist running dog"

Yeah, but that's a cliche by now and as that little book "How to Write A Column" I have secreted away says, always try to mix up cliches to make them new.

didn't work then, eh?

To be Tim Worstall. At least that's what I take it to be.

Re: Evgeny Who?

"Worstall is a marxist-socialist type"

Hoo, boy, I really am going to have to sort out my writing style, aren't I?

Re: @ IT Hack

Apologies, thought people knew who he was. One of these deep thinkiers on matters tech, bit like Jaron Lanier. He always comes across to me as somone who would say "Yes, yes, OK, so we've got our Jetson's style rocket packs now but what about the number of cats not being spayed?, eh, eh!"

C'mon! Greece isn't really bust and it can pay its debts

Re: There was never a need for a combined currency all over Europe

Ouch. The European Council and the Council of Europe are not the same thing.

The European Council (aka the Council of the European Union) is an EU body. The Council of Europe, which manages the human rights act, is a much wider body. Includes Russia for example (about the only non-member in anything like Europe is Belarus).

True, you must be a member of the Council of Europe to be a member of the EU but it's still an entirely different body. The ECJ is an EU body, the ECHR, which administers the human rights stuff, is not.

Re: There was never a need for a combined currency all over Europe

I fear you've got very slightly confused over the technical terms here.

"Monetary policy" refers to things like the size of the money supply, interest rates and so on.

"Currency policy" refers to having the one currency or multiple ones.

And this is the heart of this idea of "optimal" currency areas. Currency policy means that the larger the area covered the better. Monetary policy means that the larger the area the more problems we can potentially have. The two are in tension, which is why we can have an optimal area. Where we get the maximum possible of one while only getting a little bit of the problems of the other.

We can also reduce the monetary problems by having integrated fiscal policy (ie, taxes raised in one area are shifted to pay for problems in another area). But the EU doesn't have that.

Yes

"The idea that an area is too large for a single currency should also be challenged. What is required is that that area has to appreciate that the rich will subsidise the poor."

That's the point that I mention, that fiscal policy can enlarge that optimal area.

Re: There was never a need for a combined currency all over Europe

That's John Major's idea of the "hard ecu". A new currency that's legal tender across Europe, but with variable exchange rates to each of the national ones.

Reckon YOU can write better headlines than us? Great – apply within

Re: Pay?

Bay area pay plus European holidays is a pretty neat mixture actually.....now if only I would be allowed to do it remotely from Portugal so thus be paying Portuguese rents.....

Bloody TECH GIANTS... all they do is WASTE investors' MONEY

Re: Err ...

Yes, "business sense" here means "where's the cash coming from"?

Didn't the Left once want the WORKERS to get all the dosh?

Yes, a distinct similarity there.

Re: Stupid

"Marxian", meaning using certain strands of Marx's analysis to illustrate certain subjects has a great deal of value. While he didn't actually use the word he was spot on about the dangers of monopsony purchasers of labour just as one example (and I used exactly that analysis when looking at the Valley wage restraint cartel).

"Marxist" as a detailed set of rules about how to run an economy or society. Well, we ran that experiment, we generally call it the 20th century. Given the outcome of that experiment I don't think "stupid" is really all that strong as a description.

Vodafone didn't have a £6bn tax bill. Sort yourselves out, Lefties

A small hint

The one part of this piece the author of it was not responsible for is the headline......

Re: Yes, but

"That is, if you don't accept tax avoidance as a legitimate reason."

Well, I do accept tax avoidance as a legitimate reason. That some people will manipulate so as to reduce their tax bills lowers the tax bills of the rest of us.

Yes, *lowers*. Because it puts an upper limit on how much the political class can screw out of the populace. And agreed, tax evasion is by definition not legal but I'd also argue that it's legitimate in a different sense. In that it similarly reduces the impositions on the rest of us.

True, this is arguing from a very cynical standpoint, that of Mancur Olson. Who argued that the political system is just a stationary bandit (rather than a roving one, he arguing that it was better to have a stationary one as they would farm the population rather than just hunt it) out for whatever can be squeezed from us all. So, people willing to rebel, to disobey, reduce what can be squeezed.

Re: What a load of rubbish...

Well, you can try that. But HMRC would like to have tax on your worldwide income if you reside in the UK (unless you're a non-dom). So, assuming they find out about it, they will charge you tax on that life of Riley abroad. And jail you if you don't pay it.

Of course, you could move abroad and then enjoy it. But then you won't be resident in the UK and won't be subject to the UK tax system anyway.

I've written about the Goldman case elsewhere (back at the time) and I agree that that one is at least more arguable that Hartnett screwed up. They probably should have been forced to pay the interest on the bill they delayed paying. About £10 million as I recall....

Re: What a load of rubbish...

Sure you can do that. It's just that you can't get the money out of the company and into your hands without paying tax. Because you've got to either:

a) bring the money back from offshore to your UK company, at which point you pay UK tax

or

b) Pay it to yourself but you live in the UK so you pay UK tax.

So you're in exactly the same position as all these other companies. Tehy only delay tax until they try to take the cash back into America to give it to hte shareholders. At which point they pay the full whack.....sa e-Bay did about 6 months ago.

Re Amazon

Two bits of law.

1) EU law says that any EU based company can sell anywhere in the EU and pay corporation tax in hte country where it is based. That's what "single market" means. Except, if there's a "permanent establishment" in the country of sales. Then tax on he profit from those sales will be paid in hte country of the sales.

2) UK Luxembourg tax treaty (and this is the standard OECD treaty) is here:

http://www.hmrc.gov.uk/taxtreaties/in-force/l.htm

Which says:

(3) The term "permanent establishment" shall not be deemed to include:

(a) The use of facilities solely for the purpose of storage, display or delivery of goods or merchandise belonging to the enterprise;

(b) The maintenance of a stock of goods or merchandise belonging to the enterprise solely for the purpose of storage, display or delivery;

(c) The maintenance of a stock of goods or merchandise belonging to the enterprise solely for the purpose of processing by another enterprise;

(d) The maintenance of a fixed place of business solely for the purpose of purchasing goods or merchandise, or for collecting information, for the enterprise;

(e) The maintenance of a fixed place of business solely for the purpose of advertising, for the supply of information, for scientific research or for similar activities which have a preparatory or auxiliary character, for the enterprise.

Or: warehouses are specifically excluded from creating a permanent establishment.

Re: Tim, get real.

"and that Starbucks Trading is in Switzerland as it has the greatest crop of coffee beans"

Strangely, Switzerland is the world's leading centre of coffee bean trading. Dunno why myself, might just be historical happenstance like Holland running the cut flower market. But if you were going to set up a coffee bean trading arm for Europe then Switzerland is pretty much where you would put it. Like doing diamonds in Hatton Garden rather than Vauxhall, that's just where you do it.

Re: "Branch" line

Standard part of common law is that you "don't pierce the corporate veil". Google UK and Google Eire can both be owned by Google Inc and UK is doing engineering and Eire is selling and you think, hah! but they're the same company really! But the law says they ain't. You can't look through that corporate front to decide otherwise.

Re: What a load of rubbish...

Starbucks and Luxembourg. That's a royalty payment, yes. For they are using the Starbucks name. And that has a value. So, under the transfer pricing rules, there should be a payment for the use of the name.

Starbucks does, in some countries, have franchises. And HMRC (as did the EU more recently) had a look at this. And the rate that Starbucks charges Starbucks UK is the same as it charges franchises, ie unrelated companies.

It's fine.

Re: If the political parties were genuinely interested in addressing the cause

The Fair Tax won't work. It's a sales tax (once only, at the point of retail) and needs to be 25% or so to raise the revenue. And a sales tax at 25% will have horrendous avoidance (or evasion) issues. To get a consumption tax up to that rate you need a VAT, a little bit being added each step down the supply chain.

But the people who want the Fair Tax are dead set against a VAT. Go figure.

Re: Grossly mileading and innacurate

http://www.dorsey.com/london_tax_may26/

Not quite. HMRC won on one technical point: that the CFC rules could possibly be applied under certain circumstances in the EU. Cadbury showed that Vodafone almost certainly met the requirements that CFC did not apply.

It's not easy being Green. But WHY insist we knit our own ties?

Re: So, in other words...

"So is Tim saying that the economy is worse off because I didn't go down to the pub or to the cinema and spend money in my own spare time?"

No, not at all. The argument is coming from entirely the other end of things. If people who specialise in making bread make the bread then I will be able to consume more bread. I will thus be better off from the division and specialisation of labour. And the same goes for everything else, too.

Re: The problem with markets

That's rather good. So, Tim Worstall needs to elect another humanity to become worthy of the free market, eh?

Didn't Brecht get there first?

Re: Specialization and Corporatism

Both Smith and Marx made exactly this point and warned against it too. So true, but not exactly new.

Re: Let me get this right:

"To value 'free time' is a category error: all you can say for such a value is that you might prefer to do one free time activity than another during it."

Quite. And a synonym for "prefer" is "value more highly".

SWINGBELLIES! Take heed AGAIN: Booze shortens your life

Sadly

The paper is bollocks. Statistical cherrypicking at its worst.

http://velvetgloveironfist.blogspot.cz/2015/02/dont-worry-drinking-is-still-good-for.html

Skin colour's irrelevant. Just hire competent folk on their merits, FFS

Gary Becker's answer to this was interesting. He asserted that Jim Crow (the actual laws about it) existed precisely because in the absence of such laws then the market would gradually sort it out. Thus the racists passed the laws to make sure the market couldn't sort it out.

Basic minimum income is a BRILLIANT idea. Small problem: it doesn't work as planned

Yes, and in hte first few paras they make clear that the effect upon the labour response should be the same under either system, negative income tax or ubi.

Yes, but in hte effects on labour provision they should be the same thing. Different in other aspects, but not this one.

From Twitter, a paper examining that labour response.

http://www.widerquist.com/karl/Articles--scholarly/Failure2communicate.pdf …

Not as bad as it was painted to be apparently.

The negative income tax (from Milton Friedman) is similar in intent but still different. Because it's conditional. You don't get it if your income is above the baseline. That makes it a great deal cheaper, of course, but you've then got those incentive effects.

It was that negative income tax which eventually led to the EITC (in English, working tax credits)

There were some US experiments, Minnesota maybe? Worked out a little worse.

Google gets my data, I get search and email and that. Help help, I'm being REPRESSED!

Re: The transaction is not symmetrical ...

Umm, please, try reading an article, by me, on this site, about the emh. This week or last, "worstall" in the search box will get you to it.

Re: Ideological note

Of course.

It's possible (well, certain perhaps) that we will disagree about *when* but the basic idea, sure.