27 Sept
Transparency International and the UK
Transparency International maintains a league table of corruption. It’s the the sort of league table one doesn’t want one’s home country to be at the top of. To be fair, there are many countries which are less transparent than the UK. But there seems to be a steady trickle of stories about the close relationship between tax policy setting and the Big Three (Four?) accountancy firms here in the UK. The argument is that corporate taxation is a complex topic, because the income of a bundle of contracts is hard to define. I have a sneaky suspicion that the best approach is to not tax corporations at all, but to tax the various end-investors and stakeholders that themselves derive income from the corporation. Probably a step too far, although Corporation Tax as it exists now was introduced only in the 1960s (by Jim Callaghan). Anyway, it’s very depressing to see the UK mentioned repeatedly in the latest Transparency International Report. Quite a few of the incidents are old, and it may be that the worst abuses are in the past, but the incentives for corporations to lobby for extra complexity, and the concomitant loopholes remains incredibly strong. The recent increase in the marginal rate of tax serves only to increase that incentive.
At least we are not as bad as the US, a low bar to be sure.
The reserve bank of Scotland
Scotland does not have a central bank. But it could have, and if it did this would be what its website would look like. The bank would issue a new currency: the Scottish Pound. Commentators on the left and the right have been arguing for a separate currency for Scotland for decades. Tim Ridout is the latest. He has done a lot of work to anticipate the objections to those who will argue against it. It will be a strain, for sure, bit it’s not obviously a stupid idea. Listen to this episode of the MMT Podcast to find out more. As a Welshman, I could not help wondering if Wales might be galvanized by having its own currency. I think it might help, but there are more practical actions to take first. Although monetary policy can do a lot of damage, I think that its power to affect the real economy is fairly limited. Back in the distant past, politicians were always talking about “the supply side.” I think that it’s time they started again. We cannot eat pounds, Scottish or British.
Worth a look
Why price comparison websites may have had their day. Great article that explains the economics of the business. Interestingly, more and more ad spending goes to Google.
Big Tech wins with repeal of digital service tax. The US has been strongly arguing for scrapping of the Digital Service Tax, because, well, lobbying. It looks like all that money funnelled from Google to various member of Congress did the trick!
A new Bear Cave newsletter is out. Interesting as always. Might be worth looking at $WIMI and $DATS as shorts. Do your own research!
A good post on planning for retirement.
Matt Stoller explains yet another reason why US medical treatment is so expensive. It’s a long post, but it is about the fact that it’s much easier to make profits by bribing purchasing managers than by competing on price. The corruption, in which hospital chief executives are literally given a share of the profits made by suppliers to their own hospitals is egregious, but explicable.
Evegrande may be the fuse to a new Minsky moment. TBH, I don’t fully understand this, but it seems to be saying that there is a huge, global scramble for actual balances at the Fed., because banks can’t keep track of who owns what collateral. I bet J Powell wishes his re-appointment could be brought forward by a few months.
Wrap
Weak equities, flat bonds, strong dollar, weak gold, strong oil. Generally risk off. Gilts were hit hard(ish): 10Y yield up to 8.6%, 3bp rise.
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