Check your biscuit tin

Do you have an old biscuit tin where you stash left over cash from foreign trips? You may want to check it for any Greek euros. Yes, there are such things. Physical euro notes are issued by national central banks and the notes are pretty much identical across the zone except for the serial number. Those numbers on notes issued by the Greek central bank start with Y.

The Greek saga continues to twist and turn with each passing day. However, the most significant development this past week was the unprecedented statement by France’s Nicolas Sarkozy and Germany’s Angela Merkel that any Greek referendum on Greece’s bailout package will be considered a referendum on continued membership in the euro club.

This is a seismic shift in attitude. Those committed to maintaining the eurozone have never countenanced the slightest discussion of a possible exit from the euro. Even now, they’re warning of all manner of catastrophe if that were to happen and point to the huge complexity of such a move - as if carrying on with the status quo is free of potential catastrophe and complexity. In particular, they’re doing everything they can to make sure there is no Greek referendum. They have bitter memories of the inconvenience from listening to the people.

Now that Merkel and Sarkozy have finally made an exit from the euro an official option, we wish all parties godspeed to do what needs to be done. Back in February, The ASI featured a five-point plan for Ireland to leave the euro. It was quick (overnight) and dirty but quite doable for Greece today. Sure, it would be messy and costly but so is staying in the euro.

In anticipation of this, it might be smart to exchange those euro notes issued by Greece. One of the ASI’s five points calls for Greece to keep current euro notes in circulation but calling them Greek euros when the serial number designates them as such. They’d start at a 1:1 exchange rate with the real exchange rate soon set by market forces, starting in the black market - a very big one in Greece.

A large benefit of this switch to a Greek euro would be the continued functionality of ATM’s and other machines. Losers would include tourists stuck with the old notes but this is a relatively small number holding a relatively small amount of spare change. Big losers would be criminals and tax evaders doing business in cash. We shed no tears for them.

So check those crumpled old notes and toddle on down to your local bureau de change. While you’re at it, here’s other codes you may want to check for: Ireland (T), Italy (S), Portugal (M) and Spain (V).


Peak Stuff has been and gone

One of the amusements I delight in about the environmental movement is that they're generals, always fighting the last war. We've still got doomongers warning about population when we already know the answer to that. Indeed, are implementing the answer to it. Population, birth rates, fall when places get rich (not least because rich places have more for women to do than endlessly pump out more babies) and as the world is getting rich we've solved that problem. We've similarly got doomongers telling us all that minerals are about to run out: without noting that we're recycling ever more of them and in many places co0nsumption of virgin material is falling as we replace it with recycled (the iron industry being an obvious example).

One that is similarly popular is that we're just simply using too much stuff, that on a limited planet we can't all just keep having more. But it appears that peak stuff has already been and gone:

In 2001, Goodall says, the UK's consumption of paper and cardboard finally started to decline. This was followed, in 2002, by a fall in our use of primary energy: the raw heat and power generated by all fossil fuels and other energy sources. The following year, 2003, saw the start of a decline in the amount of household waste (including recycling) generated by each person in the country – a downward trend that before long could also be observed in the commercial and construction waste sectors.

In 2004, our purchases of new cars started to fall – as did our consumption of water. The next year, 2005, saw our household energy consumption starting to slump (notwithstanding an uptick last year due to the cold winter). And in 2006 we seem to have got bored with roads and railways, with a decline in the average distance traveled on private and public transport. All of this while GDP – and population – went up.

The secret to this is that GDP is the "value of all goods and services produced". And we can, as we have been, increase GDP by increasing the value added rather than the quantity of goods and services. There's actually no great secret here at all: it's exactly what we would expect to happen in fact, if raw materials get more expensive (as those who insist they are running out would say they are) then we'll use less of them.

And note, no one planned this, insisted upon it, regulated for it or imposed it. Just happened quite naturally as the market response to higher raw material prices. As we've seen the quite natural market response to greater wealth being fewer children, prices encouraging recycling of metals and all the rest.

Great things markets, aren't they? If only more environmentalists would realize that they are the method of getting what we all desire, that cleaner, greener, richer, world.


Thank goodness for the European Union, Margot Wallstrom and REACH!

You remember how back in 2006 everyone was getting poisoned by all those nasty chemicals that industry was using? Sure you do, millions falling over every month. And how Margot Wallstrom was able to push through the REACH legislation? To make sure that we were all safe and that only chemicals that had been properly tested were available for use? Glory be, aren't we lucky little boys and girls, eh?

The thing is though, there's a bill to be paid for this. In my email this morning I got this: 

In continuation to our earlier communication regarding this letter of access (LOA) cost for Sodium Iodide (EC no: 231-679-3) please be informed that the LOA cost calculated is 8500 Euros (for the 100 to 1000 tons per annum tonnage band); considering the present response in the SIEF.

Now, if I'm honest, a payment of € 8,500 to make sure that sodium iodide is safe to use doesn't seem like all that much.

Except that's not actually what this payment is. It's not one payment for someone to go through the scientific literature and say, well, yes, this appears to be safe. It's not even a payment for anyone to do any experiments. It's not even one payment.

Every single importer, manufacturer and or user (if you're a user and the manufacturer has done this you don't need to, but if you're a user and the manufacturer has not done this you do need to) has to pay this fee. This is after all of the importers, manufacturers and users have got together and agreed to share the costs. This is the cost each, not the total cost.

No! Wait! There's more! Every single chemical combination has to go through this process. OK, you don't have to deal with O and a couple of others but just about any possible combination of elements must go through this process. Given that there's 72 elements that we normally worry about (the radioactives and a few of the gases we tend not to) the number of possible combinations is 72! Which is, umm, 6.123445837688612e+103 or, at my level of maths, gazillions. Possibly even umpty elebenty billions.

So every single importer, manurfacturer and or user of a chemical combination has to, even after they band together to share the costs, pay this sort of sum for each and every chemical combination that can possibly be used in a complex economy of 500 million people and some billions of different products.

I suppose you could just about, possibly, make the case that this is worth it to make sure that we're not all poisoned in our beds. Maybe. But this isn't the cost of doing the testing or anything. No one is actually doing any work for all of this money.

This is the cost of filing the paperwork.

No, really, this is the fee that must be paid to the European Chemicals Agency just for the joy of having them look over the paperwork. We're not getting anything for this other than a bunch of bureaucrats in Helsinki reading a few .pdfs.

As I say, thank goodness for the European Union, Margot Wallstrom and REACH. Just think of the idiocies we would have spent all this moolah on if we'd had a choice. No one actually wanted to cure cancer, poverty or HIV anyway, did they?


On "ethical eating"

Last Saturday I attended a Battle of Ideas debate on whether or not food can be moral. It's an interesting question for libertarians, particularly when you try to consider the extent to which the non-aggression principle can apply to other animals. Some take a purist approach and consider all animal life to be inviolable. Others take the position that eating another animal is fine, so long as you didn't support the system that put it on your plate by buying it. This could have been a debate on exercising personal morality, using the power of the consumer to gradually change trends.

But the majority of this particular debating panel had other ideas. With the honourable exception of Kirk Leech, who put up a robust defence of the consumer, a bunch (or should the collective be 'a table'?) of food critics expounded their personal pet hates. Some raised valid environmental and ethical concerns, but an alarming consensus began to emerge on the inherent evils of cheap 'convenience' food. Apparently, the very cheapness and availability of food detracts from the moral worth we place on it.

The argument goes that these pre-packaged, processed foods mask the sources of other moral issues: instead of stuffing a tuna meal-deal sandwich into my face within seconds, I should first take the time to consider how that tuna was farmed, and who may or may not have been exploited in the process. All of this naturally leads to calls for more expensive food. One of the food critics went as far as saying we should artificially raise the price, even if it will impact lower income families. It's for their own good, you see.

I cannot think of a more snobbish, elitist and condescending attitude. The reality is that no matter how long I could contemplate the ingredients for a tuna sandwich (as that seems to be the implication of not having it pre-made), I probably wouldn't be any the wiser about its impact on the world. And that's the beauty of the free market: just like the short memoir of I, Pencil, the price mechanism allows countless buyers and sellers to co-ordinate their actions and limited knowledge, not even needing to all speak the same language let alone understand each others' industries.

As Kirk Leech pointed out, the economic revolutions of the birth of modernity saw the democratisation of gastronomy, with the emergence of meat, sugar and wider choice for everyone, not just the feudal few. But just like the absurdly resilient notion that capitalism makes the poor poorer, food paternalists have convinced us that eating and buying food is a morally sanctioned activity. Ethical eating has become a form of penance rather than a source of pleasure. But not everyone can afford it.


Making taxes more app-arent

apppHow much tax do you pay to get the money to buy everyday goods and services? The answer might surprise you. When you buy something at the shop, HMRC take away Value Added Tax and then some more for things like petrol, tobacco and alcohol through special duties. But even before you have the money to buy what you need, you first have to earn it and here too the Government takes another cut. Fortunately, the TaxPayers' Alliance has released 'Tax Buster', a great little smartphone app today that does all the calculations for you.

One of the biggest problems with the tax system is the amount of effort you need to invest just to understand exactly what we pay in which taxes. So a tool that shows, for any product you buy, how much extra you'd have to earn to pay for the Income Tax and National Insurance, and takes into account the effect employers' National Insurance and Corporation Tax have on driving down earnings. Forget the 20% 'basic rate' of tax. On most ordinary goods and services, typical taxpayers with average incomes pay over 50% tax. On tobacco, alcohol and fuel, the percentages are higher still. Play around with the app yourself. It certainly provides half an hour of compulsive (if rather depressing) fiddling as you enter the details of the various products you've bought recently and Tweet and Facebook the results to your friends.

Tax Buster is available from the App Store for iPhone users while other smartphones can use the online webapp version. For more information, visit the app's website at


How Greece can leave the euro

Greece could well conclude that the costs of Euro membership – the continued uncompetitiveness and the forced restructuring – outweighs the benefits. Or maybe German taxpayers will call a halt to the bailouts. But because the Euro was conceived as a one-way European unity project, no wind-up clauses were built in. That makes it harder and more painful for countries to leave – or be ejected – than need be. In the long run, though, Greece’s departure might spare protracted pain for both sides.

If Greece (or Italy, Ireland or Portugal) is to go, leaving must be a surprise. Leaving the Euro means adopting some new currency that is worth less. That’s the point. But if people get wind of that, speculation would be a one-way bet. There would be bank runs as citizens pulled out their cash in order to put it in other countries where it might keep its value. Businesses would be squeezed as bank finance dried up, and because foreign customers would be slow to pay and quick to demand payment in the hope of benefiting when the devaluation occurs.

So it needs to be a shock announcement, preferably on a Sunday morning when the markets are closed. That gives Greece no time to print all the new currency it needs by the time the shops open on Monday. But all Euro notes have a national registration letter in the serial number – Greece is Y, Italy is S, and so on – Greece could still use those until its new drachmas are printed. When the Austro-Hungarian Empire broke up, the existing banknotes were simply stamped with the symbol of the relevant country.

This new currency is of course worth less than the old Euro. That is the point ­– Greece wants to make its exchange rate more favourable. Its announcement would proclaim that all local assets and liabilities are now denominated in this new currency. It would need capital controls to hold things together while people adjust to it. Foreigners might try to sue Greece for its default. It could buy time by promising to honour Euro-denominated liabilities in Euros when they fall due. Or it can tough things out.

Would anyone ever lend to Greece again, once you had defaulted? History shows that yes, investors generally come back to such countries quite quickly. That is because the default gives an immediate competitive advantage against your neighbours – a chance to sort out your economy and make it a better, and cheaper bet for people who want to trade with it and invest in it. You can also afford to offer them higher interest rates, which are presently decided in Frankfurt.

Yes it is messy, but there can be clear advantages to Greece leaving the Euro – for the other Euro members as well as Greece.


Hanging London out to dry: The impact of an EU Financial Transaction Tax


Our new report, released today, assesses the impact of a Financial Transaction Tax (aka Robin Hood Tax) on Britain's economy. The results are eye-watering – it would destroy the City's derivatives trading sector, hit Britain's growth and ramp up market volatility. The executive summary is below:

1) The European Commission has proposed a Financial Transaction Tax (FTT) on all securities traded with at least one party within the European Union. A tax of 0.1% would be applied to shares and bonds trades and 0.01% to derivatives trades, including over-the-counter derivatives, of which London is a world centre.

2) The EC’s impact assessment projects a 1.76% hit to long-term (20-year) growth across the EU. This would amount to a £25.58 billion cost to the UK economy over this period, and a £185 billion cost to the total European Union economy (2010 prices). This is based on a direct application of the cost to Britain’s economy. The true figure is likely to be far greater, because of Britain’s disproportionately large financial sector (and especially its derivatives trading sector).

3) The EC impact assessment also projects up to a 90% decline in derivatives trading if its proposed Financial Transaction Tax is implemented. The City of London is the centre of global over-the-counter derivatives trading, accounting for nearly half (45.8%) of all global interest rates derivatives turnover. This would adversely and disproportionately hurt the London economy, and would destroy a socially-valuable financial activity that it integral to the modern British economy.

4) Contrary to some supporters of the FTT, the tax would increase market volatility. There is no empirical support for the idea that the FTT would reduce volatility. Indeed, by making transactions more costly, the tax would make markets less responsive to new information and more prone to violent lurches up and down. Academic models of the tax have been inconclusive at best.

5) The FTT would reduce market liquidity in all securities markets. 40% of the London Stock Exchange’s volume is based on high-volume, low-margin transactions, which would be wiped out by the FTT, making markets far more illiquid. Markets’ ability to incorporate new information into asset prices would be undermined.

6) Unemployment would rise if an FTT was introduced. At the margin, the FTT would mean less investment and less output. The tax, if implemented in 2014 as proposed by the EC, would slow down an economic recovery and reduce capital investment. The EC’s long-run projection for this is a 4.5% reduction in investment.

7) If the FTT was only introduced in the EU or G20, many traders currently operating in the UK would relocate to places like Hong Kong, Singapore or Zurich. There is little scope for a worldwide FTT – even types of trades that are affected in a minor way by the FTT would likely move en masse to other jurisdictions that would flourish as FTT-free zones.

Download PDF


Charities and the Robin Hood Tax

Have you ever given money to Oxfam thinking, "Gee whiz, I hope some of this goes on support for the Robin Hood tax campaign!"? Me neither. I doubt many people do. The phenomenon of charities like Oxfam, Médecins Sans Frontières, The Salvation Army and others supporting the Robin Hood Tax is bizarre. Most people give to charity thinking that their money will go on doctors for poor people, food for starving people, shelter for homeless people, or the like. They would be surprised – and, I expect, angry – to find out that the charity they are donating to is a supporter of the Robin Hood Tax campaign.

In the interests of people who want to give money to charity without supporting the Robin Hood Tax, here is a list of the more prominent charities that support the campaign (I've emboldened some of the most prominent ones):

  • Action for Global Health
  • ActionAid
  • Barnardo's
  • Bond
  • Chartered Society of Physiotherapy
  • Christian Aid
  • Christian Medical Fellowship
  • Church Action on Poverty
  • Comic Relief
  • Concern Universal
  • Health Poverty Action
  • International HIV/AIDS Alliance
  • Oxfam
  • Pump Aid
  • Restless Development
  • Save the Children UK
  • Stop AIDS Campaign
  • TB Alert
  • The British Dietetic Association [I had never heard of these guys, but I thought it was funny]
  • The Salvation Army
  • Water Aid

Now, are there a lot of people who donate to The Salvation Army with the intention of supporting the Robin Hood Tax? Probably not. When I give to charity, I want to help people who are less fortunate in life than me, not support crackpot, celebrity-backed economic cyanide masquerading as "tax justice". Fake Charities monitors charities that get money from the government.

In future, I'll only be giving to charities like these, which (as far as I'm aware) do not support anything like the Robin Hood Tax:

There are plenty of others (leave suggestions in the comments). Charity should mean charity, nothing else.


That higher education bubble you've been hearing about

Talk of the higher education bubble is all the rage these days, especially in the US. I'm convinced we've got one here too, for slightly different reasons, but this graphic of US degrees really puts the idea that more graduates equal a better economy into perspective. There's nothing wrong with a "degree that doesn't pay", but there's no economic case for government subsidy for visual and performing arts degrees (US data):


Read the article I got it from for more.


The proper functions of trade unions


The public sector trade unions are threatening strike action over plans to reform their pension arrangements. These plans are so moderate and the current arrangements so generous to public sector workers that even the Labour Party appears to support them! In short, the trade unions are arguing that future taxpayers should fund them to the tune of £770 billion and £1,176 billion, depending on which estimate one uses.

I had to laugh at the sheer effrontery of the unions’ argument that pensions will begin to fall as a share of GDP by 2060. 50 years hence the problem may begin to ease somewhat, so that’s alright then! The unions are right about their claim that they’re going to have to work longer, contribute more and get less – that’s the only way by which public sector pensions could be made affordable.

Trade unions are by far a bigger issue for the public sector than the private. At present (2010 statistics), trade union membership stands at 56% in the public sector compared to only 14% in the private (UK average trade union membership at 28% is quite high compared to the OECD average, the Nordics somewhat distorting the figures).

Given that the public sector employs 6 million workers in the UK this is a serious issue – not because there is anything wrong with trade union membership, far from it, but because the nature of public sector employment gives trade unions disproportionate power, as most public sector (i.e. nationalised) services are monopolies or near monopolies and their users have few alternatives. Of course, this is one of the many compelling reasons to privatise most state controlled services.

Perhaps an easier step would be to prohibit public sector unions or unions with public sector employees lobbying and donating funds to political parties. This would prevent the eminently unjust position under the previous and likely future administrations whereby the public sector was financing the governing party with the authority to determine the pay and employment of the public sector! If civil servants in a personal capacity wish to donate money to any party that is at their discretion, but to do so via a corporate mechanism is simply corrupt. That Labour and the unions would complain bitterly is an indication that it ought to be done.

In spite of past reform, the trade unions still have more legal privileges than they deserve – most importantly they possess a right to strike without a corresponding right of employers to sack. Moreover, a good deal of the trade unions’ agenda has been enacted through legislation – the minimum wage, maternity leave and discrimination legislation.

This legislation comes to the benefit of current employees but reduces employment and hinders the newer entrants to the labour market (particularly the young and the long-term unemployed). It almost goes without saying that national pay bargaining and pay scales should be ended immediately – they prevent reform of the labour markets and distort regional economies. 

Instead of lobbying the government, trade unions should focus on their proper functions. Naturally, a large role is to bargain with employers for pay and conditions – this should be done without legal privilege on either side. This would be better done by more, smaller trade unions who could negotiate wages and conditions more suited to local conditions – of course, if they were dealing with smaller employers and more competitive industries rather than the state this would make far more sense.

Secondly, as observed by Hayek in the Constitution of Liberty, the origins of trade unionism lay in providing benefit and support to their members for sickness, unemployment and old age. As with many areas of civil society they were crowded out of these functions by state intervention. How much better would it be if instead of trying to strongarm the government into promising taxpayer’s money the unions were instead the providers of private, probably mutual, pension funds for their members. Far better that the unions revert to their traditional position of providers to their members of welfare, social security and social capital rather than the faceless bureaucracy of the state.