£ vs. €

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altThe pound seems finally to be struggling up from the floor, rising above $1.60 for the first time since November. It even maanged to rise to €1.15, and speculators are betting it will hit €1.25 by the middle of the summer – providing a welcome boon to the few British travellers who are venturing abroad this year. Time to raise a cheer?

Well, maybe. There are some encouraging statistics – the number of mortgage approvals rose last month, housing rents are strengthening, and some of the more optimistic experts say we're through the worst of this crisis. But most of the pound's consolidation is actually due to the fact that America is in just as big a fix as we are, with a comparable mountain of public debt and a beaten-up financial services sector. And the Eurozone is worse off than everyone thought. It didn't suffer the financial shock that we did because its finance industry is smaller and more conservative. But now that the Brits and Americans are putting off their European holidays and purchases of BMWs and washing machines, the Eurozone is suffering.

Still, the cheapness of British exports is beginning to have a visible effect on our balance of trade, far earlier than most economists thought. The belief was that the low value of the pound would only help us in a year or two, once the world was buying again. So that's lucky. And it's more than luck – it's good judgement, and you have to admit that it's Gordon Brown's good judgement – that we're not in the Eurozone. Then we would be unable to adjust in the wake of an economic shock like the one we've had. As the likes of Italy and Spain now realize.

Tube strikes

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altI have written before about the failure of the Mayor of London to face up to the RMT Union. Now we are seeing the repercussions of that initial weakness with news that the RMT have voted to strike over pay, working conditions and some 3,000 jobs feared to be at risk.

Workers will begin a 48-hour strike at 1859 BST on 9 June. The response from TfL has been swift and non-conciliatory:

The RMT leadership has failed to engage in any meaningful talks on pay, instead submitting a wildly unrealistic claim - demanding a 5% pay rise for fewer hours in the middle of a recession. On jobs, the RMT leadership knows full well we are seeking to end the duplication of back office jobs and that no front line staff will be affected. Our offer guarantees real wage increases for the next five years. Very few Londoners have that level of certainty for the future.

The battle lines are drawn. If the RMT does not back down, nor should the Mayor. One thing is for sure: Londoners would be near-unanimous in their support for confrontation.

In truth, the fight will not be won until the London Underground is privatized. This is certainly easier said than done; it is the case for most industries that once they have been touched by the inefficiencies of government, putting them back on the straight and narrow is a long and often painful road. Nevertheless it is the only way out of the mess we are in and it should not stop Boris doing the right thing. Let it not forgotten that before his makeover, he was a disciple of Thatcherism. If he could just follow his intellectual instincts as opposed to his political ones, there is no reason why he could not be the person to revolutionize London’s ailing underground system.

Blog Review 975

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It's hardly a surprise that unions attempt to use the law to make life easier for their members now, is it?

Is California broke because it doesn't raise enough in taxes? Or because it spends too much money?

Best comment so far on the upcoming elections.

At last! An economic explanation for why modern art sucks.

Although it has to be said, some economists can have some odd thoughts at times.

Zimbabwe's problems: no, not caused by colonialism, drought or anything else except appalling policy.

And finally, did we domesticate cats or did they domesticate us?

A good time to die

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altThe US state of New Hampshire has as its motto, “Live Free or Die." The US taxpayer may soon adopt a similar “Live Tax-free or Die" mantra when a provision in US tax laws causes a massive jump in the federal estate tax rate.

During his first election campaign, George W. Bush railed against the so-called “death tax." Soon after taking office, Bush and a Republican-led Congress introduced sweeping tax reforms, including a programme that would gradually reduce, and ultimately eliminate, the estate tax.

The American estate tax system sets a flat rate at which estates in excess of a specified value will be taxed upon the death of the estate holder. That rate has decreased for each of the last nine years, and in the 2010, the estate tax will be eliminated altogether. The estate tax reprieve is only temporary, however. In 2011, the reduction expires, and the estate tax rate returns to the original fifty-five percent level.

Many cynical observers speculate that 2010 will bring there will be a spike in the deaths among wealthy estate holders who hope to avoid the estate tax. Perhaps not wanting to see a sudden depletion of the nation’s wealthiest citizens (and most capable campaign fund contributors), the US Senate recently voted to reduce the 2011 estate tax rate to thirty-five percent. Notwithstanding the Senate’s willingness to compromise, estate holders who die in 2010 will be able to pass on one-third more of their estate to their heirs than those who die in 2011.

Americans are renowned for their tax aversion, but in 2010, the world will find out just how far wealthy US taxpayers are willing to go to remain estate tax-free.

REG: Regulation and NEDs

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Our Regulation Evaluation Group (REG) kicked off its new series of lunchtime roundtable discussions this week at the headquarters of the British Venture Capital Association in Central London. The speaker was Mark Austen, former head of PwC's global banking and finance practice, and he focused on the role of non-executive directors (NEDs) on company boards, particularly within the banking and finance sectors.

Much of the discussion, however, centred on the problems that NEDs – and other directors too – have in dealing with the Financial Services Authority (FSA). Directors claimed that even a small financial enterprise can face a levy of £750,000 or more for the FSA – that's on top of even costlier insurance requirements – and be required to fill in hundreds of forms each year. But little seems to happen to the data that is connected, and directors are given no indication of whether the FSA considers them acting sensibly or not. The regular meetings with FSA personnel seem to focus principally on how institutions treat their customers, rather than whether they might be taking too large risks and going bust. Which might explain something of our recent troubles.

In other words, we already have plenty of regulation – though most of it is misdirected. That's not preventing the EU from proposing even more extensive regulation, of course, to the point where even the company that makes Kettle Chips would have to be regulated by the FSA – which sounds pretty daft – and the UK economy will be saddled with yet another £1bn burden.

So we have more than enough regulation. What we don't have enough of is supervision of the sort that the Bank of England used to do reasonably well. The box-ticking FSA might have a role in the protection of retail financial-services customers; but the supervision of the banking sector, with a view to keeping them out of the systemic risk that precipitated the current crisis, needs to be done by a central bank.

Older gamers saved... from what exactly?

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altP2P is reporting that the EU is funding the development of game tables that allow older people to play video games:

According to Amparo Ruiz, an occupational therapist in Galicia, Spain who helped supervise some of the trials, “The elderly people like it when they play and feel integrated into the new technologies. “It’s also very important that I can get information about their attention, memory and other functions while they are playing, and then choose games that emphasis the areas where they have problems.

Surely we are old enough to remember ATARI game tables that ended up in bars and nerdy pubs? They are probably pretty cheap to pick up these days. I know a few people who have then at home. Why bother with a new "system" when one already exists? Is there something that the EU finds offensive about Pac-Man, Defender and other ATARI classics?

Scott Paul joins the ASI

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Scott is finishing a Juris Doctor degree at Brigham Young University’s School of Law. His research emphases include fiduciary duty law, religious freedom, and charitable giving instruments.

During law school, Scott served as president of the BYU student chapter of the J. Reuben Clark Law Society and on the board of the law school’s Government & Politics Legal Society. He also helped organize and run several international policy conferences hosted by the law school. Prior to law school, Scott received a BS in Psychology from BYU and then worked in Washington DC for the Nasdaq Stock Market.

Scott is an avid sports fan, a musician, and a budding social entrepreneur.