Pickles Given Warm Welcome at Cambridge University

As one protester told Varsity at the vist on the 25th May.

The forced removal of 400 gypsies and travellers from their established homes is“flagrant racism” that is “absolutely horrific.”

“What we need is communities coming together and actually making the decisions. ‘Big Society’ is actually about delegitimising and raising onto a false pedestal this non-existent idea that communities can do things without any money.”

As Varsity reports

towards the end of the talk, Mr Pickles launched an unprovoked attack on a member of the audience. The question was simple: asking why the Conservatives have trouble with their legacy of being considered ‘poor-haters’ by a wider public. To which Mr Pickles replied “because rich people like you join the Labour Party,” before refusing to answer the question. The student sought an apology – stating rightly that Mr Pickles knew nothing of his background – but was flatly denied.

After he left, many in the audience, including the president of CUCA, apologised to the student, Charlie Bell, for Mr Pickles’ words. There was a general feeling that the speech had been tainted, as a politician, by giving obfuscatory but harmless remarks, had reacted entirely inappropriately to an honest question.

When his argument had been cogent, he had been convincing. But in bullying members of the audience to get out of answering questions, Mr Pickles lost face and credibility. There is a lesson for politicians of all stripes in that.

Planners have had the same treatment for a year.

Rejects College Oxbridge

Philosopher A C Graying is setting up a private university in London and offering top dollar to famous professors to teach exactly the same course as the University have of London at twice the price, Indeed his whole curriculum appears to be nabbled off his former colleagues, much to their annoyance.

Mayor of London Boris Johnson said it reminded him of his idea of “Reject’s College, Oxbridge”, which would be “aimed squarely at the wrathful parents – many of them Oxbridge graduates – who simply could not understand how their own offspring could rack up three A-stars and grade 8 bassoon, and yet find themselves turned down”.

Although the affair garners much hilarity it exposes how the best universities cannot expand with higher fees and wider international intake and instead everyone, including the poorest students now pay the max 9 1/2 grand fee.

An oxbridge system less restricted by medieval charters and pampered by vast landholdings would have long ago expanded naturally to create an english Ivy League with more colleges in Oxford and Cambridge and in many of the towns around. Profits from the wealthiest students could then pay for fees for the poorest.

Deflation and Devastation – The Confused Neo-Austrian Argument

Given the current fears about deflation and calls from many on the blogosphere for a return to ‘sound money’ it is worthwhile to examine the economic effects of deflation.

The Gold Standard is deflationary – there is no getting around this. The problems of this are emphasised even more under 100% reserve banking which many neo-Austrians hold to. By neo-Austrian I mean the increasingly orthodox views of those who follow Murray Rothbard, rather than the broader range of views of those from the wider Austrian tradition many of which support fractional reserve banking in one form or another.

Lets wind back the arguments to the origins of classical economics and the origination of fractional reserve banking. This is important because many claim that the standard is not deflationary because of the scale of economic growth in the 18th and 19th centuries. Sadly the history of money is rarely taught these days and neo-classical text books take fractional reserve banking as given. This means that those instinctively opposed to neo-classical economics often long for a previous golden age – forgetting that the history of money is one of fractious theoretical arguments, multiple crises and multiple innovations. We are living through one such crises today and have yet to innovate ourselves out of it.

By most accounts this originated in 17C Amsterdam, in part because of the problems caused by it having too much gold, and this causing inflation, innovation was required. For a while this innovations were all the rage and were picked up by the Scottish adventurer, banker, conman and economist John Law.

He convinced the French King of a scheme to pay off the national debt, run up by endless war and the excesses of court, through fractional reserve banking backed by ‘real’ assets. What is known as the real bills doctrine, that issuing money was not inflationary if backed by real assets. The problem was these assets were the result of monopoly state land grants in Mississipi – a huge bubble was created where many grew rich. One of Laws colleagues,  Joseph Edward (‘Beau’) Gage, even tried to buy the whole of the Kingdom of Poland. Of course because these assets were misvalued the whole scheme collapsed.  France did not trust banks again for a century.

Cantillon, a friend of Law got out just in time, which made him one of the richest men in Europe. He was the George Soros of his day. He also wrote a single and remarkable samizdat book the first modern text on economics which influenced the next generation of economists.

On money though he was biased, as a banker he naturally favoured a monetary doctrine that favoured creditors and not debtors. And favoured a monetary system that would prevent the wild effects of Laws scheme.

Cantillon believed, correctly, that the view that there could be a shortage of money in circulation was a myth. If an economy grew that quite simply each piece of specie coin would buy a lot more. Cantillon was the first to break decisively with mercantilism – the idea that hording specie created wealth. Cantillon and after him Smith and Ricardo instead believed that real wealth was measured by goods and money was just fleeting in exchange.

There were a number of problems with this early classical view of money. The first being that it did not properly deal with credit. If an economy is growing then if prices are set in specie then contracts will deflate over time. Debts will get worse and worse. Secondly if something today is worth more in specie that tomorrow people will rationally hoard and not spend. This links to another problem with the theory – money is more than a fleeting means of exchange it is store of value – people can hoard. Therefore hard currency can create a deflationary spiral by reducing the necessary circulation of money throughout the whole economy. Think of that Dads Army episode where one five pound note through circulating manages to pay off all of the villages debts worth far more (based on a much older joke).

Now Austrians seem to fall into one of three camps. Though who put their head in their hands and deny any deflationary effect, those like Hayeck who because of this accepted the need for fractional reserve banking, and finally those that accept that it would be deflationary and say this would be a good thing.

Typical of the last camp is JÖRG GUIDO HÜLSMANN who has written a pamphlet for the Mies insitute on the subject in 2008 ‘Deflation and Liberty’ – Ill give you a few Quotes.

It is true that without further government intervention there would be a deflationary spiral. It is not true that this spiral would be bottomless and wipe out the economy. It would not be a mortal threat to the lives and the welfare of the general population. It destroys essentially those companies and industries that live a parasitical existence at the expense of the rest of the economy, and which owe their existence to our present fiat money system. Even in the short run, therefore, deflation reduces our real incomes only within rather narrow limits.

There is only one fundamental change that deflation brings about. It radically modifies the structure of ownership. Firms financed per credits go bankrupt because at the lower level of prices they can no longer pay back the credits they had incurred without anticipating the deflation. Private households with mortgages and other considerable debts to pay back go bankrupt, because with the decline of money prices their monetary income declines too whereas their debts remain at the nominal level. The very attempt to liquidate assets to pay back debt entails a further reduction of the value of those assets, thus making it even more difficult for them to come even with their creditors. In the memorable words of Irving Fisher: “The more the debtors pay, the more they owe.

But rather than adopting Fishers sensible conclusion that ‘the liquidiation is self defeating’ (the paradox of delevering) the author makes an extraordinary claim.

The point is that other people will run the firms and own the houses—people who at the time the deflation set in were out of debt and had cash in their hands to buy firms and real estate. These new owners can run the firms profitably at the much lower level of selling prices because they bought the stock, and will buy other factors of production, at lower prices too.
In short, the true crux of deflation is that it does not hide the redistribution going hand in hand with
changes in the quantity of money. It entails visible misery for many people, to the benefit of equally visible winners.

In short deliberate and widespread bankrpucy and debtors – that is,  in todays economy, most people and most firms in western countries, and in the fallout those with capital will claim the spoils of the world.

The problem of course is the scale of debts, the downward spiral in demand and employment the deleveraging would cause and that only the very richest would be able to afford to bottom feed. The scale of the economic crisis is such, as several economists have pointed out, that there are now far fewer who can afford to bottom feed.

So deflation is alright then, if it destroys middle class wealth, small businesses and consolidates all capital in the hands of the very richest, at precisely the time on the economic cycle when debtors require forebearbace not punishment and when we need deflation like a hole in the head.

For those that advocate ‘sound money’ ask them how they would deal with deflation and these redistributive effects.

The Shaggs ‘Better than the Beatles’

According to Frank Zappa – a cruel joke to get us to listen

Dont let Rebbecca Black take the crown for the worst music ever

Make the Shaggs biopic now

Celebrated New Yorker piece on the band here

National Planning Policy Framework Forensics #6 Core Planning Principles

This will be a short post as I will deal with most of these principles in the topic specific sections which follow which highlight key policy changes/ommissions in those areas.

This is a curious section. Halfway between objectives and key policy principles. The intention seems to be to follow the concept of core policies from development plans, but it doesn’t quite scan at the moment as it is an odd mix of objectives, operational principles and policies. Their is also some duplication with earlier and later sections. Better editing should resolve this.

local planning authorities should be proactive in driving and supporting the development that this country needs. They should make every effort to identify and meet the housing, business, and other development needs of their areas, and respond positively to wider opportunities for growth;

So if im sitting in West Devon District, say, would it not be unreasonable to ask – how much of the 260,000 houses per annum the country needs should we be providing? How much does the country need.

A local authority can make a good hash of how much housing it might need if only locals continue to live there, but if it serves a wider national employment/growth function – like say Milton Keynes did – how far should a local authority step forward to meet this. That everyone should step up to the plate is a weak argument as there would never be enough infrastructure spending to go around. Deciding where major growth areas should go is an issue of strategic choice and there always needs to be a mechanism of ‘wider than local’ planning to resolve this. One where the SoS is involved as many central government revenue streams will be involved nationally or through devoloved agencies or privatised utilities.

The reference to responding to wider opportunities is welcome – but this is not localism. It is regionalism in its widest geographical sense, looking at a decision at a wider scale above the local mosst appropriate for that decision.

Seen from this perspective the pickensian system is not one of replacing regional planning – so long as there an SoS doesnt abolish him or her self there will be regional planning – rather it is complicating, obsuficating and slowing it down through forcing decisions to be made in a ‘cats fighting in a bag’ manner.

to get the most out of their available land, local planning authorities should:
-promote mixed use developments that create more vibrant places; and
-encourage multiple benefits from the use of land in urban and rural areas, recognising that some open land can perform many functions (such as for wildlife, recreation, flood risk mitigation4, carbon storage, or food production).

New and welcome – influence of the RSPB I think.

planning policies and decisions should always seek to secure a good standard of amenity for existing and future occupants of land and buildings

Critical backstop missing from national planning policy since the DB days. particularly important given the ‘presumption in favour…’ etc.

Mogg – the biggest reduction in housing is in your own manor where your son is mp

Perhaps papa mogg needs to be having a word with baby mogg, if you want to blast off. Nimby mps like junior are the problem.

thanks to Planning/Tetlow king

The Worlds Worst Bookshop

Last week when passing through central London on business I decided to make a b-line for a bookshop I hadnt visited in 20 years – The Economists Bookshop (the LSE bookshop) in clements, especially now Foyles has gone so down hill in specialist areas.

It is now a sad reflection of its former self, just another Branch of Waterstones, still described as the campus bookshop but really no point in going in. Just a couple of shelves on economics books, half of those filled with populist paperbacks and books facing forward to take up space.  One shelf on my own study has far more nooks.  A couple more on specialist subjects, like international development, but the sections on travel and poular fiction were far larger.

Much the largest section was develoted to sale of second hand text books.  Guess students cant afford to buy books any more.

Am I getting nostalgic but I can remember when in London and Edinburgh academic bookshops books of a wide range of descriptions, text books, heterodox, and historic reprint, were stacked on shelves, floor to ceiling.

The shop reminded me of a local grocers near Blackheath Standard that progressively stocked less and less until noone shopped their.  The new owners has filled it up and is now doing a roaring trade.

 

Theme Song for Planners Facing Redundancy Everywhere

‘Sell every Asset except Gilts’ Telegraph Deflation Panic

David Kauders in the Telegraph writes an interesting piece, raising some good, some bogus points, but the overall message is clear.  We are heading towards deflation in real terms, with the continuing economic bad news (lets see what the IMF opinion is this afternoon) so he recommends:

Since income offered by gilts is still above that earned from many bank accounts and there is a continuing flight to quality, gilt prices must go on rising until this deflation is over.

Investors should change to a gilt-only strategy to preserve capital and income. This way, they will have the cash to buy the bargains when stock markets offer them.

The argument simply is in a depression the only thing you can be sure of is the government has to sell its debts – so buy gilts.

Why not buy property, after all shortages of new build has pushed rental yields above capital yields, is normally a sure fire signal to buy to let again?

However if deflation erodes balance sheets so there is further default on owner occupiers mortgages distressed sales could deflate house prices a further 20+% before we truly hit the bottom.

This is worrying those in the investment banking community. I keep hearing anecdotes of them selling up in order to rent in order to ‘preserve capital’ i.e. they fear stock, asset and property deflation.

If a flight to quality means higher demand at bond auctions, despite potentially a higher supply caused by higher national debt, then rather than investors investing in the real economy they will be investing in gilts. Less QE Bank of England purchasing of gilts will be needed. This will both lead to a shift from the profit making economy towards funding government spending and a shrink in the growth of base money.

Any flight to gilts, caused by low performing investments, could therefore trigger more widespread deflation.

Gilts are a hangover from the Gold Standard age and laws in several countries requiring government spending to be paid for in ‘redeemable debt’. They are effectively savings certificates offering annual returns and as such make it irrational to hold money in deposit accounts. So they are one form of money guaranteed to crowd out private sector investment.

What is more they guarantee that future money supply will need to grow each year to pay for yields. If you have a structural deficit that is getting worse therefore gilt financing will guarantee it will get worse year on year requiring ever more rounds of gilt financing to pay for it. This cycle only ends when investors figure that gilts are no longer ‘gilt edged’ and there is a potential default – i.e. failed gilt auction (of course the traditional QE route is not available to Greece as it no longer as a central bank in the conventional sense, the ECB meets that function – a government living on a german credit card).

In times gone by gilts would be bought by banks of the nation that issued them. This ensured that the yields and redemption from gilts recycled into the national economy raising effective demand. These days they are used in the ‘carry’ -international arbitrage – trade to buy higher yielding investments – such as in the third world.

As we see in the GIPS countries they might not even be issued to a bank in the same country – a straight transfer payment to the creditor countries, from poor europe to rich europe.

This has meant since financial downturn government deficit spending in the western world is financing capital expenditure in the developing world and fuelling asset price inflation. Countries such as Brazil have imposed controls because of the inflationary effect on their own economies. It also helps to explain why the multiplier from government debt has slumped to close to one in the last 30 years meaning that traditional keynsian ‘recovery’ measures have not lead to consequent falls in unemployment.

In short the 21st century use of the 19th debt financing measure is no longer appropriate.

As a teaser to a different way of thinking about gilts and government debt financing what would happen if a central bank buying gilts through QE threw them in an incinerator, or gave them away to consumers – would the earth fall apart – think about it.

National Planning Framework Forensics #5 Objectives

Current policy objectives for the planning system are listed in PPS1 para. 5 and date from the 2003 Sustainable Communities Plan.  Lets compare them side by side.

PPS1	Practitioners NPPF
-making suitable land available for development in line with economic, social and environmental objectives to improve people’s quality of life;	The Government expects the planning system to deliver the homes, businesses and industrial units, infrastructure and thriving local places that the country needs, while protecting and enhancing the natural and historic environment. Planning has a key role in securing and delivering a sustainable future. …Simply stated, [sustainable development] recognises the importance of ensuring that all people should be able to satisfy their basic needs and enjoy a better quality of life, both now and in the future.
– contributing to sustainable economic development;	Planning for prosperity (an economic role) – using the planning system to help build a strong, flexible and sustainable economy by providing infrastructure and development fit to meet the country’s current and future needs in a world of challenging global competition;
-protecting and enhancing the natural and historic environment, the quality and character of the countryside, and existing communities;	The Government expects the planning system to deliver the [development] that the country needs, while protecting and enhancing the natural and historic environment. Planning for places (an environmental role) – using the planning system to help tackle climate change and adapt to its effects; to protect and enhance our natural and built environment; and to use natural resources prudently.
-ensuring high quality development through good and inclusive design, and the efficient use of resources; and,	Development will be expected to be of good design and appropriately located.
– ensuring that development supports existing communities and contributes to the creation of safe, sustainable, liveable and mixed communities with good access to jobs and key services for all members of the community	planning for people (a social role) – using the planning system to help promote strong, vibrant communities by providing an increased supply of housing to meet the needs of present and future generations; and creating a good quality built environment, with accessible local services, that delivers the diverse requirements of a community;

It is notable that the practitioners draft is longer (although to be fair I had to repeat one para. to get an exact side by side comparison).

Some notes:

The draft does not include reference to land being suitable.  This is an operational issue though and best not in objectives.

The curious reference to people being able to satisfy their ‘basic needs’ – how basic?  Will the government be now operating a site and services programme so the homeless now house themselves?  I have no ideological predisposition to people satisfying their own needs however the government seems to be displaying its ideological colours that only ‘basic’ needs be met and saying nothing about the needs of those who cannot satisfy their own needs and require the support of the community.  The phrase could also cause operational problems implying a puritanism.  Image a planning application for a boat shed for a luxury motorboat and a cllr objecting on the grounds that this was not a ‘basic need’ and should be refused for not being sustainable.  Why not just a neutral ‘satisying needs’.

The economic objective is rightly beefed up.

The reference to climate change, and prudent use of resources, is welcome.

The omission of protecting the quality and character of the countryside is disturbing.  I dont think this is an editorial  slip.  It is repeated throughout the draft which removes national policy on protecting the countryside for its own sake.  This is the most major putative change to national policy since Patrick Jenkins (swiftly removed) proposed changes in the early 80s and arguably the greatest change since 1948, a system then founded on the principle of protecting the countryside.

The objective on design is a major weakening of policy.  ‘Expected’, what if you expect and it doesnt deliver – can you refuse?  Developers always sought policies worded like this in development plans and inspectors rightly gave them short shrift.

No reference to inclusive design.  This is key – why not mention it?  The disability lobby will be furious – as will Tommy Campaign – political golden rule dont upset Mumsnet.

All reference to safe communities removed, is crime prevention through design no longer a government priority?

In place of ‘sustainable, ”liveable’ communities we have reference to ‘strong’ and ‘vibrant’ communities.  A community can be strong and vibrant without being liveable or sustainable.  Look at any third world slum.

The reference to good access to jobs and key services for all members of the community is removed, instead only accessible local services.  This is a major shift.  Not land use and transport planning, planning only through the location of services, not planning homes in relationship to transport networks, nor planning the transport networks themselves.  This is taking planning back 30 years.

The reference to the needs of diverse communities is long overdue in national policy.  So should diversity be planned for when the Prime Minister says we should not tolerate ‘segregated communities behaving in ways that run counter to our values.” Should Mr Pickles allow those controversial Mosques in Caterham and Newham to be permitted? – or one allowed because the group is more moderate than the other? A stronger reference to the European convention of human rights should prevent planning decisions being made on a prejudiced and unlawful basis.

The reference to an increased supply of housing as a topline objective is welcome and again long overdue.