I read an interesting article on Bloomberg this week which as an exercise in stating the bleeding obvious was a masterclass. Whoever the writer was, they concluded that the Banks aka Tradfi had discovered that Crypto could make them a lot of money. Well DUH!
Elsewhere the Rothschilds, not noted for making pronouncements unless they make money out of it, mentioned that digital adoption was proceeding faster than expected. I’m not very sure what that means but probably they have positioned themselves advantageously and are waiting for us mere mortals to catch up. Before selling.
In case you missed it, the UK and US Governments have stated that stablecoins should be backed one-to-one by high quality, liquid assets. It is beginning to look a lot like “real” money. If you asked me (not that anyone is likely to) I’d say that Tradfi has won and those assets created to bypass it have quietly been absorbed. I wrote about the 16 massive institutions that have joined to issue deposits insured by the National Banks that will surely take over from eg Ripple. Originally, stablecoins were touted as the same as Dollars, just moved around quicker. That has all changed with the Banks effectively muscling in and telling people you leave the banking system at your peril. It’s a fair point, I suppose.
All the talk of Andy Burnham is at the very least interesting as instead of Starmer’s inability to think of anything other than legalistic nonsense, we now have a rapid-fire ideas man who - according to the reportage – appears to be doing lots of stuff, none of which is properly funded nor, indeed, thought through. I am reminded of the Law of Unintended Consequences when I read what is being said. Historically, Governments have looked for ways to increase their tax take and one of the most notorious was the Window Tax. I’m sure there was a paper somewhere that said we will raise £Xmillion by doing this. Despite lasting 155 years, it is interesting to note that it was finally the health situation that finally killed it . The Government had the last laugh as they transitioned to a whole house tax. Governments appear to be incapable of giving the public enough nous to make changes to mitigate depredations. In the event relatively little was raised, resulting in the tax being halved and changed, but more importantly lots of people lived in un-aired, dark, damp buildings affecting their health.
The same has happened with the wonderful Scottish Government who increased the top rate of tax expecting a bonanza. In the event, £22 million LESS per year has been collected. Politicians should be forced to do an economics course and to learn what the Laffer curve tells us about Human Behavior. Surprise surprise hard working people do what they can to keep what they have earned. It’s one of the many reasons a wealth tax will be counterproductive. People will change what that wealth is and move it away and out of reach.
I was reminded this week of two paradoxes, both of which I had forgotten about. When you get to my age things that were learned sixty years ago tend to become somewhat hazy and dare I say it mushy. In essence in his 1865 book The Coal Question, Jevons stated that making a resource more efficient to use, INCREASES its use rather than diminishes it. The reason is the cost of production drops with a concomitant higher demand. Good old economics confirming yet again what everyone instinctively knows (apart from politicians). You may not think so, but this has a relationship to AI which is turning into a Thing of our Days – but one which is rapidly commoditizing. In the same way, something DIRECTLY related to AI, Moravec’s Paradox, states that there are things that humans find very easy (walking, pouring a cup of tea, drinking it) but computers and AI find really difficult. Reasoning (maths, Chess) is very easy for computers. The net result is that (as ever with a new technology) forecasts of Armageddon in certain job categories are proving nonsense.
Indeed, those jobs which AI would supposedly kill are employing more people than ever. The point here is that AI is a MULTIPLYING tool and makes these people much more productive. The Vanguard report has confirmed that the 100 jobs most exposed to AI have actually outperformed the rest of the jobs market. Job growth and real wage increases have led to occupational restructuring and a change in behavior. Who would think it! You can guarantee that Governments will go the wrong way and create barriers to economic dynamism. Why wouldn’t they? They always do. As ever, leave it alone and it will sort itself out. I particularly like the fact that one of the categories stated as certain to disappear (truck drivers) as driverless trucks become the norm is in fact adding jobs faster than any other in the USA. You may ask why? The answer is you still need people to oversee manifests, security etc etc etc and in fact employing a truck driver and buying a truck is about 30% of the cost of buying a driverless truck and operationally it is MUCH cheaper to run.
There are a couple of other things that have struck me this week. The first was the rate of growth of borrowing in UK relative to (for example) the USA, Germany and France. Oh and Switzerland. Since 2002, public debt has grown by 557% in America. By 285% in France. Germany clocks in at just 125%. Britain leads with 801% ie pretty much what America and France have done together or DOUBLE what France and Germany have done together. In case you are wondering about Switzerland, it is totally heartbreaking. They have in fact REDUCED by some 37%. Truly appalling. What do they think they are doing? It’s enough to make a strong man weep. Did they not get the memo?
Four years ago there were more than 1 million millionaires in the UK. I mentioned last week that swathes who were in the list 2 years ago are no longer there as they have left. Now comes confirmation there are only 442,000 or so. That represents a gigantic drop in wealth leaving, employment and general additions to the economy.
One last thought on Andy Burnham. As Mayor of Manchester he literally bullied all governments to give Manchester more and more resources which – because the money was coming from all over the country and not just from Greater Manchester – meant OTHER parts of the country were not so lucky. That’s a total consequence of favouring one sector or area over another – the rest are worse off. Now as Prime Minister, he can’t do that anymore. It will be interesting to see how he intends to square that particular circle. Getting the millionaires back would be a good start.……
