http://www.ft.com/cms/s/0/c941f226-9ca5-11de-ab58-00144feabdc0.html

“On Thursday at noon the Bank of England’s monetary policy committee will announce its decision on base rates. Suppose I think the rate will stay the same, and the market expects it will rise. At 11am I make a trade that reflects my judgment. I am right, the market is wrong, and I make a profit – perhaps a large one . . . The social rationale of financial markets is that they discover information and create liquidity. But the benefit to society of more informed guesses of what the MPC will announce in an hour’s time is small. The benefit of creating liquidity at 11am, when the decision is uncertain, rather than at noon, when it is known, is also small.”

In my previous life I had to spend some time combating people like that: ‘scumbags’ in the phrase – and it was a royal PITA – a waste of my highly productive time. But my experience at IG suggests is was perhaps 1% of the trading – JK somewhat overstates how much of “banking” is this cat and mouse.

Quite, apparently they are. Friends of the Earth was all in favour of agro-fuels until the riots and then they started to be against them.

Something, somewhere, has to indicate when public policy has been hijacked by idiocy. So why not markets doing so?

And who cares about whether profit is made (btw, futures are a zero sum game so whatever was made by one speculator was lost by another) as long as the system ends up with a good or better result than would be achieved without the actions which led to the profits?

I’m no defender of agrofuels (the “insane insistence of idiot politicians that we should all drive our cars on ethanol derived from corn and wheat” was in fact a product of the corrupt nexus between the American big agriculture lobby and the politicians it buys – do you really think Dubya brought in a program in order to mitigate climate change?), but:

(a) the trigger for the price spike in fact was related to actual harvests as well as expectations of agrofuel demand, so your basic premise is incorrect

(b) the speculation began to feed off itself, ending up with a situation where rich private speculators were effectively hoarding a scarce commodity that people couldn’t live without – this is not a social service, it is extortion.

Even if we accept your premises, which I don’t, your comment should in fact read:

“Vote stealing weasel felchers fuck up big time and enact a policy that if left unaltered could starve millions if not tens of millions. The futures markets reacted and by bringing prices forward in time made the millions if not tens of millions start starving today.”

I realise that under your religion the blind greed of the speculators was guided by the invisible hand to do this alleged social service, but it is quite funny that you draw a veil over the profits made during this episode, and what became of those profits.

Finally. “Don’t you think that’s a marvellous system? When the body politic errs we’ve got a system that points out to them the error of their ways?”

Yes, I absolutely agree. Tortilla riots are an essential means of getting a message through.

I define people as rich if they earn more than £40,000 a year. Yes, the right-wing trolls here think that’s a normal salary but it isn’t, it puts someone in the top 10%.

If I did say that then I didn’t mean to….and I’m reasonably certain I didn’t actually say that anyway.

What I did say and mean is that we don’t tax property lightly, which is The Guardian’s allegation.

“My basic point still stands – defend the recent unregulated speculation in (say) food staples.”

I’ll defend that no problems.

One of the things that speculation does is move prices around in time. It futures and options markets that make the news of a bad harvest in the future move prices now: at which case of course people curb consumption because prices have risen in anticipation of a bad harvest and thus the real food shortages are less bad because we’ve all be consuming less over time rather than carrying on and then finding we have none at all.

But in this specific instance it wasn’t a bad harvest that caused the likely future shortage. It was the insane insistience of idiot politicians that we should all drive our cars on ethanol derived from corn and wheat. We could see that demand would thus be higher than supply at current prices and speculators thus drove up current prices for future harvest. The higher price in the future was brought back to the present.

This set off bread riots and even tortilla riots in Mexico. This made idiot fucking politicians rethink their idea of taking the bread out of the mouths of the poor so that they could drive their limos to the next “let’s solve climate change meeting”.

Me, I think the role of speculation and speculators in this was absolutely glorious, a complete and total vindication of the system. Vote stealing weasel felchers fuck up big time and enact a policy that if left unaltered could starve millions if not tens of millions. The futures markets reacted and by bringing prices forward in time made the politicians realise how crazed and lunatic they were being. Riots in the streets helped to concentrate their minds.

Don’t you think that’s a marvellous system? When the body politic errs we’ve got a system that points out to them the error of their ways?

seems reasonable to me, afterall, someone needs to pay it (obv) and the decision needs to be reached as to who to tax more

More broadly, it’s a myth that “right wingers” don’t think the rich should pay much tax. The debate (on LC at least) seems to revolve around; who “the rich” are, with definitions ranging fromanyone who has a tax paying job to a hedge fund manager; and how they should be taxed (on income, wealth or consumption).

Wasn’t it Peter Mandelson who said “We’re very happy to see people getting filthy rich” (and implicitly therefore very happy for the working/middle classes to bear the tax burden of statism)

You don’t normally get such a civil exchange of violently opposed views around!

But don’t be so complacent as to think you have “proved” that we tax property enough. All you have proved is how misleading aggregate macro-statistics can be – so thanks for that. You have very ably shown that a cross-country comparison of the sum total of property tax tells people precisely nothing about whether the country’s tax system is doing a brilliant or terrible job of taxing large wealth concentrations. But if you think they are not a problem in the first case, I can understand your consequent lack of curiosity about the further intra-country details.

Remember what this thread/post was about: the division of taxation within a society. You can achieve “enough” property taxation by taking £2000 from every property-owning household, flat, – which is close to what council tax* will achieve if the bands never shift.

You would still have a system which is lousy for addressing inequality (if you care about it . . . ) and bad for dealing with asset-based instability. So your OECD comparisons prove very little, or nothing. Buried within those OECD stats might be some countries that have a far more progressive way of hitting their property-tax levels.

Another failing of the OECD methodology is the choice of denominator. Different economies may have very different wealth-GDP ratios. Dividing through by property wealth (as the IFS figure does) gets a very different proportion.

When you get a figure that makes your views too obviously right, it’s time to get suspicious.

Now, I really need to get on with quantitative easing . . .

*(in fact, check out table 14 here http://www.statistics.gov.uk/StatBase/Product.asp?vlnk=10336 for more on that)

OK. I thought that’s what the per se was doing, but as I went on to say, don’t you worry about some other things “per se” that also only really have consequential grounds for doing so? anyway, I understand your position.

That’s not exactly how the Founding Fathers saw it, but what did they know?

That’s what the per se is meant to indicate. Many think that, in and of itself, inequality is something that must be addressed, solved, reduced. I don’t….although I’m always willing to listen to reasons as to why I should, like, as you say possible consequences of it: all people named Tim will wake up with a micro-penis the day after post tax post benefit Gini in the UK hits .50 would get my attention.

But “inequality exists, we must do something” doesn’t convince me. It concerns me about as much as the fact that the Duke of Sutherland owns 280,000 acres of ghastly Scottish moorland. So what?

I was going to answer that Tim cannot address this point because the stats on wealth inequality are so outrageous that the rich and the crazed little market ideologues that run along after them can only respond by blanking the issue, pretending it doesn’t exist and hoping that thereby nobody else will notice it.

@27 Then Tim responds with “I just don’t give a damn, sorry, but I don’t. Inequality per se just isn’t one of those things I worry about.”

Speculation is almost always larger than the primary market. In fact, in some ways, it needs to be. The futures market for wheat is hugely larger than the entire global grain crop. It also transfers risk from farmers to speculators and if you going to try and transfer and disperse risk you need to be going from a smaller pool of money to a larger one, otherwise you just ain’t dispersed it, have you?

Secondary trading on the stock market is very much larger than primary issue. FX is vastly greater than the trade flows which is helps finance….

Indeed, Robert Shiller’s argument about what allowed the housing boom to get out of control was exactly that there wasn’t a large enough speculative market in which people could go short.

weird …. what if empirically it turned out to be the case that inequality had worrisome consequences (lower growth, more social strife), wouldn’t that be worth worrying about? I don’t see how you can have convinced yourself this is not the case. I don’t see how this possibility is any less worrisome than, say, the possibility that a bloated left-wing europhile government might have worrisome consequences, which is something you do worry about. You might say that you’d worry about lower growth and more social strife, not inequality per se, but then wouldn’t you say that you worry about statist governments per se?

Or is it a division of labour – do you leave worrying about inequality to others?

(Giles, hope to see more of you here)

I think my central challenge to your CiF piece is to the following sentence:

“As the Guardian noted in 2001, speculators are “an exceptionally useful lot, working day-in, day-out, risking their own wealth to supply a thing called liquidity … Without liquidity, markets dry up, prices become volatile and goods become difficult to shift”.

Speculators may have some role at the margin but it is insane – and exceptionally destructive to honest economic activity – when they make up 90% or more of the market.

The claim that letting speculators rule the roost is a brilliant idea really needs to be made to those who lose their businesses due to speculation-driven price spikes & crashes and crucially, to those periodically going hungry across the world every night due to speculation and hoarding in food staples.

(Gratiutous self refrence: I’ve been banging on about this so much for so long that other people now put the link to Nationmaster into the comments at CiF when writers claim that property is lightly taxed in the UK).

Now, having disposed of the idea that we don’t tax property enough….I’m entirely happy with the idea that we should tax differently. I’m all aboard the LVT train (although I manage to avoid some of the more Georgist nonsense that accompanies it). I’d also drop in my pet point about instability here: it’s not housing prices that vary from boom to bust, it’s the right to build a house on a piece of land: the planning permission bit. Change (ie damn near abolish) the planning system as is and you get rid of that…..and of course an LVT would help as well.

As to wealth taxes, well, I just don’t give a damn, sorry, but I don’t. Inequality per se just isn’t one of those things I worry about.

I don’t have a problem with arbitrage profits – they can’t whip the money out of nowhere. It is leverage that bothers me . Sorry, more self publication:

http://www.guardian.co.uk/commentisfree/2009/aug/28/transaction-tax-fsa-turner

But I still don’t think the basic point that Strategist raises has been answered.

The fact that we manage to raise 5% of our revenues through Council tax, which accounts for half of our property tax, say, and which remains so incredibly regressive (tax a 400k property the same absolute amount as a £4m property), just shows that we are able to get high in the OECD property tax tables while taking far more (as a proportion of either wealth, or income), from the poor under this category, than the rich.

So “we do a lot of things that are called Property tax – we don’t need to do more here” falls down for me. Replacing council tax with something that is actually proportional to property or land or wealth value, and you might go no further up the OECD table, and still introduce a system that is less regressive and more likely to deal with instability.

So (before going out to the gym), my basic point remains: we have large wealth inequalities, and our current tax structure does little to address them. That we have a high place in the OECD property tax table just shows you that our current system of property tax is not very much proportional to individual levels of property ownership – it is wide rather than deep.

Agree with you about VAT. That will go up too.