Saturday 19 December 2009

new yorker

The New Yorker's scintillatingly entitled The Weekly Politics podcast does a good job on banking this week. Highlights:

1. If Obama had focused on banking before healthcare, he could have really done something. The bankers were terrified and begging, and would have accepted real regulation in return for being bailed out. Having been bailed out, they think, because they are just normal people, that the resulting profits are the result of their own cleverness. They are now not really interested in meeting with Obama.

2. But the profits are the result of being able to borrow money at almost no interest, thanks to the government. They can either lend it at higher interest or invest it in bonds. It is, therefore, impossible for them not to make money. To start handing out huge bonuses to 'superstars' is to try to pull the wool over everyone's eyes and try to take credit for a hugely successful (so far) government intervention. It is totally reasonable to put a tax on these bonuses. It is not (just) political grandstanding.

I repeat, I am in favour of strong banks and big wages for good people, but not insane wages, since you can get people just as good with merely big wages. They're just these guys. I'm all about the market, and it isn't working, because bankers make profits from stuff they haven't done. It's like people think they're clever when their house price doubles in ten years: this is money you haven't earned, people. It is because you happened to be rich enough to take a disproportionate benefit from an economic situation which lots of people who can't afford houses were also contributing to. Stamp duty is a way of taxing money people didn't earn.

(I know it is a bit more complicated than this. A bit. If I'm wrong, which seems unlikely, tell me. I will happily retract. I mean, 'unhappily retract'.)

3 comments:

Matthew said...

When your house goes up in value you are not really making money at all. If you ever want to move, your new house will cost that much more money. When you die, your children will inherit that bit more, but then it will cost them that much more to buy a house. You are in a better situation than non-home owners - but they are now worse off than before; you are not better off.

Robert Hudson said...

When your house goes up in value, yes, you are not getting richer in terms of all moving house. However, all the people who do not have houses at all (if you can imagine such a thing) who are also contributing to the booming economy from which you are worklessly benefiting are the ones who the stamp duty is there to help.

Anonymous said...

Mmm. Yes but. Your house goes up in value but you're not compelled to spend that money on another house that's gone up in value proportionally (even though that's what most people do). You/we still made money from sitting on your/our arses, even if you/we only actually have that money for the brief second it rests in your/our accounts before being spent on something better/bigger/flashier that you/we can afford because of the money you/we made while sitting on your/our arses. The main difference then, what we're saying, between bankers' bonus taxes and stamp duty is that one's levied on them "evil" bankers and one's levied on us "normal" people. Which is no difference at all in terms of fairness, merely a difference of mass perception.

(Actually, I've been struggling with this comparison on a personal level because I wonder whether anyone actually does object to paying stamp duty? And then I read it back, realise I've asked whether there are people who object to paying taxes and accept that I should never be let out in public.)