Martin Meenagh blog

It's May, So It's Big Frank Time You never knew whether he was going to sing like the choir celestial or lamp someone or both. Das is der mann....

Somewhere in time--well, ninety-six years ago to be precise--the Irish rebellion happened. By some strange synchronicity, I notice that the anniversary was welcomed by headlines such as 'Ireland Meets Austerity Targets' and 'Ireland Proves Itself to Germany'. Ah well. Still, in faith I know that resurrections happen. Still...

I wrote about the News International scandal and what it would reveal nearly two years ago. It's one of those moments, like Dallas, or Watergate, or Mary Meyer or David Kelly, when you glimpse the skull beneath the skin of the West, if you have the courage to look at it. The one thing that struck me, though, today, hearing of Rupert and James Murdoch's testimony, is oddly enough another echo from the sixties; If You Remember News International, You Weren't There....

Currency Unions After the Euro

The world is full of currency schemes. SDRs, Khalijees, East African Shillings, Ecos, ASUs, and Tasman Dollars currently follow stages of gestation and quickening which would trouble St Thomas Aquinas, for example. There;s nothing, after all, that wrong with a currency union per se. I live in one; the purchasing value of the pound in London, the North, and the various parts of Cymru-Kernow varies, both between the regional areas and with regard to the Isle of Man, Scotland, and Northern Ireland, which all technically issue their own currency. I suppose since regional inflation is a given, regional real interest rates differ, but there is no mechanism for the difference to be expressed beyond regional differences in unemployment and government spending. From a London perspective, the thing seems to work reasonably well.

You would have thought that the eurozone's ongoing crisis had poisoned the well of any less national schemes, but the world seems to have decided that the continental folly is simply a matter of the exception which proves the rule and to leave things at that. Europe, after all, should never have had a single currency, or at least not when it did; a parallel currency yes, a single currency, no.

The single currency enabled an historically underperforming Germany to lock in a low rate of Deutschmark to the euro, so that when it returned to form after digesting the East, it had a built-in trade advantage. An historically highly-rated set of Mediterranean currencies were allowed to join and to exploit the new system to fuel a credit boom, at the cost of ever devaluing externally again. They weren't forced to reform internally. A low-wage east with flexible currencies was allowed to offer cheap, skilled labour in a way that undercut the South's labour advantage when times got tough, and that built up the German-led North's surplus; and a worldbeating financial centre with a bond and exchange market big enough to make the currency a world reserve, Britain, was allowed quite rightly to stay out.

No adequate mechanism was developed for adjusting the pressures in the different parts of the zone, other than an interest-on-bond mechanism that invited shady gambling and the form of financial badness known as arbitrage. The thing was a triumph of hope over experience; Miss Havisham married off to Mr Micawber.

Now that the crockery is flying next door in so obvious a fashion, why are so many states playing with currency ideas? I think that there are three reasons, beyond the obvious one that would cut this little ramble short, that it's in their interest to do so. One is the preparation which some might think to make for the gradual decline of the United States Dollar, given the way the Americans seem determined to run their economy.

A second is the evident and unfolding fear that China is on a long-term path, gilded by gold purchases and hedged bets that mysteriously appear about two months before renmimbi bond issues occur in Hong Kong, to float its currency without buying into the IMF's Special Drawing Right. This is something that could very much destabilise the world.

My third reason is the way reviving the ghost of the Imperial pound sterling could make sense of trade between Australia, Canada and New Zealand, and help eliminate the danger that those countries become satraps of China or India in the way that the African seaboard is being invited to do. Who knows? With Singapore and Hong Kong gone, and trade routes oriented North and not West, someone has to give Perth a reason to exist whilst restraining the Aussie bubble.

But perhaps my vision is confused, or at least too limited. Fiat currency, like the British monarchy and to a lesser extent the Vatican, is often most to be suspected when it is pretending to be immutable and eternal. It's not that long ago that banks issued their own notes, which could be accepted as payment for taxes or in settlement of third party debt; nor, beyond that, is the time when Gold mattered that far away. What is far away is the nominal constraint which the existence of private or gold-based money placed on governments and banks, and many people--not just Ron Paul--crave that time back.

Once you see that, you run into an epiphany like a drunk sobering up on coke in a bar. Money schemes aren't there for the expansion of productivity or trade as such. They reflect what the philosophers would call ontologically embedded paradigms of control. States have somehow realised what critics of money muliplier theory and neoclassical economics are grasping--that banks create and destroy electronic money of any denomination as they wish without a link to an existing deposit or reserve.

The logic of that is that states and central banks cannot control the money supply. To maintain the illusion that they do would require permanent recession, or local currency integration--a thing which, in turn, would allow the oligopolies and abnormally profiting conglomerates that globalisation throws up the chance to dominate several countries whilst pretending to be competitive across a region or the world. The needs of capital and power, the old Iron cross, thereby cohere. Perhaps international bureacracies and the social science class which run most modern states then see that their empires need clothes; perhaps they are seduced by the idea that this time, things will be different.

When the history of the time in which we live comes to be written, I think that its strangeness will be seen to have preceded the beginnings of the understanding that capitalism, computers and system-thinking had changed the world just as the resources began to be severely depleted. States undermined traditional families whilst pretending to take over their duties, and life became a consumer choice whilst many drowned in debt. A single currency for the region was grasped at by many as a way of pooling power in the face of the choices that this depletion of resources, families and spirits imposed inside and outside of people's heads. As in the old Roman story, people sought to transfer their slavery from ideas to monies to the interests of capital and back again, in ever increasing revolutions.

But then, I hope, enough will say, 'stop', just as a man nailed to a tree just under nineteen hundred and seventy nine years ago in Jerusalem did. I wonder what will happen then?

The Speech the Chancellor Should Have Given on Budget Day


Mr Speaker, our budget this year takes place in a changed economic environment. It is now clear that we live in a global economy which has so fundamentally changed from its previous form that we would do well to call it 'globalisation 2.0'. In this new dispensation, a series of imbalances compete with periodic, oil-based contractions to reorganise global and national economies.

It is clearly the case that cheap oil, by which I mean oil at viable prices, which can be extracted relatively easily, is a thing of the past. Though prices may fluctuate, and though there are clearly reserves that will last for centuries, oil is now found at depths and temperatures and in ways that stretch technology to the limit, and which invite ecological disasters.

We, on the other hand, in the UK are lucky Mr Speaker. Not only are gas and oil fields still producing for export--with a combination of English and Scottish technology and integration that cannot be disentangled--but British territories overseas, such as the Falkland Islands, are well placed to exploit the inevitable rise in the price of oil, which will be sustained by Chinese, Indian and ASEAN demand as much as by the diminution of supply elsewhere for many years to come. So the British budget of 2012 starts on a good note.

Things get even better on the most basic level of energy when we consider that this island stands atop at least two centuries worth of coal. Mr Speaker, I propose to divert fully half this year, and then half again in the following years, of our subsidies to unproven and unreliable wind and solar technologies (but not wave and nuclear power) to provide for a general zero tax on any cooperative enterprise engaged in opening new mines or reopening old ones, so long as liability for any failure is accepted by the new co-ops or companies.

The economy of any strong country, Mr Speaker, is based on an ecology of economic interests. I propose to recognise that different businesses require different treatment. Therefore, to encourage the small and medium enterprises that are the backbone of any decent society, I propose to merge the national insurance and tax systems and to develop a new, cloud-based computer programme which all small businesses can join. In this 'cloud template', small businesses would be in direct touch with Her Majesty's Revenue and Customs and could, at any one time, see how much is owed in tax, when the tax is due, and input new transactions. I propose that the work of developing software for this new system be funded by a Treasury prize, rather than government procurement, of £1 million pounds, provided the creators allow for open licensing of the technology. I also propose a new, fifteen per cent tax rate on small businesses to replace corporation, capital gains, dividend, and income taxes as they apply to those businesses currently.

I also propose one, flat, unavoidable tax for larger businesses, with an elimination of loopholes and general avoidance measures, to be set initially at twenty six per cent. I propose the extension of the Freedom of Information Act and the Human Rights Act to large businesses, on the basis of a concurrent and balancing elimination of burdensome employment and equality legislation.

Mr Speaker, I propose the creation of a national debt fund, into which payments from energy taxes and Value added tax can be made, with the express purpose of paying down national debt and paying out on pensions liabilities. The fund shall be activated when our deficit is closed.

To that end, I propose an aggressive programme to close the deficit. Mr Speaker, I propose the suspension of international aid payments; the elimination of the Departments of Business, Culture Media and Sport, and Overseas Development; the elimination of the Scotland Wales and Northern Ireland Offices. I also propose the creation, under the auspices of the House of Lords, of a Government Commission to monitor outsourcing and procurement contracts on the basis of delivery, cost and efficiency and to impose penalties on any deal. I propose that a general debt to GDP target be adopted, and that all government activities should be assessed in terms of the target. When we return to surplus--which we will--I propose that the debt be paid down year-on-year.

I propose that the National Lottery be amended so that present revenues go to good causes, but that any future revenue increases go to the national debt, and also that tax returns submitted on time be immediately associated with a number that gains a place in a lottery, capped at two million pounds prize money. I propose the reinstitution of the 10% tax on bets which can be paid before or after they are resolved. If we are to allow gambling, it should not be the House that wins, but the people.

Mr Speaker, I propose that government subsidies for rail companies and universities end. If any rail company should be unable to bear the loss, I propose that it be transferred on a cooperative basis to a new British Rail Federation, and if any university go bankrupt, I propose that it be absorbed into a new, transferable-module, open-access British University under the guidance of the Open University.

At the heart of economic management should be democracy and self-determination. My Right Honourable friend, the Justice Secretary, will be bringing forward proposals for a referendum on our membership of the European Union shortly. Already, more than half of our trade is based outside Europe, Mr Speaker, and we are the tenth largest exporter in the world. We have no hope of developing our position and our industries if we measure our comparative advantages in terms of what remains an alien entity which needs us, our exports and our subsidies, more than we need it. In addition to the EU's effect on our economy, however, we should not lose sight of the effect of local government. Often, local government and agencies drive up costs, impose taxes, and go against local wishes and local business whilst failing in basic duties to collect rubbish and fix roads.

We propose, Mr Speaker, on referendum day, to suggest two new questions. One would, if assented to, allow for the elimination of half the council seats in England and Wales; another would devolve local taxes to local areas on the basis that they submitted their budgets to an affirmative referendum of local people every year. We are confident that, in this way, we can allow people to take power back over their communities, as well as lowering costs.

Mr Speaker, our model of tax payment has for too long been one based on the centuries old idea of coercive tax inspection. I propose a new model. On birth, every registered citizen will be granted a basic bank account held electronically at the Post Office. Any transactions in this account will be taxed at zero per cent. Should citizens wish to maintain their accounts upon maturity, a ten per cent tax will replace all income and national insurance taxes provided that they allow the tracking technology in the accounts to migrate to any competitive high street account which they choose to replace their post office account with. Alongside a £10000 rate of income tax, the advantages to the state and to the individual of this form of tax payment are obvious, Mr Speaker.

I also propose a commission to reorganise Her Majesty's Revenue and Customs, to return dedicated tax inspectors rather than call centres, and to gradually shift to a new system of electronic, real-time tax collection through banks or the post office, which would be accompanied by a flat 10% rate to reflect the ease of use. Those who wished to maintain the present, end-of year paper based system and monthly pay-as-you-earn, could of course do so, but at the cost of present taxation.

I propose two commissions of ordinary people and experts under the aegis of the House of Lords. One would examine reform of the banking, shadow banking, and investment system with an eye to allowing the development of a forest of credit unions, mutual societies, health insurance groups, responsible retail banks, and merchant banks which can free us from the threat of ever again facing the consequences of oligopoly banking. Another would carefully examine our Welfare State, which is now approaching its seventieth year, with the aim of regenerating and redeveloping the links between the citizen and their legitimate public needs, and their reform. Once the commissions make serious proposals, my honourable friends propose to place them as referendum questions before the British people.

Finally, Mr Speaker, I propose that citizens be given an educational allowance to offset against the cost of skills or language acquisition, to spur new growth, to encourage our people to look east, west and south, and to take advantage of a world which still has need of our skills. I commend a Budget for energy, for efficiency, for growth, and for debt repayment to the House.

Prediction is a dangerous game...

especially about the future, as the late great Yogi Berra is rumoured to have said. Barack Obama's presidency is a case in point. I thought between around 2007 and 2010 that he would win the Democrat nomination, beat McCain--and be a one term president, and said that to friends as well as writing it in various places before events unfolded. The problems of the American economy, which people are pretending is out of the woods, and the fissiparous and demented nature of American politics have all suggested that the best Mr Obama could hope for in 2012 is a split in the electoral college and a replay of Bush v Gore in his favour, and I think that if an election were held today, a tie would result.

With the retirement of the Republican A-team at the start of the race--Petraeus, Rice, Daniels, Ryan, and Bush--I also thought that the only two people who could win the nomination on that side were Perry and Romney, and Perry imploded oddly, and early. My own sympathies veer towards Ron Paul, but let's face it, his monetarism is nuts and goes against the reality of what money in an electronic age is, his supporters are often quite bad people, he's a devotee of Ayn Rand's Satanism and he won't take responsibility for the newsletters sent out in his own name.

Mitt Romney, however, is a much stronger candidate than many people seem to be allowing themselves to believe. Of all the Republican candidates, he is the least religious (a bizarre thing to write about a former Mormon Bishop) and though he is very weak in evangelical states, I'm not convinced he needs the votes of the Godly to win. He's well financed, he has now proven himself time and again, and, though badly damaged in the primaries, a general election in a year as strange as 2012 is a proposition which has a way of changing things. What was said in the primaries may just stay in the primaries, especially since both Romney and Obama will be hunting the partisan-averse independents. Romney's combination of Wilkie-but-moral outsiderness (I can't see him giving Madame Chang Kai-Shek one for the cause as Wilkie did) and the aura of business success that Americans fall for occasionally ought to do him some good.

Finally--and, again, for the purposes of credibility, I delivered a paper on this point some eighteen months ago--Barack Obama's signal domestic achievement, healthcare reform, is almost certainly unconstitutional. If it is based around the general power of Congress to tax, the tax is unfair and against the tenth amendment, and not genuinely dedicated to revenue raising as detailed in Article 1 section 8 of the constitution; if it is a regulation of commerce, it is coercive of an intrastate matter best dealt with under the police and hygiene powers of states; if it is coercive of doctors and employers and compels the sharing of medical information and the provision of specific treatment it is against the fourth, fifth and ninth amendments; and since it compels individuals to do something which is otherwise voluntary and which does not benefit anyone else, it is an expansion of federal power too far and should properly bring down a modern ruling on the basis of the ninth and tenth amendments. The rottenness of America's vast, greedy and basically duplicitous insurance industries can't be used to justify a constitutional abomination like this, and the Supreme Court shouldn't feel worried about saying the obvious.

In other matters, Mr Obama has done relatively well, but foreign affairs are things that Europeans and eggheads care about and modern Americans are generally unsettled by the absence of war. He was right to save the car industry, given the human suffering that would have taken place had he failed to do so, and the banks were saved with federal money and commitments before he took office. He's avoided the mis-steps of the Clinton administration, and has taken serious decisions, like the one which resulted in the termination of Osama Bin Laden. He has also, however, continued the horrifying expansion of the executive to the point of drone wars, assassinations, and specious national security assaults on liberty, and I don't notice him reining in torture, abortion, or racist executions, which are stains on the modern American character.

So, Obama should be a one term president. And yet, and yet...I can't quite bring myself to see the circumstances in which that would come about. Catholics don't generally vote as a bloc, and many aren't in lockstep with their Bishops, and indeed many are still present in the working class currently being assailed in states like Wisconsin, meaning that any Republican is going to have a hard time. Mr Romney can't seem to help giving offence, and is the product of what John Medaille calls the 'fire' economy (Finance, Insurance, and Real Estate) which many suspect have got America into trouble. The administration has taken action to appear to be dealing with the student debts under which many Americans are drowning, and Mr Obama has raised more money, won more support amongst women, had a smoother route to nomination, and avoided more mistakes than his opponent. He also plays by Chicago rules, so I imagine a ground operation to radically limit the attempts of Republican legislatures to disenfranchise people accompanied by the acceptable sorts of voter fraud and sharp practice in the general election.

Obama is also helped by the sheer badness of the GOP Congress, which is about as popular as a Stephen King clown at a meeting of the feminist AA. Paul Ryan seems to be auditioning to be some form of combination of LBJ and a stomach enzyme, and the rest of them are actually worse. The bubble president is being boosted by a bubble GOP which appears literally demented, and which now doesn't talk to ordinary Americans, and the president's favourite pose as a sort of Liberal Republican of the old school, before the military-industrial empire, seems to me to be paying off with independents in direct proportion to the energy and activity of Congress. Someone really ought to take them aside and tell them to do nothing.

Most of all, the Democrat coalition of the working class, the left, the old, and the brainwashed young, allied to lawyers, media oligopolies, professional women, identity groups and environmentalists is a broader and thicker one than most people imagine, and clearly at less risk of a split than that on the other side. Given that it is difficult now to imagine a third party run in 2012--organisations, ballot permissions and state campaigns generally don't arise from the clay in the Sprinng--a sort of 51-43 repeat of 2008 is more than viable in November, as a 50-50 in April hypothetically would be.

Yet we move in a fog. No one quite understands how electronic banking works, or how toxic the combination of derivative debt and misplaced stimulus may have been (I don't pretend to), events in the gulf are underway which could yet result in a Persian war, and a general or regional economic collapse is not impossible. Events, dear boy, events, as Harold Macmillan used to mutter, could yet intervene in American politics against Mr Obama. Republicans should not hope for such, though, since the tenor of history suggests that serious problems enhance and dramatise the presidency for the period that people think Presidents can do anything at all about them. Even Jimmy Carter had an Iran bounce. Barack Obama is not, on the evidence of his present term, going to offer himself up on a plate since he is, at least, competent.

Since 2010, I haven't been able to help thinking, that the president of the United States may have avoided the one-term, David Dinkins style footnote that many had lined up for him. If that is true, then, as Yogi Berra would have said--its all because he came to a fork in the road, and took it. That's a disquisition for a whole 'nother blog.