The New Republic has republished 'Why I Hate Christmas -The Grinch has it right'
by James S. Henry. First published in 1990 he makes an economic argument against
Christmas. In the spirit of a modern day scrooge he provides a litany of complaints,
some of which are contradictory. There may be some sense in curbing the excesses
but what has provoked this response are his comments on the exchange of presents.
Or as he puts it a throwback to the barter economy 'in which people have to match
other people's wants to their offerings. Of course, money was invented precisely
to solve this "double coincidence of wants" problem.' and if we were to monetise
the process we would show it for the pointless exercise it is. At a superficial level
there is a truth to this but it also shows a misunderstanding of basic economics.
The difference between exchanging physical gifts and money is that the goods are
real wealth and cash is just a token for it. The goods may be tat but there will
have been a number of other transactions creating employment and income that can
used to buy more useful wealth, in effect a redistribution of money. All these transactions
would be lost if we just exchanged cheques that sat within a savings account. This
argument is a microcosm for the wider economic understanding where the gifts represent
the dealings of real wealth in the real economy and the exchange of cash is very
similar to movement of money to shares or other derivatives with in the asset economy.
A theme explored in Wealth Creation and Wealth Destruction.
If Christmas were purely an economic event Scrooge and his latter proponents would
have won the argument a long time ago but life is for living and we like our festivals
in whatever form they come; be they solstice, spring, Lunar; secular or religious.
22nd December 2013
Nelson Mandela- The man and his legacy
The BBC gave the announcement of Nelson Mandela's death a suitably grave treatment
by interrupting the schedule and whilst the event may have justified it, the news
report soon became repetitive as they ran out of details. It could have gone on like
this but along with the predictable coverage of the historical struggles it soon
provided an insight into the man behind the icon and the contemporary South Africa
he created. This was clearly an intelligent and able operator but a common theme
to the warm memories was someone who could understand the needs of others and a propensity
to forgive. It is perhaps these two qualities that go to the core of his greatness.
They can also be seen as sign of willingness to compromise.
I make this point in some Radio 4's 'Thought for the Day' way. As I see it compromise,
or the need for it, is a driver in the human decision making process and a theme
that I explore in Wealth Creation and Wealth Destruction. I cannot know where Nelson
Mandela's understanding for the need to compromise came from (maybe I should read
his autobiography) but I suspect it was formed from his experiences on Robben Island.
He was imprisoned in his mid-40s, a time when many men and women in positions of
power can develop a tendency to be pompous which if left unchecked leads to self-importance
and a belief in ones opinions regardless of their rightness. The results of this
can be seen in a number of African countries where popular freedom fighters once
in government slowly turn into autocratic despots. This is not just limited to Africa,
western leaders can also susceptible to this pitfall but the democratic institutions
are generally strong enough to remove them before it becomes a problem. Nor are the
rest of us immune but having a boss to answer to generally forces us to consider
our actions. In prison Mandela had compromise by answering to the regime but he also
found ways of fighting back with dignity giving him an understanding of his oppressors.
When Mandela was voted in as South Africa's first democratic President he choose
not to outstay his welcome, like many of his contemporary's, and served only one
term. This is perhaps his greatest legacy as it established the concept of limited
terms served that later Presidents will find hard to overturn. In doing so the office
is now larger than any individual and even leaders have someone to answer to.
8th December 2013
Is this the end of rising UK house prices
There are a number of contradictory indicators on the UK economy - On a personal
level I got unusually caught up, on Saturday, in a traffic jam journeying to my local
town centre. By itself nothing of note but the last time I remember it happening
was before the crash when it was a regular occurrence. It was also noticeable on
that visit that a number of the boarded up shops had re-opened. These new shops were
mainly of the Poundland variety but it all provides a positive sign for the economy
that 'people' are starting to go out to spend. As with many I attribute this spurt
of growth to the stimulus given to the housing market but strangely there are very
few 'for sale' signs about for this mini-boom. Now it could be that houses are being
snapped up quickly but that never stopped estate agents advertising their successes,
with under offer or sold. Again by itself this could be a curiosity but Friday's
(29-11-13) Guardian reports that house prices are down 0.2% in October according
to the Land Registry. On the same page was a report that Kingfisher the owner of
B&Q were seeing flat sale despite a boost from the aftermath of the Saint Jude storm.
The general economic view is that the Land Registry figures are a blip but it could
be that the housing boom is running out of steam and if this is the case the reasons
are twofold. First the much of the housing activity seems to be made up of those
with money already; overseas buyers and those investing in buy to let. For the remaining
buyers demand has been pent up for five years and in the future those with the resources
to buy will be reduced. The buy to let investors in the short term are one of the
drivers for rising house prices but in the longer term it will be negative as they
look for suitable returns which will inevitably result in higher rents. This in turn
impacts on the wider economy with less money circulating in it and further reducing
number of those with the resources to buy. This is all before The Bank of England
pulled the plug on cheap money to mortgage lenders so we could see significant slowdown
in house price rises with the consequences for the wider economy. Without the new
money currently entering the real economy from mortgage lender growth the current
growth will stall.