UK: 50 per cent tax on bank bonuses

It was the government’s money anyway…

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FT.com / UK / Politics & policy – Banks hit by 50% tax on bonus pay-outs

Banks will be hit by a 50 per cent tax on bonus pay-outs, Alistair Darling, the chancellor, said in his pre-Budget report, in a move that will inflame bankers but is likely to be welcomed by the general public.

The first £25,000 of bonuses will be exempt from the tax.

The Treasury estimates that the measure – which comes into immediate effect and runs until April 5 next year – will affect 20,000 bankers. Lord Myners, the City minister, recently estimated that 5,000 bankers earn more than £1m in bonuses.

“We hope it will be a disincentive for banks to pay bonuses,” said one Treasury official.

The windfall tax – which politicians argue is justified, as banks have generated excess profits as a direct, or indirect, result of the bail-out of the banking system – will apply to all banks and building societies, including groups that operate in the UK under a European Union branch system.

The tax, to be paid by banks, will be levied on top of the marginal tax applied to individuals’ bonuses.

“Wake up, gentlemen”

After a certain age, financial rewards must lose their glitter…

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‘Wake up, gentlemen’, world’s top bankers warned by former Fed chairman Volcker – Times Online

One of the most senior figures in the financial world surprised a conference of high-level bankers yesterday when he criticised them for failing to grasp the magnitude of the financial crisis and belittled their suggested reforms.

Paul Volcker, a former chairman of the US Federal Reserve, berated the bankers for their failure to acknowledge a problem with personal rewards and questioned their claims for financial innovation.

On the subject of pay, he said: “Has there been one financial leader to say this is really excessive? Wake up, gentlemen. Your response, I can only say, has been inadequate.”

China Exports May Be Cut by Climate Plan

Hey, what about free trade??

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China Exports to U.S. May Be Cut by Climate Plan – Bloomberg.com
By Mark Drajem

Dec. 9 (Bloomberg) — Legislation pending in the U.S. Congress to cut greenhouse-gas emissions may reduce imports of Chinese goods by 20 percent, a World Bank study said.

The provision, included in the measure passed by the U.S. House in June, would tax imports from countries that don’t enact curbs on carbon-dioxide emissions.

Senator Sherrod Brown of Ohio and Representative Sander Levin of Michigan, both Democrats, say any legislation in the U.S. to limit pollutants must include the so-called border measures to tax imports. The Senate hasn’t yet acted on the greenhouse-gas measure.

“People haven’t thought through the full implications of those measures,” Aaditya Mattoo, a World Bank economist and one of the paper’s authors said in an interview.

The threat to imports should be part of what drives negotiations at global climate talks in Copenhagen this week, said Scott Paul, the executive director of the Alliance for American Manufacturing, which represents the United Steelworkers union and U.S. Steel Corp.

“It shows that the right border measures would be effective,” Paul said in an interview. “So it would be in the interest of India and China to participate” in any global agreement to cut emissions, he said.

The U.S. imported $338 billion in goods from China in 2008, more than from any other country.

Advocates say the fees are needed to prevent price- undercutting by manufacturers in countries that won’t match U.S. or European Union climate-change standards. The World Bank study said U.S. and EU manufacturers of steel, cement, plastics, paper and chemicals have reason to be worried.

the hubris of economics

The hubris of economics
Barry Ritholtz | Nov 4, 2009

Given the failures of the profession — failing to anticipate the worst recession in decades, missing the warping effect of the housing boom, not recognizing the credit collapse until too late — a damning indictment of the dismal science might have been more appropriate.

Perhaps I can be of assistance.

There are many areas I would have liked to see the Economics Crisis article explore: The lack of Scientific Method, the mostly awful performance of economists, its misunderstanding of the value of modeling, the bias inherent in Wall Street variant of economics, and lastly, the corruption of economics by politics. I will just touch on some of these; you can fill in much of the blanks yourself.

Let A Hundred Theories Bloom

Let A Hundred Theories Bloom – International Business Times -
By Joseph E. Stiglitz
Oct 26, 2009 @ 02:51 pm

The economic and financial crisis has been a telling moment for the economics profession, for it has put many long-standing ideas to the test. If science is defined by its ability to forecast the future, the failure of much of the economics profession to see the crisis coming should be a cause of great concern.

But there is, in fact, a much greater diversity of ideas within the economics profession than is often realized. This year’s Nobel laureates in economics are two scholars whose life work explored alternative approaches. Economics has generated a wealth of ideas, many of which argue that markets are not necessarily either efficient or stable, or that the economy, and our society, is not well described by the standard models of competitive equilibrium used by a majority of economists.

Behavioral economics, for example, emphasizes that market participants often act in ways that cannot easily be reconciled with rationality. Similarly, modern information economics shows that even if markets are competitive, they are almost never efficient when information is imperfect or asymmetric (some people know something that others do not, as in the recent financial debacle) – that is, always .

A long line of research has shown that even using the models of the so-called “rational expectations” school of economics, markets might not behave stably, and that there can be price bubbles. The crisis has, indeed, provided ample evidence that investors are far from rational; but the flaws in the rational expectations line of reasoning-hidden assumptions such as that all investors have the same information-had been exposed well before the crisis.

China Consolidates Its Lead in Global Trade

China Consolidates Its Lead in Global Trade – NYTimes.com

“Although world trade declined this year because of the recession, consumers are demanding lower-priced goods and Beijing, determined to keep its export machine humming, is finding a way to deliver.

The country’s factories are aggressively reducing prices — allowing China to gain ground in old markets and make inroads in new ones.

The most striking gains have come in the United States, where China has displaced Canada this year as the largest supplier of imports.”

Economists for an Imaginary World

Bringing Economic Theory Back Down to Earth – washingtonpost.com
By Harold Meyerson
Wednesday, September 30, 2009

“The worldly philosophers” was economist Robert Heilbroner’s term for such great economic thinkers as Adam Smith, Karl Marx, John Maynard Keynes and Joseph Schumpeter. Today’s free-market economists, by contrast, aren’t merely not philosophers. They’re not even worldly.

Has any group of professionals ever been so spectacularly wrong? Pre-Copernican astronomers and cosmologists, I suppose, and for the same reason, really: They had an entire, internally consistent, theoretically rich system that described the universe. They were wrong — the sun and other celestial bodies save the moon didn’t actually revolve around the Earth, as they insisted — but no matter. It was a thing of beauty, their cosmic order. A vast faith was sustained in part by their pseudo-science, a faith from which such free thinkers as Galileo deviated at their own risk.

As it was with the pre- (or anti-) Copernicans, so it is with today’s mainstream economists. Theirs is an elegant system, a thing of beauty in itself, as the New York Times’ Paul Krugman has argued. It just fails to jell with reality. And unlike the pre-Copernicans, whose dogma posed a threat to those who challenged it but not, at least directly, to anyone else, their latter-day equivalents in the economic profession pose a clear and present danger to the well-being of damned near everyone.

The problem with contemporary economics, at least with the purer strain of free-market economics associated with the University of Chicago, is not simply that it failed to predict the near-collapse of the world financial system last year. The problem is that it believed such a collapse could not happen, that all risk could be quantified by mathematical models and that these quantifications could help us correctly price just about everything. Out of this belief arose the banks’ practice of securitization, which put a value on all manner of mortgages and enabled buyers to purchase and swap them with the certainty that such transactions reflected an accurate judgment of the value of the properties and the risks associated with them.

Except, they didn’t…

read more…

human brains evolving, but why?

This post is dedicated to those who think too much.

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Study finds humans still evolving, and quickly — latimes.com

“In the last 5,000 to 10,000 years, as agriculture was able to support increasingly large societies, the rate of evolutionary change rose to more than 100 times historical levels, the study concluded.

Among the fastest-evolving genes were those related to brain development, but the researchers aren’t sure what made them so desirable, Hawks said.”

Towards a better measure of well-being

FT.com / Comment / Opinion -
Towards a better measure of well-being
By Joseph Stiglitz
Published: September 13 2009

A political leader attempting to promote the well-being of his citizens is pulled in different directions: he will be graded on economic performance but there are many other dimensions to the quality of life, including the state of the environment. While there is no single indicator that can capture something as complex as our society, the metrics commonly used, such as gross domestic product, suggest a trade-off: one can improve the environment only by sacrificing growth. But if we had a comprehensive measure of well-being, perhaps we would see this as a false choice. Such a metric might indicate an increase in wellbeing as the environment improved, even if conventionally measured output went down.

Update:

From the Commission on the Measurement of Economic Performance and Social Progress home page:

Here’s a provisional draft summary of the commission’s work…

Stiglitz Urges End to GDP ‘Fetish’ / Warns banking problems now bigger than before…

Stiglitz Urges End to GDP ‘Fetish’ in Favor of Broader Measures - Bloomberg.com
By Mark Deen and David Tweed

Sept. 13 (Bloomberg) — Joseph Stiglitz, the Nobel Prize- winning economist, urged world leaders to drop an obsession with examining gross domestic product and focus more on broader measures of prosperity.

“GDP has increasingly become used as a measure of societal well-being and changes in the structure of the economy and our society have made it increasingly poor one,” Stiglitz said in an interview today in Paris.

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Stiglitz Says Banking Problems Are Now Bigger Than Pre-Lehman – Bloomberg.com
By Mark Deen and David Tweed

Sept. 13 (Bloomberg) — Joseph Stiglitz, the Nobel Prize- winning economist, said the U.S. has failed to fix the underlying problems of its banking system after the credit crunch and the collapse of Lehman Brothers Holdings Inc.

“In the U.S. and many other countries, the too-big-to-fail banks have become even bigger,” Stiglitz said in an interview today in Paris. “The problems are worse than they were in 2007 before the crisis.”