Taxes, Tobacco, and the Laffer Curve

As the economic credentials of the political parties in the UK 2015 election get scrutinised, it is worth bearing in mind the ‘Laffer Curve’ effects on fiscal policy. Don’t increase our overall taxation burden and tax rates, please…from Dan Mitchell at the Centre for Freedom and Prosperity at the Cato Institute, lessons from the other side of the pond.

International Liberty

What’s the Laffer Curve?

It’s the simple, common-sense observation that there’s not a linear relationship between tax rates and tax revenue.

Folks in the private sector understand this principle. No restaurant owner, for instance, would double meal prices and assume that revenues would climb by 100 percent.

Yet that’s basically the methodology used by the Joint Committee on Taxation when estimating the revenue impact of changes in tax rates.

Which helps to explain why Washington is so often wrong about revenue implications of personal tax rates and corporate tax rates.

The Laffer Curve also applies to tobacco taxation.

Patrick Gleason of Americans for Tax Reform points out in the Wall Street Journal that greedy politicians in New York have pushed cigarette taxes so high that the main beneficiaries are smugglers.

Rampant cigarette smuggling isn’t the problem in New York. It’s a symptom of the problem: sky high tobacco…

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Expectations: Mis-sold

We are picking up on a theme we have been experiencing and confirmed by this HBR article  published in 2012: Job and Career seeker’s unfulfilled EXPECTATIONS   The word expectation has several meanings, amongst them words like hope, belief, prospect and even probability.  It is interesting that if you were to consider these four other … Continue reading Expectations: Mis-sold

The “Harsh” Market

In light of the UK #Election2015 and the build up to May 2015; we review a thought piece on actions required during the period following the May 2010 election. How did the government do and are the three hard choices faced then still as pressing in the lead to to May 2015?

theMarketSoul ©1999 - 2021

It is true.  This is not a playground, kinder-garden experience…

As we don’t live a purely Command and Control or 100% Free Market environment we have to constantly adjust our actions and interactions with the market around us based on factors such as:

Geography

Jurisdiction and cultural norms

Experiences

Sophistication levels

Access points

Openness

English: A tag cloud of the 2010 UK Budget Sta...

There are many other factors to add to the list above, but we are referring to the behavioural aspects inherent in any market interaction.

One of the greatest challenges facing the political class in the UK at the moment is the Truth or Dare conundrum.

We are specifically referring to the urgent need to cut public sector spending, yet the painful reality that it is:

a)      Very difficult and not politically expedient to admit the ‘Truth as seen by any politician’ (see the ‘Forces of Hell’reference uttered by Alistair Darling on trying to speak…

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Sustainability I

An opinion piece we published in 2010 on Sustainability we believe to be as relevant as ever today…

theMarketSoul ©1999 - 2021

The focus on sustainability and sustainable practices is a self defeating objective.  Sustainability means that business leaders take their eye off the equity holder’s value creation ideal, as it flies in the face of self-interest as promoted by Adam Smith some 234 years ago (The Wealth of Nations , 1776).

Profile of Adam Smith

Self-interest and the pursuit therefore is being clouded by a multitude of other non value adding factors that is diluting the message and contributing to more uncertainty and risk and therefore capital flight and volatility in the financial and capital markets as we have experienced over the last 2 years.

This process and Zeitgeist will not disappear or be properly understood, unless we develop a deeper understanding and familiarity with uncertainty as a driver of the innovative spirit of human endeavour.

Risk management per se is not the answer and panacea it is held out to be, and if…

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Capricious Markets

Some thoughts on #Markets and #Risk from our archive (2010). Still relevant today?

theMarketSoul ©1999 - 2021

The market is capricious.  We are paraphrasing a line from one of Bernard Cornwell’s series of historic novels on 9th century England, where he referred to the ‘old gods’ (pagan gods) of the Danes and Vikings as capricious.

So if the impulsive nature of markets is to be appreciated for what they are, then why are we trying so hard to manage risk completely out of existence?

We will focus on two specific factors today in what we refer to as the ‘dumbing down of risk’.

A strict or narrow definition (old financial language) of risk is possibly that it is a quantifiable number with a probability ranking and we can therefore attach a statistical inference to the occurrence of the risk event.

Yet in The Health & Safety Executives language a risk and “Risk management involves you, the employer, looking at the risks that arise in the…

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Moral Hazard PLUS – Part 2

Part 2 - Revelations   In part 1 of this article we focused on the economic cycles and the underlying drivers for future Moral Hazard risks. In today's edition we will dwell a little on the revelations 2014 brought about in a series of disclosures and financial regulatory deals concluded.  As Tony Robinson put is so eloquently … Continue reading Moral Hazard PLUS – Part 2

Thoughts on 2014 – Moral Hazard PLUS – Part 1

Reflections on 2014 As a behaviourally focused economics publication we have been very quiet and inactive during 2014. A year of reflection and introspection, however, we are ready to resume service, with vigour. And what better way to start than with a reflective piece and thoughts on the biggest risk we believe are developing under … Continue reading Thoughts on 2014 – Moral Hazard PLUS – Part 1

Immediacy – Analysing the Behavioural Dimensions

Revisiting some posts from 2013…

theMarketSoul ©1999 - 2021

The problem of getting too distracted by constantly fire-fighting in business settings

Français : Logo de Connecting Emotional Intell...

We might have heard it referred to as phrases such as “blinkered vision, short-term thinking”, possibly even “tunnel vision” or something similar; however the challenges of Immediacy is (1) the hidden cost and (2) damage it does to our organisations and culture within those organisations.

This is a behavioural consequence of a much more deep rooted problem.  It could possibly be insecurity or ‘over’ control, mistrust or some other behavioural issue.

However, we would like to make a bold statement that the problem is one of an over commented emotional connection to what we do. Too much passion and care in other words. This is not a bad thing in itself, but it must be tempered and balanced by its opposite twin, namely logic and deliberation.

Too often we let the Emotional Intelligence (EI) side of our…

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The Market Burden

Thoughts on regulation and a skewed market:

theMarketSoul ©1999 - 2021

Illustrates the intersection of supply and dem... Illustrates the intersection of supply and demand curves as the free market equilibrium (Photo credit: Wikipedia)

Today’s post is actually only a short sound bite for further conversations to be developed in the future:

The real burden of the open and free market is the fact that it does not always behave and act in the way the market participants anticipated. [In other words, the market might be open and free but not perceived as fair – a real challenge when the clearance mechanism experiences the odd bottleneck moment, because in the long run, the market should and will always clear and achieve equilibrium].
The burden the market then bears is in the form of interference and regulation…
Counter argument always very welcome.
theMarketSoul  ©2013

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Funky New Job Titles

A reminder to be creative everyday…

theMarketSoul ©1999 - 2021

Below is an extract from a posting we made back in 2008.  Maybe still relevant today:

In this new, new world of work

What titles are there yet to lurk?

The new MD

He or she or it could be:

Maverick Director;

Not your average reflector!

The IM is the person

Where intuition is the key

Or are they the Ideas Merchants

or just another fee?

IT stands for Interesting Thing

Technology drives the process

And we are told that knowledge

Must definitely be better than porridge!

The SD drives the sales

Or Sets Deception

Yet revenue collection

their fortunate projection

The HR director,

You’d better respect ‘er

Yet Human Potential

Sounds much more consequential?

Or politically correct,

You OLD cynical fool!

Now even that word

We must reject!

Where am I heading?

With this you ask

Must there be an end?

Or just another bend?

Charisma, inspiration

Or just…

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Do you think it should be compulsory to pay into a pension?

Some thought provoking issues raised as part of the ‘long-term savings gap’ challenge, perceived by think tanks and government advisors…

Steve J Bicknell Tel 01202 025252

Pension Scheme

A government think thank, Policy Exchange, have urged the government to make it compulsory that people save for their retirement. Their proposal the ‘Help to Save’ Scheme is aimed at avoiding 11 million people ending up in ‘Pension Poverty’. In a BBC article….

James Barty, author of the report, said the lack of people saving for their retirement was putting an “intolerable burden on the state” which “needs to be addressed sooner rather than later”.

He said: “With an ageing population, putting money aside for later life should be seen in the same context as National Insurance contributions, taxes and even education – an obligation that falls on everyone in society.

“‘Help to Save’ will prevent the state from having to pick up the tab for people who haven’t put aside enough money for later life.”

Under the plans, the opt-out in the Government’s auto-enrolment scheme would be removed…

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The Bread-ish Difference Between Capitalism and Socialism

…keeping economic concepts simple or just plain being conceptually simple…

Dan Mitchell has a knack in this re-blogged post to get the concept of socialism versus capitalism across very succinctly.

International Liberty

If you ask an economist about the difference between capitalism and socialism, you’ll probably get a boring answer about the size of government, the impact on incentives, and the power of the state.

Or maybe you’ll get a nit-picking answer, sort of like when I explained that Obama technically isn’t a socialist.

That’s why it’s sometimes best to use simple, common-sense analogies.

Two years ago, I used two cows to explain the differences between various economic systems.

But this image may be an ever more succinct way to showing the difference between capitalism and socialism.

Socialism capitalism bread

Or, if you prefer stories, this updated version of the fable of the ant and the grasshopper makes the same point.

And here’s the PC version of the Little Red Hen.

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Technical Default Options – US Government Shutdown Analysis (Part2)

The real challenge and issue: The US Debt default that is looming ever larger with each passing day that the US Congress, Senate and White House seem to treat as a brinkmanship fatigue challenge will have a specific default structure or process attached to it, that the rest of the world needs to get to … Continue reading Technical Default Options – US Government Shutdown Analysis (Part2)

US Treasury Yield Curve – The Shutdown Analysis (Part 1)

Today we very briefly focus on the dynamics we have observed in the US Treasury Yield Curve between two critical dates: 1. The Yield Curve at 30 September 2013 - The day before the US government shutdown officially began 2. Friday 11 October 2013, exactly 11 days into the White House, Congress and Senate stand-off … Continue reading US Treasury Yield Curve – The Shutdown Analysis (Part 1)

Immediacy – Analysing the Behavioural Dimensions

The problem of getting too distracted by constantly fire-fighting in business settings We might have heard it referred to as phrases such as "blinkered vision, short-term thinking", possibly even "tunnel vision" or something similar; however the challenges of Immediacy is (1) the hidden cost and (2) damage it does to our organisations and culture within those … Continue reading Immediacy – Analysing the Behavioural Dimensions

The Market Burden

Today's post is actually only a short sound bite for further conversations to be developed in the future: The real burden of the open and free market is the fact that it does not always behave and act in the way the market participants anticipated. [In other words, the market might be open and free … Continue reading The Market Burden

The BIG Sovereign Debt Structure cliff – Part 1

…and a year and a bit later we are exactly at the same place as far as the US Debt cliff is concerned…now only US$16.7trn and counting the continuing cost and Debt mountain…

theMarketSoul ©1999 - 2021

In yesterday’s article, “Where will all the new money come from?” we concluded the brief analysis with the Sovereign Debt Maturity profiles (otherwise known as the Debt Structure) of both the USA and Italy, noting how similar the two profiles looked at first glance.

Digging a bit deeper today, we would like to compare those charts to cliff edges. We trust that the sentiment of the article is that we perceive Central Banks across the globe fretting about the ‘New Money’ we were referring to.  With general economic confidence waning and the outlook for a sustainable long-term solution to sovereign over (indulgence) spending fading, the landscape is looking very bleak at moment.

New money will have to be printed (Quantitative Easing or QE) if investors in the capital markets cannot be found to bear the burden of purchasing new Bond and Treasury issues.

Some headlines over the…

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