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Unintended consequence of Stamp Duty holiday

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Buy-to-let property investors, who have long been elbowing first-time buyers out of the housing market, have emerged as unexpected beneficiaries of the stamp duty holiday announced this week.In an attempt to ease affordability for first-time buyers and re-energise the housing market, the government waived the 1 per cent stamp duty for properties under £175,000 for the next year. Is there no limit to the government's incompetence and inability to foresee the consequences of its decisions? Article in Financial Times.

 

Propping up the housing market

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Nearly every day brings a fresh twist to the housing market crisis. Stock exchange response to the US government's action on Fannie Mae and Freddie Mac has been positive but that was an immediate reaction. As the implications sink in, sentiment is likely to change. Reports suggest that the UK government is also about to do something to "kick start" the housing market. Meanwhile, a Nationwide Building Society commentator predicts that house prices will drop by 25% from their 2007 peak, and the Royal Institute of Chartered Surveyors report that house sales are at their lowest level for 30 years. What is one to make of all this?
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Fannie Mae and Freddie Mac nationalised

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Henry Law has made a comment about this on the LVTC blog.
 

House price fall accelerating

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The Halifax Building Society reports that "house prices" were falling at the fastest rate since it started its monthly survey in 1983. This has been widely reported, for example in this Daily Telegraph article.  Elsewhere, comparisons are now being made with the collapse in the 1930s. Of course, what is falling is what had been bubbling up until 2007 - land prices. But nobody seems to have noticed.

 

Conservatives doomed without new ideas

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Without new ideas, the Conservatives are doomed, says John Kampfner in the Daily Telegraph today. At the heart of the problem, he says, is that the centre-Left is running out of ideas. The policy wonks' cupboard is bare. The underlying problem is that economic theory stopped developing in the 1880s, when it had reached the point where the privileges of powerful vested interests would have come under increasing scrutiny. Economists such as Thorold Rogers, Professor of Economics at Oxford University and a Member of Parliament, and of course Henry George, had to be sidelined. This was done by throwing up a smokescreen of bogus theory which still holds sway. The result is that economic theory degenerated to the point that medicine was before scientists understood things like bacteria, viruses, vitamins, etc. In the absence of adequate explanatory theory, think tanks are unable to provide the politicians with the conceptual tools to enable them to understand what is happening and deal with the problems. The result is that the some troubles recur every couple of decades. And the powerful vested interests in the status quo remain. Read the article here
 

Interest rates to remain at 5% in classic stagflation trap

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The Bank of England Monetary Policy Committee has decided to leave the interest rate at 5%, unchanged for the past five months. Is this the right figure? Some say it is too high and will make the forthcoming recession worse. Others say it is too high and will aggravate inflation. Both views are correct.
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Scottish Local Income Tax announced

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Alex Salmond, leader of the Scottish National Party has long advocated a Local Income Tax instead of the Council Tax and has now announced that it will be included in the next legislative programme. The belief is that it is based on "ability to pay". That notion is a delusion (see below). It has been widely condemned, for example in this article which appeared in The Scotsman in September 2007 and shows how it would have a particularly adverse effect on the Scottish economy.
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What should the government do about the economy?

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What is the public's level of understanding about economics? Following the Chancellor's comments and predictions about the state of the British economy, a BBC discussion forum invited members of the public for their suggestions. There are over 100 pages to be viewed, but it is only necessary to scan through a few in order to get the flavours. They are worth looking at since they provide a snapshot view of people's ideas. It is a measure of the task confronting anyone wishing to sell the idea of land value taxation in Britain, and probably anywhere else too.The main themes, are in no particular order, are...
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