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Are Nation States Beginning to Splinter? |

Are Nation States Beginning to Splinter? |.

March 24, 2014 | Author 
The Counterrevolution to the EU’s Centralization

Venice just held a ‘non-binding’ referendum on whether the city should once again become an independent city-state and secede from Italy. An astonishing 89% voted ‘yes’ (which makes the outcome of the Crimea referendum no longer look ‘strangely one-sided’). This happens just as Scotland’s vote whether to remain part of the UK is approaching and Catalonia is preparing to vote whether to remain with Spain.

“Venetians have voted overwhelmingly for their own sovereign state in a ‘referendum’ on independence from Italy.

Inspired by Scotland’s separatist ambitions, 89 per cent of the residents of the lagoon city and its surrounding area, opted to break away from Italy in an unofficial ballot.

The proposed ‘Repubblica Veneta’ would include the five million inhabitants of the Veneto region and could later expand to include parts of Lombardy, Trentino and Friuli-Venezia Giulia. The floating city has only been part of Italy for 150 years. The 1000 year–old democratic Serenissima Repubblica di Venezia, was quashed by Napoleon and was subsumed into Italy in 1866. 

Wealthy Venetians, under mounting financial pressure in the economic crisis, have rallied in their thousands, after growing tired of supporting Italy’s poor and crime ridden Mezzogiorno south, through high taxation.

Activists have been working closely with the SNP on their joint agendas, even travelling to Scotland alongside Catalonians and Basque separatists to take part in pro independence rallies. Campaigners say that the Rome government receives around 71 billion euros  each year in tax from Venice – some 21 billion euros less than it gets back in investment and services.

Organisers said that 2.36million, 73 per cent, of those eligible to take part voted in the poll, which is not recognised by the Rome government. The ballot also appointed a committee of ten who immediately declared independence from Italy. Venice may now start withholding taxes from Rome.”

(emphasis added)

And while the Scottish and Catalan pro-independence forces are toying with the idea of joining the EU, there is another part of Italy that wants to secede as well and wants to definitely get out of the EU – in fact, this goal appears to be one of its motives. The island of Sardinia – which contrary to Venice is actually quite a poor place – wants to leave Italy and join Switzerland instead (this would of course be a brilliant move for the Sardinians):

 

“As familiar as it is, however, the secessionist spirit has never manifested itself in quite the way a small group of activists is advocating in Sardinia. Angered by a system they say has squandered economic potential and disenfranchised the ordinary citizen, they have had enough. They want Rome to sell their island to the Swiss.

“People laugh when we say we should go to become part of Switzerland. That’s to be expected,” said Andrea Caruso, co-founder of the Canton Marittimo (Maritime Canton) movement. While many have dismissed the proposal as a joke, its supporters insist they are serious. “The madness does not lie in putting forward this kind of suggestion,” said Caruso. “The madness lies in how things are now.”

A ruggedly beautiful gem in the middle of the Mediterranean, Sardinia – one of Italy’s five autonomous regions – has always had a strong identity of its own. DH Lawrence, visiting in 1921, described it as “belonging to nowhere, never having belonged to anywhere”. For a minority of Sardinians, independence remains the island’s best chance for success. Caruso and Enrico Napoleone, the two 50-year-old school friends behind Canton Marittimo, disagree with them. After decades of keeping faith in Rome, they now believe that staying in Italy can do no good- but fear that going it alone could end badly, too.

The answer, they say, lies more than 1,000km to the north. “Having good teachers is something which in life everyone considers positive. We don’t educate our children at home; we try to find the best teacher in the school,” said Caruso, a dentist from Cagliari. “Why, when we have this mentality with our children, do we have to renounce it when talking of our people? “We think of Switzerland as a good teacher who could lead us on a path of excellence.”

As the 27th canton, Sardinia, so goes the argument, would bring the Swiss its miles of stunning coastline and untapped economic potential. Sardinia could retain considerable autonomy, while also reaping the benefits of direct democracy, administrative efficiency and economic wealth.

The fact that Switzerland is not in the EU is “definitely” a plus, say the activists. Like many Italians, they no longer believe in Brussels’s ability to deliver the dream – both economic and cultural – they once thought it could.

(emphasis added)

One of these days, one of the secessionist movements in Europe is likely to succeed and then a domino effect may be let loose. The Crimea’s recent change of allegiance has probably energized these movements further.

Italian-states-before-unification

Italian States prior to Italy’s unification – click to enlarge.

Anachronism Nation State

And it is about time, too. The concept of the centralized, large-scale nation state is anachronistic and should be abandoned. The increasing centralization of the EU is going in the wrong direction. Once again it must be stressed that for the individual citizen, it matters not one whit whether self-important EU politicians and bureaucrats can ‘throw around their weight on the international stage’.

What matters far more is that they would likely be treated a lot better and become more prosperous if everything fell apart into tiny independent territories. That would definitely not mean that there could be no free trade zone, or that every region would necessarily use a different currency. The main goals of the founders of the EU, namely free trade and free movement of capital and people need not be abandoned – on the contrary, they would likely be adopted without hesitation (see below why). When a great many small territories compete with each other for citizens, then they are all going to be forced to make a good offer that makes people want to stay. Large declines in taxes would be an immediate effect, but not the only effect that could be expected.

As Hans-Hermann Hoppe points out in this interview, the unification of the German states (Germany consisted of over 360 independent territories before 1794, and 39 were still left prior to the 1871 unification) was in many ways a big mistake in hindsight:

Q: “You want a return to “Kleinstaaterei”, the system of mini-countries of the 19th Century?

A: “Take a look at the economic and cultural development. In the 19th century the area of what Germany is today was then the leading region in Europe. The major cultural achievements came at a time when there was no great central state. The small territories were in intense competition with each other. Everyone wanted to have the best libraries, theaters and universities. This region was significantly more advanced culturally and intellectually than France, which by then was already centralized. All culture in France is focused on Paris, the rest of the country fell into cultural obscurity.”

Q: ‘But free trade would be threatened by secession and a return to fragmented nations

A:  On the contrary. Small states have to trade. Their market is not big enough and they are not diversified enough to live independently. If they are not running free trade, they are finished after a week. However, a large country like America can be largely self-sufficient and is therefore less dependent on free exchange with other states. In addition, small and sovereign states cannot permanently dump the blame on others when something goes wrong with them. In the EU, Brussels is often blamed for all sorts of ills. In independent small states governments would, however, have to take responsibility for abuses in their own country. This has a pacifying effect on the relations among nations.”

Q: “If small states have their own currencies, that would be the end of the integration of capital markets.”

A: Small states could not afford their own currencies because of the transaction costs. They would therefore strive for a common currency that is independent of and uninfluenced by the individual governments. There is a high probability that they would agree on a commodity money such as gold or silver, whose value is determined in the market. Kleinstaaterei leads to more market and less state intervention in the monetary system.”

Q: “If Europe were a collection of small states then on the international stage it would have no economic clout next to the large states.”

A: “How then do Switzerland, Liechtenstein, Monaco and Singapore manage to be economically at the top? My impression is that these countries are wealthier than Germany and that the Germans were wealthy before they embarked on the adventure of the euro. We should free ourselves from the idea that business takes place between states. Business takes place between people and companies that produce here and there. Economies don’t consist of states competing against states but companies against companies. It is not the size of a country that determines its prosperity, but the ability of its citizens.”

(emphasis added)

Indeed, the facts support every one of Hoppe’s contentions.

Secession Brought to its Ultimate Conclusion

In ‘Power and Market’, Murray Rothbard discusses among other things whether the free market could provide judiciary, police and defense services. In this section of the book there is also an interesting remark on secession. Rothbard not unreasonably asks why it is e.g. not held that Canada and the US are in a ‘state of anarchy’ relative to each other. After all, they don’t have a single, centralized government. Why is it fine for Canada to be independent, but not, say for Texas? However, he follows this thought further to its ultimate conclusion:

 

“[…] once one concedes that a single world government is not necessary, then where does one logically stop at the permissibility of separate states? If Canada and the United States can be separate nations without being denounced as being in a state of impermissible “anarchy,” why may not the South secede from the United States? New York State from the Union? New York City from the state? Why may not Manhattan secede? Each neighborhood? Each block? Each house? Each person? But, of course, if each person may secede from government, we have virtually arrived at the purely free society, where defense is supplied along with all other services by the free market and where the invasive State has ceased to exist.”

 

(emphasis in original)

Indeed, there is no reason why one could not arrive at a stateless society at some point. Small territories such as those Germany consisted of prior to 1794 could probably no longer really be called ‘states’ anyway.

 

Ger1871

Germany prior to the 1871 unification – 39 independent states (and they all used precious metals as money, so it didn’t matter whose face was on the money – it was a unified currency anyway).

Are Nation States Beginning to Splinter? |

Are Nation States Beginning to Splinter? |.

March 24, 2014 | Author 
The Counterrevolution to the EU’s Centralization

Venice just held a ‘non-binding’ referendum on whether the city should once again become an independent city-state and secede from Italy. An astonishing 89% voted ‘yes’ (which makes the outcome of the Crimea referendum no longer look ‘strangely one-sided’). This happens just as Scotland’s vote whether to remain part of the UK is approaching and Catalonia is preparing to vote whether to remain with Spain.

“Venetians have voted overwhelmingly for their own sovereign state in a ‘referendum’ on independence from Italy.

Inspired by Scotland’s separatist ambitions, 89 per cent of the residents of the lagoon city and its surrounding area, opted to break away from Italy in an unofficial ballot.

The proposed ‘Repubblica Veneta’ would include the five million inhabitants of the Veneto region and could later expand to include parts of Lombardy, Trentino and Friuli-Venezia Giulia. The floating city has only been part of Italy for 150 years. The 1000 year–old democratic Serenissima Repubblica di Venezia, was quashed by Napoleon and was subsumed into Italy in 1866. 

Wealthy Venetians, under mounting financial pressure in the economic crisis, have rallied in their thousands, after growing tired of supporting Italy’s poor and crime ridden Mezzogiorno south, through high taxation.

Activists have been working closely with the SNP on their joint agendas, even travelling to Scotland alongside Catalonians and Basque separatists to take part in pro independence rallies. Campaigners say that the Rome government receives around 71 billion euros  each year in tax from Venice – some 21 billion euros less than it gets back in investment and services.

Organisers said that 2.36million, 73 per cent, of those eligible to take part voted in the poll, which is not recognised by the Rome government. The ballot also appointed a committee of ten who immediately declared independence from Italy. Venice may now start withholding taxes from Rome.”

(emphasis added)

And while the Scottish and Catalan pro-independence forces are toying with the idea of joining the EU, there is another part of Italy that wants to secede as well and wants to definitely get out of the EU – in fact, this goal appears to be one of its motives. The island of Sardinia – which contrary to Venice is actually quite a poor place – wants to leave Italy and join Switzerland instead (this would of course be a brilliant move for the Sardinians):

 

“As familiar as it is, however, the secessionist spirit has never manifested itself in quite the way a small group of activists is advocating in Sardinia. Angered by a system they say has squandered economic potential and disenfranchised the ordinary citizen, they have had enough. They want Rome to sell their island to the Swiss.

“People laugh when we say we should go to become part of Switzerland. That’s to be expected,” said Andrea Caruso, co-founder of the Canton Marittimo (Maritime Canton) movement. While many have dismissed the proposal as a joke, its supporters insist they are serious. “The madness does not lie in putting forward this kind of suggestion,” said Caruso. “The madness lies in how things are now.”

A ruggedly beautiful gem in the middle of the Mediterranean, Sardinia – one of Italy’s five autonomous regions – has always had a strong identity of its own. DH Lawrence, visiting in 1921, described it as “belonging to nowhere, never having belonged to anywhere”. For a minority of Sardinians, independence remains the island’s best chance for success. Caruso and Enrico Napoleone, the two 50-year-old school friends behind Canton Marittimo, disagree with them. After decades of keeping faith in Rome, they now believe that staying in Italy can do no good- but fear that going it alone could end badly, too.

The answer, they say, lies more than 1,000km to the north. “Having good teachers is something which in life everyone considers positive. We don’t educate our children at home; we try to find the best teacher in the school,” said Caruso, a dentist from Cagliari. “Why, when we have this mentality with our children, do we have to renounce it when talking of our people? “We think of Switzerland as a good teacher who could lead us on a path of excellence.”

As the 27th canton, Sardinia, so goes the argument, would bring the Swiss its miles of stunning coastline and untapped economic potential. Sardinia could retain considerable autonomy, while also reaping the benefits of direct democracy, administrative efficiency and economic wealth.

The fact that Switzerland is not in the EU is “definitely” a plus, say the activists. Like many Italians, they no longer believe in Brussels’s ability to deliver the dream – both economic and cultural – they once thought it could.

(emphasis added)

One of these days, one of the secessionist movements in Europe is likely to succeed and then a domino effect may be let loose. The Crimea’s recent change of allegiance has probably energized these movements further.

Italian-states-before-unification

Italian States prior to Italy’s unification – click to enlarge.

Anachronism Nation State

And it is about time, too. The concept of the centralized, large-scale nation state is anachronistic and should be abandoned. The increasing centralization of the EU is going in the wrong direction. Once again it must be stressed that for the individual citizen, it matters not one whit whether self-important EU politicians and bureaucrats can ‘throw around their weight on the international stage’.

What matters far more is that they would likely be treated a lot better and become more prosperous if everything fell apart into tiny independent territories. That would definitely not mean that there could be no free trade zone, or that every region would necessarily use a different currency. The main goals of the founders of the EU, namely free trade and free movement of capital and people need not be abandoned – on the contrary, they would likely be adopted without hesitation (see below why). When a great many small territories compete with each other for citizens, then they are all going to be forced to make a good offer that makes people want to stay. Large declines in taxes would be an immediate effect, but not the only effect that could be expected.

As Hans-Hermann Hoppe points out in this interview, the unification of the German states (Germany consisted of over 360 independent territories before 1794, and 39 were still left prior to the 1871 unification) was in many ways a big mistake in hindsight:

Q: “You want a return to “Kleinstaaterei”, the system of mini-countries of the 19th Century?

A: “Take a look at the economic and cultural development. In the 19th century the area of what Germany is today was then the leading region in Europe. The major cultural achievements came at a time when there was no great central state. The small territories were in intense competition with each other. Everyone wanted to have the best libraries, theaters and universities. This region was significantly more advanced culturally and intellectually than France, which by then was already centralized. All culture in France is focused on Paris, the rest of the country fell into cultural obscurity.”

Q: ‘But free trade would be threatened by secession and a return to fragmented nations

A:  On the contrary. Small states have to trade. Their market is not big enough and they are not diversified enough to live independently. If they are not running free trade, they are finished after a week. However, a large country like America can be largely self-sufficient and is therefore less dependent on free exchange with other states. In addition, small and sovereign states cannot permanently dump the blame on others when something goes wrong with them. In the EU, Brussels is often blamed for all sorts of ills. In independent small states governments would, however, have to take responsibility for abuses in their own country. This has a pacifying effect on the relations among nations.”

Q: “If small states have their own currencies, that would be the end of the integration of capital markets.”

A: Small states could not afford their own currencies because of the transaction costs. They would therefore strive for a common currency that is independent of and uninfluenced by the individual governments. There is a high probability that they would agree on a commodity money such as gold or silver, whose value is determined in the market. Kleinstaaterei leads to more market and less state intervention in the monetary system.”

Q: “If Europe were a collection of small states then on the international stage it would have no economic clout next to the large states.”

A: “How then do Switzerland, Liechtenstein, Monaco and Singapore manage to be economically at the top? My impression is that these countries are wealthier than Germany and that the Germans were wealthy before they embarked on the adventure of the euro. We should free ourselves from the idea that business takes place between states. Business takes place between people and companies that produce here and there. Economies don’t consist of states competing against states but companies against companies. It is not the size of a country that determines its prosperity, but the ability of its citizens.”

(emphasis added)

Indeed, the facts support every one of Hoppe’s contentions.

Secession Brought to its Ultimate Conclusion

In ‘Power and Market’, Murray Rothbard discusses among other things whether the free market could provide judiciary, police and defense services. In this section of the book there is also an interesting remark on secession. Rothbard not unreasonably asks why it is e.g. not held that Canada and the US are in a ‘state of anarchy’ relative to each other. After all, they don’t have a single, centralized government. Why is it fine for Canada to be independent, but not, say for Texas? However, he follows this thought further to its ultimate conclusion:

 

“[…] once one concedes that a single world government is not necessary, then where does one logically stop at the permissibility of separate states? If Canada and the United States can be separate nations without being denounced as being in a state of impermissible “anarchy,” why may not the South secede from the United States? New York State from the Union? New York City from the state? Why may not Manhattan secede? Each neighborhood? Each block? Each house? Each person? But, of course, if each person may secede from government, we have virtually arrived at the purely free society, where defense is supplied along with all other services by the free market and where the invasive State has ceased to exist.”

 

(emphasis in original)

Indeed, there is no reason why one could not arrive at a stateless society at some point. Small territories such as those Germany consisted of prior to 1794 could probably no longer really be called ‘states’ anyway.

 

Ger1871

Germany prior to the 1871 unification – 39 independent states (and they all used precious metals as money, so it didn’t matter whose face was on the money – it was a unified currency anyway).

Obama Demands Russia Leave G-8; June Summit Cancelled While Ukraine Deploys Army Along Borders | Zero Hedge

Obama Demands Russia Leave G-8; June Summit Cancelled While Ukraine Deploys Army Along Borders | Zero Hedge.

UK Prime Minister David Cameron stated that it is “absolutely clear” that the G-8 Summit scheduled for June in Sochi, Russia will not go ahead. But it is President Obama that appears to be pressing the hardest for major changes:

  • OBAMA SAID TO PRESS ALLIES TO SUSPEND RUSSIA FROM G8: WSJ

This comes at a time when Ukraine forces are being withdrawn from Crimea and deployed to North, South, and East borders of the region.  Meanwhile, Ukraine is taking its soldiers pulled from Crimea and deploying them along all other borders.

  • UKRAINE’S PARUBIY: PRIORITY IS TO PROTECT BORDERS, LEAVE CRIMEA
  • UKRAINE DEPLOYS ARMY TO NORTH, SOUTH, EAST BORDERS: PARUBIY
  • UKRAINE HAS MOBILIZED MORE THAN 10,000 PEOPLE, PARUBIY SAYS

David Cameron says G-8 Summit Scrapped…

There will be no G8 summit in Russia this year, David Cameron said in a further ign of efforts to isolate Moscow over the Ukraine crisis.

The Prime Minister said it was “absolutely clear” the meeting could not go ahead.

Speaking in The Hague ahead of a meeting of G7 leaders, he said: “We should be clear there’s not going to be a G8  summit this year in Russia. That’s absolutely clear.”

Preparations for the planned June summit in Sochi had already been suspended as a result of Russia’s actions in neighbouring Ukraine.

And Obama is calling for Russia to be kicked out of the G-8.

  • OBAMA SAID TO PRESS ALLIES TO SUSPEND RUSSIA FROM G8: WSJ

Obama Demands Russia Leave G-8; June Summit Cancelled While Ukraine Deploys Army Along Borders | Zero Hedge

Obama Demands Russia Leave G-8; June Summit Cancelled While Ukraine Deploys Army Along Borders | Zero Hedge.

UK Prime Minister David Cameron stated that it is “absolutely clear” that the G-8 Summit scheduled for June in Sochi, Russia will not go ahead. But it is President Obama that appears to be pressing the hardest for major changes:

  • OBAMA SAID TO PRESS ALLIES TO SUSPEND RUSSIA FROM G8: WSJ

This comes at a time when Ukraine forces are being withdrawn from Crimea and deployed to North, South, and East borders of the region.  Meanwhile, Ukraine is taking its soldiers pulled from Crimea and deploying them along all other borders.

  • UKRAINE’S PARUBIY: PRIORITY IS TO PROTECT BORDERS, LEAVE CRIMEA
  • UKRAINE DEPLOYS ARMY TO NORTH, SOUTH, EAST BORDERS: PARUBIY
  • UKRAINE HAS MOBILIZED MORE THAN 10,000 PEOPLE, PARUBIY SAYS

David Cameron says G-8 Summit Scrapped…

There will be no G8 summit in Russia this year, David Cameron said in a further ign of efforts to isolate Moscow over the Ukraine crisis.

The Prime Minister said it was “absolutely clear” the meeting could not go ahead.

Speaking in The Hague ahead of a meeting of G7 leaders, he said: “We should be clear there’s not going to be a G8  summit this year in Russia. That’s absolutely clear.”

Preparations for the planned June summit in Sochi had already been suspended as a result of Russia’s actions in neighbouring Ukraine.

And Obama is calling for Russia to be kicked out of the G-8.

  • OBAMA SAID TO PRESS ALLIES TO SUSPEND RUSSIA FROM G8: WSJ

IMF’s Property Tax Hike Proposal Comes True With UK Imposing “Mansion Tax” As Soon As This Year | Zero Hedge

IMF’s Property Tax Hike Proposal Comes True With UK Imposing “Mansion Tax” As Soon As This Year | Zero Hedge.

One could see this one coming from a mile away.

It was a week ago that we highlighted the latest implied IMF proposal on how to reduce income inequality, quietly highlighted in its paper titled “Fiscal Policy and Income Inequality“. The key fragment in the paper said the following:

Some taxes levied on wealth, especially on immovable property, are also an option for economies seeking more progressive taxation. Wealth taxes, of various kinds, target the same underlying base as capital income taxes, namely assets. They could thus be considered as a potential source of progressive taxation, especially where taxes on capital incomes (including on real estate) are low or largely evaded. There are different types of wealth taxes, such as recurrent taxes on property or net wealth, transaction taxes, and inheritance and gift taxes. Over the past decades, revenue from these taxes has not kept up with the surge in wealth as a share of GDP (see earlier section) and, as a result, the effective tax rate has dropped from an average of around 0.9 percent in 1970 to approximately 0.5 percent today. The prospect of raising additional revenue from the various types of wealth taxation was recently discussed in IMF (2013b) and their role in reducing inequality can be summarized as follows.

  • Property taxes are equitable and efficient, but underutilized in many economies. The average yield of property taxes in 65 economies (for which data are available) in the 2000s was around 1 percent of GDP, but in developing economies it averages only half of that (Bahl and Martínez-Vázquez, 2008). There is considerable scope to exploit this tax more fully, both as a revenue source and as a redistributive instrument, although effective implementation will require a sizable investment in administrative infrastructure, particularly in developing economies (Norregaard, 2013).

We summed this up as follows: “if you are buying a house, enjoy the low mortgage (for now… and don’t forget – if and when the time comes to sell, the buyer better be able to afford your selling price and the monthly mortgage payment should the 30 Year mortgage rise from the current 4.2% to 6%, 7% or much higher, which all those who forecast an improving economy hope happens), but what will really determine the affordability of that piece of property you have your eyes set on, are the property taxes. Because they are about to skyrocket.

Sure enough, a week later the Telegraph reports that UK Treasury officials have begun work on a mansion tax that could be levied as soon as next year, citing  a Cabinet minister.

“Danny Alexander, the Liberal Democrat Chief Secretary to the Treasury, told The Telegraph that officials had done “a lot of work” on the best way to impose the charge. The preparatory work would mean that a Government elected next year might be able to introduce the charge soon after taking office.  Mr Alexander said there was growing political support for a tax on expensive houses, saying owners should pay more to help balance the books.

After all it’s only fair. It is also only fair, for now, to only tax the uber-rich, who are so defined merely in the eye of the populist beholder. However, said definition tends to be fluid, and what will be a tax on, i.e., £2  million properties tomorrow, will be lowered to £1  million, £500,000 and so on, in 2, 3, etc, years.

And in a world which as Zero Hedge first defined years ago as shaped by the “fairness doctrine“, the one word that was so far missing from this article, can be found momentarily:

“There’s a consensus among the public that a modest additional levy on higher value properties is a fair and reasonable thing to do in the context of further deficit reduction,” he said. “It’s important that the burden is shared.”

There you have it: “fair.” Because there is nothing quite like shaping fiscal (and monetary) policy based on what the du jour definition of fair is to 1 person… or a billion. Especially if that billion has a vote in the “democratic” process.

It gets betters:

Mr Alexander said the new tax would not be “punitive” and insisted that the Lib Dems remained in favour of wealth creation.

So if it’s not “punitive” it must be… rewarding? And how long until the definition of fair, far short of the projected tax windfall, is expanded to include more and more, until those who were previously for the “fair” tax, suddenly become ensnared by it? As for wealth creation, perhaps in addition to the fairness doctrine it is time to be honest about what socialism really means: “wealth redistribution.”

Telegraph continues:

That may be a seen as a challenge to Vince Cable, the Business Secretary, who first called for the mansion tax and has criticised high earners.

 

The Lib Dems and Labour are both in favour of a tax on expensive houses. Labour says the money raised could fund a new lower 10p rate of income tax.

 

The Lib Dems have suggested that the tax should fall on houses valued at £2  million and more.

 

The Treasury last year estimated that about 55,000 homes are in that range, though the Lib Dems say the figure is closer to 70,000.

To be sure not everyone is for the tax:

David Cameron has opposed a mansion tax but George Osborne, the Chancellor, is said to be more open to the idea. Most of the homes that might be affected are in London and the south-east of England.

 

Boris Johnson, the Tory Mayor of London, promised last week to oppose any move towards the tax, which he described as “brutally unfair on people who happen to be living in family homes”.

 

Some critics have questioned the practicality of the policy, asking how the State would arrive at valuations for houses.

Well, they will simply draw a redline above any number they deem “unfair”, duh. As for the London housing bubble, it may have finally popped, now that all those who bought mansions in London will “suddenly” find themselves at the “fair tax” mercy of yet another wealth redistributionist government.

Unfortunately, for the UK, the “mansion tax” idea, , gloriously populist as it may be, may be too little too late.

As we reported late last week in “The Music Just Ended: “Wealthy” Chinese Are Liquidating Offshore Luxury Homes In Scramble For Cash“, the Chinese offshore real estate buying juggernaut has now ended courtesy of what appears to be China’s credit bubble bursting. So if the liquidation wave truly picks up, and since there is no greater fool left (you can forget about sanctioned Russian oligarchs investing more cash in the City in a world where asset freezes and confiscations are all too real), very soon London may find that there is nobody in the “fair” real estate taxation category left to tax.

But that’s ok – because that’s when one simply expands the definition of what is fair to include the not so wealthy… and then again…. and again.

Finally, if anyone is still confused, the IMF-proposed “mansion tax” is most certainly coming to the US, and every other insolvent “developed world” nation, next.

IMF's Property Tax Hike Proposal Comes True With UK Imposing "Mansion Tax" As Soon As This Year | Zero Hedge

IMF’s Property Tax Hike Proposal Comes True With UK Imposing “Mansion Tax” As Soon As This Year | Zero Hedge.

One could see this one coming from a mile away.

It was a week ago that we highlighted the latest implied IMF proposal on how to reduce income inequality, quietly highlighted in its paper titled “Fiscal Policy and Income Inequality“. The key fragment in the paper said the following:

Some taxes levied on wealth, especially on immovable property, are also an option for economies seeking more progressive taxation. Wealth taxes, of various kinds, target the same underlying base as capital income taxes, namely assets. They could thus be considered as a potential source of progressive taxation, especially where taxes on capital incomes (including on real estate) are low or largely evaded. There are different types of wealth taxes, such as recurrent taxes on property or net wealth, transaction taxes, and inheritance and gift taxes. Over the past decades, revenue from these taxes has not kept up with the surge in wealth as a share of GDP (see earlier section) and, as a result, the effective tax rate has dropped from an average of around 0.9 percent in 1970 to approximately 0.5 percent today. The prospect of raising additional revenue from the various types of wealth taxation was recently discussed in IMF (2013b) and their role in reducing inequality can be summarized as follows.

  • Property taxes are equitable and efficient, but underutilized in many economies. The average yield of property taxes in 65 economies (for which data are available) in the 2000s was around 1 percent of GDP, but in developing economies it averages only half of that (Bahl and Martínez-Vázquez, 2008). There is considerable scope to exploit this tax more fully, both as a revenue source and as a redistributive instrument, although effective implementation will require a sizable investment in administrative infrastructure, particularly in developing economies (Norregaard, 2013).

We summed this up as follows: “if you are buying a house, enjoy the low mortgage (for now… and don’t forget – if and when the time comes to sell, the buyer better be able to afford your selling price and the monthly mortgage payment should the 30 Year mortgage rise from the current 4.2% to 6%, 7% or much higher, which all those who forecast an improving economy hope happens), but what will really determine the affordability of that piece of property you have your eyes set on, are the property taxes. Because they are about to skyrocket.

Sure enough, a week later the Telegraph reports that UK Treasury officials have begun work on a mansion tax that could be levied as soon as next year, citing  a Cabinet minister.

“Danny Alexander, the Liberal Democrat Chief Secretary to the Treasury, told The Telegraph that officials had done “a lot of work” on the best way to impose the charge. The preparatory work would mean that a Government elected next year might be able to introduce the charge soon after taking office.  Mr Alexander said there was growing political support for a tax on expensive houses, saying owners should pay more to help balance the books.

After all it’s only fair. It is also only fair, for now, to only tax the uber-rich, who are so defined merely in the eye of the populist beholder. However, said definition tends to be fluid, and what will be a tax on, i.e., £2  million properties tomorrow, will be lowered to £1  million, £500,000 and so on, in 2, 3, etc, years.

And in a world which as Zero Hedge first defined years ago as shaped by the “fairness doctrine“, the one word that was so far missing from this article, can be found momentarily:

“There’s a consensus among the public that a modest additional levy on higher value properties is a fair and reasonable thing to do in the context of further deficit reduction,” he said. “It’s important that the burden is shared.”

There you have it: “fair.” Because there is nothing quite like shaping fiscal (and monetary) policy based on what the du jour definition of fair is to 1 person… or a billion. Especially if that billion has a vote in the “democratic” process.

It gets betters:

Mr Alexander said the new tax would not be “punitive” and insisted that the Lib Dems remained in favour of wealth creation.

So if it’s not “punitive” it must be… rewarding? And how long until the definition of fair, far short of the projected tax windfall, is expanded to include more and more, until those who were previously for the “fair” tax, suddenly become ensnared by it? As for wealth creation, perhaps in addition to the fairness doctrine it is time to be honest about what socialism really means: “wealth redistribution.”

Telegraph continues:

That may be a seen as a challenge to Vince Cable, the Business Secretary, who first called for the mansion tax and has criticised high earners.

 

The Lib Dems and Labour are both in favour of a tax on expensive houses. Labour says the money raised could fund a new lower 10p rate of income tax.

 

The Lib Dems have suggested that the tax should fall on houses valued at £2  million and more.

 

The Treasury last year estimated that about 55,000 homes are in that range, though the Lib Dems say the figure is closer to 70,000.

To be sure not everyone is for the tax:

David Cameron has opposed a mansion tax but George Osborne, the Chancellor, is said to be more open to the idea. Most of the homes that might be affected are in London and the south-east of England.

 

Boris Johnson, the Tory Mayor of London, promised last week to oppose any move towards the tax, which he described as “brutally unfair on people who happen to be living in family homes”.

 

Some critics have questioned the practicality of the policy, asking how the State would arrive at valuations for houses.

Well, they will simply draw a redline above any number they deem “unfair”, duh. As for the London housing bubble, it may have finally popped, now that all those who bought mansions in London will “suddenly” find themselves at the “fair tax” mercy of yet another wealth redistributionist government.

Unfortunately, for the UK, the “mansion tax” idea, , gloriously populist as it may be, may be too little too late.

As we reported late last week in “The Music Just Ended: “Wealthy” Chinese Are Liquidating Offshore Luxury Homes In Scramble For Cash“, the Chinese offshore real estate buying juggernaut has now ended courtesy of what appears to be China’s credit bubble bursting. So if the liquidation wave truly picks up, and since there is no greater fool left (you can forget about sanctioned Russian oligarchs investing more cash in the City in a world where asset freezes and confiscations are all too real), very soon London may find that there is nobody in the “fair” real estate taxation category left to tax.

But that’s ok – because that’s when one simply expands the definition of what is fair to include the not so wealthy… and then again…. and again.

Finally, if anyone is still confused, the IMF-proposed “mansion tax” is most certainly coming to the US, and every other insolvent “developed world” nation, next.

Russia Vetoes, China Abstains From UN Security Council Resolution On Ukraine | Zero Hedge

Russia Vetoes, China Abstains From UN Security Council Resolution On Ukraine | Zero Hedge.

In a rather concerning (though not entirely surprising) turn of events, the United Nations (which may well need to be renamed after this) is making headlines:

  • *RUSSIA REJECTS U.S. DRAFT RESOLUTION ON UKRAINE, CHURKING SAYS
  • *U.S. DRAFT DOES NOT DIRECTLY BLAME RUSSIA FOR CRISIS IN UKRAINE
  • *RUSSIA VETOES UN SECURITY COUNCIL RESOLUTION ON UKRAINE CRISIS
  • *CHINA ABSTAINS ON UN RESOLUTION ON UKRAINE

And then the US comes over the top:

  • *POWER SAYS UN VOTE SHOWS RUSSIA ‘ISOLATED, ALONE, WRONG’

Well “isolated and alone” with China?

#UK: ‘#Russia stands isolated in this Council & in the intl comm’ ‘ball is firmly in Russia’s court’ #Ukraine #Crimea pic.twitter.com/m3xBGDDXS9

— Ukrainian Updates (@Ukroblogger) March 15, 2014

It is hardly surprising since the UN Resolution declared Sunday’s referendum on Crimea as invalid but China’s abstention makes it clear that the 2nd largest economy in the world is in no way supportive of the West’s plans and is siding more with Russia (albeit in a diplomatically safe way – for now).

Here is The Diplomat’s Wei Zongyou on China’s potential role to offer some constructive diplomacy to resolve the impasse:

Though far away from China, and definitely not affecting China’s “core interests,” Ukraine crisis is increasingly placing China in a diplomatic dilemma. On the one hand,  the crisis aggravated by the “peaceful entry” of Russian soldiers into Crimea and the latter’s plan to break away from Ukraine through a referendum is diametrically opposed to China’s long-held principle and position of non-interference and anti-separatism; on the other hand, if China sympathizes with Kiev’s new government or the West’s view of point, it will surely alienate Russia, with which China has forged close strategic relations in recent years. What’s more, as Russia and the United States are both wooing China for support and as the situation in Ukraine goes from bad to worse, how could China still stand on the fence while not alienating either and transgressing on its own long held principle?

In view of the delicacy of the situation and the inherent dilemma, China’s response, so far, has been very cautious and intentionally ambiguous. However, as the United States and Europe push for tougher measures and sanctions against Russia, and if Kiev decides to put its case before the UN Security Council, which would seem very likely, China’s diplomatic leeway will be increasingly squeezed. Beijing will have to make its position more clearly heard and play a more active role, as new Foreign Minister Wang Yi suggested at a People’s Congress press conference.

The good news is that there is still some room for diplomacy:

First, neither the West nor Russia wants war, even cold war. For a post-modern Europe, a war with a nuclear-armed Russia is unthinkable. Even a cold war of some form would be unbearably costly, if not an outright disaster, for the struggling European economy. Britain, France and Germany each have huge economic interests with Russia. The budget-constrained Obama administration, meanwhile, just doesn’t have the means or the will to wage or even imagine a small, conventional war with Russia. For Russia, although it is disillusioned with the West, it is not prepared physically or psychologically to have a war, hot or cold, with Western powers.

Second, the United States, Europe and Russia all want to find a reasonable way out of the current crisis, as of course does the Ukraine government. No doubt, Russia’s action in Crimea surprised both the U.S. and Europe, which find themselves pressed by world opinion to take firm action, even though they are not prepared and reluctant to do so. And while they push for some kind of economic sanctions against Russia, they still don’t want to shut the door of negotiation and push Moscow into corner. As for Russia, though it did expect some resentment and criticism from the West, it is not prepared to face the prospect of tough economic sanctions and political isolation. If offered a decent solution, Russia will not be foolhardy.

Third, an autonomous Crimea within Ukraine, within which Russia’s military presence can be guaranteed, is in the best interests of Ukraine, Russia and the international community. Under the current situation, what worries Kiev most is the possible loss of Crimea and the Russian threat to its territorial sovereignty and integrity. In its turn, Russia’s nightmare is a pro-West Ukraine, hostile to Russia and opposed to its military presence in Crimea. If each can get what it wants to and avoid what it fears, a solution may be found.

Given these common interests, China can play an active role in facilitating a diplomatic solution to the current crisis.

First, China could embark on a quiet diplomacy, taking advantage of its close strategic relations with Russia. At present, in the shadow of looming economic sanctions from the U.S and Europe, the chance of Russia backing down in bilateral or multilateral dialogues with the West is very slim. Russian President Vladimir Putin is not going to bow to the West because of sanctions. However, if China can quietly offer Russia a helping hand, talking from the perspective of a close friend of what is in Russia’s best interest concerning Ukraine, something Putin knows better than anybody else, the perhaps the Russian president will be more willing to listen. And Chinese President Xi Jinping can reciprocate Putin’s phone call and offer his advice as a friend.

Second, if Putin is interested in China’s advice, Beijing should seek Washington’s promise or even guarantee of the status of Russian military base in Crimea and the cancellation of economic sanctions.

Third, once a promise or even guarantee is secured, China should work together with Germany, whose position and attitudes are somewhat different from those of the United States and other European countries, to persuade Russia to de-escalate the situation and seek a diplomatic solution to the crisis.

Of course, if Russia is unwilling to take China’s advice as a friend, Beijing should also be straight with Moscow, telling it that China will not be comfortable with, let alone support, the secession of Ukraine territory, which would be contrary to China’ s long-held principle. And Beijing should also be frank in conveying that Russia cannot count on China’s vote if the case of Crimea’s independence or secession is put before the Security Council by the Ukraine government.

And indeed they did not get their vote – but clearly China is still playing the game with their abstention.

Russia Vetoes, China Abstains From UN Security Council Resolution On Ukraine | Zero Hedge

Russia Vetoes, China Abstains From UN Security Council Resolution On Ukraine | Zero Hedge.

In a rather concerning (though not entirely surprising) turn of events, the United Nations (which may well need to be renamed after this) is making headlines:

  • *RUSSIA REJECTS U.S. DRAFT RESOLUTION ON UKRAINE, CHURKING SAYS
  • *U.S. DRAFT DOES NOT DIRECTLY BLAME RUSSIA FOR CRISIS IN UKRAINE
  • *RUSSIA VETOES UN SECURITY COUNCIL RESOLUTION ON UKRAINE CRISIS
  • *CHINA ABSTAINS ON UN RESOLUTION ON UKRAINE

And then the US comes over the top:

  • *POWER SAYS UN VOTE SHOWS RUSSIA ‘ISOLATED, ALONE, WRONG’

Well “isolated and alone” with China?

#UK: ‘#Russia stands isolated in this Council & in the intl comm’ ‘ball is firmly in Russia’s court’ #Ukraine #Crimea pic.twitter.com/m3xBGDDXS9

— Ukrainian Updates (@Ukroblogger) March 15, 2014

It is hardly surprising since the UN Resolution declared Sunday’s referendum on Crimea as invalid but China’s abstention makes it clear that the 2nd largest economy in the world is in no way supportive of the West’s plans and is siding more with Russia (albeit in a diplomatically safe way – for now).

Here is The Diplomat’s Wei Zongyou on China’s potential role to offer some constructive diplomacy to resolve the impasse:

Though far away from China, and definitely not affecting China’s “core interests,” Ukraine crisis is increasingly placing China in a diplomatic dilemma. On the one hand,  the crisis aggravated by the “peaceful entry” of Russian soldiers into Crimea and the latter’s plan to break away from Ukraine through a referendum is diametrically opposed to China’s long-held principle and position of non-interference and anti-separatism; on the other hand, if China sympathizes with Kiev’s new government or the West’s view of point, it will surely alienate Russia, with which China has forged close strategic relations in recent years. What’s more, as Russia and the United States are both wooing China for support and as the situation in Ukraine goes from bad to worse, how could China still stand on the fence while not alienating either and transgressing on its own long held principle?

In view of the delicacy of the situation and the inherent dilemma, China’s response, so far, has been very cautious and intentionally ambiguous. However, as the United States and Europe push for tougher measures and sanctions against Russia, and if Kiev decides to put its case before the UN Security Council, which would seem very likely, China’s diplomatic leeway will be increasingly squeezed. Beijing will have to make its position more clearly heard and play a more active role, as new Foreign Minister Wang Yi suggested at a People’s Congress press conference.

The good news is that there is still some room for diplomacy:

First, neither the West nor Russia wants war, even cold war. For a post-modern Europe, a war with a nuclear-armed Russia is unthinkable. Even a cold war of some form would be unbearably costly, if not an outright disaster, for the struggling European economy. Britain, France and Germany each have huge economic interests with Russia. The budget-constrained Obama administration, meanwhile, just doesn’t have the means or the will to wage or even imagine a small, conventional war with Russia. For Russia, although it is disillusioned with the West, it is not prepared physically or psychologically to have a war, hot or cold, with Western powers.

Second, the United States, Europe and Russia all want to find a reasonable way out of the current crisis, as of course does the Ukraine government. No doubt, Russia’s action in Crimea surprised both the U.S. and Europe, which find themselves pressed by world opinion to take firm action, even though they are not prepared and reluctant to do so. And while they push for some kind of economic sanctions against Russia, they still don’t want to shut the door of negotiation and push Moscow into corner. As for Russia, though it did expect some resentment and criticism from the West, it is not prepared to face the prospect of tough economic sanctions and political isolation. If offered a decent solution, Russia will not be foolhardy.

Third, an autonomous Crimea within Ukraine, within which Russia’s military presence can be guaranteed, is in the best interests of Ukraine, Russia and the international community. Under the current situation, what worries Kiev most is the possible loss of Crimea and the Russian threat to its territorial sovereignty and integrity. In its turn, Russia’s nightmare is a pro-West Ukraine, hostile to Russia and opposed to its military presence in Crimea. If each can get what it wants to and avoid what it fears, a solution may be found.

Given these common interests, China can play an active role in facilitating a diplomatic solution to the current crisis.

First, China could embark on a quiet diplomacy, taking advantage of its close strategic relations with Russia. At present, in the shadow of looming economic sanctions from the U.S and Europe, the chance of Russia backing down in bilateral or multilateral dialogues with the West is very slim. Russian President Vladimir Putin is not going to bow to the West because of sanctions. However, if China can quietly offer Russia a helping hand, talking from the perspective of a close friend of what is in Russia’s best interest concerning Ukraine, something Putin knows better than anybody else, the perhaps the Russian president will be more willing to listen. And Chinese President Xi Jinping can reciprocate Putin’s phone call and offer his advice as a friend.

Second, if Putin is interested in China’s advice, Beijing should seek Washington’s promise or even guarantee of the status of Russian military base in Crimea and the cancellation of economic sanctions.

Third, once a promise or even guarantee is secured, China should work together with Germany, whose position and attitudes are somewhat different from those of the United States and other European countries, to persuade Russia to de-escalate the situation and seek a diplomatic solution to the crisis.

Of course, if Russia is unwilling to take China’s advice as a friend, Beijing should also be straight with Moscow, telling it that China will not be comfortable with, let alone support, the secession of Ukraine territory, which would be contrary to China’ s long-held principle. And Beijing should also be frank in conveying that Russia cannot count on China’s vote if the case of Crimea’s independence or secession is put before the Security Council by the Ukraine government.

And indeed they did not get their vote – but clearly China is still playing the game with their abstention.

Climate change: Evidence and Policy

Climate change: Evidence and Policy.

by Resilience.org Staff, originally published by Resilience.org  | MAR 5, 2014

Click on the headline (link) for the full text.

Climate Change: Evidence and Causes

Royal Society and the US National Academy of Sciences
From the Press Release:
The U.S. National Academy of Sciences and the Royal Society, the national science academy of the U.K., released a joint publication today in Washington, D.C., that explains the clear evidence that humans are causing the climate to change, and that addresses a variety of other key questions commonly asked about climate change science.

“As two of the world’s leading scientific bodies, we feel a responsibility to evaluate and explain what is known about climate change, at least the physical side of it, to concerned citizens, educators, decision makers and leaders, and to advance public dialogue about how to respond to the threats of climate change,” said NAS President Ralph J. Cicerone.

“Our aim with this new resource is to provide people with easy access to the latest scientific evidence on climate change, including where scientists agree and where uncertainty still remains,” added Sir Paul Nurse, president of the Royal Society. “We have enough evidence to warrant action being taken on climate change; it is now time for the public debate to move forward to discuss what we can do to limit the impact on our lives and those of future generations.”

Climate Change: Evidence and Causes, written and reviewed by leading experts in both countries, lays out which aspects of climate change are well-understood, and where there is still uncertainty and a need for more research.

Carbon dioxide (CO2) has risen to levels not seen for at least 800,000 years, and observational records dating back to the mid-19th century show a clear, long-term warming trend. The publication explains that measurements that distinguish between the different forms of carbon in the atmosphere provide clear evidence that the increased amount of CO2 comes primarily from the combustion of fossil fuels, and discusses why the warming that has occurred along with the increase in CO2 cannot be explained by natural causes such as variations in the sun’s output.

The publication delves into other commonly asked questions about climate change, for example, what the slower rate of warming since the very warm year in 1998 means, and whether and how climate change affects the strength and frequency of extreme weather events…

Link to report
(27 February 2014)


The GLOBE Climate Legislation Study

Globe International
From the website:
On 27 February 2014, the Global Legislators Organisation (GLOBE International) released the 4th edition of the GLOBE Climate Legislation Study – produced in partnership with the Grantham Research Institute at the London School of Economics.

The Study is the most comprehensive audit of climate legislation across 66 countries, together responsible for around 88% of global manmade greenhouse gas emissions. The new study (4th edition) was formally launched at the 2nd GLOBE Climate Legislation Summit held at the Senate of the United States of America and at the World Bank, Washington D.C

The 700 page study reviews almost 500 pieces of legislation that have been passed in the 66 study countries.

Link to the Executive Summary or full report from this page
(27 February 2014)


Potential climate engineering effectiveness and side effects during a high carbon dioxide-emission scenario

David P. Keller, Ellias Y. Feng & Andreas Oschlies, Nature Journal
Abstract:
The realization that mitigation efforts to reduce carbon dioxide emissions have, until now, been relatively ineffective has led to an increasing interest in climate engineering as a possible means of preventing the potentially catastrophic consequences of climate change. While many studies have addressed the potential effectiveness of individual methods there have been few attempts to compare them. Here we use an Earth system model to compare the effectiveness and side effects of afforestation, artificial ocean upwelling, ocean iron fertilization, ocean alkalinization and solar radiation management during a high carbon dioxide-emission scenario. We find that even when applied continuously and at scales as large as currently deemed possible, all methods are, individually, either relatively ineffective with limited (<8%) warming reductions, or they have potentially severe side effects and cannot be stopped without causing rapid climate change. Our simulations suggest that the potential for these types of climate engineering to make up for failed mitigation may be very limited.
(25 February 2014)

Siemens CEO Explains Why Russian Sanctions Will Never Happen | Zero Hedge

Siemens CEO Explains Why Russian Sanctions Will Never Happen | Zero Hedge.

With the UK rapidly backing away from sanctions against the Russians (and the Russians suggesting the confiscation of US and EU assets should sanctions occur), it appears President Obama is becoming increasingly isolated in his calls for sanctions. As the CEO of Siemens – Germany’s massive industrial conglomerate explains Russian natural gas provides “lifeblood” to western Europe and there is substantial “dependency.”

Via WSJ,

The head of German industrial conglomerate Siemens AG said he doesn’t expect European governments will press hard for sanctions against Russia in response to the Kremlin’s authorization to potentially deploy  troops into Ukraine.

Siemens President and Chief Executive Joe Kaeser was asked about the situation in Ukraine during an appearance at the IHS CERAWeek energy conference in Houston, Texas. He said it was important to remember that Russian natural gas provides “lifeblood” to western Europe and there is substantial “dependency.”

“Maybe the American people or the government or whoever raises their eyebrows can say how could the Europeans be so moderate on the debate over sanctions. Guess what? You don’t want to sanction anyone you depend on,” Mr. Kaeser said.

...

Mr. Kaeser went on to say the U.S. is in a better position to consider economic sanctions against Russia because of its recent surge in oil and gas production.

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