Jonathan Davis | John Kay

Fannie Mae Is a Needless and Risky Model for UK Housing

May 1, 2013
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There are many lessons to be learnt from the financial crisis. But the need for countries to establish institutions such as Fannie Mae is not one of them. The failure and abrupt nationalisation of the US's Federal National Mortgage Association was at the heart of that crisis. Yet George Osborne, Britain's chancellor, has announced plans to introduce similar state-backed mortgage guarantees, with proposals for a “Help to Buy” scheme to underwrite mortgage lending.

Sovereign Scots May Have To Drop Sterling

When Czechoslovakia broke up at the end of 1992, the new states agreed to use the same currency pending further negotiation. This resolve lasted 19 days. The scale of speculative transfers from Slovakia to the Czech Republic forced immediate action to stabilise the banking systems of the two countries. Three weeks later there were separate Czech and Slovak korunas.

Fair Value Is Not the Same as Market Price

Anyone who comments publicly on economic affairs receives regular correspondence from monetary cranks, who espouse schemes for securing peace and prosperity by reforming the world's money. Bitcoin, the private cyber currency whose supply is fixed to prevent inflation, is only the latest entrant to a lengthy catalogue. Bitcoin also attracts anarchists and libertarians.

Politicians Bow to Pressures to Bend Data

The British government recently assumed the £37bn liabilities of the Royal Mail pension fund. As a result, government borrowing was reduced by £28bn. Yes, you read it correctly. The explanation is that, by convention, unfunded pension liabilities do not represent government borrowing while, by a different convention, public assets intended for sale – such as securities formerly held by the Royal Mail fund – may be offset against borrowing.

Even a Subpar Sage Is Pure Genius

Has the Sage of Omaha, now 82, lost his touch? In his annual letter to the stockholders of Berkshire Hathaway published last week, Warren Buffett admitted a “subpar” performance in 2012. He acknowledged that his next annual letter may show that, for the first time, his fund had underperformed the S&P index over a five-year period.

Labour’s New Tax Policy Is an Old Mistake

I first wrote this article 33 years ago as a young researcher at the Institute for Fiscal Studies think-tank, and have repeated it at regular intervals since. When Ed Miliband announced last week a new flagship policy for his opposition Labour party – a reduced starting rate of income tax to help the low paid – he provided me with an opportunity to pull out the file again.

For A Stimulus, Boring Is Best

The image of helicopter money is arresting. The central bank governor flies across the country in a helicopter, a deranged grin on his face as he showers money on a grateful populace. Of course, this is not what advocates of helicopter money have in mind. They are also anxious to distance themselves from great instances of inflation – most recently that of Zimbabwe, in which the police and army have been paid with freshly minted currency rather than money raised through taxes. Nominal expenditure expands faster than the supply of goods and ever larger quantities of notes must be printed to keep the army and the police supportive of the regime.

Only Fools Claim To Know the Future

At this season it is customary to look back on the achievements of the year that is past and to consider what may unfold in the year to come. Nate Silver, the young statistician who became an unexpected hero of 2012, is relevant to both exercises.

To Understand Christmas, Go To the Pub

With gift-giving as with finance, it takes an eclectic approach to understand human behaviour Why do we exchange gifts? I once enjoyed a heated debate with a group of anthropologists. After discussing what we might learn from each other we adjourned to the pub, where the debate continued. We bought rounds of drinks. But why?

Corporate Tax Should Be Fair and Shared

Many multinational companies that appear to be operating successfully in Britain pay little or no corporation tax in this country. It is not difficult to understand why ordinary people on wages and salaries, and small British companies that pay tax at the normal rate on their profits, are angry. The origin of the problem is simpler to describe than to address. If a business operates in many countries, and makes a profit, in which country is the profit earned?