Saturday, January 1

More rip off merchants masquerading as charities

So now Sir Stephen Bubb says that bank bonuses should be taxed and proceeds given to charities. Oh! very nice of you, mate. Next idea presumably would be to force people to grow green hair? Or how about forcing people to pay £1 every time they have a McDonald burger? How about forcing people to pay £1 every time they switch on their tv’s? Or every time they fill up their tanks with petrol?

Taxes are compulsory, mate, you pay them so that there is a state which looks after basic needs. Charity, on the other hand, is voluntary. This basic idea seems to have passed you by, you fascist ignoramus. Why call yourself as a charity if your funding is based upon government levied taxes? Shame, this is so highly illiberal. The story also says, and I quote:

Last month, a survey by the Charity Finance Directors Group, consultants PWC and the Institute of Fundraising, found that a third of charities nationally that receive state cash say they will have to reduce the level of services they provide. More than a quarter expect to make staff redundant and the charity thinktank New Philanthropy Capital estimated that the voluntary sector's income from state sources could shrink by between £3bn and £5bn as a result of the cuts.

Assuming that the reduction is about 25% (same scale of normal government cuts), this tells me that this forcible contribution via taxes to the charity sector is to the range of £15bn and £20bn. That is about 10-13% of the annual income tax take by the government. What the hell? We pay £43bn in yearly interest costs, there’s a place where you can spend this £20 billion in charity funding. What on earth is this stupid thing? Go see the site. Here’s a great example:

An independent employment charity which works nationally with the long-term unemployed, helping people overcome personal barriers so that they can move into long-term, sustainable jobs. Our objective is to help those who are furthest from the labour market to get and keep a job, by preparing them for work and supporting them through their individual return-to-work programmes.

Very good stuff, its good to hear that private citizens are putting their money to help their fellow citizens get back to work. No? no!

The Charity’s accounts for the financial year ending 31 March 2009 show an income of £7,981,260 and expenditure of £7,620,171. The charity’s income includes £6,717,834 funding from regional Government Offices, local authorities and the London Development Agency.

You are welcome. The mind boggles. Here is an example of what local council’s fund out of your council tax and general taxation.


Why are we funding Irish in Greenwich or a Somali Lunch Club? Or a swimming club? Good lord.

Quick updates on IT4CH

I quote from Pat’s email: :

You may remember that BD asked at the last meeting whether I had been contacted by students at Nottingham University regarding charity support.  I heard from the leader of the SIFE group, which is sponsored by HSBC, and I met them a few weeks ago.  I was trying to work out the best way of utilizing this group and came up with a plan to set up an IT Club at Queens Medical Centre in Nottingham where they treat seriously ill children and teenagers from all over the East Midlands.  It would mean having the students CRB checked but it could be worth it.
Our local Nat West branches (where our Social Enterprise account is held) decided to do some fund-raising for us.  I suggested that Queens Medical could be the beneficiary and they were very pleased.  They have raised money to purchase a high-spec laptop and I’ve arranged for them to go to QMC ON December 7th to officially hand over the laptop.  I also requested that the university students could also go and see what we do. the hospital teacher agreed.  The teacher who does the Youth teaching is going to discuss how the Computer Club can be organized.  Just doing repairs to IT when we no longer have a site would not work. A Computer Club could be ideal.

Thursday, December 30

Amusing take on U2 and Africa

From here. I quote:

An expert commission of African leaders today announced their plan for comprehensive reform of music band U2. Saying that U2’s rock had lost touch with its African roots, the commission called for urgent measures to halt U2’s slide towards impending crisis.

“Our youth today are imperiled by low quality music,” said Commission chairman Nelson Mandela. “We will be lending African musicians to U2 to try to refurbish their sound to satisfy the urgent and growing needs for diversionary entertainment at a time of crisis in the global music and financial sectors.”

Concerns about U2 have been growing in Africa for a while. One Western aid blogger testified to the Commission that his teenage kids found U2’s music “cheesy.” The Mandela Commission proposed that U2 follow a series of steps to recover its Edge:

1) Hire African consultants to analyze U2’s “poverty of music trap”

2) Prepare a Band-owned and Commission-approved Comprehensive U2 Reform Strategy Design (CURSD)

3) Undertake a rehabilitation tour of African capitals to field-test and ground-truth proposed reforms

4) Subject all songs to randomized experiments in which the effect on wellbeing of control and treatment groups is rigorously assessed.

Mandela expressed optimism that the Commission’s report and proposed reforms had come in time to stave off terminal crisis in U2, and restore its effectiveness in the 80s arena rock field.

More on UK Charities’ income sources

Saw this article in the financial times today. Its talking about how uk charities are struggling with getting money. I quote:

Fergus Finlay, head in Ireland of Barnardo’s, a children’s charity, has managed for the past two years to meet rising demand for services such as breakfast clubs for poor children, even though this has meant cutting staff salaries and eating into reserves. In common with the leaders of many other nonprofit organisations around the world, however, he anticipates still greater pressures ahead – and scant prospects for individual voluntary support to compensate for cuts in tax-funded public money.

See what I mean? why are charities getting funded by taxes? A fascinating graph gives some fascinating if incomplete information.


Now check out the middle graph and see where the 4th element is. This is Income from other sources, presumably from the government sector. I tried to see the original report, but it carefully avoids specifying where or what this “other sources” is. Now when you see that majority of the funding is actually coming from other sources, one is very surprised that the report does not break out this “other”. One could say that this is from the corporate sector but I rather doubt it.

Here is a partial list of schemes and projects that you can apply to to get government funding. Here is another government site itself which talks about what to do to get funding from the government. They even have a bloody separate domain name. This is all taking taxes from you and I, and giving them to charities without asking us and then the charities income is also tax free. And now they are talking about matching voluntary contributions with tax funded funds. What on earth? What on earth is this? This isnt fair and this is economic madness.

Wednesday, December 29

Smuggled Swede sweets eat away Danish tax take

Economics always wins out. Denmark has a high sugar tax rate so what’s going to happen? People are going to smuggle in Swedish candy.

An estimated 300 million kronor ($44.18 million) worth of illegally smuggled sweets and chocolate from Sweden are sold in Denmark every year, the Danish tax authority announced on Tuesday.

Skat, the Danish tax authority, revealed that every other kiosk that it has inspected sells smuggled candy from Sweden.
The reason behind the appetite for
illegal Swedish candy stems from a high sugar duty amounting to 17.75 Danish kroner ($3.15) per kilogramme, resulting in brisk illegal cross-border trade.
"Candy is our biggest challenge right now," Skat's Lars Klamer told Danmarks Radio (DR) on Monday.
According to the report, illegal candy
sales cost the Danish industry millions of kroner because it cannot compete on price. At the same time, they also cheat the state out of millions in taxes and duties.
Klamer added that the number of individuals and businesses simply crossing the Öresund between Copenhagen and Malmö to shop without paying taxes and surcharges has soared.
He acknowledged that the tax agency has made progress in stamping out smuggled beer and soft drink sales, but the Danish Chamber of Commerce singled out the job and business losses as a result of the illegal trade.
The chamber estimated that 15 percent of all candy trade in Denmark is illegal, the report said.

Tuesday, December 28

International equity portfolio allocations and transaction costs

I got an email out of the blue.

Dear Dr. Bhaskar,

Hope this email finds you in best of your health and spirit.

I am Chandra, Sunil Poshakwale’s PhD student and you were one of my external advisors in my MRes. I would like to thank you for all your help and support at the initial stage of my PhD. I have now completed my doctorate and working as a Lecturer at the University of Stirling, Scotland. In fact you were the one to float my doctorate’s idea when you visited Cranfield University as a guest lecturer in 2007. I still remember you saying to me that one of the reasons you do not trade in emerging markets because its not worth it, given the high transaction cost. You then asked me to prove this, if I could and that would be a good PhD project.

Tapping your idea of transaction costs I have now published a paper in Journal of Banking and Finance. Please find attached the article which I published with Sunil.

Once again profound thanks for all your support. I would be very glad to have further research ideas which I can work on, pariticulary those benefiting international investors.

Kind regards

Dr. Chandra Thapa
Lecturer in Finance
University of Stirling

Quite a nice man, eh? for him to remember an off the cuff conversation from many years back. This is the paper he has written along with my old friend Sunil Poskakwale. Journal of Banking & Finance 34 (2010) 2627–2638

a b s t r a c t
In spite of the critical role of transaction cost, there are not many papers that explicitly examine its influence
on international equity portfolio allocation decisions. Using bilateral cross-country equity portfolio
investment data and three direct measures of transaction costs for 36 countries, we provide evidence that
markets where transaction costs are lower attract greater equity portfolio investments. The results imply
that future research on international equity portfolio diversification cannot afford to ignore the role of
transaction costs, and policy makers, especially in emerging markets, will have to reduce transaction
costs to attract higher levels of foreign equity portfolio investments.

Interesting article indeed and something that does touch on one of my pet bug bears, the assumption that transaction costs are zero. This is ridiculous to assume that they are zero. They arent zero, this isnt a perfect world. Economics and Finance are applied sciences, what’s the bloody point of putting in an assumption like that? Next thing you know, you will assume that investors are totally rational and follow all economic laws. heh.

Monday, December 27

Should you friend your parents on Facebook?

Well, my son was a friend on Facebook and then about an year back, he defriended me : ( or whatever the correct term is. Then my mum joined Facebook so i friended her. Bit challenging eh? Here’s a convenient flow chart if faced with this conundrum. Not that it worked for my son who lives at home, isn't planning to move out in the new year and has an apartment of his own..I guess he is now in the “little shit” category, and provides a simple test of when he grows up when he friends me again, eh? lol

What are your kids doing?

Sunday, December 26

A charity funded by the Govt is not a charity #ukpolitics

So there is this charity called as Booktrust Charity. It does good stuff, like giving out books for people to read when they are children. For me as a confirmed bibliophile, I like the idea, get more people to read about it.

But here’s what is confusing me. This is supposed to be a charity? So where is the charitable giving? Relying on the government to fund you means that you arent a charity, you are just another government department. Do you think that the government has some other sources of money other than mandatory extraction of money from your pocket and mine via taxes.

So the government, very rightly, said if you are a charity, then get charitable donations, why are you relying on the govt to fund philanthropic activities?

These charities which are reliant on govt funding screw it up for the other charities like ours. We do not rely on government funding. We rely on our volunteers who go about getting money, running to raise money, etc. etc. So how come they get govt funding while we dont? Because we are based upon the principle that if its charity, then its not going to be based upon forcible extraction of money.

Everybody who is backing this charity to have government funding, you dont want a charity, you want public investment. Bah!, this is intellectual incoherence of the first order.

How Europe is seizing your pension assets

And this is happening all legally. Remember, you chaps, your money is not save from these grasping politicians who will rob the people who scrimp and save to give to the feckless and useless. Bloody thieves. Argentina did the same. And then these buggers want you to increase your pension contribution. Bah!, no wonder pensions are the furthest things from people’s minds.

I quote:

People’s retirement savings are a convenient source of revenue for governments that don’t want to reduce spending or make privatizations. As most pension schemes in Europe are organised by the state, European ministers of finance have a facilitated access to the savings accumulated there, and it is only logical that they try to get a hold of this money for their own ends. In recent weeks I have noted five such attempts: Three situations concern private personal savings; two others refer to national funds.

The most striking example is Hungary, where last month the government made the citizens an offer they could not refuse. They could either remit their individual retirement savings to the state, or lose the right to the basic state pension (but still have an obligation to pay contributions for it). In this extortionate way, the government wants to gain control over $14bn of individual retirement savings.

The Bulgarian government has come up with a similar idea. $300m of private early retirement savings was supposed to be transferred to the state pension scheme. The government gave way after trade unions protested and finally only about 20% of the original plans were implemented.

A slightly less drastic situation is developing in Poland. The government wants to transfer of 1/3 of future contributions from individual retirement accounts to the state-run social security system. Since this system does not back its liabilities with stocks or even bonds, the money taken away from the savers will go directly to the state treasury and savers will lose about $2.3bn a year. The Polish government is more generous than the Hungarian one, but only because it wants to seize just 1/3 of the future savings and also allows the citizens to keep the money accumulated so far.

The fourth example is Ireland. In 2001, the National Pension Reserve Fund was brought into existence for the purpose of supporting pensions of the Irish people in the years 2025-2050. The scheme was also supposed to provide for the pensions of some public sector employees (mainly university staff). However, in March 2009, the Irish government earmarked €4bn from this fund for rescuing banks. In November 2010, the remaining savings of €2.5bn was seized to support the bailout of the rest of the country.

The final example is France. In November, the French parliament decided to earmark €33bn from the national reserve pension fund FRR to reduce the short-term pension scheme deficit. In this way, the retirement savings intended for the years 2020-2040 will be used earlier, that is in the years 2011-2024, and the government will spend the saved up resources on other purposes.

It looks like although the governments are able to enforce general participation in pension schemes, they do not seem to be the best guardians of the money accumulated there.