Countries like the US, Australia and Great Britain have gone through housing booms in the last decade. The global cities in those countries seeing double-digit home appreciation rates. Bill Gross comments that the US economy has been growing, but in manner that is highly dependent upon home prices appreciating .

From the article;

.... and [interest rates] landed in a valley so low that the lure of assuming a mortgage became irresistible. Houses were then turned into ATM machines as refinancing, equity extraction, and a plethora of funny money mortgage innovations placed cash in the hands of consumers. The U.S. and global economic recovery over the past four years, as detailed in previous Outlooks, has thus been asset-based with housing leading the pack. Central banks worldwide, through both historically low real policy rates (Fed Funds) and the recycling of reserves into longer-dated U.S. Treasuries (Bretton Woods II) bear responsibility for much of the froth. Ordinary citizens with a capitalist bent - gettin' while the gettin' is good - must own up to the remainder. Combined, they have produced a growing economy but one which is acutely dependent on housing continuing to go up, equity continuing to be extracted, and consumption continuing to be motivated by what seems to be an endless chain of paper prosperity.

A graph of percent borrowing against home equity in terms of income. This is not in itself bad, but an example of how Americans have been subsidising the lack of salary and wage growth by using the equity in their houses to borrow against and spend.

It is not uncommon in the US for home owners to be issued special credit cards that can be used against the equity in their homes. This money has been spent into the American, Australia and British consumer economies.

Greenspan states that homeowners borrowed $600 billion last year against the growing equity in their homes made possible by the annual gains in housing prices of near double-digits in recent years. That $600 billion amounts to nearly 7% of disposable personal income. While Greenspan again does not take the risky step of suggesting how much of that flows through to spending, private economists and good old common sense suggest at least 50% and maybe more. People don't borrow money to deposit it in the bank. They borrow money to spend. If so, and using a conservative 50% figure, the chart points out that home equitization has added ½ to 1% annually to the U.S. GDP growth rate in recent years. Should home prices stop going up at recent rates, equity extraction will become more difficult. Studies by Goldman Sachs on other home asset-based economies, such as Australia's, point to retail sales slowdowns of as much as 4% once equitization rolls over. This week's consumer reports from the UK point to the same conclusion.

Bill Gross suggests that the housing bubble may pop as soon as six months from now judging by his criteria. He makes no claim on recession, just that the US economy will be weak, and that weakness will be determined by multiple factors. Again, governments end up carrying the sword for a bad economy even though it is often not their fault. A housing bubble pop in Australia may have political ramifications at the federal and state levels.

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The UK is planning to track every movement of every car on the road.

Using a network of cameras that can automatically read every passing number plate, the plan is to build a huge database of vehicle movements so that the police and security services can analyse any journey a driver has made over several years.

Now like myself you may be gagging with rage at this point, so let me skip the part where attempt to voice just how stupid and dangerous this is, and skip straight to the conclusion.  The only way the planners of this system could have the slightest regard for liberty is if they open it to everyone.  Create a website, vehiclejourneys.gov.uk, and let everyone see everyone else, police vehicles included.  That would be a changed world, and maybe not a better one, but it wouldn't be a unilateral handing of power to the state.

A study in the UK found that a majority of those polled, 61%, had committed petty offences against the government or the workplace. For instance, over a third had paid cash in order to avoid VAT(GST) and nearly one fifth had appropriated stationary from work.

One of the reasons politicians constantly bang on about crime is because stiffer sentencing is so popular. Often irrationally so. When fines for everyday infringements become so expensive as to be unaffordable, then sentencing has moved into the absurd. For instance $700 AUD or $1,000 USD for speeding fines.

Yet studies, like the one from Keele University, seem to be at odds with that graph. I think it is safe to say when people are asked if criminals should get stiffer sentences they are thinking murderers, not the cash in hand economy.

There are other issues too, for instance, the cost of regulation with VAT, GST and sales tax is pretty high for someone who wants to get something done for a few hundred dollars. It is easier from everyone's point of view to pay cash and avoid the additional costs of government regulation.

As to the stationary; many employees, rightly or wrongly, feel under-appreciated and small items become a sense of entitlement. They are small enough that it won't be noticed, and universal enough a practice, that it will most likely not be punished as a crime or a fireable offence.

Some of the other ones were similar to avoiding government red-tape and regulation; such as eleven percent not paying their TV license. I suspect many doing that may have read Thoreau's Civil Disobedience . A TV license must be the stupidest tax on the planet.

These are excerpts from the UK Chambers' Hansard of Gordon Brown's speech on Constitutional Reform.

Brown outlines twelve areas where power will devolve from the executive to the legislative:

The route map seeks to address two fundamental issues: to hold power more accountable and to uphold and enhance the rights and responsibilities of the citizen.

While constitutional change will not be the work of just one Bill or one year or one Parliament, I can today make an immediate start by proposing changes that will transfer power from the Prime Minister and the Executive.

For centuries, they have exercised authority in the name of the monarchy without the people and their elected representatives being consulted, so I now propose that in 12 important areas of our national life the Prime Minister and the Executive should surrender or limit their powers, the exclusive exercise of which by the Government of the day should have no place in a modern democracy.

These are: the power of the Executive to declare war; the power to request the dissolution of Parliament; the power over recall of Parliament; the power of the Executive to ratify international treaties without decision by Parliament; the power to make key public appointments without effective scrutiny; the power to restrict parliamentary oversight of our intelligence services; power to choose bishops; power in the appointment of judges; power to direct prosecutors in individual criminal cases; power over the civil service itself; and the Executive powers to determine the rules governing entitlement to passports and the granting of pardons.

I now propose to surrender or limit these powers to make for a more open 21st-century British democracy which better serves the British people.

He is arguing for checks and balances between the Executive and Legislative. Which is very wise and makes for a more deliberative process. It should be noted that Australia lacks several of these too.

I did not realise that parliament could appoint bishops, surely in a republican system, secularism is the goal and parliament, or politics, should play no role in the appointment of clergy. I am aware that the UK is not a republic, and that the Queen is the head of the church as well as state, but surely it could just be gotten rid of and the church told to deal with it themselves.

It is also interesting to note, particularly with the issues in the US, that Brown wants to devolve power, or oversight for pardons into the legislative. In the Washington system the President has absolute authority in this area. It is supposed to be a check and balance against arbitrary judicial decisions, not a political get out of jail free card.

On the issue of dissolution of parliament, under these reforms there must be a majority for the dissolution rather than just the executive council deciding it. This would probably be better handled by fixed terms. The executive calling the election date gives too much incumbent advantage anyway.

Brown seeks to make the Attorney-general have less political intrusion into cases:

The role of Attorney-General, which combines legal and ministerial functions, needs to change. While we consult on reform, the Attorney-General has herself decided, except if the law or national security requires it, not to make key prosecution decisions in individual criminal cases.

Seems wise. There is also a requirement for the public service to be governed by legislation rather than executive procedures. There is also a decoupling of politics and civil service by not allowing special advisors to give orders to the civil servants.

This has been an issue in Australia and has allowed the "I don't know, no-one told me" type get out of jail free cards to Government Ministers. IIRC Bob Brown tried to pass a private member bill in the Senate seeking to stop this practice in Australia.

Gordon Brown also argues for 'citizen juries':

The first is powers of initiative, extending the right of the British people to intervene with their elected local representatives to ensure action, through a new community right to call for action and new duties on public bodies to involve local people.

The second is new rights for the British people to be consulted through mechanisms such as 'citizens juries' on major decisions affecting their lives. The third is powers of redress, and new rights for the British people to scrutinise and improve the local delivery of services. The fourth is powers to ballot on spending decisions in areas such as neighbourhood budgets and youth budgets, with decisions on finance made by local people themselves.

He is also seeking to reduce the age of enfranchisement to lower than seventeen. Ultimately Brown wants it all wrapped in a written constitution (like Australia, but not like Tasmania or Western Australia):

In Britain we have a largely unwritten constitution. To change that would represent a fundamental and historic shift in our constitutional arrangements. So it is right to involve the public in a sustained debate about whether there is a case for the United Kingdom developing a full British Bill of Rights and duties, or for moving towards a written constitution.

Because such fundamental change should happen only when there is a settled consensus on whether to proceed, I have asked my right hon. Friend the Secretary of State for Justice to lead a dialogue within Parliament and with people across the United Kingdom by holding a series of hearings, starting in the autumn, in all regions and nations of the country, and we will consult with all the other parties on this process.

This is an important speech, which, ironically, because Australia shares a Westminsterish system and is deficient in many of the same areas, will probably have political ramifications in Australia too.

Very interesting.

x-posted eurotrib

Via Westminster Wisdom, Vino discusses assymetrical devolution of the British political system.

Australia uses the technology of federalism and a written constitution to separate the political responsibilities between the national government and the states.

The British constitution is a mix of practice, convention and statutes over time but until recently there has not been a growing layer of government outside the national parliament in London and the local councils.

The devolution and establishment of Scottish parliament, the Welsh Assembly and Northern Ireland parliament, without the clear cut separations of federalism or confederacy have raised some issues.

Vino argues that asymmetrical devolution is natural in national systems and can be accounted for politically without too much disorder.

Secondly, looking abroad asymmetrical devolution does exist in a number of cases abroad. In Spain, Catalonia and the Basque country have more autonomy than other provinces of Spain. The Spanish Constitution enshrines the right of provinces to ask for and negotiate autonomy with the Centre - if they wish.

Due to their history and to the existence of indigenous nationalist movements, Catalonia and the Basque country have done so. Other provinces have not felt the need to do so.

Also, although it is mostly a uniform federal system, the US does have forms of asymmetrical devolution too. Washington DC does not have the autonomy a state does. It is under a form of direct rule by the federal government.

Such is a case of asymmetrical devolution, as powers are vested in states which are not vested in the local government of Washington DC.

It is interesting to note that the Australian Territories have been evolving into the federalist structure with self-government, and presumably becoming states in the future. The Northern Territory has already posed the question of becoming a state.

Washington DC by comparison has its budget approved by a committee in Congress. It has a delegate in Congress but like delegates from Puerto Rico, American Samoa and Guam, the representative is a non-voting position who can take part in floor debates.

There is a great deal of resentment in Washington DC that they do not have full Congressional enfranchisement in the House and Senate. The number plates on cars for Washington DC have "Taxation Without Representation" emblazoned on them.

Vino argues that asymmetry is often a needed political compromise:

The Spanish case, to me, is a case where asymmetrical devolution has been designed to reach a much-needed compromise between the nationalist aspirations of local nationalists and the desire of the bulk of the people and of the country as a whole to maintain a degree of national unity.

Autonomy which leaves local nationalists of a community satisfied can stop short of outright independence. Such autonomy enables a compromise between the nationalist aspirations of Catalan nationalism and the desire of Spanish nationalism to keep Spain united.

Gracchi however does see a need for an English Parliament. This would make the UK more akin to a Federalist system as currently the national parliament is doubling as the English parliament.

The issue at the moment in the UK is that there are various asymmetrical devolution settlements - there is not just one problem - but Parliaments in Wales, Scotland and Northern Ireland all have different powers and in England there is no body with those powers.

All other decisions are taken at a national level - hence whilst a Scottish MP at Westminster can vote on English health matters he can't vote on Scottish health matters.

This produces the situation like in England recently where a measure passed charging English students for their university stay, because Scottish MPs voted for it, when Scottish students receive free university education. There is here a manifest injustice.

Gracchi also argues that this form of political structure is incompatible with representation and leads to unjust democratic outcomes where "votes mean different things in different places".

Fascinating discussion. Both links are well worth the read.