The quiet revolution in internet search

I saw a survey recently proclaiming the popularity of search engines - "92% of internet users search", it said, beating email into second place as the most common online activity. The only surprise is the 8% of people who go online and somehow avoid using search at all. How is that possible?

For the rest of us search engines have been a constant part of our lives online right from the start, helping us make sense of the deluge of data that would otherwise be impenetrable and bewildering.

Search (which means Google for 2/3 people). Type in a term, hit return and within a few nanoseconds get thousands of suggested links with the most promising at the top of the first page of results. Apart from a few superficial changes (no longer needing to hit return) nothing much has changed except that, under the hood, everything has. Many times and, some say, with profound implications.

Google is constantly evolving the algorithms which drive the ranking of results. When I was trying to get a high ranking for our website a couple of years ago, links to the site from other websites, particularly those anchored in the search term, were said to be the key. Now these links can result in your site being banished to the "also ran" pages as Google suspects you are trying to game the system.

Some of the factors that are said to improve your rankings were barely on the radar two years ago:

• Social factors - the rising influence of Facebook and Twitter with "shares" on Facebook being given particular weight

• Speed of the website

• Penalties for low quality content (e.g. content farms)

• The growing importance of location particularly in mobile search

• Use of Google's own data from searches, sites favourited (or blocked), paid search etc

• More sophisticated assessment of quality of page's content, structure, layout

The key messages I got reviewing the latest trends are that it is getting harder for site-owners to game the system and it is better to focus on quality content, constantly improving the usefulness of your site and trust that Google will find it. Some kind of social media strategy would appear to be a must though.

And what of personalised search: results tailored and filtered to reflect your preferences, location, search history etc? Google says it is personalising results to make them more useful but some people fear that its getting too Big Brotherish and may result in users getting a distorted view of the internet that filters out important material such as political views that your own. If you are worried about Big Google watching you then maybe try logging out of your Google account while searching.

From our website this week: Will I get caught not declaring Spanish tax

Now IS the time for a referendum on Europe

Over 100,000 signatures collected by volunteer groups and some brave Conservative MPs have forced a vote in Parliament over UK membership of the EU. All the main party leaders are forcing their MPs to vote against a referendum. Strange bed-fellows Cameron and Miliband are effectively saying the same thing: now’s not the time.

They are wrong. It’s the perfect time for the British people to be given a say on the EU. After all they have not been consulted for over 35 years. They have never had the chance to say whether they want to be part of what the EU has grown into since those seemingly innocuous origins of six countries in a Common Market.

Since then, with barely a nod to democratic process, the EU has grown into a 27 state behemoth that reaches into every legislative area, slaps down our courts and parliament, dictates who we can let in to the country and claims to speak for us in the world.

It also soaks up enormous sums of money, a net £12 billion of which comes from the UK taxpayer. As we wrestle with a massive fiscal deficit, now is most definitely the time to consider whether we can afford to pay this massive subsidy to our neighbours and debate what we get in return.

Many other economic issues are tied up with the EU from the burden of regulation on industry to the effects of unchecked immigration and the impact of EU schemes to undermine the City. Far from a referendum being a distraction in a time of economic crisis, it may be a pre-requisite of recovery. We should at least be able to debate the arguments rather than remain permanently shackled to the Euro project which has never looked so tarnished and dysfunctional.

Some argue that the sovereign debt crisis should be given priority at the moment and that a referendum is an irrelevance we could do without. On the contrary, the Euro crisis is the most compelling reason for a debate on continued membership. For one thing it has undermined one of the principal claims of the Euro-enthusiasts: that Europe does things better and we would be better off inside the club.

Also, however the crisis is resolved, it is sure to presage enormous changes in the way the euro area and EU are run. We deserve to be consulted before the UK government has to decide how to respond to the crucial choices that are bound to result.

Fundamentally the Euro crisis has exposed the dearth of democratic legitimacy in the rotten core of Europe. The political elites have pushed the project along hard and fast ignoring popular doubts and look what a mess has resulted. Just think of how the German electorate must think about their politicians’ promises about no bail outs and pooled debt.

With the sole exception of the Euro and one or two opt-outs, UK governments have gone along with the lot and have never put the issues to the people. Now is the time to remove that stain on our democratic heritage and have a referendum on this vital topic.

If you feel the same way you can make your voice heard (in a small way!) by signing the People's Pledge here.

On our website this week Spain is bringing back the wealth tax

10 reasons why stimulus is the problem not the solution

Last week I wrote that calls for more economic stimulus should be rejected because such measures demonstrably make things worse rather than deliver the boost they are supposed to. I listed 13 separate fiscal or monetary efforts made to stimulate the US economy since 1993 which have left it in a worse state than any time since the War.

Other countries which have run even bigger government deficits and run easy money policies for longer, like Greece and Japan, are in an even worse state.

Despite this dismal record policymakers (most recently the Bank of England with its QE3 programme) persist on trying to shove stimulus down our throats. Few commentators ever seem to question whether these “boosts” actually do more harm than good.

So, in no particular order, here are ten reasons why I think unfunded public spending, super-low interest rates and money printing are economically damaging and preventing recovery:

Sugar rush - stimulus only creates a temporary boost to demand at the cost of storing up demand-destroying effects for the future. One reason why most countries are suffering marked slow-downs now is that the effects of the 2008/9 stimulus packages have worn off.

Prolonging the agony – these false demand rushes do not just benefit healthy parts of the economy, they allow unhealthy, over-indebted and unsustainable parts to limp on: zombie banks, companies and, dare I say it, consumers.

Bad habits die hard – if you look at the way stimulus is supposed to work, it is in ways that are completely contrary to the long term interests of the countries being “helped”: encouraging consumption rather than investment; more borrowing rather than savings. Bank of England policy has been likened to “war on savers” which is just about the last thing the UK needs with a pensions timebomb ticking.

So now Inflation's a good thing? – the monetary authorities are expressly trying to create inflation with their policies and seem to be quite pleased with themselves when they create it. I am less sanguine. The BoE reckoned its first bout of QE generated up to 2% extra inflation. One reason why private sector demand is so depressed this year is high fuel prices which have been particularly affecting retailers. A lot of government spending is indexed to inflation so it makes the deficit reduction harder. Contrary to commonly stated opinion, high inflation doesn’t automatically erode debt. It may do this if wages rise faster than general prices but this has not been the case in recent years.

Leakage – A lot of the demand supposedly created by these stimulus measures leaks abroad in the form of increased imports or by encouraging investment capital to flee to emerging markets in search of better returns. The Chinese bubble that may be about to burst was made in Washington.

Moral hazard – The financial sector knows that every time the markets weaken, the fiscal and monetary taps will be turned on and they will be rescued. This has been done so many times - the term that describes the phenomenon, the Greenspan Put, was coined as long ago as 1987 – that the financial sector has a strong incentive to take ever greater risks because the downside is so limited. Stimulus is one of the main reasons for the “too big to fail” phenomenon.

Confidence trick – QE, fiscal stimulus and lower interest rates are all supposed to encourage business investment, which creates jobs and thus more consumer spending and thus more investment in a virtuous cycle. But if you were in charge of a business, would stimulus policy incentivise you to invest for the long term? Maybe a decade or so go but these kinds of measures have been tried and have failed so many times now that they are counterproductive and cause cynicism and confusion in the business community.

Bucking the market – True free-market believers are a dying breed these days. How else do you explain the lack of criticism, even from supposedly right wing politicians, for probably the biggest and most damaging example of state interference there is - central banks holding down interest rates below their market level. Interest rates are a price mechanism like any other: if you set the price of credit too low you will upset the delicate balance between saving and investing, investment now and consumption later. See this article to understand the theory of intertemporal misallocation which explains a lot of the current crisis: What Spanish Pigs Can Tell Us About Economics

Pensions vandalism – One common aim of stimulus measures of the QE variety is to lower bond yields which also has some nasty side effects for pension funds and retirees buying annuities. Is it really going to help our companies to have to increase the contributions to their pension funds? Will it help demand to impoverish pensioners? See this article from the telegraph There’s Another Fine Mess QE Has Got Us Into

Big Spenders – if you believe that governments spend (and then tax and borrow) too much, then take a look at stimulus as one of the main reasons for this. Look at Spain where low interest rates over-stimulated the economy, falsely inflating GDP and tax revenues thus encouraging the government to spend too much. And when the stimulus wears off, governments have a great excuse to spend and borrow even more to “support” the economy. One Nobel prize-winning idiot even claimed that an imaginary war against aliens would be a good thing because it would encourage the US government to spend even more trillions it didn’t have – Paul Krugman: An Alien Invasion Could Fix the Economy

OK, so this is a mish-mash of ideas and I haven't tried to distinguish between the different types of stimulus. Maybe different countries which might benefit from certain measures at particular times. But in general I believe that governments would be better to concentrate on balancing their budgets, cutting taxes and regulation and leave the economy, including interest rates, to the markets.

From our website: guide to Spain's Autonomo (self employed) system

It's a case of Good News, Bad News for Spain

Mixed headlines about the Spanish economy this week as the tourist sector delivers the goods, but unemployment continues to rise to an agonising 4.2 millions.

New figures reveal that Spain's travel sector experienced a very good Summer season. Visitor numbers hit a record high of 7.64 millions in August (up 9.4% on the previous year).

A separate survey showed Spain remains the number 1 choice in Britain (Spain's top market) for family holidays. Some have speculated that the Arab Spring and rising flight costs have caused some Europeans to choose Spain over more exotic and far-flung destinations.

Great news for the economy as tourism is Spain's biggest industry and employer. It is also the main source of export income which injects foreign demand into the stagnant domestic economy.

That's the good news. The bad news came from unemployment stats showing a net increase of 95,000 on the unemployment rolls to record another new high of 21%. The two bits of news are probably connected as tourist jobs are inevitably seasonal and some will have already been laid off last month.

Another component of the jobs woe however is more worrying. Reports say that there were heavy job losses in the public sector as local government in particular sheds employees. Teachers are being laid off for example and are going on strike in some areas.

Many local authorities which profited from high property-related taxes in the boom (and spent accordingly) are now deep in debt and some are not settling their bills and being taken to court by contractors such as rubbish collectors and cleaners.pp

It's all a reminder that austerity isn't painless and that, although Spain has made decent progress in getting the deficit under control, that very process may deepen the economic crisis.

From the website: Changes to Spanish Tax Form 210