Winter of discontent
I dread this time of year - because if you're in my trade, it's an exhausting season of parties hosted by chief executives, ministers, editors, ambassadors, even prelates.
You'll doubtless ask why, as an ungrateful and ungracious bah-humbug Scrooge, do I join the festive throng. Well, they are an excellent place to test the climate of opinion of those with the economic or political power to influence most of our lives.
And right now, the climate is grim - and the forecast is worse.
It won't surprise you that those who run our biggest retailers are utterly fed up.
What does surprise me is that those I've met recently are furious with the government for cutting VAT.
Partly it's the cost and hassle of changing all their prices that irks them.
But mostly it's that they don't believe the 2.5% cut in the VAT rate will increase their sales. I lost count of the number of times I was told that the £12.4bn cost to the Treasury of the change was "money down the drain".
All they see is an unstoppable trend of consumers spending less - and the big shopkeepers tell me they would have cut their prices, with or without the tax reduction.
They believe that a reduction in income tax or an increase in tax credits for those on lower pay would have been a more effective stimulus.
We'll see.
In my experience, retailers are always grumpy about something. But they are at the frontline of consumer spending, so it would be foolish to ignore them.
Only one group is more miserable than the retailers: the bankers and investment bankers.
The investment banks are as challenged and threatened as the coal mines in the 1980s. Those running them tell me they're planning to make further significant job cuts between now and the end of January. "We've cut so much, we've become anaesthetized to the process" said one.
Another told me that the latest round of redundancies would be pretty indiscriminate: "it's about simply getting the numbers down now" he said.
There is one common theme to the shrinkage at these leading investment banks. They are massively cutting back the businesses that provide services and funds to hedge funds - which has the knock on effect of wreaking havoc on the hedge fund industry.
"We're going to see the closure of well over half of all hedge funds" a banker told me.
Which brings me to the professional investors, who are the most dazed and confused of all those on the party circuit.
"Where oh where do we put our money?" said one.
That's not what you want to hear from someone who manages the pensions and retirement savings of many thousands of us.
I'm 
© MMIX~RS~q~RS~~RS~z~RS~55~RS~)
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Of course retailers always complain, so would you if you had to deal with the general public everyday! However this time it is with good reasonthe dynamic duo of GB &AD were told ad nauseum that a 2.5% reduction in VAT was useless in the face of retailers already offering up to 50% discounts, but did they listen...no. All it did was increase retailers costs, disrupt the xmas selling period and offered no increase in consumer spending...well done AD. This government is at the stage of self denial, they ignore the real world and just try to hang on to power at any cost.
So "where do we put our money".....it is obvious, stop throwing good money after bad in the pursuit of even more debt and even higher house prices...put interest rates up to a level that gives a real return and see the money flow into the banks..... There are more savers than borrowers so the efffect will be positive for the economy.
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I have a NATO-standard safe cabinet. It's slowly filling up.
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I believe it is a false assumption to think that our pension money in the hands of a pension fund manager who invests in the stock market, will necessarily grow. As if by magic.
If you consider inflation and the competing pension funds, who is going to be the loser on each transaction, for your pension fund manager to be a winner?
The only reason stock markets go up is because of our regular and unstoppable stream of monthly pension payments. Not because the underlying industry really creates any value.
If pension plans were not allowed to invest into the stock market, then we would see the true face of stocks and shares.
And perhaps a more honest and simple stock market.
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''where oh where do we put our money?''
With sterling here, UK assets are exceptionally cheap.
Bank shares are cheap, especially for those too big to be allowed to go down.
It's obvious, they should buy LLoyds/HBOS and RBS shares.
They won't do it yet, though, because fund managers are sheep (that's how they got into this mess).
They will wait until UK bank stocks have doubled in price, which will happen when the hedge funds buy their shorts back. And they'll also wait until sterling's back to 1.3 to the Euro (which will also happen as soon as the hedgies try to take their profit).
No, before you ask, I do not hold any UK bank shares.
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Investors should put their money into Property but expect low returns as opposed to losses in the stock market.
Who cares about the hedge funds the term hedge means to limit risk, but these hedge funds have done exactly the opposite and geared up to incredible levels on the back of cheap money good riddance to them I say. They arte a prime cause of the problems we now have.
Retailers need to use some common sense exactly how many flat screen telly’s do we all need the over manufacture and supply in our economy and the world as a whole is a disgrace!
Any retailer who has not built-in some contingency is a fool and the same goes for the average John.
Will we ever return to any form of common sense?
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Its the fundamentals dear boy.
Britain's economy has been in an unstainable position since 2004.
International investors will shun the attempts to borrow some much more.
When bank rates fall to 1% I suggest all UK depositors withdraw their funds from the banks as they will be safer and more useful in safe deposits.
Save Britain not Brown.
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The excessive charges on our pensions and investments made by the financial industry are another Disgrace.
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I'm surprised that you're surprised by retailers who are 'furious with the government for cutting VAT'. It seemed obvious from the start that it would have minimal impact and be accompanied by significant disruption.
Think also of the many businesses who sell to other businesses (BtoB). For them, the VAT change has been all pain and zero gain. They're even more unhappy!
The fact that (so we're told) the PM and chancellor were at one point considering _increasing_ VAT smacks of desperate men shooting from the hip.
All things considered, the VAT change was a bad move.
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How do we get the economy moving again?
Certainly not by just pouring money into it.
We might ask ourselves why people invest money; for surely if we are to get the economy moving we must have people in productive employment.For productive employment investment is needed. People must not just be units of consumption which is how Brown Darling sees them.
People or businesses invest money because they see a profit at the end of the exercise. When a low risk is perceived and the economy is motoring then a small profit is acceptable: however when times are hard and the world is a dangerous place it is only worth investing if the potential profit is large.
Imagine that you have a couple of million in cash and everything around you is uncertain.
If you invest and make a profit the Chancellor has made it clear he will hit you hard with tax. If you employ people and then have to stop employing them, you will face an employment tribunal who will fine you unless you are very carefull.
Or you can find the safest place that you can think of and stash the money away, put your feet up and wait for the storm to pass.
Which would you do?
If the goverment wants the economy to move it must make risk taking worth while and at present it is not.
If it was worth while thousands of risk takers would come out and invest to get the economy moving again.
Stop giving everyone money to consume with no purpose, give a tax holiday to those who try and build something to support the economy.They will reward you with action
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The 2.5% vat reduction is certainly doing one thing and that is getting us talking about minor rather than major financial issues a red herring anyone?
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On a more serious plane, the news from the US is that the credit system still isn't working. There are a number of reasons for this:
1. The Rating Agencies have failed. Their continued survival must therefore be blackmail.
2. The regulators have failed. Although the FSA has created a number of new posts, they're all jobs for the boys from the banks: Lord David Lipsey's resignation last week as head of the Financial Services Consumer Panel sums it up, the promises made to him to allow him to promote the cause of the consumer inside the FSA haven't been kept.
3. HMG obviously has lost its grip. Darling's doing too little too late, and is following, not leading the way out of the recession. As a result, Sterling's now around the lowest it's been in my lifetime.
4. The international governmental collaboration which should have been a priority has been put on the back-burner. The original Bretton-Woods was set up by people who were workers and who got stuck in. The meeting a couple of weeks back was of total straw men, figureheads rolled out to suit the need of the moment, spouting a few remarks which we now see were inanities because nothing has been done since to put them into action.
5. The rational man therefore asks why we put up with this. We're possibly too hidebound to actually do anything about it, such as happened in 1648, "away with this bauble". The bauble's still there, and the rigmarole with it which allows the supposed forces of order to create more dissent than they will cure in a month of Sundays. I suppose they were running out of work to do, so this makes some more for them.
6. And therefore why should anyone hope for a way out? The difference between recession and depression isn't statistical, it's moral, and this is how one moves from the first into the second, by destroying not only peoples' lives, but their very will to live. That's what drives bankers off the sixth floor at Wall Street, depression, systemic and entrenched.
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Bert - it will only be a winter of discontent if you choose it to be and you are making a hell of a stab of depressing everyone
what is your trade btw?
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VAT reduction of 2.5% helps a tiny bit. I am scanning the web for bargains and they are there. Coffee maker, Comet, Argos, Amazon all around £124. I got the excat one for £92 with free delivery. The fact is, retaliers are not making their usual profit on what they sell but they can lower prices alot more and still have a markup. Of course web retailers do not have shops, lots of lighting and displays with staff hovering. Just wondering when there will be a higher seperate VAT or business rates for internet sales.
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#3
I agree the stock market is a very unstable place to invest, over the long term it has struggled to keep pace with inflation.
It is worth remembering that despite un- remitting bad news the UK housing market has only fallen a modest 10-15% not the 50% the FT 100 has fallen in the same period
The three fundamentals for survival are food, water and shelter for this reason land and property will always outperform the stock market.
Put your money in tangible assets based on land.
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"they don't believe the 2.5% cut in the VAT rate will increase their sales. I lost count of the number of times I was told that the £12.4bn cost to the Treasury of the change was money down the drain"
That's the whole point, isn't it ? And we're only one day into the new VAT regime.
Furthermore, at the very same time they told us deflation was coming: so it's hard to figure out how they ever imagined otherwise.
But now these fiscal geniuses have shot their bolt. Whatever else can they do - and how would they spin it ?
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''where oh where do we put our money?''
The answer, in times of recession, is in sensible start-ups.
Business angels who invest in companies with their feet on the ground, respect for the economic climate and a tangible, easily understood concept, will reap the benefits as their investments come to fruition 3-5 years down the line during the recovery.
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"Where oh where do we put our money?" said one.
If I were they I would make sure it was tucked away very safely and they have a very good hiding place.
To say its going to get grim is understated. This nation is going to go bankrupt under the weight of welfare payments and housing support added to the idiotic bail out of the banking system.
Discontent? I doubt it, more like revolt.
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"I dread this time of year - because if you're in my trade, it's an exhausting season of parties hosted by chief executives, ministers, editors, ambassadors, even prelates."
Who do you normally socialise with then; Kings, and PM's? - this must be such a come down...
Or name dropping!
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I am heavily involved in the commercial property and finance sector and for the last month i have heard more doom and gloom that i ever remember and i can remember a fair way back.......... That said i have a challenge for you Robert. I challenge you to give us ONE positive blog over the next week, be it outlook, sections of the market , anything, i dont care.........give me positivity!
Those of us in the financial and property markets know its melt down out there but it will get better, maybe not to what it was but better. Give me something to go to the Christmas party and get drunk on..........I dare you!
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The previously high levels of spending were fuelled by high pay and high risk lending. Construction and home improvement are dead in the water, and these tend to be big-ticket, requiring savings or more commonly borrowing to drive them. The latter is stagnant/non-existent, the former people are hanging on to because its now beginning to sink in.... the P45 is coming.
So, it is not a case of giving the lucky still employed a minor tax break in the hope that they will spend more, but of directly stimulating investment in new jobs across a broader range of industry sectors.
The potential 1m extra unemployed will take at least 30 bn pounds out of the economy. Add that to the 12bn cost of the VAT reduction and you have an awful lot of cash to finance that stimulus.
It would have been far better to authorise major infrastructure upgrades/energy conservation measures to this value of 42 billion pounds back in August, because by now they would be kicking in, the surveys underway, and money cycling round and back into the treasury through taxes. Yes there has been some attempt to do this but it is half-hearted, and too late and too slow.
That way we all get something long term for the tax pain to come. What we've got now is trivial reward for long term tax pain, and lots and lots of unemployed
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Frankly at the moment I think i would rather have a coal mine than an investment bank.
There again what do I know, probably as much as an investment banker.
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9.
''Imagine that you have a couple of million in cash and everything around you is uncertain.
If you invest and make a profit the Chancellor has made it clear he will hit you hard with tax. If you employ people and then have to stop employing them, you will face an employment tribunal who will fine you unless you are very carefull.''
You only pay 18% capital gains tax on such profits. That is among the lowest in the developed world, hardly being 'hit hard' by the Chancellor (aka us taxpayers). That's also on clear profit, after your accountant has had a go at employing your allowances, expenses etc. The Chancellor is unlikely to see anything much of your profit for a while.
You can fire people very easily up to the end of their second year in employment.
Basically, what you appear to be saying is that it's best to stick your cash in a safety deposit box- even lending it to a bank or the Government carries a degree of risk.
It's certainly a plan, and sounds a bit like Cameron's 'man with a plan' speech.
Shame that those without 2 mill in cash can't do likewise.
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The vat reduction actually cost the people and business money - the 12 billion could and should have been paid in cash to everyone so that they could spend it and the vat rate should have been left alone.
What they did is daft as it cost business perhaps a billion and gave nothing to the consumer as the effect of continuing 'panic' moves is to depress the pound and so force up the price of imports. It is these products that people would have spent their money on.
It seems to me that with the best will in the world these people who change policy will force the slump/depression to be deeper and longer than it might have been if they had done nothing. Perhaps this is as inevitable today as it was in the thirties. It is partly a social phenomena that impacts on the ruling class at the time of economic paradigm change - they take a long time to change their ways (The view is generally that they will hold a view for as long as they have already held it.) They are just poor ignorant cogs in the wheel of the economy - they pretend not to be, but history shows that they are.
The upshot of this, if I am right, is that none of the present generation of politicians in parliament (on all sides) and none of the Civil Servants are capable of understanding what to do and these people will continually make the wrong moves until we replace then through natural wastage. We need a regime change in the civil service, in advisers, in business and in politics and that will take time. The 'facts' of the economy will have little impact on these people, not because they are not trying to do the right thing, but because they are incapable of distinguishing the right thing from the wrong thing to do. Let us hope that these people recognise their own failings and quit before they damage the country any more!
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"What does surprise me is that those I've met recently are furious with the government for cutting VAT." It only surprises you Mr Peston because you are a Labour apologist, and when the Prime Mentalist or Lord Mentalson says it is the right thing to do, you unskeptically accept every word.
I may be an old cynic, but I'm more tempted to believe the commercial insight of our top retailers, rather than the latest propaganda from the Brown Bunker.
But you can't quite see it yourself, can you ? "We'll see" is the nearest you'll ever get to criticising the New, or is it Old, or is it New again Labour machine.
Still, it's only money eh ?
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#14
I agree house prices are still very high, but these are asking prices. There are no sales to back these prices up.
On the issue of investing, land and property may seem basic and fundamentally safe. But if you look on an aerial photo you will notice VAST expanses of "green belt" "agricultural land" "farm land" and so on surrounding tiny little enclaves of houses.
The only reason house prices are what they are is because the councils and government do not allow more land to be developed.
However, we are just a council man's pencil stroke away from redeveloping a lot of land and thereby increase the supply of housing.
In other (EU) countries land is cheap as chips, you pay for the house you are buying (and the quality of its construction) and perhaps an extra 10% for like 1/4 of an acre of land if present.
In the UK you pay millions to buy shoddy old houses, reconstructed barns and 1930s shambles. Which you call "character".
That is another bubble just waiting to burst.
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Just a thought to stimulate the economy without borrowing any money.
Allow those with PPPs to withdraw their saved pension funds (tax free) now at any age - to do with what they like. Yes they will have a reduced pot or none at all at the end but many people are going to need the money now.
Those with a final salary scheme - and particulary in the state sector, could be encouraged to do the same if they wish (but of course they then loose the final salary benefits wth all that implies for government debt).
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Ah well consumers don't see extra money in their hands.
So they won't spend it.
Besides the high inflation of household bills, mines running at 11% does rather slow one down if ones income hasn't grown.
Be nice to see a proper pay rise for the Public Sector, say ten percent.
The Inflation is there, pretending it doesn't exist will just increase the suffering of the lowest paid workers.
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25:
Food Production is important.
In Europe there is far more land available for building purposes.
Europe is a lot bigger than the tiny isles of Britain.....
Fewer people own their own homes in Europe, a lot more rent.
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How is Santander coping with the Spainish property crash ?
Just curious as to whether Abbey etc are safe for my money.
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And this is only the start! The 1929 depresion took 3 years to reach its bottom in 1932. This Christmas will be looked back upon as one of the good ones.
Where to put your money? Food. No mate what, people need to eat.
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Anybody who thinks that retail prices are set by adding a percentage markup to the cost then adding VAT is living in cloud-cuckoo land. Prices are set by what the market will bear taking account of psychological price points. There is no chance whatever that an item previously selling for £9.99 will now reduce to £9.74 for example. If this is what retailers have been trying to do then they are dumb. As Robert set out prices are being slashed anyway and they are settling at a level that the market will bear to match the point to where the demand curve has now moved.
The significance of the VAT cut is that it puts £12.5bn back into the economy to help ease the pain of the slowdown, it will not cure it and neither will anything else – we are in for a bumpy ride. Some of the £12.5bn will end up with consumers through lower prices and some will end up with retailers. The part that ends up with retailers may, for example, help them to retain more jobs and those people still employed will spend more money than if they had been unemployed. The £12.5bn will help the economy but the way it trickles through will be far more complex than knocking 25p off a £10 Christmas present.
Was it the best way to put money into the economy? Probably not – I would for example have preferred a significant increase in the tax thresholds and a big increase in the basic state pension (we will all be old one day), but we have what we have and it will help.
Going forwards the government need to plan for a reduction in spending to bring the books back to balance. Ministers use of the word investment when they mean spending is a distortion of the English language. Sensible investment is good, profligate spending is bad and we have too much of the latter in the public sector.
With respect to the pension funds I had a look at mine recently and the fund manager has lost 25% of the value in the last year. If this is the best that the professionals can manage then I would suggest putting some of my contributions towards their redundancy costs and employ just a handful of lower paid workers to buy Gilts, bonds and holding cash on deposit. Why do I need a pension fund manager when I am sure I could manage my money better myself?
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So, are you inferring Robert, that the banks lent to hedge funds so that they might bring them down? Hoist by one's own petard? No wonder the banks are unravelling their postions.
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> "Where oh where do we put our money?" said one.
Thats exactly my question. Having missed the housing market boat I decided to sit it out, and wait for the inevitable crash. Which took about 3 years longer than I thought.
Holding sterling is worrying the hell out of me. I believe we will see a brief period of asset deflation followed by rampant inflation.
I plan to buy a modest house (to live in) once I can call the bottom of the housing market, or close enough.
But the rest of my savings I fear will quickly become worthless, as the only way out of personal and government debt for the UK is inflation.
So do I buy more property and rent it out, buy gold, buy dollars? Even with the pound this low I fear it has further to fall.
This government is definitely not the savers friend. Prudence. Ha!
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Does anyone rember Bob Beamon? who was the financial guru on LBC radio in the eighties and nineties. His book on economics entitled the Wave Theory
(i think) predicted this sort of financial behaviour. Well worth getting hold of a copy.
With regards to retailing the one good thing about it all is may stop the high streets becomming cluttered with shops that sell stuff that frankly we could all do without. In my local town Woodbridge, we have lots of shops that actually are based not on retail good sense or a business model, but on the persons interests/dreams etc. At the moment these people are actually doing slightly less business than estate agents (Bottom of the barrel). A harsh lesson perhaps, but in hard times you have to sell what people need not stuff they could do without. Anyone at the moment considering opening a "niche" (shorthand for c--p you dont need) retail outlet needs their head examining.
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I understand from talking to the helpdesk of a software company which supports around vehicle hire companies, that only one of its 500 clients have dropped prices with the VAT change - everyone else has just kept the same retail price points and increased margins.
The VAT decrease was simply a giveaway with no positive effect in terms of increasing demand, and reduces consumer prices at a time when deflation is the next big worry.
Very poor thinking, I believe.
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Can we please please have a blog on Britain joining the EURO? I've said in a previous posting that this would be one way to mitigate the UK consequences of the debt / house price bubble and that entry would make sense, to me as a non-economist, when GBP:EUR exchange at 1:1. Surely this is more significant than a smallish bank in Manchester going belly-up?
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#27 supercalmdown
"Be nice to see a proper pay rise for the Public Sector, say ten percent."
No chance! We are broke! Do you not understand?
Large numbers of public sector people will get the chop. There is NO CHOICE.
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I have yet to find anybody, apart from Brown and Darling who thinks the VAT cut is anything other than a costly inconvenience which will do no good in the short term and cost us all in the long term.
The lack of common sense and thought beyond the sound bite in this Government is staggering.
I am currently reading a book by Professor John Seddon.
"Systems Thinking in the Public Sector", published earlier this year, shows graphically how and why the current fad for target driven command and control management in central and local government is leading to waste and cost for us all, as well as demoralisation in the public service.
I am tempted to use my VAT saving to buy a copy of this book for GB and team.
Oh, I forgot. There is no VAT on books (yet) so there is no VAT saving to spend!
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The UK needs things to get a lot worse in order for things to improve in the long run. The best solution is for there to be massive migration from the UK due to lack of jobs. The decrease in population would improve things greatly. Let market forces dictate the future.
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hell mend the hedge funds - they seem to have forgotten the "hedge" bit!! too much good time and not enough long time
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Please tell us, Mr Peston, if you have anything to drink at all when enjoying such august company ?
And what is it that you drink ? And who pays for the drinks ? DO YOU ?
Think over this question and you might just grasp how fed up the general public has become of the incompetentence, selfseeking, and bad manners of the UK's governing elites....the BBC's brilliant journalists included.
Merry. merry Christmas.
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#36 HousePricesWillFall
"Can we please please have a blog on Britain joining the EURO?"
There is no doubt that behind-the-scenes (back stabbing?) discussions are taking place. JM Barroso said he was talking "with the people that matter", that is not you, BTW.
Someone on another blog said we could not qualify because of our debt.
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Robert???
Bricks are falling from the sky.
The economy is in freefall.
The Government has Bust the finances.
People in some cases choose to have light/heat or food.
GET OUT THERE AND CALL THEM TO
ACCOUNT PLEASE.
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36 HousePricesWillFall
You've raised the old chestnut about joining the Euro. Do you think that any of our Euro partners would allow us to join at 1:1?
This would give British industry a permanent advantage over their domestic producers. Using the other extreme they may want us to join at 2 Euro to the pound to lock in their own advantage.
Tell you what, lets call it quits and say 1:1.5
So all we need to do is stabilise at that figure. Joining the Euro may prove to advantageous to the future of the UK. If this country ever decides to do it, it must be from a position of both stability and strength. I just cannot see it happening at the moment.
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No.31
Most sensible comment so far.
The VAT change was done to help the WHOLE economy immediately not wait for the alternative, personal tax changes, to adjust incomes marginally over the remainder of the financial year.
Not everyone pays personal tax and the poorest would have missed out altogether.
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What does surprise me is that those I've met recently are furious with the government for cutting VAT.
Partly it's the cost and hassle of changing all their prices that irks them.
But mostly it's that they don't believe the 2.5% cut in the VAT rate will increase their sales. I lost count of the number of times I was told that the £12.4bn cost to the Treasury of the change was "money down the drain".
I dont know why it surprises you.
If you had any nous and read your blog responders or the comments of the German chancellor or any number of others you would already know this
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The VAT cut may not make me spend more, but I think it will stop me from spending less. The fact that my latte was 5p cheaper this morning made me feel just a little bit better off, over a year that's about £12.50.
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the recent fall in sterling has brought the Euro debate back into focus.....dont even think about it!
the pound is weak against the euro but next week the euro may well weaken, the exchange rate is not something one should base economical decisions on, it is regulated by the same guys who put petrol up to $150......the speculators. Do you really think the euro is a strong currency? just look at the eurozone economies....are they any better than the UK? I can even see the time when the germans say enough is enough and go back to the Deutschmark! And anyway do you really think any UK politician is brave enough (apart from mandelson!) to even suggest it to the British people?
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37
"Large numbers of public sector people will get the chop. There is NO CHOICE."
Not until after Brownstuff calls his "Saving UK" election call.
Dominoe effect comes to mind every day.
You ain't seen nothing yet!
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As we are posting our alternative economic packages this is mine:
The Govt should have suspended all housing stamp duty with a commitment to a phased reintroduction so the longer house purchases are delayed the more it will cost in tax.
The Govt should also provide banks with cheap mortgage indemnity insurance for new mortgages (obviously subject to certain underwriting criteria).
The Govt should offer to purchase all repossessions at marker value and rent back to the current owners at a small mark up to the cost of the capital to the govt and give the current owners the option to buy back at any time at the price the govt paid plus inflation.
This should 'fix' the housing market which would 'fix' the banks as they would no longer need to make huge write downs against their mortgage books thus making them less risky which would in turn restart interbank lending and thus allow credit to flow to the rest of the economy.
Housing caused the problem, prices are now close to long term norms so if the 'undershoot' can be prevented then fixing housing will fix the economy.
Longer term I think stamp duty should be scrapped and replaced with scrapping the CGT indexed exemption but it would be very bold to do this now.
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#38 qwerty
If Seddon's latest book is anything like his earlier work "Freedom from command and control", then I can imagine it will go down like a lead balloon in front of ministers.
The target and inspection regime espoused by the Gvt is central planning at its most pernicious (don't get me started on hospital waiting times).
Regrettably the private sector in this country as well as the public sector are stuck in an 18th Century factory style mentality. One that built the empire, but then has slowly eaten it away for the last 100 years or so (why can't we mass produce cars anymore? read Seddon and you understand why).
Perhaps the City was merely a modern day manifestation of this feudal arrangement (lots of "bright" and "talented" people who were nothing more than battery hens in the financial instrument production factory). We deplore those who question authority, yet our mass scale compliance would give North Korea a run for its money (look how easy it is for us to be trained to spend our money voting to evict / retain non-celebrities on our TV).
There are none so enslaved as those that think they are free.
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I think people are missing the point of the VAT reduction.
2.5 percent off will not make people rush out an buy now, but when the 2.5 percent goes back on next year when there are hopefully some signs of light at the end of the tunnel and most of the redundancies have happened, then the threat of an imminent price rise will persuade those who have money to buy sooner, rather than wait for VAT to get back to 17.5%.
The stimulation from the VAT change will come then, not now.
However, its still not the right thing to do. Everyone who owns property is frantically trying to save so they do not get reposessed. If the government want to get people spending they MUST guarantee that no-one who is made redundant will have etheir house reposessed to repay the mortgage.
As soon as people are sure their house is safe they willk spend their savings.
There need to be some safeguards to prevent abuse but that is not difficult for anyone with common sense to work out, which probably means its impossible for civil servants and politicians who see to have a collective iq in the order of 2 when it comes to finances.
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The only solution is to blame the messenger. I vote for imprisoning "Bert" for 2 years.
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#33 swatts1000
"So do I buy more property and rent it out, buy gold, buy dollars?"
NOT DOLLARS! Really not!
#48 jolo13
"just look at the eurozone economies....are they any better than the UK?"
You are absolutely correct. The whole Euro thing is a stack of cards and the table is about to get an almighty knock.
Things have been very quiet about Eire and Italy.
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#21
Why would you rather have a coal mine than an investment bank... ?
That bloke Turner says coal is nasty, dirty smelly stuff and despite the fact that we've got oodles of it we have to stop burning it in power stations because the world is getting too hot... ( We had snow last night in Scotland) ..
Worryingly though this is the same Turner that's now Lord of everything at the FSA...
Doesn't bode well does it?
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"You dread this time of year Robert - because in you're trade, it's an exhausting season of parties hosted by chief executives, ministers, editors, ambassadors, even prelates"
Im pleased to hear it Robert.
At a time when many people are losing there jobs Robert this is the most arrogant crass opening paragraph I think you have made [and there are many].
No thought at all for the countless who have been made unemployed or soon to be. No its look at me im Robert Peston lording it up.
Personally I hold this remark at the same level of contempt as those who complained about the antics of messrs Bland and Ross.
I hope this post draws the same attention but sadly your not that popular.
I demand an immediate appology and yes I will be forwarding my thoughts to your controlling bodies.
I urge any one else who feels the same to do likewise.
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As i have said earlier the GB dream team has run its course, to inject some hope into the markets needs new faces.
Unfortunately,we wont see that for a while as MP's have pension pots to fill and allowances to claim so there will be no early election.
So we can look forward to 12 months of uncertainty in the markets.
i notice not many other people think we are a good bet with the pound dropping like a brick.
I think Gordons hopes of being seen as a world leader in economics have taken a bashing.
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re RobKirton @ 44.
Thanks for picking up my thread on joining the EURO (@36).
I don't understand why everybody assumes that Britain would not be allowed to join the EURO at a 1:1 exchange rate. In terms of purchasing power for quality of life (not the same as purchasing power for a flat screen TV) I think 1:1 is about right. This would also immediately correct the still inflated valuation of the UK housing market, and it would reduce the debt of those who are struggling to pay crippling mortgages, and it would create some room for growth. What British industry are you referring to? Do others in Europe really have anything to fear from British exports? If they let Eastern European countries join, why not Britain?
Surely, this is all far more significant than Darling cooking the books with VAT.
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I guess that 2.5% reduction could be explained as a subtle subsidy, evading normal EU rules, for large ticket items such as new cars. Whilst the high street retailers lose because it has a negative impact on their cashflow,since they buy with credit and sell with cash while temporarily holding the tax. Just don't expect tears for Tesco.
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To those who are still urging us to invest in housing because of a fundamental shortage I recommend a stury of Japanese house prices. In Japan, land is even scarcer and development more restricted than in Britain, yet house prices have fallen for every one of the last fifteen years. Rather than invest in Sterling denominated houses in this miserable country it’s surely better to follow Wemmick’s advice and get hold of portable property.
And it’s really no use looking to Alasdair Darling and Gordon Brown to fix this mess. They are politicians and their first concern --- like all politicians --- will be to do whatever they can to hold on to the perks of office. Rather, each of us has to look to our own best interests and those of our families, and try to arrange our affairs so that we’re as little reliant on the political classes as possible.
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Dear Robert
Thanks for enlightening us about the good and the great in their festive cups.
I share you stoicism about the VAT reduction. But I worry about the Tories' 'kitchenomics' and scaremongering about national bankruptcy.
As for the investment bankers wondering about where to invest, why not start to expose the obscene rates of return previously being sought by some of these people, and explore their role in the near collapse of the banking system?
Peter Kenyon
http://petergkenyon.typepad.com/
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"They believe that a reduction in income tax or an increase in tax credits for those on lower pay would have been a more effective stimulus [than the VAT reduction, at an equivalent fiscal cost].
We'll see."
How will we see, Mr Peston? The VAT's happening, the income tax/tax credits isn't. We won't have anything against which to compare what actually happens, will we?
This is another quaint little Labour trick. Deny that best estimates should be given more credence than any other estimate, so allowing the backing of irrational outsiders if these are more in tune with the unannounced political agenda.
New Labour! Old Labour without the honesty.
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Anybody else here believe that we continue to see the tip (ie 10%) of the iceberg right now? The 90% lurking beneath the surface will become evident in the first of half of 2009, after the Christmas euphoria and natural desire to hang-on-in-there falls away. Then there will be a succession of financial and economic shocks that will ripple around the world in waves, each wave taking us a notch further down the prosperity ladder.
We shouldn't be surprised. We've been living on the never-never for so long now, that a dramatic correction was inevitable. Pity our politicians are doing everything possible to make the end result much worse by trying to delay the inevitable. They're wasting their time and our money, of course.
As before, I add my usual rider that the end of mankind's era of cheap energy will pretty much coincide with the trough of this global economic slump; we're about to live in interesting times.
Cry havoc and let slip the dogs of (economic) war!
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I have stated on Roberts blog many times throughout this year that we were heading for a melt down. This is worse now, and will not get any better any time soon.
Stop the spending by Government NOW and stop the bully boy tax credits system of Brown confiscating hard earned wages and handing the booty out to his choosen few (Usualy the NON working classes) Put money in peoples wage packets NOW by increased personal allowances and also take thousands of hard working people out of the tax pay completly.
Brown and his useless cabinet must go now and bring some stabilty into the Country. A stability that Brown, and he alone, has trashed.
We are in difficult times but no doubt PMQ time will have no answers and no help to the British Public. A shambles of the highest order.
Had Enough
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go shopping near the border in northern ireland they are already doing 1:1 on the euro/ pound
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"We're going to see the closure of well over half of all hedge funds" a banker told me."
Happy Days are Here Again......
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#2 "I have a NATO-standard safe cabinet. It's slowly filling up."
For a long time now, the Spetznez have been trained to crack open NATO-specced safes to get any secrets kept in them !!
Just thought you'd like to know !! :-)
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Increasing tax credits for the lower paid would only have boosted Tesco profits. Reducing the tax paid by young, childless people in work (who don't get tax credits), would benefit clothing retailers, mobile phone companies and restaurants, arguably more at risk than Tesco. The main problem with the VAT decrease is that it is not targeted. the economy needs targeted help.
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How can you avoid bankruptcy when stuck in a bent family law system:
1. Lawyers learn your children's name and then say you can not see them unless you spend a couple of years in court, (so they can get a BMW)
2. Property and assets are transferred by Judges
3. Legal Costs are charged against the property
Might as well stop working now because you know they will get rid of you when they have finished using you.
When they say "Jump" you have to jump as high as you can, (which is not enough)
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VAT change had a massive effect on my business-I had to log into my accounts system, add the new rate as default and add a new VAT category for the old rate in case I need to do anything with invoices/purchase orders from ore change. Oh, and train my accounts staff on the changes to the system. Took all the time it takes to have a cup of coffee!
Had a VAT inspection yesterday, and whilst chatting, I pointed out that we'd changed the rates and he was shocked-because he'd forgotten about it!
My companies are not high street retailers, and many other businesses are the same. All our quotes have VAT added afterwards.
In short, the change has and will make a negligible impact on my businesses. The good thing is that we supply large format printing to many companies, including the retail sector. It is possible that the VAT change may well cause them to use it as an advertising tool-then they'll need more print.
There are many winners out there from this, if not directly, but from the knock on effect. I don't think this is what AD wanted however!
As Alex C states-UK plc is so broken, 2 paracetamol and a cuppa won't fix it.
The expertise to sort this mess out is right in front of their noses-but asking for help is too humble for those who are arrogant headless chickens with jerky knees!
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Robert
As AD and GB have never had a real job in their lives (Scottish solicitor and College lecturer) it is hardly surprising that their efforts to stimulate spending will fail. The retail profit margins in the UK are usually at the 100 percent mark and sometimes higher - hence the 50 percent discounts on the high street. In the US margins are lower but volumes higher.
Ever since VAT came in at 17.5 percent, I have viewed it as a parameter not a variable. Income tax had to come down and to make disposable income go further. AD and GB have to crack down on the electricity and gas suppliers prices which are disgracefully high. These utility companies are TERRORISING the population - where are the Anti Terrorism police when you need them?
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The Chancellors VAT cut has not achieved its purpose; retailers are NOT passing it on. (EG Tesco Fuel: no change in price).
Hence private consumers see no benefit while business such as mine which use a lot of fuel see a 2.2% rise in costs. I calculate that in the case of Tesco fuel sales ONLY, this brings a windfall of £21m per day to their P&L account. And we all know about Tesco's ways with corporation tax. Did the Giovernment really want this to happen? Of course not, and they could easily have predicted it. The rest of us did.
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Why would anyone invite Robert to a function? The tedious delivery, the emphasis on the wrong part of every word, talking to the audience as if they are 5 year old kids. Plus he doesn't want to be there. Don't invite Darling's mouthpiece and have a better party I say.
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joining the euro?
I'm totally agnostic over that-but most importantly, it is so contentious it should be referendum issue.
My concern is that a 'back door' adoption of this currency will cause massive dissent - if the government do it without going to the country first they obviously have no idea of the proportions of the ensuing backlash.
If the comments from Juan are to be believed, then someone is big headed enough to think they speak for the nation AND has a big mouth. Now who is arrogant enough to do that?
We're spoilt for choice!
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The point of the VAT reduction is not to make people spend now but more importantly to make them spend just before it goes back up-- just before the next election.
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I never met Robert Peston, but he seems to think he is good at his trade and deserves to keep his job and be be a "have" instead of "have not". Get rid of him so he can learn what it's like to be in the half that's never been told.
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Robert I hope that when you've retired from one or more of these celebrity Christmas ding dongs you control yourself as you walk home. Too much good living my friend'll take it's toll on you. Be warned. You may end up on the front page of the Sun or God forbid the Sport pictured in a rather poor state as you pull yourself off the pavement. So take it easy at these parties they have a way of turning the mild and the meek into rampaging monsters. Oh, by the way, if you do bump into Gordon and his merry band of woodentops tell them thanks for bankrupting the country and recklessly expanding the nations debt. Just the sort of Christmas present we all wanted.
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Re 72
Fuel duty was increased to negate the VAT cut so no change in fuel prices for private users - business users are a different matter as it effectively went up for them.
(Ditto alcohol and tobacco duty.)
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#58, #44
The OECD publish Purchasing Power Parity values for countries. If I'm reading their numbers right, it looks like the Pound is actually "worth" around 1.3 Euros or 1.5 Dollars, so the current exchange rate is about right.
Personally, I'd prefer to peg the Pound at purchasing power parity against the Euro, rather than actually adopting the Euro. If that could be done we might get the benefit of Exchange Rate stability while maintaining some independence regarding fiscal policy. Failing that, adopting the Euro is the best bet - the past few decades of an independant (and over-valued) Pound have done this country no good at all, though I'm sure the currency traders have done very well out of it.
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#12 "The meeting a couple of weeks back was of total straw men, figureheads rolled out to suit the need of the moment, spouting a few remarks which we now see were inanities because nothing has been done since to put them into action."
This is certainly true of Britain but, then again, what else is expected of Gormless Gordon and his incompetent crew ??
However, it is not true of some other countries at that meeting !! Both China and India have put in place infrastructure aimed at (1) creating more jobs and (2) improve and/or upgrade their badly depleted infrastructure !! China is planning a tax cut (actually a rise in personal tax allowance) while Gormless Gordon is planning MORE tax *RISES* !!
The Asian countries are planning to *reduce* government debt as agreed at the meeting while dear Darling is going to *borrow* to the hilt !!
All other countries at the meeting agreed to open up to fair international trade and investments while Gormless Gordon is punishing Barclays for accepting Arab money !!
Where Gormless Gordon when to the meeting roaring like a lion and asking the rest of the world to follow *his* example, he came back meek as a lamb after being rebuffed for his, shall we say, less than workable ideas on how to solve the economic crises !!
Therefore, the fault lies not in the failure of the G20 meeting but in our Glorious Leader !! It is our Great Helmsman who is steering us straight into the rocks !!
But, of course, such things are never spoken of in the parties and functions of the great and the good, especially within earshot of any who might report them to the thought police of the Ministry of Truth !! They might get a highly undesirable visit from certain gentlemen of HM Constabulary !!
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A quick comment on joining the Euro.
We couldnt afford the cost of the change before, what makes anyone think we can afford the cost of change now we are broke!
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58 HousePricesWillFall
Providing that the Euro does prove to be a bedrock stable currency, I think if we were ever allowed to join the Euro at 1:1 we would be fools not to do so. Though as I said, I can't see it happening. Prices of everything in Britain (apart from still overvalued property) now seem wonderful to other Europeans. Imagine reducing them further and then locking them in i.e. at parity.
Remember if it looks to be such an attractive option to us - it may not be to Eurozone members. What is in it for them?
We must look beyond the current economic crisis. A currency is for life - not just Christmas
In time, other European investors will want to snap up British businesses. That is investing in this country and providing work. There would be no reason why millions of French / Dutch / Belgians shoppers would not just flood the UK every day - bargain hunting. Come to Britain - everything is guaranteed to be cheaper. It would be great for us, but what about there own domestic economies? It doesn't sound like the professed level playing field of the single European market to me.
Eastern Europeans were allowed to join the Euro - but only at hard fought and commonly agreed exchange rates. Likewise there was a period of stability in exchange rates for most countries, especially for the larger ones, prior to joining. Remember the ERM?
It was disastrous last time we joined. We most likely would need to do something similar this time. Of course there may be a cunning plan to create high inflation here and low inflation in the Euro zone to equal things out in a few years. However fine tuning such things is beyond the realms of plausibility, when we couldn't maintain a degree of exchange rate parity for a few months last time we tried to grow closer to currency union
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Where should they put their money....? Wrapped up in that question is the myopia and greed of the investors. The answer is obviously gilts or bank deposit, not stock, not property. Gilts will give you a small return, probably not much else will, until the time comes to buy back into the market.
They are still looking for a big return and the bonus from a trade when there is non to be had. Rather like WW1 generals who couldn't think of any other idea than sending troops over the top, because thats what they had always done.
They clearly haven't grasped the idea that the landscape has changed for probably the next five years, and they should be thinking about survival and hibernation not trying to make a profit.
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"3. At 08:27am on 02 Dec 2008, AndyGreen44 wrote:
I believe it is a false assumption to think that our pension money in the hands of a pension fund manager who invests in the stock market, will necessarily grow. As if by magic."
Magic?
It's simply inflation... Didn't you know?
The money supply increases at 12% per year. "Official" inflation increases at 3% per year and the banks and businesses pocket the difference between the additional money and what you are willing to accept as inflation.
Growth, is simply the devaluation of the currency through the expansion in credit. Your pay slip and savings are on a big downward elevator (normally).
Anyone who says otherwise is a banker.
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#19 "Give me something to go to the Christmas party and get drunk on......."
The price of booze is going to go up in the new year. So eat, drink and be merry for in the new year it will cost you an arm and both legs !!
How's that for some cheerful season's greetings ??
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RE EURO??
CHOICES?? HA HA!!
Herr Braun,Frau Smit ,lord m & the GANG
are more likely to live on Mars than give us
the plebs any choice.
Like Decimalisation, if they do it it will be
used to cover over the dire state of the
Public Finances.
Print a load of new money ,rampant inflation
job done ,back to the 70's and the IMF.
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All for pumping money into the economy, but why on earth is the measly 2.5% VAT cut combined with a rise in National Insurance, hitting the lowest paid.
The explanations that make most sense here are the cynical... Brown can't really be that stupid, tho?
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Its simple we need to start investing in manufacturing/technology shares and Venture Capital rather than debt and houses.
All these comments about land etc assume that business is a zero sum game. This ignores the fact that people are intelligent and we actually do make progress.
In the last 30 years:
Personal Computers,
Internet,
Mobile Phones,
GPS.
In the immediate future:
Electronic paper,
Robots,
Low cost solar power
Further Out:
Biotechnology - cheap food, massive improvements in medicine
Nanotechnology - new materials
Hydrogen economy
In technology the basic rule is you invest in R&D in the down cycles and sales/marketing/production in the good times. The goal is to have the best products at the point of maximum demand. Unfortunately, the UK financial community in its wisdom has shut off pretty much all Venture Capital funding to technology companies.
Equity investment in technology and manufacturing companies is the logical complement of a strategy of devaluing the currency to increase exports. Unfortunately, instead of following through on what could have been a reasonable strategy the money was wasted on a 2.5% VAT cut.
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"I dread this time of year - because if you're in my trade, it's an exhausting season of parties hosted by chief executives, ministers, editors, ambassadors, even prelates".
.. and what trade is that Roberto? You're only as good as your current job, (I wanna be a Rasta DJ)
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Yes - the VAT cut is ridiculous, and displays Gordon Brown's worst tendencies..... to fiddle about tweaking this here and that there making much more work for all of us, when what we want is a much simpler tax system (....I say this running a few small businesses). This is the major delusion that Gordon Brown has - that being in charge of the Treasury (yes, still....) he is the only person that can do anything to help, and therefore has to design some ideal system of incentives/checks etc etc up and down the whole income/asset/tax spectrum to create a "fair" society.
The National Insurance system is the worst of the lot (the most complicated system). The opportunity that this major crisis has presented to do something to simplify things has been wasted (..... like increasing personal allowances, removing the Cap - the Upper Earnings Limit on EE's National Insurance contributions, and then combining NI with PAYE to produce just one system - I'm sure these few changes alone could save the government many many thousands of employees pushing paper with money signs on around pointlessly - just like the banks have been doing, you could argue, believing that they have been doing something useful for the economy).
And so, yes, moving on to the investment banks..... that's good news in fact, given we need to harness the talents of these intelligent smart people to do things that actually contribute to the economy (in science, technology, manufacturing, building, and teaching..... yes, teaching!). The City of London has hijacked just a huge amount of the talent within the UK and sold them a pup (and us at the same time) - the idea that out of money, you can produce all the things you need in life..... it was all just a chimaera.
The model we need to get to is where investment banks have to change their names and are prohibited from using the word "bank" so become .... investment funds/arbitrage operations/hedge funds/holding companies/conglomerate investors etc etc and are not able to borrow from "banks" at all (yep.... I'll say that again, not at all). The proper "banks" become the only things that can take retail deposits, and which we then insist run "open book" banking i.e. have to display details of their loan book and funding book (realtime?), and also operate under decent capital ratio requirements (25%?). This would mean as an individual you can either put money into a bank where you know the capital ratios are huge and so it is very safe, or you could put it in one of the above funds - where indeed you might make a good return, but where you might lose it all (just like any equity investment that the majority of people in the UK understand). This would create a 'firebreak' in the system and most importantly would push down the decision on "appetite for risk" within the system to individuals (you and me) rather than leaving it to some stupid greedy banker in some massive organisation, who is on some huge one way incentive bonus scheme, to set the "systems" appetite for risk, by either a. making huge bets with borrowed money (.... our money!) and b. confusing themselves with financial products they don't understand and that they don't realise increases the systemic risk.
It is important of course in a new system that the opportunity still exists for start ups/takeovers/buyouts to take place funded with large amounts of money, to ensure the "efficient allocation of resources" takes place that will promote economic growth that we all want.
Just don't do it Mr Banker with the money I've put in my bank.
Rather, let me decide if I want to take some of it out of your bank and give it to these other guys to go gambling.
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I suggest that RP dodges the mulled and mullered London circuit and goes off on a spree to California to report on the financial crisis there.
I heard on the World Service this morning that CA is billions of dollars in debt and is close to bankruptcy. It was suggested that, as CA is the 6th (?) largest economy in the world, this could have serious global repercussions.
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In reply to #33:
For what it's worth I am splitting my savings between gold and gilts. Gold is good if sterling goes down the pan and gilts are best to have if we get into a deflationary spiral.
In my view you do not want to be touching equities or property with a bargepole for the time being. If and when things start to pick up oil majors might be a good bet.
I have seen nothing to convince me that there is any hope for the UK economy. What little manufacturing we have is also suffering, due to lack of credit and overseas markets drying up.
I honestly believe our only hope may be to go back to 'digging for Britain' to provide food and to try to become self-sufficient in energy and other basic items such as clothing.
Short-term measures by Labour are just digging a deeper hole for us to get out of. They have also turned this into a police state so the sooner we have a chance to vote them out the better.
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#52 "then the threat of an imminent price rise will persuade those who have money to buy sooner, rather than wait for VAT to get back to 17.5%"
If there is a choice between heating and food on one hand and saving a few quid from VAT increases on the other, I think I know what most people will choose !! Flawed thinking at best, lunacy at worst !!
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so who is looking to gain a European position if they leave british politics?
There must be someone- after all, currying favour there must have an ego centric reason behind it!
How dare that person presume they represent the UK!
Like I said, push this through and see whathappens!
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The VAT reduction is a complete waste of time.
RBS the state owned bank has just passed 1% of the 1.5% interest rate cut onto me.
How can AD tell Banks to pass on the full amount when RBS does not. How about setting an example.
Fuel bills have still not come down.
Rip of Britain strikes again.
Savings solution, buy property outside the UK. Until they find a way of taxing you on that as well.
Save nothing, buy nothing in the UK.
Scrap Council Tax. Why should we pay Tax on money already taxed.
Scrap NI and just have PAYE.
It's a stealth TAX that nobody understands
This country is a joke
Get out while you can before they Tax you on emigrating.
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If its any consolation, I'm even more miserable than the Bankers and the Retailers...
Why ?
Because the Bankers have created a right old mess and completely cocked up my plans, including my long-term investment in Woolworths which looked reasonable until the Credit Crunch...
I hope they all have a rotten Christmas too...
Particularly those retailers who were selling things for £5.99 last week, but they're still £5.99 this week because the reduction in VAT is going into their pockets rather than the consumers....
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#58 You seem to have mistaken the EU for Eurozone !! The Eastern Europeans are joining the *EU*, not the Eurozone (yet) !! Britain is *IN* the EU but not *IN* the Eurozone !! Neither is Denmark and Norway, for that matter !!
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Comment 70 : Tigerjayj
"The expertise to sort this mess out is right in front of their noses-but asking for help is too humble for those who are arrogant headless chickens with jerky knees!"
Yes. Banish these three myths, and the road to prosperity becomes clear again:-
1. The only way the he can avoid being exploited to the point of misery is for the average man to control the entire political decision-making process.
2. It's unquestionably the case that a decision-making process controlled by the average man is just as capable of making best-option decisions as one controlled by the intellectual elite.
3. The quality of the decisions made is unaffected by the level of awareness and involvement of the general population in the political system, and of its understanding of the thought processes that are required for it to operate effectively.
Silk purses cannot be made from sows' ears.
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88 tom_edinburgh
I couldn't agree more. Good to see that there are others who can see above the speculative "investment" economy. i.e. not really investing, simply gambling on the the price movement of a commodity such as land or property.
I always remember the Thomas Edison classic quote
"Opportunity is missed by most people because it is dressed in overalls and looks like work."
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The demise of hedge funds is long overdue - they have caused havoc with their concerted short selling and played a major part in the destruction of investor confidence and wealth in the UK.
Why is the selling of shares you do not own not banned?
It would be very interesting for a journalist to investigate the contributions made to political parties by employees and managers of hedge funds, and who from Government, parliament or the Civil Service has taken up positions in the hedge fund industry.
And also to investigate and explain why our pension fund managers lent shares to short sellers.
Perhaps then we will see why the selling of shares you do not own is not banned.
We have seen a taste of what the hedge fund industry gets up to with Rothschild "entertaining" Osbourne and Mandy in Corfu.
I would not have trusted Mandy given his history - I now don't trust Osbourne.
We need much greater regulation of this shady industry in order to protect our pensions and other savings.
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The government should plan a massive tax rise for January and tell everyone to go out and get the bargains now before the good times end
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Robert's problem is he is not really affected by the credit crunch.. if he was he would realise that it is sad to think about things.
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#33 swatts1000
"So do I buy more property and rent it out, buy gold, buy dollars?"
What you do is research as much as you can and then make up your OWN mind, that way if it goes wrong you will have no one else to blame but YOURSELF.
Unfortunately too many people want someone else to do the work for them so they can make a quick buck, and then when it goes wrong claim they didn’t know what they were getting into, its about time some people started taking responsibility for their own actions.
VAT
So everyone seems to be moaning about the VAT cut.
Well if the stores applied VAT correctly in the first place as an addition to the product price they wouldn’t have this problem or expense, doesn’t it seem odd the so many products were priced at exactly £10,£30,£40 etc inclusive of VAT and that no pre VAT price is shown. After all its not the first time the rate of VAT has changed. I don’t hear the likes of Costco complaining as they already show both prices, maybe this stems from their American roots where sales tax is always added on separately.
And as for those moaning that 2.5% in nothing compared to the one day 25%, 50% reductions just remember the VAT cut will be around for a bit longer than the many short term loss leading sale products we are currently seeing, its not much but as they say every little helps.
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#79 "Personally, I'd prefer to peg the Pound at purchasing power parity against the Euro, rather than actually adopting the Euro. If that could be done we might get the benefit of Exchange Rate stability while maintaining some independence regarding fiscal policy."
Sorry but it is way, way too late to do any pegging !! The government is already bankrupt !! Any pegging is just more hot air since the government has *NO* reserves to maintain that peg, especially when it gets hit by the currency speculator sharks like the Asian currencies were !!
BTW, that is why all those Asian countries built up massive reserves, just in case they get hit again !! At the moment, if Britain gets hit by the speculators, it will be reduced to brick bats and name calling !!
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Why o why do the retailers complain - surely they are the biggest reason for our downfall!!
This country used to manufacture for the likes of retailers, ok the goods were a little more expensive than foreign imports but how many of us bought from M&S years ago because 99% of goods were british made - or so the advert led us to believe.
If we had bought more british goods and retained manufacturing in this country i believe this would be a much smaller mess. (Especially as the only exports we have of any note are services the banking institutions provide and now they are making massive rounds of redundancies).
Shouldn't we have bought British more often and ignored the price difference to Taiwanese, Chinese and other ex third world manufacturers?
Oh dear........
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If any readers know how to use and install browser bookmarklets, you might find this one useful:
[Unsuitable/Broken URL removed by Moderator]
I do.
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#82 "In time, other European investors will want to snap up British businesses."
In time ?? Whaddaya mean "in time" ?? Try Santander, EdF, Eon, BMW, etc !!
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''where oh where do we put our money?''
They've got money left? Oh no sorry they're getting money from the taxpayer who would like to save it in a bank or building society - but you took those away from us years ago.
We could do with a war so we could make thes epeople work down the pits instead - oh hang on we got rid of any wealth creation a long time ago in favour of services - most of which can be done on a couple of computers without any human input.
When will people get it into their thick skulls that there never was that economic growth due to services it was accounting fraud and there is no getting back to where we never were.
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Pity the small businesses that had to pay money to get the VAT rate on their website adjusted.
And what about those on the Fixed Rate VAT scheme that are now worse off?
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It's a hard life treading the rubber-chicken circuit. All that indigestion: and those chocolates the ambassador gives out are as pretentious as the advertising.
It was Benjamin Disraeli who once remarked `there is nothing quite as revealing as a patrician in a panic'.
The revelation is that all those who have been justifying their high salaries because they are more talented than the rest of us are suddenly bereft of any new ideas.
Well guys, welcome to the world of work!
This applies to the lot of them: the bankers, the politicians, the hedge-funders, CEOs and the rest. Not only has their universe collapsed but so has the morality and the social structure that sustained it. Now, perhaps they will begin to understand economics!
In order to get outcomes there have first to be incomes.
Investment has to produce returns.
Value has to be based on productivity.
Anything else is away with the faeries!
In the UK we have a government which is just pressing all the buttons and pulling all the levers in the hope that something will happen. There is no strategy whatsoever other than get out the hose and soak everything with taxpayer's money.
They are managing to turn a crisis into a disaster. I just wish they would stop digging.
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Post 88 and Post 90
You two have summed up pretty much exactly what needs to be done to fix the UK.
I would like to add to that that its high time we had a 'population policy' which becomes part of a proper debate on living within our means.
This policy could focus on growth per capita and improvement in living standards per capita, not just headline growth figures. Building ever more houses, roads and bridges for ever more people on a small crowded island is hardly a way forward.
The harsh truth is that Britain cannot afford many of the perks taken for granted by its citizens, like the option to not work and have large families, or the blanket adoption of certain drugs that cost thousands of pounds annually to administer and prolong a non-economic part of one's life by just that little longer, or the education system that is being run into the ground due to ever increasing pressure and lack of funds to pay/retain the best academics, etc. etc.
Sure, we live in a civilized liberal country, but there is nothing wrong with being civilized within our means, and there is nothing wrong with continuing to supoprt people on low incomes but for example removing incentives to burden the state with ever increasing numbers of dependents.
A more stable population would ease the pressure to continuously invest in more roads adn railway lines and runways. Effective taxation can give tax breaks to ALL familes who choose first to afford a roof over their heads and food on the table before deciding to start a family. This can be paid for by limiting benefits AT CURRENT LEVELS only for EXISTING claimants but progressively eliminating all incentives to keep adding to pressures on social housing, free school/uni education, etc.
Last but not the least, we must adopt an immigration system that only encourages th best and brightest who start paying large amounts of tax day 1. The US immigration system works pretty well (the legal one). It produces Nobel Laureates, the best researchers and innovators, an immigrant community wealthier than their hosts and more integrated than here. They have very strict regulations on immigrants' spouses for example joining them, whereas here the spouses often add to the benefits burden.
Immigrants can be 'cash positive' to the state, or 'cash negative'. For e.g. its the difference between a single foreign doctor coming in on 70k and starting life integrating into the community vs. a British or European earning 15k bringing in a foreign spouse and starting a family with attendant NHS and education costs. Again, unaffordable.
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"Where oh where do we put our money?"
Why not do what everyone without extensive knowledge of finance market had been assuming you were doing?
Instead of gambling it in dodgy finance vehicles for risky returns, invest instead in well-run companies producing REAL products and TANGIBLE services, invest in well-run governments and countries whoever they may be.
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I agree with 95 (metalstardust).
Sod all the different and diverse taxes and rename VAT as TAX.
Everyone pays it. It's set at a level to pay for public expenditure.
Have TAX free items such as food, fuel, and clothing (childrens as they are currently VAT free).
Other than that, spend your money, you pay the tax. And that goes for business too ... no claiming it against tax input versus tax output as they do VAT.
No other taxes are required excepting Capital transfer TAX (taking money out of the U.K).
If someone earns 20K then they pay TAX on the proportion of the 20K spent on TAXable items.
If someone earns 50K they pay based on what they spend their money on. Since they earn more, they will spend more, and pay a proportionately higher amount of tax.
No TAX on saving. Let people save all they want TAX free. Sooner or later they will spend it, or someone else will inherit it, and they will spend it ... Hey presto, you get the TAX on what they spend.
A system so easy, no more accountants. No dodgy auditors (Arthur Anderson anyone), no more vague and opaque vehicles in which to disguise true value, or hide losses.
If the government does well running the country, and needs less money next year, then the single TAX rate comes down.
If the government does badly, then it will need to raise the TAX rate and everyone will see their bad management.
As for councils, be they county or local, then an agreed weighting can be established to formulate rural versus urban, but basically per head they are given a fixed amount from the central fund pool.
Then since any idiot and his Casio can easily work out their TAX liability, there will be automatic prison sentences for people evading tax (as there will be no avoidance options). Make it clear, that any TAX dodge is breaking the law, and an immediate period of incarceration is due.
Just imagine how productive the U.K could become without all this paper pushing, all this servicing fee charging. Surely the U.K would have a competitive advantage of over 5% on other national competitors. I know from running my own company, that paying my accountants accounted for about 10% of profit. No need for accountants no loss of 10% profit.
I learnt during the heady days of the late 80's and early 90's about business process re-engineering. Removing non-value effort from a service or a product manufacture. It was surely a shame the government didn't learn it too, for then they would never have thought charging people TAX and then rebating it in the form of TAX credits on an annually reviewed basis, was a good idea.
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The "Winter Of Discontent" is a bad title for an article about rich people moaning at parties.
It should relate to poor people getting radical fighting against the system, having better parties.
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The retailers who complain that the VAT reduction will hardly be noticed by their customers, and that they would have reduced their prices anyway are probably right. However when they have to pay their VAT bill to the inland revenue, the reduction should be welcome, especially for those with cash flow problems.
Personally I am dubious about the value of all the fiscal measures. It would have been better to target the money directly at saving and creating jobs. The government should ensure that new orders are placed to help depressed areas of the economy, such as the construction industry.
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@90 Noideaatall : great post.
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does the credit crunch / unemployment equally affect black / white people?
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Robert, here’s something useful for you to do while you’re enduring the misery of endless parties this season, bring up the question of why the present government are not freezing the bank balances of all the fat cats?
Yesterday, anothermrmicawber mentioned the fact that the bankers pocketed over £31b in bonuses over the last 4 years.
Is it too late to limit daily withdrawals from bank accounts so that those with all the loot don’t empty them? I suppose it is.
PS I don’t think you're a bit like Scrooge, more of a Ulysses tied to the mast.
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Where do we put our money?
If I had put it under the mattress I would have done better than to follow the advice of financial advisors. Really.
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Comment 113 : SoapboxJoe
"I know from running my own company, that paying my accountants accounted for about 10% of profit. No need for accountants no loss of 10% profit."
I thought that the argument for accountants was that they were trained to convert the actual ins-and-outs of a business into algebraic format, and that monitoring the performance of a business, and controlling the actions of its employees, is immeasurably more efficient and productive done algebraically than physically.
In my day we used to hear your type of argument all the time, but we put it down to the fact than people who don't understand algebra are actually incapable of seeing the benefits of using it. It doesn't look as though much has changed.
The key is to recognise that the strength of any business is directly proportionate to the quality of its administration, and that most business failures are down to skimping on the intellect needed to allow the more basic functions of the business to operate effectively.
This doesn't mean to say that there aren't some pretty useless accountants out there, but there are some pretty useless salesmen too, aren't there? But generalising isn't a very clever way of forming opinions, is it?
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22,
Actually thats 1 year NOT 2, so folk on here do not get confused.
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'Where, oh where, do we put our money?'
I quietly believe that the first developed country that:
1. Eliminates or drastically cuts the capital gains tax, on a permanent basis, on all manner of investment,
2. Drastically dismantles the superstructure of taxation/regulation/welfare-state-goodies, etc. that has essentially crippled business start-ups, and driven good people out of their businesses,
3. Eliminates (or drastically flattens the rates of) income tax, replacing it with taxes on consumption only--thus ceasing to tax work and earning, and
4. Controls its borders
will lead the charge toward recovery, and will prosper. Everyone else will be looking at 'dust and tail-lights' scrambling to catch up.
I think, somewhere, it will happen, because it must.
I hope it happens here in the US first, because the 'knock-on' effect will be strongest for the rest of the world.
Fingers crossed...
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Just a little more on the Euro:
"Europe’s unfunded pension liabilities
Some antagonists say that by joining the euro, Britain would have to “take
responsibility” for the unfunded pension liabilities of Continental countries. Owing to the ageing of the population, these liabilities will on present policies continue rising."
Just search for this: unfunded pension liabilities
It is horrifying.
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When the pension funds don't know where to invest their money things are as bad as they can get.
They should have a whopping big safe and store it until we have deflation.
It will be worth a heck of a lot more then.
Then when hyper inflation takes off they can happily invest it again.
At least they won't lose it
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The last time we had a serious economic problem one of the TV firms put an unemployment counter up.
I think it was daily. It made one realise how steep the downhill path was.
I suppose such news would be suppressed now.
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#42
If the powers that be are interested in us joining the Euro then it will happen, regardless of any existing criteria. Haven't we all seen enough moving of goalposts over the last couple of months to realise that THEY can get away with pretty much anything at the moment.
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#105 Boreblog
Why blame the retailers? After all WE sent those shops selling expensive, British made goods to the wall so WE could buy cheaper imports. Those who survived did so because they were selling what WE wanted.
A better place to lay the blame would be the bosses, unions and politicians who allowed British industry to decline through lack of investment, strikes and poor policy to the point where the goods were no longer competitive. Then a generation of consumers who didn't have the vision to see that an economy built on economic slight of hand to pay for imports is bound to vanish in a puff of smoke in the end.
As for the poor money managers, perhaps someone should explain to them that there are lots of ways to make money in a volatile and/or falling market - it's just alot more work than the "buy-price goes up-sell" model they've grown used to. But then - that is their job. Those who can master the new environment are probably also securing their own jobs for the next 10 years........
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Regarding the VAT change, it is a pain for businesses, but I can see the value in it *if businesses use it correctly*.
Knocking a few pence off the B2C price of your goods or services is a huge waste of time, effort and opportunity. As has been widely stated already, businesses are already discounting at 20%+ to get extra customers through the door so an extra % or 2 won't make a blind bit of difference to consumers.
However, companies can take advatage of scale here - by keeping their prices at the 17.5% VAT level they make a tiny bit of extra profit on each sale. HM Gov is effectively subsidising them for a year. This in turn allows the company to keep staff on their books they otherwise would have to cut. The staff can then keep paying their mortgage and buying stuff from other shops etc.
Frankly I think offsetting the GBP12 bil against income tax would have been a better alternative from a psychological perspective, giving people the feeling they had more cash in hand to spend. Or, if keeping ppl in jobs was the idea, then having a fund where smaller businesses could apply for help paying wages, maybe on a matched funding basis. Much more work certainly, but for lower wage earners on £15k you could keep ~160,000 ppl in jobs.
Don't get me wrong, it doesn't matter which party is in charge, times are going to be tough, and are guaranteed to get tougher before they improve, but HM Gov's inexperience with economic management seems to be showing at the moment. They've had an easy time over the past 11 years and it looks like they forgot to put some pennies aside during the good times...
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Imagine if Darling's £12 billion tax cut had been spent on scientific research. It could have been the stimulus to propel Britain to the front of a chosen field. Instead, it's going to buy Chinese goods and propping up the excessive retail space we have in the UK.
For example, £12 billion would probably be enough to develop vat-grown meat into a commercially viable product. You might think it's unnatural, but the huge potential benefits of reduced pollution, pasture land released for other purposes and cheap food make it worth looking at.
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Robert, the more you seek to be an apologist for the present government the worse your credibility becomes.
Blog or not I thought the BBC was always there to give a balanced view. A position that set it heads and shoulders above the competition. Your articles are becoming repetitive and in their lack of content and I really wish the BBC gave your blog to either Paxman, Clarkson or Humphries at least we woud see real balance come across in print .
Don't you bosses see you are becoming a one story bore?
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#84: True-liberal
How is the 12% growth in money supply achieved. This is a rephrasing of my earlier question.
http://www.bbc.co.uk/blogs/thereporters/robertpeston/2008/11/weep_for_woolies.html#comment297
I am finding information about the recent (last 20 years) growth of money supply / reserve ratios difficult.
Do you have a link ?
Thanks,
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Robert's backs away from real challenges to uncover fraud or corruption because he is scared of defamation lawsuits.
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This comment was removed because the moderators found it broke the House Rules.
To Whom it May Concern;
The BBC may find it interesting to see how the incompetence of planning departments of the local councils is contributing to the property market woes. In this environment it is one of the few ways a property owner can stay ahead of the price drop - improvement.
My main issue, however, is with the banks.
I am renovating a property incorporating a significant number of green elements.
I only have one last hurdle which is proving to be impossible and that is obtaining a loan to do the work. The numbers all work even in today climate so that is not the stumbling block.
The development is not a cheap one. The value, in terms of issues facing the country, is miniscule but the majority of that money will be spent on local contractors and suppliers which is a good thing for the local community. I've got builders falling over themselves to do the work and suppliers all looking for a piece of the action.
The problem that is now facing me which is very real is that I cannot obtain funding to improve my house and employ a number of people in the process. The reason that is coming back is because banks are not lending to developers / renovators.
It appears that even the government owned banks are "talking the talk" but not "walking the walk".
I am available for further elaboration.
Regards,
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One thing that really concerns me in all this is that businesses will lose focus on their CUSTOMERS when they make "tough" decisions - i.e. that they will damage their customers' experience of them (particularly their best customers) - people who they will really need when things recover.
I'm so concerned I commissioned 18 World experts on the subject to write about it - and I have made the Report available totally FREE - see www.customerfutures.com/downeconomypublication
ANYBODY is welcome to download it and learn from their experience and expertise.
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@129
£12billion would be enough to mass produce grid connected inverters, (and windmills and hydrogen stores) fit one to every home in the country and not have to build any more power stations.
Oh hang on, we've shut down all our industry so we'll just have to pay the french and russians for our power for eternity.
But at least we'll be able to offer them some services.....
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The difference between investment banks today and coal mines in the 80s? HMG wanted to destroy unions in the 80s, taking anything with it, while the Treasury gleefully throws truck loads of cash at investment bankers today, most of whom have been off-shoring UK jobs as fast as possible for the last decade and trousering the bonus. QED: 85percent of the UK economy is now service-based, not a great platform for the coming challenges. Along with encouragement for people to buy houses and ramp up debt, this crisis has been in the making for 25 years.
#88: agree we need to invest in manufacturing, but private equity? Questionable they now stay the long term when challenges knock their returns and their investment in R&D is strictly low-risk. HMG needs to develop a central strategic investment plan to re-industrialise.
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On a national level, real investment means spending on infrastructure, education, training, factories, research and development, etc. On an individual level, investment means bank savings accounts, pensions etc. We keep fooling ourselves that the second automatically leads to the first. It doesn't.
Real investment is largely done by the state, or by successful companies ploughing profits back into research and development, training or updated plant/machinery.
Depressingly little of the money going into banks and pension funds gets used for real investment purposes (eg supporting tech startups or rights issues by existing companies for the purpose of building new factories etc). Instead it just gets lent out again for others to use for consumption, or it creates asset price bubbles.
The system just doesn't work. We need to move to a European style system with high State pensions and much less reliance on private pensions and savings. And yes we can afford it.
All a pensions system is is a kind of covenant, whereby those in work today give up some of their income for today's pensioners, in the expectation that the same will happen for them when they come to retire. It's a tax of sorts, a redistribution of income, but in reality there's no need for vast sums of money to be held in funds in the City, nor to consider State pension commitments as an adjoint to National Debt.
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No. 134 Sasbliss
The lack of lending is a sympton not a problem. The banks do not share your optimism of an eventual sale of your improved property to repay their loan. THAT's the problem. And it has several dimensions, i.e. too much private indebtedness to support your property sale and too much reduction in purshasing power from consumers by the inevitable contraction of credit to more realistic levels. There is an obvious reduction in banks' capability to lend since the wholesale credit markets dried up, and your project is probably riskier than other projects where banks are lending.
LIke scores of small businesses, the decade of bingeing on debt has made certain business models look viable for very long. This itself needs to be re-examined.
If indeed your numbers work at say a 50% discount or whatever the appropriate price is, then be patient, tha market will correct, construction costs will fall, demand for your proeprty at that price will emerge and the banks will lend.
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"where oh where do we put our money?"
Do the obvious, ask Sir Fred Goodwin.
That is if anyone has any money left, after his last attempt at investment genius.
Knighted for services to banking..........
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If 'those who run our biggest retailers are utterly fed up' can I have a go?
I've recently been shopping with my wife (of 25yrs) and Super Markets have certainly changed since I used to go with my mum.
There are a few more changes I'd make straight away though:
1. I'd put the beer, fags, pizzas and the DVD's next to each other for starters
2. Get shut of the veg and fish, that should make room for a decent Hand Tools display
3. Balsamic Vinegar? You tried that on chips?............ Not on my watch - it's gone!
4. What's with all the wasted space for toiletries? Some talc, tooth paste, cotton buds (to do your ears), baby oil, tissues and some mascara for the ladies. All bases covered I think (maybe some Athletes Foot powder)
5. Why are there no eggs and bacon in the breakfast isle?
6. Bread? Both sorts please, white sliced thick & thin – OK some Brown for the vegans.
Bish, bash, bosh. I’d be through there like a dose of salts, just needs a coat of thinking!
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Next Robert will be moaning because he only made 50 million this year.
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only tax and death are certain so investors should put their money in funerals and undertakers. dead cert!
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Where to put my cash?
I concur with those who suggest the best thing to spend it on are new businesses. Funding is scarce so now is an opportunity to buy into startups, who can't get the cash elsewhere.
Sure, most of them will flop, but say you invested in 20 of them, the one that doesn't flop is the one that pays for the losses of the other 19.
However if I personally had a spare 25k right now I'd be starting a bank, a full-reserve bank, the market is screaming for it, just read the comments here.
Unfortunately the FSA sets the barrier to entry at 25k so it keeps out the riff-raff/innovative startups.
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Lowering VAT may not make any difference for retailers but for the bathroom installer, garden landscaper, builder it will make a huge difference!
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tam_fb
post 106
Golly Gosh how clever you are?
Alexander Curzon.
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post73,
Now that was Hilarious :)
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Talking Blues (Robert Marley)
'Cause I feel like bombin' a church -
Now - now that you know that the preacher is lyin'.
(So who's gonna stay at home
When - when the freedom fighters are fighting?)
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"Where oh where do we put our money?" said one.
That's not what you want to hear from someone who manages the pensions and retirement savings of many thousands of us.
Does that apply to the last 9 years by any chance?
At the end of October 2008 I had invested 63K. The current value of my pension is 67K. So 4K growth in 9 years.
Now without naming names it's one of the biggest most respected pension providers in the UK. Even with the current dip is 4K not a pathetic amount of growth.
So where do you put your money?
Pensions are like betting on the outcome of a horse race to be held over 40 years with no idea if your horse will fall on the way, if it will be in first place until the last fence, or will come home at 100:1
Even if it comes home at 100:1 the prize money goes to an insurance company that will decide how long you have to live and pay out the winnings in monthly installments.
Interest rates dropping so no point saving especially as inflation will go up.
Property dropping in value.
Here is my credit crunch strategy
Save nothing if you have debt you are paying off.
Shop around for everything. There is no such thing as brand loyalty in a recession.
Only replace items if they fail/fall apart.
Budget, check where every single penny goes.
Buy British especially food.
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So, by reducing tax revenue by £12.4bn p.a. through a VAT reduction there is a gross extra £12.4bn available for shoppers to spend (providing they don't put it into savings)... I think we can only wish one day retail bosses will see a little more than microeconomics!
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> In my experience, retailers are always grumpy
> about something. But they are at the frontline
> of consumer spending, so it would be foolish to
> ignore them.
Haven't those guys heard of rip-off Britain? If they sold their wares at the right price, people would throng to the shops. By overcharging, our merchants strangle commerce before it even gets going. You only have to go to Spain or Canada to see how high the prices are here. Shame on them for gouging us.
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"You can fire people very easily up to the end of their second year in employment..."
No you can't.
I can give you hundreds of examples of successful prosecutions from staff who have been dismissed.
Its my job after all.
My favourite is the person sacked after 4 days for causing two fires and thousands of pounds of damage.
They won £6,000 in compensation for unfair dismissal. I thought the case was a non starter, so I assume the adjudicator had a grievance against the company concerned.
Unbelievable amount of evidence not admissible by the defence for no real reason.
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""Where oh where do we put our money?" said one.
That's not what you want to hear from someone who manages the pensions and retirement savings of many thousands of us."
Actually, I would like to think that's the only thing they are thinking off - but i know they don't. Just think of the layers of fat with pension funds paying commissions to institutional fund managers paying commissions to fund of hedge fund managers paying commissions to hedge funds paying commissions to investment banks.
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We don't need people as it's only machines that make money
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Thank you Robert for the enlightenment that you have given to many like me who were ignorant of such fascinating matters as 'fractional reserve banking', 'hedge funds' and 'short selling' etc.
When I watch and listen to my fellow inmates in this mad house they do seem to be running round like headless chickens or, if they're not yet de-capitated, squawking furiously without
squawking much sense. Thank you Robert for injecting a little decorum into these frenetic times.
PS If you can stand it, a glass of cold milk last
thing at night, after too much taxing festivity,
will do much to restore equilibrium and your digestive system.
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Our take on 2009? Universally BROWN.
Dull flat and uninspiring, whether that applies to GB Ltd, or GB (CEO GB Ltd, extremely Ltd. ).
Commodities will bottom out as will the markets, at 20% off where they are now.
More arrests will be made, as Capability Brown, is shown to be increasingly less so.
People will begin to realise what the color Brown, is reminiscent of, and its aroma (see... 'Brownian Motion': a phenomena which used to be taught in what were quaintly called 'physics lessons'. Until 2004, children were cruelly forced to 'get their heads around' such difficult concepts if they wanted to get on a science course at Uni).
And Mystic Mog will point out that the French for 'Brun' is only a letter away from the old name for a Bear. We will be talking about 'Brown Markets' as well as 'In a Brown study'
In short 2009 will be universally Brown, in all its possible connotations, and the famous Cherie Blair quote, so aptly made on the anouncement of her last pregnancy, and so neatly repeated by Ian Hislop:
'We had forgotten how tedious Labour can be'
will ring down the annals of history, as the most apt comment ever made by a 'first lady'.
A dreary procession of bankruptcies, foreclosures, job losses, pensiondectomies, and a decimation of the High Street will continue. As the BBC, mindful of its public duty, assures us that 'without GB, it would have been MUCH WORSE'.
From the April 2009 Daily Mail:
"George Innocent, was driving his Discovery along the Strand, when a policeman flagged him down, and, pulling over to the kerb, he was immediately clamped by a parking attendant for 'parking in a controlled zone' and was instantly leapt upon by 20 armed officers on suspicion of 'leaving a possibly exploding car, and a 4WD at that, in a position of national insecurity'. Later, after being arrested for resisting arrest, he was charged with being in possession of state secrets before it was realized that the laptop found in his car was in fact dropped by one of the arresting officers. He was finally charged and convicted of wasting police time, after having confessed for no apparent reason, to the Gunpowder plot and supporting Napoleon.
His fine, of £25,000 was held by the judge to be 'punitive, but fair' : 'We have to offset to some extent the extraordinary amount of public money this man has wasted by his frivolous actions. We have little enough police resource as it is to cope with the daily domestic violence at No 10, without it being wasted on people like these: besides he can always sell his Discovery'. On being pointed out that the going rate for 5 year old Disco was in fact less than the cost of a loaf of bread at Tescos ( £135.23p) the Judge remarked' well let him eat cake, instead. It's gas guzzling antisocial people like this that have put the country in the state its in: He is lucky not to be given an ASBO'."
Meanwhile, the National Debt indicator is paralleled by the Genocide indicator, put up by Amnesty to count the number of people killed in the world as a result of direct action by 'insurgents' and 'state sponsored armed militia' or masterful inaction by governments who simply find it all to tedious to stop.
Additionally complex derivative financial instruments will be sold and traded, based on interesting combinations of which will run out first, money, people, oil, medicines, military ammunition or peoples' patience with the color Brown.
Suicide rates among whistleblowers and Opposition MPs will rise to alarming proportions.
And the shoe industry will be nationalised, and all imports of foreign shoes will cease. Shoes will be one size fits all (for a "fairer Britain") and in only one Colour.
Brown.
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Re: Post 9
You made some very valid comments about what is wrong with the way our financial markets operate and more importantly how vast sums of pension money is being used by the people working in the stock markets to corrupt the value of stocks and shares in the hope that they can con investors into believing that it somehow is possible to create money out of nothing by declaring better than average returns.
The stock market valuations of the stocks and shares of many of our leading businesses is no indication as to the health and well being of our business or how well they are being managed. Particularly when it comes to reinvesting for the future. A check on the share price movements shows they can fluctuate widely on a daily basis and that is not how well managed bussinesses are run.
Sadly too many of our leading businessmen are influenced by the stock market valuations of what a company is worth and that is unfortunate because the stock markets operate as little more than giant casinos. Many of the people working in these establishments appear to be little more than compulsive gamblers hoping to walk away with a fistful of dollars at the end of each session and going back the following day in the expectation that they might win the jackpot.
Although our senior bankers and industrialists are rightly being given some stick for their behaviour in causing the credit crunch, it has to be said they were ably supported by the stock markets abilty to confuse everyone about what was happening in the financial markets.
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just to make Robert feel better for Christmas, I predict unemployment next year will exceed 3 million.
Surely now is the time to review how the Country is funded. The one one thing that UK economy excels in is the velocity of money, sometimes it moves so fast you can't get your hands on it! Look at business costs; why think about starting a business when so many of the costs, which represent a standing charge, are completely ridiculous? Review employment law, which includes 'equal opportunity, or wimmins rights, as it is known, racial law, etc. etc. Any employer with a long term regard for his Company will always pick best person for job. Let's get rid of all other unique to Britain rules, like carbon costs, so that more manufacturing can come back here from China etc.
We also need to take a massive axe to Government employment. Too often employee incompetence is revealed,only for the perpetrator(s) to be sent home on full pay, then perhaps given a huge payoff, and still keep a gold plated pension.
Of course I could go on and on, but Christmas is coming, but do you agree with the basic premise that now would be a good time to slay a few sacred cows for the long term benefit of the Country??
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Shut Em Down
I testified
My mama cried
Black people died
When the other man lied
See the TV, listen to me double trouble
But look around
Hear go the sound of the wreckin' ball
Boom and Pound
When I
Shut 'em down
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Quite amusing this VAT thing but not if you're a small business,
It was introduced to encourage people to part with more of their money but ended up with businesses having to spend just as much money to implement it.
Valuable staff time new stationery and goodness knows what else. Just at the time they needed all hands on deck to take advantage of the Christmas trade.
And what about those that have prepaid for hospitality and restaurants as well as holidays.
What another mess GB got us into.
Implementing ideas off the top of your head without good market research was always a non runner.
Spending 12 billion to do it deserves a lot more than a slapped wrist,
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#100 "It would be very interesting for a journalist to investigate the contributions made to political parties by employees and managers of hedge funds, and who from Government, parliament or the Civil Service has taken up positions in the hedge fund industry."
...err... Mr. A Blair ??
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#22, actually it is one year that is the line after which you basically cannot sack someone. Even before you have to go through a rigmarole of verbal warning, written warning unless the guy is completely and obviously incompetent. Even then he can take you to a tribunal - it costs him nothing - and you take your chances. Far better to be a civil servant, where else do you get a inflation-linked final salary pension?
Here's a better idea on the CGT. Leave the UK go to somewhere like Singapore invest that 2 million in a company there, automatically get residency, pay a marginal rate of 11% tax and NO CGT, NO tax on interest and earn money in a currency that isn't depreciating by the minute and pension fund that isn't 700bn+GBP in a hole.
Of course the downside of living in Singapore is that they arrest people like opposition MPs who publish information the government would like to hide....
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#158, no they'll be reclassified as something else or employed by the public sector. Just like Crash Gordon has been doing for the last 11 years - I mean you didn't really believe that nonsense about "creating jobs"?
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Tell your unhappy Investment Banking acquaintances to cheer up. The Coal Mining
industry, so 'challenged and threatened' in the
1980's, is on the verge of a great Renaissance
supported by newly minted Government policy.
Perhaps the unemployed Bankers could find
jobs as miners. It would be easier work than
hitherto as the plan is mostly for ' open cast'
mining. Far less dangerous than the horrendous
business of mining deep underground.
Enjoy your evening - and don't forget the cold milk. Most effective.
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We can carry on this charade, but it will all end in tears in the near future.
There is absolutely nothing that the government either here, in the US or elsewhere can do to stop the world economy collapsing. There is not enough money in the world to deal with the amount of debt that is out there. Indeed, if they were all so bright they wouldn't have got us here in the first place.
The so-called 'experts' can't seem to get what many of us have seen coming for a long time, i.e. that you can't build a world economy based on borrowing, because eventually the whole house of cards - built as it was, on an illusion - will come crashing down.
We are seeing the results of unfettered globalisation, where we have all been exploited for the benefit of the few.
Over 3 decades we have seen earnings in the West fall in real terms, hidden by Micky Mouse inflation figures, and masked with ever more elaborate credit mechanisms and asset bubbles to bridge the gap between falling incomes and higher costs of living.
Capitalism was indeed the best system available, that is until this era, but sadly even that couldn't cope with this wide-scale abuse.
We are facing new answers for a new world. The thing is none of the monkeys currently in charge are capable of providing those answers because they are the problem.
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#113 SoapboxJoe, meet Supercalmdown
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11#
"now around the lowest it's been in my lifetime"
You must be under 24 years old as in 1985 a pound could only buy US $1.05.
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Can't wait for next year, this recession will have set in deep and hard. Businesses will be fighting hard for survival – cutting costs and shedding jobs no doubt....... it’s going to be ‘dog eat dog’ and no one will be able to rest on their laurels
...... there’ll be some serious bargains out there guys. Might even be a spot of deflation
But I know of a business that will buck the trend, a business that despite the recession will still pay over the odds for staff, a business where there’ll be no cut backs, no redundancies and a decent inflation proof rise in the cost of their product....... a business that will take people to court for not paying – there’ll be no 6 months nonsense here..... a business that despite reporting nonstop on the effect of the down turn in the Global Economy will still expect us all to pay more for it next year!
Don’t forget it’s your BBC and it’s recession proof!
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If you don't want me to live in a house or work to live in a house they what are you going to defend.
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#122 Strange as it may seem, I know of *two* places that fit your description to a T - Singapore and Hong Kong !!
- Both have *NO* capital gains tax !!
- Both have no welfare-state handouts although Singapore has excellent state subsidised housing and unbeatable, state managed pension benefits.
- Both have pretty flat income tax regimes
- And both control their borders pretty ruthlessly !!
Malaysia satisfy the first three conditions but its borders are porous as all hell !!
And all three have a fairly high standard of living !! And they speak English (of sorts) in all three places, too !!
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#136 "and windmills and hydrogen stores"
As a confirmed chain-smoker, I'll not have any hydrogen store anywhere near me, thank you !! Not unless they have managed to develop the much-written-about "containment field" of Science Fiction !!
Going up in a huge ball of hydrogen flame is definitely not my idea of fun !!
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As someone who works a 50 hour week for a, no doubt, small percentage of your wage, I have the uppermost sympathy for your dread and exhaustion. I only pray you live to see the spring.
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No. 156 that post should realy be sent to Downing St.!! Creative writing at its best
Just wonder how many ppl would have voted Blair in repeatedly if it wasn't for Brown's largesse though.
We reap what we sow.
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#143 "only tax and death are certain so investors should put their money in funerals and undertakers. dead cert!"
...and any dividends from your investments will be taxed to death !! :-)
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talleyho 156
100% BRILLIANT.
Surprised it wasnt censored by you know
WHO.
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Some independent retailers round here are applying a 2.5% discount at the till in a mis-guided attempt to comply with the VAT cut, and not incur re-labelling costs.
The gross price reduction should be 2.13% as many clever swots have demonstrated here.
Those small retailers who can least afford it are throwing away 0.37% of sales. On takings of £1,000 a day, thats £3.70 per day, or over £1,100 per annum.
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Instead of throwing all these huge numbers and ABC names at us, don't you think it's about time the real explaination starts to be published, as to how we all got into to such an impossible mess so fast---AND "WHO" IS RESPONSIBLE FOR IT?
Unless I'm getting this all wrong, this is just the very beginning of what will take years to work out. The citizens are not just going to sit back and watch this destruction of our lives and economies happen without some big questions answered? I may be wrong again, but it appears the same people that caused this fraud are the same ones still making big, fat checks! I have always considered myself an educated, middle-class American Republican, but I'm turning into a Nationalist very quickly if we do not start to get some truthful answers and not more endless, fantastic numbers of lost money, with the taxes and bills being sent on to the public to pay--- with NO ONE responsiple! I believe the first step to correct this huge loss would be to understand what and who went wrong? The BBC and media should not be trying to protect the criminals behind this crisis.
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#19. At 09:08am on 02 Dec 2008, GlasgowOptimism wrote:
I am heavily involved in the commercial property and finance sector and for the last month i have heard more doom and gloom that i ever remember and i can remember a fair way back..........
Give me something to go to the Christmas party and get drunk on..........I dare you!
Sorry mate. You've already had your fair share of those....
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"Growth, is simply the devaluation of the currency through the expansion in credit. Your pay slip and savings are on a big downward elevator (normally).
Anyone who says otherwise is a banker."
... or any person who is not a monetarist crank. Look up the MV equation.
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How about this for an idea? We stop doing things for vote gathering, and start getting real.
It is disposable income that has dried up. That is partly due to banks being prepared to extend credit to pot plants (over the last 9 years of New Labour "growth") and anything else that qualified as living. It is also because the burden of keeping the tax man happy was bearable while the pot plant was able to afford it. Now the pruning shears are taking effect, and no coercion on the part of Government will make the pot plant viable. So RBS will leave defaulters for 6 months. GREAT, that should sort out the recession then, and 6 months is plenty of time to get another job, start a factory, employ another workforce.
In the absence of a credit line, no matter the saving on VAT and heating of grannies, people will not spend, as they are paying back the bank as they stood sureity for their pot plants. We hear a lot about stimulating small business. Especially when we run out of real answers. How will this keep people spending? Not by helping small businesses grow, as this didn't happen over the boom... but let's pretend it will happen now. Nuts.
We have seen the easy route taken in bailing out the banks (Sagely nod here), but this was not going to fool the market.
Boost disposable income, and spending will increase. Halve council tax, reduce utility bills, reduce levies on petrol, and we will be able to afford a Christmas. But alas, we bailed out the banks with that cash, so now we have to sit it out, the pot plant and us.
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As somebody else commented, there is far too much pension fund money regularly invested and tied up in the stock market and it is skewing the values of corporate worth. Another major issue is the level of pensions we should be expecting or even needing when we retire.
On a flippant note, I would question why people need pensions of 2/3 salary at retirement when all debts have generally been repaid. Cue standard pre-retirement question (especially to wayward bank CEOs) “Well how do you propose to spend £x000 per annum?” If answer is either vague or unreasonable, hike back what can’t be justified for the common good . . . After all, what is the point of being on a financial ego trip only for the exchequer to reclaim most of it in death duties (and spend it unwisely) after you expire?
My own solution – will never see the light of day – modest pension provision for all (if it can be afforded) whilst those on higher incomes make their own provision for a more comfortable retirement. Cue next question! “Can I rely on the custodian of my money not to fold before I retire?”
There have been many investment managers in recent years who are on record as saying they wouldn’t invest their own money on the stock market – says it all really – and thankfully caused me to always search out high-paying savings bonds. Yes, I have to spend an hour or two every few months on this matter but gain the luxury of being able to sleep soundly at night AND I don’t have to pay a reputable financial adviser to tell me how to lose money!
Final point! With UK government financial policy in a dire state, isn’t it ironic that the public used to be able to borrow 5xSalary for 25 year mortgages. Nowadays, with so few people feeling confident about their employment prospects for the next 25 years, isn’t it only reasonable that bank lending policy be reined in to reflect the shortage of credit? Five year mortgages anybody?
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It looks like the games up for sterling.
Clearly Robert Peston's party circuit haven't got a clue and have lost the plot.
A newspaper reports today, Tuesday 2nd December, that,
"Lord Mandleson had told a political conference on Saturday:
"Our aim, our goal, should be to enter the single currency".
The problem is clear.
The Brown government is piling up UK government debt, but foreign investors won't buy it, except on extortionate and unaffordable terms, which is not a sustainable position for sterling.
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#73 is bang on, Robert is past his sell by date and appears to be less aufaiit on the markets mechanisms than he should be.
The blog is becoming way too repetitive and we are entitled to discuss a variety of economic issues.
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Mr Peston. Today you pushed all my buttons.
'the most dazed and confused of all those on the party circuit.'
"Where oh where do we put our money?" said one.
That's not what you want to hear from someone who manages the pensions and retirement savings of many thousands of us.
At age 46, after (following a series of company conversions) I ended up with 4 different private pensions.
Each one will pay peanuts.
Each one has an 'administrative cost'.
All came about using independant financial advice.
Each one is now suspended and I hope I die before I retire.
May I say, that the statement you made simply highlights the sheer unadulterated ignorance of the people that hold the future of millions of retirees in their hands.
Quite frankly, the only thing i can suggest is that when you next meet one of these very fine and intelligent people that you gently poke them in the eye with a cocktail stick and say to them 'If you cant do your job resign and let someone else in who CAN do it'
Above was mentioned the European Pension Hole, there is still a Uk one, and it gets bigger and deeper every day.
The End.
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Does anyone know how much the war in Iraq & Afghanistan has cost this country? have we been fed lies ( or nothing at all?)
Wars and staff employed by the government are a drain on our financial resources and a burden to the taxpayer
This countries heading for a revolution!
Vive La Revolution!
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#88 tom_edinburgh
I agree that technology needs to be discovered and exploited.
However you cannot break the laws of physics. Far too often the government is investing in pump priming technology whilst it is obvious that they are just throwing money away.
The hydrogen economy is the most glaring example.
Scientists are playing with fuel cells and pretending that once the efficiency is better then all will be OK.
Wrong. Just ask them where the platinum is going to come from. How much energy is expended in its refining. And of course even if the fuel cell / electrolyser efficiency is as high as feasibly possible then it will still be a waste of electricity.
Meanwhile the taxpayer's money goes towards supporting house prices near to centres of academia.
Electronic paper will be a truly disruptive technology but it depends entirely on the amount of data that can be displayed, and changed, quickly. That in turn depends on very high speed processors and the like.
These exist of course but are power hungry. That means you need big batteries. That means your nice light weight electronic paper device can only be updated slowly.
You might as well carry a book with you. And a map.
If you want highspeed pictures you might as well be sat at a desk. With a PC + monitor.
Robots are probably about the last thing we need - there will soon be so many people out of work.
Solar power is just another way of academics getting grants.
The refining of silicon used in their manufacture uses up more energy than they produce in their lifetime.
Particularly if they are installed in northern europe.
Using algae and slime will just use up land that would otherwise be used for food production.
Solar power generated by thermal means in the Sahara is another matter though. It might actually work!
I doubt whether it will attract much in the way of UK government grants though.
Biotechnology will just be an expensive way of feeding people and keeping rich people alive for a few more years.
Much better to invest in avoiding wars and getting people to eat healthily.
At present companies will not invest in new technology unless they get tax breaks. And that generally means they have to involve universities. Once a university gets involved then the grants come rushing in. But who pays for the grants? Tax raised from spin-off companies? I very much doubt it.
I predict an upturn in the old smokestack industries. And mining. Probably open-cast.
Green issues will take a second seat behind staying warm through the winters..
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#155 possumpam
Where has Robert blogged about Fractional Reserve Banking, or come to that any Theory of Money I must have missed it ????
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So giving a tax break to somebody who has spare money doesnt encourage them to spend more, at least that was the rationale presented by AD or his advisers presumably via a leak.
And if a consumer without spare money spends all he has and you give him a tax break he spends the same sum in total because he always does that because he is short of money. He or she wont spend any more because they have no more. And the shopkeeper knows this and says it makes no difference so pockets the tax tweak. Question - How does this VAT drop which is only 2p in th pound move us forward. Having customers is such a hassle for a retailer. Much better to have no customers. And then ask for taxpayer money or complain.
And the investment banker whose job is to place money is saying he is not up to the job because he is having to work for the first time in a long time and he doesnt have a clue what to do.
Yes it must be hard partying with people like that. No wonder we are in trouble
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161 ishkandar
I suggest you look no further that the Tory party treasurer and his links to the city, this was the man that was reported as saying volatility in the markets is a good thing, and I guess running a money brokers it was ….for him!
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156#
Obviously still out of sorts with Labour over the fox hunting ban!
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23#
A post a couple of days ago gave the cost to businesses of the VAT reduction as ?300 million now you have hiked it up to a billion.Don't you know there is a recession on and prices should be coming down not going up?
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Christmas parties, pantomimes, merriment, yeah what a drag Robert!
Meanwhile...back in the real world....
The USA have been trying to deal with a financial problem or two and are trying to kick start their economy. Where are we up to?
1. Invest cash directly in banks...didn't work..check.
2. Invest money buying bank shares directly...didn't work...check
3. Buy debts owed to credit card companies...jury still out but my bet is that won't work either.
The UK has followed...1 and 2, why don't we try 3 as well?....laughable.
When will governments on both sides of the pond realise that they haven't been successful because they haven't addressed the real problem yet (toxic liabilities). These must be taken off banks balance sheets.
RBS raised 12 Bn ..largest ever rights issue and had burned through it in less that 3 months. The Government have invested 15 Bn in the same bank....any guesses how long that will last?
Papering over the cracks doesn't work if your building foundations are suffering subsidence.
Evenin' All.
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I dread this time of year - because if you're in my trade,you have to get up at 5;30am everyday and go to work on a freezing cold building site. Worrying if your gonna have a job next week. And then get home at 7;00pm completely exhasted.
I think mr Peston gets a lot of undeserved stick on here but his opening line grated on me just a tad.
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re 134 Sadbliss
The reason that you cannot get your development/renovation done is not because of restricitve planning committees or the nasty banks. Its because you don't have the money, now thats not a very difficult concept to grasp is it?
Ah, I forgot, thats EXACTLY the attitude that has got us into our present malaise.
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"consumers not spending or spending less"
yes maybe you re right but WHY ?
Because MEDIA tells us everyday ; " don't spend, don't buy , just wait " !!
everyday another supid doom and gloom reports or so called experts on BBC telling people "Don't buy a house, wait prices will go down more" or "don't do shopping yet wait till prices go down more and more" !!!!!
and as a consumer you do listen these doom and gloom promoters and basically welcome to "self destruction UK " !!!!!!!
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Where do we put our money? Anywhere except in Sterling, the way things are going.
Looking ahead, apart from a few duff shops and banks, and maybe the present government, I think we'll all survive this intact - except for Sterling. The only thing that kept it alive and aloof was UK high interest rates. Now they are on the way out, it is only a matter of time before we see the end of Sterling as an independent currency.
So, do we join the dollar or the euro? Maybe we should have a vote now, before we are forced to jump one way or the other.
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There is going to be a revolution in retailing over the next 2 years with everything turned on its head. The biggest retailers will be hit the hardest and some of the biggest names that are around today may not be around in a couple of years (and I am thinking of food retailers in the main). The winners will be the manufacturers and producers.
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The Franck Muller Master Square pave black diamond Colour Dreams watch costs gbp 42,600
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Am I crazy?
I simply don't believe that things are as bad as everyone else seems to think..
Time will tell, I guess.
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If anyone thinks that 2.5% off VAT is going to make a jot of difference they must be living in a different world. I have yet to meet anyone who thinks that it will (apart from Messrs Brown, Darling and seemingly, Peston).
£12bn definitely down the drain that could have been far better spent elsewhere. This is playing politics with the Country's finances!
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#185 charltonspinney
"Does anyone know how much the war in Iraq & Afghanistan has cost this country?"
13 billion GBP (and a lot of lives).
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As with many of the others who have posted on this blog, I struggle to see the point of RP's input on this one- it is so unremarkable
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Was everyone not complaining about inflation earlier this year? The anguish of the retailers sounds like the welcome relief everyone was hoping for.
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Consumers not spending, now there's a thing, what on earth could they possibly need?
After 10 years of buying just about everything and a good bit on credit there cant be much left that the average person has not bought in multiples or come to that even has any room to left to put the stuff in.
More drink and fags?
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Todays thoughts of Mr. Peston contains all the information needed to understand why there is no conventional route out of the mess we are in.
So, you get to meet a bunch of movers and shakers those with "economic or political power to influence most of our lives"
However these people are said to be "fed up" and "furious" and are much exercised by "an unstoppable trend of consumers spending less"
So it would appear that although they claim all power for themselves they don´t actually have the power to make people spend money on things to consume.
Tell me again what power do these people have?
And finally we get a brief insight into the contempt that the professional classes have for the mass of the population, the law and the language.
"Where oh where do we put our money?" said the pensions and retirement fund managers.
How did it get to be their money? What about the idea that they are salaried managers charged with investing the money of many millions of individual savers. Has the pathetic residue of my pension simply been expropriated by casual innuendo and corruption of the language?
Whilst prostrating yourself before power is ordinarily contemptible it assumes a comedic visage when you are unable to correctly identify the font of power.
Viva la Revolucion!!
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RP: "We're going to see the closure of well over half of all hedge funds" a banker told me.
Which brings me to the professional investors, who are the most dazed and confused of all those on the party circuit. "Where oh where do we put our money?" said one. That's not what you want to hear from someone who manages the pensions and retirement savings of many thousands of us.
So the locusts have seen their best days? Fine with me. As for pensions, I don't think they should have anything to do with the stock market in the first place. Pensions are nothing but one generation feeding the previous. And you don't need stocks and hedge funds to do that. Time for a change! By the way, if I get you, Mr Darling and Mr King right, then the government is determined to further destroy our currency and sacrifice the saver's interests for the sake of a limited reduction in the pain the big spenders will feel over the next couple of years. If so, why don't they use all that freshly printed money to feed the aged, as a replacement for all these worthless pension funds?
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"131. At 1:47pm on 02 Dec 2008, iwanttoscream wrote:
I am finding information about the recent (last 20 years) growth of money supply / reserve ratios difficult.
From my simplistic understanding then either the central banks have to print more money or the reserve ratios have to fall"
Both happen.
Published on the Bank Of England web site:
What you need are the M1 and M4 figures.
e.g. *Current* credit growth.
http://www.bankofengland.co.uk/statistics/m4/current/
However, you're looking for historical M1 and M4 figures. Their interactive database can be used to to look up the M4 and M1 figures for the last few decades:
http://www.bankofengland.co.uk/mfsd/iadb/NewIntermed.asp
M1 (notes & coins) has been increasing about 3% annually for decades.
M4 (credit) has been increasing about 10% annually for decades. More like 12-14% for the last decade.
You remember the inflationary boom in the 80s? That was the conservative m*ppets reducing the reserve ratio basically to nothing.
Why do you think we all have credit cards, debit cards and the banks still want to charge us for using cash machines? It allows them to increase their lending by decreasing their reserve ratio.
The whole growth thing is rubbish. It is all simply monetary devaluation and the corresponding inflation.
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#193 - know how you feel mate having worked 7 days a week for the last 4 months combatting the credit crunch.
At least you can take succour from the fact that you're hobnobbing with people who work hard, know their jobs, knuckle down and get on with it...unlike the denizens of Mr Peston's party clique who clearly haven't a clue.
Some good news though..sold a property today at a smidgeon off the asking price...you could have knocked me down with a scaffold pole !!
Saints be praised the recession is over.
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#206 "As for pensions, I don't think they should have anything to do with the stock market in the first place. Pensions are nothing but one generation feeding the previous. And you don't need stocks and hedge funds to do that. Time for a change!"
Exactly my point (#138)
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Robert,
Whatever happened to your faith, at this or any other time of the year?
Hate it you say.
More likely to be a lack of sunshine.
Take a holiday.
Leave the economy to us smokers, drinkers and taxpayers, we'll soon have it sorted out for you just like the working classes always do but never get the credit, get it?
Bye!
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"179. At 6:18pm on 02 Dec 2008, tuairimiocht wrote:
"Growth, is simply the devaluation of the currency through the expansion in credit. Your pay slip and savings are on a big downward elevator (normally).
Anyone who says otherwise is a banker."
... or any person who is not a monetarist crank. Look up the MV equation."
And... Your point? That prices increase when the amount of money increases? That the amount of real stuff increases? What do you think the level of growth of *real* stuff is? Do you think it comes anywhere near 12%,14% per year?
So you think there are 12% more houses, more businesses, more cars, more roads, more everything every year? Because 12% growth means a doubling time of 6 years. There would have to be twice as much of EVERYTHING produced every 6 years.
Um... no... the "growth" we see in house prices, in the stock market, pretty much everything, is simply inflation and currency devaluation, and anyone who says otherwise can't count. i.e. is a banker.
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growth is when youths have food
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Some excellent posts.
Instead of this VAT nonsense, the government should have started paying gas+electricity bills, for everyone, up to a point, give tax rebates for private schools and private health, tax rebates for loans on houses and cars and other purchases and so on.
They could also invest heavily into infrastructure, eg our ancient trains and the tube, hospitals, electricity power stations, shipyards. Instead of employing 1000s of state employees filling forms all day, they should be sending them out into factories and into manufacturing.
If the whole nation has become white collar workers sitting behind a computer screen all day, then who is going to produce the tangible products that we need? We cannot keep importing for ever.
Foreign money will soon dry out once they realise there is nothing worth of value in this country anymore save the land itself.
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#211 you are right. It is all fictitious wealth and growth, there is no underlying, no substrate beneath it.
As I said above we cannot create value by filling forms all day. Someone, somewhere has to produce something so we stop importing. If we carry on importing we will have nothing left to pay with, except our manual or skilled labour, and that is if the other countries want it/ need it. If they are also in recession and they do not then what do we do?
We are not even self-sufficient for energy. We will have to beg the Russians and the French. We will have nothing to pay them back with, we will have to sell them Scotland.
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look on the bright side possibly we will all start repairing things instead of replacing them. New car when its needed instead of every three years.
White goods etc. that are priced for real costs of production. washing machines at 1000 pounds not 250 which we sort, less impact on the environment, less resources used, less waste same profit over less units, Ah the good old days except Im too young.
Coming to a town near you a whole new perspective on consumerism brought to us by the financial sector.
It will happen soon.
whey hey.
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rather than write a blog complaining about it, tell the bar staff at the parties you go to. they'll enjoy it more.
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Enjoy the free parties this year in case there aren't any at all next year!
Keep up the good work.
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muppets!
Just wanted to see if this is the word which causes moderation referral!
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Having read through 100 comments or so the two things that stand out are (1) the suggestion that UK should adopt the Euro at 1:1.
That should be economically impossible as the UK's debt is far and away outside the rules for Euro membership.
In the Euro countries aren't permitted to ow more than 3 per cent of GDP, which is why Italy and Ireland may struggle (Ireland currently at 6 per cent).
UK's comparable figure is 43%- if you don't look left or right off the balance sheet. It would have to be an unholy fix to bring the UK into Euro membership. It would be a hell of a comedy to watch.
Second point; Another poster queried why hedge-funders aren't being hauled out of this mess by the collar and said collar heading jailwards.
I know a bit about hedge-funders and they are the original granny sellers. These people, two of whom I could name, pay NO tax here in the UK and haven't for at least a decade. The only reason they are in the UK at all is so that their kids can attend English public schools. They contribute nothing to UK society and care nothing at all for the British economy and one of them I know couldn't care less if the UK sank into the North Sea.
One of them had the cheek to threaten the Treasury in public that they would move their business to Ireland if the Treasury didn't drop plans to end their low tax status.
The Treasury backed off- I can only assume because they didn't think to check whether any tax was paid at all. They also didn't seem to be aware that the guy's company is registered in the Cayman Islands.
So the Treasury was threatened by a man whose company nor he personally does not pay any tax.
I must remember the incompetence shown by UK Treasury in case I'm threatened with taxation in the future- it worked for a hedge-funder, why shouldn't it work for me?
The truth is that both Labour and Tories are so busy courting these people in the hope of a donation that they bypass normal checks. It happened yesterday, it happened today and will happen tomorrow.
If the ordinary people of this country could see the way these people stroll around in the highest circles there would be bodies hung from lampposts down Horseguards Parade tomorrow.
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a much better solution with winter heading this way would have been to get rid of the 5% VAT on energy bills. helps the old, infirm, and gives us all some extra money in our pockets along with reducing our bills.
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By the way, Peston isn't the only journalist to suddenly stop referring to their job as a 'profession' and suddenly start using the word 'trade'.
Its the old sackcloth and ashes technique from the overly wined and dined journalist and conveys an image of a guildsman toiling away on a cathedral etc.
Journalism is a trade alright, Mr P. The third oldest, in fact, after prostitution and politics.
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The purpose of the 2.5%vat cut is to bring about an immediate reduction in the monthly inflation figures, in order to reduce base rates further[1%] by proving that the government is on track with its anti inflationary stance and hasn't abandoned its fiscal prudence[dont laugh!]
After all , those brave sovereign wealth funds might think we are only interested in devaluing their money .
Inflation will be stored for a rainy day[the flood] ,preferably under the next Tory government when old labour can resume their ranting and raving about Tory boom and bust
Someone should rework " Love Labours lost" into a contemporary farce where three aging bankers lead by Gordone Berowne promice to lay off printing money and raising new taxis for one year to prove their love for the electorate
or write "The Joy of Reposession "and "101 ways to enjoy bankruptcy "
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Dear Mr Peston.
I am sorry to read about the bunch of complete losers that you must spend your time with at this special season of the year.
Do you not have any friends or family you can party with?
best Regards
Traducer
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#233 traducer "Do you not have any friends or family you can party with?"
I'm sure that he *does* have friends and family but I suspect that they are all over the other side of the border and the Scots are/will be busily re-building Hadrian's Wall *from the other side* !!
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224 - Aye, he certainly has Scots based "brothers", but whether their lodge is located up here is debatable.
cheers
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#204 magicblackfrog wrote:
"Consumers not spending, now there's a thing, what on earth could they possibly need?
After 10 years of buying just about everything and a good bit on credit there cant be much left that the average person has not bought in multiples or come to that even has any room to left to put the stuff in."
SPOT ON.
Did anyone else see the new self store 'industry' appear on scene about 5-6 years ago, so that all the things they bought that they didn't need with money they didn't have to impress people they didn't know now has a home.
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The party is well and truly over and the bill is a lot higher than we thought and will take years to pay off. We need to get a quote to "fix the roof", something we wish we had done years ago! But we don not have the money to get it repaired.
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#211, #214 et al
Agreed, Growth is no longer sustainable.
As Fractional Reserve Banking depends on it, we will have to think of something else.
- Clamshells?
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So interest rates (and deposit rates) will fall on Thursday.
Fine, now what is the plan to rebuild Britains manufacturing industry ?
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These are dark and depressing days indeed and will be continued for the forseeable future. However it is always better to look on the bright side and I am often reminded and lifted by the words and lyrics of the late Mr Ian Dury. Reasons to be cheerful, always made me smile and how is he missed.
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Deflation is last weeks news. Money supply has been shrinking for months (the 'credit squeeze') and its only now that price decreases are being experienced. What we should be worrying about is the inflation in the money supply that the government is creating. I can see a lot of this coming from the monetisation of public debt which can only mean one thing - rapidly rising prices, possibly even hyperinflation. This won't happen now or possibly for most of 2009 but expect double digit RPI\CPI in 2010. Only the U.S. is worse with the $100bn+ a day injection of dollars into the system with an outrageous abuse of fractional reserve lending.
Zimbabwe here we come...
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So who still thinks that the financial world is going to end or are we 'just' going to have a nasty prolonged recession?
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229. Supercalm
What we need to ask is what kind of manufacturing industry is likely to be viable here in the UK in the medium term.
Having a stronger manufacturing sector is of little no use if it requires large amounts of public support. The continental Europeans keep very quiet about this, but much of their manufacturing base would not survive without substantial amounts of public money, with the obligatory backhanders to public officials. Many manufacturing industries in the US also require substantial public help, (esp. the motor industry) and are not of themselves profitable.
These countries' economies are in as bad or worse shape as ours, despite their larger manufacturing sectors. If the Pound v Euro stays here or lower for a while, however, more manufacturing industry (and other jobs) will inevitably migrate to these shores. It will take a sustained period of currency weakness for this effect to become noticeable. It will also make Eurozone members squeal.
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Mr. Peston is like George Bush flying over New Orleans looking at the flooding out of the window of his Air Force One. We don't want another lame duck Bush. Send another Moses.
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231. Ged
If anyone thinks they can predict what the world will look like in 2010 they are either prescient or deluded.
You're right to worry about steep inflation rises at some stage, though. This will occur unless the brakes are slammed on the US economy once the first green shoots start to appear. This is a very tricky call, as data is often lagging and or misleading, and the window for rate / tax hikes is small indeed. Plus, you have to suspect that politicians would like a bit of inflation to reduce the % of National indetedness.
We have to hope that Obama and the Fed are up to it. Previous experience suggests that having a few index-linked National Savings Bonds could be advisable.
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This comment was removed because the moderators found it broke the House Rules.
This comment was removed because the moderators found it broke the House Rules.
Having finally got round to watching "The American timebomb" last night, most of my optimism for the long term future has now been squeezed out of me!
It seems that the only president in recent times who had a clue was Clinton - he delivered a budget with a surplus. Sadly though W has completly ruined those efforts by doubling the national debt.
Here's hoping that Obama as prudent as Bill (and I mean real Prudence not the lies peddled by GB!)
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Munich,
Agreed on the prediction point. However, I have been observing what is happening to money supply in the U.S. and U.K. and there are historical references. Hyperinflation always follows a period of deflation when associated with crazy increases in money supply - $7 to $8 trillion at the last count. Fractional reserve banking is how they translate $700bn into a bigger number plus of course the Fed can print what it likes. The fact that M3 figures stopped being published on March 23 2006 also suggests something afoot as does the bizarre behaviour of the gold and silver spot markets recently.
What is not clear is how the U.K.'s mini version of this situation will play out or what the impact of the U.S. dollar implosion will be in 2010.
I'm not an optimist.
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From the queens speech............"There will be new powers for the Bank of England to provide short-term lending to banks in trouble without telling anybody"
And why would the government be worried about us knowing how much of our money they are lending to the banks?
And what is the definition of "short term lending?"
This is scandalous!!!
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I guess Bob was at one of the aforementioned parties last night as we have made it to midday with no new blog.
Poor love must be exhausted
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#231.
Spot on I fear - about time we had a return to Monetarism. With GB seemingly hellbent on recreating the 70's, we need to prepare for a rerun of the 80s.
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238 scouseflyer wrote:
"It seems that the only president in recent times who had a clue was Clinton"
err, it was actually Clinton who employed goons whose job it was to 'force' banks to lend to ethnic minorities, even though they had no way of paying back the money, so that they could become property owners and share in 'The American Dream'.
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"From the queens speech............"There will be new powers for the Bank of England to provide short-term lending to banks in trouble without telling anybody"
And why would the government be worried about us knowing how much of our money they are lending to the banks?
And what is the definition of "short term lending?"
This is scandalous!!!"
The reason that something like this exits (and I beleive already did but RP told the world) is that banks can occasionally have short term cash flow issues where the BoE helps by being the "lender of last resort". They are supposed to do this when the bank is not overal in danger but needs short term help.
Basically the public is not very clever and if they find out about this sort of thing runs on the bank develop (eg Northern Rock) and this in itself can bring the bank down!
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Comment 233 : MunichMadrid7980
Do you think that some part of the problem with manufacturing is that we look at each specific production activity in an isolated, self-centred way?
For example, why do Gillette razor blades cost more than a pound each? Is it because they are fairly complicated to manufacture, and there's no feasible way they could retail at much less that a pound? Or is it more the case that the total necessary cost would allow them to be sold for 5p each, and still give adequate reward to everyone connected in the supply chain?
The "Gillette" system, it seems to me, benefits only those engaged in the "Gillette" process, from Woods/Henry/Federer down to the worker on the production line, but that this "product enhancement" is actually detrimental to everyone else in the world.
Gillette's just a very obvious example of what I believe to be endemic. The focus of the entire system, it seems to me, is about escalting end-prices so that as many as possible can feed off a process, no matter whether or not they have contributed anything of value to it.
What say we try to re-focus minds on making a reasonable living by contributing value, not adding cost? In both macro and micro terms, wouldn't we all be a hell of a lot better off?
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244. At 12:19pm on 03 Dec 2008, scouseflyer wrote:
"The reason that something like this exits (and I beleive already did but RP told the world) is that banks can occasionally have short term cash flow issues where the BoE helps by being the "lender of last resort". They are supposed to do this when the bank is not overal in danger but needs short term help."
Your mistaken, this clearly states "for banks that are in trouble" not the usual help a freind in need nonsense! Why did they have to write it into the Queens Speech if it was the normal short term lending? I tell you why, its because they want the facility to lend as mmuch as it takes to keep the banks afloat, but tell the public its only a few billion. Just like the FED.
We need another gunpowder plot now!
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lordy lordy - the mere mention of lack of blog, party, head and sand gets you bumped these days
hand it out and not take it!
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#245 ExcellenceFirst
'The "Gillette" system'
A Gillette technical expert stated on Radio 4 that 'any more than 3 blades would damage your skin'.
They now have 5 blades.
Time to grow a full set.
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The government are a bunch of incompetent morons. A 2.5% reduction in VAT will not make the slightest difference to consumer spending. The reasons for reduced consumer spending?
1. Extortionately high Gas and Electricity prices.
2. Extorionately high Water charges.
3. Extortionately high Petrol/Diesel prices.
4. Extortionately high Staple food prices.
5. The Refusal of Mortgage Lenders to pass on the full benefits of lower interest rates to ALL borrowers.
These five reasons mean that the average consumer cannot afford to splash out on a new LCD Tv or buy a new family car etc. What has the goverment done to reduce the cost of these necesseties? Jack Sh*t, Thats What.
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Mr Preston,
I detract 237 when I said 'on the Rob' it was an attempt to be funny not condone or encourage unlawful activity. At least we can give you a hard time without breaking defamation rules (good fun). You could be the next Rick Astley John Sargent superstar.
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#190 BillieBson
Quite the reverse, since the ban, membership has increased for our two local hunts - it's the one growth 'industry' around here. A couple of thousand people attended the last Boxing Day meet and you could only find parking a mile away.
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#207 True-liberal
Thanks very much, I think the two growth rates you quote are the simple answer to my question.
Many things about the drive towards a cashless economy become clear when you start to understand these things.
The problem is that the more I understand the more scared I get
Cheers,
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I see the queen has outlined plans to enforce / help folk on benefits back to work.
1. Where are they going to work?
2. Presumably The queen herself comes into this category, being the biggest receiver of state benefit in the uk?
3. I work btw always have done, but I may end up having to rely on these benefits at some time – Like many on here!
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#228
Scallops. See Wednesday's Commons running order, they get higher priority than the latest Big Bruvvah incident.
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#235 JanvaMan1984
I don't know many pensioners in their mid 80s who've delivered, year on year, the punishing schedule HM the Queen takes on.
She's worth every penny, if only for her ability to keep a straight face when reading the drivel contained in the Queen's Speech.
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Another debt gem:
"In the Euro countries aren't permitted to ow more than 3 per cent of GDP, which is why Italy and Ireland may struggle (Ireland currently at 6 per cent).
UK's comparable figure is 43%- if you don't look left or right off the balance sheet. It would have to be an unholy fix to bring the UK into Euro membership. It would be a hell of a comedy to watch."
You have confused the debt-to-GDP ratio with the budget deficit. The debt-to-GDP ratio refers to total debt of a state, accumulated over many years. The budget deficit refers to the deficit in a given fiscal year. So to compare Ireland's 8% budget deficit with Britain's 45% debt to GDP ratio is like comparing apples with electric kettles.
Incidently, I think Italy's debt-to-GDP ratio is near 100%, and they managed to squeeze their way into the Eurozone. It's not that hard!
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Hello hello hello. 'Tis the season of goodwill, not depression.
I have read many of the comments, and agree with those who say the VAT redn should not have been made. I suspect the MOST inflationary factor is high levels of unemployent : paying people for doing nothing must be inflationary. One of the biggest social evils is also unemployment. I know because I have been unemployed (fortunately only for a few months).
The Cause: we have collectively lost our values. Too many people want to make a fast buck, and not enough want to maximise long-term customer satisfaction (for which making a profit is a necessary condition, not an aim in itself).
The long-term solution: (1) The government should stash money away when things are good so that it can invest in infrastructure when times are bad (doesn't anybody remember the parable of the seven fat years and the seven thin years? No, it did not originate in the musical "Joseph" - it originated in the bible).
(2) Banks should be forced into reinstating their old-school philosophy avoiding borrowing short to finance long, and we, the public, should stop borrowing long to finance short (apart form a few key necessities e.g. housing and transport). We seem to live in a culture where people do nit understand the difference between "want" and "need". We should also remnind ourselves of the marginal value of money : £10 is worth far more to people in geniune need (for clean water, for example) than it is to most of us.
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The reduction in the VAT rate was not designed to increase consumer spending. As other bloggers have said, "how could it, when it is the prices of energy, home loan financing, fuel and so on that are the biggest factors in squeezing personal budgets".
But the Government did need to make a powerful statement of principle to many in consumer facing businesses (for example the Banks and the Oil companies - and also retail!!) over reducing prices to the consumer at large. The VAT reduction says "we are doing what we can and we expect you to do the same".
Also, for what it is worth, anyone who has done the fiscal maths on the VAT reduction will have worked out by now that the 2.5 point reduction will not cost Government finances anything. If (and at a macro economic level it will) a 2.5 point reduction in VAT causes spending to occur that otherwise would not have occured, it follows that the most likely scenario is that VAT revenues would be the same next year as they would have been had the rate been held at 17.5%. In fact they may even be higher.
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249 sjhoulton
I was enjoying your highly-developed satirical skill until it dawned on me that you must actually mean most, if not all of what you say. If indeed it was satire, then Sir or Madam, my hat is off to you; if not, then please read on.
I couldn't agree more with your first 2 sentences but totally disagree with you on most of your other points.
Utility prices are probably not high enough to (a) encourage conservation and sensible use and (b) recover costs of externalities, let alone the bill for cleaning up waste products and decommissioning redundant plant.
Food prices too high? Too low, more like it! Pay more and eat better, eat fresher, eat local, eat less and enjoy it more. Even better, grow some yourself. No time? Maybe switch off the TV, Skyplus, mobile etc and you might rediscover some you didnt know you had.
I've never owned or driven a car and never needed to. Neither did my parents. I don't choose a life that requires a ton of metal to hurtle round the lanes. The car driver's freedom to pollute the air and endanger lives restricts my freedom to walk/cycle safely. As a society we would rather kill maybe 3000 of us a year than give up our precious freedom to move goods and people along at speeds over 15mph.
Save petrol? Burn cars!
OK - rant over. Now, what was the topic again??
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A lot of talk about the £12.4B cost of the VAT drop by the Government, but surely this is relative, as it is only a progressive tax if people spend. If no-one was spending anyway then a big part of that £12.4B would have been lost for doing nothing? So the government is not really giving away so much unless everyone goes bonkers and buys VATable items to which it applies in large numbers.
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249.
Yes, you are right, a 2.5% cut has only a tiny psychological boost. Darling planned it that way, he / we cannot take too many chances, yet. See eg Gednorth (231) on the chance of very high inflation hitting us in a couple of years if governments pump too much money in now.
As for reducing prices of essentials, it's a bit tricky in a market economy. We have to compete with other countries to buy the gas, etc. You can't just name your price, unfortunately.
What the govt should be doing is investing in British technology on renewables, and overriding any Nimbyism on planning- this is a national emergency waiting to happen in a few years. In a few years' time, if we do nothing, power prices will be even higher than today.
This country could be very close to self-sufficient on energy, putting a lid on future price hikes for power.
The cost would be higher taxes now to pay for it. I've yet to read any bloggers on here asking for higher taxes though.
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The governmint wishes to encourage banking to return to subsidized manurefacturing ,they deserve a pat on the head!
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Trueliberal, all I suggested was that you look at the MV equation, which shows that a change in the quantity of money is balanced by inflation, real growth, and changes in the velocity of money. It's just not that straightforward to match inflation with changes in the money supply. For that to happen, changes in money velocity and real growth would need to be zero.
Indeed, the role of velocity in the money supply is not well understood, I think. Friedman assumed it was constant, but Friedman's pure monetarism has not been practiced since the mid eighties.
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@259
Of course you wouldnt need a car in the rural idyl of Thornton Heath would you.
Try it outside of a metroploitan area where the buses come once a week if at all and the branch lines were shut in the 60's thanks to that renowned economist beeching
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I was jotting down a few figures having seen the case of a chap who has lost his job and I would think the everage family/individual or couple would like 10K in the bank to help them through these difficult times, to pay the mortgage and keep the bailiffs at bay. Had they saved just 10 pounds a week during the lifetime of this labour government, then with interest, they would have over ten grand in the bank. I think most people could have saved a tenner a week without any real effect on their lifestyle, lets face it most of us chuck food away we have not used, buy things we dont need and if we had the inclination could shop around for better deals on our telephone, utilities, insurances etc.
If it was that simple for individuals to prepare for bad times, surely our government, full of inteligent people?, could have done the same. Stripped out the waste in central and local government, done away with many wasteful projects (the NHS computer sytem at 14 billion, to name one) and spent just a little less on health schools etc bearing in mind much of this extra investment has not resulted in better standards and services, just a bigger organisation.
So whilst the Government has been reaping in extra cash over the good years, just like so many individuals it has spent the whole lot, wastefully in some cases, and as times were good has borrowed even more money thinking the good times would never end.
Perhaps its possible to understand and even forgive individuals who were naive, misguided or even foolish with their own finances but not a government and PM who for over 10 years shold have known better.
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Re: above did you know that
£4 sandwiches at work each day = £20 per week
= £1,000 per annum
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#261 MunichMadrid7980
"-this is a national emergency waiting to happen in a few years.!"
It is here NOW!
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Comment 261 : MunichMadrid7980
"What the govt should be doing is investing in British technology on renewables, and overriding any Nimbyism on planning- this is a national emergency waiting to happen in a few years. In a few years' time, if we do nothing, power prices will be even higher than today."
Wouldn't it be far more cost-effective for the government to evaluate the intellectual honesty of the advocacy of anti-nuclear campaigners?
Let's put it like this:-
1. What proportion of the anti-nuclear campaigners also believe that cheap, efficient, unlimited power supply is a positive development for human progress?
2. What proportion, on the other hand, believe that growing human consumption must be halted and reversed if we are to survive. And that expensive power is a very effective contribution to this objective.
3. How much therefore are the downsides of nuclear energy production being exaggerated in order to demonise unreasonably an industry, not direcly for what it does, but for it being a major stumbling block to the restoration of social primitivity?
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I think the economy will start to pick up around this time next year - thanks, in no small measure to the actions of GB and AD over the past month or so - and then will really take off in the latter part of 2010.
I know it's tough for retailers at present, but then, that's the economy for you - a downturn was always inevitable, and the sun did shine for a remarkably long time.
Still, I think that the government's hadnling of the crisis, the steps it's taken and the banking blueprint being adopted by other countires is a sure sign of the fiscal intelligence and strength of Brown and Darling.
Credit where it's due: Well done them.
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264 pot kettle
Agreed, it's clear that I don't need a car, but then neither should the vast majority of urban dwellers i.e. about 90% of UK population.
Point taken - though actually I have found rural buses around the SE and some other parts of the UK very good (e.g. Oxfordshire, Notts), though you clearly have to plan around what's there rather than what used to be there. I can't vouch for other parts of the country though.
The disaster of Beeching/Marples etc has been covered at length elsewhere, though they still have defenders in the SMMT no doubt.
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267.
a national emergency is when the lights either go out for all of us, or when only hedge-fund spivs can afford the bills (offset against tax, of course).
what we have at the moment is a crisis, and any measures taken to address this should, in my view, also minimise the chances of a future emergency.
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265.
It is the sheer steepness of the fall-off in growth this time which has left households, banks and governments ill-equipped to handle them.
In the case of the UK, lower interest rates generally work very well to head off slumps, as we are very good at spending extra cash saved from mortgage repayments.
This time, and for the first time, the slump was joined, not caused, by a massive spike in oil-driven inflation, which prevented rate cuts (the ECB even raised theirs in July).
What was behind the oil-price spike?
Ask George Osbourne to ask his mates.
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Comment 265 : paul654lon
But this is hindsight, isn't it?
If the government, commerce and the general public had reason to believe that we were going to hit the buffers in 2007, then of course the sensible thing for anyone with a brain to do would have been to squirrel away some money for the bad times.
But the entire popular climate of the last 10 years has been that the buffers have been taken away. "No more boom and bust" has not just been Gordon Brown's boast, it's been the mainstream belief - so much so that anyone counselling a bit of caution has been treated as a party-pooper with leprosy. "This isn't a boom - this is normal". Society has behaved like a class of excitable school-children who have lost the controlling influence of their teacher.
I'd suggest the responsibility is only partly with society for behaving like children. The chief responsibility is with authority for not insisting that the central focus of the passage to adulthood is mental maturity. And also for refusing to accept that the widespread failure to ensure this development meant that it needed to take more seriously it's teacher's controlling role.
The Clinton/Blair vote-hungry policy of raising mass-sentiment to the status of sagacious wisdom has a great deal to answer for.
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#269, just say no man. Drugs will mess you up. How exactly is the UK going to get out of this? Exactly what measures did AD and GB do to end this and how did those measures help - exactly.
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#269
" ... and the banking blueprint being adopted by other countires is a sure sign of the fiscal intelligence and strength of Brown and Darling."
Other countries are not doing what we are doing are they? The US let Lehman go under.
We are not printing 100billion USD per day are we?
' fiscal intelligence' -Rowlocks!
How did we get in this state if either of them had any?
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#263
Good points. I would think that the velocity of circulation is slowing dramatically at the moment, while the supply is increasing rapidly. I worry what will happen in 2 years time when the velocity picks up and we still have a bloated money supply out there.
Yea, pure monetarism hasn't been practiced much in UK since mid 80s but it seemed to work then - before we abandoned it for a policy of tracking the DM, then joining the ERM, latterly relying on prudence and 'golden' rules - look where those have got us.
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269,
LOL, I'm assuming you are joking though!
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What you don't buy sandwiches for two of your four holiday weeks! That's crazy.
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GB and AD are, in my opinion, at the roulette table and hoping its gonna come up evens not odds. Its 50/50, thats how much of a mess they have got the country into and how desperate they are hennce the increased tax on fuel announced last week. If they win, they will take the credit and the money but if they lose, which is the most likely outcome the taxpayer will pick up the tab!
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re 273.
We can all look back with hinsight but we should all try and prepare for a rainy day not least our government!
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@279
Paul
Its worse than that, they have put every penny on zero/Green
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maybe the best strategy is to go post nuclear (using the term as an abstract non literal war metaphor)
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#271
#281
About 97% chance of losing then?
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269: gooner_no1
I claim my £5. You are the government sock puppet on this site. Either that or not a very good troll.
I've long suspected that *some* of the posters on here are controlled by central offices of the political parties. If that isn't you, I suggest that you offer your services to you know who. I suspect they are in need of cheering up.
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Comment 280 : paul654lon
This is absolutely the key question - what approach should we take now. Now. Not what we should have done over the last 10 years.
The answers aren't necessarily the same, although the government would have us believe that spend/spend/spend is as beneficial for the economy now as it has been over the last 10 years.
But the government fails to make clear that the most powerful reason for its advocacy of spend/spend/spend is that it diminishes the individual's scope for self-determination. The more inter-reliant we are as a people, the easier we are to control. The more people who have the ability to structure their lives independently of government, the more difficult it is to construct a managed society.
Look, for example, at the virtual destruction of the private pension system. What a good way of diminishing a large number of people's ability to cock a snook at the politicians' desires. Increase their reliance on the state and they've little choice but to be more obedient.
Look at every Labour policy, in fact, and you can see the goal of big-state control behind all of them. All by stealth and deception. Big-state, apparently, isn't even in their thinking. What a bunch of muppets they must think we are!
Labour can think of no greater champagne moment than for the entire population to be up to its neck in debt to a state-owned banking system. Nearly time to set up the cascade, I think.
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This policy of slashing interest rates will prove to be counterproductive and ruinous.
Those people heavily in debt are not going to spend more, as their credit is almost certainly exhausted already; it might make the repayments eat the capital marginally faster but that is all.
Small firms are still unable to borrow unless they are creditworthy and should not be borrowing further if they are not.
Savers who have cash in the bank are forced to spend less or will be withdrawing capital to maintain their standard of living, decreasing the bank’s ability to lend. The whole will be a vicious circle.
If those who are already insolvent are permitted to borrow further, the ensuing bad debts will put the banks in a worse situation than now. Permitting mortgage interest to accumulate further in a falling market will exacerbate and accelerate the problem. Either total stagnation will ensue or catastrophic falls will occur as the inevitable repossessions and forced sales mount after the phoney truces expire. Taxpayers cannot pay forever increasing amounts without drastic cutback.
Brown and his glove puppet will bankrupt Britain. I suspect Brown’s desire for fairness is behind it all, but is it fair that the prudent are destroyed so we are all equally destitute?
(Apart, of course from those on the state’s payroll)
With apologies for the reprint, this seemed a better forum than the original
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275.
we dont have any significant British Lehman-like institutions, among the last was Barings...
the closest we have is hedge funds, many of which have and will be allowed to go under.
[Probably the ones whose main shareholders fund the Tories, if you're a conspiracy theorist]
The rest of the world's main economies have followed the UK in part-nationalising some of their main deposit-taking banks.
Don't think it was an active decision, more like Hobson's Choice.
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All the ifs
It's like my sun won't shine
It's like my ride don't roll
It's like the only one thing I love
Dont love me no more
It's like my right gone wrong
It's like my ice gone warm
It's like the only one thing I love
Dont love me no more
If I'd a prayed instead of wishing
You'd still be here with me
But all the ifs in the world won't bring you back again
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re 280,
I agree with you its about what we do now, but, its important to look back too. In managemant its important to plan for next year and beyond not just plan for today, thats why thanks to Brown, blair and co we are in a BIGGER mess and face a BIGGER downturn. The sad thing is this was all preventable.
1. Save some money for a rainy day.
2. Intoduce mortgage controls (in 2003/4). Only a fool and estate agent thought house prices would go up and up. Force banks to depoist more funds in respect of housing loans.
3. have a plan B.
4. Perhaps now is the time to review and stop or alter index linked final salary pensions like the private sector have done as the cost is escalating.
5. Stimulate real growth by cutting business red tape, and reducing business tax. before you ask I do not havor run a business.
6. We are in a mess because we have spent and borrowed too much, GB answer spend even more.
Doctor Doctor, I have put on weight and my health is suffering. Dont worry, here is a prescription for 24 cream cakes!!!
Does it make sense? Just as well GB and Ad are not doctors.
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Comment 289 : paul654lon
I agree with you that we should have been more prudent over the last 10 years. I'm one of the people who've been consistently shouted down as being a party-pooper with leprosy.
I'm still being shouted down now by all those millions of people who are unable to admit even the possibility that they may have been wrong, insisting instead that they were not in any way responsible for what has happened, and that today's problems are all the fault of the messengers. And that it's only a matter of re-feeding the meter and the good times will start to roll all over again.
The ability of stupidity to become mainstream wisdom appears to be limitless.
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289.
There will come a time to wean the patient from cream cakes, onto the fiscal cold turnip soup- higher taxes.
If we did that now, the patient would die of shock / withdrawal.
Great in the short term for all of us with savings, we would benefit from deflation as our money can buy more. Personally, that would be great for me, in the short term. (The sight of all those skint, repossessed, redundant people might make my own steak and chips taste a bit less palatable, though).
Unfortunately, as no rational person would buy anything apart from food and heating fuel in those circumstances, business activity would collapse, as would sterling if the UK went it alone with its cold turkey cure.
The key is to give the patient enough 'poisonous' calories to stay alive, so that you can later administer the correct medicine.
Unfortunately, that means that even savers like you and I have to bear some of the cost.
The alternative is very, very nasty though.
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Robert
After years of selling largely Chinese and other imported goods (your book says M&S has gone from over 90% to 2% British manufactured goods in a few years - and they were the laggards) should the retailers really be surprised that their customers who live in the UK don't have money to spend?
They only have money to spend if they borrow it on credit cards financed by the Chinese Government and Chinese workers' savings. When they can no longer afford this they stop spending.
Tesco clearly knows about this. They are opening shops in China as fast as they can.
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Most of these financial geniuses had MBAs and commanded huge salaries. What a mass of overpaid, overrated morons they were. They rode the bus right over the cliff. They deserve whatever happens to them and far worse. Change separates the wheat from the chaff and these are all chaff. Smart people got out of all asset classes except cash a year ago in anticipation of what is happening right now. I think future economic historians will wonder how so many people could have missed what in retrospect seemed so inevitable. Not only were these people greedy which is not a crime but they were stupid which is the worst of all crimes.
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