What RBS's results say about QE
If you want to know why quantitative easing may not be working - in the sense that it hasn't led to a conspicuous increase in lending - this morning's financial results from Royal Bank of Scotland give a pretty good clue.
I'll explain.
In simplified terms, quantitative easing is the process of buying gilts from investors - to date some £122bn of them.
Let's assume, which isn't necessarily the case, that when the Bank of England buys gilts from investors the cash ends up in the British banking system.
Well, if the cash is classified by the banks as a customer deposit, which it might be if the investor that has sold gilts to the Bank of England happens to be a relatively small and unsophisticated institution, then the banks say "yippee".
Because that deposit increases the ratio of supposedly stable customer deposits to loans and advances: it reduces the banks' dangerous dependence on flighty, unreliable wholesale funds.
Which genuinely matters, because - as you'll recall - one of the reasons our banking system came so close to collapse last autumn is that our banks had become too dependent on wholesale sources of funds, which dried up after the collapse of Lehman Brothers when investors took fright and took flight.
Take Royal Bank of Scotland. Today, its chief executive has set a target to reduce its ratio of loans to deposits from 156% to around 100% by 2013.
That will require it to reduce its dependence on wholesale sources of funds by not far off £200bn over the same time period.
So when cash deposits come in, the instinct of Royal Bank of Scotland - and of other banks - is to say "thank you very much" and just sit on the cash, rather than lend it out.
And there's a similar story for Lloyds. In the six months from 31 December to 30 June, its ratio of loans to customer deposits has fallen from 166% to 152%, as it has simultaneously increased deposits by £20bn and reduced loans and advances by £25bn.
To reiterate, that reduction in these banks' respective ratios of loans to customer deposits is a deliberate policy.
Why? Well, when Lloyds and RBS increase their customer deposits and don't lend out the cash, they becomes a much safer place for their other depositors.
So a benign effect of QE may have been to increase the security of our banks for savers - even if that's not what the policy was intended to achieve.
But actually much of the cash raised by institutions from selling gilts almost certainly isn't converted into customer deposits at banks.
More likely is that institutions have lent it to banks and other financial companies in the form of wholesale market loans - the kind which the banks are supposed to be weaning themselves off.
If that is the case, then there is absolutely no chance that banks - already too dependent on wholesale funding - will lend the money out.
What's more, some of this money raised by institutions from gilt sales may have been lent to the banks in the form of short-term debt securities underwritten by the Treasury via the credit guarantee scheme.
In effect, there will have been a double public-sector subsidy for fund-raising by the banks, with little apparent consequential benefit in the form of lending into the real economy.
There is a final paradox in this tale of where all the Bank of England's money has leaked.
The banks may have used the additional cash deposits to purchase gilts, as they've been instructed to do by the regulator, the Financial Services Authority, which wants to see them holding much greater reserves of genuinely liquid, high-quality assets.
Let's look at Royal Bank of Scotland again. It has a new target to increase its "liquidity reserve" from £90bn to around £150bn. And that means it may well buy an additional £60bn or so of gilts.
So one lot of gilt purchases, by the Bank of England, is simply spurring a separate lot of gilt purchases by the commercial banks - for which the government should be profoundly grateful, because it helps finance the humongous public-sector deficit, but prevents any of the cash being lent to businesses and households that may need it.
Does that mean QE has been a waste of time?
Probably not.
Without it, there might have been even less lending into the real economy.
But unless and until the banks' ratios of customer deposits to loans and advances have returned significantly nearer to parity, QE is almost certainly not going to spark much in the way of incremental lending to non-financial companies and personal customers.
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Back to banking then...nevermind.
How RBS got itself into this sorry mess is a national embarassment. The only event which may eclipse the same will be if QE and gilt sales in particular collapse leaving the government red faced and running to the IMF, unable to service the astronomical national debt.
Watch those gilt sales when QE ends.
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So to summarise your 779 word article:
We have substantially increased public / national debt (i.e. gilts) with little or no actual trickle down effect on the REAL economy.
Genius.
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A good post Robert which again highlights the contradiction in the Government's stance in berating the banks for not lending at the levels they like.
The boom was largely built on unsustainable levels of debt and unfortunately the necessary measures to wean us off this culture will result in viable companies not getting the capital they need. However this is a price worth paying (although terrible for the companies/employees concerned) if it puts us in a better long term position.
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Quite simply, quantitative easing will not work because it is a communist plot.
http://moneyistheway.blogspot.com/2009/01/print-money-no-to-hell-with-marxists-we.html
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I'm amazed that everyone expects this global recession to be over in a few months. Whatever has gone on up to now, has been about stabilising the boat - not even patching the holes - and certainly not about getting it up above the waterline. The economy is all phoney just now, and you can't understand it by applying traditional rules. Think how long and hard we worked to create this mess, acknowledge the fact that we can't go back to our old ways, and consider just how much longer it will take to reach a stable position.
If all that sounds negative, I'm sorry but that's how I see it. Personally, I quite enjoy it, since it gets us out of the old ruts and provides loads of opportunities for those who can still think for themselves.
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At last a banking story. I was getting bored with news stories.
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and all I can think of is: vast wodges of money have been fond to baiil out the bankers and try to get us out of the hiole they've dug for us; small sums necessary to keep our society running as a civilised place are queried in detail, trimmed, or dropped, often for political reasons or whims.
I know we have to do this, but it's amazing how the money can be found for this but not to give our old people a pension good enough to live on decently, or the NHS enough to fund properly necessary treatment....
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Surely the answer is simple: negative interest rates, which is what the Riksbank have done in Sweden. Charge the banks to hold reserves at the Bank and they'll have to lend it out.
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Yeah typical. This government says one thing and does something else. Maybe I should give them the benefit of the doubt? - They haven't got a clue?
But in the real world Robert a relative, new graduate, went to RBS to ask for a mortgage. The family have banked with RBS for over 60 years. They are relatively well off. Frankly, if I had the cash I would loan them the mortgage. So they had the 25% deposit. Did they get the mortgage? No. Why? Because the contract of employment has a one year 'probationary' period. Mortgage requires a guarantor. Parent is old. So guarantor mortgage period 11 years. Guess what happens to repayments?
So they went to building society. Absolutely no problem with 'probationary' period. Why? Cos 'failure rate' is no different than any other job. Catch? Yes interest rate is 0.75% more than RBS. But given the fact that there are no RBS mortgages at that rate, does the quoted rate mean anything?
You can fool most of the people most of the time, but not all of the people all of the time.
Well done Hester. Reduced RBS to a banking equivalent of 1970s British telecom in less than a year. Quite an achievement.
This Labour government has not got a clue. It is out of touch with reality & on holiday.
The banks are trying to hide reality. How about some real disclosure like MPs expenses? If loans are happening. Publish the data. I for one no longer believe the rubbish being turned out.
Robert where is your investigative journalism? Or do you not mix with real people?
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So in other words...it will get worse before it gets better?
If the banks have to withdraw forms of lending because of the restrictions placed upon them by the government, why are the government turning around to the banks and saying that they must lend more?
Sometimes I do wonder which issues you try to tackle Robert.
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The change in accountancy rules means the banks can survive. The underlying problems remain and nothing but time will solve this. The Labour government have pushed the problem to the next government. Poor conservatives.
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#4 MichaelFowke:
It has nothing to do with communist ideals. You may want to hop over to Ireland and see how they are coping. At least we have 2 weapons to fight recession the Irish don’t have. The first is a floating currency. Ireland is locked into the Euro, but we have sterling. The second tool the UK Government has to drive growth is increased short term spending and temporary tax cuts to boost consumption. Ireland could badly do with both quantitative easing and some fiscal stimulus on domestic demand. Actually, it is nice now that some in opposition broadly accept the need for fiscal stimulus now, alongside increased spending on education, health and defence with repayment in the future. Though of course, they want less of it.
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This is a good blog and something we should all be looking at, still I think it looks like the QE won't work.
Oh well, never mind. I remember being happy with pieces and jam as a kid.....................Little did I know how this practice would serve me well in years to come.
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This comment was removed because the moderators found it broke the House Rules.
In reporting on the results of the Banks Robert seems to blame only them for the financial mess we are in. In their thrust for market share there is no doubt that, in hindsight, some, HSBC and Barclays apart, have been reckless. However we must not forget that Brown was the father of the mess the country is in. He created an economic climate which led to a downturn in demand resulting in job losses and thus inability of many to service debt levels which at the outset appeared sustainable. Result, foreclosures, negative equity, factory closures.
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The people who borrowed unsustainably (and who continue to do so) have helped to get us into this mess (and the more they borrow the worse the coming second crash will be). Newsnight last night was very interesting because Trichet was questioned as to why the Eurozone is not going for more quantitative easing, whereas we are. As usual, he was the perfect gentleman - deeming it 'inappropriate' to rubbish his 'sister institution' (the BOE). However, one British economist managed to hit the nail on the head when he said that it was possible for the Eurozone to allow some degree of deflation because there has not been such a dreadful culture of household borrowing in the Eurozone. Yes, unemployment is high in the Eurozone, but they are clearing out the system and the ECB repeatedly says that it is proceeding with 'prudence and caution'. The ECB still considers 'price stability' to be their raison d'etre, whereas the BOE has thrown all caution to the wind - reluctantly maybe - because Mervyn King seems to be very much of the same ilk as Trichet, but his hand is forced by the politicians.
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With interest rates for savers at near-zero, this is the perfect time for banks to "sit on" vast piles of BOE cash....it costs them virtually nothing to hold it....a gift from the public.
Add that to the bail outs.....another gift from the public.
And why should we take any notice of published bank results....they have been shown to be a nonsense?
Two years ago they were reporting "a loss of a couple of billion", when in fact they were broke.
And why should we rejoice when they make big profits, when they have every intention of putting so much of it in their pockets?....another gift from the public.
I dont really believe in re-incarnation, but if it happens, I WANT TO COME BACK AS A BANKER.....live like a king, and have my bottom wiped by the public for life.
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Robert,
At last you have exposed the truth about our government 'Ponzi' debt creating money pyramid scheme which is scary as per the true analysis below.
You have confirmed that bank 'reserves' are nothing other than bank loans (gilts) to an overspending bankrupt government, and that this is debt created bank money 'out of thin air'. So we now have government bailed out bankrupt banks creating money via fractional reserve banking to lend back an even greater amount back to a bankrupt overspending government. In effect via the as good as nationalised banks the bank is borrowing from itself whilst creating inflationary money in the process.
In addition, the banks have been given by the Bank of England more 'printed' Quantitative Easing debt created money via old gilt purchases so that the banks can buy more gilts to fund the excesses of an overspending government with Gordon Brown being the winner by not being kicked out by voters who have not yet felt the effect of their national bankrupcy by him.
With deposit interest rates being so low, saver deposits are now non existant and it is only the government bailout money that the banks have to lend at a fractional reserve multiple.
The reason why the banks are seen not to be lending is mainly because people cannot afford to borrow more to pay the interest from their earnings irrespective of how low their house price assets have fallen.
This government Ponzi money creating pyramid scheme relies on people taking our greater debt, and now that people and companies are maxed out in debt it is collapsing.
Quantitative Easing is making it worse because any attempt to stop it will result in rising gilt yealds and increased borrowing rates that will now be terminal to the economy. Hyper-inflation Zimbabwe style will soon be upon us.
It would have been far better to let the banks go bust, to protect retail depositors at far less cost to the taxpayer than the black hole bank bailouts, and to increase interest rates to encourage saving instead of making the situation worse by encouraging greater borrowing with reduced rates.
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#9. At 10:40am on 07 Aug 2009, Blogpolice wrote:
Yeah typical. This government says one thing and does something else. Maybe I should give them the benefit of the doubt? - They haven't got a clue?
The real problem is that they don't understand that the reactions to the actions they are taking are not what their simplistic logic would have them believe and so your last 5 word are probably the sad sad truth.
I love analogies and in this case I think one has to think about obesity, no one becomes obese over night it takes many years of ignoring what is happening. Once you have identified the problem it would be stupid to think that the cure could be to eat loads and loads more food really quickly and hope that this somehow naturally triggers your body to become thin.
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the engineers of old built pyramids with the points of the buildings upwards, the great engineers of today built the pyramids with the point down the way.
All this money that is getting printed is getting sucked out of the system by people scrabbling around to get a monetary value for their useless worthless bits of paper, As we the public and funding this I demand a full and public audit of ALL the books the financial organisations hold and lets see who is telling the truth.
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We should have a site dedicated to QE, say qe-watch.com ?
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Can we have a story about how the pension funds have been asleep at the wheel? They own the banks on our (current and future pensioners) behalf. They take their annual fees (e.g. 1% of my pension pot every year) without any regard to how well the investments perform. They don't seem to get involved enough in managing the companies that they invest in. Is it any surprise that I and many other punters have put money into our home property rather than put more money into the money pit that our pension companies represent. I resent the way that the banks are earning commissions from churning my investments from one company to another - I get poorer and the bankers get richer while the pension companies grease the wheels.
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First installment leading to blasting out of the water the government's strategy in dealing with the recession and managing the economy generally. Stupid bank rate, PFI's, privatisations to follow.
We have a Labour Government following an out of date extreme capitalist route because they have ceased to be able to understand any other way including the modest social democratic line of the LD's. New Labour is another bankrupt in the recession and the sooner it goes and is purged from the real labour party the better.
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#2 Hawkeye_Pierce
Brilliant post!
When do the IMF get called in?...what are the economic conditions/circumstances that trigger their involvement?
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A very simple suggested answer why Quantitative Easing (QE) hasn't worked and that another GBP 50,000,000,000 is required, according to the Bank of England (BoE).
I imagine much of the money has gone abroad. Humour me for a moment.
QE is where the BoE buys up outstanding government debt with "new cash". If the sellers take the cash and deposit or invest it in the UK then the virtuous circle Robert proposes of it going into banks who can lend it takes place.
However in my big bad world I believe the following has happened.
When UK interest rates were higher than either US, Euro or Japanese rates foreigners bought UK gilts for the increased return. Now UK rates are down and our economy is going to the wall. There is a huge loss of confidence on the behalf of said foreign investors in the ability of the current UK government to be able to "find their A*s with two hands and a mirror" let alone run a G8 size economy.
The foreign investors see a mug punter (the self same BoE mentioned earlier) offering them a get out of jail free card on Gordon's road trip to oblivion and surprise surprise they have taken it.
It might be interesting to see the cash outflows from the UK since QE began.
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.. are we talking long or short scale £ billions here?
If long scale why not just give everyone a million? More chance of economic recovery than anything this useless Guvt are ever likely to do..
GC
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This piece has a fundamental flaw in logic at its very heart! As you point out, banks have decided to reduce their loans-to-deposits ratios to a level that increases their stability and security. If we agree that this new ratio is a fairly fixed point (in the minds of the banks' boards at least), then clearly they are going to contract their lending and increase their deposit-taking until that ratio is reached.
In the absence of any cash injection from the BoE, this would mean that the process of arriving at the desired ratio would in fact take a fair deal longer, and would be more detrimental to those who want to borrow from the banks. In other words, the cash that the banks have gained via quantatative easing acts as an accelerator to get to the desired loans-to-deposits ratio. The fact that some further lending contraction may be desired by the banks over and above the effects of QE is in itself not a sign that the QE has not been beneficial.
I'm astonshed that you have made this absurd logical leap, and that you have not sat down for five minutes to consider your opinion. All I can say is, I'm glad we're not having to pay for this "insight" yet :-)
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If you're right - and I think you are - then QE will have little or no effect on the real economy. The MPC should have reduced interest rates to 0% , not bothered with QE and sat tight until the recession ran its course.
Every day we have "experts" and commentators bleating on about inflation. I wonder how many of these people - not least the banks - have a vested interest in the base rate going up, so they can make an even bigger profit than they're making already? The differential between base rate and the average mortgage is about 5% at the moment. Does that mean if base rate goes back eventually to say 4%, that mortgages will be priced at about 9% ? I don't think so - therefore I'm forced to conclude that the current high differential is nothing to do with banks "repairing their balance sheets" and everything to do with blatant profiteering. And that goes for their current sharp practice in calling in overdrafts with little or no notice, charging rip-off arrangement fees and generally doing nothing to help their customers or the wider economy. Caledonian Comment
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A day or so ago I asked if anyone knew is bankers were to get bonuses for handling the QE cash from the BoE? (No response as yet.)
However given that there seems to be a confirmed merry-go-round of QE cash being turned into gilt purchasing by banks my guess is that the bakers WILL be getting bonuses fro managing this enforced merry-go-round. This is unacceptable as there is no risk and it required no judgement by the bankers as they are being forced to take to money and then forced to buy the gilts!
RBS on the other hand has slightly improved in my opinion after hearing Stephen Hester on Today (Radio 4). He did seem to understand that loans to business for productive purposes were more important to the recovery than those to inflate assets via home loans. (I bemoaned this problem that was within the whole page RBS advertisements last week when there was a definite desire expressed to re-inflate the housing bubble and I am glad that the bank seems now to have stepped back from this position.)
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I wish I were paid in Euros!
When the pound starts to slide against the Euro even futher (as it surely must do), the brain drain will really start to kick in.
There are quite a few French, Germans and Italians where I work and a significant number have already left this year to go back to Europe. It's in a high-tech environment and there just aren't the people in the UK, sufficiently qualified, to replace them.
I wonder where all our clever/qualified people went?....surely it wasn't banking!
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QE will not work. The money is effectively just helping the banks, who can make a quick buck by selling gilts at a short term profit, at the tax-payers expense.
The profits in the investment banking division which accrue as a result then get paid out in bonuses.
The only long-term solution to our problems is for Britain to make stuff that can be sold for a profit. Anything else is just creating a short-term illusion of recovery, which will only last as long as the government can print money.
As many of us have said ad nauseam, there is a massive fraud being committed against the general public here. Nobody in the BBC sees fit to even report it.
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I wonder why no-one in the media is highlighting the fact that nothing has really changed at the banks at all.
Just look at the board and top management of RBS, there are 20 of them. Two are women - although one of these is based in the US, all the others are white middle aged men.
17 of the 20m have worked for RBS for over two and half years so were part of the problem, but none of have faced losing salary, benefits or bonuses.
None of them have ever run, set up or be involved with a small business, most have gone straight into banking.
Yet these are the people the Government is trusting.
Also as the Governement owes 75%, why do they not have anyone sitting on the board
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"In simplified terms, quantitative easing is the process of buying gilts from investors - to date some £122bn of them."
But the banks are buying gilts.
Does this mean the banks are making some easy, risk free profit on transaction of £122bn of guilts. These profits will then be used to justify and pay for huge bonues, at out expense ??
Surely, it cannot be. I must be missing something. Very puzzled.
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One other reason that the banks are holding on to cash is that the FSA has set minimum capital ratios. Hence the banks have had to boost their holding of cash. So the government is saying they should lend and the FSA are saying they can't.
Is this the 'joined up government' we were promised......
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#9 Blogpolice wrote:
'Robert where is your investigative journalism? Or do you not mix with real people?'
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What!...the son of a Labour peer mix with real people AND do some real work!...you can-NOT be serious!
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Correction, 18 neospeakthetruth.
It should read 'the government is borrowing money from itself'
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#12 modest_mark wrote:
'Ireland could badly do with both quantitative easing and some fiscal stimulus on domestic demand.'
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Fear not!...Ireland can expect some very generous help from EU-land very soon....for there is to be a very important 'Re-referendum' there...don't you know!
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And this whole City greed and favouritism thing is part of a greater scheme....the re-assertion of the "superiority of the establishment" over the masses.
Thanks to the destruction of the unions in the 1980s, the "establishment" are in the process of "filling their boots" at the expense of the public.
CEOs, top civil servants, bankers and City staff. Obscene inequality.
But out of this the unions will return...and the establishment will only have themselves to blame.
The country, including the banks, will be brought to its' knees....to a standstill....unless the establishment reverses its' program of self-reward.
Regardless of whatever monstrous lash-ups they have made, they are still pocketing millions.
Those unions who have supported New Labour with the doctrine of being "sympathetic to business", have been hoodwinked, tricked.
New Labour is clearly part of the "enrichment of the establishment" 30-year scheme.
I'm no fan of hard-nosed unions, but they are surely coming back.
Thankyou bankers, and give my regards to the folks in the Cayman islands.
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Robert,
An interesting discussion from your good self. As you may know from my blogs I am no economist. As I may have mentioned recently I continue to keep what little money I have in a biscuit-tin in the kitchen.
One thought though did cross my mind:
We have a large number of students graduating from various universities around the country having studied 'Economics'. Couldn't we round them all up, lock them away in a room with bread and water, and not let them out until they have found a solution to this mess.
It appears to me that those highly paid economists in the government and the City of London.....don't have the faintess clue about what they are doing!
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It's really quite simple then. Banks, as commercial profit making enterprises, are protecting their interests. The banking system for normal depositors and lenders needs to somehow be separated from the rest of a banks interests. Keeping lending going is a fundamental part of the economy (and of national interest) that needs to be separated from banks more risky profit making ventures.
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A comment / question for Robert really: Through QE the government is in effect buying back it's own debt. That debt is therefore retired, since the Government then simply owes itself the debt obligation (gilts) it buys. SO, QE of GBP 200bn will reduce the public debt by GBP 200bn, or rather fund the largesse over the past year. Why has this aspect not been covered? QE has a very real benefit in that sense
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This credit dilemma is never going to end as long as QE is just a trick with money.
The evolution of money is an interesting one and we seem to have reached a dead end now. How can money be money in one place ("if the cash is classified by the banks as a customer deposit") and debt in another ("money raised by gilt sales.... and lent to banks in the form of short-term debt securities") etc etc etc?
I don't pretend to understand any of the above, in spite of your attempts to explain it all.
We may have something useful in QE but probably only from a narrow viewpoint, a bit like the International Date Line.
This line marks Greenwich as a starting point for the day and somewhere in the Pacific, halfway round the globe, as the end of a day. For the setting of clocks it's useful but for people travelling it's a nightmare. To quote from Wikipedia, just to give a flavour of the paradox created by this system:
"For two hours every day, at UTC 10:00–11:59, there are actually three different days observed at the same time. At UTC time Thursday 10:15, for example, it is Wednesday 23:15 in Samoa, which is eleven hours behind UTC, and it is Friday 00:15 in Kiritimati (separated from Samoa by the IDL), which is fourteen hours ahead of UTC. For the first hour (UTC 10:00–10:59), this phenomenon affects inhabited territories, whereas during the second hour (UTC 11:00–11:59) it only affects an uninhabited maritime time zone twelve hours behind UTC."
Perhaps we just need to stop pretending that the money system we currently have can be everything to everyone? The International Date Line can be ignored by looking at the sundial in your garden to find out what time it is, but we seem to be stuck with concepts in banking that are all about profit and not about real value, with no alternatives when the system fails.
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I'm no expert but it seems to me that a fundamental mistake that the BofE is making is treating the UK economy like a closed system.
The same mistake was made in Iceland where the central bank assumed that putting up interest rates would slow down economic activity. What happened was the high interest rates sucked in more foreign money (like from UK depositors) which was then lent out with fewer and fewer controls.
I suspect that a lot of the money that is not being used to buy UK guilts is actually being invested abroad (probably India and China). So the BoE is in effect delivering a stimulous package to the countries who least need it. (Sigh).
Even if the money is invested in FTSE 100 companies, how many of them do the majority of their business in the UK?
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Fin. Instns. are reluctant to lend (retain cash) because we are yet to see the full effect of appauling mortgage facilities and the dubious method they are sold to unsuspecting households in recent years. Specific case: couple with £36000 mortgage, house V £100.0000 and monthly outgoing of £550 for loans and personal insurances. Finance Rep: "Would you like to reduce monthly outgoings to (say ) £450 and reduce your mortgage to 15 years (from 20 years)." Result :£51000 mortgage BUT includes car loan £6000, up front PPP premium £7000 & life cover premiums ( can`t recall £amounts), and fees £1500. Such arrangements have yet to be tested with FSA but the fall out will be huge.Large lending & insurance institutions are caught up down line.
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It's all very clever, Robert. The banks extended loans to people who couldn't afford them and fuelled a credit boom that has brought the economy to its knees. The govt rescues the banks by doling out astronomic sums from taxpayers to keep the banks in business and tells them to get their houses in order and get back asap to lending money again. At the same time, banks are required to balance their loans to deposits ratio..which means tightening criteria for borrowers and attracting more deposits from savers. Interest rates for savers and currency investors are reduced to marginally above zero. People who relied on savings interest for income (pensions having been destroyed) become benefit dependents and draw their money out of the bank to live on. The pound is considered a lame duck by currency investors because other countries pay more interest on deposits. The B of E tackles this by giving more monopoly money to the banks which future generation of taxpayers will pay for. Bankers put aside huge sums of govt largesse to fund their bonuses and fixing their balance sheets. Then they tell the govt they need more money to issue loans....Alice in Wonderland... will you, won't you join the dance.
As I said it is all very clever..far to clever for ordinary mortals to understand. When most of the people who didn't get into debt have left the country and are replaced by more benefit dependents..what next?
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So at the point when the ratio of loans to deposits exceeded 100%, NO ONE on the board of directors said "Isn't this a really stupid thing to do?"
It's what you would expect from a person concerned about the continuation of the company would do, not someone looking to make a quick buck.
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#37 BankSlickerminustheR wrote:
Ireland can expect some very generous help from EU-land very soon
Yes - we can see which way that is going sir!!
Consider this, in the past, the opposition have made a lot of noise about the value of keeping the pound, if they weren’t so keen on telling us to follow Ireland’s current slash and burn fiscal policies, which ironically enough comes as a result of having adopted the Euro.
Anyhow my point that seems to be lost by many people, but what are the consequences of not using QE?
Ireland now has high unemployment, a depressed housing market and commercial base which incidently is impairing much of the HBOS debt.
Charlie Bean at the Bank of England seemed quietly enncouraged in July 2009, but how much more of it is actually necessary? This is crux. I don't think we have enough statistics to confidently judge that QE will or will not work. The vast majority of this money is being funnelled into banks' reserves not to their staff or customers that need it!
I would advise people to contact BOE directly if they really want to know more because I can't claim to know everything...
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I do have some sympathy for the dilemma facing the banks (and banker) because they will never be able to satisfy the conflicting demands of the government, to build up their reserves and meet the needs of small businesses and homeowners to be able to borrow more money.
It is reasonable to assume that the BOE quantitative easing programme is helping the banks to build up their reserves and at some stage in the future the banks will have enough finacial resources to lend more freely. However I suspect it will be at least another twelve months before the banks feel confident enough to relax their lending criteria. Even then the banks will not be a position to lend anything like the ammount of money they were lending before the onset of the credit crunch. At a guess I would say no more than 90% of what they were lending before and at a much higher rate of interest.
What would would be of help to small businesses right now (especially the wealth creating ones) would be if the banks deferred paying out the billions they have set aside for bonus payments for at least the twelve to eighteen months. That total ammount of bonus money would help a considerable number of small businesses to weather this storm.
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Once again we seem to have totally misunderstood the point of Keynes' solution to the 1929 crash. Government printed money was used to pay for extra public works (which were also intrinsically useful to society) and created both employment and demand for services (cement, transport, etc). Much of the money ended up directly in the hands of ordinary people who spent it on food and clothing, and then indirectly to banks to pay back loans and improve their balance sheets.
How can the current policy of QE possibly acheive these things as well? It looks suspiciously like another kind of money-go-round of the same type that created this mess.
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"Take Royal Bank of Scotland. Today, its chief executive has set a target to reduce its ratio of loans to deposits from 156% to around 100% by 2013".
The easiest way to do this is decrease the margins between lending and deposits ie pay savers more and charge borrowers the same.
This is what the government in part attempted by reducing Base rate almost to zero to stimulate the spending boom, most of it in housing.
But savers who rely on interest and dividend income are also spenders and if interest rates fall, less income, less spending, as sure as night follows day.
Since banks are unlikely to reduce their margins time I think for the Bank of England to increase Base Rates and the government to set a maximun level on the differential between lending and deposits. That way borrowing will reduce to sensible levels. Savings will increase to notionally at least cover lending. The banks will still make profits. Spending will resume on greater stability and we have a win win situation.
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So how much of the £122bn soon to be £172bn is still in the UK?
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Interesting summary Robert. Can I just check I got the facts straight?
1. The government needed money, so borrowed it from creditors (banks) in exchange for IOUs
2. The creditors got into trouble and faced bankruptcy.
3. The government decided to help their creditors to avoid bankruptcy, by repaying their debts with "imaginary money," buying back the IOUs and putting them in a safe somewhere.
4. Banks then either lent the imaginary money straight back to the government in exchange for another IOU or put it in a safe somewhere, neither organization noticing that the money didn't exist.
5. Things didn't seem to get much better, so the government went back to 3 and repeated the process, giving banks more imaginary money.
Now, I may be naive, but I don't think this achieves anything - apart from getting various economics experts writing articles on how the crisis is over. The debts still exist, but are growing like Topsy. And we will have to cover them by hyper-inflation.
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The whole thing's a ghastly nightmare!
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Robert, you are getting there. After a long last, you recognise importance of loan to deposit ratio (L/D). But you still do not recogniase that lending with L/D above 100% constiutes a pyramid scheme and is a crime. Read this document published by The Treasury Committee:
"The largest heist in history"
The other two short article will give you an idea what is happening to QE money (you will be surprised).
"Is another loot going on now?"
"How to make money?"
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One of the key problems , which has been around for 10s of years is that its not easy for new banks to come into the market. To me most of the current banks are business failures. In a normal market they would be replaced by better and more efficient businesses. Unfortunately this does not seem to happen in the banking world.
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It seems useful that the QE cash has filled a hole in balance sheets that would otherwise have had to come from elsewhere - and probably wouldn't have, sine depositors are unlikely to be very keen to do much depositing at the moment.
And that seems to be a root cause - if we do not encourage saving then there is no platform on which to build an economy based on sound banking principles. If nobody is saving, how can lenders have the money to lend unless they borrow it elsewhere?
Therefore it is looking more and more of a 'no-brainer' to abolish tax on savings? Even to incentivise it further than the neutral position?
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SO IN A NUTSHELL, ALL OF THE BAIL-OUT AND QE MONEY IS JUST BEING CONVERTED DIRECTLY INTO BANKERS' BONUSES...MEANWHILE THE REAL ECONOMY CAN GO SUCK!
THIS IS A MASSIVE FRAUD BEING COMMITTED ON THE BRITISH PUBLIC.
WHY ISN'T THIS BEING REPORTED FOR WHAT IT IS?
Meanwhile...
'Personal insolvency at new record'
http://news.bbc.co.uk/1/hi/business/8189053.stm
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Has QE ever worked anywhere it has been tried...i can find no evidence of it. I also note that RBS benefited from a one off gain of £3.7 billion relating to the redemption of some outstanding securities... in other words it bought back some of its own debt which was now cheaper due to the very crisis that RBS was involved in...So the apparent "profit"! was due only to another accounting trick..QE is giving the banks a one way bet at the moment, it will be interesting to see what happens when the BOE has to start withdrawing the money....
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In a few years time I can't help thinking all of this money creation will have to come "out of the wash" and I can't help wondering in what guise that will be?
I happen to think QE is solely designed to protect the banks from going bust and if that co-incidentally happens to protect deposit balances, for the moment, then so be it. When there is no more QE what will be convenient for banks then? The losses that banks, companies and individuals have been sitting on today (and trying to nurse through the recession) may well be forced out then. Bank balance sheets by then will have been restored, so they won't suffer too much pain. However, companies and individual's with, for example negative equity or highly geared balance sheets, i.e debts they have not been paying down quickly enough, will be wide open to the financial pressures caused by their excess borrowings and rising interest rates. They will not have had Government assistance don't forget. Bank write-offs will increase but they have had QE protection and won't go under, (and bankers will still get their bonuses!) The question is what then happens to the "man in the street," who has had no protection? He's, in effect, been fed to the lions. This hardly seems fair, but the Establishment won't give a damn, right? (They didn't in the early 1990's.)
QE shows quite glaringly the massive extent of banker greed (for profits) and RBS results today show that they don't even know how to lend properly to a retail market either. This is what I consider basic banking, as compared to the casino stuff. They have been "retail lending" for over 300 years and they ought to know how to do it sensibly by now. Nowadays they only know how to lend it, they ain't got a clue how to get it back and what with the Sales Culture in Banks, getting it back is clearly just an awkward afterthought with risk analysis being consigned to the back office. (Where any back office function is considered to be, merely a cost and therefore of doubtful validity.)
Until the "man in the street" takes resonsibility for installing an Establishment that works for him and not the privileged or the elite, he will be "rooked" by the powers, that are not working in his interests, forever!
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Money moving about, so presumably someone in the Financial Services Indusrty will be taking a cut (of £122 billion)..... then it all stops!!!!
Only one Winner, and it's the Financial Services Industry..... No Change then!
No wonder we are seeing the Investment Banking divisions showing profit!
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The real aim of QE is to rescue the debt securities held in off-balance-sheet structured vehicles. By doing this the banks can save these 'Enron-type' entities, whilst reflating the asset bubble that gave them their value in the first place. The stuff about helping the real economy is all just guff. Reflating asset prices and the return of securitization is the true aim of all this, AND IT WONT WORK.
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GBP 150,000,000,000 equates to approximately GBP2000 per person.
Why not just give each person in the UK that sum with two options;
1. Use the money to pay off debt owed to a G.B bank/financial institution or
2. Spend at least that sum within a year, in Britain, on anything.
The gov. would receive a significant sum back straight away via the various direct and indirect taxes. The banks' balance sheets would be improved, the money would be remitted to G.B accounts and many would choose option 1.
At present it seems that there is confusion re what exactly the government want to happen;
1. Consumers to spend, but only within their limits when their cards are at the limit,
2. Banks to save to improve their leverage ratios but then to simultaneously lend, but again only within their limits when they've been told they've lended negligently (effectively).
And how is this 'investment' being funded? Invisible money being borrowed (but which has to be paid for) and then lent back to the banks to do with as they please, with much going abroad- partly due to our low interest rates. What?
Consumers should be forced to maintain manageable debt levels, in much the same way as the banks are. The market mechanism failed in this miserably, self certified 120% mortgages for example. Fundamentally we simply have too many outstanding IOU's and the QE scheme/borrowing more money is akin to taking out a consolidated loan at an extortionate rate when we can afford the existing repayments if we only stop spending as much money.
We desperately need an election now, not for political reasons bizarely, rather because we need a government, any government frankly, who will take a longer term view on the economy. QE, increased gov borrowing, low taxes, will only get us so far. Enough delaying the pain. We know it is going to be painful, for many it already is. Taxes must rise, spending must go down, unemployment will go up and it will be harder to borrow money. We know this, it is already happening.
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Hi Robert
Pretty good blog - its just unfortunately over 12 months late. This is not new in terms of comment. The question is why aren't the media hounding GB and AD for what can only be described as the biggest disaster economically.
At the risk of repeating myself and others, there is no evidence that QE on this scale and for these purposes works. There never has been. It's just an economic idea, but those who are desperate have endorsed it to the full and keep throwing the great line that it would have been worse if we didn't. Yeah....yeah.
What's absurd is reading all the press comment yesterday abour recovery (though it doesn't fool any of us in business seeing the latest CBI survey - well two thirds anyway - the others must be social enterprises) when the BoE announces another surprise move to inject another £50 billion of QE?
Doesn't anybody spot the conflict? Not even a question. Or are we just too collectively dumb as a nation nowadays with all of our worthless degrees?
Parliament should not be on holiday right now....
This is bad. Very bad.....I'm currently reading Japan in the 1990s and Germany of the 1920s. You may want to even try Zimbabwe of the 00s. I suggest everybody does the same. Even I'm getting a touch nervous....
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Following up on my last comment please read:
http://en.wikipedia.org/wiki/Hyperinflation
Very, very scary....
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In response to CockedDice early you are assuming that the directors of these banks are not arranging their balance sheets to increase later bonus income. The newly appointed head of RBS only has to move the share price from 39 to 78p to obtain over £6m in bonuses.
There appears to be no sign that the banks as the are structured at present have any intention of returning to their primary objective of lending savers money to institutions and individuals who have need of temporary (short or long term) funding. The previous "quick buck - short term investment" of previous times still lingers, eating away at the stability of the banking system.
Privatise the banks, we the taxpayer own, break them up into the historical small local banking institutions they were previously so they can cater to their local needs more appropriately. Tax the wealth out of the global monster banks - 50% rate on every penny earnt in this country, no facility to move funds out of the country of origin, 90% taxation on bonuses earnyt for doing what a lucrative salary is being paid for, legal recourse for reimbursement of bonuses at any time (say 3-5 years after payment) for failures.
An LSE investigation into the proportion of cost, trickled down from bank to instore purchase, for corperate bonuses, expenses and privileges (such as free school fees for overseas employees - non-contributory pension/family medical insurance, car and travel costs, flights to all compass points, so called working lunches and sponsored sporting/cultural events and the corresponding free tickets). The gravy train gets longer than this rant, but costs each an every working individual in this country a large amount of our spending power, which in the main leads to a borrowing culture where that which is extremely over-priced has to be purchased with money not yet earnt. How long ago was it when Leeds United was booming on the assumption that the team would be playing European footbal for ever more, and where did they end up Division Two (old Third Division).
Banks are not doing what is necessary because they see themselves to be larger than the state - just remind them what happened to Charles the First and see them scurry back to their foreign havens (Scotland included).
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Robert
Do you mean that in one sense QE is really just a giant sized 'back-door bail out' and that the government does not want to admit that the original bank bail outs are too small and that the problems in the economy are still mcuh worse are worse than anyone cares to admit?
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One good thing that is coming from the current crisis is that the British people are starting to see the true face of their enemy, and the biggest threat, by far, to their future prosperity, freedom and way of life; and that face won't be seen on dusty, far-flung battlefields and ramshackle failed states but rather in the board rooms, offices and chambers of Westminster and the City of London.
War on Terror? My a$$! Couldn't we just have a War on the Money Elite instead?
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I usually don't like your articles as they are sensationalist and misleading but have to say today's article was clear and informative.
Well done Robert.
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Quantitative Easing is quite simply a watering down of currency, rather like clipping the edges off silver coins, theft in another word. Creating debt to reduce debt is lunacy.
I propose Quantitative Squeezing as a solution to crisis; taking money out of circulation. That would do the trick. The savers would benefit; the borrowers would suffer. The workers would reign; the scroungers would have to beg. That's what we need.
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Lets all look on the bright side, once George osborne and co get in next year we will be saved by the 'prudent' tories.
I remember their last 18 year stint,
Yikes!
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Whether we like it or not there is a real economy.
The participants in the real economy get to choose the next government.
The present government, red party, wants to get in next time. So they try to get the feel good factor going. But the banks only want to save their skin. They have become detached from the real economy.
The real economy is well used to generating credit every time an invoice is raised but payment is not received for perhaps 3 months.
Multiply that up by the turnover of all the SMEs in the country and you rapidly approach 80% of the UK's GDP.
But of course if the banks don't allow SMEs credit then the country's GDP rapidly goes down the pan.
So the government, through QE, makes it easy for the banks to release money for the real economy to work.
Wakey wakey!
Why not just have the government cutting the banks out of the loop and directly fund the real economy? Far and away more cost effective.
After all, it is the real economy that actually counts.
Ah of course. I am being simplistic. Back on your heads. I had quite forgotten that the real economy only exists to serve the banks.
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Time to get out the wheelbarrows?
http://www.webofdebt.com/articles/hyperinflation.php
"It was horrible. Horrible! Like lightning it struck. No one was prepared. The shelves in the grocery stores were empty.You could buy nothing with your paper money." Quoted from Fiat Paper Money by Ralph Foster
And if were to happen here, it's just as likely to strike like lightning.
But the story has an even more intriguing twist:
"Within two years, Germany's unemployment problem had been solved and the country was back on its feet. It had a solid, stable currency, and no inflation, at a time when millions of people in the United States and other Western countries were still out of work and living on welfare."
And the secret to this amazing turnaround? Abolition of usury and privatised money creation. But as they say, history is always written by the winning side.
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To all the posters commenting on the contradiction between the Govt castigating the banks for not lending more to UK SMEs and Retail customers, and the Govts and FSAs requirement that they need to hold higher capital ratios.
I've been raising this quandry on here for too long now, highlighting the incompetence of this Govt. The fact they put more effort into Spin than effectual policies says everything.
Also the fact that Peston hasn't commented on this contradiction since RBS and Lloyds were part nationalised, and GB started his blame spree on the banks only for the failings of the UK economy.
Don't let this big con trick fade from your memories.
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Robert, I think your final point may well sum up why the UK has not ended up at the door of the IMF just yet. I think its a safe bet to assume the banks have been using the money aquired from QE to buy up new guilts from the Government. In effect the BofE has printed electronic money which has indirectly subsidised government borrowing through the banks buying new guilts. Of course doing this directly is illegal under EU law. The question we must really ask is if QE were not taking place then would the government be able to find a buyer for its guilts? Also now that the government owns a large stake in the banks is this process really indirect and as such legal under EU law?
From your blog entry dated 21/07/2009:
"In April, May and June, Stheeman and his team flogged £57.9bn of gilts, while Mervyn King's traders waded into the market to buy £77.7bn of UK government debt."
This would suggest that the QE amounts are more or less in line with new government borrowing, which may point to the possiblity of QE propping up the goernments bond auctions and therefore supporting its increased borrowing.
One final point, what does the BofE do with the bonds is buys through QE? Does the Government pay coupon interest to the BofE and will the government eventually buy those bonds back once they reach maturity? Or do they just get written off and forgotten about to make the public finances a little easier to balance?
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QE causes the yields on gilts to fall as it causes gilt prices to rise. Selling gilts from a bank's portfolio allows them, to crystallise real profits. When QE stops, or when interest rates rise, then the banks can buy back the gilts for less than the received for them. ....Robert could you ask your colleagues why the BBC website says RBS made a £15 million profit when after tax and other payouts such as dividends on the preference shares which were held by the Government, RBS slid to a net loss of £1 billion. Surely not an attempt to put gloss on a dismal story....
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69,
Oh dear, that was the icing on the cake during the great depression, obsulte lunacy!
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This comment was removed because the moderators found it broke the House Rules.
#54 Greg
You keep making references to fraud. Is this along the lines of the fraud that William K Black refers to:
http://www.pbs.org/moyers/journal/04032009/watch.html
If so, then who can enact an investigation / lawsuit (surely, no-one in Gvt or Crown Prosecution would pursue this unless there is some major collapse an public en masse demands it).
Can a group of taxpayers initiate a class action against certain financial institutions?
Damn, there just aint a forensic accountant around when you need one!
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Masterly (PC) understatement by the BBC:
Personal insolvency at new record
should read
Personal insolvency at SHAMEFUL new LEVEL
GC
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#15
Your analogy:
"I love analogies and in this case I think one has to think about obesity, no one becomes obese over night it takes many years of ignoring what is happening. Once you have identified the problem it would be stupid to think that the cure could be to eat loads and loads more food really quickly and hope that this somehow naturally triggers your body to become thin."
When dealing with an obese person, you don't cut off their supply of food completely, you keep feeding them but at a lower rate.
With the sharp slowdown in wholesale lending, the (fat) banks would have starved. They did need to be fed somewhat. Hence the need for the government (soup kitchen) to keep them going. That's the theory anyway.
Back to my own question.
How much of these bad debt charges are actually crystalised as actual bad debts? How much of them are provisions for bad debts that may or may not happen?
I will wager a dollar to a doughnut that these crooks are making sure that they get all the bad news out so that they will look like heroes in a year or two when they can write a good lot of them back up again.
Then it's nose in the trough time again.
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Robert, Why does the BBC always report that we the Government owns 70% of RBS as opposed to the actual figure which is 68%
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#73 islider55 wrote:
I've been raising this quandry on here for too long now, highlighting the incompetence of this Govt. The fact they put more effort into Spin than effectual policies says everything.
Fair play, you are consistent in your message. Basically the government as I see it had three objectives to acheive when the global economcic and financial downturn arose in September 2008.
1) Bring immediate stability to the banking sector
2) Bring sustained stability to the banking sector
3) Ensure the resumption of lending across the UK
2) + 3) are The Asset Protection Scheme
As far I can see 1) was acheived and 2) is now starting to look more likely if you look at how the shares and value of the pound has increased in the last few months.
3) is still proving to be problematic and there are doubts over the effectiveness of QE but it is still too early to say - give it 9 months from inception.
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Gold is money, paper is lies.
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Do you think Mr Peston that the level of QE has been adequate for the difficulties being faced.
Or should we think of a number, double it and add 7 per cent of GDP ?
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Your commentary is peurile on RBS is telling us nothing we don't know already save you are enlightening us as to what Cameron and Co will be facing.
Why are you not focusing on Barclays deliberate misrepresentation that they have not received any government help so can pay whatever bonuses they want.
All you have said is that the government has spent £billions of our cash and only just about managed to stop us sinking that much deeper. Impressive.......not. We all knew, why are yoo not highlighting what would have happened if we had let HBOS go belly up, who would actually have lost out? Depositors are so called protected so all the rest would have to found a new lenders and shearholders woudl have been wiped out. Isn't that how its meant to be? HBOS was no international RBS.
And what of Barclays and their assumed bonus culture when are they going to be read the riot actand brought nto line with what is actually going on in the world.
And idf they say they have to pay so much for the best how was it they screwed things up so badly when others came out smelling of roses!
Come on Robert you need to read up man and re-look at Glass-Stegall you empathy for the banks is becoming ominously uncharacteristic and not good independent journalism.
Fair play and good reporting require you and the BBC not to be economic with the truth and get to the bottom of all issues not sychophantically print from Barclays and others what are clear misrepresentations of what is is really happening!!
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I am starting to become a fan of QE now, just for the sheer mind numbing cheek of it!
The bank of England creates money (value) out of nothing, then uses it to buy back its own debt (Gilts)thus reducing the quantum of its debt, in the meantime it is still selling those same gilts by the truckload and increasing its debt. the banks use the cash to lend to people to get into more debt so they can buy stuff (not made here) in order to kick start the economy!!
Genius!!
let none of us forget that this is not even paper anymore this is just shuffling around atomic level indentations on hard drives between computers based around an agreed international trading system protocol. none of this actually exists until someone tries to buy a can of baked beans with it, then all of asudden it has value.
But is only has value if the guy you are buying the can of baked beans from believes it has value and can trade it in for ...something else!
With the internationalised markets the value of currency all seems to orbit around 'confidence' in an economy as there is very little that is tangible now to hang your confidence hat on. So as long as we can keep blagging it that we have stuff to exchange to the world of real value then we can just keep on printing 'value' out of nothing and the rest of the world will just keep giving us their stuff to keep em busy because they believe it has value!!!!!!
Genius!!
QE is like a new global religion we can get rich out of nothing at all!! Just a perception that we are well governed stable, relatively uncorrupt rich nation who has our own relatively credible currency off the back of our history.
Wasn't the universe created out of nothing? Surely we can use the same model, it seems to have worked pretty well for the universe has it not?
Why stop at 50 Billion more, lets push the envelope here, lets drip feed in another 50 billion in a couple of months, see if the currency markets notice (they seem to be going up if anything at the moment!) and go on from there. By the time their economists realise what is happeneing (lets admit they are hardly the sharpest knives in the drawer are they) it will be too late!
We will have paid off our debt and invested in loads of 'real' stuff overseas with value out of nothing creation scheme to keep us in the manner we have become accustomed.
or am I missing something here anyone?
keep buying those gilts boys, if it looks like someone has noticed what you are doing just back off a bit then print a few more later when they are focussed on something else. You guys all go to the same cocktail parties anyway, i am sure this can be smoothed out on the high seas of the mediteranean during the summer.
thank goodness we never joined the Euro and had a big enough but not too big economy, otherwise we would have been totally *******.
Jericoa
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#54 GregPytel As you say, and as you demonstrate, much of modern banking is a criminal enterprise. However the government is propping up the banking system, and hence by extension they are also involved in a criminal enterprise. Taxpayers are dragooned into supporting this whole charade, and the media acts as cheerleaders for this course of action - thus making the media and the general population accessories to a crime.
Try and remember, in the end crime never pays.
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Please could somebody help answer me three questions all of which I once thought I new the answer to but now day by day for the last five years I grow increasingly unsure of the answer and I wonder if anyone else is becoming puzzled too.
Question one; what actually makes money, wealth – where does it come from- I do not mean a die, a press, the village of Flash or the mint. I mean what actually increases wealth financial wealth that is
Question two; why does my house which cost 375 pounds in 1948 and which I have maintained and added a conservatory to now have a value of 375,000 pounds but which means nothing because I’ve still got to put a roof over my family’s head. Who gained the wealth there.
Question three; why does my car which cost 30,000 just five years ago and which I have maintained and added a roof rack to become only worth 12,000 yet will still take me anywhere I want to go in the country in comfort and serves a practical essential support to my being paid for what I produce.
As I set the questions a caveat - which may make them six questions - does the answer to the above stack up the same for a National economy as it does for a truly global social economy?
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The 'Lavender Hill Mob' certainly didn't get away with printing money...they are in prison now!
http://news.bbc.co.uk/1/hi/england/london/7968879.stm
What's the difference?
BTW - Where's WOTW today?...maybe he's been silenced!
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Addendum to may last note...I especially like the Judges comment at the end of the article.
'Judge William Kennedy said it would be wrong for people to become "misty-eyed" and liken it to the Ealing crime comedy The Lavender Hill Mob.
He said it was absolute nonsense to suggest that counterfeiting was a victimless crime.'
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#88
This is a fascinating set of questions, and no doubt will yield very different answers depending on whether you are speaking to Chrematisticians (currently known as Economists, but people who only really understand the concept of trading), or genuine students of REAL economics. My punt is as follows:
1) Wealth is the access to, or ability to generate economic surplus. By surplus I mean freeing a proportion of people from having to do directly productive life giving activities (e.g. food, shelter, warmth, medicine etc.). If only 5% of our population is doing these activities, the rest of us are free to do other things, some of which are beneficial (law & order, research & development, improving for the future etc.), but some of this could manifest as economic drain (celebrity culture, fashion, holidays to Ayia Napa etc.)
2) There are two things to compare here. One is the difference in REAL asset value (i.e. what it does for you - which in your case has some slight improvements), and the other is the monetary assessment. The fact that the monetary value has far exceed the increase in REAL asset improvement suggests a devaluation of the monetary currency of 10 to 100 times (depending on how much we accredit to REAL asset improvement)
3) The answer to this is similar to point 2. Your car (as with many other consumer durables) depreciates slightly in REAL (physical) asset value due to wear and tear. But as you say it is still reasonably fit for purpose. The false appearance in monetary value decrease is because we are conned into thinking that we need to replace it every few years (just as with mobile phone handset etc.) Yes there are improvements made in some aspects of the car, but the real neccessity is that capitalism demands ever more increased consumption (so this can only come from you replacing your car way before you really need to). I recall being appalled many years back when I had no other choice but to drive a perfectly good 12 year old car to the scrap yard, simply because I could not get more than £30 for it.
In answer to your last part, I would say it is more about trying to understand our economy (rather wealth) at a national or international level (which can benefit from non-zero sum gains - win/win), rather than the Chrematisticians who are (despite their bluster) actually masters of zero-sum (i.e. win/lose) activities. As a start point I suggest you take a look at the following:
http://www.nationaleconomy.net/
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88 - go to youtube or google video and watch the masterful "money as debt" - fundamentally what we call money is now an instrument of debt rather than a store of value.
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I read somewhere that QE is likely to go far further than this again - I think the figure of 300 billion was mentioned. This seems to have the ring of truth about it because, if the government has been forced to increase QE already in order to keep the Ponzi scheme going, unless the government decides to have a general election in the Autumn, it will have to keep printing money until next Spring's general election.
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"We have substantially increased public / national debt (i.e. gilts) with little or no actual trickle down effect on the REAL economy."
No, the national debt is not increased by the BoE's QE policy. The debt is the responsibility of the treasury. Nothing in Robert's post is about the national debt.
""Within two years, Germany's unemployment problem had been solved and the country was back on its feet. It had a solid, stable currency, and no inflation, at a time when millions of people in the United States and other Western countries were still out of work and living on welfare."
And the secret to this amazing turnaround? Abolition of usury and privatised money creation. But as they say, history is always written by the winning side."
Rubbish. The inflation ended when the German government created a new currency, which was fixed at a specific rate, instead of being able to float.
How this is relevant to now, I have no idea. Hyperinflation won't happen now, because we are in a liquidity trap, whereas the Weimar Republic wasn't, and they had crippling war reparations to pay, whereas we don't, and they had the French seizing lands containing most of their industry (the Ruhr), whereas I don't see anyone marching into our territory and seizing anything of ours, do you?
Nor is this Zimbabwe under "ZANULIEBORE GORDON MCBROON LOLZORZ!!!!!!!eleventyone". Labour are bad, but there are easy ways to criticize them without resorting to childish caricatures and distortions which make everyone against Labour seem crazy and easy to dismiss. Concentrate on the real evils of Labour, and the government will have an even harder time dismissing people against them.
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The National debt is screaming skywards as is unemployment and yet the Footsie is on the rise !!!!!!!! The banks are not lending although that is their "raison d'etre". Bank rate is 0.5% but it might as well be zero and seems to have lost all link with rates that Joe Public pays or receives. QE is set to continue but nobody is telling us about the effects this will have on all our (and future generations) finances in the years ahead. It seems that we are in an "Emperors new clothes" situation with nobody willing to tell us the truth. It's like a D notice has been slapped on any mention of the effects of all this Govt fiddling with the nation's finances. Like a lot of us , I can deal with the truth but the not knowing is getting very scary
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"fundamentally what we call money is now an instrument of debt rather than a store of value"
So money has no value? Good luck convincing people of that when you try to steal things in the shops because "money has no value". Or maybe when you come to pay your energy bills, the energy company will decide not to accept your money, as it has no value.
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#88 hack-round. From the perspective of a society there are only 3 ways to generate wealth: Make things, grow things, or extract things.
Your house has risen in value as a consequence of a complex set of interactions. Government policy has restricted the supply of houses, and government tax policy has tended to be relatively benign with regard to the capital value of housing. Inflation will account for a good portion of the capital value increase. Since 1948 there have probably been a lot of improvements to your house - central heating for example.
The UK has been a stable, prosperous and growing economy and this means that UK assets have grown in value. If you had bought a house in Baghdad then its value would likely have been wiped out. People like living in houses and hence will sacrifice something else in order to be able to do so. It is a cultural thing - a lot of Mongolians are quite happy living in yurts.
Who knows why your car has depreciated in value? People see cars as some kind of status symbol and so will pay up for something brand new. It is a cultural thing - but there is something wrong with the model, that is why all the car companies are in trouble and why the roads are clogged up. People go on about the evils of drugs - yet for the most part they tend to kill far less people than cars. It makes no sense.
Whereever you are in the world you can only grow richer by making things, growing things or extracting things. Houses and cars are purely cultural and their monetary and utility value varies depending on where you are.
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Post 91 an interesting attempt at answering the questions posed in post 88.
I wouldn't disagree greatly with your answers but would like to add a supplement. In the past people acquired wealth generally by means of production be that food via agriculture or goods for sale be they made or manufactured.
This gets us on to the question of use and exchange value. The so called water diamonds paradox that tormented some of the greatest minds in history. Now people seem to acquire wealth with no apparent effort or reason. Much of it is illusory wealth merely borrowed from others such as our friends Mr Madoff and Stanford.
If the mods would allow me a slight deviation many of the answers are in the Birmingham Museum and Art Gallery. Please humour me for a moment and it has a BBC link as well.
Currently there is an exhibition at the Museum marking the 200th anniversary of the death of Matthew Boulton a man who with his partners James Watt and William Murdoch and associates and fellow members of the Lunar Society such as Josiah Wedgwood laid the foundations for the modern wealth of the UK via the industrial revolution and empire. They made the things the world needed.
People like them and others in cities such as Manchester and Liverpool created huge wealth by exploiting machines, industrialisation and the earths natural resources including human labour admittedly.
This wealth allowed their heirs to lavish huge sums on many things and some of the wealth was distributed not only via industry but also the arts. The Birmingham Museum has the worlds largest collection of pre raphaelite art purchased with the wealth created by the industrial revolution should those fans of the current BBC2 series want to see the paintings and pictures of Rossetti, Millais, Hunt and others.
This wealth was redistributed in art and public works in the same way that people like Andrew Carnegie bought hospitals, libraries and arts centres. This same desire drives people like Bill Gates to use his wealth to try to solve some of the worlds major health crises.
Wealth is merely a means of you having choice to do what you want.
Re question 2. The house may have increased in notional monetary value but its real value is effectively unchanged in that a 3 bedroom house is still a 3 bedroom house. A house to live in is only worth something if you no longer need it or can move to a smaller one. To a large extent no wealth has been created as the increase in monetary value has been eroded by inflation and also the cost of alternatives.
I tred to think deeply about the answers to the questions posed in 88 and to be blunt it gives me a headache.
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Bravo Robert! Someone has finally put their finger on one of the unspoken purposes of QE. Namely to shore up the banks' balance sheets against the aftershocks of the current crisis. (mortgage and credit card defaults amongst other things. )
Helping plug the budget deficit is no bad thing either.
I'm not convinced this was ever about allowing the banks to lend more.
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Stephen Hester may not have been coloured by the failure of his predecessors but by saying today that 'RBS will get the tax-payer out of a hole' demonstrates that like all other bankers he out of touch with the public. It was a truely gob-smacking comment. It is the tax-payer that will get the bankers out of a hole and if Stephen Hester does not realise this he needs to make way and let someone else more in tune with public opinion manage RBS out of their woes
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Can anyone explain the difference between:
a) Securitazation
b) Carousel fraud
thanks
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Why, when coming off a fixed rate mortgage of over 5% I am now going on to a SVR of 4.7% when the BOE rate is 0.5%. I am £50 a month better off. To get a rate nearer the BOE rate I must have a 60% LTV or less. Why are they still allowed to get away with this robbery. Explains the monstrous profits they will be posting AGAIN in the next few years.
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MY GOD THEY ONLY MADE A 15 NILLION POUNDS IN PROFFIT.What a poor position to be in. What about the poor businesses that rely on these banks for trading, if you run your business on the whim of the banks, you are buggered
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101. At 11:32pm on 07 Aug 2009, funnydice wrote:
Can anyone explain the difference between:
a) Securitazation
b) Carousel fraud
++++++++++++++++
Is it that you go to jail for b)?
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I seem to have been abbreviated in#104. I felt no pain
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RBS should have had all the good assets if any given to tax payers as invested capital bonds and repaid with interest and the running man Fred who does not seem to be in this country at the moment should have been sacked instead of enjoying himself abroad when everybody at home is not.
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thanks Toldyouitwould - i knew there was some difference.
'i didn't understand what i was selling/buying but it sure generated loads of nice fees' must be better defense for the guys doing a)
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I am grateful for those who have so far responded to my questions at post 88 and pleased with the number of people whose basic thinking sort of aligns with my thinking and understanding of Adam Smith.
His work of course was the Wealth of Nations and I really wondered if any one had considered if it were time to think more about the pattern of a global economy most of which more modern economists Keynes and Friedman to name but two seem to have failed miserably to address
The issue of my house and my car like most of my possessions are the subject of a phenomenon and a paradox that I think are responsible for the increasing divides in society and are driven by both ends of the social polarity in a way that suits neither. I await other thoughts and responses with interest and anticipation..
For there has to be a better way to run an economy but we will not find it while we are still struggling to understand the basics of what for some 500 years has and still drives our economy
Surly it is time to find a better way it is exercising that thought that like (Economicalyliterates post 98) gives me a headache every time I try to understand the rationale behind anything being offered by our leaders and experts as a solution to the world economic crisis
Where we are being directed, what we are asked to do and what we are being told and even saying might or will be the answer to our economic future just does not add up to a solution nor have any reasonable cohesion. When set in context against any one or all of those three questions
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Morning Robert,
I'll give you my opinion of QE and what it's done for the banks.
It has increased the confidence of the shareholders in the two Nationalised banks so that the share price in each has shot up (for no good reason that I can see).
Projecting this forward for another 40 per cent QE, I can see the share price rising above the taxpayers buy price. The result will be a profit (on paper) for the taxpayer, vindication for the politicians that they were right all along, a return of the feel good factor and a re-election of a Labour government.
Of course nothing has really changed in the last 18 months and I believe that the crunch will be repeated as there is nothing to stop another shorting frenzy.
Cynical moi?
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Robert
In other words, the UK population isn't paid enough to sustain domestic lending. And this has been the situation for many years.
Foreign capital used to fill that gap, now QE and govt lending at 0.5% is filling it. But the problem remains. Wages are far too low relative to asset prices.
QE. The BoE funds Govt debt with monopoly money. Govt doesn't use the money to create infrastructure which enhances our productive ability. It doesn't even use it top for tax cuts that lower production costs and raise income. It uses it to enhance it's chances of re-election. (Leopards don't change their spots.)
0.5% interest. It's the population and producers who need the lower interest costs to enable saving, production and consumption. But our govt only gives the low rate to banks who ignore it's purpose and gamble with it.
I believe the govt's course is profoundly wrong because it's economic model is wrong. Growth is the result of free actors making, selling and buying. Our govt's model ignores the fact that in a functioning economy the maker, the seller and the buyer are the same person. Squeeze one element and the whole is diminished. It's unavoidable.
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Robert
All true.
In real words RBS and Lloyds/HBOS (a.o.) are insolvent; for them there is no need to declare insolvency as the government - we - are backing them up. They will go on cleaning up their balance sheets, getting the ratio loans-to-deposits down; hence lending is counterproductive, making profit is not an issue, bonuses the loose change of billions and trillions.
At the same time more and more of our loans will go sour which will prolong the cleaning up process and make it (much) more expensive for the public; a vicious circle on the back of the public.
We need "New banks", now, with opening balance sheets that allow lending; these "New banks" stuffed with public money will come much cheaper - a pittance compared to the QE and collective debts nessesary to turn around the old and blown up balance sheets.
The challenge is to find the gutts to establish such "New Banks", the ultimate harassment in the eyes of the old bankers and their final sentence.
C
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This crisis is caused by over-supply of credit; the government's supply of more credit is hardly going to improve things.
Quantitative easing is even worse, it is currency debasement.
How about applying the correct treatment, quantitative squeezing - reducing the money in circulation?
Together with not bailing out failed institutions, this should do the trick.
Comments anyone?
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Mr Casalingua
Your attack on Mr Peston's logic is itself flawed in two respects.
Firstly Mr Peston pre-empted your commennts when he wrote "So a benign effect of QE may have been to increase the security of our banks for savers - even if that's not what the policy was intended to achieve.
But actually much of the cash raised by institutions from selling gilts almost certainly isn't converted into customer deposits at banks.
More likely is that institutions have lent it to banks and other financial companies in the form of wholesale market loans - the kind which the banks are supposed to be weaning themselves off."
Perhaps you missed that ?.
Secondly your logic pre-supposes that the cause of the crisis is the ratio of deposit to lending. Which is not the cause of the crisis at all. Historically and in other geographies the ratio's have been higher. Rather it is the QUALITY of the lending which has been the cause of the crisis. QE will only really work if banks are equally and simultaneously forced to make quality loans. ie to Productive and wealth creating businesses. Rather than asset price inflating loans to the property market and wholesale money market casino operations. Yes I know that 18 months ago calling them 'casino' operations would be considered facile but that was 18 months ago but now that is what they have been exposed as because the underlying assests that all of the financial instruments bought and sold were based on have been seen to be over priced.
A very good blog Mr Peston
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Why banks are still not lending?
Mr Robert Peston, a BBC Financial Correspondent, disclosed on his blog information on Royal Banks of Scotland and Lloyds. Assuming other banks follow the same or, more-less, similar practice (and it is very likely) that appears to explain, why banks are not lending on the level that normally would be expected from such institutions. He wrote:
"Take Royal Bank of Scotland. Today, its chief executive has set a target to reduce its ratio of loans to deposits from 156% to around 100% by 2013. (…) And there's a similar story for Lloyds. In the six months from 31 December to 30 June, its ratio of loans to customer deposits has fallen from 166% to 152%, as it has simultaneously increased deposits by £20bn and reduced loans and advances by £25bn."
This information confirms that both RBS and Lloyds were lending with loan to deposit ratio above 100% reaching the current level of loans to deposits. Mr Peston does not write what is the actual level of loans (and also deposits) in monetary terms. It is this factor, that resulted in overblown banks’ balance sheets, which led to liquidity crisis. This is why, to prevent a collapse, the government had to provide fresh liquidity (in form of cash injection, guarantees and now “quantitatively eased” cash) to increase banks’ reserves to secure overblown balance sheets.
Although it is not clear from Mr Peston reporting, there is an indication that these two banks (and possibly many others) could still be lending with loan to deposit ratio above 100%. And in case of RBS the ultimate target is actually 100%. This indication comes from slow lending, very little liquidity provided onto the market by the commercial banks.
This situation appears to be (and it definitely has been) perverse. If banks lend with loan to deposit ratio above 100% their profit margin model is as follows:
L*I(L) – D*I(D) > 0
(where L is value of loans, D is value of deposits, I(L) is interest paid in by customers on loans, I(D) is interest paid out by banks on deposits)
L=D*LD
(where LD is the current ratio of loans to deposits)
Hence:
D*LD*I(L) – D*I(D) > 0
LD*I(L) – I(D) > 0
As LD is above 100%, this model allows what one would consider as impossible: pay higher interest on deposits than to collect on loans. This is easy money for a bank. This explains why for years of the credit boom banks were able to offer very low (quite often 0%) interest rate on loans and still pay quite attractive rates on deposits. This completely distorted competition on the market as well as pay packages to the bankers.
But such bonanza could not last forever. As described in the seminal article of this blog "The largest heist in history" this is a pyramid model, called “depleting-reserves banking” as this results in reserves depletion, (depleting reserves at [loan-to-deposit ratio] – 100% at every cycle of deposit – loan cycle). Having nearly gone bankrupt, the banks are now very weary not to deplete the reserves (provided by the government actions) too quickly. Hence they are lending very slowly. The deposit - loan cycle pace is very slow. This slows down the process of reserves depletion but unfortunately is also severely restricts liquidity on the market, which is based on circulating money in the economy. Banks have a perverse incentive to hold on to cash and limit lending.
If banks were lending with loan to deposit ratio below 100% (as they traditionally had been doing for centuries), the same formula:
LD*I(L) – I(D) > 0
would still apply.
However, as this time LD is below 100%, the interest on loans must be higher than on deposits in order for banks to have a positive profit margin, to make money. Therefore banks would find it harder to make profit, i.e. they would have to be more costs efficient in their operations. This would mean that less money would be available for big bonuses. However banks would be able to circulate money in the economy as fast as they could as at every deposit – loan cycle they would have generated reserves at 100% - [loan-to-deposit ratio] level.
The government must therefore examine whether banks are still lending with loan to deposit ratio above 100%. The above shows that such practice is criminal. If they still do, the government must ban it. It creates a perverse situation of further depletion of reserves, effectively slows deposit – loan cycle and creates an inefficient competition environment for the financial industry combined with over-inflated remuneration packages (which effectively come from the loot: reserves depletion). Most likely it is a systemic problem: so all the industry should be examined, not particular institutions. Let us face the real problem: the business model that the financial industry developed in the last few decades is a parasite on a real economy.
The above is on top of other concerns highlighted in the articles: "Is another loot going on now?" and "How to make money?"
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The only people to benefit from the current 'quantitative easing' are the Banks' CEOs, the wealthiest in our society and the middle income group who were already doing very nicely thank you. Once again it's the poorest
in our Society that get the boot put in and suffer the most from the 'squeeze'. Before long we will be back to square one and financiers and government will trumpet success. Then the entire sickening process will
start over again. Until our economy is based on UK manufacturing and farming, instead of on the machinations of Wall St and the City, there can be no hope for our society .
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Gregpaytel at post 114;
You have put a great deal of effort into formula and debate on bank lending but by my understanding of banking it is flawed on two simple facts
One is banks do not lend against deposits by close proximity they by the security of the Bank of England’s guarantee lend legally to up to 8 times deposit levels the exception used to be the mutual societies. When houses used to cost only twice our annual salary.
Further they actually cove their lending by assets, that is where the real problem is because asset to a bank is debt mine your any one they lend to is on the books as a tangible asset that is it can be readily sold on by this method the more they lend the more they can lend this is where the problem comes in if it was not for this we would still be able to go to the theatre have a meal and change out of a sixpence 2.5pence.
But the error that everyone falls into is the concept of the governments money or the banks money
The only money is the publics money every penny that the government spends on anything is our money. Money we do, have or will pay for in our life time and secondly in the case of banks they are also gambling our money or some ones money but rarely if ever their own however we know where the bulk of the profit goes don’t we.
Why not have a go at answering the simple economic questions I asked at post 88
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I think the only solution to the problem with the bankers and other fat cats is simply to put a cap on the maximum salary and benefits that can be paid to anyone who is in employment. A figure of 250K seems reasonable.
If these supposedly brilliant people want to earn more let them risk their own capital by setting up their own companies. Then they can pay themselves what they like in the form of dividends.
Don't give me any hogwash about about the best people leaving either. Let them leave and good riddance to them.
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RBS could reduce their loans to deposits ratio simply by writing loans as bad debts,or reducing them to a nominal amount.Better to scare the market now than later.
Then when released by the govt to the private sector,having scooped the bonuses from general market sentiment,quell surprise,they are worth a lot more than ''first thought''...
and the chairman(and cahoots) whacks in another huge pay deal...
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What a load of drivel Robert. Do you seriously think that investors who sell their gilts back to the Government actually leave the money in a bank? This is the last thing they will do, they invest it elsewhere in commercial bonds, stocks and shares or spend it. You need to spend some time living in the real world not the ivory towered politically motivated world of Fleet Street and Islington.
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So the Bank of England prints money to buy gilts from those it expects to subscribe to future issues because unprecedented borrowing needs to be funded to the tune of £220 billion. The Bank of England's efforts are entirely pointless if the government also insists the quality of the loan books of the banks the public has propped up be improved and their reserves increased. This is not a banking failure, this is a policy failure and it is not being properly reported, yet again, by the media.
Gordon Brown was told, very publicly, that he should be concerned about unsecured debt in 2003, by Vince Cable. When challenged about his claim it was not a problem at all, he claimed it did not become a problem until 2007. What hope have we for any real considered solution, which includes a drastic reduction in public spending, when our political leader is so out of touch with reality? What chance have the public of knowing what is going on if the media are unwilling or unable to keep it properly informed. Don't keep pointing at RBS Robert, the greatest villain is paddling in the Forth and you were and continue to be very quiet about his role in the mess we all face today.
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'RBS to keep paying bonuses despite £1bn first-half loss'
http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/5990966/RBS-to-keep-paying-bonuses-despite-1bn-first-half-loss.html
...and just to rub salt in the wounds...
'RBS offering footballers and wealthy secret mortgage deals'
http://www.telegraph.co.uk/finance/personalfinance/borrowing/mortgages/5989755/RBS-offering-footballers-and-wealthy-secret-mortgage-deals.html
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VOTE WITH YOUR FEET!
'Bank of China arrival in UK heralds return to traditional banking'
http://www.telegraph.co.uk/finance/personalfinance/borrowing/mortgages/5989228/Bank-of-China-arrival-in-UK-heralds-return-to-traditional-banking.html
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DON'T PANIC, CHAPS. I HAVEN'T ACTUALLY STARTED YET ...
Sure. The good ship Banks is using the new money as ballast to satisfy more demanding ratios, rather than fuel.
So we'll need to recognise that "real" refinancing can only actually begin when the required ballast is achieved. Then, we'll have to start printing another hundred thousand quadrillion to have any effect!
Oh, the slippery slope.
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http://www.youtube.com/watch?v=61fHfBgLvvM
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Interesting link from over on Steph's blog from RadioDPRK
WELL WORTH A READ!
http://www.leap2020.eu/When-China-prepares-its-Great-Escape-from-the-dollar-trap-for-the-end-of-summer-2009_a3582.html
If we don't get responsible banking from our own 'anglo saxon' banking lizards, it would appear we might get it from elsewhere.
Ref Debt slavery.: a slave will always prefer a more benevolent master!
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Mr. Peston's essay is a erudite description of a dog chasing its own tail.
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What gets me, is if the banks want to strengthen their balance sheets by increasing deposits, why don't they pay a decent rate to depositors?
...after all that would be market logic and basic supply and demand...
ahh but wait, if they did that,they wouldn't make the same profit on lending people's money back to them; and given the fact they all seem to tow the party line, there appears to be no competition for such supposedly more desirable sources of finance.
A good reason for old fashioned savings and loans based banks to be created and for everyone to move their cash out of the current banking establishment. After all if they're not paying for our money, why should we let them use it to make profits?
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Another very good piece Robert. I have read it several times and while I think I understand it the "Alice in Wonderland" character of what is happening is hard to accept. It looks like there is nothing that the government can do and that our fate is determined by bankers not politicians.
If the bankers put balancing their books before landing to business then the worst thing that the government could do would be the same, that is to cut expenditure and/or raise tax to cut their deficit. That would change a recession into a full blown depression which could last a decade or more. But that is what any incoming Tory government intends to do. Cameron indeed lauded the recession as a political "opportunity". Our corrupt political system looks like delivering another massive Commons majority to another small group of no-hopers serving a narrow political base. Heaven help us.
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QE will not be of any benefit to the wider economy unless banks return to the old fashioned method of credit reseach. Banking, ie lending, was based on knowing your customer and tailoring lending to their needs at rates that were sensible to both parties. Margins were fixed by the credit status of the borrower and were affordable. These days the one size fits all policy of the bigger margin the better for the bank will not increase the flow of funds through the system. Lending margins have increased so much that borrowers, either for business expansion or consumer purchases, cannot afford the costs and have been made to stop borrowing. This cannot spread the money through the system and increase any activity in the economy.
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I've said it before and I'll say it again.
Instead of nationalising the banks, we have let them bankise the nation.
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Scamsterfinder you ask whether Mr Peston 'seriously thinks that investors who sell their gilts back to the Government actually leave the money in a bank'. What 'investors' do with the money is neither here nor there. As far as I know QE was not and is not aimed at 'investors' but rather the banking system itself. What BANKS do with the money , our money , is more to the point. And what the BANKS do with the money is what Mr Peston's excellent blog discusses.Now my reading of Mr Peston's blog is that banks ARE in fact keeping the money in the banking system --- rather than lending it out to business and individuals. Which is the business of a bank.It is what they are , implicitly or explicitly , mandated to do persuant to the granting of a banking license by the powers that be who act on behalf of the citizenry. Which lending is what we , the great unwashed out here , led ourselves into believing was the point of QE. Mr Peston's blog disabuses us of such naivety and explains the functioning of the uber-cynical 'real world' of money and banking rather well. Rather than being an 'ivory tower' point of view Mr Peston is very much down here with us , the hoi-poloi who run the businesses and homes that build the wealth which vanishes as fast as it is created. Mr Peston's blog has usefully elicted some interesting responses and in my view these should be discussed rather than knee-jerk critiscim of the original blog. For instance what about the suggestion to follow the example of the Swedish Authorities and charge banks for deposting money with the Central Bank ?. Solution or Disaster in the making ?. I can't can't arrive at a conclusion. Any thoughts Scamsterfinder ?.
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Oh dear what can you say?
So many commnets blame the banks for lending too much in the first place - now they are not lending enough
So many comments want more bank regulation - but when the banks are told to hold greater reserves by the Government - those same comments blame the Government for regulations
I have run a small business for 6 yeras and have had no problems with my Bank at all. Perhaps well managed businesses always survive?
What seems to have escaped Pestons grasp is that this is not a British banking crisis but a worldwide recession -but why let facts get in the way??
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@131
In effect, the Swedes rented the money to the banks; an excellent solution.
It defines the ownership of the currency, enables full control of its use, provides useful information, and pays for the regulation.
Why don't we all do the same? Too simple?
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There is much wisdom insight & common sense here. A tragedy then that this will never be applied for the benefit of the people and to the recovery of this nation.
Until parliament is actually full of citizens who hold those entrusted with power to account, the shameful debacle of the ruling elite will continue.
Brown is worse than criminal, Blair & Thatcher were worse and the tories don't even seize their chance - why? Because they are the political elite and, despite all that has happened in the last 2 years, cannot allow that real change is required - they are not prepared to work for the people - PERIOD.
The real answer, as was posted by someone here is very very simple - time to make something real and sell it to someone else for a profit. QE is a technical smoke and mirror trick and solves NOTHING!
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Robert
You have served your time as a fully paid up Labour Party stooge. You can now be released on compassionate grounds... I allude only, please do not confuse Royal Bank (RB) with Ronnie Biggs (RB) - only one has been convicted of Bank robbery to date, but with a Class Action looming in USA, perhaps it's only a matter of time...
RBS's results say nothing of QE.
RBS's results show no sign of being any more faithfull to the truth than at any time during the past 20 years. With say 20% of the Lending book being classified as problematic - in arrears/ default, insufficient margin to cover costs and requiring Govt Guarantee, what do we find? £7Bn write down... It could quite simply have been anything!!! It will indeed a difficult journey over the next 3-5 years if the implications of RH's remarks are to given credence. In reality it could take more than 25 years to sort out the mire!!! £15M profit - rofl!!!
Of QE, I think you agree that the effects of QE will not begin to be felt for between 9 - 12 months after the event? (If not, then, no worries - but for all others, rest assured...)
The Almighty Godro and the Badger Budgetmeister have created a festering financial time-bomb which by my initial calculations we might expect the fuse to run out around Xmas (damn, you have me thinking of xmas before my summer hols, bad mistake!). Your jottings will not serve either well longer term...
The RBS, and Labour lackey, S Hester, have nothing credible to say on any matter, and certainly not QE!!!
The RBS stable has not been 'rid' of the senior management as RH urges us to believe. The bullying culture remains.
You might re-consider RHs televised remarks when he says that SME's are looking to reduce their outstanding obligations... Might this be un-spun as, 'My Relationship Managers have been instructed to drive the imbalance in the Banks Books. Do this by hammering down borrowing on Business Current Account overdrafts, and transfer this to Business Loans. RH can then honestly say that 'He' has increased lending on Loan Accounts, but also that customers are in reality reducing their exposures to 'His' Bank. Smoke and Mirrors... New boss? - Same as the Old Boss... When I heard RH's initial utterances I nearly laughed my head off - does he think us all mad? Incidentally, 'His' Relationship Managers are obliged to levy fees for this 'Service' on which their Bonuses are in part calculated. What greater incentive for his loyal staff to, in effect, stick two fingers to the decent law abiding taxpayer?
Robert, the tread holding these two stories is taught and will not hold. They are separate issues, albeit commonly dangle a noose around the neck of the innocent.
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STOP STOP STOP!!!! Mr Peston when are you going to realise that your persistent comment on the UK economy is contributing negatively to the recovery. Every evening your reports on BBC news are far more negative than any other news programme. The sooner you begin to put forward a balanced view the better. The BBC are famous for balanced comment. Your obvious bias against the current government is apparent for all to see.
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#127 is right about banks not encouraging deposits.
It's interesting that these profiteers link savings rates slavishly to the base rate whilst charging what they damn well like for loans. Their disgraceful attitude towards hard-pressed customers over the last 18 months won't be forgotten or forgiven. Calling in loans with only a few days notice - ripping people off with outrageously punitive arrangment fees - manipulating LTV's with instructions to their surveyors to down the value of properties so they can charge higher rates - repossessing as a first resort rather than a last - starving businesses of credit and causing unemployment. They should hang their heads in shame, but of course they won't. It appears their lack of conscience and social responsibility is matched only by their greed for bonuses. Caledonian Comment
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In the same way that the 'R' word wasn't mentioned by economists and politicians until we had been in a recession for 8 months - the 'D' word will take even longer to be used!
Obama has let the fact that the one month unemployment figures are 7000 less than they were previously go to his head and has hinted/proclaimed that 'his administrations action' has seen the US turn the corner. He clearly doesn't use a Dyson, because it's Hoover all over again!
Brown/Labour will latch on to the 0.1% house price rise and declare a similar fate for GB. However, due to their backward-looking measures, most economists and politicians will endure several months, probably even years of deflation before declaring a Depression.
Quantative easing will continue until we are so deeply in the mire that GB will be on a Titanic'esque route to the depths of a dark, cold economic ocean.
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Ref 136: Unfortunately Kirkhope, RP has been accused (by many commenters over the last 18 months) of being in the pocket of Labour AND being a staunch anti-gov activist etc. He surely can't be both? - which would suggest that he is giving some balanced opinions, or is it the truth?? Either way....his comments cannot possibly be 'contributing negatively' to the recovery! Firstly, there is no recovery and if his words were this powerful surely he would be the next Warren Buffett and he wouldn't be wasting his time with the BBC?
The once (seemingly) powerful wheels of the GB/world economy have seized up as a result of combined braking forces far more significant than one man and a blog!
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Public money which we have to use is corrupted by a private banking system and their political friends. Mandelson and Osborne have stayed at the private estate of Nat Rothschild of the banking dynasty, this shows how close the politicians and bankers are. If you have savings put them in a building society, credit union or ethical bank, anywhere except the big four banks.
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97. At 10:19pm on 07 Aug 2009, armagediontimes wrote:
#88 hack-round. From the perspective of a society there are only 3 ways to generate wealth: Make things, grow things, or extract things.
Your house has risen in value as a consequence of a complex set of interactions. Government policy has restricted the supply of houses, and government tax policy has tended to be relatively benign with regard to the capital value of housing. Inflation will account for a good portion of the capital value increase. Since 1948 there have probably been a lot of improvements to your house - central heating for example.
Agree with some of this about house prices armagediontimes. There are nearly 1 million empty properties in the UK, many of these to let. There is certainly a shortage of affordable housing, especially in more desirable areas and a huge decline in the quantity and quality of social housing. The main reason for some houses rising in price by 100 times or more over the last 40 years is the huge increase in money supply, M4 measure has risen by over 100 times between 1963 and 2008 from £15 billion to £1700 billion. Nearly all of this new money is debt, as the government has increased their debt and younger people have had to take on bigger mortgages to buy even a modest property. Wages need to rise to make housing more affordable and enable the amount borrowed on a mortgage to be lower relative to salary - this will be the trend in the next few years as borrowers will not be able to get such big multiples of salary, so it will be a return to lending and borrowing practices of 25 to 30 years ago. House prices will not rise in a big way again for at least ten years and probably have a bit further to fall.
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#135. HunkieDunkie wrote:
"Robert...You have served your time as a fully paid up Labour Party stooge."
#136. Kirkhope wrote:
"Mr Peston... Your obvious bias against the current government is apparent for all to see."
So, yet again, in consecutive posts, we have one contributor accusing Mr Peston of being a Labour Party stooge and another claiming that he has an obvious bias against the government!
Unfortunately, the truth - or, at least, the facts as they are known and able to be reported - rarely coincides exactly with one's own view of events.
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So, because the Banks disbursed the vast majority of their capital to sharholders, quantitative easing is now being used to rebuild capital reseves. That sounds like the accounts should be examined for the past few years to ensure that profits were actually made and not merely asset stripped out of the business.
As the taxpayer effectively pays for Quantitative Easing by working to create the cash, when will this scheme give rewards to the ordinary taxpayer? Increasingly, these schemes all look like a thinly disguised form of private taxation.
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Let's just forget about Jonny graduate's mortgage for a minute and turn to the small business.
Why aren't banks lending to small businesses? Remember HMG very kindly agreed to go easy on VAT & PAYE payments for businesses who were struggling? Well, they did just that; even for those who weren't struggling. Very generous they were with even more taxpayers money.
So the choice? Not pay my VAT & PAYE or borrow from a bank? Even at base rates of 0.5% that's a no-brainer for the small business. Just 2 issues; tax revenues down £22bn and yes, the money needs to be repaid eventually.
What will happen then? Easy - small business tries to borrow from a bank - Crown arrears too great to render the business viable - Bank doesn't lend, business goes bust, taxpayer takes hit - HMG & Peston blames Banks.
How about a bit of balance BBC?
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Robert
I note that the Banks receiving QE money are note name anywhere or the amounts involved - the amounts of money involved are enormous but the crucial details are kept from the public.
Presumably, the main beneficiaries of QE will be RBS, Lloyds and NR and other banks receiving taxpayer bail out money - I notice that you have been careful not to provide these details (if indeed, you may have them) but the QE exercise is more New Labour spin (if we were able to look back at the BBC news reports about QE when the 'initiative' was first announced.
I'm not criticising your report on QE but we have waited months to find even basic details and QE is effectively shrouded in mystery and not one ailing SME or small business owner has been seen laughing and leaping around yet saying that he or she is the direct or indirect beneficiary of QE.
QE is pure government spin - buying time and attempting to attribute quedos to Goondog Triilionaire Brown and the rest of the Goon Show and by yesterday's TV interview that should include Hester as well! (all at the expense of the taxpayer, of course).
I suppose the GDP figures will include QE expenditure to artifically and improperly 'lower' the rate of GDP decline and keep it in single figures.
If the UK and global GDP figures were to be properly calculated and leaving out susbsidies, QE, long term debt and multiple counting of the same banking/ corporate transactions (or parts thereof) - all claimed by several countries in their own national GDP 'ESTIMATES' - we might get a more accurate picture of the UK 'recession'.
I'm afraid that media reporting on the QE/ credit crunch crises is generally very poor although you are probably closest to revealing what is actually happening - you probably have very good reasons for not telling us (taxpayers the rest of the story but I think that what RBS results tell us about QE is still very little and is a mystery (but their £15m profit looks like an accountants fiddle and is very timely for the government as well as RBS)
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QE is just more smoke and mirrors with the banks on a one way bet...we are being fooled again and surely it is not too much to expect that a BBC journalist could do some investigative journalism to find out the truth... and is there a reason why Nick Robinsons stand in Laura has had all her blog comments silenced?....Nick getting ruffled by the outstanding blogs she is writing in his absence?
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The government is right to put pressure on banks to increase the rate of lending. It will be the only way to move the economy on. The fact that 2 years ago lenders were giving 100% mortgages whereas now you need a 20% deposit to get a mortgage. It slows down development as new builds are now taking longer to sell, which means contractors are unable to complete developments and developers are unable to move onto the next contract. I know this from personal experience. In my case we are struggling to find a mortgage even though this is probably the best time to buy as house prices have now stabilized and are more likely t go up from now than down.
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http://www.youtube.com/watch?v=VSwWy4E6I04
http://www.youtube.com/watch?v=ZoQrYa_NKQQ&feature=related
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Watch this part of the film "The International" to start to understand what is going on...go to 4.45...
http://www.youtube.com/watch?v=XDxNtpMEEZM
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hack-round
Someone with more time , experience and education than I have at the moment could perhaps give you a more very erudite than mine which is as follows.
Wealth is created via two mechanisms. Abundance and Scarcity. 'Old money' or 'Old Wealth' relies on the creation of scarcity via 101 ways including , amognst others :-- nimbyism , trade protectionism , guild formation , professional barriers , restrictive lending practices , old boy networks , laws of libel and slander , to inhibit Abundance and thus create scarcity which in turn creates perceived value. Or 'wealth' in other words. Abundance is the fruit of that old four letter word - 'work'. 'Work' being endeavour , making things , planning things , designing things , inventing things , advertising things , selling things people need and want and mainting things.Abundance creates 'new wealth' or 'real wealth' as I like to call it. But it does decrease the perceived VALUE of 'old wealth'. Say for instance I discovered , patented and brought into operation a cheap and simple mechanism for turning garden waste into oil. That would destroy the value of oil and the 'old money' or 'old wealth' that relied on it's scarcity. But it would make all the products that rely on oil much cheaper making them more abundant increasing the wealth of the populations by leaving them with more discretionary income at the end of each month. Everything that you see being played out in front of you is basically a struggle between the forces of abundance creation ( ie businesses and industry ) and the forces of scarcity ( the vested intrests of politicians and the banking world ). The forces of scarcity are winning.
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Re 150
The tacit assumption about the oil from garden waste example is that garden waste is abubdant and costs next to nothing. As soon as there is a demnd for garden wsste its perceived value will go up and the economics of the new process for cheao oil will become less attractive.
Incidentally there are already proven systems being developed and exploited for converting garden waste directly into electricity. These will only remain attractive as long as "green" electricity is heavily subsidised, whether it comes from garden waste or wind power, so permanently cheap alternatives to oil which are sustainable are, I'm afraid, an illusion, as is the notion, supported by politicians of all colours that we must get back to a growth agenda as a cure for our ills.
Surely the most important lesson to be learned from this collapse of global economy is that the consumerism which has been allowed to grow unchecked for several decades is the biggest enemy the human race faces. The fact that banks are not lending and people are not being allowed to borrow irresponsibly should not be described as our major problem. It is perhaps one of the few truly green shoots which have emerged from this debacle.
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As if 'coin clipping' can ever work over the long term. More to the point are the fates of past 'coin clippers' and their subjects.
As recently as World War II the Nazi's tried to quantitavely ease sterling to undermine the economy of their enemy. How very sad that we now do it to ourselves.
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Who colt the game
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How much of this QE 'money' has been given to non.doms to spend on behalf of their banking employers and how many non.doms are in the elite group of bankers are receiving super salaries as in the several hundred name list of executives earning both massive salaries and bonuses - within the bailed out banks.
How much of this QE and other bail out money is now administered in tax havens by non.doms?
Hester is completely wrong about one thing - that bankers have to be paid more like other business executives because to do otherwise would not attract the right callibre of individual. Banking stands apart from other businesses as a large part of it relies directly on managing the money of ordinary taxpayers.
I don't know where Goondog Trillionaire Brown is hiding right now but if he had any b***s at all he would levy a super tax on the banking industry to put them in their place and use the money to start new ethical banks and create schemes for the public to shift their money from bad banks into new ethical banks. This way - the 'UK banking indsutry' could be completely reshaped irrespective of regulation and I for one would immediately switch what bit of money I have if I could find an ethical bank.
That's one tax that most people would be in favour of and a similar one on the gas and electric industries but with the importanbt proviso that the money is not wasted by the UK government but invested in new ethical power supply companies.
It looks like only a woman would be able to take these tough decisions!
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At some point the government is going to find it very hard to finance its debt. At that point the interest rate on gilts will have to rise to attract buyers. The price of gilts will fall in tandem. The consequence for the banks - another whopping loss, this time on the gilts that the government has told them they must buy. Next round of banking crisis?
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Hang on a darn second..
If the banks are not lending the money out now so they can reduce their loans/savings ration, I'd imagine the same banks (in pursuit of the aged old performance bonusses and pressure from shareholders) wil quite happily increase this ration again once we're out of a recession as they'll be a lot more confident in lending funds out.
So if they do this, will we not then be flooded by cheap credit again as banks try to gain the share of the market during the healthier times?
I cant imagine banks will act prudent when the market picks up, they still have targets to reach and will be willing to take on a bit more risk when the economy is getting back to full health. We could just be going round in circles here with the even worse scenario of so much capital being made available it could be quite inflationary. All this money will come out in the wash somewhere.
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So the banks have lost loads of money, the government has lost loads of money. The government prints loads of money to give to the banks in the hope that that spurs the economy enough to get the tax revenues flowing? But that tax will be coming from money that the Government has printed... errr... it reads like a massive Ponzi scheme or something.
Should have let the bad banks go down and left it there.
It's me!
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Having just seen how China has dealt with Beijing Airports former chief after he was found guilty of fraud and corruption and considering the state of our political system and surveillance society, I'm starting to think that a successful invasion by China would probably be our best interests. We'd narrow the rich/poor divide, have a political system closer to democracy than the one we have and less official surveillance.
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That's all too clear, Robert, for which, thanks. So is there anything more that can be done..?
And it would be great if it didn't involve more of our money..
And once again -- why can't the well-paid bank directors explain their predicament in simple terms to the rest of us ? The odd TV appearance at a prime-time interview wouldn't hurt ? Otherwise, we're going to go on wondering if that's wool in front of our eyes...
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"Everything that you see being played out in front of you is basically a struggle between the forces of abundance creation ( ie businesses and industry ) and the forces of scarcity ( the vested intrests of politicians and the banking world ). The forces of scarcity are winning."
Of course they are, because there's a flaw in your logic, you do not create abundance by depleting finite non-renewable resources, especially when most of the depletion is for unnecessary/frivolous purposes.
A truly efficient society/business has no waste. Many things can be done to reduce waste, 'neighboured' industries where one factory's waste is another's raw material, reduces transport costs of the material, reduces waste disposal costs, reduces extraction costs of new materials and reduces depletion of resources. Much of our materials consumption is wasteful and produces very little. Demand created by 'fashion' wastes resources that primarily should be used to satisfy demand created by need.
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quietjimcampbell wrote:
"However we must not forget that Brown was the father of the mess the country is in. He created an economic climate which led to a downturn in demand resulting in job losses, etc."
And your conclusion is? What? That the only person pointing that out at the time was Vince Cable? Are you arguing that we should therefore all vote LibDem just because they got it right? Such shameless politicking is absolutely outrageous!
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Robert, if as you say the banks may have lent some of the money raised by selling gilts to other banks or financial companies via the wholesale market, then this is good, not bad as you suggest, because they will have reduced their net debt in the wholesale market, and should therefore be prepared to lend more to customers.
The point of QE is to increase the sterling money supply to compensate for the severe reduction caused by the banks reducing the money supplied in the form of credit. It does not really matter if it is passed from one bank to another via the wholesale market, this is only important if it causes one bank or the other to reduce lending to its customers. This is unlikely since the overall effect must be to increase the money available somewhere in the system. Even if the money is used to buy shares or other assets, this does not matter in the short term, at least, since the sellers of the assets will now have the money. As the extra money circulates around the system it will from time to time be used in a way which creates work, provided someone does not put currency under their bed.
If QE does not appear to be working sufficiently well, it is probably because there has not been enough of it. The recent rise in the exchange value of the pound suggests that there is scope for a little more QE.
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I agree with 162 comments (Not that I am an expert mind you) but,
The whole problem was caused when UK Banks were allowed to borrow from foreign sources. When those overseas investors got spooked by the sub prime mortgage debacle in the states, they started to withdraw their sterling (foreign reserves) from our banks.
The QE program is currently filling this void (Meanwhile those foreign investors are seeing the value of their reserves diminish). Once the void is filled via QE (and I agree that this probably needs to be accelerated) What will the foreign investors do with their sterling reserves?
Is this when we will see inflation? I posted on another thread a link to what the Chinese banks are planning to do. They are going to come into the UK lending markets, with some very tasty deals on interest rates.
We shall see…….
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So far it seems that the only real beneficiaries of the QE programmes (that governments around the world have initiated to unfreeze the money markets) are the large investment banks. It seems these banks are now declaring huge windfall profits based largely on their QE transactions and individual bonus payments are being inflated accordingly. That suggests these banks and bankers are making huge profits and aquiring huge bonus payouts straight off the back of government initiatives to get their economies moving again.
If that is true then these banks and bankers must not be allowed to proclaim or make spurious claims about their ability to make huge profits. at times like this, is down to their enterprising culture and finacial engineering skills.
I for one would like to our government (and other governments around the world engaged in QE initiatives) act quickly to ensure that these banks are hit with punitive taxes on the profits they have made from their QE transactions and on any bonus payments paid to any bank employee who will have benefitted from those transactions
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"Does that mean QE has been a waste of time?"
I have to disagree with your answer Robert.
It definitely has - all it has done is kept alive those institutions that should have fallen victim to the recession. They are still alive - they are the reason for the recession and will be the reason for the next one.
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Well, Robert, a typical patronising analysis of why QE is not working, but offering no solutions of your own. Gordon Brown must be laughing in his porridge at the low quality of alternatives offered by commentators and the opposition. Come on Robert - what would you do in this siutation? I read today in the FT that the UK and Italy were leading Europe in manuufacturing output. So something must be working don't you think?
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Robert, I think your article suggests the results of quantitative easing, i.e. the banks would use the cash to rebuild their balance sheets rather than to lend it on, were foreseeable given the difficulties in which all banks have found themselves, to a greater or lesser degrees. But, for me, the big question is “Where to next?”
With its implicit government guarantee, banking now appears to be being treated as a utility by all governments. In a sense the ever growing banking bonuses and wage inflation of anyone who had anything to do with the City in the noughties were predicated on large and unsustainable asset price inflation. When the bubble burst, everyone had to share the pain caused by the banking system’s inability to identify and price risk appropriately. But, even though quite a number of bankers did lose their jobs (and even a few senior ones, although they were very well looked after), bankers are, if we believe the reports and the anecdotal evidence, being hired and making very large bonuses again, thank you very much.
Why? Their systems have not improved. The risk that they pose to the wider economy has not diminished. The drivers behind the behaviour that caused this crash have not been mitigated. The argument was, in the depths of the depression, when no or very few banks were hiring, that the poor bankers had to be paid huge bonuses otherwise they would walk. Where to? (At the time.) If they are so deluded by their own self-importance and not a little “money illusion”, are they fit to be the custodians of our money? Quis custodet custodies?
Well, really, only coordinated and concerted international cooperation, and not the petty political nationalistic point scoring that appears to have reared its head in Europe recently. How to clip the bankers’ wings without killing off the banking system?
Here’s an intuition: it was (Enron x LTCM)² = out-of-control operatives who were a law unto themselves sheltering under the diaphanous blanket of inappropriate financial models. Maybe there’s a clue there about regulating (rather than outlawing) greed and regulators concentrating on auditing and strengthening the internal risk controls of financial institutions very aggressively (perhaps, even having temporary suspension of banking licences as one sanction until compliance is restored – at least better than having to let a bank go to the wall to make a point and threaten the whole banking system).
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The UK Government budget deficit is forecast at GBP 175Bn and QE will now total £175Bn. Bit of a coincidence! I think I have spotted the plan by our Government to finance our deficit without actually raising taxes or borrowing money – they use QE. Very cunning!
This is how it works: The Treasury sells Gilts to our Financial institutions (mostly Banks) and they in turn sell the Gilts back to the Bank of England! The banks make profits (Individuals bonuses) but do not increase their liquidity and that is why credit remains tight! However our Government has financed their deficit on the cheap!
Two ways at looking at this: Either deceitful or very clever!
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Only banks can steal like this. They made a lot of loans, that were bad loans, but they made a lot of money on the processing fees. When the loans went bad, which anyone with any sense could have predicted, but of course we had the government watching over all this, the banks dipped into individual retirement and investment accounts to make up their shortfall, bascially using the old addege, "Rob Peter to pay Paul", them being Paul and we being Peter. Once the banks had recovered their initial losses they did not want to risk their money again so they needed the government to print more money. The governments being stupid decided that unlike an insurance that would cover those who actually lost money, our accounts, they would pay the ones who created the loss, the banks. If all this makes your head spin, that was the very idea, to present a common theft as if it was some complicated process to difficult to understand. Welcome to the 21st century, evil won.
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142. At 3:11pm on 09 Aug 2009, rbs_temp wrote:
#135. HunkieDunkie wrote:
"Robert...You have served your time as a fully paid up Labour Party stooge."
#136. Kirkhope wrote:
"Mr Peston... Your obvious bias against the current government is apparent for all to see."
So, yet again, in consecutive posts, we have one contributor accusing Mr Peston of being a Labour Party stooge and another claiming that he has an obvious bias against the government!
Unfortunately, the truth - or, at least, the facts as they are known and able to be reported - rarely coincides exactly with one's own view of events.
RBS-Temp:
I appreciate your dilema. However,(I might gather by your moniker), you may already be uncomfortably close to the facts as they stand? You will know within yourself whether you support my basic approach. I did think that I might know you, but your volume of 'posts' and their 'timings' suggest to me otherwise - pity, I should like to but you an ale! I appreciate that many will currently find it extremely difficult to comment upon that which they 'know', and safely take themselves to a position where they can openly and honestly report...
For good measure, I might also suggest that the Politics of the RBS is merely in its infancy, and Kirkhope has only 'kicked off' the first half of what promises to be a real 1970's football style encounter. Wait until the General Election draws near, and the politico 'Chopper', and 'Bites yer Legs' swing into action! As they say, 'You ain't seen nothin' yet...'.
Re Kirkhope, you never know, we may both be left-wing by instinct - then where would that leave your comment?
As suggested at the outset, we should not conflate two quite separate issues- please, for the sake of clarity and understanding.
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#168 - SPOT ON !
Remember the movie 'Dumb & Dumber' with the suitcase full of IOU's ?
Remember the TV mini-series 'Private Schulz' and the counterfeit £5 notes ?
No different to QE really ? Criminal and fraudulent.
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Does this mean that the Banks are helping to reduce the potential from inflation that can be a side effect of QE?
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I have been working on heavy-duty deadlines for the past three days, so haven't been able to keep up. I skimmed through the posts this morning -172 no. reasoned, thoughtful, incisive comments from the readers, and an appropriate sprinkling of delusional drivel.
Outstanding -and all for free.
Pity those in power don't have the intellect, imagination and dedication that your punters do, Bobby. There are enough people around the country who understand perfectly the pain that has to be borne for us to get out of this mess. The City & Westminster just want to squirm and rob and steal to avoid facing up to such a conclusion.
Your duty (RP) is to be more blunt, but good article in your constrained manner.
(Throw down your chains).
Regards,
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As perhaps the last word on QE given this blog has been going for days I would urge people to read Richard C Koo's 'The Holy Grail of Macroeconomics'(and specifically pages 73-79).
There's several pages dedicated to QE used by Japan which Koo summarises as 'the great non-event of the 15-year recession'. Koo puts his finger on the trigger by stating that lending wasn't the issue but borrowers wanting to lend, so the much vaunted expectation of recovery through lending never materialised (note also the near-zero interest rates).
Given the recent surveys showing the same dampening by borrowers here - what probability of the same net effect?
There are some differences between current UK/US and Japan 90s/00s but we would do well to take note of the contiunued problems that Japan has with its economy (which has been going on for 20 years).
So the question is are we headed for stagflation or hyper-inflation?
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Of course everybody is asking the question of QE from an economic viewpoint as per my last comment.
But as some have alluded to here already, maybe its never really been the economic take at all from the UK standpoint but finance, or more specifically financing an overdraft we can't afford.
If you are a desperate UK government in 'power' and you have a funding problem due to the black hole in finances - then maybe there's no better way to fund it than through QE. Why?
Because you print money at the click of the button and it is transferred to banks. They in turn through various transactions subscribe to the new gilts issued by HM Government thus making sure there is full take-up which doesn't spook the markets or put pressure on sterling/ratings/yields etc.
Qute possibly the worst case of financial malfeasance by a British Government ever. How long can it go on before we really start investigating this whole matter?
When we've gone to the IMF the first time? or the second time? or when we're on the verge of national meltdown?
Answers on a postcard please......
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The scheme seems more and more like Enron accounting. If I understand it correctly, the Government issues Gilts, the State controlled Banks buy them then sell them to the BofE, take a profit on them and reward the dealers with a big bonus.
No doubt some time in the future the BofE will then sell the Gilts back to the Banks who again will make a profit and the dealers another bonus.
All the while the taxpayers (not the same as the voters) will pick up the tab. You couldn't make it up if you tried.
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This must be one of the longest running blogs ever!
The results from CBI's Access to Finance Survey do indicate some cautious optimism that credit availability got better in July. Not sure what RBS's call is on this, but the Treasury is understood to support LBG's tentative plans to raise cash from the markets and scale back its exposure to the government's Asset Protection Scheme. LBG is now considering reducing the amount it places into the scheme by as much as half and strengthening the balance sheet by raising between £10bn and £15bn through a new share issue. It will begin talks with leading shareholders this week.
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Hey folks - I've been away in Egypt for a long weekend - I thought I saw some pretty big pyramids there - but I come home to find the biggest pyramid of all is right here in the UK!
Surely this needs to be passed to trading standards - the UK Government is operating the second biggest scam in the world at the moment and someone needs to phone watchdog and get Nicky Campbell to interview the masters of deception.
I thought I got burnt in Egypt - but coming home I realise I haven't seen anything yet. We (the tax paying public) are going to get seriously burned in a couple of years time - I cannot imagine the tax rises that will be needed to get this country back into shape.
There are sure signs of complete capitulation at the moment:
1) Experts arguing amongst each other - no common consensus
2) Governments starting to protect their internal industries (protectionism)
3) Militant workers in key industries (rail, Post Office etc.)
4) A very angry public - so many issues to choose from (unemployment, money printing, politician's (lack of) integrity, greedy sections of society, increased authoritarian police and goverment)
Read your history books, these are usually the preludes to serious uprisings.
....but of course many people keep teling themelves 'it will never happen here'
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Another effect of QE which this article does not go into is that when gilts are bought their yield goes down as their price rises, simple function of increased demand for them as a result of the QE program.
What this does is it brings down the risk free cost of capital (gilt yields), corporate debt (debt that companies borrow at) is often priced at a spread to the risk free cost of capital, so corporate debt costs go down making it easier for companies to refinance or more affordable to pay their existing debt costs. Pretty important for companies when they are all trying to cut costs due to falling revenue streams as a result of the recession. This in turn may reduce, even if only slightly, the risk of companies forcing more redundancies etc
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#168 PhilipMills wrote:
'The UK Government budget deficit is forecast at GBP 175Bn and QE will now total £175Bn. Bit of a coincidence! I think I have spotted the plan by our Government to finance our deficit without actually raising taxes or borrowing money – they use QE. Very cunning!'
'Two ways at looking at this: Either deceitful or very clever!'
I think it's brilliant and can't understand why they haven't done it before.
The government prints a load of free cash to pay the bills and there doesn't appear to be any downside to the economy, why don't they print some more and lower the tax rate, even better they could print a couple of trillion and we could have a man/woman on mars by 2020.
# 178
Egypt for the weekend, very nice but not very green
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180. BobRocket
Yep - dusty and dry, not green at all.
Don't worry about the environmental cost (if that's what you refer to) - as my air miles are a long way short of most peoples as it's only the 5th plane journey I have made in my 38 year lifespan.
Still you've got to take your trips while you can because there might not be any airlines left in 3 years time and we'll all be travelling by rowing boat.
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Why is everyone in the media (and on here) so concerned with the governments ‘figures’ Ha! On credit availability!!!
1. Credit got us into this mess.
2. More credit will not get us out of it.
3. The banks don’t want to give credit (That said, I recently tested this theory be applying for a large loan with the biggest building society in the land). No sweat Mr Javaman, when do you want your money? And finally, and most importantly.
4. Already troubled folks, can’t get credit! And the folk that are Prudent DON’T WANT IT!!!
They need to think in terms of the REAL economy and Job creation, this is where a real turn around will develop from. Confidence gained via wages through employment. Hey I should have been an economist!
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I see that the oil price has risen again, due primarily to 'Record' imports to china.
Jings, Crivens - Help!
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Keeping the ball rolling (where are you Robert?)
BBC News 11.08.2009
"HM Revenue & Customs (HMRC) has agreed with the Alpine tax haven Liechtenstein to start exchanging information.
Up to 5,000 British investors are thought to have an estimated £3,000,000,000.00 in secret accounts in the country.
Investors will be offered the chance to volunteer details of their deposits in return for penalties, capped at 10% of tax evaded over the past 10 years."
And we get walked upon without "chance" or recourse. Sickening isn't it!
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Robert, have been a regular reader of your blogs. I'm a(not so proud) Irishman living in Uk for a number of years. As much as people here complain about the Labour goverments actions during this crisis they are in some ways very lucky that they have accountable politicians that have a tiny miniscule idea in getting us out of this financial mess.
I'm sorry to say that Ireland as a society is going through a painful transitional period of complete implosion due to the mind boggling excessive greed of a clueless political class, bankers and property developers on a scale that makes the situation here in UK look like Camelot.
At least the general public here cried foul when the expenses scandal became apparent. In Ireland far worse "artful dodger" dealings have gone on without barely as much as a whimper or outcry. The common hardworking taxpayer is like the proverbial deer caught in the headlights of an oncoming truck and is now a very endangered species.
So when I hear people complaining about useless British politicians and the way they have handled this financial crisis I generally grit my teeth and think of the scene in the Monty Python film 'the life of Brian' and say to myself "you lucky lucky ****" What Ireland wouldn't give for one of your politicians who at at least on the outside displays some inkling of remorse for the situation we now find ourselves in and though they may present a plan of action, however flawed it may be, at least it's a plan of action unlike the cute politians which the people have been lumped with in Ireland. Then again as one could say, you get the government you deserve.
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185,
You are wrong! The reason Ireland is so badly affected is because you are tied to the euro. Your government does not have the means to provide fiscal stimulus to your economy, neither do they have the power to devalue their currency because they don’t have one anymore (the punt).
The Euro and the united states of federal Europe are in REAL danger.
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Further to 168...... So far so good. QE has not yet and probably won't be inflationary at the current level. However there is a limit. Normally QE would be inflationary, but due to world demand being on the floor at present it is not, however there is a limit. My guess is max £200bn then inflation would kick-in.
As explained in 168 above the nett gain is initially the Treasury however they disburse the funds throughout the economy via Public Sector salaries and Social Security payments etc. So eventually the money spreads throughout the economy.
The sector that is not gaining is British Manufacturing and our Service sector by way of new bank loans because Bank credit is still extremely tight and will remain so for quite a while.
The big fall guys will be manufacturing as usual. Our Government does not care. They think the economy will run on shopping! A total disgrace and wrong – unemployment will continue to rise!
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182 JavaMan1984
Number 4 is the part the Government just doesn't understand.
"4. Already troubled folks, can’t get credit! And the folk that are Prudent DON’T WANT IT!!!"
The Government is being completely irresponsible, it really is trying to start a boom to cover up the bust - with it's main goal now being re-election and not the long term good of the country.
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186 JavaMan1984
I agree and the consequences of them not being able to do anything is very clear. We do have sterling and able to make decisions ourselves - I just hope they pan out well as excessive QE will not work (re Japan)
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So the point is to get the economy moving again by pumping cash in and putting money back into the banking system to get money circulating around the system again. The problem is that everyone is playing safe, the government by pumping the money into the economy through the banks and the banks ate only interested in looking after themselves. A far better way would have been to pump the money directly into the economy by spending it on a couple of major infrastructure projects such as the high speed 2 rail line and increasing the capacity of our other main railway routes.
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#187 PhilipMills
If inflation won't kick in till we have been QE'sed to the tune of 200 thousand million then we should all brace ourselves for another round as the BOE inflation target (by their measures) is 2% and it is currently well below that (by their measures), why don't the government just mail us all a cheque for 100 quid each with a promise of another one after the election if they win.
#181 WOTW
Dry and dusty with spiders the size of dinner plates is not my cup of tea, give me this green and sceptic isle and day.
Not rowing but sailing, now that is green transport
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Is it just me or is there begining to be a serious ammount of mission creep with QE? It seems that there is no problem that can not be solved by the simple expedient of creating just a little bit more money. Thats why they are doing it now before the economy recovers enough to make it seem like what it is.
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I see that Tony Blair is now 'working' for an international merchant bank - I'm wondering what his employers' UK operations fees and bonuses are (if any) for UK quantitative easing?
Let's hope (from the benefit of the UK taxpayers and a few million British OAP's, many of them that are war veterans and war widows, scared to go out after dark and shivering to death because they can't pay their gas bills) that QE non. dom banker bonus merchants are not making political donations to the labour party (using taxpayer QE money?) before the rules on party and other political donations are set to change AFTER the next general election.
Quantitative easing? More like quantitative sleasing!
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185. At 3:39pm on 11 Aug 2009, doctorbrenman wrote:
Robert, have been a regular reader of your blogs. I'm a(not so proud) Irishman living in Uk for a number of years. As much as people here complain about the Labour goverments actions during this crisis they are in some ways very lucky that they have accountable politicians that have a tiny miniscule idea in getting us out of this financial mess.
>>>>>
Accountable politicians?
I think that you must be Dr Spock!
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@193 nautonier
Is this the one? The day Blair joined JP Morgan they bought the best part of Northern Rock for a knock-down price. Seems like he's just the type they need.
"JP Morgan Chase, whose chief executive Jamie Dimon last year recruited the former prime minister as an adviser, is being investigated by the City's watchdog, the Financial Services Authority for allegedly failing to keep track of £8.5billion of clients' money."
Read more: http://www.dailymail.co.uk/money/article-1205631/Customer-probe-Blair-bank-targeted-8-5bn-FSA-probe.html#ixzz0NtotxWRW
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195. At 7:15pm on 11 Aug 2009, hodgeey wrote:
@193 nautonier
That's part of it - I'm surprised its taken so long to hit the headlines properly.
In any reform of Parliament/House of Lords I would have thought that there is a strong case for preventing former MP's particularly PM and former cabinet ministers in holding this type of position in a financial institution. Why not be content with proceeds of memoirs and very fat Parliamentary pension and life long MI5/MI6 minders for security?
Blair does not strike me as someone who needs a lot of bank bonus income for himself - he has more than enough ability to make a lot of money from appearances, books, articles, lecturing etc.
I thing that it has a big smell!
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Hi Robert and all,
You appear to be ready to get down and dirty with the real question which we are entitled to know - who are the gilt sellers and what are they doing with QE liquidity. Do you or anyone else know why the BoE have changed policy by not just increasing QE volumes but re-targeting gilts with minimum maturity down to 3 years ( away from 5-15 year maturities to keep banks out) and why is there a need to lend QE purchased gilts back into the market? How much of the UK sovereign gilts market is owned by the BoE? What gilts are now owned exclusively by BoE?
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Why is anyone suprised at this ? Of course the banks were just going to sit on any cash the Govt handed out because they were told to get their act together and this is the easiest and simplest way of doing so.
RBS have just laughed at AD's attempts to get them to start lending and waved the poverty flag whilst cutting jobs and shoring up the defences.
But worry not, in 2 years all will be forgotten, the captains of industry will be steering the ship on a new course and the debris of failed businesses and individual insolvencies left in their wake will not prick their consciences one tiny bit.
Anyone for accountability ? Nope...didn't think so
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The policy of quantitative easing is therefore just a further example of the Government bailing out the banks. How long will this dynamic of the Monetary Policy Committee printing money and giving it directly to the banks, who simply keep it, continue? The Government needs to realise that the banks simply aren't lending the money and that it is the people who need that money most that are the most restricted from it. This induces problems such as the ones seen this week regarding loan sharks charging exorbitant interest rates forcing people into further debt. This measure seems both counter intuitive and regressive in the way they are affecting the poorest in society.
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RP:
"our banks had become too dependent on wholesale sources of funds, which dried up after the collapse of Lehman Brothers when investors took fright and took flight"
++++++++++++++++++++
Is that what really happened or did it come to light that the derivatives and CDx'swould be worthless when unravelled?
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Hey guys and gals,
Anyone think that pestons blog and its educashion, educashion, educashion of the masses of the UK will ultimately be the banks undoing ;-)
Roll on stealth communism :-)
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Uk Gov prints money
Uk gov gives to banks
It bad enough that folks cannot save money but when they cannot earn it or borrow it (from the banks WE lent it to)?
WHat's coming folks, engage your brains and stoke up on food stuffs (forget the mortgage)
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What would be the impact of perhaps a bottom-up version of QE - financing the people themselves. Wouldn't it be a darn sight cheaper for "the Government"/"the bank of England" to simply give every household in the country a million pounds, lets say there are 22 million households (according to the 2001 census) that would merely cost 22 Million pounds practically an invisible sum against the £122 billion of QE so far.
Newly-made millionaires would spend on the high street, buy cars, make saving deposits in banks and building societies, pay off their mortgages in short do all the things that are the indicators of a burgeoning economy - no?
What are the reasons for not doing it? political, short termism, giving the power to the people and not enabling one or other political party to be seen to, in Gordon Brown's Freudian slip, "save the world"?
Relatively cheap to implement a lot less complicated than the scrappage scheme or "giving" it to the banks in the hope they'll lend whilst at the same time discouraging the wholesale lending that got us in the mess in the first place.
Put the money in the hands of the people? Now there's a thought.
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#203
The only downside to making everyone millionaires is that it devalues the currency, as shops would just put their prices up, e.t.c.
The situation we're in is a horrible one. As others have said, we really need a crash to make people realise that being in debt is bad and has consequences. We cannot keep on borrowing to fuel our growth/excesses - is this the era where capitalism fails?
One area the government could be useful is the housing market. A home is to be lived in, not to be treated as a financial asset. House prices need to come down, and if that means people being in negative equity, then big deal - refund them perhaps? There is a whole generation that will need to buy houses but cannot due to the selfishness of property owners and developers.
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qe is a waste of time, shows up the system for what it is a racket and a con trick.Also is that bloke out there, the one that told me that im wasting my time and money, backing draws in the championship,well dream on mate and check the results for 7th 8th august.brownwatch 290 days.(max)
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#203 you have qualified for the brown order of economic merit, if you gave everybody 1 million pounds inflation would be through the roof a cup of tea would cost prob 5000 pounds as an example, if it were that simple it would have been done years ago .you be better off scrapping all money and have a barter system it would be fairer.also #204 has a good point , a home should be somewhere you live and not a money making machine,house prices are a joke we need to provide decent affordable housing for the young people in this country so they dont take on excessive debts.
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I've just heard on the news that 6 million peopel failed to keep appointments with the NHS and this is costing money. The health service is spending time and money to persuade these people who no longer need treatment to keep their appointments. This is because they claim these people cost the health service. How? It would seem to me better to encourage others no longer needing attention not to attend and concentrate resourses on those who are sick. Is this really a news story? Are those managing the health service stupid?
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The idea of turning us all into millionaires instead of doing QE is not without merit.
All debt would be wiped out, we could do away with the welfare state, work would be voluntary, income taxes could be abolished, indirect taxes would be more than enough to provide infrastructure, etc.
But how would the state control us once we were not slaves? How would employers exploit us?
Our masters would never allow it to happen; it took a long time to build up the debt mountain that enslaves us all; their finest achievement and everything is on track now.
In the immortal words of GWB 'mission accomplished'.
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Come on Robert - the next blog had better be good.
You're missing out on unemployment records, no SFO investigation into Rover, Rio Tinto staff being charged in China, Liechstenstien tax deals, Royal mail strikes......
...so much to discuss and you're stuck on the results of RBS.
- Have you been fired? Maybe you just became 'another statistic' like 2.5 million others....
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As usual a brilliant blog, easily getting to the meat of the matter as clearly missed by our supper chancellor and prime minister.
When is Robert being invited to take over from Alistair and the bankers to sort out the mess?
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Is Robert on holiday? If so let's kick off something ourselves.
1) Todays unemployment figures -truly shocking and getting worse. From today's BBC article:
"There is rising concern about youth unemployment, which Business Secretary Lord Mandelson said the government needs the help of businesses to tackle." No Mandy - businesses need government to get out of the way, stop over-regulating and being taxed to death. Growth and productivity will then increase.
Another worrying structural problem is what is the incentive for companies to take on under-educated teenagers when skilled labour can be imported?
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203,
1,000,000 (to each person) * 22,000,000 (households) does not equate to 22 millions pounds
'What would be the impact of perhaps a bottom-up version of QE - financing the people themselves. Wouldn't it be a darn sight cheaper for "the Government"/"the bank of England" to simply give every household in the country a million pounds, lets say there are 22 million households (according to the 2001 census) that would merely cost 22 Million pounds practically an invisible sum against the £122 billion of QE so far.'
Although, I do feel the plan does have relative merit.
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"Work experience, mentoring and internships are needed to avoid a generation "lost to work", Lord Mandelson told the BBC."
Oh I get it - let's get them to work for free - that will compete with the Chinese - clever.
"This is something the whole country has got to rally to. We need public and private employers, as well as those in the [charity] sector, to help us mount this national campaign to back young Britain." - mindless drivel that TB would have been proud of - education, education, education.
"A group called the Youth Fight for Jobs Campaign says there is a lack of training and affordable housing for younger people." - there will not be affordable housing as long as the government try to reinflate the housing bubbble and maintain our highly restrictive planning laws.
"Campaigner Manuel Dominguez said: "It's about highlighting that there's a problem, and also saying to the government, and local MPs, and councillors, what are you going to do about it? Young people don't get proper training,"
What exactly is education for, what do they learn now for 11 years+? Is our education system merely defered unemployment?
For solutions we need to look at what the government is doing, and planning to do, and do the opposite.
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BBC - "No probe into MG Rover collapse"
"For the Conservatives, shadow business secretary Kenneth Clarke called on the government to publish the report "as soon as possible. My suspicion has always been that delayed publication of the report was being sought because of criticism of the government within it," he said. "I wait to see if my fears are allayed."
No surprises here, whenever government gets involved in private businesses it make the issue worse. BMW knew what they were doing - stripping out Mini and other assets that they wanted. The government then let their friends ride in on a white horse to strip out another £40m.
Interesting parallels with the economy and theor banking friends.
Whitewash.
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BBC - "Banks given new rules on bonuses"
"Many believe this risk-taking contributed to the financial crisis."
Many also believe that going out in a t-shirt in the pouring rain contributes to getting soaking wet.
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211. At 10:20am on 12 Aug 2009, truths33k3r
Ah yes, but according to the Government (and I mean this one or the most likely to be the next one) unemployment doesn't matter.
They think the country can borrow and 'shop it's way out of recession'.
The world has seriously gone mad - I think the meteor shower tonight might be the cause...
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213. At 10:25am on 12 Aug 2009, truths33k3r
I listeneed to Mandy on the radio this morning and what I thought cannot be repeated on this blog.
His arrogance is unsurpassed, even in the arrogant world of politics. He wanted to solely concentrate on what the opposition are proposing (because he knows he cannot possibly defend his own parties policies, past or present).
Basically nobody wants to say the dirty word CUTS or TAX RISES - but the reality is only the extremely naeive TV watching fools don't realise that one, or both are coming down the pipe no matter who wins the next election.
This is the state of our politics - they will LIE, LIE and LIE again in the hope that enough of the public will believe them. Most people know there is no magic to get us out of this hole - it will simply be pay more taxes - get less public services.
When the lords are leaping like this it must be 7 days to christmas.
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Truths33k3r
How about your favourite subject - do public sector workers pay taxes?
Surely nobody actually pays taxes - we're all just circulating the same bits of paper in varied amounts. The public servants are like the outsourced administration of the private sector in that they provide roads, education and other parts of the support network that the private sector need - and they pay (through tax) for that service.
The alternative is a low (or no) tax regime where the Government doesn't provide this service and the private comapnies have to go elsewhere (to other private companies) - like the security services in Iraq.
Therefore it's not really a tax - but a payment for a service.
A true tax is like in Feudal times when the Lord said 'Give me your tax money' - and you got nothing for it.
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212. At 10:20am on 12 Aug 2009, JavaMan1984
...with maths like that 203 must work in a bank (or in the Treasury)!
However the reason the Government (past and present) don't take this line is that the live in the misguided belief that the bond holders (mostly the rich) will spend their additional cash more responsibly than the general populus.
However it's clear that this is untrue as the rich are more likely to squirrel the QE money benefit away in a swiss bank account (which the poor are unable to do)
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This comment was removed because the moderators found it broke the House Rules.
This story has to be the best - it shows how even in a recession the Government is still finding new ways of wasting money:
http://news.bbc.co.uk/1/hi/business/8195758.stm
Never has such an obvious question been asked - basically you only go to the job centre WHEN YOU ARE ABSOLUTELY DESPERATE and there is no other options left for you.
They can't find you a job - unless you want to work in a hotel or a kitchen etc. They don't have skilled jobs in there and a lot of the jobs are fake or get filled before you get there (because the job centre doesn't get exclusivity)
I have said it before and I'll say it again - you're only hearing about the state of the jobcentre at the moment because middle class people (not that they exist, but lets humour them) are experiencing the demoralisation of the job centre for the first time.
As a working class man I still remember the tables and chairs that had to be screwed to the floor and the stench of rotten tennants super which you had to endure while you sat in a mile long queue to be 'interviewed' for your claim.
I was one of the 'lost generation' as I finished my education in the early 90's and walked straight into a non-existant job market. I was lucky but many of my friends never recovered from that experience.
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Q: What's the difference between Bernie Madoff and a City banker?
A: Bernie Madoff knew what he was doing.
Post 213 wrote:
"What exactly is education for, what do they learn now for 11 years+? Is our education system merely defered unemployment?"
Maybe. Alternatively, the state education system is childcare; whereas the private education is, of course, a preparation for government.
Now, here's a big idea (alright, not mine, unlike the joke above, but a compilation of other little ideas). I have nothing against the current state school curriculum (although it does seem to be, to be fair, very derivative of 19th century grammar schools). Still, a broad education is a good thing. But, what about Citizenship? I hear that is part of the curriculum these days but I have no idea what it consists of? An hour a week for an entire school career. That must be about 500-530 hours. What should it/could it contain?
We live in a liberal democracy. Our economic system is essentially capitalist. How can our rulers (i.e. the people of this country) exercise that power and choice without the tools to do so? So, here's the big idea. Starting from the earliest age, in the simplest terms and then becoming gradually more sophisticated, Citizenship should be a course that combines, Personal Finance, Politics, Economics, Philosophy, Psychology and Law. The essentials. But enough to know what your local council can do for you, how to get insurance, what is illegal, etc. Enough to hold others to account and enough to understand the extent of one's own responsibility.
This is about giving power to the rulers, the people, rather than adopting a rather nannying, paternalistic, 19th century approach, where each government adopts measures to placate and dull anyone outside the political class so that they can play their political games. There are some outstanding exceptions. But, generally, this may go some way to explaining a fall off in people's engagement with the political process. People get it. They understand that politicians are simply playing games with power amongst themselves and part of that game is to say anything to persuade us to do what they want, to vote for them. And, in that respect, their motivation and modus operandi is not at all dissimilar to City bankers. But, then again, perhaps that, too, is a question of education.
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220,
Referred? Auntie Beeb don’t like the truth published do they? Is this Democracy in action? I’m taking my lot out of this stinking cesspit of a ‘Country’.
221,
I left University in 1993, I remember those days all to well. I was also lucky, your summation of that situation is bang on the money!
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When the British Media starts harking on about the 1950's and the associated benefits of having ones own allotment to grow veg, it really does have the desired effect in getting one to hold on to ones wallet and yes, paying off some of those pesky debts that one may have built up over the good years. The reverse is true when one save up a "few bob" in an account; why bother with pesky allotments, live now, enjoy,invest as you may not get another chance to spend/invest that few shillings you have saved in such upbeat economical conditions.
I guess when one has managed to "tuck a few bob away", the whole cycle will start again. If not, "who gives a rats arse", back to the allotment the garden shed and the cat.
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# 221 - Benefits are a pittance and jobs on offer include poll-dancing (only for women presumably) and night-club bouncers! A sane person would only enter such a place if prison was the only alternative. Actually, having visited some open prisons, they aint that bad, probably much better than living on benefits in a sink estate. I remember in the 1980s the next street but one to the benefits office was always full of parked white vans on signing-on day - wonder why?
The job centre and benefits staff have been wound-down to such a degree during Brown's 'no more boom and bust' era that they have been totally overwhelmed (shock & awe) at the increased workload. They were expecting to be phased-out altogether as NuLabour's nirvana rendered them obsolete.
Such is the hubris of politicians.
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I suspect whats going-on is that people from their mid-50s being made redundant have realised there are no jobs available and, having checked that they have the new 30 years required for a state pension with SERPS (or new equivalent), have decided to wait-out the last few years before retirement on the their savings and investments. By the time these run-out they will have reached retirement age and be entitled to full state support.
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A statement was produced by the "department for the blindingly obvious" which read:
"One possible explanation for this discrepancy could be that some people who have recently lost their jobs are relying on their partner's income, their own savings or redundancy payments rather than drawing on benefits."
You don't say.
What will they deduce next? Perhaps that higher unemployment weighs down on local Government as the need for services such as mental health, anti-social behaviour and domestic violence goes up?
Oh yes - the department is already on to that one - a statement will be released soon.
Next they will be telling us that unemployment is actually quite depressing as you idly sit wasting the skills you've taken time to learn - and there was me thinking most people saw it as an extended holiday!
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225. At 12:53pm on 12 Aug 2009, TheNewPonzi
I like your use of word play against the system. (shock and awe) - we should start sending back some of the nonsense they keep using on us.
On the bright side however, those of us who were around in the early 90's know what to expect and how to avoid the pitfalls.
a) Do you have any savings?
No, not in this country anyway
b) Do you have a partner who is earning?
No, well she's not strictly my partner, she is just a 'live in nagger'
c) Have you looked at the board for jobs (now replaced with a computa screen)
Yes, I have read every last one of them.
d) Do you have any skills
Yes, but not for any of the jobs on the boards - do you have anything in Archeology?
e) Is your post box safe
No, I shall collect my giro every Friday by personal issue as I can't trust the post office not to be on strike and if my money doesn't come by Wednesday the local loan shark will burn my house down (which I don't own of course)
f) Have you any feedback for your experience at Job centre plus
Yes - it was the most awful experience every - see you next week!
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225,
'The job centre and benefits staff have been wound-down to such a degree during Brown's 'no more boom and bust' era that they have been totally overwhelmed (shock & awe) at the increased workload. They were expecting to be phased-out altogether as NuLabour's nirvana rendered them obsolete.'
Brilliant!
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218 WOTW - my favourite subject is money supply and and the gold standard, public sector tax receipts is second.
Essentially what really matters is how does UK plc pay its way - we need less consumption, more saving, more exports, fewer imports, more self-sufficiency, more production.
I believe that we need a smaller public sector, as they use tax, more private enterprise as they earn tax. I will concede however that private individuals earning money as a result of public largesse (as with management consultants in the NHS (my 3rd favourite subject)) do not actually pay tax either.
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222 ahj1966 - I like your ideas but would call them "life skills" - "citizenship" sounds too Orwellian for me - like "Mandelson Youth"
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228,
That's the best advice anyone can get, you have obviously been down a similar track to me.
Perhaps for added affect (The icing on the cake) speak in an eastern European tongue, claiming for your kids that live abroad!!!
C’est Magnifique!
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This is Pyongyang calling: The Dear Leader is concerned that not all inhabitants of your islands are imperialists or their lackies. There is a growing risk that the imperialists will soon turn their fire inwards.
They have demonstrated their shamelessness by operating in full daylight, but be warned the real and final theft will come at night under cover of the dark. For those with eyes to see, see this and take heed.
http://fofoa.blogspot.com/2009/07/call-me-contrarian.html
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231 Truths33k3r
Yes. "Citizenship", as far as I understand it, is already on the curriculum. I just want to subvert it for the purposes of personal empowerment.
Interestingly, I think it will appeal across the board to people who think of themselves as left or right. I was fascinated by the reaction of a young middle-aged American couple to a discussion of the credit crunch recently (he is quite senior in a very, very successful Wall Street institution). His wife was angry with the people who had actually taken out the subprime mortgages "without being able to afford them" (though, at the time, she omitted to note, that may have been less obvious, but, whatever). We did, however, manage to agree, very quickly, that increasing basic education in personal finance was a wholly good thing.
Think of it another way: if we in this country promote a consuming public that is more sophisticated and demanding, our financial institutions will have an incentive to become more sophisticated and responsive also. That level of sophistication and responsiveness will then be able to be exported to gain a competitive advantage against institutions in other countries that do not face the same level of demand. This is only one potential/likely, albeit medium- to long-term effect. But, he said, inviting a barrage of complaints, how does this not make sense?
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Just discovered another type of back door funding for the banking system. Before this debacle I was transfering money from our Halifax acount to other people's accounts in just a day. Overnight it was transferred to our account to theirs. simple. Now we are back to the money taking three days to transfer over. It is all just an absolute disgrace what has gone on and no doubt the wool will be pulled over the eyes of joe public for many months to come. When are we going to stop allowing the money men to earn so much money in commissions. When are hard working men, women and business people going to put their foot firmly down and let these banks and the gamblers at the SE know that it is us and our forebearers who have earned the wealth of this country not them. Damn disgrace.
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Want to see how the world works?
How can you 'settle out of court' in a matter like this?
http://news.bbc.co.uk/1/hi/business/8197737.stm
Sounds like a pay off to keep quiet to me....
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Our economy is for the most part service based, it stands to reason that those employed by the service industry (setting aside some global services)are are paid by our wealth creators. It amuses me to hear many service workers complaining about having to pay taxes in order to keep the unworthy on the dole, I even hear government workers complain in the same way, surely those who benefit most from the taxes that we all pay, the unemployed too, are government workers, local and national service providers, landlords and other businesses. The unemployed/unfit/state pensioner get a roof (on sink estates for many)and a paltry amount of cash for living on, no more, indeed the landlord gets more. Indiginous British people who are in this situation do not have anywhere else to go.
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234. At 2:58pm on 12 Aug 2009, ahj1966 wrote:
"manage to agree, very quickly, that increasing basic education in personal finance was a wholly good thing."
....but then the question is why doesn't this apply to all trades and services?
For example, should we all understand engines so we don't get ripped off by the mechanic? Should we all understand medicine so we don't get ripped off by the Doctor? Should we all educate ourselves in building techniques so we don't get ripped off by the builder?
I also thought IFA's provided the role of educators - so what were they doing?
The bottom line is the people didn't take sub-prime mortgages - they were OFFERED them. The payments were stepped deliberately to fool them.
When writings was younger he took out an HP agreement on a car - he was schmoozed by a slippery car salesman. The agreement was signed at the car shop, but quickly sold on to a bank....and another...and another.
Luckily writings was lucky and bought himself out of it early, but still had to pay the penalties. However this was a bit better than the 15k he would have had to pay for a 9k car.
Of course the bankers will blame the people who took on the debt - that's because they don't want all their windows broken.
The first rule of making a mistake is that you immediately find someone else to blame - the Government do it all the time and we simply follow their lead.
I would have had a few words to say to the wife of the 'wall street type' - like
'What does your husband actually do that is productive'?
'How does he justify his large wages or bonus when he actually does nothing of benefit to society?'
'How do you live with yourself knowing you are one of the most useless people in society - if finance collapsed you would be a pointless waste of air'
'Where do you think the wealth came from that he gambles daily on the stock market'
'Why do you think there is such imbalance and starvation in the world'
and most important of all - the unanswerable question:
'Where does the profit actually come from'
Unfortunately vacuous people rarely have answers because they never actually ask themselves these questions.
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#222 I go along with what you say about education and would title it as 'Life Skills' which also ought to encompass and encourage an understanding of human anatomy and healthy living too. Not all that is sold to us is good for us. Survival skills for the world they find themselves in is more useful and can replace and enhance many subjects studied, it is open in nature, just as demanding for those who need to delve deeper. life not played out on a level playing field, the young ought to be given the chance to at least know the lay of the ground, before the game begins. Currently, many leave school without having a clue about things that would really enhance their life chances. Credit is useful for those who know how to use it. I do know some people who do know how to use it however cannot help but overindulge in it. If it were not credit it would be something else, an addiction anyway.
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Has Robert gone on holiday with ALEXANDER CURZON ? - Missing them both
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221 and 223
- - - - - -
Is that necessarily all the fault of the JobCentre though? If you were an employer on the lookout for staff would you advertise roles with
a) An employment agency; or
b) A JobCentre
My own personal experience always led me to go down a). i used to ask my employers why jobs were never placed with te jobcentre. The employers used to reply that JobCentre applicants were the worst - assuming they turned up at all. Also employment agencies were more likely to find someone with the relevant skills
If employers think that people looking for work at the jobcentre are the worst to employ and refuse to advertise jobs there then the Jobcentre will never have good roles on the go. They assume people who interview at an agency are more motivated. Also the agency will carry out a certain number of checks on individuals. Agency staff have the incentive to try harder to place a good candidate as they have better reward/ incentive schemes for success whereas the DWP staff have none (oh wait no one likes performance related pay anymore)
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I am new to this Blog and what strikes me is the volume of Bank bashing that takes place without offering solutions. I am not saying that the banks are blameless for contributing to the current financial situation but when solutions are offered that will help the country, economy and ultimately the people get back to sensible levels of savings,spendings and borrowings why criticise? I accept that economists will have different views upon the veracity of methods employed to take the country out of recession and for that matter politicians but essentially what helps business and the man in the street is confidence.I would like to see some positive blogs please - is this a challenge for Mr Peston?
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238, writings.
Well, the answers to your questions are: it's still possible to find doctors and even mechanics and builders we can trust?
Seriously, there is a limit to how much you can shoe-horn into the education system but there have been calls from various quarters for personal finance to form part of the curriculum for some time. The reason for the other subjects is to help people to understand some whys and wherefores, be better able to protect themselves, better able to navigate the system in which we live and, therefore, better able to contribute to it.
Knowing your rights and being able to hold people to account would help with builders, etc.
Oh, and the philosophy and economics will help people answer for themselves the questions you so passionately put at the end of your piece. More power to your elbow.
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Reading this blog reminded me of something I studied when I was starting my Bachelors in Eco. It was quite a while back.....however it was something to do with the history of Money and the story of 'Good' Money and 'Bad' Money that played out hundred of years ago when the amount of 'bad' money i.e. fake etc. was so large that the govt, or whoever in those days, decided to release a whole lot of good money....hoping that the 'good' money would drive the 'bad' money out of circulation. Well what happened was the opposite....people started hoarding the 'good' money and the 'bad' money was all that was in circulation. So it had the opposite effect, Ironical isnt it...a similar story is playing out hundred of years later !!
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238. At 4:11pm on 12 Aug 2009, writingsonthewall wrote:
'Where does the profit actually come from'
This and the preceeding questions are the fundamental ones that NEVER get asked amongst "polite" society or in the media - everyone is far too busy discussing tabloid tittle-tattle.
It is our systemic ignorance of where true wealth comes from that is the challenge to overcome. We need to wake up from the Matrix.
Ruskin could see through the vanity of possessive wealth more than 150 years ago, yet we have learned nothing:
http://etext.virginia.edu/etcbin/toccer-new2?id=RusLast.xml&images=images/modeng&data=/texts/english/modeng/parsed&tag=public&part=2&division=div1
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So the banks are returning to the system that was in force in the 1970's, that is all to the good, now maybe the loans will be more reasonable and the ability of people to repay them more likely. The problem in the housing market has been spured by multiple ownership, which has enabled house prices to soar thus pricing families out because they only have one earner. May be the law should be that any house, flat or other accomodation can only be bought with a loan covered by 2 & half times the prime salary and 1 times the second, all others being ignored. That will return sanity to the market and enable lending and saving to be done securely.
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242. At 5:43pm on 12 Aug 2009, sunnyalnwick
Here's a solution nationalise the function of lending.
Recent events have confirmed that banks are too big to fail.
The market allows failure - and therefore the only body which is big enough to support lending effectively is the Government.
Sadly people don't have enough faith in the Government to run a bath, let alone run the lending system.
However logic dictates that's what must be done (and is happening at the moment)
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245. At 6:11pm on 12 Aug 2009, islider55
I think you'll find RP is on holiday WITH GB explains his absence (GB has a little carrier for his little RP)
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246. At 6:12pm on 12 Aug 2009, Hawkeye_Pierce
Agreed, but should the people be asking themselves or should the Government be asking for them?
For me, Marx's critique of Capitalism is unsurpassed and there does not seem to be a counter argument in existence that disperses it. Ultimately the profit comes from the back of the worker, even if you price in a 'Cost of risk' - i.e. investment - this might work on a man who invests his only 20k which he scrapes together to start a business - but what of the Gordon Gecko who buys and sells with very litle risk to himself or his livelihood?
The solutions Marx posed are another matter, but his theory of overproduction and diminishing profit are being demonstrated in the present.
Just because the system has got more complicated, doesn't mean the theory doesn't hold true.
The question for today is what system will prevent this? - I don't believe Marx had that answer, but I certainly don't believe tinkering with the current one is any better.
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246 Hawkeye - whilst eloquent the social dreamings of Ruskin created the Labour party. They only destroyed the economy twice.
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250 - If Marx does not have the answer he never really understood the question
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#248 writingsonthewall. You write "Recent events have confirmed that banks are too big to fail."
Yeah maybe, or maybe recent events have confirmed that system managers believe that banks are too big to fail. Just because someone believes something does not make it true.
Maybe the failure of banks is the writing on the wall. If it is then all that will happen is that the entire system will be dragged down with the failing banks.
The game is not yet over, although it could be very soon.
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#242 sunnyalnwick
Sadly confidence can never actually be achieved since those "in the know" are only too aware that the system is ready to collapse at any moment.
What will actually turn the economy around is general acclamation that now is the time for all to get into debt again.
Put another way once the herd starts moving then things will get better.
But somebody has to get into debt.
Perhaps life is just too short not to get into debt.
My complaint about the banking system is that the bankers rewards far outstrip their contribution. They also skew the real economy in this country so that we cannot compete in the global market.
Also of course we are supposed to just accept our lot. Why?
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I LOVE this blog and Stephanie Flanders' blog. Since the autumn of 2007 when I became interested in (for want of a better word) economics, when I struggled to understand quickly what was likely to happen to share prices (few quid in the system) and sold out, I have increased my knowledge of macro economics, the madness of fractional reserve banking, neo classical economic theory, peak oil, debt deflation etc, all through links and comments from this and Steph's blog. Thanks to ALL!
Long may we all share our opinions to understand better what is going on.
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Marx was just another "New York" banker`s shill a la Peston and Goondog Trillionaire.
The communist manifesto is an evil piece of filth.
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With a population of 60m people, QE of £122bn is enough to give every one of us £2000 a piece. But somehow it's appropriate to give it all to the banks to lend to us instead, (which they're not doing.) Partly because the Regulator insists on greater capital strength and partly because bankers don't want to lose their institutions, which enable them to milk the global economy for all it's worth.
The worry is that giving each one of us £2000 would simply be inflationary. (In theory.)With more Sterling about our currency should fall in value and this is also supposed to be inflationary. So we get inflation irrespective of what the mechanics of easing happen to be and whether bankers get all the money, or the people do. OK so it's not quite that simple?
It seems the ONLY ones who will be allowed to PROFIT from QE in any shape or form are banks! At the first sign of prolonged inflationary pressure, interest rates will rise quite sharply in an attempt to mop up the excess note printing that has gone on. Borrowers, be they companies or individual's, will be snared in a vicious and completely unprotected credit trap. Bankers may suffer a few write-offs, the pain for which will be passed onto their shareholders.
First they're kept alive by bailout, then they become the only beneficiary of QE, then the handful of senior bankers are subject to precious little bonus or salary regulation and finally the only ones who will suffer are the ordinary people. Who pays for massive banker incompetence? - Joe Bloggs, the ordinary man in the street. Bankers have received far far far too much protection! The ordinary man in the street has received nothing! Shame on our politicians and regulators for letting this happen.
I say if top bankers want to disappear off to their tax havens then LET them go!! You have to realise that the ones we have today, at some point in the recent past, replaced someone else who was a top banker, (who retired, did something else etc.) The ones around today will retire, change career, do something else too! They are NOT irreplaceable! (If Lehman Brother's genuinely was that important the US govt would not have allowed it to fail. The US govt probably looked around and saw they had a number of these casino bank's on its soil and viewed one failing as worth it!)
The whole point is, if Joe Bloggs is going to suffer big time, either from bankruptcy or a prolonged period of higher taxes anyway, then why didn't we just let the banks fail? The outcome would have been practically the same.
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Latest comments about someone having to get into debt to kick start the herd made me think of an old comedian who once said " I am up to my head in debt.....I wish I was a bit taller!" Thought this may lift the mood a little on this sunny morning.
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I see the BBC is reporting that France and Germany have come out of recession..... two countries that did not go the "Gordon Brown, i can save the world" route... no vat cuts, no quantitative easing... just common sense policies..... another blow for GB's credibility...
http://news.bbc.co.uk/2/hi/business/8198766.stm
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The Companies whose Pension Plans are in deficit could capitalise their underpayments from the past, as new Shares in the Company and then pay those Shares into their Pension Fund.
Thus giving their Pensioners a claim on the future Profits of their business.
Of course the Profiteers and Pirates in the City would not like it, but I'm sure they would find a way to swindle a big bonus out of it.
Does anyone honestly believe that QE will reach the Man or woman in the Street ? I don't.
Only proper cost of living pay rises will halt this Recession, coupled with a proper Industrial policy to produce more exports, and perhaps limit imports of non essential goods.
Perhaps a Luxury Tax (customs duty) on non essential imports is required.
This would provide an incentive for local manufacture of such goods, reduce carbon emissions (less transport using fossil fuel) and generate revenue for the exchequer.
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The money that supposedley is there for QE won't make it into the ecconomy to supposedley help business. As a small business making a small profit the thing that is killing me off is the longer time its taking customers to pay for services and the fact that suppliers are chasing the invoice sooner the cash flow management has become a juggling act! Mister Brown says he's made a stack of cash available to the banks to ease this what a load of dribble... you try getting an overdraft facility from any of the banks without signing away the house, wife and kids for a measley £10,000 for quantitiveley easing my cashflow to pay mine and my staffs wages.
Quantitive Easing is the supposedley government money being made available via the bank is purely ficticious they living in dreamland the bank management are protecting their interests at the tax payers expense!
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249 writings
Do you mean RP is GB's Mini Me a la Austin Powers?
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Have just seen in The Times that RBS has taken on two new bankers at a cost of £10million. Good to see our money is being well spent!!!!
Between this, an multi-million pound office outfit in London and their new adverts, just how many business could they have helped.
Why is no-one at the Government doing anything about this!!! Guess the banks are now running the country
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What will happen to Peston's blog now that the recession is over?
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259. At 08:15am on 13 Aug 2009, jolo13
...oh it's better than that - this morning the BBC claimed that 'Europe is coming out of recession' on Breakfast TV.
So Europe is now France and Germany - so all those eastern European countries in dire straits, Ireland and Southern Europe don't even get considered anymore.
I'm sure that will please them.
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262. At 09:14am on 13 Aug 2009, islider55
Yes - in fact I think they are holding the world to ransom for 'ONE HUNDRED BILLION DOLLARRRS'
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Listening to Hector Sants on the radio this morning he made it quite clear that curbing bankers bonuses and pay is 'not the FSA's responsibility'.
Just so we're clear - we have the FSA saying it's not their job, the BoE don't think it's theirs and politicians saying 'it must be someones job because the people want it'.
Does that sound familiar? - Think tri-partite system and the absence of specific responsibility and you're there...
Chaos will ensue because the city has returned to normal and the police (i.e. the FSA) have made it clear they won't be taking any action.
After what Alan Duncan said - I think people should be aware of how this system really works and what the people in charge (or would want to be in charge) really think.
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249 Smallgraycat wrote:
"Why is no-one at the Government doing anything about this!!! Guess the banks are now running the country"
Ah, was it ever thus.
What is going on? Well, it seems that the banks, who form the system on which we all depend for the distribution and allocation of private money throughout the economy, screwed up big time with their investments. They lost enormous amounts of money and were on the verge of collapse. After Lehmans was allowed to go down, the resulting chaos was enough to persuade all governments that letting another one of such magnitude to go down would mess up the whole economy and drive us further into recession. So, they bailed the banks out.
QE seems to be the BoE's way of pumping more money into the banking system (not unlike the ECB's relaxation of what assets can be used by banks for repos with it) to help it recapitalise in the short to medium term. Of course, the banks themselves are taking their job of recapitalisation very seriously by not passing on interest rate cuts to borrowers in the UK, making borrowing requirements more stringent, paying depositors proportionately lower rates of interest than were paid before, etc.
On top of this, as can be seen from the provenance of HSBC's and Barclays' profits recently, any capital raised by the banks is most likely being used to underpin investment or lending in more profitable overseas locations, again as an attempt to rebuild profitability and, ultimately, balance sheets.
QE works if you consider it a way of supporting the banks. But, in the same way that the government cannot/refuses to control what banks pay in bonuses, it does not control what the banks do with the proceeds of QE.
Any action to direct banks, or at least give them incentives, to service the domestic economy and be an engine of growth, as opposed to, apparently, waiting until the real economy picks up, would probably have to be coordinated internationally. Can't see that happening.
Looking forward, we are likely to be in for a bit of a roller-coaster ride coming out of this recession (one from which the banks undoubtedly will profit in their traditional fashion). But what of the rest of us?
People might be complaining about GB now but the real fear is how the next lot will fare at the tiller. How much will the Boy George rely on his mates in the City to tell him it's all alright really and "There is No Alternative". Oops, back to the 80s, then?
Not if I can help it.
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253. At 8:26pm on 12 Aug 2009, armagediontimes wrote:
Too big to fail? I guess whilst nothing is too big to fail (even Government) in the context of our working Economy the Fiat currency system is such that the failure of one - or many banks would put an end to mass production, such is the need for credit.
However as the banks take more and more out of the Economy (through charging interest) and give less and less back - the reliance on credit becomes greater and greater.
A lot of people assume that the credit boom were greedy buy-to-let landlords and people who were irresponsible. However there are people who have taken credit on - in order to simply survive. Many more than in previous years.
This number will be increased further during this recession as people try to make ends meet - and more and more people will slip into the clutches of the banks via their debt obligation.
This will only serve to ensure the banks are even more 'safe' in that they will not be allowed to fail - the moral hazard goes out of the window as every bank knows it will always be saved by Government, allowing them to take bigger risks - which in turn makes them more likely to fail.
I sincerely hope the news from Germany and france is reliable and that this may be a turning point - however I don't want to be around when the next boom collapses.
It's like a game of poker where you must bet regardless of your hand - every round you participate in the less chips you have at the end of it - some get lucky and win a hand, but those who don't pass their debts on to their children - giving them a faulted start.
as we go down the generations we will see more and more families who are totally reliant on either credit from banks (with no actual hope of paying it back) or handouts from the state.
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#266. writingsonthewall wrote:
"this morning the BBC claimed that 'Europe is coming out of recession' on Breakfast TV.
So Europe is now France and Germany - so all those eastern European countries in dire straits, Ireland and Southern Europe don't even get considered anymore."
The BBC reported that France and Germany were now out of recession because their economies grew in the last quarter. They also reported that the Eurozone may be coming out of recession because the rate at which its economy was shrinking had slowed.
But why let facts get in the way of a good moan?
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Usury was once defined as simply charging interest.
In the time that it was illegal inflation was virtually non existent. If a barrel of apples cost 3 coins at the beginning of a king’s reign, then the chances were it would be the same cost when his grandson sat on the throne.
Over the years the influence of money lenders reached the point where usury became defined as excessive interest charges.
Thomas Aquinas disagreed, arguing that charging both for the money and also spending it was immoral.
Dante condemned usurers to the 7th level of hell.
These days when the word usury is mentioned we often only think of manipulating money in immoral or unethical ways. In doing so we have let the usurers redefine the law, along with ethics, morality and the dictionary entry of the word itself in order to ply their trade.
But what does this have to do with RBS and quantitive easing? Well yet again it is the same basic premise that the entire economy is failing on- avoiding the fundamentals of how an economy works in order to do what 'they' want.
In this case the fundamentals are these:
1) Money has no inherent value, save that of what it is printed on.
For those not quite getting what that means, think of this- how much is a piece of paper worth if it has a note scribbled on it from someone saying he owes you 5kg of flour? It's worth as much as a fraction of a gram of second hand paper and ink.
Now the promise might be actually worth the 5kg of flour, but the inherent value is solely the piece of paper.
This is why so many civilisations used silver and gold coins. So that their currency actually had an inherent value.
1b) The theoretical value an item has is solely down to what you believe it is worth.
2) Money is used as a method of trading between persons of very different trades, without having to go through several intermediary stages to do so.
In other words, a wheat farmer who needs a new combine doesn't have to trade several bags each with a hundred different other tradesmen in order to provided the combine manufacturer with the shopping list of items they want in exchange for their machine. Nor does the combine manufacturer have to accept ton upon ton of wheat from each of the hundreds of farmers he sells to over the years and then have to swap it by the bag for the materials he needs etc.
3) The total monetary value of a system is based upon the share of the resources that money represents.
This 3rd point is of great note with quantitive easing. By 'printing' extra money a government, by definition, reduces the theoretical value of the money already in existence. If the amount of money each individual member of the general public has does not change then, by definition, the proportion of the nation’s wealth that they possess has reduced- and the proportion held by the usurers has increased!
In effect, what the various governments around the world have done over the last few decades is to remove an ever increasing amount of control of the economy from the hands of inherent values, and put that control into the hands of usury.
Banks have been allowed to lend more money than they actually have, and in many cases more money than they technically even have access to!
They have made money from the work of others, without any requirement to earn this by taking a share of the risk. Instead they have passed on the costs of poor investment choices to their reliable customers and/or been bailed out by the tax payer.
And why? Because the reshaping of the economy, at the behest of the financial sector over the courses of successive generations, has created one reliant upon credit.
So as we worry about wholesale funds, toxic debts and lending being injected into the economy, we miss a much larger issue-
Why are we so reliant upon usurers in the first place?
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The government are guilty of gross incompetance, end of.
However Brown can be cited as the saviour of all things fiscal is beyond me. All he has down is misled the public in return for a bumper payout and gold plated pension when he retires from politics next year and takes the banks gratitude back to his highland lair.
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#271 rbs_temp Good to see your veneration of facts shining through. Here are some more facts:
The Chief Credit Strategist for RBS is a Mr. Bob Janjuah. Mr. Janjuah has advised all clients to take profits and exit the markets, as he is expecting another significant leg down in the autumn.
Mr. Janjuah suggests that people should consider the question as to who bails out governments after they have bailed out everyone else.
Perhaps you should have a word and put the record straight.
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#270 writingsonthewall. You seem to have a touching faith in the power of government.
"The voices in your head are calling
stop wasting your time, there´s nothing coming
only a fool would think someone could save you"
The Clash
Both the average guy in the street and the financial oligarchs would do well to pay heed to that.
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good post 272.
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Robert can you explain, for those of us outside the financial industry, why it is that banks can have loan/deposit ratios greater than 1? Is there some argument that there would be no 'progress' without a tendency towards inflation?
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272 - great post - you can come again.
Gold is money - Paper is Lies
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#274. armagediontimes wrote:
"#271 rbs_temp Good to see your veneration of facts shining through. Here are some more facts:
The Chief Credit Strategist for RBS is a Mr. Bob Janjuah. Mr. Janjuah has advised all clients to take profits and exit the markets, as he is expecting another significant leg down in the autumn.
Mr. Janjuah suggests that people should consider the question as to who bails out governments after they have bailed out everyone else.
Perhaps you should have a word and put the record straight."
I fail to understand your point. What, exactly, would you like me to set straight? What you have written is true - Bob Janjuah has stated his belief that there will be a major correction, of up to 40%, in the equities market in the third quarter of this year.
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Given the rise in unemployment figures yesterday - 12.08.2009, Peston and or BBC might like to investigate the huge amount of commercial property for sale or to let in places like Bradford, Leeds and Newcastle. What is the story behind all this vacant property ? Is it caused by the recession, companies and jobs going overseas, over development, or simply the Internet in the modern age so less office space is required because people can work on the move or from home ? What future does a place like Bradford have, hopefully more positive than the present. Is the huge amount of commercial property that is for sale or to let another bad debt mountain for the banks to deal with, and have they gone large on commercial loans in the same way as they did with buy to let and residential mortgages ?
Economists are 'surprised' at the growth in France and Germany today in the same way that they were 'surprised' at the depth of the recession. They should not be surprised and know that boom and bust is caused by banks lending and increasing debt with the approval of governments and regulators. Eventually a limit is reached as a large number of people struggle to pay back debt even at zero interest rates. Good ecomomic times will only return when debt is paid off, house prices are affordable relative to salary, working people are not taxed to the max, and the UK makes things that people need, for example electric cars and the infrastructure to support them.
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271. At 11:47am on 13 Aug 2009, rbs_temp
Actually you are WRONG
The business guy who does his slot at 7:45 said "EUROPE is coming out of recession"
It may have been a slip - but HE SAID IT.
...but why let the fact that you didn't see it get in the way of you correcting me eh?
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272. At 11:51am on 13 Aug 2009, LeviticusS wrote:
Usury was once defined as simply charging interest...
Excellent post LeviticusS
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236. writingsonthewall wrote
Maybe they got a really good offer? Maybe their legal advisers told them there was little chance of success if the matter was pursued further? Either way good to see HMRC score a victory:
http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/6017758/HRMC-wins-court-order-for-access-to-offshore-accounts.html
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#272 – "Why are we so reliant upon usurers in the first place?"
Well one answer, and I hope not seen as glib, is that we all want to live in well constructed houses and not the mud huts that our ancestors did. In other words, we want to have today something that costs more value (of whatever nature) than we have in our pocket – and for which its reasonable to say that the long-lasting value of a good roof over your head can be paid back over a period of time. It is also reasonable to expect to have to pay a fee for that credit, otherwise why would anyone bother to do it for you. Surely there is nothing wrong with the fundamental concept of "credit" – what is wrong though (in my opinion) is the use of credit where the value of the purchase is only instant or negated over a (much) shorter period of time than the credit.
Then, in keeping with many other postings in this thread, we are back to the assessment of risk – is the person receiving the credit got a cat’s chance of paying back over the course of the credit, and if they don’t will the prevailing value of the thing bought cover the outstanding credit amount.
Around 20 years ago I recall applying for a loan, and having to state what I was purchasing (a car). Whilst I don’t think it explicitly stated anything on the form, I would have expected that an application for a loan to go on a 2 week holiday would have been rejected. Up until recently (and maybe even now) I imagine I could have borrowed a lot more money than a 2 week holiday would cost, literally no questions asked.
More fool those that did, and more fool those that lent to them. And more fool me for being one of the mugs now paying for them both.
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272. At 11:51am on 13 Aug 2009, LeviticusS
Nicely put.
It seems more people than I expected know that ursury is wrong and is ultimately slavery for the modern age.
It would also appear that most major religions also take this view (or at least they did until they were manipulated by man).
So what is to be done?
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Moderators - it's taking more than an hour to moderate posts when there aren't even that many here today.
Have they been cutting staff at the BBC again in order to maintain the expenses of the executives?
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267 writings
Too Funny! And quite apt.
However Dr Evil's plan could be unravelling, as the British Board of Censorship - I mean Broadcasting Corporation have removed the original post.
The plot thickens...........
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#281. writingsonthewall wrote:
"rbs_temp
Actually you are WRONG
The business guy who does his slot at 7:45 said "EUROPE is coming out of recession"
It may have been a slip - but HE SAID IT."
I'm not disagreeing with you, so there's no need to shout. He said that Europe is coming out of recession - is coming, present tense, not has come - because the rate of economic decline in the Eurozone has slowed.
He also reported that France and Germany have come out of recession, because they have seen economic growth in the past quarter.
He did not say that Europe has come out of recession.
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#272
"Why are we so reliant upon usurers in the first place?"
Modern society has attributed the economic success of the last 200-250 years on the abandonment of usury restriction instigated by Jeremy Bentham. Alas this was a false premise. Economic growth is actually gained through industrialisation. It was James Watts et al. not Adam Smith et al. that built our wealth.
For a good contemporary discussion of usury, see:
http://www.che.ac.uk/publications/usury.htm
To understand how big a fraud the current money system is, see Michael Hudson.
First Ruskin, then Soddy, tried to warn us, but the average man in the street was both too powerless & too cowardly to challenge the status quo. Why do we need debt? It is not a physical concept. Once something worthwhile is built, it is already "paid for". Our wealth is the things around us, not the money that we possess, or the "value" of our homes.
What is the solution? Well, I'm not quite there yet, but I'm just tucking into Money Changers by David Boyle:
http://www.amazon.co.uk/Money-Changers-Currency-Reform-Aristotle/dp/1853838950/ref=sr_1_1?ie=UTF8&s=books&qid=1250173394&sr=1-1
Perhaps the answer lies within.
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284,
Actually I think you will find that there is a much larger picture here than you see. Identifying risk is impossible, this primarily due to the forces of capitalism (those who seek to exploit the poor whether indigenous or otherwise).
You see its impossible to determine one’s credit worthiness whilst you are plotting to remove their source of income some finite years down the line – Thus raping them of their last several years effort to become a home owner.
And that sir, is the real problem here!
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287. At 2:46pm on 13 Aug 2009, islider55
Oh no! - and I bet I know what it was removed for...
"defamatory to person, or persons"
i.e. Robert or Gordon might take offence.
Isn't it interesting how journalists can give it out all day - but cannot take it - very similar to politicians in fact.
Maybe people seriously think the Dr Evil reference is serious - or then again maybe people aren't that foolish.
...but obviously the Beeb thinks there are people foolish enough out there to remove it as it might cause members of the public to dress as Austin Powers and use their Mojo to fight the good Doctor.
It's funny that no-one takes any notice of the good, relevant and important points that are made on this blog about how we're witnessing the 'crime of the century' - but as soon as you compare a man to a fictional character it's straight in the spotlight.
Come on moderators - aren't you human too? Surely you must be worried about the future as much as we are.
We're all cogs in the machine, but it doesn't stop us sticking once in a while...
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284
Twenty years ago I worked for a high st bank, and then you could apply for a loan for a holiday, the only extra criteria then was that the repayment period could be no longer than 12 months on a loan for a holiday.
Normal credit risk assessment applied for this type of loan as for others such as car purchase or home improvement.
I also seem to remember that the loan risk assesment for any loan application was looked upon much more favourably, if the applicant took out the wholly extortionate payment protection.
Or was I just dreaming that last bit, to protect me from any Libel prosecution???
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"The Bank of England has warned that the UK economy still has some way to go before it recovers from the effects of the financial crisis2
It winds me up a treat how the BOE talks so blithely about recovery. Recovery - in any sense you care to name - will only come from a Herculean effort by already tired and overstretched taxpayers (us) working our 'fingers to the bone' - as the Guvt lifts ever more tax from us to pay for something we didn't cause or even care about - the banking crisis. Why?
GC
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I for one will not forget the way the banks have behaved during this time of hardship. They are making more profits than ever despite being totaly responsible for the whole mess. So much so, that one may be forgiven for thinking that they had in fact engineered it.
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Here's a good one to pass the time and to get your backs up.
I was listening to Radio4 a couple of days ago and they were talking about the cracking down on city bonuses and how it would lead to a 'flight of talent'.
The interviewee said something along the lines of:
"these wealthy people already have money in many different countries and therefore moving to a place offering better pay and less taxation will be easy for them"
What he seems to be saying is that if we don't pay the mercenaries what they want then they will happily go and 'bat for the other side'. What's particullarly irritating is the fact that they have money in other countries means they are avoiding paying their dues to the state (like the rest of the population does)
In addition to this there was an assumption that there is talent in the city of London in the first place - in order for it to 'fly away'.
Well I've been working in the city for about 8 years now and I have seen very little talent. I've seen lots of 'overweight', plenty of 'un-earned arrogance' and mountains of 'incompetence covered by bravado' - but very little actual talent.
Most of the talented people I have met, have gone and set up their own business elsewhere, returned to education or gone travelling the world. Talented people see the city as a 'short term money making system' - but their goals are often much bigger and better than simply making money.
If the greater public knew the real truth they would not be concerned about 'the flight of talent' - in fact they would welcome it.
It's a bit like the old time sooth-sayers or witch hunters. As long as you keep everyone believing your image then they will never question what actually lies beneath. If someone does question you then you simply accuse them of 'being a witch' - and hey presto no-one ever questions you again.
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rbs_temp - Writings....
I see that divide and conquer is alive and well.......................It's time to focus your attention back on to the Bankers, politicians et al....
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rbs_temp
I originally said:
"...oh it's better than that - this morning the BBC claimed that 'Europe is coming out of recession' on Breakfast TV."
What isn't present tense about that?
My point is that a man stands on national TV and speaks to millions about important Economic news and can't get it right. I don't believe the man is stupid - it's the BBC trying to put a positive spin on the subject so all the fools run out and borrow more money to buy more 'stuff they don't need' and start the whole boom again and enslave themselves further and further into debt.
It's complete mind manipulation.
Speaking of baseless and factless comments - has anyone seen Baroness Verna's green shoots she saw back in January?
http://news.bbc.co.uk/1/hi/uk_politics/7828549.stm
Don't forget people - the liars must be brought to book. This is someone who is the 'Business minister'.
Is that talent we should keep at all costs?
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289. At 3:25pm on 13 Aug 2009, Hawkeye_Pierce
Interesting - this line was key for me:
"Usury is what marks the distinction between money being simply a socially contracted abstract mechanism to lubricate between supply and demand, and money as an end in itself"
This is what confuses most people - money is fine as an interchangeable and internationally recognised commodity which assists in the exchange of illiquid goods and services. However the essence of money today is no longer simply that.
I am also interested in this sentence of yours
"Economic growth is actually gained through industrialisation. It was James Watts et al. not Adam Smith et al. that built our wealth."
I totally concur with this thought - and it's the FIAT and FRB which have allowed Economic growth to be 'faked' in the absence of real industrial growth. The world has been taken over by tricksters and conmen (or maybe the devil himself) - a phenomenon not unknown to invesntors and industrialists who were often left poor and destititute while someone else stole their idea and made money from it (al la Dragons Den)
I shall read the second article at home...
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This article has ben here all week. Is Robert on holiday?
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#290 "Actually I think you will find that there is a much larger picture here than you see"
Please let me just point out I DO see a much larger picture!
I was simply responding to a single philosophical point, as to whether usury (interest on loans) is an evil.
That seems to be the trouble with going back to fundamentals - someone then dives in to overlay another prevailing evil (in your case, capitalisism and the fact it comprises a winner and a loser), as if that somehow proves the fundamental is wrong. It doesn't.
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#295. At 4:09pm on 13 Aug 2009, writingsonthewall wrote:
... "In addition to this there was an assumption that there is talent in the city of London in the first place - in order for it to 'fly away'."
... "If the greater public knew the real truth they would not be concerned about 'the flight of talent' - in fact they would welcome it."
I think you're absolutely spot on here, the would-be "masters of the universe" in the City wish to perpetuate the myth of "financial engineering," whereas we should be supporting and developing REAL engineers in the long and proud tradition of James Watt, IK Brunel, Trevithick et al and their spiritual descendants whom you also alluded to earlier.
An exodus from the City would be entirely welcome and hopefully these jobs will never be replaced because as a nation we will wake up to the fact that we need to create genuine wealth and quality of life by putting our efforts into areas like engineering, manufacturing, technology R&D, science, medicine, agriculture, crafts, education, culture, sport and the like.
Once the City has been cut down to size, no-one will ever again put much faith in devising ever more obfuscated methods of gambling on transient share price movements and so forth, which is all this much vaunted 'financial engineering' amounted to. The degree of wilful obfuscation in these instruments was deliberately designed to conceal the level of risk, until it was too late to do anything except fleece the taxpayers for a massive bail-out of our rotten casino banking operations.
France and Germany of course are exiting the recession somewhat more smartly than us, because they never gave much credence to the high-rolling big swinging dick financier's nonsense in the first place and they backed their genuinely productive engineers, manufacturers and farmers instead.
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Change of subject No.1
The power of the financial markets over an an incompetent government.
I am currently trying to sort out the credit card debts of one of my family.
The Credit Card Co.-having spent the last few years increasing the limit on the card (on their own initiative)- now don't like the total sitting on the card. So they have determined to raise the interest rate applicable on the debt.
We complained that -at a time of shrinking UK interest rates- they had no justification in raising them, and 'declined' to accept the raise. We asked them to convert the debt to a loan, first they agreed, then they refused.
They would like to continue charging at the rate of 20+% (per cent), making money hand over fist. Abusing their power. We don't like that idea.
The matter is not over yet.
My point is this. The Credit Card Companies have been enthusiastic co-conspiritors in the current financial melt-down, stoking debt by raising credit limits to everyone except those who actually applied for a raised limit......
(Yes, yes, I know, nobody forced anyone to spend/borrow money, but it is your mother and the Government's job to protect us from our worst excesses.........)
So, why not make it obligatory that a Credit Card Company (especially if they raised the credit limits) has to offer a conversion of the debt to a term loan at a competitive rate. This would be triggered either at the behest of the customer, or if some pre-determined default point has been reached on non- or late-payment. Credit Debt gets paid off, customer loses his card, but lives to fight another day.
Go on Gordo, make it so, at least while you hang on to power.
Regards,
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Change of subject No. 2.
Recession turning the corner?
Dream on.
All that has happened for the past 12 months is that someone else has been footing the bill for the financial sector. They have had a free ride -paid by us and the money presses- and gleefully taken their slice off the top.
Jeez, if all of that couldn't produce a single positive (fake) green shoot 'til now, then maybe people could now understand how deep the hole really is.
Believe me -and lots of others- this is no U-shaped or V-shaped recovery, this (at the very best) is a slow Nike tick, and objectively is the proverbial dead-cat bounce -for another couple of years minimum.
The creek we are up is hardly worth paddling in. We need to jettison some non-paying passengers or make them start pulling on their oars. It would also help if the captain wasn't asleep on the job, dreaming of his legacy.
Regards
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302 Allmyfault
Why not try and get a term loan from another, any other, financial institution (at the most reasonable rate available), pay off the card, cut it up, burn it, post it back to the card company.
Oh, if only we could start a campaign to have everyone limit the use of their credit cards to where no alternative is possible, i.e. purchases over the phone, and always pay off the balance before any interest is incurred! Console yourself for one sweet moment with the look of anguish and despair on the faces of the credit card company owners as the realisation that any chance of making a fat living off a gullible public was evaporating before their small round eyes.
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Re: 289 and 298
I happen to agree with much of what you have to say about the society that we have long cherished but can no longer afford. What we need in this country is a quiet revolution to reassert some of the ideals and ethics that once made the UK a proud and prosperous nation. Albeit that the next time round we would need to see the wealth distributed more fairly and equally.
It seems to me that we have passed the point in this country where the wealth creating sectors can continue to support the cost of paying the people who are responsible for administering and distibuting this wealth.
The cost of maintaining the banking and finacial sector is way too high because the people working there are relatively speaking overpaid for what they actually have to do. There are far too many professional shysters and con men receiving vast sums of money simply because they are allowed use other peoples hard earned cash to circulate this money. Very few of them are genuinely talented wealth creators working to build a better nation. In fact a good number of them are genuinely talentless wealth destroyers whose only aim in life is to grab as much money while they can.
The cost of maintaining law and order and our leagal system is becoming prohibitive for many of the same reasons. And the cost of running our prisons seems to have gone way over the top.
That of course leads us to the continuing escalation in what it costs to run central government in Whitehall and local government in the shires.
There has to be a fundemental shift away from paying so many professional scroungers the grossly over inflated salaries that they now demand and a move has to be made towards rewarding these people with the more modest remuneration packages that engineers and scientists working in other wealth creating sectors recieve.
I hope I haven't upset anyone!
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303 Allmyfault
This is a polite quibble.
The big bonuses of the financial sector both now and in the noughties and nineties were predicated on the various asset bubbles and overpricing created by the mis-priced liquidity made available by the private sector: a bit like, if you will, estate agents boosting their bonuses by talking up the market, and just as respectable and admirable in every single way.
In turn, that mis-pricing and causing of asset bubbles was a direct cause of the current economic crisis. In essence those big bonuses were and are predicated on the hardship of anyone who has had to take a pay cut or lose a job in the current recession: in a very similar way to the way in which the bonuses of Enron traders were predicated on the hardship of single old ladies caught in Californian power cuts and about which those same Enron traders were once recorded having a jolly good laugh.
I wonder, do you suppose the beneficiaries of very large bonuses in the City of London will turn up for work tomorrow morning, loll back in their softly padded chairs, take a slurp of their grande skinny lattes with two shots of hazelnut syrup and have a good old belly laugh at the miserable unfortunates who are not as god-like as them? Surely not! I'm sure they deserve every penny.
Any attempt to change the bonus system that has already been identified as contributing to this financial meltdown would be interfering with the natural order!?
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#306 ahj1966
If you think there is a bit of inequality going around at the moment just wait until the Blue Party franchise gets in next year.
They will attempt to get what is left of the real economy to pay for the past excesses of the bankers.
They will do this by applying cuts, taxes and stealth taxes to all non bankers.
Bankers will be able to wriggle out of taxes. It is what they do.
Peston has it right. Whether we like it or not banking IS the business of the UK.
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In all the discussion concerning the plight of our banking system and its malfunctioning in terms of the British Economy as a whole, we seem to forget the root of our troubles - our total reliance as an economy on service indutries for gross domestic product. Since the days of dear old Iron Lady Thatcher our capability to produce to meet our needs and to export to others has totally disappeared. Recent denigration of the state of the British Economy (-1.8 GDP) as opposed to the newly dawning economies of Germany and France (with recently announced minor increases in GDP) ignore the basis of their wealth production.
Margaret Thatcher was so dependent on the money men who made her political success possible (and to this day are doing the same for David Cameron) and so anti any notion of workers rights and protectionism in her vision of a free trade world (a la Adam Smith) that we lost all diversity in our economy. Sheltering, as the Tories were able to do for their 18 year stint (1979-19997), in the security of the wealth created by sucking the North Sea dry of oil and gas and selling the utility companies to all and sundry. How would our economy be doing if like the Norwegians we kept our oil wealth in national control, rather than lining the pockets of the afore mentioned money men. Our utilities are now owned by French and German companies, who by the way have increased their GDP on the back of our consumption.
The Germans are the manufacturers of Europe, and once consumer confidence returned they started producing again, their banks loaned to industries that started producing again. Likewise in France people eat, the whole of Europe eats so agricultural produce increased their GDP, along with manufacturing of industrial products. What has Thatcherism left the British public - banking (corrupted by greed and bonus culture and still with "loads of money") - property development by people who used to work in industry now "developing property portfolios" at the expense of the homeless (who used to be able to afford to by a home) - out of town retail centres (town centres decimated by the americanisation of shopping habits) where products are shipped from around the globe; food from East Africa and South America; products from China and South Africa. All in the name of the Adam Smith quick buck - no wonder they wanted him on the back of the £20 note.
The one lesson we need to learn, and quickly, is that the money men have to corrupted our economy, so diluted our general means of production, that the fantasy of the entrepreneurial spirit (Rolls washing machines; Freddie Laker Airways; Sinclair ZX81 and C5 car(?); Amstrad computers and communication systems) "want to buy a Rolex watch" attitudes of hedge fund management. The Emperor has clearly for the last 30 years been stark naked, and none of us in our rush to gain favour with the grace and favour of DEBT have not admitted to what is frighteningly obvious - we as a nation no longer pay our way in the world. Accounting scams where debt becomes wealth; where pension funds are the playthings of corporate management and company administrators. Margaret Thatcher's legacy of "society is dead" and the "new me society" is what we see before us, a situation that cannot be rectified without selling what we nolonger own.
Maybe we should all emigrate to whatever nation will take us and leave what remains to the hedge funders to gamble away.
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#302 - "Yes, yes, I know, nobody forced anyone to spend/borrow money, but it is your mother and the Government's job to protect us from our worst excesses........."
I don't get you, please tell me you were being tongue-in-cheek.
The Government's job is to protect US from your excesses, not YOU.
Or would you like them to sanction everything you buy from now on, over a limit of say £20? Because they'll happily do that in the future, if you let them.
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308, Excellent post and all too true. We are goosed!!!
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France and Germany emerge from Recession - into Depression !
Just check out the growing unemployment and year on year falls in consumer spending.......
Lies damn lies and Gov't statistics.......
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308
It wasnt Margaret Thatcher or the bankers who destroyed our manufacturing base. It was the unions and restrictive practices. Mrs Thatcher was just the antidote to years of union power which meant that managers were unable to manage. The Winter of 1978 was probably the worst year in our history for defining what became known as the British malaise or disease but the illness had been incubating for twenty years before that. Inward investment was clobbered as multi-national firms got tired of having the union gun held to their heads. Productivity went out of the window and we became hugely uncompetitive.
Thatcher set out to try to restore some sanity to working relations between management and its employees, and in the process bringing the unions down to earth, but it was too late - the world had moved on, and with it any chance we had of competing for a share of manufacturing.
The sad fact is that we have always had people of great ingenuity, examples of which you have given. However, in recent years they have been stuntified - even driven away by lack of support from our leaders. Whichever government we have from 2010 will need to recreate an environment in which they can thrive and get us back to the position where we can hold our own in world trade.
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303. At 6:53pm on 13 Aug 2009, allmyfault wrote:
Change of subject No. 2.
Recession turning the corner?
- I saw an interesting piece on you tube last night, a college lecturer in the States who is predicting October will be the time the brown stuff hits the fan - triggered by the end of the fiscal year revealing the true extent of the US crisis.
They are expecting the Dollar to collapse and to be dropped as the international benchmark as the US have printed so much recently.
When that happens, it's every man (or rather country) for himself - 1929 style protectionism.
There are already 'homeless camps' springing up around the states as evicted homeowners take to living in the park.
If you think things are bad here - they are much further down the line already in the US - a prediction of our future perhaps.
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304. At 7:27pm on 13 Aug 2009, ahj1966 wrote:
"Oh, if only we could start a campaign to have everyone limit the use of their credit cards to where no alternative is possible, i.e. purchases over the phone, and always pay off the balance before any interest is incurred! Console yourself for one sweet moment with the look of anguish and despair on the faces of the credit card company owners as the realisation that any chance of making a fat living off a gullible public was evaporating before their small round eyes."
-Alternatively - why not everyone deliberately default on their debt and hit the IVA - regardless of whether it's needed or not. That will bring down all the lenders and we reboot the system and all start again debt free. Sure I might loose out because I have net savings - but to bring down the oligarths of this country - it will be worth it. Just think of some of those bankers faces when they realise the game is over...
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Germany and France, (of all countries) exiting recession before the U.K. Before, the U.K that can't be right??
How can France be doing this? Haven't we been told how their whole society is based on Socialist ideals, with their "unhealthy" trade unions and their attitudes, (often leading to ferry crossing disruption and our own M20 being blocked up with lorries for days?)
The news reports seem to be suggesting that the French are better at business than we are! That can't be right, surely? How can these reports be true, because we've been told for years how British business is so superior to the French model? It is, isn't it?
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Please - if you only do one thing before the lights go out - at least watch this video.
http://www.youtube.com/watch?v=-e8rt8RGjCM
This is what I keep going on about - also note the fact that 90% of what Marx wrote was about Capitalism and only 10% was about Communism.
When you watch this video you will find the logic indesputible - and as yet I cannot find a theory which discredits it.
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305
"There has to be a fundemental shift away from paying so many professional scroungers the grossly over inflated salaries that they now demand and a move has to be made towards rewarding these people with the more modest remuneration packages that engineers and scientists working in other wealth creating sectors recieve."
....I'm glad to see you recognise the real scroungers of society live 'above' and not 'below' in the social sense. Very enlightened and I hope others will start to believe this too.
I completely agree with your sentiments - the highest paid people should be (not in a particular order)
Inventors
Scientists
Teachers
Doctors and Nurses
Sanitation workers
Security + safety (police, fire, defence)
Food producers
...etc - as these all contribute to the development, health and wellbeing of society
The lowest paid should be
Politicians
Financial services
Royalty
Legal professionals
Appointees (lords etc)
Landowners
With the current imbalance of wages although the list on top is much greater than the list on the bottom - the bottom can afford to pay for the top!
Viva la Revolution
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308
I listened to a similar point of view recently which basically took us from the 1970's - when the Bretton Woods was floated - to today and demonstrated that each bubble has simply been replaced by another.
Most recently the tech bubble in the Dot-com boom was merely moved to the property bubble, that has collapsed and has now been replaced by a 'bailout bubble' - all of which is simply creating a deeper hole for us to fall into.
(The information was for the US, but the same applies here to some degree)
The goose is cooked.
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312. At 09:50am on 14 Aug 2009, majorroadaheadagain wrote:
You must have missed some history class.
The workers and unions didn't simply decide to strike because it was a sunny day! - They went on strike in the 70's because then (as now) they were not prepared to pay for the crisis inherent to the system of Capitalism.
All Thatcher did is ensure that they could no longer do this and the result is the workforce you see around you - poorly paid and unhappy, because 'the dream' of enterprise was just that - a dream.
The Unions were most active in manufacturing - which is why she allowed that area to decline, along with other industry - and everything was concentrated on finance - an industry which produces nothing of value.
The result is (as someone astutely put above) that France and germany (who still have some manufacturing) are able to re-stimulate their Economy - where as we cannot.
Maybe Thatcher simply didn't understand what she was doing and was ill-advised, but certainly her legacy was the root of the serious trouble we're in now.
Just look at mining, it was completely destroyed (mainly because it was heavily unionised) - we sold of North Sea oil and hey presto - we're now dependant on the Arabs to keep the country moving (hence the war to secure resources)
What people don't get is the longevity of decisions - what the Government does today is not felt for decades. The same is true for Gordon and his bailout.
The stark reality is that only the industries which still have a union presence (Rail, mail etc.) show enough solidarity as to not have to pay for the bailout through wage and job cuts. For the rest of us we will be paying like suckers for years - well those of us lucky to keep our jobs.
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#312 Majorroadaheadagain
You're not seriously trying to suggest that our manufacturing base would not have been outsourced/transferred (whatever you want to call it) to the Far Eastern sweatshops anyway? Cheap labour (even child labour) was bound to see to that in the end.
The much less unionised U.S has seen much of its manufacturing go that way.
However, German manufacturing, which is unionised, has remained in Germany. Yes the credit crunch has hurt their manufacturing because of it's higher costs, compared to the far eastern alternative. But union issues were not a problem for the German economy before the bankers came along and totally trashed the western world.
Maybe if we had some able bankers in Britain we wouldn't be in the mess we are today. Stop blaming the union issue of 40 years ago for problems today. The union problems of the 1970's did not help us at all - but that was back then! This is today, we've had 40 years to recover - then a load of bankers came along. You seem to fail to realise this!
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In response to majorroadaheadagain (#312) I would point out that the examples of entrepreneurs given all failed, went bust complaining about the lack of financial support. Try and look at the realities of your beliefs and come out of your Thatcherite trench.
Your comments concerning the unions being to blame for the downfall of British industry needs further analysis, rather than Tory rhetoric. Firstly, companies are not run by unions who represent the means of production, they are run by management whose function is to get the best production from their workforce at a reasonable cost. Yes there was conflict in most industries in Britain from the 60s onwards, I would argue as a result of a management style of them and us, Tory governments proclaiming "you've never had it so good" (MacMillan) while workers were facing ever more restrictive management practices. The miners' strike was in defence of an industry, way of life for whole communities across Britain, not about union power as posted by the Tory government and the media. Whenever personality rather than issues are used in a dispute you know the Conservative Right are fighting to the death. The truth is that Britain has one of the largest coal stocks in the world (now unusable as a result of pit closures, but we import coal from Poland and other countries around the world. Not because the mines were unproductive, where Coal Board reviews indicated most pits were viable, but because Thatcher and her team wanted revenge for what had happened to Heath's government (again a situation mismanaged by an autocratic management system).
My case is that if you look at the industrial success of this world, Japan and Germany for the last 40 years, management is about co-operation not conflict. In Japan the management see there responsibilities lie with ensuring happy workers, factory line committees reviewing dayly goals and outcomes, within the control of the workers themselves not from management dictate based on greed or perceived need for profit. British workers have the least holidays, longest working hours of any workforce in Europe, and at the time inquestion there were even fewer holidays.
So please let nots perpetuate the myth that Thatcher was turning British industry into a world leader, her government's intention was to weaken the strength of the workers of this country and restore the old status quo of "them and us". to give them credit they succeeded as the divide between the richest and the poorest in the country is only exceeded by a few minor oil rich states in the Gulf. Wealth has continued to polarise around the few, while access has been increasingly restricted to those who, in the likes of Japan, Germany and now India and China, would be seen as the true wealth creators - the makers of the things we sell, not the makers of profit on paper fiction that eventually bursts.
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...and so the imbalance begins....
Why Airbus and not some of the other struggling industries?
http://news.bbc.co.uk/1/hi/business/8201222.stm
...and isn't this a bit foolish considering it's highly likely plane orders will drop this decade as fuel price rises and people reduce their business and pleasure flying?
Sounds like another bad investment by the UK PLC.
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Absolutely shocking stuff from the BBC!!!
http://news.bbc.co.uk/1/hi/business/8199933.stm
The BBC started the day with Repossessions Up type heading, now changes to Repossessions easing headline. When you go into the article and read it, it makes for grim news.
What is going on, was this headline changed on the direct orders of Emperor Brown?
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writingsonthewall
My history class took place in the 1940s so was very much about a working class boy's thoughts on Atlee, Bevan and the Iron Curtain.
My memory of what happened from the 50s up to when Thatcher was given power by the British people because they had had enough of the flying pickets, restrictive practices, bully boy tactics, militancy and a general disregard for the people of this country in order to pursue their own narrow interests is different to yours. Admittedly, it is coloured by the Red Robbos and the Scargills of the world, but I hope balanced by the fact that there were some first class union leaders who contributed a great deal but whose voice tended to be drowned out. The Len Murrays of the world.
Although I belonged to a union myself, and believe in the concept of people organising to make sure that they are properly represented and are not exploited by management (as has often been the case) I never understood why the country could be brought to a standstill while preposterous pay claims were pursued with no regard to the poor, the sick, the elderly etc who had to walk because there was no public transport, who couldnt get their post, were blacked out etc etc. Look back at some of the pay claims in the 70s and ask why a group of people with power would ask for 10-15% pay rises and go on strike if they didnt get it. In my view the answer is they had power and had little regard for those without muscle whose pensions and benefits were being left behind.
I have no doubt that short-sighted governments from Atlee onwards must bear a lot of the blame for not following Drucker's mantra of feeding your opportunities and starving your failures. They did just the opposite hence the decline. There was a lot wrong with the 80s, but the die was cast for manufacturing long before then. In my view Mrs Thatcher's greatest achievement is manifest in the common sense way in which industrial relations are pursued today. Whether she intended it that way or not is a moot point.
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Is our Bank of England making any profits or losses out of this QE?
Because of QE, the BoE reckons that the yields on UK T-Bonds are lower than otherwise. Which means UK T-Bond prices the BoE paid through QE are also proportionately higher than otherwise.
Meanwhile, BoE is coining interest on its Bond purchases with its invented money. Nice trick that yields a nice little earner. Or maybe not?
Presumably, when BoE stops buying UK T-Bonds and inflation eases upwards, their yields will rise and their prices will fall below what the BoE paid for them. My question for all you City experts is: will the interest rate profits made out of QE exceed or fall behind the potential capital losses? And who pays the bill?
Answers on a postcard only please!
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@ 315 spareusthelies
"Germany and France, (of all countries) exiting recession before the U.K. Before, the U.K that can't be right??"
A good question. I may be completely wrong, but do you think the reason is because here in the UK we're living in limbo, waiting for a general election?
That's one big factor France and Germany don't have to worry about. Here everyone's holding on to their funds (including the banks), waiting to see what kind of shower will be in charge for the next 5 years.
It's another legacy bestowed on us by Gordon and company.
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323. At 11:44am on 14 Aug 2009, JavaMan1984 wrote:
"Absolutely shocking stuff from the BBC!!!"
Yes,I spotted that as well.Reminds me of the pro-Mousai(ahem)pro-Armedinejad rally photos.
Rest assured though comrade,General Steiner is at this very moment sending his armies to requesition those vacated dwellings!
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324. At 12:14pm on 14 Aug 2009, majorroadaheadagain
I don't believe any union leader actually pursued their own self interests - I do believe that some of them got so entrenched in a war with the Government that they lost all sense of compromise - but their stance was still backed by the members. If it hadn't of been then they would have been ousted. You have to remember that unions were comparatively small against the forces of the Government which led to the situation. In hindsight the unions were proven right - go to any ex-mining community and you will see poverty.
If Thatcher did so much for industrial relations - then where has all the industry gone? No longer to future generations aspire to be productive, they now want to earn wealth without doing anything - and by logical assumption not everyone can live off the work of others. A manufacturing base would have been ideal at the moment - shame all we have is paper pushers.
I can't understand why people always look to blame those less fortunate than themselves for the crises - but never look above to see the true cause.
Sure it annoys me slightly when the trains don't run because there is a strike - but I know that the strikers are not doing it to make themselves unpopular - they're doing it because they know they will be expected to pay for the exceses of the few - the same was true back then as it is now.
There is always finger pointing at 'extreme union militancy' as the cause of the indsutrial inefficiency, but the reality was it's the continued devaluation of the wages of workers (either directly or indirectly through inflation) which causes the breakdown.
For every extremity on the union side - there is a counter extreme on the free market side who are prepared to cast off anyone who won't work for peanuts in order for them to sustain their profits. Is this the sort of society we want?
As Old man writings said once, we can reach full employment under Capitalism, in the same way the Victorians did - kids up chimneys and the poor cleaning the 'black bits between the toes' of the rich for a loaf of daily bread.
The system broke the industrial relations - all Thatcher did was to find a way of reducing the standard of living for millions - without them realising it allowing the contradictory system to continue for another 30 years or so.
Blaming the unions was simply a strategy to steer the public away from the true cause of the crisis - Capitalism.
Hitler did a similar thing with the Economy and the Jews - it's an old tried and tested method of distraction.
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323. At 11:44am on 14 Aug 2009, JavaMan1984
I've noticed a number of stories changing on the news website from when they were first released.
Not an Economics story but there was one broken on the 6th July which started out as "Rapists and Murderers 'at large'"
....which was later downgraded to
"Crime offenders 'remain at large'"
...after the BBC realised that the majority of the criminals in question were not Rapists and Murderers.
You cannot trust the media - which is why it's always the TV stations which get taken over first in revolutions. The propaganda of the west would have impressed Stalin or the Nazi's it's so incredible.
If you go back over previous stories on any media website you can see how inaccurate news is when it first breaks - and most important of course is how some interviews and stories never get picked up and shown - despite there being a very real public interest.
Some people still think we are living in a free society - I beg to differ. You might be able to say what you want, but you will be drowned out by the mass media and made to look like you are deranged.
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writingsonthewall
You made some interesting if somewhat miopic points which bear no relation to the time scale of the demise of our industrial base - Atlee, Churchill, Eden, Macmillan, Douglas Home, Wilson, Heath and Callaghan were all part of the same failure as was Thatcher.
However, you mention Hitler and Thatcher in the same para which proves to me that there is absolutely no point in discussing anything with you which would evoke any sense of balance.
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323. At 11:44am on 14 Aug 2009, JavaMan1984 wrote:
Absolutely shocking stuff from the BBC!!!
What is going on, was this headline changed on the direct orders of Emperor Brown?
- - - - - - - - -
Something i've never really understood is this. If so many poeple on this board believe that the BBC is Labour supporting/ biased/ corrupt then why do said people keep returning to BBC communications!?
If i see a labour broadcast i switch over. If i don't like a newspaper - say the Daily Mail for example - i have nothing to do with it. I certainly wouldn't run out and buy a copy and immerse myself in it! So if people really hate the BBC as much as they say why continually expose yourself to it?
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#317 Writingsonthewall
I agree with you. I am sick and tired of hearing it said that bankers have to be paid inflated salaries in order to attract the most able. Not to mention that creep Alan Duncan saying that no able person would be satisfied with the pay and perks of a Member of Parliament. It's nice to know that he's in charge of reforming the parliamentary expense system. What a joke!!!!
What nonsense they talk. My two sons, both highly qualified engineers, would knock spots off the lot of them. Either of them could have easily worked in the financial industry but I told them to do what they love and that is why they work as engineers.
Are they rewarded? Not really. My older son is in his first job and has just had his pay frozen. He works overtime just to pay the bills. My younger son, who won 4 prizes as best engineering student at once of Britain's best universities earns a pittance compared with these bankers and MPs.
Could they do the job of Alan Duncan or the financial bods? They are both highly numerate, literate ad computerate so the answer has to be 'yes'.
I wouldn't mind betting that you will find more talent in the staffroom of a secondary school (no experience of junior schools, so possibly there too), than you would find in the Houses of Parliament. Why do they earn so much?
VOTE OUTSIDE THE BOX, I say.
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329, Writings………
Sure it’s a free country all right, as long as you do what you are told!!!
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331,
So that leaves me with Murdoch’s sky empire to choose from?
I don’t hate the BBC, actually I encourage it. However, under this labour government, the BBC has become a mouthpiece as if they do not toe the party line………………….
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331. At 1:21pm on 14 Aug 2009, MrManj
Simple answer to that - best of the worst. There is no unbiased media view, it's either a Murdoch sponsored one - or similar media moguls, or it's tat like the ITV stance (Peter Andre, Posh Spice, celeb news etc) or it's back to the BBC.
My brother-in-law works as a journalist and I know how his original copy isn't what gets written in the paper - much to his frustration.
I don't read any daily paper - but it doesn't stop me being annoyed when I see people reading (and believeing) some of the outrageous bending of the truth that goes on.
Anyone who has had experience (or knows someone who has) of being a media story will know perfectly well how what really happened is twisted into 'what the media think will attract attention'.
Luckily the BBC are foolish (or brave) enough to allow blogging so the stories based on hokey statistics and re-wording of the truth can be exposed.
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#331 MrManj
"If i see a labour broadcast i switch over. If i don't like a newspaper - say the Daily Mail for example - i have nothing to do with it. I certainly wouldn't run out and buy a copy and immerse myself in it! So if people really hate the BBC as much as they say why continually expose yourself to it?"
The difference, as I see it, is that the BBC is a public service that we ALL pay for, whether we like it or not. The BBC's output is also seen as representative of Britain's "official" position and, indeed, as the voice of the British people by many people around the world. This being the case, surely it's our duty (an old fashioned virtue I grant you) to keep an eye on it and complain if we believe we see a lack of honesty or impartiality? Same goes for Mr Peston on here!
Where's Peston gone btw? I'm a manic depressive and come here for a daily dose of depression (not necessarily from Robert, more often from the other blog posters!). I note other BBC blogs (Nick Robinson's for example) employ a stand-in to cover holidays etc. Why not for this blog? Or has something bad happened to Robert that the BBC are trying to cover it up? Like he's gone to work for Sky News or something?
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332. At 1:40pm on 14 Aug 2009, economaniac
Alan Duncan - don't get me started. However we must congratulate the man for he has shown us how most MP's feel privately.
You have to remember Mr Duncan (the multi-millionaire) does not compete with you, me or your sons in his pegging of wealth, but with Murdoch, Abramovich, Branson etc. - hence his feelings of not being well paid.
Where I sit here I could say I was not well paid in comparison with those around me in the city - however if I went to any other city in England most people would be astounded at what I earn.
It also encourages less people into proper productive disciplines (like engineering, science etc) and more into productiveless areas such as finance.
If I had the free choice I would have been an inventor - I would love to bring inventions into the world for the benefit of all. However when you consider the pressures of life (homeownership, retirement etc) - I sold my soul to the highest bidder - which happened to be finance.
Now many will criticise me for that - and I will take it on the chin, however it's very difficult when you are young and faced with the options this system presents.
In the long run I will probably loose out as I am a net saver and Hyperinflation looms, but I am not so selfish as to think of my self interest over the interests of the majority of society - unfortunately this attitude is bereft in the upper eschelons of society where MP's and Bankers live.
Do you know what the biggest indicator is? Well you would be surprised how many huge off-road vehicles drive around the city - odd considering it has some of the smoothest streets in the country. It's more a demonstration of character than a need.
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Also MrManj,
The BBC opened a story earlier with “Repossessions on the Up!”
Later they changed it to “Repossessions on the Slide!”
And you then have a go at me for suggesting the BBC are incompetent or worse, are deliberately misleading people! I think you need to think this one through, how can a story like this be reported in such a manner?
Now for me, they either told a lie, or were ordered to change the headline.
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330. At 1:19pm on 14 Aug 2009, majorroadaheadagain
I think you're missing the point, it wasn't the succession of prime ministers pre-1974 who created the demise of the industrial base, nor was it the unions action.
These were all symptoms of the root cause which was the forcing down of wages in real terms - as per the Labour Value Theory.
My point was that you originally claimed that Thatcher improved relations and made industry more productive. What she actually did is ensure that the workers of this country had no choice but to work for less (whereas up until that point they could strike to prevent this) - but to counteract this she allowed the loosening of credit to fill the hole lost by the wage reduction.
....and there lies the seed of the problems today - in order to maintain the lifestyle the country expected it was forced to borrow to make up the difference.
I was a child of Thatcher and I am well aware of the damage her legacy has brought - of course she isn't the sole cause, but her policies ensured that when you ask people in the street today 'do you think you are well paid for your job' - a VAST majority will answer no.
If you look around the world other countries have been able to maintain their competitiveness in industry through working with the workforce rather than forcing it closer to slavery in the desperate attempt to retain the diminishing profit.
However I can see that you are undeterred in your faith in Thatcherite policy and are myopic yourself in failing to see the long term legacy it produced.
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JavaMan1984
Sometimes when I read your posts I think you are me in disguise!
Maybe I am schizophrenic and don't realise I am posting twice.
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Oh JavaMan1984....I saw this one coming this morning when the newsreader said:
"reposession figures come out today but they are not expected to be as bad as first feared"
...which referred to the change in the CML forecast earlier in the year.
So instead of the number being 'very dire' it's now only 'dire' which means the population should crack open the champagne and go shopping on their credit card to celebrate and boost the Economy as a result.
This is no way to run any economy - even ZunuPF would think twice about this plan!
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Is there a record for the number of posts on a BBC blog? - we must be getting close.
I heard if we hit 500 we bring the server down....
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I suppose we are all lucky none of the big Spanish owned Banks have collapsed (yet).
And our Housebuilders have survived (almost miraculously) without going bust.
But without cost of living rises and in many cases with rising unemployment, where is the Consumer demand (not just for Houses, for everything) going to come from ?
QE isn't actually putting more Cash into the pockets of ordinary people.
So they are still struggling to make ends meet and pay off debts.
Sometimes people need to come down out of their Ivory towers and actually look around at Ground level.
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Writings,
I must admit I found your credit card default post very exciting, and a good idea. As we cannot strike anymore (a general strike) to bring about change, perhaps a general default on unsecured lending would bring about the same result ;-)
Now, all I need to do to perform my bit is load up on 12k’s worth of guff (whoops, that will ‘help’ the economy just before my default. Mind you, I could also do with a shiny new beamer so off to the nationwide I go for 30k…… It’s mounting up already………..
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342,
It goes to page 2, been there before when Curzon was alive. Also I see somali pirate may be in trouble.
http://news.bbc.co.uk/1/hi/world/africa/8201110.stm
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JavaMan1984
Sometimes when I read your posts I think you are me in disguise!
Maybe I am schizophrenic and don't realise I am posting twice.
Both in finance,
Both in Software,
Both left Uni in early 90’s
Both North of the Border?
I think that our attitudes developed along similar lines, due to similar life experiences (i.e. Leaving Uni and there were no jobs. Being forced to sit in stinking queue’s for dole money).
Oh If I knew then what I knew now, I would have gone to business class or accountancy (smoke and mirrors style) plus there were more girls in those classes (unlike engineering!)
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314 writings - you have defended bailing out the banks vociferously before now, yet you are now suggesting the sytem "reboots" - is this not what contolled bankruptcy proceedings would have achieved?
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It would help if you could conduct a discussion on the basis of quoting other people accurately. You write a lot, and some of it makes sense. However, it is a phony form of debating to attribute things to other bloggers that they haven't said, and then set it up as an argument to make your own point.
339
I did not "claim that Thatcher improved relations and made industry more productive" nor did I infer it.
You also indicate that I am "undeterred in my faith in Thatcherite policy". How do you know that?
What I said was:
"There was a lot wrong with the 80's but the die was cast for manufacturing long before then. In my view Mrs Thatcher's greatest achievement is manifest in the common sense way in which industrial relations are pursued today. Whether she intended it or not is a moot point."
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339 - Writings, if you watch "the Mayfair set" by Adam Curtis on youtube you will see that the rot set in well before Thatcher. Asset strippers were gorging themselves.
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Look at the hysteria around Daniel Hannan's comments on the NHS. I used the NHS last week and the people were lovely, but the building was a disgrace and the sytem does not work anywhere well enough given the vast amounts of money poured in.
Daniel Hannan for PM.
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truths33k3r
I thought Hannan's piece on GB was hilarious. However, this time I think he is guilty of believing his own rhetoric and pandering to the viscious right in the USA. He probably has never used the NHS - I did in 1999 when I was totally paralysed and have lived to tell the tale. Warts and all, it is and always has been something we should treasure, because it looks after everyone irrespective of their means. There is a lot to put right, but knocking it like Hannan has done just puts the debate on the wrong level. I bet Obama wishes he hadn't opened his mouth because it has just made the winning more difficult.
Daniel Hannan for Twit of the Year.
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Given that Pesto hasn't blogged for ages I thought I would look at some blogs from last year - interesting to see how many bloggers were right and wrong when looking at things with a nice touch of hindsight (as most blogs are fire and forget)
http://www.bbc.co.uk/blogs/thereporters/robertpeston/2008/08/rbs_takes_silver_medal.html
Talking about RBS's astonishing £700m loss...ain't hindsight wonderful!
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352 Horned_Devil
It ain't over 'till the fat lady sings
although the last comment back in August last year made me laugh :)
The credit crunch started 2 years ago, the recession officially started around 8 to 10 months ago, even in a contracting market some people will have to re-stock. The French and the Germans actually make things so yes they will see a rise in forward orders but whether they are climbing out of recession or just popping their heads over the parapet remains to be seen.
We don't make anything anymore so we won't see any benefit from restocking, our economy will only get better once a global recovery gets under way (we are in a global downturn afterall)
This is not over by a long way
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347. At 4:32pm on 14 Aug 2009, truths33k3r wrote:
"314 writings - you have defended bailing out the banks vociferously before now, yet you are now suggesting the sytem "reboots" - is this not what contolled bankruptcy proceedings would have achieved?"
Well,well,well.How very "New York".
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FAT CAT FUNDING, The banks and credit card companies are robbing the people of this nation with total excessive interest costs on credit cards,in the good times they charge 9% as soon as a person or company use the card for short,medium and long, term finance ,the rate can jump to 34%,Without negotiation.
It should be made illegal to charge more than 15%.as if you add on over limit and missed payment charges the rate can jump to 50%.Making it impossible for a body to pay other commitments ,such as morgage, school dinners, fees. prescriptions.etc.
Sadly ending in bankruptcy
Are these excessive charges funding fat bankers bonuses.Rather than the
the extra money circulating around the economy.
I would like to know what controls the FSA has over the costs these bodies charge ,and the hundreds of millions taken from the economy in
extortionist interest,and charges .
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@355 keirona
Nobody is forced to finance their lives with loans from a credit card, or loans of any kind for that matter, it is their choice.
What is wrong is that when they go bankrupt, others have to bail them out. Just like the banks, we are funding the fat cats.
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And to think that Nick Leeson done time for losing £800m...
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The reason many bloggers I think both contribute to BBC blogs and criticize the BBC is that the BBC have a privileged position with access to all elements of government and are therefore perceived as the most influential element of the media.
It is important that when we think that 'we' see spin and lies from any governmental or parliamenatry source that it is questioned otherwise it is put around as 'fact'.
I think that the BBC economics editors are using well earned breaks to hide behind the B of E on 'growth figures' and the like. Do any contributors really think that the last quarters negative growth is just 0.8%? - it feels more like 2.8% -3.8% to me?
Do any contributors think that French and German GDP figures are amy more reliable than our UK 'growth' GDP figures and which are obviously beyond comparison as the structure of their economies is different to our own?
Do any contribuors think that the government are manipulating the GDP estimates because that is all they are and with a certain degree of error tolerance that is conveniently ignored and as boosted and calculated using long term subsidies/ borrowings and other questionable calculation items?
The Quantitaive slEasing, GDP figures, inflation - every government statistic is pressed stressed and massaged to maximum effect in an effort to allow Gurndog Trillionaire Brown to stay in power at the next general election.
We tend to accept all government figures that are thrown at us because we are naturally very trusting as taxpayers - the BBC is doing this also but my point is if the BBC know anymore about the accuracy of government statistics after vital questioning of Mervyn King for less than 60 seconds on air, with the latest growth figures - perhaps the BBC have a public duty to keep us all properly informed and not merely meekly submit to this idiotic national growth statistical charade of getting over-excited with regard to pathetic edicts containing fractions of a percentage movements in growth estimates and projections which cannot even be verified until later this year.
The big question is are we being conned by all of this? - All that the Labour party now wants is to start shouting that the recession is over - the lives of millions of ordinary British people is subsidiary to the desires of the politicians in power - to stay in power.
This is corruption, sleaze and megla-mania - the same greedy selfish sleaze museum parliamentary culture that has got the country into the economic mess that it is in.
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Simple solution....
Scrap credit cards
Appoint an ELECTED prime minister old enough to understand the ways of the world (I suggest not less than 60..)
Freeze MP's salaries for 10 years
Outlaw "second" jobs for MPs. Time to put an end to part timers.
Fixed and frugal expenses for MPs. If I get a new job I'd be expected to move with my family to somewhere close to work.
Do away with "redundancy payments" for ditched MPs
Scrap MP's pensions and have them contrubute to their own pensions just like most WORKERS in the private sector.
Outlaw the practice of giving jobs to friends and members of the same clubs
Do away with ALL quangos
Remove all financial management aspects from the NHS.. sack everyone not concerned directly with providing medical services
Sack all the beancounters from the NHS
Sack all the beancounters from Education. Remove all financial concern in Education and sack all the accountants and hangers on.
That'll do for now...
Oh yes... fine any banker that makes a loss if he wants a reward for making a profit...
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QE is waat of public money. All it has done so far, allow banks to increase interest rate charged to the customers In the case of credit cards in excess of 30%. So the FSA and the govenment has done nothing. This is theft by the banks. Close all of them down now.
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Almost all QE money has been used to purchase Government debt. The process seems to be - Debt Management Office issues large amount of debt - hedge funds and others buy it - then said parties sell it back to the BOE (making money in the process) - I can't see it affecting the real economy very much - they would be better not issueing any new debt - then it really would boost the money supply when old debt was bought back - am I the only whop has spotted this?
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All this talk now for 8 months about "financial professionals".
In nearly every profession I can think of if one is negligent in your actions and as a consequnce someone gets hurt or injured or is killed, criminal charges would be brought against you. These aptly called "casino bankers" ruin their companies, country, and sink a lot of people with them now walk the streets with fat bonuses. No surprises why public wrath is high.
James S Galloway I.Eng., FIET.
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Come on Robert, I've been looking at this QE blog for a week now. haven't you got a blackberry with you?
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I'm an ordinary chap who is trying to catch up with this mess in the world's economy. And I'm still astonished at the a posteriori reasoning that the banking system is in big trouble.
Where had all the pundits been before the credit crunch? Why there was nobody shouting loudly - sort of 'over my dead body' - to us that there was a big crack of doom in the heart of the economy, simply in financial institiutions? Why nobody told us that over the years, before our very eyes, banks had become borrowers rather than lenders?
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Dear Moderator,
My pen-name is OMASTA, not YOU.
Yours faithfully,
[Personal details removed by Moderator]
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I know many people are angry at the governemnt for borrowing something on the order of £1,000,000,000 in order to bail out the banks but that was necessary because we need banks and that's not what i don't like. I think that if the government has already borrowed £1,000,000,000 then they should go a bit further. That 1 billion pounds hasn't really gone into the actual economy at all. I think that, in order to bring us out of this recession in a healthy state the government should take say, £500,000 and spend in on more schools, parks, public buildings, regeneration projects, green projects etc. For instance when the government announced Green britain they said the baseline would be half the network speed of the current european average. If the internet resally is the future (which it is) then why not invest the extra £26,000,000 to make it work. When you've borrowed £1,000,000,000 a little more is not gona make much difference to the balance sheet but it would make this country a much nicer place when we finally do climb out of recession.
In summary i think the government have to go the whole hog if this is going to work and they're not
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Japan , China , Norway , Hong Kong , Germany and France are moving out of the recession. We in The UK are garanteed to be in recession for as long as Gordon Brown and New Labour are running ( or ruining rather ) the economy - which makes it until May 2010 at the earliest. I can't find any evidence of QE happening on the scale that it is happening here in any of the aforementioned countries.Is that for want of looking far enough or is that because it has not happened ?. Does anyone know ?.
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Re 308. honestgeraldinho
As an unlightened economist said of the service industries some decades ago, 'we can't all make a living opening doors for each other'. Wealth is material.
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#367. orangeneugerbil wrote:
"We in The UK are garanteed to be in recession for as long as Gordon Brown and New Labour are running ( or ruining rather ) the economy - which makes it until May 2010 at the earliest."
Sorry to disappoint you, but I think we'll be emerging from recession rather earlier than you think.
Neville Hill, a senior economist at Credit Suisse, is of the opinion that the UK is already out of recession and will post positive growth in the second half of the year.
Jim O'Neill, of Goldman Sachs, has said that his forecasts suggest Britain would be firmly on the road to recovery by the end of September.