Lloyds: compensating taxpayers
The Chancellor isn't going to let Lloyds out of the Government Asset Protection Scheme (GAPS) without extracting a price.
The Treasury saved Lloyds earlier this year by promising to provide it with the protection of GAPS - which was a statement that taxpayers would absorb 90% of future losses on £260bn of poor quality loans and investments.
In that sense, taxpayers were giving a valuable pledge that losses Lloyds may incur on reckless loans would not kill the bank (to be fair to Lloyds, most of those reckless loans were made by HBOS, the bank it bought in such controversial circumstances).
So even if GAPS has not yet been created in a formal sense, Lloyds has been benefitting from the offer of GAPS for months: taxpayers have been keeping the bank's head above water.
How much should Lloyds now pay for being kept out of Davy Jones's locker by Alistair Darling?
Well a 1-1.5% fee on the implicit increment to Lloyds' capital generated by the APS would seem a reasonable starting point for negotiations.
That de facto capital increment was just under £16bn. So a 1% fee would see Lloyds paying just over £150m to the Exchequer.
Lloyds' board may haggle about the size of the break fee - but I am told its directors are reconciled to paying something.
And they also know that the Chancellor will force the bank to honour one very important commitment it gave when initially agreeing to the APS - and that was to increase by £14bn the volume of credit it makes available to businesses and households.
I'm 
© MMIX~RS~q~RS~~RS~z~RS~39~RS~)
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Interesting addendum.
Looks like Lloyds are going to make the announcement tomorrow then.
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The APS scheme will not help Lloyds achieve the new regulatory standards on core capital and leverage multiples in the long term. What it actually needs is a huge injection of fresh capital and if the private sector is willing to provide this then Darling should bite both it's hands off.
If the gov's real agenda is to build a more robust private sector financial system then it will go for the private sector solution of extra capital injection, if it's not then what is it really trying to achieve??
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Are Lloyds about to make their second colossal mistake?
(the first was when their eye was bigger than their stomach and they tried to swallow the poisoned HBoS).
They are in no way out of the woods with HBoS toxic loans.
Everywhere in the past year or so that I have seen a daft company who over-borrowed, guess who had encouraged them to take more.
If I was Lloyds I would be forever grateful of the GAPS protection -cheap at twice the price.
Lloyds hoping the market will believe they are worth £40/50 billion depending on disposals? Dream on........
Regards,
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As I think that based on what my business informants have told me regarding 'real' credit availability. And the level of guarantee.
15bn over 5 years is a good amount to ask.
Is there not 'goodwill' clauses in contracts these days?
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Lloyd's problems stem from the government forcing them to take on HOBS instead of letting it go into bankruptcy or nationalizing it, if thy had thy could of sacked Fred the shred and saved millions, as for the 14bn of credit for businesses and households I doubt this has happened?
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Robert
It would be stupid, and dishonest, of the government to set the bar so high on LLoyds that it is damaged further, perhaps fatally. Stupid because we would be shooting ourselves in the foot by hitting straight at the value of our 43% stake in Lloyds - worth far more potentially in the long run than any short term gain the Treasury might get from the APS. Dishonest because everyone knows that some reassurances must have been given to Sir Victor Blank and Eric Daniels in that famous meeting between Brown and Blank in Sep 08 and on which it seems the Government and the Treasury, who must have been involved, may be reconsidering those assurances. We would need to see the correspondence to ascertain whether that is correct - fat chance.
We should disregard the FSA and Europe (Neillie). They had their chance to stop the monopoly being formed, and failed to act at any time between Sep 08 and Jan 09 when the deal was sealed.
This is about taking a long term view, and being pragmatic. Lloyds is too big, and has to shed some savings and mortgage business. Everyone would agree on that. However, not right now, when it would be nothing more than a fire sale. In the meantime, Daniels has to play this right - it is too late for him for anything other than redemption for taking Lloyds into one of the worst deals in corporate history. If he is able to swing it that would some recompense to hard-hit shareholders.
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......14 billion loans to business and households who neither need it nor can afford it. Isn't this the sort of thinking that got us into trouble in the first place?
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Can we pretend to be French and just ignore the EU? Or like the Italians who never pay any EU fines? Or the Germans who have made their own parliament superior to the EU? If only - then being in the EU would be a pleasure.
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Chancellor Darling is desperate for a political "Coup" in the middle of the Conservative Party Conference
These are games to keep Cameron form ongoing headlines
Lloyds should simply line up and take its medicine. It bought HBOS and it most certainly did not have to. All the warning signs were there and the decision makers deserve what they get from this fiasco.
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Nice to know the bank's directors are "reconciled to paying something". How considerate of them. If these greedy banks were treated by the government in the same way as banks rip off their customers the pips would really be squeaking. Caledonian Comment
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Stop skirting the real reason for our woes Peston and explain the jaw-dropping shockingly fraudulent practice of the fractional reserve system to which all the banks are guilty of perpetrating on the unsuspecting man in the street .. Go on, I dare you.
Even the Bank of England is ignoring requests from hundreds of people from all walks of life, for more clarity under the freedom of information act.
Are you brave enough to pull your finger out of the dyke?
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As a reluctant shareholder in Lloyds (from my poisoned HBOS holding)would I consider, after the value of my holding in HBOS went from something to nothing, consider adding to my worthless company with more hard-earned cash?
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I'm not sure I fully understand why Lloyds should pay anything to Darling
An implicit need for GAPS is not a contract...or is it?
Let the government pull all its money and destroy all the rest of the value it has "invested" in too
If there's no contract and I was in charge of Lloyds I might just be giving a two fingered salute, especially if they can raise the capital elsewhere...after all the government agreed that their shareholding would have no one on the board to affect day-to-day management of the business
Competition is what usually keeps businesses alive, and if Lloyds can get their money cheaper elsewhere why shouldn't they. Is darling just being the spurned lover
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It's probably fair that the government should get a windfall from Lloyds, but please let it be after the election. If they get one now, it will be spent before it hits the bank account.
On another note, I hope that someone from Lloyds spills the beans on Crash Gordon and Dangerous Darling's involvement in the HBOS takeover. All the juicy details of the sordid affair please - abut 2 weeks before the election.
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JohnnyZero66
"Lloyds should simply line up and take its medicine".
Only one problem with that argument. Unless you are not part of the UK the Lloyds you are talking about is 43% us. Thus for every 1bn the Government can get for Lloyds when it is eventually sold (assuming it dos not go bust in the meantime) we, you and me, get 430m. It wouldnt take much for the value to us in Lloyds to be worth as much as the Tories were claiming on their Osborne measures on Tuesday.
The decision makers who you say deserve what they get are us. Our government put up the 43% and we elected them.
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There was a huge error compounded today - not raising interest rates for the seventh month.
Without money having a positive price all of this talk of bail-outs and repayments and asset protection schemes is just fantasy and results only in a mythical 'recovery'. We are still being fooled out of our cash! And the economics commentators haven't even chosen to notice! Shocking!!!
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I personally think Lloyds will do everything they can to avoid having to sign up to the GAPS, already I suspect they are hard at work reducing the 43% stake us taxpayers currently hold.
I have shares in the Lloyds, and at the last rights issue the offer was 38p per share. If memory serves they were almost all taken up and they have more than doubled in a few months, so I don't think there will be any problems raising more from private investors.
Whilst there have been lengthy and often heated debates about the rights or/and wrongs of the bank bailouts - one key fact is that tax payers money should/will be repaid and it is better for all of us if this starts happening soon.
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LloydsTSB were always a cautious middle ground bank .The decision to buy HBOS must have been influenced by the Government.That or LloydsTSB didnt look at the numbers properly. It may say publicly that it believes it was a good medium term move but look at how it u turned over closing/opening again C&G branches when the EU" too big a bank" news came . Any more indecision is unacceptable. Lending must be encouraged to business more than personal customers.Surely the banks focus should be on attracting funds and encouraging savings now not increasing personal debt.
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Get this.
I have been in a meeting with my bank this afternoon: the Bank of Scotland, part of the Lloyds Group. They've just told me and my business partner that the Bank has neither the funds nor the desire to support our business any longer; just like that. Our working capital facility has been summarily withdrawn. No more cheques will be honoured. Our business relationship manager left us in no doubt that our job was to find another bank, fast.
Don't let anyone tell you that Lloyds Bank is providing credit to its customers. The banking mafia is looking after its own, using money being printed furiously by the Bank of England to shore up their own banks' balance sheets. Citizens of the UK be warned: we are being robbed blind ... by the UK banking mafia, aided and abetted by our stinking political elite.
This country is going bust. Ironic really, given that our Dear Leader spent years telling us that he'd eliminated boom 'n' bust (before going on to save the world).
My company is about to go bust, whilst the bankers and politicos draw their salaries, expenses and bonuses just like they ever did ... all funded by us taxpaying mugs.
Somebody had better sort out this unholy mess fast, before people like me start taking to the streets.
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moraymint -
My company has just been offered a 5 million quid extention to its overdraft facility by the Bank of Scotland that it neither requested, needs or wants - with no charge for the unused part of the facility.
I guess the bank can be seen to be offering the credit to businesses - provided the customer has no intention of taking it up.
It's a funny old world, isn't it? You have my every sympathy.
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I' m sure that Lloyds are already thinking about how to fill the taxpayers gap with whatever electronic diddle doe that comes to hand .
Bankster fat cats are like spiders they will carry on spinning even when their are no silk purrs left in their sows ear.
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The p;urpose of near zero percent interest rates is to preserve the appearance of solvency through avoiding compound debt interest on government credit crunch card debt to inkfinity and beyond, whilst banksters carry on rewarding themselves for looking after the non existant ponzi pie in the sky .
Lloyds will definately extend credit CRUNCH SERIAL to their best customers ie those ready to pay the overdaft charges that count as earned inkome and form the basis of banksters bonuses [solvent buisinesses can go to the wall]
We all have Gordon to thank for keeping his pointy index in the dyke although I remain unconvinced that its Gordons "index " or the city "dyke"
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Robert:
That would be a wonderful idea, but, what is the consequences of the
reimbursing the taxpayers...If they don't have enough money!
~Dennis Junior~
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Morning Robert,
I like to read this blog to find out what the Government would like us to know/believe.
Didn't a bank raise funds so that they wouldn't have to pay the 9% coupon on preference shares?
Now we have Lloyds after ANOTHER £15 billion, and RBS trying to raise more cash as well (allegedly).
Something is very wrong here. Are taxpayers (shareholders) in these banks allowed to know if these banks are insolvent (or is this money being raised to pay bonuses- just like the £37 Billion last year).
I would like all of the major banks to be profitable and perform a banking service but it would seem that this is not likely in the near future.
As a previous contributor pointed out, these bad loans have not disappeared they are just being priced at what is convenient on the balance sheet. The bad loans will get worse when interest rates increase, which I guess will be sometime in 2010.
Will you, Robert, comment on the rumour that BOE is trying to downgrade or even remove the savings guarantee provided by all our banks at the moment?
With respect to Lloyds policy, I find it incredible that a 43% shareholder has no say in the way that the bank is run, but then taxpayers were not asked if the two banks should merge nor if they would like to commit even more money into these financial black holes.
Is it this Government or a previous one that wouldn't support lame ducks?
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I am a retired Engineer, (a proper one with an apprenticeship and an honours degree), who seems to understand less and less of the banking system. I always thought that the banks used their depositors money to lend to people, either business or private, to help them get what they wanted or needed. Profits were generated from interest on these loans which paid the bank staff's salaries and interest on our savings accounts.
I cannot understand how bankers have beeen allowed to rip its customers off to line their own pockets. They raped us during these scams to sell poison loans to each other world wide yet when they got into trouble they expected.... AND GOT....massive loans from taxpayers to bail them out.
Why are not these bankers who made such massive bonuses being forced to pay back their excessive sums? Why do we still have to continue giving them their bonuses? Why are the banks continuing to receive support from governments worldwide whilst still ripping their customers off.
I have been using Lloyds TSB Bank, as it is now, for 46 years. Having supported them for that time I was amazed yesterday to be offered a loan by one of the now many managers in my branch to buy a new car. I did not ask for a loan, I was simply paying off my credit card and was waylaid by this person. I was offered a loan of £14,000 at an interest rate of 17.9%. When I pointed out the the Bank of England was lending them money at 0.5% interest I was told that they had to get their money back some way or another.
We, as taxpayers, pulled them out of the deep, brown smelly stuff and now it looks as THEY are rubbing our noses in it.
Anybody have any idea where I can go to bank?
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# 17. jikster wrote:
"I personally think Lloyds will do everything they can to avoid having to sign up to the GAPS, already I suspect they are hard at work reducing the 43% stake us taxpayers currently hold."
If they applied up to the scheme, as mentions of £260bn suggest, and the guarantee was promised, they would seem to be committed, even if the scheme has not officially started, and therefore liable to pay.
As Robert has stated, they have subsequently benefited from the security that has given them.
So of course they should pay for the extremely cheap "insurance" they have been given (considering the risk profile at the time and nobody.
The taxpayer "only" owns 43%, so although in some ways we pay part of the fee ourselves, we don't pay it all. Shareholders may complain, but it must be remembered that those shares would have been worth nothing without intervention (so the taxpayer only owning 43% isn't exactly great value for the bail out).
"and that was to increase by £14bn the volume of credit it makes available to businesses and households."
Not just replace and maintain lending but to "increase" it!!!
As others have mentioned, that's the mentality that got us into the mess in the first place... but what's the solution to problem caused by excessive debt, lend more; sometimes it beggars belief.
The notion of lumping lending to businesses and households together also appears illogical...
As highlighted by moraymint's unfortunate situation above for which I have every sympathy, businesses need working capital to survive and in the rare cases where its applicable in the current climate funds to invest to expand.
Viable businesses being driven under due to cash restraints does nothing to help the economy, and especially if it results in unemployment does nothing but harm to the nations finances .
Increasing loans to individuals seems to be motivated by one primary reason factor - to support house prices, something that doesn't really offer any benefit and in many ways has proven to be a dangerous mentality.
With capital repayments surely loans to individuals should be reducing gradually.
# 25. fedupbankuser
Yes its shocking..
That interest rate margin is why low interest rates aren't encouraging investment in the "real" economy.
BoE base rates are all well and good, but only really have an impact in financial circles (including government borrowing) and lo and behold on mortgage rates - once again propping up house prices.
The savings rate being pretty much nothing is nonsensical given that banks have supposedly needed additional funds (so why don't they pay for them) and driven by the government [BoE] providing these funds at an unrealistically low rate.. which doesn't make much sense when the state needs to borrow so much.
So in many ways, financing of the banks means we pay to reduce the earnings on our own savings... and the banks are set up to milk ordinary customers further.
"Anybody have any idea where I can go to bank?"
I have always liked the concept of mutuals, so the mass of demutualisations, especially when driven by carpet bagging, in the 90s was a considerable disappointment and in many ways can be seen as one of the seeds of the recent financial chaos.
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#19 Moraymint.
For what it is worth, my deepest sympathies.
The Govt. tell the banks to lend, the banks will only lend to those who have no inclination to take extra borrowing. So they can say they have met the usual uselss Govt. abstract target.
(Just like credit cards used to be; if you asked for an increase, you were refused. If you didn't ask, your limit was raised.)
Get a hold of your MP and tell them to start working for you.
Then talk to a foreign bank. They are going to move in and fill the void.
Regards & good luck.
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#19 Moraymint.
From earlier posts you have made, I am sure you have been in business for over 5 years. Didn't the Govt. put in place a loan guarantee scheme to underwrite the banks' risk for looking after customers who find themselves in a similar erstwhile position as yourselves?
If you opened a deposit account equal to the bank's remaining exposure and assigned it to the loan, then the bank is presumably covered in toto.... and can give you what you need.
Or was that scheme abandoned as soon as it was found to be potentially any good.
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I'm not much for conspiracy theories but Lloyds has all the symptoms. Lloyds buy HBos, without doing due diligence, against the wishes of staff and shareholders (the shareholders who voted for it were HBos who were about to lose everything), pushed through by the Govt, even though it contravenes the monopolies regulations. The Govt then tries to tie up Lloyds with a bail out in excess of 50% (which they didn't quite manage) and they are now making it all but impossible for the bank to extricate itself - deposits are going to Nat Savings and N.Rock, so Lloyds are missing on the deposits to lend against, the loans have got to be water-tight, which in the current economic climate is almost impossible, and yet they are being ordered to lend more, and without the lending they have problems making the money to pay back the Govt and so the taxpayer. The Govt need to back off and let the bankers get on with their jobs - but I suspect that Labour will not be happy until they have the entire banking system in their sticky mitts!
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The gloves are off , the governments first goal is not the well being of Lloyds it is balancing the books, with growth dead and a Treasury budget front end loaded with growth from now to April our debt mountain is only going North of £175 billion, with a lot more to come for 2010/2011 onwards.
Without the tax payer, Lloyds / RBS would be worth nothing, so the government needs to get tough and insist on the best returns for the tax payer, because in the next few years this money WILL be the difference between sacking nurses or keeping them on..
Come of GB start fighting,the banks are doing nothing apart from screwing UK businesses and customers on fees ,interest on deposits and lending. They are rebuilding there balance sheets on the backs of hard working people and companies.
I am no leftie but perhaps consideration should be given to a new UK government bank specifically designed for lending for small and medium sized businesses,at the moment private banks are acting like a cartel and not giving real value to the people in the UK. Its obvious to all the existing private banking system is not working for customers...
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Splendid
It is true that taxpayers were not asked if the two banks should merge, but then before the merger was put on the table at the now infamous meeting between Brown and Blank there was no taxpayer shareholding.
It is said that Lloyds were urged into the merger to save the banking system. I have no doubt that HBOS and RBS should have been allowed to be put into administration and that the whole fabric of the two banks should have been unravelled in the same way that Northern Rock has been treated. Partial state ownership gives us the worst of all worlds and loss of public funds, real and potential.
In my view there are many culprits in all this, none of whom includes either the tax payer or the ordinary shareholders of Lloyds, HBOS or RBS who have been duped.
1. The management of each of the banks who indulged in appalling practices not seen before in banking in my lifetime.
2. The regulators at the FSA and in Europe who were asleep on the job and let them do it. Now they try to set rules as if the monopoly at Lloyds has just come to their attention - rules that would involve fire sales of assets against the interest of the 43% owner (us)
3. The government, who feted the bankers, knighted them, and made them feel like gods. Then ran for cover at the first sign of trouble, having stoked up the boom that made it all possible.
4. The auditors, who have not been mentioned too much in all this, but must have failed totally to conduct proper audits.
5. In LLoyds case the institutional shareholders, who had the muscle to stop the bid, but owned shares in both banks and saw Lloyds as the saviour of their HBOS money (they lost it in both).
6. The politicians, including Vince Cable, who said nothing while times were good, but then suddenly emerged post hoc as a great guru.
7. The media, who write copious words on the subject, and seem to know every nuance of the problem and how to solve it, but said nothing between 1997 and 2006.
The banks are being pulled in several directions at the same time. They have to get their Tier 1 capital ratios in order, but at the same time lend money at 2008 levels. A total nonsense - in practice they will always salt the money away. Yet as shown by others on here it is working against the interests of hard working people who need and deserve a break.
Memo to Gordon and Alastair - this is your problem - sort it.
3. ,
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Robert,
Could you find out and tell us whether UKFI are going to particpate in the new share subscription and who will be underwriting it.
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This comment was removed because the moderators found it broke the House Rules.
27 is bang on, here come the chinese........What affect will this have on the taxpayer 'investments' in UK zombie banks?
You guessed it folks........................................Bust!
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25 Fedupbankuser
I feel your pain! Last week I went to see my 73% public-owned bank "relationship-manager" to try to organise some bridging finance to secure a retirement property for a relative. The loan would be secured to the tune of 180% by a property currently being sold by that relative and 100% by assets that I could offer as security. The answer...I could have 70% of the new property value at 9%!!!
Charging 8.5% above base for a totally secured loan is usury and I let them know this. They wriggled saying that something might be negotiated but I'll go elsewhere.
The situation is identical to the early 90s when, if you'll recall, the banks last took a bath by reckless and indiscriminate lending in the 3rd world...a goodly portion of which was never repaid. What did the banks do then? Did they pursue creditors? No, they rebuilt their balance sheets off the backs of their domestic customers. Does anyone else recall the era of receiving letter informing you that you were £3 overdrawn and charging you £28 for that letter?
Well here we are again, with the banks frantically trying to recapitalise at our expense. The difference this time is that they have already been in receipt of literally squillions of pounds in public money, have promised to make credit available to business at a fair price, but are manifestly reneging on that undertaking. The present government have utterly failed to ensure that banks use their public largesse to the benefit of the nation. Sadly, I don't believe that the incoming government will do anything different and it is the poor Joe who will, as ever foot the bill.
It used to be a maxim that "if you owed the bank £500, they had you by the short and curlies", but "if you owed the bank £5 million, it was the other way around". The unintended consequence of Gordon Brown's intervention is that we, the public, are entirely at the mercy of the bankers. We can't even pull the funding without bankrupting the nation.
If George Osborne could come to the table with a set of measures to correct the public finances that also involved disciplining the banks in addition to freezing the pay of the less well off and taxing the **** off the better off...he would get my vote.
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25. At 03:08am on 09 Oct 2009, fedupbankuser wrote
"I cannot understand how bankers have beeen allowed to rip its customers off to line their own pockets."
The banks own the government, not the other way round. Therefore there is no concept of "allowed". Look up "federal reserve act" "fractional reserve lending". Effectively banks control the money supply, and he who controls the money supply controls the nation.
I would look at Co-Operative bank.
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30 Hughesz
I'm absolutely with you there. I too am far from being a leftie but there is now a clear cut case for a publically owned bank to handle the business of the small customer and small company. Sadly, there used to be just such outfits in the shape of Girobank, National Savings Bank and several others. The argument for their abolition was based around the principal that it was unfair that these banks were in competition with private banks (the same argument currently being directed against the BBC by Sky et al) so away they went.
Surely now this argument is defunct. The private banking system has shown itself to be incapable of behaving responsibly, either to its customers or shareholders. I would not advocate nationalising the banks permenantly but there is now a very strong case for a national bank to run alongside private equivalents, providing retail current and deposit services, small retail loans and small business services at reasonable rates. This might reintroduce a sense of humility to the sector!
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Do you think there was a message for business at the Conservative Conference?
Ken Clarks session was the most upbeat of the week despite the downbeat times we are facing!
I've just arrived back from Manchester. It has been a hugely inspiring conference on many levels and I think I really need some time to take it all in. The Conservative Party have so often been criticised for spilling rhetoric and not having any policies. David Cameron's Conservative Party have always had policies. Many of them have been adopted by Labour!
The modern Conservative Party also recognise some areas where Labour policies have succeeded. They not only acknowledge the fact but give clear indication that they will protect and improve in those areas.
One of the most moving events at the conference for me was the full length video of Cameron Direct. David Cameron is one of the greatest leader of the Conservative Party of all time, if not the greatest. History shows that leading the Conservatives is one of the toughest roles any man or woman could ever have. It was the cause of Margret Thatcher's downfall. She did not fail in being a Prime Minister. She did not fail as a stateswoman. She failed as leader of the Conservative Party.
David Cameron is not only a great leader of the Conservative Party but someone who is truly and totally motivated at being in touch with the electorate. His leadership comes from listening to real people. He is not in politics for money. I don't think he is there for glory. I think he is a good man who really desires the best for all. He cares about the weak and the needy. He has plans to motivate and gain the best from all. He has a huge respect for those who give to society and to our country. His vision is that we as a nation have great talents and that with good leadership we can achieve things that are beyond our imagination right now. These things do not seem to be above his imagination and if there is anything that I have taken away from the conference it is that he has seen a great potential in the people of the United Kingdom and that he will lead us to not just to aspire to more than we can imagine but to achieve also.
I think if you ask me when I have had time to digest the whole experience - What did I come away with?
Hope.
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16. At 10:03pm on 08 Oct 2009, John_from_Hendon
Excellent point - whilst the media is obsessed with individual banks and their woes they are missing the really big stories and not letting the public in on the really painful stuff.
I think it's 7 months of rates of 0.5% and still there aren't any signs of a tangible recovery (merely bull traps created by Government stimuli and forlorn hopes of investors who are in too deep to be able to climb out)
I would also note this story regarding the purchase of dollars by Asian banks - a very risky strategy. If it works and the Dollar recovers - then fine, however if the Middle East decide to drop the greenback in favour of a basket of currencies then the Far East is going to have a banking crisis all of it's own.
http://news.bbc.co.uk/1/hi/business/8298037.stm
You won't find this story on the 'front page' - but buried somewhere deep inside.
In comparison to these major financial events the trouble at Lloyds is insignificant - even though the bank is a large one.
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38,
BNP
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38. At 10:38am on 09 Oct 2009, Johnnie_London
Thanks for the party political broadcast - but did you fall asleep at the conference and dream half of it?
Where is your hope coming from when George Osbourne announced some pretty drastic and unpopular cuts / pay freezes which amount to about £7 billion - which is not really much to knock off the £175 billion the Conservatives are saying has made this country 'bankrupt'?
Sounds like we're doing something into the wind.
If you had watched question time last night maybe you will have seen there is very little difference between each party and the differences there are, are simply immaterial.
Both paths lead to disaster as both parties blatantly refuse to recognise the fundamental causes of Economic collapse and tinkering with the dials on the car is not going to fix a broken engine.
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39, So the dollar is safe ?
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42. At 11:17am on 09 Oct 2009, JavaMan1984 wrote:
39, So the dollar is safe ?
As solid as a rock - a Northern one....!!
Everything depends on the Middle East at the moment, and I don't think the US are historically in their good books.
We're going to see some serious "brown nose" diplomacy coming out of the US soon as they try to save their currency.
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#40. JavaMan1984 wrote:
'38,
BNP'
worse, Amazon Turk
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37. At 10:37am on 09 Oct 2009, Anglophone
I am impressed with your logic - but you realise once you state that lending has to be a function of the state - then you start down the road of inevitable comparisons....
The Post
Transport
Energy production and supply
etc...
All too big and important to the public to be allowed to fail aswell. The logical conclusion must be that these must also be state run.
P.s. To clarify - by 'state' I do not mean 'Government' as this is the current scam to transfer everything back to the private sector at a cost to the public.
...and what's that called? I can't think of the word but it begins with C....
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43, The dollar will likely fail.............The far east will have to take the pain as the middle east, china and south america & france (along with others) have all but agreed the dollar should go.
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moraymint said:
"My company is about to go bust, whilst the bankers and politicos draw their salaries, expenses and bonuses just like they ever did ... all funded by us taxpaying mugs.
Somebody had better sort out this unholy mess fast, before people like me start taking to the streets."
...now someone tell me that hard working legitimate businessmen (or women) making statements like this is not a sign of impending revolution.
The BBC have attempted to play down the crisis this morning by indicating that Union membership is much less than in the 70's so there will be no repeat of the winter of discontent.
A few years ago it took a small band of irate hauliers to bring this country to a complete standstill such is the danger of our 'just in time' Economy.
Moraymint's is a common story I am hearing - a story of banks pulling funds which 2 years ago they would have happily advanced without question. Property deals falling through and businesses not being able to borrow to cover the loss in revenue.
Strange that.... especially as the news keeps telling me how 'lending is increasing' and 'the Economy is recovering'.
Are you all getting it yet?
Depression is a steady downwards trend highlighted by occasional 'blips of life' - the blips are being highlighted by the Government and media as 'the norm' to give the impression of recovery but the overall trend is downwards.
.....just like the US in 1929....
I'm not joking folks - I'm already buying up canned food as it lasts longer.
If I'm wrong then I'll have a baked bean party - however if I'm right you'll all be knocking my door for handouts - but as I am a humanist you will be welcome to share in what I have.
Want to know why lloyds are really keen to get out of APS and loose the Government stake?
- so they can follow their instincts and reduce their lending as they will be free to make the rational decisions to ensure their survival in a recession - i.e. not lending to people for the sake of a Government target against your instincts.
Unfortunately this is contrary to the needs of the public / consumer and the Economy.
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JavaMan1984
"as the middle east, china and south america & france (along with others) have all but agreed the dollar should go."
....now there's a line I never thought I would see in my lifetime.
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....don't take my insane word for it - listen to a man who saw this coming...
http://news.bbc.co.uk/1/hi/business/8298182.stm
"easy money chasing assets"
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44 lol
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....speaking of 'big mistakes' - here comes another one...
http://news.bbc.co.uk/1/hi/business/8298262.stm
JJB are going for a £100 million rights issue just as nearly everyone else does the same (like Lloyds, Ladbrookes etc.) and what are they planning to raise the money for?
"Observers say it will use the rights issue to revamp shops and buy stock. "
I don't think the lack of customers has anything to do with your (presumably) shabby shops and lack of stock.
Either they have lost the plot or the real reason for the rights issue is simply 'survival'.
Good luck JJB.
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Anyone noticed how preternaturally calm Eric Daniels seems during all this? Add the fact that until recently he was one of the heaviest FTSE CEO smokers and has recently given up. Should Andrew Marr be asking some embarrassing questions?
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I do feel sorry for Lloyds.
Who are the beneficiaries of those £260bn of poor quality loans and investments made by HBOS. Could much of £260bn be frauds and swindles, with insider help, disguised as "poor quality" loans and investments?
Where is the money now?
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There was a story which did the rounds in the 80's (Big Bang)
Everyone was so busy, no-one had time to stop for lunch.
Someone had a tin of tuna, so he offered it for sale.
Each person who bought the tin, held it until he got a better offer.
Nobody opened the tin or ate the tuna.
It got to £60, then -either Black Wednesday or Pink Tuesday or something happened in the markets- and the tin dropped to 2p.
Of course when at that point you might as well have the tuna lunch...
Rancid tuna..
The tin was worth £60 only as long as 'the market' believed its value could only increase......
Cut to today.
There is barely a company in the FTSE 350 currently worth more than the tin of tuna, yet the market buoys itself up with dutch courage, and goes ever higher.
I smell rotten fish.
Regards,
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megagodfrey22 wrote:
Lloyd's problems stem from the government forcing them to take on HBOS instead of letting it go into bankruptcy or nationalizing it.
This is complete and utter nonsense!! As Lloyds Group employee, we have seen various bids knocked back previously because of the competition commission enquiry (including Northern Rock). Although I don't agree with it morally, LTSB wanted the deal and saw the capital behind the balance sheet and a healthy customer base. What they did not know was the extent of the impairments that HBOS held in loans. Many of these did not come out until after year end when commerical/housing property prices had been depressed even further and the debt had grown further.
The government did the right thing for the country and after seeing the impact of Lenman collapse in the States did not want the domino effect to hit banks here.
Further to this if we had let the other banks go bust, it would have impacted many customers, businesses and staff that did work in the finanical sector and the high risk takers would still have walked away anyhow like Fred the Shred
Incidentally, many of the toxic loans are tied up in Ireland and Australia. And we won't mention too much about Ireland with their ability to create fiscal stimulus locked in because of their committment to the Euro!!
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#25: Try the Co-op bank.
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#47. writingsonthewall wrote:
"The BBC have attempted to play down the crisis this morning by indicating that Union membership is much less than in the 70's so there will be no repeat of the winter of discontent."
Or perhaps they are simply reporting reality?
You see conspiracies everywhere, positively revel in gloomy news and have been gleefully predicting social and economic meltdown for months. You must be absolutely gutted that the world continues to turn, day after day, and that the vast majority of people just get on with their lives.
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In the 1960s, 70s and later, various UK governments have master-minded the re-organisation of our car, aircraft, ship building, steel, motor-cycle and much of the rest of our manufacturing industries. They pushed and promoted mergers and took into state ownership. What was the result? We have ended up with close to no manufacturing.
But, Tony Blair said it didn't matter. We could survive pefectly well on service industries, notably finance and banking. We would be the great post-industrial economy (and satisfy Kyoto in the process). For a short while, it seemed to work. Or was it just a bubble driven by house price inflation?
If the present government's interventions in the banking sector have the same success has the ealier ones in manufacturing, where are we going?
Is the UK to survive on tuition fees from foreign students attending our universities?
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57. At 1:41pm on 09 Oct 2009, rbs_temp
"You see conspiracies everywhere, positively revel in gloomy news and have been gleefully predicting social and economic meltdown for months. You must be absolutely gutted that the world continues to turn, day after day, and that the vast majority of people just get on with their lives."
rbs_temp - you're back! I thought you might have floated off into bubbleland
Ah and how things haven't changed. Well you might think I'm gleefully predicting social and economic meltdown - but there's no glee here I can assure you. I don't relish the thought of power cuts, no post, no bins being colected and civil unrest anymore than the next person. However should I simply be getting on with my life?
So are the near 3 Million unemployed now simply 'getting on with their lives'?
Are the 110,000 bankrupt people from last year and the expected 150,000 from this year all getting on with their lives?
Are the 40,000 homeowners who are no longer homeowners (from 2008) and the predicted 75,000 from this year all getting on with their lives?
Don't forget - a few weeks ago you didn't think there was a recession at all, because you weren't personally experiencing one. However once a tirade of people on this blog corrected you I thought you realised that you can't rely on your own personal situation as an indicator of the wider picture.
I have a job, and a house, and no desire to borrow money, but I don't assume that so does everyone else.
With regard to the BBC's reporting, well it's convenient they reported the union membership so readily but were not so keen to point out that the Lindsey oil depot strike earlier this year was a watershed.
I'm no expert on industrial relations but as I understand it Mrs Thatcher introduced a law which outlawed such unofficial strikes. However the strike which brought Total to the table was effectively illegal and demonstrated you don't need a union to protect your jobs - you just need solidarity.
I sincerely hope you're still around in 12 months time so we can continue this discussion of worker solidarity as we picket outside the Royal Bank of Scotland at the upcoming cuts - don't forget if you work at RBS it makes you a public sector worker these days....
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56. At 1:34pm on 09 Oct 2009, goodthinkinggeorge wrote:
"#25: Try the Co-op bank."
Unfortunately this will be a pointless excercise for moraymint as he will be asked by the co-op why he is switching banks.
When he tells them why they will reject his application as he will be seen as 'high risk'.
The Co-op pride themselves on sensible and prudent banking so why would they take on another banks rejects?
I have found this to be the case in my own situation very recently.
Moraymint, and I are two of the growing number of 'financial outcasts' who are wandering the banking wilderness at the moment finding that there is "no room at the inn" no matter how desperate things become.
That is how the credit system works.
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#53 puzzling
"Who are the beneficiaries?"
HBOS was part of a lending consortium that funded the buyout of McCarthy & Stone. The retirement home builders.
It all went pear shaped for them and now they are bank owned.
HBOS exposed to north of 200 million pounds.
But everything is still functioning.
I suppose you could consider that there is now a new super trading entity.
Publicly (state) backed private industry.
Is McCarthy & Stone publicly owned?
HBOS is just following the money though. The grey pound.
Only retirees have liquid money nowadays.
Obviously it is just waiting to be repatriated to the banks.
Via McCarthy & Stone of course..
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Modestmark
I agree with your summary except for one thing. I do not believe it is the place of the government to actively promote a bid such as the Lloyds bid for HBOS which was in clear contravention of the country's competition rules, even if behind the motive was saving the banking system. Rules are set to provide a basis for proceeding in a proper manner, in this case to prevent a monopoly situation, and if the Government deliberately allowed them to be broken I think that was wrong.
Lloyds TSB wa a prudent commercial company, apparently with none of the "attributes" of the other banks like NRock, B&B, HBOS or RBS. Of course Daniels and Blank's eyes must have lit up when they were told they could have a pot at HBOS - the key question we dont know, you or I, is what was said at that meeting with Blank and Brown and what reassurances were given if any. There must have been subsequent meetings with the Treasury - I know how they work on these things. Also there must have been at least a nod towards the FSA and Neilly for something so clearly anti-competition as this to get through untested.
Am I not right in thinking that Lloyds had made a similar suggestion for HBOS several years ago and was rejected out of hand, and also tried to take over Northern Rock but that was rejected too. You will correct me if I am wrong on those. It seems to me that this deal allowed a bid which gave LLoyds over 30% of the mortgage and savings business in the UK. Now all the regulators are out of the woodwork trying to apply sanctions - sell Halifax, reduce the number of branches, increase lending to 2008 levels, increase Tier 1 capital ratios.
If you are working in Lloyds as I think you said you are you will be as appalled as I am at how little due diligence must have been done. Surely that is a bedrock of our business arrangements - it was a commitment on the management of Lloyds to safeguard its shareholders' interests in this respect. They failed lamentably, or had the wool pulled over their eyes. They bought a pup on shareholder's behalf, and in doing so they failed in their fiduciary duties.
If the whole basis of the bid was to save the banking system, and Lloyds TSB shareholders, who were asked to put their money in after the bid at 1.73p per share and then 38p per share, were not told that then they have been misled by the Government, the Board and all the people who knew the facts about the bid and said nothing. Did Daniels and Blank know, when they were floating the first rights issue in January this year, that they were shortly to announce billions of write offs on HBOS losses?
The whole thing stinks to high heaven, and yet all the main participants (save Sir Victor) are still in their jobs.
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38. Johnnie_London
Keep it up! I love the gags!
That's what we like to see in the midst of this dark recession, the good-ol' british sense of humour bubbling to the surface.
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Oh dear - sorry to once again cast doubt on the people living it up in cloud cuckoo land but whilst the British public may be trusting of their Government (this one or next) - your Government certainly doesn't trust you.
Here is a little story hanging around the BBC's back door - it seems innocent enough - training the army to deal with civilian unrest in Afghanistan.
Until you realise that the handling of civil unrest is a job for the local Afghan police (or army) and not a job for the British army who are far too busy handling armed insurgents (Taliban / Al Quaeda). I am certain the British Army do not plan to get involved in foreign civil matters.
So what do you think they are really training for? I've seen similar footage of US troops undertaking the same training - 'civilian control training' they call it.
http://news.bbc.co.uk/1/hi/england/8299177.stm
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#57 rbs_temp
Good to see someone accenting the positive on writingsonthewall's personal blog!
Moraymint - commiserations, been there 20 years ago, but I have every faith that your entrepreneurial spirit will win through and you'll be back.
writingsonthewall, you need to get a grip mate. The "projected" repossession figure is still only a fraction of 1% of all the mortgages held nationally. The vast majority of people are still making their now substantially reduced payments month-on-month and are using the balance to pay down expensive credit card debt - or buying new cars, judging by this month's figures.
Interesting that Questiontime featured a former Housing Minister (Cooper) and her nit wit Lib-Dem shadow and no mention was made of why we still have the lowest house building rate in 80 years. Reference to RTPI planning portal shows that the Conservatives are recommending villages nationally expand by 10% - that'll upset their middle England NIMBY core voters!!
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Johnnie London
I dont think Mrs Thatcher failed as leader of the Conservative party. Some of the men in her various cabinets were horrified at the thought of being led by a woman and spent their whole time either being disloyal to her or feigning support. She had an inner core of people she trusted and who liked and who got on with her, like Joseph, Whitelaw, Parkinson and Tebbett. On the other side she had the Michael Heseltines and the Geoffrey Howes - the former introduced the most ludicrous management system into DOE and MOD called Minis (Management Information System for Ministers). It made what Labour are doing look like respectable endeavours (well, perhaps not, but it was pretty awful).
If she had any skill at all it was to manage to blend together a cabinet of huge egos and still run the country, rather like Atlee did in the 40s.
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65. At 4:28pm on 09 Oct 2009, houseflogger wrote:
"writingsonthewall, you need to get a grip mate. The "projected" repossession figure is still only a fraction of 1% of all the mortgages held nationally. The vast majority of people are still making their now substantially reduced payments month-on-month and are using the balance to pay down expensive credit card debt - or buying new cars, judging by this month's figures."
You're missing a big factor in your analysis - we're only 12 months into this crisis - or did you think all the reposessions happen on day 1?
I'd also like to know how you know about this 'vast majority' who are on low rates and paying back debt. I am on a BoE + 0.5 but I didn't have any debts to start with. That's because the demographic of prudence means the people who are good with money had no debts (or very few) to start with.
When 'Super Cameron' arrives with his public spending cuts - will the resultant unemployment boost or demolish the number of repossessions?
I think you need to stop kidding yourself and realise how bad it really is - or are you like rbs_temp - "I'm alright jack so where is the problem"?
P.s. increased car sales is because the Government are subsidising every new car purchase to the tune of £2000 - or did you think it was a sign of recovery?
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# 67
I would tend to argue that repossessions have been far too low given the number of mortgages taken out at speculative levels.
When there is a supposed "credit crunch" surely supply and demand dictates that interest rates should not be at such a low level, but then BoE base rate is only applicable in certain areas, unfortunately not the productive area i.e. loans to businesses.
The revulsion at the thought of repossessions is part of why the downside risk gambling on house prices does not match the potential gains and is another factor in the bubble.
The home ownership mantra has been taken too far, aided by a failure to construct social housing (which should currently be doable relatively cheaply given the amount of redundancies in the construction industry), home ownership is not a right.
[And in many cases the emphasis was more property than home, the notion of treating homes as a speculative asset is somewhat distasteful].
As to cuts resulting in unemployment and increased repossessions... why should others pay for someone to do something that doesn't add value to buy them a house?
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To 25 fedupbankuser and everyone who is frustrated with the existing big banks....
Change to the Co-Op Bank or Nationwide for the moment if it's possible for you.
Neither of these institutions have shareholders to pay dividends to, and seem to be offering much better deals to both borrowers and lenders.
One other outfit that, while very small at the moment, holds out a glimmer of hope for the future is "Zopa" at http://uk.zopa.com/ZopaWeb/
This model works on so many fronts:
- the level of transparency is fantastic
- borrower and lender are connected practically directly i.e. this is the disintermediation that we desperately need in order to provide both parties with better value and reduce the ridiculous spreads that bankers are taking at the moment.
- the lender can choose to some extent the levels of risk he/she is willing to embrace
- no casino banker can get his hands on your money and use it to go gambling for his own entirely personal benefit
One imagines this concept could be scaled up massively, covering all sorts of other types of loans too, and indeed that other websites could start up along similar lines.
Perhaps then finally, the ordinary people of the UK will have access to a decent value for money debt exchange system.
PS I have no financial interest in this organisation and no money borrowed/lent through it - but I sure am looking at the latter.
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# 65 houseflogger
"Moraymint - commiserations, been there 20 years ago, but I have every faith that your entrepreneurial spirit will win through and you'll be back ..."
Thanks to you and the other posters picking up on my earlier comments; your interest and support is appreciated.
You're damned right my entrepreneurial spirit will win through! The Bank of Scotland can go to hell.
Of course, neither our political elite nor the banking mafia would know entrepreneurial spirit if it trundled over them in a steam roller. Regrettably, it's people like me, chasing business, working every hour God sends, sacrificing holidays and getting grief from the wife and kids for never being around, earning profits and paying corporate taxes that keep the politicians' expenses and bankers' bonuses flowing.
If only Gordon Brown and his pathetic Marxist acolytes had the faintest idea of the degree to which they've screwed this country over the past decade.
I'm thinking of some words from a Dougie MacLean song, "You can fall over, but you mustn't lie down ...". I have absolutely no intention of lying down. This travesty of a Government can go join in hell their banking pals at Lloyds; rest assured, I'll get my own back in due course.
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#67
Base rate + 0.5% is a cracking rate, especially in the current climate, so congrats all around. Presumably you were on the same rate 18 months ago when base was 5%. What are you doing with all the spare cash, or do I spy a new motor on the driveway?!
Stay positive and have a good weekend.
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47 rbs_temp
Which world are you living in? I can't beleive that the penny hasn't dropped yet. You might be "alright jack" but many others are slowly sinking.I manage a charity, which amongst other things house homeless families. I can tell you from the coal face that things are starting to get a lot worse.
I also have family members recently laid off or made redundant, my young nephew is possibly about to loose his house too, he may have to go bankrupt to escape the debt he will be left with even if his house sells, and he saved for a good deposit. Still as long as things are ok in rbs_temps world then everything is fine....
WOTW's spot on in my opinion. I've been stocking up on coal and tinned food for a while now....
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Can't we just receive those £160m as Lloyds ordinary shares? Lloydscan probably manage £160m much more carefully and productively than the government. Well, except for wasting money buying HBOS.
All UK's security services (MI5, MI6, etc) should have get together and have a unprecedented, relentless investigations and pursuits on how much of HBOS "£260bn of poor quality loans and investments" are frauds and swindles. £260bn recovered can go a very long way to pay off our national debt.
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#59. writingsonthewall wrote:
"Well you might think I'm gleefully predicting social and economic meltdown - but there's no glee here I can assure you. I don't relish the thought of power cuts, no post, no bins being colected and civil unrest anymore than the next person."
Oh, but you are quite gleeful. You post links to every negative story without comment, while simultaneously questioning the veracity of every report that suggests that the economic picture is a mixed one.
"Don't forget - a few weeks ago you didn't think there was a recession at all, because you weren't personally experiencing one. However once a tirade of people on this blog corrected you I thought you realised that you can't rely on your own personal situation as an indicator of the wider picture."
If the only reply you have to my post is to distort the truth then I'm afraid you've lost the argument, my friend.
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Now for a change of subject.
For some time I've been considering the inflation/deflation debate.
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#52. mdcass
Eric Daniels - Get out of jail free card.
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Let me just pose a couple of thoughts.
Various posters have queried why bank base rates haven't been increased? Could it be that many people have annual reviews of their mortgages and that some of the biggest mortgage lenders adjust payments in September?
We can't have people's mortgage payments going up before the next election can we?
Some people have queried why we haven't been inundated with lots of repossessions. Considering that bank base rate is at a 200 year low and will likely remain there or there abouts until after the election this is hardly surprising.
Just wait until they start to rise and then see how many hand back their keys or default?
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#64. writingsonthewall
Thatcher trained the Orgreave police on the hippy convoy in savernake forest two years before the miners strike, the current state obviously doesn't trust the police to carry out the orders anymore (afghan riot training my hairy...)
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Moraymint, if there is value (transparent) in your business then think more local, current employees, credit unions, sod it, all out internet appeal, if the business has legs then someone will recognise your determination to run with it.
It is better to try and fail than never to try at all.
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Before Northern Rock went over public ownership in 2008, Sir Richard Brandson hoped to buy the Northern Rock, although the offered price of £1 per share had not been accepted by the government.
Now Lloyds Bank Group still has £16bn waiting to be credited to businesses and households.
There is an article titled “Virgin Boss Reflects on Financial Crisis” by clicking on the links of http://au.biz.yahoo.com/090930/2/28x2z.html. At its last paragraph, it says: “Sir Richard said Virgin Money would also launch banking products over the next 12 to 24 months including deposits, personal loans, home loans and credit cards.”
I wish that Virgin boss would like to buy a local business of Lloyds Bank Group, which can facilitate it with mature and good famed financial products and services. And Lloyds Bank Group can be discharged of some debts inherited from reckless loans by HBOS.
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I work locally, try to reinvest locally wherever I can......I'm hoping that this culture and straegey wil pull us through the hard times ahead.
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David Cameron was nervous when he took the stage at the conference, not because he was facing a huge audience, but because he was wondering whether he really had the bottle.
He knows what is coming, what choices he will really have to make.
This is not about economics, it is about people and their relationship with the state.
We are not economic units, we are human beings.
David, are you with us or against us.
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Bob He may be nervous but he will be thinking about a straight fight between himself and Gordon Brown come next Spring. Forget all the others - we have a truly Presidential system where 75% of the population dont even know the name of their own MP (unless they have been sleazy). Thatcher versus Foot, Blair versus Major, Howard versus Blair - I bet few could name the Foreign Secretary at each of those elections.
He is thinking if I cant beat Gordon Brown after what has hapopened then I really must pack up. Is shoe-in hyphenated?
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Good on you moraymint.... If your anywhere near Leeds, I'd like to buy your products/services. You sound like a decent honest hard working person... I 'd like to do business with someone like you
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Dewonflower
He probably wants to buy British Airways for a quid too. He's a real chancer. But when I worked in London in the 70s I went into his first shop in town (I think it was either in Charing Cross Road, Tottenham Court Road or Oxford Street). There was just an opening in the wall and boxes piled with vinyl LPs, mostly by people like the Sex Pistols. I thought what a joke and as a 40 year old I ought to leave when I heard their version of God Save the Queen. I knew as much then as I do now.
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83. majorroadaheadagain2
That Brown will lose the next election, barr major hiccups, is a given. Then why so nervous, this should have been his triumphal conference speech (whoa, look at my wad, see you broonie)
It wasn't.
Cameron knows what is coming, I question his bottle and his loyalties
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In 1989, Erich Honecker made the decision not to fire on his own people and thereby sealed his own fate.
David Cameron, have you got this kind of bottle ?
Sadly for all of us, I think not.
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Inflation is upon us.
Average house prices have risen for 3 months despite being 6-7 x average income. QE has led to shares inflating 50% in 6 months on nothing but sackings and factory closures. The post office workers are striking despite their cause being over a year away and negotiations ongoing. Railway staff are heading this way too. Infrastructure vital to our economy is not being built.
Yet QE and low interest rates continue.
So the real question is, will this inflation go hyper.
For hyper inflation to emerge 3 conditions are required.
1/ A govt printing money to meet it's everyday expenses and unable to finance itself otherwise for the foreseeable future. (tick)
2/ A lack of social mobility. (tick)
3/ A narrative attributing the cause of an economic disaster for the majority population to the corrupt enrichment of a national elite, dominates popular economic and political analysis. (tick)
they can be summarised as, the govt is broke, I can't help my kids, the rich have stolen all our money. The result is, I'm getting some back, STRIKE.
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# 88.
sizzler944
Indeed.
It can be argued that our period of low inflation hasn't been as low as is claimed, its merely the chosen measure that has been low.
There has been inflation (and recently deflation) but this has been locked into speculative markets, especially the property one.
When you look at in those terms, wage increases for the majority in recent years may well not have matched these increased costs of living, meaning increased personal debt (often on the basis of inflated asset prices) was needed to increase or indeed maintain living standards.
Even measures including housing costs only reflect the cost of servicing the finance, which have been kept low in relation to the cost of the underlying asset.
And some were naive enough to call it an "economic miracle", it was just the big lie and some people still buy into it and trust the perpetrators.
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# 77.
Economicallyliterate
Living up to your ID...
Low interest rates (for some) are indeed being used to keep some people sweet in the hope of a few more votes.
I can see less base rate tracker mortgages being offered as replacements when existing deals come to an end; but then the banks do owe the government for services rendered and no doubt avoiding impacts of failed property gambles helps to avoid more constrictive rules on future behaviour.
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#86, BobRocket wrote:
"83. majorroadaheadagain2
That Brown will lose the next election, barr major hiccups, is a given. Then why so nervous, this should have been his triumphal conference speech (whoa, look at my wad, see you broonie)
It wasn't.
Cameron knows what is coming, I question his bottle and his loyalties"
BobR,
It's funny really. Brown helped get the UK into this mess and in a way I'd like to see him try to dig us out before having him exiled. Then, again, I don't trust his economic judgement.
I've no doubt Cameron is nervous. He knows - like everybody from all the parties - that belts are going to be savagely tightened over the next few years. It's not just about digging the UK out of a hole (as verious governments have had to tackle before), but doing it in a global context of unprecedented severity.
Tell you what worries me. While all this money (our money) has been poured into banks, I can't remember the last power station to come on line. Not counting the highly subsidised and intermittently productive windmills...
For goodness sake, we don't even have an adequate gas storage capability in the UK. (OK, I know that gas supplies will run down, but the UK has far, far less storage to buffer it against a sudden supply rupture than France or Germany.)
What has happened for the last decade? What new energy plants have been developed? You can argue about the "value" of banks. But losing power supplies is a real difficulty. I wouldn't bet against it.
It's one thing to work towards a brighter future. Quite another to face having to do it in the dark, when the lights start going out.
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#73.
puzzling wrote:
"Can't we just receive those £160m as Lloyds ordinary shares? Lloydscan probably manage £160m much more carefully and productively than the government. Well, except for wasting money buying HBOS."
Perhaps we should already have a lot more shares... after all without government support or the prospect of government support it was pretty much worthless.
Of course investment in the stock market isn't really the place of government and does create all kinds of ethical issues where policy may well be influenced by protecting investments and against other interests.
"All UK's security services (MI5, MI6, etc) should have get together and have a unprecedented, relentless investigations and pursuits on how much of HBOS "£260bn of poor quality loans and investments" are frauds and swindles. £260bn recovered can go a very long way to pay off our national debt."
This assumes all £260bn is frauds and swindles and that its recoverable, neither are likely to be the case.
In many cases its a case of pushing more and more loans at people who can't afford them, then of course bundling lots of these together and selling them as risk free assets.
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#70. moraymint:
Great attitude, hang in there, if the underlying business is sound here's hoping the fighting spirit helps you pull it through.
The determination and commitment alone should be worth something to a potential lender.
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I just don't get the whole LloydsTSB / HBoS deal.
I gather that Lloyds had looked at a couple of prospective targets before all the crunch stuff came up (Northern "Rock" and even HBoS), but either finabials weren't right or competition issues cropped up.
How is it that the government can simply set aside competition laws/ rules in order to avoid nationalising a failing institution? Was it legal?
Lloyds had been a pretty "conservative" operator. It probably had some bad stuff on the books, but then again could probably have dealt with it.
So how come a couple of cosy politico-business chats and a complete lack of due diligence was allowed to bring a respected institution into disrepute? Stuffing up the Lloyds shareholders (including private pension funds) along the way.
Stinks. Stinks even more when rabid Labour supporters talk about the close links between Tories and bankers. It's not just a mote in the eye, or even a plank. It's a tree.
How come we have no Serious Fraud Office enquiry into RBS looking for a major rights issue when somebody, somewhere within that group must have known they were not just "having a few minor difficulties" but going down the pan? (If the directors didn't know what was happening, they should at least be debarred from directorships until they were re-trained to understand the companies they oversaw. Did that happen to RBS, Northern Rock or HBoS directors?)
Politicians are just people we allow to "represent" us for a while. They should never be allowed to set aside the normal operation of UK rules (such as competition considerations) to get themselves off the hook.
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My view was that the government had to make a call in a short space of time and LTSB were the only option. They still could have turned their back as the Bank of America and Barclays did with Lehman Brothers. Agreed, I would question the amount of due diligence done, abeit under strict time constrainsts. Between September and year end the value of a number of repossessed properties also nosed-dived significantly making the HBOS impaired debt much bigger as well
I am not entirely happy with the situation myself with the millions and time (under less resource I may add) we are now spending on integration to marry the two banks would make me question the value of breaking them up again. I am now more concerned with the tax payer being paid off a soon as possible. The share value will not increase significantly until this happens.
LBG are putting in measures to make this happen and the policy response to the recession entails buying bonds. This means not just QE, but also the requirement that banks hold more liquid assets.
Ironically the same factors that caused recession gives the means to finance it cheaply. Of course, things could change; I wouldn’t be surprised if yields do rise in coming years.
But the fact is that, for now at least, bond markets are telling us that there's no urgent need for big, quick spending cuts but wise investments
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Just want to bring the conversation back to its starting point. What Robert and other commentators seem to miss is that as a country we are effectively having to borrow to cover for this capital 'hole' so it is not a fee but merely the cost of borrowing passed on - so this is not some kind of earnings we magic up as it is implied.
So take the current £16 billion - one would be expecting to pay at least 2% plus any risk premium at national level. So I think that the starting point quoted shall we say is at the low end.
I've been interested to observe when others are talking about making a profit from the nationalised banks that its been conveniently overlooked at the actual cost of providing the capital in the first place from the markets (which in this case is borrowing by the Government since we long ago ran out of surplus cash) and which is far more than the £16 billion being talked about here. The bill is accumulating (over 2 years now).
Ask any entrepreneur who could borrow to inject capital into his/her business but he/she would have to pay an interest charge (and some) for that. The principle is the same in all cases.
The problem is that this interest charge is due to rise as we find national financing harder to come by in terms of our increasing national debt which is what the Conservatives and others are worried about.
There's no such thing as a financial free lunch (other than a few specific cases of arbitrage) and that goes for quantitative easing as well...........
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And as an addendum.
Just for everybody's attention. The Government HASN'T used any CURRENT taxpayer's money to bail out NR, RBS, LTSB/HBOS etc.
It has used FUTURE taxpayer's money by borrowing it. That is why it is dangerous for the country.
How dangerous?
Well if you are mortgaged up to the hilt right now and your next-door neighbour comes to you for help to avoid being evicted by asking you to borrowing more money to pay off their mortgage - would you (if somebody would lend you the money of course)?
Mmmm.......I think most would see this as an extremely dangerous proposition - fundamentally there's no real difference in principle to the scenarios presented.....apart from the fact that we weren't asked.........
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Those sensible lenders in the industry walked away from the cheap and racy reals HBOS (amongst others) were doing over the last few years and this was a disaster waiting to happen. Basel 2 and the effect on bank capital came at a bad time and it's been inevitable that casualties would result.
Bail outs and guarantees are all well and good, but the Government is missing the big picture. Businesses are not confident about the future, they are waiting for tangible evidence that UK plc is moving forward and then I expect they will cautiously re-enter the market and start to fund expansion on the back of debt. Telling banks to lend more is ridiculous strategy that every sensible lending manager in the country knows isn't going to work. Who are we going to lend it to if the level of trade has dropped, reducing profit and cash availability resulting in reduced affordability ? Gearing up companies in uncertain times is a recipe for recklessness that got some banks here in the first place.
Creating the climate where business wants to borrow is the key and so far the government have failed miserably to deliver. I'm a lending Manager and have been for over 25 years, the issue is not that I can't find companies to lend money to, the issue is that they don't want to borrow at the moment.
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Rugbyprof
I've been interested to observe when others are talking about making a profit from the nationalised banks that its been conveniently overlooked at the actual cost of providing the capital in the first place from the markets (which in this case is borrowing by the Government since we long ago ran out of surplus cash) and which is far more than the £16 billion being talked about here. The bill is accumulating (over 2 years now).
SPOT ON!
We can only make a profit if we're charging more to Lloyds for borrowing than we're pating to borrow (in Gilts). The only other source of pofit is appreciation (share price rising). If we're not then as the biggest purchasers of Gilts are the financial giants then we're effecively running a money pump into the financial system!
Can someone clarify what these rates are?
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Despite a lot of grand claims from our leader, “saving the world”, “we will make sure it will never happen again”, all that happened is that present and future tax payers became poorer. Brown roars like a Lion but doesn’t bite, and now it is too late to make the necessary changes to prevent a future repetition of the last 10 years.
The banks are in a strong position to resist any unwelcome change; it is politically impossible for Brown to change his strategy and if threatened with even the possibility of a small crisis will need to fall back in line. He is now the bank’s puppet. They quite naturally will use this position to enrich their shareholders and impoverish the state stake holders.
Saving the banks is not saving the world; it is now impossible to force through the changes that should have been demanded and implemented 12 months ago.
The next election may empower a new government, we know that Osborne will bring regulation responsibility back to BoE, however there is now less noise concerning splitting investment banking and increasing competition. Hopefully this is just Osborne wanting to avoid a war with the bankers prior to the election.
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88 comments are interesting, anyone else on here have some serious inflation predictions?
Lets face it, consumers are tapped out therefore sustained recovery is not on IMO. Anyone any predictions on how inflation will manifest itself through the economy?
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Modest-Mark
"The Government had to make a call in a short space of time and LTSB was the only option".
My point entirely in my earlier post. It is not the role of the government to sponsor takeovers, particularly when in doing so they are deliberatly breaching their own rules.
It was a government initiative as you say, and now they want to stuff Lloyds (or allow others like Neilly or the FSA or the Treasury to do so) without recognising that the country owes LLoyds shareholders big time. They bailed out the banking system and yet are now treated like pariahs. "Get your Tier one capital in order. Lend at 2008 levels. Get rid of Halifax . Get rid of branches. Lets end this wicked monopoly caused by Daniels and Blank".
This is rotten, and probably close to the wind of corporate governance. What else would you call a government that lays down rules on what consstitutes a monopoly and then allows them to be broken in the way they did. Or the regulators who sat by and said nothing but then come out of the woodwork after the bid. In the end it will cost people their jobs (jobs that might have been saved had the government allowed HBOS to go into liquidation and allowed it to be managed properly until the whole thing could be unravelled and it could be sold on). That would have been the fairest and most honest thing to do rather than cynically allowing LLoyds and its gullible management to act on their behalf leaving shareholders and employees in total darkness about what was going on.
I bet those Scottish bankers who were trying to get the bid stopped are laughing their heads off now.
The trick now is to allow LLoyds the time to manage its way out of trouble, which you may have view on about how feasible that is. There are lots of assets there but do they match or beat the possible liabilities? Since we own 43% we have to hope they do, and that when we sell our 43% on it is at a profit and that as many jobs as possible will have been protected. As we were stuck with all the shares from the rights at 1.73p (averaged by those we bought at 38p) we (the public) have some way to get our money back let alone make a profit.
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The AAA's hole banking system is a house of straw built arrouind self inflated LABOUROCK , the big bad huff puff wolf came and gave it a blow job it will never forget to reveal the falsetto of the pigs[with their "rings" on the ends of their noses ] hiding in it .
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Tha assets that banks once posessed were con ver[loo]ted into perfomance related bonuses subsequently wheeled out the front door in fool view of the owners ,leaving only the "AAA's sets" to be governed by the seemantic shifters[shifters]looking to withdraw their last quick enhanced bonus before limping off to bongo land together with the other f Owls and fat cats with their pigrin boa[s]ts .
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# 88 sizzler944
I tend to agree with your general point that the financial crisis (unsolved, but instead punted a short time in to the future) has become, or is becoming an economic crisis (we're being propped up by even more government borrowing and the printing of money) which will become, in due course, a social crisis (jobless or soon-to-be jobless people on the streets).
My own view is that social unrest is a virtual certainty during the next parliament. The politicians are desperately trying to keep a lid on things. All of the political parties' recent conference pronouncements demonstrated barely the faintest understanding of the scale of Brown's disastrous legacy, still less how to rein in state spending (now out of all control) to the tune of tens of billions of pounds per year. I haven't heard a single proposition from any politician that has anything to do with turning around our economy.
The problem is that Cameron is economically illiterate (remember "sharing the proceeds of growth", ie economic growth is some magical event that just happens, and endless growth in state spending is, per se, a 'good thing' ... Que?) and yet, it's the economy (stupid) that now needs some heavy duty attention. Cameron doesn't do numbers - which is about as helpful to the nation as if Churchill didn't do warfighting.
So, sizzler944, I reckon you're right. There's going to be trouble on the streets for as long as we have a bunch of politicos in office who wouldn't know simultaneous state cost-cutting and wealth creation if it carpet-bombed them.
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Hi Writings #99
Sorry I've been unable to reply sooner.
I presume there is some link to the rate presented on the myriad of gilt issuance by DMO though these are not the easiest to relate to because yield curves include inflation assumptions.
10 year gilt yields are somewhere around 3.5% at the moment which provides some form of benchmark though risk of default is not taken into account here. Also, UK Quantitative Easing is also apparently keeping bond yields lower (how convenient?). But it can't last forever.
If I was a business representing UK the borrowing predicament and its potential default risk I would expect interest rates of c. 20% from any bank - sovereign or no-sovereign debt(nearer 30% APR if it was a credit card).
I'm glad you've also spotted this.
I must admit I'm rather tired of so called expert journalists/reporters (including RP above) from the likes of the BBC, Sky, the national newspapers including the FT etc who don't seem to have done their homework.
Sums up the country really.........
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This comment was removed because the moderators found it broke the House Rules.
Brown is the ultimate ruthless capitalist .His deal to force a lemon on Lloyds bank shareholders to avoid carrying the can for his scottish mates rabid leverage with HBOS left the cautious and responsible Lloyd's shareholders with the contamination of HBOS greed and debt.
His pathethic cloying to be an elected prime minister shows his true lack of character.The sooner he is out for someone else to clean up his mess the better.
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Rather foolishly the chcnellor wanted to force banks to lend to consumers and businesses. With businesses not wanting to borrow and invest at the start of a depression, the banks have been lending out into consumers thereby creating a mini property bubble, the bursting of which will be even greater because money supply to business is contracting far more rapidly than any forecaster expected. What I think we're seeing is a black swan event whereby printing money is, rather than causing salary inflation, pushing us further into a deflationary spiral through asset price inflation that sucks money and aggregate demand out of the real economy. The statistics are horrific.
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Lloyds should just shut up, take the GAPS protection, and forget about raising silly money on the market.
They were given HBoS for free, have been covered for the toxic debts, and are now just being greedy. They seem to think they are missing out on a Banking party. Their own stupid fault.
Mind you, I think the idea was that UK & US governments were going to clamp down on banking largesse........ instead of which they have been chucking free money into the financial sector without any clue why. It certainly doens't reach the wider economy.
If no-one else does it, the banks are going to derail themselves again fairly soon. They have been doubling up on all bets and can't help themselves.
Regards,
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#109 (domestic) property bubble
I haven't seen a proper analysis of house sales.
The headlines presumably mean that house prices have recovered only relative to the low-point, but are still way down.
Have the banks stopped re-possessing?
Are they offering new terms to mortgage defaulters?
Have they bought the properties off the mortgage defaulters and are they now renting direct to them?
Are they still offering 6-7 times salary, but only on max 75% loan to value?
This BBC website seems to like only one-paragraph analysis, nothing in depth.
Regards,
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Firstly - my thoughts and best wishes are with moraymint - I'm waiting on Barclay's for a routine renewal of current facilities, without which we can't function. Our overdraft facility is £50K. Our L/C facility is £180,000 (currently not required), both covered by personal guarentees. Our financial position is stronger than the equivalent numbers from last year. We are a business established 10 years and have never failed to turn in a profit. We have repaid (to shedule) £400,000 of the £500,000 we have invested in the last 7 years. In 18 months we will be debt free. This is a company I bought for £1 (and it's liabilities!) and ran off my personal credit cards for a year. I cannot say that I don't await their decision with trepidation. If my business isn't worth a simple extension of the status quo - God help us all.
And that sums up the whole UK situation - we don't want lots more borrowing/lending, just a stable situation managed by people who understand business. New political Party anybody?
Javaman - 101- asked for some inflation forecasts (guesses!!!). Last November I forecast the following.
Property prices would stabilise in March / April. (see Nationwide stats)
Sterling Euro would average 1.10 over the year. (Pretty close so far)
Sterling Dollar would average 1.48 over the year. (Not too scruffy)
That we would win the Ashes.
That we would finish top of the World Cup qualifying group.
Oh - and that inflation in August 2010 would be 8% (including housing costs).
Just a bit of fun for a trade magazine, but hitting the target too often to be happy about the inflation figure.....
Anybody else prepared to make a fool of themselves by having a punt at what next August's inflation figures are going to be? Housing costs included - I think we are going to see significant price increases ( I know, I know, it's not what the "experts" say) in housing next year. We shall see....
Tony - StH
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110 allmyfault - you are having a laugh and winding up very long suffering Lloyds shareholders - there is no need for it. They certainly weren't given HBOS for free.
It is only just over a year since Robert Peston wrote:
"First things first: if Lloyd's TSB's takeover of HBOS were to collapse, HBOS itself would collapse and we would all be staring into the abyss. So that's not going to happen".
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I really hate this term "taxpayer" it sounds communist to me.
One of the reasons the public finances are in such a mess is because the Corporation Tax take is down due to the banks having a bad year.
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Whatever the outcome will be, one thing is for certain. The banks will profit, and the taxpayers will pay. Since when hasn't it been the case? Mixing public money with commercially driven banks is just a bad idea.
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Fireyshandy #114
Though the banks this year will contribute less (c. £10 billion or so), the fact that we are having to borrow upwards of 200 billion or more puts that in context. In effect we can't afford two times the NHS......which is quite staggering.
Of the 2.1 million limited companies in the UK, only about 900,000 actually pay corporation tax (source HMRC), the rest are loss making, dormant or charities who pay no corporation tax (there's a lot of them and many not so charitable).
Also self employed tax take will be down since most self employed are being hard pressed to make any cash at all. There will also be an outflow here since Brown pulled forward the taxation 'on account' a few years back (i.e. pulling tax due forward). Thus any self employed or partnership losing money or reduced earnings will see a tax rebate. Only those in self-employement know about it - yes another one kept quiet by the Government.
There are about 2.5 million of these going into the recession. No doubt the 150 bankruptcies a day will also take its toll with taxes due in most cases being written off. There's currently also about £3.7 billion in unpaid tax from the HMRC's support scheme to SMEs. One suggests that a good proprtion of this will eventually be written off (it's a good delaying tactic until after the election).
There's also about 1 to 1.5 million ex employees no longer earning for tax/NI contributions (don't forget redundancies are tax free upto £30,000) and about half of these currently are now drawing benefits. A good proportion of these are also setting up as self employed since they have no option - I wish them all well but statistics would suggest that very few will contribute tax/NI going forward.......
From ground level its hard to detect. From a national level its absolutely crucifying. I don't know how Brown or the rest of this current mob can sleep at night.
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#113 belovedgasbags.
Apologies.
I meant that Lloyds Head Office got HBoS effectively for free.
They reckoned Govt protection and lazy diligence would cover them until the economy stabilised and they could make a fortune from the 'best' bits of HBoS.
They sold their shareholders down the river.
They should now sit under the umbrella of GAPS and ride out the storm.
If they do that the share price will recover -but never to the heady days of two and a half years ago. (600) when we were in cloud-cukoo land 1.
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Isn't it fascinating how the system works - last week the Dollar rose on Bernanke's talk of 'tightening once the recession is over'.
It seems the markets still give him credibility to do what he says (although I would dispute that)
With the revelation by the CEBR that the interest rates in the uK will stay low for years - I wonder where sterling will be heading today.
Whilst it makes perfect sense to invest in a country which is going to have higher rates than another - it does show how easily the market is fooled.
The currency markets will move based on this speculation. Is that a way to run a reliable Economy? Where the price of currency is based on unsubstantiated rumours and policy talk?
Is it any wonder there are speculators out there when the system is not the 'rational model' we were all taught in Economics but rather a weighted scheme which is open to manipulation?
I'm not denying market forces may have a place in society, but only for the most frivollous goods and services - not for essentials.
...and what have successive Governments tried to convince us is the correct way to manage our (relatively) reliable public services?
- That's right, throw them to the market - PPI, NHS contracting out to private healthcare, private sector consultants for Local Government etc.
You may criticise the efficiency of public services but at least they are there in all weathers.
Imagine if your local NHS was run by one of the many private institutions that have gone bust this recession? It's one thing to loose your savings but another to loose access to healthcare.
....and what is the Government doing today? - yes, selling off more public sector services to the market.
You will all be sorry when one day you go to the Doctor and find a 'sorry we're closed' notice on the door.
Still - I suppose that where in some free market fantasy land that we 'innovate' and simply stop being ill!
Bizzare
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Rugbyprof.
Thanks for the reply - interesting you chose the 10 year Gilt rate - is this a sign of your expectation of how long the Government will have a stake in Lloyds for?
So much for getting out at a profit - maybe it's something I will have to pass down as legend to my decendants....
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"The Chancellor isn't going to let LLoyds out of the Government Asset Protection Scheme (GAPS) without extracting a price."
Robert, this first paragraph, the "...without extracting a price," bit. What makes you so sure they actually WILL extract a price? Our experience of such situations is, once the hoo-haa has died down a bit individuals, like the Chancellor, don't seem to have the stomach to upset their banker friends and weazel out of their responsibilities. Any wonder when, the taxpayer is such an easy target, the proverbial path of least resistance and will pick up the tab, if the Chancellor has another bad day!?
The banks immediately began weazeling out of their obligations to the taxpayer right from the start of the crdeit crisis and this chancellor is letting them get away with "murder" to this day. It's scandalous, outrageous and downright economic vandalism to let it go on. As every day goes by, people's lives are being ruined by the banks, the government and the elites in Britain. (Look at the latest with MP's wriggling once again because their outrageous expense claims are being questioned by Legg. They clearly didn't expect him to do this. But the mentality of these officials shows where their priorities lie, (and it's not in/on the streets of Britain!!)
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Hi Writings
10 year gilts tend to be a useful marker. I'm sure that we will be offered a share sale 'a la British Gas of th 80s' as an option before then as the Government won't wait 10 years of using public debt?
More concern is the toxic stuff still swilling around. I know I've mentioned this before but UK and US are following the same path as Japan of the 90s and spookily similar to the QE (which made no difference)and despite protestations to the opposite, I don't think there is much they can do about it....
re your entry #118
There is a very interesting and credible and retrospective theory going around that central bank intervention since the 90s (Greenspan and onwards) have actually created the mess we're in because of the artificial nurturing assistance given post 2000 which provides the means for bubbles to occur...
As for currency - the markets do have an uncanny knack of expectation (which is what they are fundamentally built around) of being correct over time. The drop in £ and $ will continue. As for speculators - it's a dangerous game. However, I would say one thing - just like terrorism, if their is enough groundswell support they exist. Much like currency trading.
Re selling off assets. I suggest it's only £16 billion because the Government can't find anymore (exception Royal Mail). We're back to Dickensian times of selling the family silver because we don't have any money and are deeply indebted.
Spot the cycle:
1970s Labour Government made country bankrupt.
1980s Tories had to sell infrastructure to reduce deficit plus raise taxes and increased unemployment to balance books and start again.
2000s Labour Government made country bankrupt plus mass unemployment
2010s Tories have to sell infrastructure to reduce deficit and raise taxes plus deal with more unemployment to start again.
Only it's much worse this time.....
The country gets what it deserves. It may not be what you or I want but we get it just the same..........
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112,
thanks for the reply, so you believe house prices will rise strongly next year? As a result of devaluation?
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112 & 122
Where is the inflation coming from?
Well I believe it's not so much where - but what type it is.
House price inflation - caused by lack of supply - soon to turn as the people who postponed selling last year are tempted to go back on this year with talk of rising prices - which will probably start a reverse of the recent trend.
Beware of stock market and used car inflation - these are being boosted by Government subsidy or bailout and is not a real sign of growth. I mean what market force creates a situation where 'used' costs more than 'new'?
Factory prices - although they did jump this month this seems to be down to the increase in tax (fuel duty) - which is set to continue for the near future.
My concern is why there is evidence of inflation around none of it seems to be related to growth. More worringly inflation in oil price due to the falling exchange rate and increased duty is a very bad omen as this can push us into stagflation (rising prices and falling / stagnant growth).
To be honest this is becoming an unplayable hand as the alternative is to stop printing money, stop bailing out and subsidising which will create the correction required much faster - but also likely to throw us into a full blown depression.
If the Economic policy of any party gets us through this they should be rewarded with a collective pat on the back. However I haven't seen anything from either party which convinces me we've got anything like a plan and in fact we're simply returning to what we know best.
I mean George Osborne 'miss calculated' £3bn in his budget according to the NIESR - and Mr Golden rule hasn't exactly been convincing - it does not bode well for the future.
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Again, one of the points being missed by the commentators re the decline of the pound is that our import balloon will be steadily getting more costly - particularly raw materials which I believe is already hitting factory gate prices. Also, things like cost of gas where we are importing more can only go upwards over time.
The real problem inflation will come from the input-side imports which destroys jobs - see history.
The other silly inflation is that of the housing market where people still don't understand that availability of finance is driving residential real estate. The price of land is currently only going one way and that's downwards. When will we learn this? Read tulip mania, south sea bubble etc......
Again - as an example - does the value of a car go up relatively because you can get more finance for it? No, so why do houses?
I think the general supply side argument is a fallacy though there may be localised spots where this may happen.......Look at rentable values for an indication.
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Want to save an instant £6 million from the transport budget?
About a year ago I noticed additional blue distance signs appearing on the motorway - this was odd as they seem to show exactly the same distance information as the smaller posts we are used to which have been there since I was a boy.
I enquired as to the cost of replacing the perfectly adequate posts with these new signs and I was dumbfounded by the response:
"The installation and maintenance of driver location signs are managed
by the Highways Agency's fourteen area teams and numerous Design,
Build, Finance and Operate (DBFO) contracts across our network. After
consulting with these teams I am able to provide the following
response to your questions:
The total cost of implementation so far is £6,103,126."
£6 million pounds on replacing something that did not need replacing! remember this was the costs so far - and I was unable to get an accurate costing of the ongoing maintenance (and cleaning) of these signs - the department simply could not tell me.
Never mind the cuts in teachers, nurses and policemen - how about we start cutting the totally uneccessary?
Who was in charge of the D.O.T. at the time? - that's right 1 Alistair Darling.
Once again showing his ability with the numbers. If the BBC got off it's backside and employed journalists instead of 'press release regurgitators' then perhaps there would be adequate pressure to cut these costs.
As it is the merry-go-round continues and public taxes are handed over to the private sector in a continuous inflationary cycle.
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Robert,
I see you are missing
Are the banks now going to prop up Sterling, or buy the assets from Gordon's car boot stall?
The FT seems to have identified the basket case, and the traders are scared by Gordon's utterances
http://ftalphaville.ft.com/blog/2009/10/12/77111/sterling-slammed/
What will improve this economic fragility?
We might be in a double dip before Gordon can make his "investments"
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#125
I always "enjoy" seeing the increase in activity from certain public sector organisations in February and March, ensuring they spend their budget for the year to then be able to justify having it (plus a standard percentage increase) the following year.
Its an obvious case of defending empires rather than making the best use of available funds, managers considering a budget to be "theirs" rather than part of the overall public purse.
Its also common practice for budgets to include "vacancies", for roles which are rarely filled to pad budgets out and gain access to funds to be spent on items that wouldn't otherwise be authorised.
Then we have the lunacy of procurement, paying over the odds to whichever vendor ticks the boxes in the specification and then often paying more if the spec is found to not meet needs or even if the vendor's costs increase.
Public sector accounting is often more about justifying expenditure than controlling it, an entire psyche that is reinforced by the bureaucratic way the treasury allocates funds and the belief that a big department makes a manager more important. & purchasing is a joke, following procedures doesn't make up for understanding commercial realities.
But is any of this surprising? Civil servants are often moved from department to department, even though they don't have specialist knowledge in those areas.
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Post 126
People may well put houses back on the market...trouble is there are less people who are going to be able to afford to buy, unless of course they borrow heavily to afford already ridiculously inflated prices. Where is the money going to come from? Perhaps some Chinese bank, maybe they will just start buying up vast tracts of housing and renting them out.
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Writings
Wasn't this the kind of stuff one used to read about in Communist Russia prior to its demise.
I seem to also remember reading recently about the bus that doesn't pick anybody up but continues to do its route for some kind of bizarre funding/policy reason.
Yes its a banana republic out there......
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126. At 4:12pm on 12 Oct 2009, StrongholdBarricades
It looks very much like Gordon is going for the 'devalue your currency to improve your deficit' route as opposed to the 'slash and burn' policy of the Tories.
Otherwise it's a big co-incidence that the BoE statement about 'weak sterling being useful' a couple of weeks ago and the statement from the CEBR (which I doubt came up with this report on their own) both dramatically impacting sterling.
I grand plan - except what are we actually exporting? Sure we will be able to provide the cheapest financial management fees for a world which has just gone off the whole idea of finance. We might be too late for the car industry and manufacturing is small. It's a policy which would have worked fine in the heady days of manufacturing export - maybe Gordon's reference books are just out of date.
If we're a net importer then this policy is a very bad one.
What's interesting is the US cannot afford to go down this road - much as they would like to - as they are still the reserve currency and a drastic devaluation of the dollar will cause ruptions for world trade.
Never mind - who want's to go abroad for holidays anyway. It looks like we're going to be staying put here for a long time.....
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Taking into account re comments above:
We are a net importer by some margin and which will get worse with energy needs/dwindling supplies in future.
Real estate in london is already more than 50% owned by overseas. 40% OF FTSE 100 already owned by foreign investors (up from 16% since 1994). Much infrastructure owned by foreign/sovereign - think airports/utilities etc.
50% of Premier League clubs foreign owned with the rest to follow its estimated (there used to be none).
Don't forget that any developments in the UK mail and telecoms space will most likely be funded through foreign acquisition....still got some pharma and oil but nothing guranteed and both facing plenty of future potential merger activity.
Banking in disarray with (as 128 posted) Chinese banks poised to enter the market with vast array of funds available. London as financial centre may now have peaked. Get the picture?
Great Britain - the first nation to be owned by others? From global empire to 'DESTITUTE NATION' - Fact or fiction?
At the rate we are going - one suggests the nightmare is actually not that far away (less than a generation) but nobody seems to mind.......
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#127
"I always "enjoy" seeing the increase in activity from certain public sector organisations in February and March, ensuring they spend their budget for the year to then be able to justify having it (plus a standard percentage increase) the following year..."
Thats a rather backwards way of looking at it. The truth of the matter is that if they save money, they dont get that money next year... To save money and end up having less to play with next year is insane - hence they spend it. A business wouldn't save to then make cuts, a business saves all of the time but ensures the money is available if required by maximising turnover and profit.
They are plenty of savings the public sector could make. One method would be to encourage cutting costs (instead of mindlessly cutting the budget next year) and then to redirect that saved money each year into a big pot which is spent on improving the local economic situation...
Cut public sector spending with good reason: Such as removing unneeded layers of management. E.g. Do schools need 6 people near the top earning over £60k each? Are they really worth more than 20 members of staff on £18k each? Probably not!
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I think this is blog now 4 days old -change of subject.
(Bobby doesn't do business, he does economics)
Imagine inflation at 10%+
Imagine unemployment at just under 10%
Imagine Bank Base rate at 10%+
Imagine a country bankrupt
Imagine a shattered currency that no-one wants.
Nope, not the good old UK just yet.
This is Iceland -today.
But the day after tomorrow, it's us.
Regards & wake up!
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Very interesting debate. I sympathise with the business people, but surely the doom and gloom is being overstated (perhaps I suffer Pollyanna Syndrome).
The major reason for this recession (not the same thing as the credit crunch- though of course there are serious implications for the 'real' economy) is lack of consumer confidence, worldwide. Why for example, did car sales collapse almost overnight by 50%, early on!
I have a guilty secret; I have financially never been better off - much better than at the top of the economic boom.
This is for many reasons; the main reasons are that my mortgage has fallen to 55 quid a month (1/2% above base rate tracker), petrol (previously $150 barrel and forecast to rise to $250- $300) is cheaper, my 2% annual pay rise which (with inflation at over 5% and climbing) would have been a pay cut in real terms, is now a real increase, my tiny savings are now (with RPI inflation at minus levels) showing 'real' growth at a return of 3.5%, my two teenage daughters will face lower house price debt and mortgage payments (though still massive no doubt, especially if the house price bubble starts to re-inflate) meaning less financial help from me....I could go on, I once added up twenty reasons why I am better off.
Negatives? Well, foreign holidays in the euro zone...what else?
If I had negative equity, no doubt I would feel less well off, but surely people realise that even those already on the house price treadmill (sorry ladder) are ultimately better off, if your own house falls by 50%, but the bigger and more expensive house on the next rung falls by 50%.....
Of course, all this presupposes that I keep my job, but even at 10% unemployment, 90% will still be in work, so the odds are in my favour.
But if people stop spending, (I too having been paying off debt with my extra funds) because of lack of confidence, then of course the recession will be long and hard.
It is the resumption of economic growth that will be reduce public borrowing, though paradoxically I personally might bee worse off.
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# 133
I noted a recent report where Iceland is investing to house servers.
In this at least its low temperatures and abundance of green energy are major assets.
The geothermal energy in particular has incredible potential and is an asset we could do with.
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#132
fierce_teapot
Spending needlessly to get money that probably isn't needed again next year, not exactly a recipe for efficiency.
The behaviour is logical if the system encourages it and you're looking out for your own empire.
That was my core point the system of resource allocation is inherently flawed, allocating based on past spending rather than future needs, as such it misses the big picture.
As to your comment that a business "wouldn't save to make cuts", how do you think productivity and profitability are improved?
You find things you don't need to spend and stop spending on them, then the directors ask you to save on costs again next year...
Savings are then only reinvested if they are considered as likely to generate additional real profits (i.e. exceeding the cost of capital).
Of course managers do attempt to maintain empires in business (especially in large or inherently profitable organisations) but they tend to be subject to much more scrutiny and pressure to avoid this. [Another exception being smaller, family run firms where profitability can be less of an objective].
Of course significant savings can be made in the public sector, before front line services come under threat, via long overdue efficiencies and reducing regulation and the associated monitoring / enforcement departments of debatable value. Such moves would be a start, but there is a question as to whether it would fill the gaping hole in our finances that has resulted from recent economic mismanagement.
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in reply to JavaMan - yep I do - not really logical, but I've not got it wrong in the last 30 years and that includes getting out at the right times - like late 2007, when I closed my buy for rent operation. If it gets too good to be true, it is too good to be true and it's time to move on. However the fundementals remain as before - indadequate supply, made worse by a two year hiatus in new build, an unbalanced national housing stock (too many flats, not enough small houses)and funds are available and at a very low cost. Problems with deposits are being bridged by inter-generational loans - my kids have had help from both parents and grandparents. Total employment levels have not dropped as sharply as forecast. Buying and selling as a hobby and to release equity has pretty well stopped and that's taken out more sellers than buyers. I know there isn't the free flow of funding that we've seen in the last few years, but there wasn't when I started and that didn't stop prices climbing at a steady 5 or 6%. What is key however is just how difficult it has been to buy houses in both the West and East Midlands, with prices easily outstripping auctioners valuations and a lot of kids being thwarted by the professionals. I think there is a lot of pent up demand out there and the slightest relaxtion in the availabilty of funds will have a seriously inflationary effect. Anyway - we'll know in the spring......
Cheers
Tony - StH
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Some days ago I posted mentioning "Quantative Easing". OK, a mistake or typo but it Was repeated by another poster without scorn.
I see too many instances of "loose" or "loosing" from verbose and presumably literate contributors. The words are "lose" or "losing". One mistake for an Indian call centre operative to make but a different level for Masters of Our Economic Locality to write about.
I do not have the full prescience of Sh*tsonthefan, however, the NHS could be overstretched far more in the near future than bankruptcy counselling and services.
I would hope that interest rates and inflation remain low for all our sakes foreseeably. That means they won't!
Inflatus anyone?
N.
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135 Reaper_of_Souls
Iceland has fish. End of.
Iceland may be cold enough for servers but that is because it is remote.
That does not augur well for servicing. Plane trip or three to get there.
Then there is the energy. It may well be green but is it efficient?
Is there sufficient infra structure and installed base to sustain the service engineers needed to maintain the geothermal generators?
Even if it makes energy sense it might still be more cost effective to import oil.
I wrote here a long time ago that Iceland's hydrogen plans are but a pipe dream.
Inefficient in energy terms even when the banking bubble was at its height.
Still inefficient. And hideously expensive now.
So. It's fish then. And a bit of tourism – until oil gets expensive again.
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#136
I think maybe I'm bitter because I work in the public sector. No matter how hard you try to cut costs and haggle, either you haven't followed the rigid tendering procedure (which prevents competitive quotes); or you have done too well and risk losing £5k on next year's budget... When delivering a service thats needs constant attention and maintenance; losing funds when items cost most each year is always bad news. You might not have needed the £5k in year 1, but come year 2 you might need it to repair and deliver your service...
I feel the finance departments of Westminster and Local Authorities are somewhat lacking in how they save money. It seems all too easy to cut money than to consider what its being spent on and what value it is bringing to the end-user (the taxpayer).
The Tories seem very happy to say "we'll cut jobs and freeze pay because it needs to be done" but will they look at the own costs, staffing and pay? Probably not. The fact the public believe that they are in it "together" with the politicians sickens me.
In regards to businesses. 'To save to make cuts' is with respect to savings made through efficiency; they only add to the profit of the organisation. These savings don't imply they will have less to spend next year to ensure they deliver the same level of service. This has always been annoying with regards to local authority finance.
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#132
Dear fierceteapot
In a dim and distant past, I worked for a local authority that had to cut about 8% from its budget three years running.
Although it was tough, very few front line services were affected - we did some things rather better AND raised income by running the Arts and Entertainments function in a more professional way - a big deficit turned into a profit.
In the third year we still found excess budgets in salaries - some hadn't been base budgeted for years.
Perhaps this wouldn't be possible now but I'd bet there are all sorts of pots that are unnecessary or inflated.
It would be interesting to see what could be done now times are going to be tight again.
Yrs
Mrs Bloggs
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#139
prudeboy
As I understand it they're currently laying the cables to pump data to and from Europe and the US.
Quite ironically one of the first organisations likely to commit to using the services is a major bank.
http://news.bbc.co.uk/1/hi/programmes/click_online/8297237.stm
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# 140.
fierce_teapot wrote:
"I feel the finance departments of Westminster and Local Authorities are somewhat lacking in how they save money."
Indeed, its no surprise that accountants trained in the public sector aren't generally able to transfer to the private sector.
The bureaucratic tendering processes are a pain, I've heard on several occasions, "we wanted this product, its better value for money, but this other one meets the requirements of the spec and is cheaper"..even though it probably won;t work out cheaper.
The problem is with allocated funds from the treasury often being very rigid. This results in a lack of flexibility to respond to situations and opportunities, if you want extra money the impact assessments can take forever to go through the system meaning opportunities can be lost. So people overstate anticipated costs to try to have a reserve... but then have to spend that reserve to keep it for next year, and so on.
Unfortunately, the entire mentality of many public sector accounts departments is flawed working to defend and justify poor cost control by managers rather than challenging and removing it. Understanding the activities the money is being spent on is essential, if accountants combine that with the numbers they can often add more value in identifying potential savings rather than just bureaucratically counting beans and keeping score.
As Mrs Bloggs says there tends to be a lot that can be squeezed before you need to look at structure never mind front line services.
Of course this shouldn't just be done when finances get tight, it should be a continuous process and part of the mentality.
Of course better tendering / procurement and more flexibility in the financial management system would help.
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# 137.
remoteislander
I've previously raised the issue of housing supply, and the fact that if a government wanted to invest in the economy, the downturn ion construction creates an ideal opportunity.
Supply vastly exceeds demand for construction resources and workers; so surely considerable amounts of social housing could be built for a relatively low cost (especially if they set up a body to do it and didn't pay inflated premiums to the construction companies).
This could be used to meet housing demand and in the future, when times are right, some of it could be sold off.
If rents were set right (and the stupidity of not paying housing benefit direct to the landlord was reversed) the construction costs and the financing of them could be covered and there would still be an asset - build-to-let if you like.
Of course increasing housing supply would put downward pressure on house prices; making notional "wealth" disappear and given that house price rises were the core of the "economic miracle" no doubt such an approach is politically unpalatable.
There is actually excess supply of some property, its just the wrong kind of property (city centre apartments rather than family homes) due to misguided planning regulations.
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129. At 5:00pm on 12 Oct 2009, Rugbyprof wrote:
Writings
Wasn't this the kind of stuff one used to read about in Communist Russia prior to its demise.
Possibly, but the result of all the money falling into the hands of Oligarchs like Abramovich etc. is no better.
Ruled by many or ruled by few - that's the difference.
.....and you do realise Russia was never Communist....
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136. At 10:49pm on 12 Oct 2009, Reaper_of_Souls wrote:
"That was my core point the system of resource allocation is inherently flawed, allocating based on past spending rather than future needs, as such it misses the big picture."
Agreed - but I would also add that the market forces allocating resources does not do much better (see current destruction of capital due to overproduction).
Therefore both ways are duff - so we must find a third way of allocating resources.
If you take the two major problems of each:
State allocation - To much overhead (beaurocracy) and fraught with problems of corruption (i.e. Soviet Union)
Market allocation - Anarchic and random creating gluts (booms / bubbles) and shortages (recession) - also encourages greed.
Neither deals with the upcoming lack of resources - the state will assume abundance until it's gone and the market will do the same - except allowing only those who have ammassed most to continue using the diminishing resources - hence the encouragement of greed.
Maybe we need to work out our optimum or target resource usage (for the country) and simply allocate per individual - simply because we're trying to reduce our resource consumption (if it's agreed we want the human race to survive)
I mean if you had a limited bag of sweets would you either a) One person take control and issue them out (State) - or b) Let everyone bid for each sweet (even though they have differing amounts to trade with)? If all participants knew there were limited sweets then maybe their desires would be subdued and only true need will be evident. The current system encourages the misconception that there is an abundance of resources simply because the price is low.
It's not as complicated as egotistical Economists make out - that's merely to put the rest of us off thinking about it.
...but I bet already everyone reading this is already thinking about improvements on the current two options...
...something I call 'the third way' and others tell me doesn't exist.
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P.s. for those discussing the issues with public sector spending budgets - well the solution seems to be pretty simple to me.
Simply create competition between the L.A's and the different Government departments - but for it to be based on those who create greatest efficiency.
Their reward can be financial, but surely a reward of status would be better - which can be followed up by teaching the efficiency to other L.A.'s.
Ths major problem with the current system (apart from the one highlighted above regarding the end of season budget explosions) is that the remainding cash goes to poor performing councils - effectively rewarding inefficiency - with absolutely no recgonition for the performing council.
Still the Government is no better than any Capitalist - it simply sees every reward as 'money based' and therefore encourages unnatural behaviour.
Maybe instead of handing out Lordships to affluent friends - they should be going to Mrs Bradley who has worked tirelessly in her charity shop for 40 years serving the community.
If you fill the second chamber with morally rich people like this then maybe we'll see the country head in a different direction.
The appointments of the latest wheeze - a supreme court - is testament to the current system failing. Not a coulored face or woman amongst them - all fuddy duddy old farts who may be experienced but will they have any empathy for the people they are making crucial decision for?
If you want to be ruled by old men then that's your business - but I have not been ruled in this way since I left home at 16 - i.e. when I grew up.
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Printing presses at the ready?
http://newsvote.bbc.co.uk/1/hi/business/8304028.stm
Justification for more and more QE?
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144 - reaper of souls
agreed - people seem to forget that housing is the only major "amateur" market place and fail to understand that nice tidy rules just don't apply. That's one of the reasons the UK marketplace is so different (say) to the French. This is a market that's neither "chartable" nor subject to manipulation (short selling etc)in ways that the professional can exploit simply by throwing huges sums of money at it. With unit pricing at 160K - average house price - and a complex aquisition proceedure, this is simply not hedge fund territory. Doesn't mean that it's not a huge sector and that it clearly impacts on the wider (UK) economic world - but it's extremely difficult to manage on a macro level. A reduction in funds is the only thing that's keeping a lid on prices at the moment and it's more than balanced by "need to move" and first home demand. Isn't it interesting that when bulk sufficient to interest the pros is created (ie securitisation)and the asumption made (by the pros) that this is now a predictable commodity, that the difficulties in understanding the market (to put it politely) become apparent. It doesn't matter wether it was fraud, economic recession or the waning of the moon that caused the American sub-prime disaster, it merely demonstrates my point that the financial sector could neither read or understand the market. They still cant.
Practical question for my fellow bloggers - If you were a Bank, with improving, but still limited resources, and with a Government driven requirement to skew your lending into the private sector (ie away from the safety of Gilts etc)would you lend it for house purchases or to the wider SME market? Which of the two - given Government's pressure that you lend or face unpleasant consequences - represents a better risk? My betting is on housing - what's your money on?
Tony - StH
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148 JavaMan
yep to that as well and I think it just re-inforces my point on housing. If we as consumers and as SMEs (more than 50% of the economy) cant use/don't want the money - where is it going to go? - if not into shoring up the Bank's balance sheets? The only commodity an individual punter can buy into which is/has been under supplied for decades - housing.
And here we go again - the only serious decision is when to pull out - Olympics year I reckon - when the amateurs are getting excited about something else (and Government has pumped even more money into the building trade). And new build costs will be 20% above current...
Tony - StH
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Post 130 WOTW "Never mind - who want's to go abroad for holidays anyway. It looks like we're going to be staying put here for a long time....."
Despite having a week by myself in Austria in June I had a very enjoyable holiday for a week with my sister and her partner in July. We spent the week camping in Essex. The first 4 nights were spent on a large commercial site on Mersea Island and the last 3 nights on a site behind a pub near Harwich. The tent we used was a large 3 person dome tent which reduced down to a size compatible with the limited transport space of a Panda. The car was used to visit Maldon and Flatford Mill but other trips were made on local buses using our bus passes. I enjoyed the holiday so much that I would like to explore more of the non-Thames Gateway areas of Essex. I can see that in the coming years more of my holidays will be spent visiting parts of the UK that I have either never been to or have only passed through when going somewhere else. For many of these trips I shall be camping.
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No. 88 and No. 101, I wouldn't like to see inflation, but fear it will soon be upon us, if not quite here yet. And this in spite of us all keeping our hands in our pockets and neither spending nor borrowing, indeed paying down our debts as quickly as we can.
The government is committed to both an ever weakening pound and inflation. This is the only way they can "make" money on the money they have borrowed to stay afloat. Say the government borrows £1 million at an exchange rate of £1 = USD$2 (oh, if only they were borrowing in these small sums....) And say this is enough, today, to buy 20,000 tonnes of coal from the Chinese. If at the end of the ten years, the pound is only worth USD$1.40, and USD$1.4 mill is only enough to buy 10,000 tonnes of coal, then the government have "won". Their borrowing will look prudent, because they've received enough to buy 20,000 tonnes of coal now, but only need to pay back enough to buy 10,000 tonnes of coal in ten years time.
The biggest nightmare for any British government over the next ten years, or however long these loans run for is an ever strengthening pound and continuing deflation. They have solved the pound problem by excessive quantitative easing and not buying, so therefore not supporting, the pound. But I wonder if they will find it quite so easy to solve the deflationary side of things. All that's ever needed for prices to fall is for the consumer to stop spending.
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151. At 11:52am on 13 Oct 2009, DickyJ39 wrote:
...and you sir are already saving the planet while our illustrious leaders are still arguing about it and stuffing their faces in the trough in a orgy of greed and self indulgence.
I sincerely hope you enjoy your holidays and spread the word that simply going to Spain to get skin cancer is not a sensible alternative.
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To those wondering about the housing market - surely one of the big factors that contribute to bubbles is that it's like an auction.
If houses were offered at a price and they were sold at that price (like a shop) then we wouldn't get bizzarre bidding wars based on the mis-conception that a particlaur house is in short supply.
I mean how many times has an estate agent said "there's lots of interest in this one" or "these come up very rarely" in order to boost the desire of the purchaser and create an unreal demand for something.
In addition to this there is a mis-conception about the lack of properties - there is a statistic used by the homeless charities which says there are 500,000 homeless people and more than a million empty properties - so where is the shortage?
Some areas (like London) do suffer from chronic shortages - but this is a reflection on the imbalance of employment and failure of public transport and not a housing problem. If I could get to London in an hour from say Derby on a high speed train - then I would not be living in London competing with the other poor buggers down here.
Finally the 'lack of houses' versus the abundance of flats is in response to demand. Sure I'd love to live in a 2 bed semi in Central London but the demand caused by the problem above means that the price of such a property is unachievable for most people.
...and that then leads to further greed and ammassing of wealth for those who desire to live in such locations.
It's a viscious circle which is caused by the lack of foresight in Government and industry.
We have known since 1945 what the impact of changing our narrow gauge would be (trains like europe) but still there has been nobody brave enough to take this on.
Short sighted Britain is what they will be calling us in the future - a tale of failing to face up to the big problems and constantly sweeping them under the carpet.
Neither this Government nor the next one has or will be any different. We need real men and women with determination and conviction - not the paltry saps who occupy the house at the moment.
Hopefully revolution will bring these people to the fore.
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I think it's a bit 'rich' to suggest that LloydsTSB 'owes' the Treasury for saving it earlier this year, when it's the Government that dropped the bank in it when it pursuaded them to take over HBOS. If that hadn't happened, then perhaps LloydsTSB as it was then, might have been in a much better position than now?
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Can someone explain how this
http://news.bbc.co.uk/1/hi/business/8303930.stm
and this can be right?
http://news.bbc.co.uk/1/hi/uk_politics/7828549.stm
Surely someone doesn't know what they're talking about....
"Who shall rid me of these parasites and charlatans?"
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WOTW,
Over the last 30 or so years I have only ever had 4 holidays in Spain. My preferred holiday destination since about 1990 has been Austria. Two of the holidays were self-arranged and involved travel by train from London to Innsbruck. Last year, however, I did spend a total of approx. 3 months in Madrid between May and October, but as that was work I don't think that that counts as holiday.
To return partially to the theme of this blog, I became a LBG shareholder as a result of still holding freebie shares from the floating of Halifax. My philosophy regarding these shares and the others I hold has been one of to receive the dividends as a nice little extra. I always feel dividends should be as a result of "reasonable" profits made by the company. I think that any company making "excessive" profit is one that is not being run correctly. In my book pedestrian performance is what should be looked for in preference to over performance, which unfortunately seems to be what the "big boy" investors seem to love. I think a classic example of the two forms are GEC/Marconi. As has been stated on RP's blog before I think the real reason for our current problems is GREED.
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157. At 12:49pm on 13 Oct 2009, DickyJ39 wrote:
"I think a classic example of the two forms are GEC/Marconi. As has been stated on RP's blog before I think the real reason for our current problems is GREED."
Absolutely true - but your acquisition of the LTSB shares is another way in which Governments have tried to get us all involved in the 'big gamble'. Many people who have been stung in Lloyds, RBS and B&B are in fact individuals who inherited them in some way (especially B&B when it turned to a bank). They are often not experienced enough to hedge their positions (or active enough) and therefore are the ones who carry the greatest losses.
Meanwhile the 'players' continue in the same vein as before....
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#154. writingsonthewall wrote:
"If I could get to London in an hour from say Derby on a high speed train - then I would not be living in London competing with the other poor buggers down here."
You completely fail to take into account the cost of commuting such a distance. Even regular commuters from the Home Counties can pay upwards of £5,000 per year for a season ticket - how much do you think it would cost to commute daily from Derby on a high-speed train? And what will you do in Derby when you get home from work? Watch Corrie?
The reason that London property is so expensive - and forecast to buck the national trend by rising in value by 40% over the next 5 years - is that people want to live there. It's simple supply and demand, and governments cannot - and should not - regulate the price of assets.
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159,
The reason that London property is so expensive - and forecast to buck the national trend by rising in value by 40% over the next 5 years - is that people want to live there.
1. because there are jobs there
2. I don't want to live there, its sinking, and generally promotes greedy banker types. It's the last place on earth I would WANT to be.
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#159
'It's simple supply and demand, and governments cannot - and should not - regulate the price of assets.'
They could and they should. Leave it to the 'market' and see the mess we get into. They won't though ;)
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159. At 1:52pm on 13 Oct 2009, rbs_temp
Note to self - better research required when going up against writingsonthewall....
Derby - London - £52.60 (single)
Toulouse - Paris annual season ticket - 4,000 euros
Moscow - Vladivostock - 10,267 Kilometers - 220 Euros return (that's about £220 these days)
Ask yourself why this might be - perhaps the private sector involvement perhaps?
Also, if you think £5000 is a lot for a season ticket then you need to see what it costs to rent in London.
Did you miss my point - I know people want to live here but it's not for the pollution, traffic or increased crime I can assure you - it's all about employment - the uneveness of which I already covered in my initial post - a problem the Government does not bother to address.
Come on RBS - you having an off day?
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160. At 2:32pm on 13 Oct 2009, JavaMan1984 wrote:
"2. I don't want to live there, its sinking, and generally promotes greedy banker types. It's the last place on earth I would WANT to be."
I am here - and it's purely because of work. If I was not working here I would be in a nice country cottage - maybe the Pennines or I've always fancied Wales.
I think the increased greed is due to the lack fo space and the general feeling of being in competition all of the time.
It's no coincidence that London drivers are far less courteous and generous than those living outside of London.
They shoudl rename London 'Me-city' because it's all about me when you get here...
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#160. JavaMan1984 wrote:
"I don't want to live there, its sinking, and generally promotes greedy banker types. It's the last place on earth I would WANT to be."
I doubt very much indeed that it's the last place on earth you'd want to be. Exaggeration never won an argument.
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163,
Agree about the ME thing, self centered pigs.
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#102
That would have been the fairest and most honest thing to do rather than cynically allowing LLoyds and its gullible management to act on their behalf leaving shareholders and employees in total darkness about what was going on.
I think we are being naive in thinking LTSB Exec did not know what they were totally letting themsleves in for. They saw the capital behind the deal and were prepared to take the hit. As I said, they could still have said "No" like Barclays and Bank of America did to Lehman Brothers and we know the consequences from that with markets freezing up. With RBS already in trouble, the government were worried that the impact of doing nothing may have resulted in our financial banking system not recovering and the impact and unemployment, business and customers being greater.
LBG as whole will make a loss this year but will return to profit in 2010 and should have a healthy future although it will probably struggle to retain its customer base. The natural attrition back into the market will be good thing in my opinion because it has become superfically too big and too complex. Keep an eye on Northern Rock return to the Treasury as this will a barometer for the future.
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#142 Reaper_of_Souls
Has the undersea cable to Iceland been started yet?
I understood it was to be finished in 2008.
No undersea cable no servers.
I hope the fishermen have been told where the cable is to run.
It would be a tad embarrasing if they were to snag it..
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Robert - Given the vast amount of shorting of the Pound Sterling that is going on Lloyds should be grateful they get to pay in ever devaluing Pounds.
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Goverment could not allow HBoS to "go down"; please can you help us out by taking it over?; Lloyds TSB "Okay"; Govt: "Ah you need a loan to keep afloat" let us help. Now please pay us back - remember we own you; little or nothing to do with the tax payer here - we fund it whichever way it goes. Cynic
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# 167. prudeboy:
The report just says "..is busy laying",
although with sufficient funding I'd be happy to investigate further :)
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This comment was removed because the moderators found it broke the House Rules.
JavaMan1984 & RBS_Temp
Sometimes I feel like we're making the news!
What were we talking about yesterday? - house prices in London....and this morning this came out:
http://news.bbc.co.uk/1/hi/england/london/8306120.stm
What is the effect on a) House prices and b)wages in London then?
The fall in house prices hasn't hit London yet, but surely the current prices or wages are unsustainable and something has to give - it's logical.
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Robert Peston's Blog is even more vital now that our Bankers and their disfunctional system are yet again able to hide in the shadow cast by the re-emergent furore over M.P.'s expenses. Only a persistent flow of authentic information from such respected commentators can provide us with some small hope that politicians will eventually be forced to take serious and effective action to hold bankers to account
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#172. writingsonthewall wrote:
"What is the effect on a) House prices and b)wages in London then?
The fall in house prices hasn't hit London yet, but surely the current prices or wages are unsustainable and something has to give - it's logical."
I do enjoy your daily "glass half empty" observations on the day's economic stories, WOTW. :-)
The flaw in this argument is that first-time buyers do not buy "average" properties, particularly in London; they generally buy the cheapest, smallest properties.
There are several parts of London where the average price of a flat is under £150,000, which presumably means that it is possible to find properties for under £100,000. And that is well within the reach of a typical first time buyer.
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with reference to 172 - writingsonthewall :-
That's the fundamental mistake - trying to apply logic to the housing market. Simply doesn't work, particularly in London and never has. I rented in London in the 70s, buying was completely out of the question. Bought my first house in Leeds and have subsequently worked and lived around the Uk and abroad. I could now afford to buy in London, but why would you want to unless you absolutely had to. I did my five years of reading a book a day on Southern Region, the Tube and the "Drain". The quality of life and disposable income is so poor in comparison with most of the rest of the UK, even on half the salary. I'm constantly amazed at the commercial inertia that surrounds so many companies that continue to resist the opportunities available to work away from the south - either physically or electronically.
TM - StH
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#175
With houses considered as much a speculative asset as a home its not that logic can't be applied its just that a different logic applies.
Prices generally have nothing to do with underlying intrinsic values, and much more to do with expectations. People expect prices to rise again in the future, and see the support that is being given to try to protect house prices, hence there is a feeling that there is still considerably more value there and so prices do not drop to sustainable levels.
Also, people feel that because they paid certain amounts and have a reinforced belief that house prices can only go up over time, this in many ways is a self fulfilling prophecy, barring total collapse.
Its more speculative markets and thus tied up in psychology than traditional supply and demand.
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#149
remote islander:
Well lending for housing is likely to have a more solid asset to secure things on of things go wrong and the "repossession / people thrown out on the streets" hysteria is always likely to encourage government support.
So yes, lending to individuals for property purchases does seem more attractive in many ways.
However, if you're only getting 3% interest from the individual and 17% from the SME it might encourage you to want to lend in that direction, if the risks are low enough and they want the funds.
I still find it incredulous (but not surprising) that in the current climate the government wants to encourage more borrowing.
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#175. remoteislander wrote:
"I could now afford to buy in London, but why would you want to unless you absolutely had to. I did my five years of reading a book a day on Southern Region, the Tube and the "Drain". The quality of life and disposable income is so poor in comparison with most of the rest of the UK, even on half the salary."
You are confusing those who live in London with those who work in London but live outside.
Yes, life must be miserable for those who spend hours every day on packed, delayed commuter trains travelling to a low-paid job in the city and home again to a soulless commuter suburb. That is true of every big city, but particularly true of London.
But for those of us who actually live in London, able to walk to work and within walking distance of the royal parks, the theatres, the galleries and museums, the shops and the cafes, bars and clubs, able to nip across to Paris for lunch and a bit of shopping, or just a night out, as the fancy takes us, life is really rather good.
Which is not to say, of course, that life is not just as good - and, for many people, better - in many other places across the country. I acknowledge that there are millions of people who prefer life outside the capital, and I completely understand and respect that point of view. Perhaps you could also acknowledge the fact that there are many people whose experience of living in the capital is different to yours, and live here because they truly want to.
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174. At 10:57am on 14 Oct 2009, rbs_temp
What you say may be true, but in my experience a high average house price (in comparison to average wages) simply forces families into flats (as they cannot afford houses) and drives out the first time buyers.
That's why on the estate where I live, because many of the flats are 3 bed - we are one of a small minority who do not have children nor are we sub-letting.
Whilst I would love to believe that there are many flats under £150k in London - I think you'll find many of these are actually studios or are in war zones (like New Cross - apologies if you live there). However when 'costing' these places you have to account for the cost of being mugged on the way home every night.
Mine estate is local authority (less than 5% now) and you won't find a 1 bed flat for less than £170k - and that's since 20% has been knocked off the value in the past year!
I agree that whilst the housing market does appear illogical - but it always has to conform to some trend at some point (even if it bubbles around a lot). This is why housing corrections can be so violent and surprising.
The imbalance of London is down to the Government insisting most public bodies are located here - which in turn attracts the private sector companies who serve these bodies.
You don't have this problem in Germany where the centres (Financial, Government, Cultural etc.) are much more distributed. A model we shoudl be trying to emulate if we want our Capital to be sustainable.
....or do we all still think house prices can rise onwards and upwards forever? - are we not learning from our mistakes?
come on - that's what we've got politicans for.
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178 rbs-temp
As Dr Johnson famously said etc etc - the rich, in any city enjoy the metropolitan lifestyle. Of course they do - but didn't this thread start with the thought that most that work in London can't afford to live in London. My experience of living in London (SE1) was that after paying the rent and food bills, we didn't have enough left over to contemplate going anywhere. I went to Lords and the London Theatres more when I was based in North Notts than I ever did when I actually lived in London. Wealth solves most day to day living problems, but most of the people that work in London will never be wealthy enough to enjoy it.
As you say there are advantages and disadvantages wherever you live. I recomend St Helena for the UK winter, no theatres, but rent at £300 a month, currently 75 degrees, cloud cover 5% and visibility over a very blue South Atlantic is 65 kilometres. You pays for money (if you have enough) and takes your choice....
Tony - StH
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178. rbs_temp:
As much as I enjoyed reading your unadulterated and joyous declaration of love for the metropolis that is London the experience you're describing is really only available to people who enjoy a significantly above average wage.
You'll find that a large proportion of the working population struggle to afford even the most basic of rents. Many people on slightly less than an average wage are forced into flat shares, or into the least salubrious slums usually south of the river.
I was raised in Chiswick where I spent the majority of my life until I was eventually priced out, as my wages hadn't kept up with the inflation in rent and house prices caused by the boom in the financial industry and the hoards of bankers and solicitors that were queuing to move in.
Several moves later I found I could barely afford to pay for the privilege of living in the murder and crime hotspot that is Streatham and decided enough was enough. I left earlier this year and have never looked back.
I honestly wouldn't even recommend London as a tourist destination.
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Lloyds & RBS are the UK's top zombie banks. Now Lloyds tries to bring itself back to life, back from the dead, but it can't. $1.6 trillion in undeclared losses remain concealed off-balance-sheet by western banks. These institutions (including zombie companies like Vauxhall), live on by consuming taxpayers money. Once fiscal stimuli and QE wind-down they will be back were they started - INSOLVENT.
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174 rbs_temp
A quick search of two large national estate agents has revealed the following properties are currently available around London for £100,000.
2 nice retirement flats in Sydenham, 40% of a one bed flat in Highbury, 2 nice retirement flats in Palmers Green, A parking space in Whitechapel, 35% of a studio flat in the Docklands and a studio flat in Deptford.....
Any of those strike you as a nice investment opportunity? because that doesn't seem to be a lot of choice to me.
Also, unfortunately, I couldn't stretch as far as the parking garage in Mayfair.
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178: Ah, the difference between the Well to do and the ordinary worker.
If you have Wealth it is harder to appreciate the lives (and Grumbles) of those who don't.
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182. At 2:42pm on 14 Oct 2009, TheNewPonzi
I'm glad you made this point. It's very true - the only thing which will prevent the scenario you portray is if we hit some "powerband of growth"* in the next 6 months - and I mean greater growth than at the sharpest incline of the boom.
The longer this bounce continues the more worried I become. I cannot see what has changed since September 2008 - especially in banking. Where is the revenue coming from to pay back the Government - aren't the public in 'recession mode' and have very little desire (or courage) to borrow?
When the illogical becomes the accepted path then it's time to really get scared.
Don't forget about 4 years ago people were saying 'this housing boom cannot last' and yet the markets, the Government and the financial system all thought they knew better. It wil be a shame when they are proven badly wrong for the second time in a decade.
(* motorcyclists wil understand the terminology used)
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184. At 3:14pm on 14 Oct 2009, supercalmdown wrote:
"178: Ah, the difference between the Well to do and the ordinary worker.
If you have Wealth it is harder to appreciate the lives (and Grumbles) of those who don't."
...until the number of poor becomes a nusiance as you have to keep stepping over their corpses on the way to the 'brandy and pipe' club.....
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Is it a good time t o buy shares in Lloyds? Im a student and am thinking of investing £1000. In 12 months I think this could treble. Whats you expert views pleas? Thanks
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187,
Best stick it on the fav running in the 4:45 at Kempton.
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In addition to repayment of Government loans, pensioners of Lloyds and other Banks expect that the pension funds will be cleared of any defecit before directors' bonuses are paid. Pigs might fly !
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#185 writingsonthewall
We all want to have hope, but......
There is no recovery.
There is only financial smoke & mirrors.
The construction industry has hit a brick wall.
SMEs can't raise fair money.
Oil price going up again on speculators hijacking the market.
The pensions, insurance and banking sectors are playing ping-pong to keep the markets up. One of them is going to blink soon (I predict 10 days from now).
Bank of England clueless about how to get out of this spiral of banking stupidity.
Gordo with his fingers in his ears going la-la-la-la.
It is all off balance sheet and under a carpet.
Sell now.
Regards,
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Where is Pesto?
The BBC Business website says if you want to keep up to date with whats happening, read the Pesto.
Up to date perhaps 5 or 6 days ago mebbe.
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It is from the former investment banks and their bankers who the governments, especially the US, need to get the tax payers money back.
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writingsonthewall (#185) "The longer this bounce continues the more worried I become. I cannot see what has changed since September 2008 - especially in banking. Where is the revenue coming from to pay back the Government - aren't the public in 'recession mode' and have very little desire (or courage) to borrow?"
Do the FTSE and DOW JONES rises reflect the fact that there isn't anywhere else for all this QE etc money to go given historically unprecedented low interest rates, and bad assets being either taken off books or otherwise effectively underwritten by the tax-payer?
However one looks at it, there sem to be lots of unwitting/unwilling (but powerless) public (taxpayers) compulsorily investing in whatever (the still legally deregulated) Financial Service sector chooses to do with all their money....
Goldman-Sach is reporting today....
This is clearly nice work and $10 billion loans from the public, if you can get it.
Public Notice: This is not a hate crime, just a public service comment on mega chutzpah ;-)
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#190. allmyfault wrote:
"The pensions, insurance and banking sectors are playing ping-pong to keep the markets up. One of them is going to blink soon (I predict 10 days from now)."
What, exactly, are you predicting will happen on 24 October? Are you prepared to be a little more specific than "one of them is going to blink"?
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writingsonthewall (#156) "Can someone explain how this ...and this can be right?
I thought I had. Repeatedly, namely the logical non-truth functionality of the intensional idioms of propositional attitude vs the limits of properly quantified values of variables - extensionally analysed. The sine qua non for constraint of markets, i.e political regulation.
This is just a hint at the scale of the consequences of freedom of the press and our obsession with narcissism, celebrity experts and what people reportedly say.
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190. At 6:52pm on 14 Oct 2009, allmyfault
You'll find no argument from me in your analysis. I am however a bit disapponted as I was really hoping to visit Japan - but the Economic crisis forbids me from making such plans (especially as I don't have enough confidence my travel operator / airline won't go bust before I get on the plane.
193. At 10:22am on 15 Oct 2009, JadedJean wrote:
More agreement from me (it must be a full moon) - the FTSE and the DOW rises clearly seem to be as those with cash are desperate to put it somewhere (as interest in banks is pointless).
Unfortunately sticking it 'somewhere' is not a 'rational and objective decision' - a concept on which all Economic theory rests.
I heard a "financial advisor" suggest yesterday that investing in the stock market was a good idea at the moment because it's generally going to pick up in the future.
....obviously this 'experts' historical Economic knowledge doesn't stretch back to the 1930's.
I am worried Peston is not around - do you think he's worked it out and is currently hold up in a bunker somewhere?
Normally his absence is followed by a return with some ghastly news....
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Quick piece of business news.....
"RIP OFF ALERT"
http://news.bbc.co.uk/1/hi/business/8308226.stm
Increased profits and reduced sales can only mean one thing.....
The war between consumer and retailer has begun.
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195. At 11:04am on 15 Oct 2009, JadedJean
The question was retorical!
It is however a blatant example of lying in order to soften the blow of bad news (i.e. we're going to be in recession for a while)
The problem I cannot understand is why people are so desperate to 'believe'. I understand fear of real change, loosing the norm etc play a factor - I am also aware that teaching methods help in this thinking (because we're 'taught' at school and not allowed to think for ourselves and come to our own conclusions)
This carries on into later life where we accept the word of teacher, politican, lord, lady etc. far to readily - for not accepting it might bring punishment (or at least that's how our thought process has been developed)
What I am fairly certain about is that a system which is reliant on lies to function will eventually collapse. As we have seen with recent political revelations - the political system is in meltdown - possibly worse than the financial one. Without the bedrock of trust there can be no Economy - nor real progress for any of us, especially when - even if the truth is told, people are so used to hearing lies that they refuse to believe.
It's a moral disaster waiting to happne - or has it already started?
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#198. writingsonthewall wrote:
"The problem I cannot understand is why people are so desperate to 'believe'."
And also why there are so many - including yourself - who are so determined not believe the opposite. To dismiss every piece of positive news as an illusion while pouncing on every item of negative news as evidence that we are still deep in the poo is illogical, to say the least.
We are coming out of recession - not out of it yet, by any means, but probably starting the long upward slog - and the statistics we are bombarded with almost every single day are contradictory and inconclusive. That is the nature of economic recovery.
"I am however a bit disapponted as I was really hoping to visit Japan - but the Economic crisis forbids me from making such plans (especially as I don't have enough confidence my travel operator / airline won't go bust before I get on the plane."
Japan is lovely at this time of year - all those glorious autumn colours and, even at the current exchange rate, prices on a par with those in London. If you book your ticket with a credit card then there is no risk of losing your money if your chosen airline goes bust (which, of course, it won't). So just go. And by the time you come back we might be out of recession. :-)
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WOTW,
Will this mean prices rise in the city center?
http://news.sky.com/skynews/Home/UK-News/London-C-Charge-Increases-To-10-Amid-Fare-Rises/Article/200910315406219?lpos=UK_News_Carousel_Region_1&lid=ARTICLE_15406219_London_C-Charge_Increases_To_%3F10_Amid_Fare_Rises
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rbs_temp
As Writings has pointed out - there is a lot of untruth or mis-truth going on at the moment that is fuelling the 'want to believe' phenomenon (kind of X-filesy).
Take the unemployment figures announced yesterday. These figures do not include a chunk of people who are not employed but who are not unemployed either. They're hidden in the multiplicity of Gov't schemes and initiatives that are really there to hide them rather than getting them work because the sad truth is there a few jobs out there.
To any expert observer signs are still flashing red (see various Economist editions over the past few weeks) that even if we see a technical end to negative GDP growth the probability is high that we will see a 'W' and slip back into negative growth (similar to 1991-92 and 1980-82).
The real problem is that as has been mentioned we have economic life support apparatus all around and it will have to stop soon.
Small example 'car for clunkers' scheme in the UK has just been extended with money we don't have and against what was promised.
In the US - they've just ended it and guess what? car sales have nosedived by some margin.
The more life support we provide during these times the more weak and protracted any upturn becomes. All's the 'car for clunkers' scheme does is pull forward sales from the future.
The housing market has been propped up by repos being restricted but the samething occurs in storing up trouble. Absolute madness to put money into real estate or stocks right now. The fundamnetals just aren't there.
And are we seeing the unintended consequences of QE beginning to emerge in cash chasing yet another bubble?
People have been lining up to 'have a go' at the market economy and all's that happens is the Government with subsidies and taxation keep on distorting it to make matters worse.
Areas of distortion: employment, residential housing, commercial real estate, funds/bonds, cars, stockmarket 'investment'linked to hugely increased spreadbetting (no taxation and potential better 'risk/returns' i.e. speculation.......
I could go on and on and on........................
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writingsonthewall (#198) "What I am fairly certain about is that a system which is reliant on lies to function will eventually collapse. As we have seen with recent political revelations - the political system is in meltdown - possibly worse than the financial one. Without the bedrock of trust there can be no Economy - nor real progress for any of us, especially when - even if the truth is told, people are so used to hearing lies that they refuse to believe."
Agreed.
I blame the cognitivists, and all the feminized-brains now ruining the 'rail-roads'.
They just doesn't add up, which is a bit of a problem in our largely technology drive economies. We need to learn a lesson or two from the Taliban I fear, instead, we seem determined to shoot the messengers.
"There can be no doubt that the civilization produced by the white races has this singular characteristic, that in proportion as men and women absorb it, they become sterile. The most civilized are the most sterile, the least civilized are the most fertile, and between the two there is a continuous gradation. At present the most intelligent sections of the Western nations are dying out"
B Russell in: The Conquest of Happiness (1930, p125)
Hence WWII against the Anarchists/Bolsheviks/Cognitivists?
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#194 rbs_temp
Because:
... the laws of accounting appear to have been suspended....
Google "golemxiv comments" and see what you find,
there is a guy who posts regularly on the Grauniad business/money website. I don't know him, but read what he says.
I agree with him pretty much 100%.
Perhaps you won't, good luck.
I used to have faith and confidence too.
My '10-days' comment relates to the fact that everyone wants to chase the FTSE bus that promises growth. Everyone, whilst they suspect the bus is going to head off the cliff, daren't miss out on the free ride meantime. They all think they can jump off before it is too late.
The problem is, they can't all jump off together.
One at a time, in an orderly fashion, starting with the insiders and the high frequency traders with a few milliseconds of advantage.
The rest of use go splat.
Now you read up in detail on how JPM & GS have achieved their ridiculous figures over the past quarter. Not good reading.
There are enough serious commentators in the US flagging up this defiance of economic gravity (not enough here in the UK). I think there is a momentum of doubt growing in the minds of the market outsiders. All it takes is a tiny wobble. My guess was 10 days.
Regards,
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#201. Rugbyprof wrote:
"As Writings has pointed out - there is a lot of untruth or mis-truth going on at the moment that is fuelling the 'want to believe' phenomenon (kind of X-filesy)."
Just because WOTW says it, and you agree, does not make it true. WOTW is at the opposite end of the scale to those who you have dubbed the "believers" - to him, there is only bad news and the inevitably of social and economic collapse.
There is no "untruth" out there, unless you also believe that the ONS and their counterparts overseas are part of the plot to deceive. There is, of course, a great deal of uncertainty, and also a great deal of spin (from all sides) to present the figures in a way that best supports one's own bias. But the wise observer will consider the figures and make his own mind up.
"Take the unemployment figures announced yesterday. These figures do not include a chunk of people who are not employed but who are not unemployed either."
You think that is a new phenomenon? Governments have been doing this for a long time. The actual number of unemployed may be impossible to measure, as no-one can even agree on what "unemployed" means, but as long as the method of calculating the number does not change significantly then the monthly statistics offer at least a guide to how the economy is faring.
Incidentally, almost all commentators agree that this month's increase in unemployment was slightly less than expected. To many of us, that is a hopeful sign that things might be turning, although we also recognise that it is unwise to read too much into a single statistic. Some on this forum, however, simply shout "Lies!" and consider that to be a valid economic analysis.
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195. At 11:04am on 15 Oct 2009, JadedJean wrote:
writingsonthewall (#156) "Can someone explain how this ...and this can be right?
I thought I had. Repeatedly, namely the logical non-truth functionality of the intensional idioms of propositional attitude vs the limits of properly quantified values of variables - extensionally analysed. The sine qua non for constraint of markets, i.e political regulation.
It's almost too easy :)
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