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Has the casino swallowed Barclays?

Robert Peston | 10:19 UK time, Tuesday, 7 September 2010

I asked a leading member of the government what he thought about Bob Diamond's appointment as chief executive of Barclays.

Bob Diamond

"Bank taken over by casino," he said. Which implies he has the odd reservation about the rise and rise of Mr Diamond.

This is not to suggest that he and his ministerial colleagues are implacably opposed to all bankers.

After all, the government will confirm this afternoon that arguably the UK's most prominent banker, Stephen Green, is joining their ranks as the new trade minister.

But Barclays is the bank that causes most angst to ministers, central bankers and regulators.

In one way, it looks like a great British success story.

Thanks to the well-timed purchase of the US arm of bankrupt Lehman Bros in the autumn of 2008 and years of recruitment and investment, Barclays now owns one of the world's biggest and most successful investment banks in the form of Barclays Capital.

What's more, Barclays weathered 2008's worst financial crisis in living memory far better than RBS and Lloyds: although Barclays needed to raise a colossal amount of new capital to protect itself against losses, it obtained the necessary funds from Middle East sovereign investors rather than British taxpayers.

That said, Barclays benefitted from emergency loans and guarantees provided by the Treasury and the Bank of England.

It was, in that sense, a beneficiary of the government's assessment that Barclays is too big and important to the UK economy to be allowed to fail.

And that, for prominent politicians in all the main parties and the Bank of England, is what matters.

Their view is that Mr Diamond has built the success of Barclays Capital in part on the ability of the investment bank to raise finance at cheaper rates than would be available if creditors didn't believe that Barclays as a whole would always be rescued in a crisis by taxpayers.

So they argue that taxpayers are - in effect- subsidising Barclays Capital's more speculative activities.

And they would say that it is wholly wrong for the state to facilitate what they see as gambling by Barclays Capital.

Even if Barclays Capital has a record of winning far more often than it loses, it sticks in the craw for many that the huge bonuses earned by Mr Diamond and his colleagues are arguably generated to an extent thanks to the state safety net.

Barclays will argue that the importance of the protection provided by taxpayers has been overstated.

Which, in part, is why the Chancellor, George Osborne, has created a high-powered commission, to adjudicate on whether so-called universal banks, which like Barclays combine retail and investment banking, should be broken up.

One uncertainty has been cleared up by the appointment of Mr Diamond, the living, breathing, Chelsea-supporting epitome of the modern investment banker: if there were a scintilla of doubt about how Barclays sees its future, it's clear that (left to its own devices) Barclays would grow and grow as a universal bank, with the bonus-culture of investment banking increasingly dominant.

Were the banking commission to recommend the break up of the bank and were that recommendation to be accepted by the chancellor, then I would expect Mr Diamond to relocate the bank's domicile and head office to New York and the traditional UK retail bank would be demerged in whole or in part.

Barclays preference, I am told, would be to retain majority control of its British high street banking business. But Barclays in the round would in those circumstances be an institution much more focussed on providing services to big companies and Investors rather than millions of individuals.

Oh, and there's another unavoidable implication of Diamond Bob's triumph. A banker who has pocketed £100m from the day job may find it tricky to heed the call from the Mayor of London that bankers should subsist on meagre rations till we're all back in the money.

Comments

Page 1 of 4

  • Comment number 1.

    The title should read `Has the taxpayer guaranteed casino swallowed Barclays?'

  • Comment number 2.

    Well done Barclays! Two fingers to the government.
    Actually the taxes produced by HSBC & BARCLAYS are too valuable to lose so the politicians have to sup with the devil.

  • Comment number 3.

    We shouldn't forget that if previous Chief Executive John Varley had got his way and bought ABN Amro (only stopped by a vanity competition initiated by Fred Goodwin), it would be Barclays not RBS that would have teetered on the precipice in 2008 and now been in state hands. There's a lot of luck and accident involved in business

  • Comment number 4.

    Bob Diamond really knows about fractional reserve banking [FRB]

    "Bubble or quit" as they call it

  • Comment number 5.

    "That said, Barclays benefitted from emergency loans and guarantees provided by the Treasury and the Bank of England."

    Thank you Robert for reminding the clowns of Capitalism that this is the case for all UK banks.

    There was no 'well managed ships' which glided through the crisis as they all benefitted from bailouts and safety nets provided by Government.

    It won't sit well however, the Capitalists can't abide the suggestion that 'systemic risk' actually means "your system is broken" - especially when they have so much invested in it and know that under any other system they will be found out as unproductive freeloaders.

    I shall await the onslaught of abuse from the angry Capitalists..

  • Comment number 6.

    Morning Robert,

    I do worry when Government ministers make quotes such as "Bank taken over by casino,", this shows their ignorance of banking, an ignorance shared by many of your bloggers. Barclays Capital does not gamble, it operates in investment banking with strict rigour and risk assessment. Other banks, such as RBS and HBOS did gamble and were rightly punished, but Barclays Capital did not.

    You rightly point out "Barclays is...a great British success story....Barclays now owns one of the world's biggest and most successful investment banks in the form of Barclays Capital.

    What's more, Barclays weathered 2008's worst financial crisis in living memory far better than RBS and Lloyds: although Barclays needed to raise a colossal amount of new capital to protect itself against losses, it obtained the necessary funds from Middle East sovereign investors rather than British taxpayers."

    They should (and are) applauded for this. What's more, it is a strong financial services centre that has helped keep Britain out of the Euro. Long may this continue. The ECB has kept interest rates lower for longer than the BoE. Of course, I rightly applaud low interest rates when it is right for the country. However, having our interest rates set in Europe, rather than by the brilliant Mervyn King, would have been disastrous. In the early 2000s ECB had interest rates in a band between 1.5% - 3.75%, whereas the BoE had in a band between 3% and 6%. This was needed at the time, now low interest rates and tight fiscal policy is needed. We should be proud of Mervyn King and proud of John Varley for their contribution to the UK economy.

  • Comment number 7.

    HOW DOES A BANKER CREATE WEALTH?

    It's not a difficult question surely - so why do I still not have an answer?

    When Dubai defaults on it's debts and Barclays are brought tumbling down - WILL BOB STILL BE WORTH ALL THAT MONEY?

    Tick, tock, tick, tock - the clock to sovereign default is ticking Bob - better get the private plane warmed up for a fast getaway...

    This is a repeat - do not adjust your sets.

  • Comment number 8.

    "Oh, and there's another unavoidable implication of Diamond Bob's triumph. A banker who has pocketed £100m from the day job may find it tricky to heed the call from the Mayor of London that bankers should subsist on meagre rations till we're all back in the money. "

    And bankers think they know what small, medium or even large businesses let alone the general public are going though because of their gambling in the last few years?
    Could a bank run a corner shop? Doubtful. Blackmail governments and spin the news to look good? ......

    My silly and basic question is if the middle eat has all this cash, is it cash or just a note on future oil sales? If it is a futures notes even more gambling on peoples hardship when the oil price goes up.

  • Comment number 9.

    My previous contribution is still relevant with the latest posting - Never before in the field of human commerce has so much been owned by so few at the expense of so many. September 7th - the start of the financial blitz with nightly raids by the banks and coalition pounding down the assets of ordinary people!
    Banks need to be supervised not regulated and there needs to be real competition that could easily be provided by retaining a significant public sector element in the banking industry. The taxes (No. 2) are a drop in the ocean when contrasted with the financial and economic misery the banking sector caused across the globe. Barclays is clearly making a fool of poor old Vince.

  • Comment number 10.

    Politician calling a banker. Doesn't the politician remember the furore over expenses? They had their nose in the trough for years but we didn't expect them to be doing it. We expected the bankers to be doing it though. They are both as bad as each other or they were made for each other.

  • Comment number 11.

    Mr Peston - I have been working in the City of London for the last 28 years in the financial markets both as a dealer and broker and you can console yourself with the fact that your knowledge of the City of London financial markets and participants is slightly better than all politicians/ ministers but that is not saying much because ,never has there been so much absolute drivel spoken than on the subject of how the City works and City bonuses. I can tell you for a fact that no City institution wants to pay out any bonus , if they can get away with it!
    The norm is that people generally get 'cheated' out of part of their bonuses by most managements , so all this rubbish about how banks like 'chucking' money in astronomical bonuses to their staff is complete and utter rubbish !

  • Comment number 12.

    6. At 10:56am on 07 Sep 2010, Sam_From_Hendon wrote

    "an ignorance shared by many of your bloggers" - well put Sam, you've finally admitted your short comings. As for the rest of your piece, there is just too much evidence confirming the above to know where to start.

  • Comment number 13.

    "Oh, and there's another unavoidable implication of Diamond Bob's triumph. A banker who has pocketed £100m from the day job may find it tricky to heed the call from the Mayor of London that bankers should subsist on meagre rations till we're all back in the money. "

    Oh the contradicitons - what will Bozo do about this one?

    "we must all face austerity together - but some of us are more 'together' than others"

    Where are the Capitalist cronies to idolise this great man? Come on, I want to see some blind gushing adoration of Bob without having the first cluse what he does for a living.

    (especially those from Hendon)

  • Comment number 14.

    See previous article. Comments still apply. Is Sam @6 real? Still no answers about how the wealth is created.

  • Comment number 15.

    It does rather seem these days that all that the only Easing that has been Quantitative has been that of the rear of the taxpayer for a right royal Banking enema.

  • Comment number 16.

    www.bbc.co.uk/news/world-europe-11204528

    Anyone still think there's no sign of the revolution?

  • Comment number 17.

    11. At 11:14am on 07 Sep 2010, roly_poly wrote:

    "I can tell you for a fact that no City institution wants to pay out any bonus , if they can get away with it!"

    Didn't the RBS board threaten to resign unless they were allowed to pay bonuses?

  • Comment number 18.

    9. At 11:05am on 07 Sep 2010, watriler wrote:
    'Never before in the field of human commerce has so much been owned by so few at the expense of so many'

    I'll add one to that:

    Today September 7th 2010, a date which will live in infamy, the United Kingdom Government appointed an unelected banker, Stephen Green, as trade minister.

  • Comment number 19.

    The thing is that the current crop of bankers haven't shown that they deserve the riches they get. What is the expertise that makes them so much richer than doctors, engineers, or even footballers for that matter. All these careers depend largely on their expertise. Bankers depend on their personal relations with one another; there is no tangible output nor knowledge extracted.

    Stephen Green as a trade minister? Wouldn't that be "a bank taking over the government"?

  • Comment number 20.

    6. At 10:56am on 07 Sep 2010, Sam_From_Hendon wrote:

    "I do worry when Government ministers make quotes such as "Bank taken over by casino,", this shows their ignorance of banking, an ignorance shared by many of your bloggers."

    Ignorance - and yet you are unable to answer the simple question of HOW DO BANKS CREATE WEALTH?.
    How are you able to back such an industry when you are incapable of answering the most simple and basic question?

    "Barclays Capital does not gamble, it operates in investment banking with strict rigour and risk assessment."

    So why did it need Middle East investment and why did it sell off it's Ishares?
    When you see your neighbour having a garage sale, there's a good chance he's not doing it for the fun of it!

    "Other banks, such as RBS and HBOS did gamble and were rightly punished, but Barclays Capital did not."

    ...but weren't Barclays trying to buy ABN too? - What about their middle East investments? - good solid investment decision or risky gamble made by a bank sucked in by the hubris of the middle east which works on the philosophy that made Las Vegas such a roaring success - followed by such a total disater?
    "build it and they will come" - might have worked for Kevin Costner - but it's not quite the same with big buildings in the desert!

    "You rightly point out "Barclays is...a great British success story....Barclays now owns one of the world's biggest and most successful investment banks in the form of Barclays Capital."

    British? - define British please?
    In this 'success' - do you count the investments in pre-aparthied south Africa? - I suppose all profit is good profit - even at the expense of other humans' freedoms - right?

    "What's more, Barclays weathered 2008's worst financial crisis in living memory far better than RBS and Lloyds:"

    ...weren't you trying to play down the recession the other day? - or was that another Hendonite?

    "although Barclays needed to raise a colossal amount of new capital to protect itself against losses,"

    "well weathered"?

    "it obtained the necessary funds from Middle East sovereign investors rather than British taxpayers."

    Well done - so the bank did need bailing out - it was just by a different set of rescuers. Weren't you just arguing how Barclays had steered it's way through undamaged?
    Banks who are well managed don't need bailouts from anyone - the source of bailout is irrelevant.

    Still I suppose if you're desperate enough to 'prove' Barclays are an exception you will clutch at any passing straw.

    "They should (and are) applauded for this."

    Which bit? needing a bailout or not having to come begging the taxpayer for it?

    "What's more, it is a strong financial services centre that has helped keep Britain out of the Euro. Long may this continue."

    Oh now I see - you're a Europhobe. Well I'm afraid banking crises don't care too much about currency. However you'll see how 'beneficial' not being in the Euro is when sterling is devalued to the point of worthlessness through BoE policy and you're paying 60% of your salary on imported fuel costs.

    "The ECB has kept interest rates lower for longer than the BoE. Of course, I rightly applaud low interest rates when it is right for the country. However, having our interest rates set in Europe, rather than by the brilliant Mervyn King, would have been disastrous. In the early 2000s ECB had interest rates in a band between 1.5% - 3.75%, whereas the BoE had in a band between 3% and 6%. This was needed at the time, now low interest rates and tight fiscal policy is needed. We should be proud of Mervyn King and proud of John Varley for their contribution to the UK economy."

    i.e - "Thanks for bailing me out Merv, I couldn't have paid my mortgage without you"

    Now go and lok up the Econimic history of Japan and educate yourself as to why what you just said was total nonsense driven by your own self interest.

  • Comment number 21.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 22.

    16. At 11:26am on 07 Sep 2010, the_fatcat wrote:

    "www.bbc.co.uk/news/world-europe-11204528

    Anyone still think there's no sign of the revolution?"

    Shhhhh - you'll upset the Hendonites.

  • Comment number 23.

    #6

    Are you simply on here to contradict everything John from hendon has been saying?

  • Comment number 24.

    The Government rescued the banking sector in 2008/9. Some needed more assistance than others. If the Government had not been there for LLoyds or RBS and let them fail, Barclays would have gone down with them, Mid-Eastern capital or no Mid-Eastern Capital. Barclays indirectly benefited from the UK taxpayer. RBS got direct assistance. The privatised losses were socialised.

    But of more concern to me is the appointment of Stephen Green, the former chairman of HSBC. (Sure it's nothing to do with being Oxford educated though?) But for the last 20 years the future of (retail) banking has been the sales culture.

    I fear he comes to government not knowing or thinking of a plan B. He's said he thinks it's unfair to criticise bankers, (re bonus's,) but also said he feels bankers should have thought about what was the right thing to do and not just what could they get away with legally.

    But in much the same way that the FSA was littered with former sales type bankers, I find it very concerning that our government is employing a former banker to be this country's trade minister. Obviously they couldn't appoint someone from manufacturing could they? (I mean Oxford types, mixing with grease monkey types. Government would grind to a halt.)I think we should get former bankers out of Government.

  • Comment number 25.

    WOTW, I suspect most people have ignored your request regarding examples of bankers generating wealth on the grounds that your views are so clearly entrenched what's the point. However, maybe just one example for you:

    1) Barclays were short of capital and a BANKER went to Abu Dhabi ( the ones with 10% of the world's oil reserves) not Dubai (the ones without a pot) and with his/her presentation and persuasion skills managed to convince Abu Dhabi that Barclays stock was cheap and would generate a very good return on capital should they put a decent slug of equity into the bank's balance sheet. This is a clear wealth transfer i.e. taking capital from Abu Dhabi to invest in Barclay's business. I'm guessing this won't satisfy your strict criteria as it doesn't necessarily involve "creation" although as a UK taxpayer I might add, I don't really care because Barclays (a UK business) now has access to capital that was previously sat in Abu Dhabi's coffers. But anyway, that's besides the point, let's now look at "creation".

    2) Barclays generates its earnings from a variety of activities including retail and corporate lending, traditional investment banking (i.e. M&A, bond and equity capital raising for clients, derivatives and foreign exchange trading for clients etc) as well as the controversial proprietary trading activities. All of these activities (apart from M&A) require capital.

    3) Let's suppose that Barclays uses part of this additional capital from Abu Dhabi to make 1 loan to the kind of marginally profitable UK engineering company so beloved of the leftists, and that company can then use that loan to finance research into a successful new more efficient widget maker, which then goes on to corner the widget market. How is that not creating wealth?

    You will of course no doubt now argue that the company could have just as easily gone straight to Abu Dhabi or maybe (more preferred for you surely) straight to an Ed Balls for the same loan. Well the answer is, the idea of 100s of UK engineering companies trawling the world looking for the most efficient provider of capital is ludicrous and exists only in the textbook world you seem to inhabit. The idea of going straight to Ed Balls is a more interesting proposition but again would seem to represent more of the USSR economic model, and I seem to remember that didn't work out too well for most people either - but at least in our nasty capitalist system we have freedom of speech which you do seem to enjoy exercising.

  • Comment number 26.

    7. At 10:56am on 07 Sep 2010, writingsonthewall wrote:
    HOW DOES A BANKER CREATE WEALTH?

    "Wealth is the abundance of valuable resources or material possessions or the control of such assets" from Wikipedia

    Let's see now, the most valuable resource at the moment is money and as, using your own previous comments, banks create money and control it, then they are doing 2 out of 3 so the general population can do the third.

    Dictionary definition:

    wealth   /wɛlθ/ Show Spelled[welth] Show IPA
    –noun
    1. a great quantity or store of money, valuable possessions, property, or other riches: the wealth of a city.
    2. an abundance or profusion of anything; plentiful amount: a wealth of imagery.
    3. Economics .
    a. all things that have a monetary or exchange value.
    b. anything that has utility and is capable of being appropriated or exchanged.
    4. rich or valuable contents or produce: the wealth of the soil.
    5. the state of being rich; prosperity; affluence: persons of wealth and standing.
    6. Obsolete . happiness.

    think most of those apply to a bank especially as they make for some customers more money for them to spend, ergo they create wealth.

    Yes, they also lend to make debt, but the interest charged to borrowers also pays investors ergo they are creating wealth.

    Of course, this will not agree with your definitions of wealth, so will automatically be slated as banker apologist, capitalist clap-trap etc etc etc.....

  • Comment number 27.

    18. At 11:30am on 07 Sep 2010, Dempster wrote:

    "Today September 7th 2010, a date which will live in infamy, the United Kingdom Government appointed an unelected banker, Stephen Green, as trade minister."

    I TOLD YOU ALL THIS WAS FASCISM

    It's not about racism, it's about merging corporation and government - and that's according to a fascist himself.

    I'm not messing around - the plebians who idolise this Government and the financial industry are agents of Fascism and must be stopped.

    P.s. - as an interesting note - Mussolini was part of a Coalition government too. A coalition which notably included representatives from the army (sound familiar?)

    "Upon being appointed Prime Minister of Italy, Mussolini had to form a coalition government, because the Fascists did not have control over the Italian parliament.[120] The coalition government included a cabinet led by Mussolini and thirteen other ministers, only three of whom were Fascists; others included representatives from the army and the navy, two Catholic Popolari members, two democratic liberals, one conservative liberal, one social democrat, one Nationalist member, and the pro-Fascist philosopher Giovanni Gentile"

    Sleepwalking into Fascism folks - well not me, I will die before I allow a fascist Government to take control of our lives. How many Capitalists are prepared to die for their failed system which has brought us to these crossroads?

  • Comment number 28.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 29.

    Some people need to have a sense of humour. The "Hendonites" are obviously just trolling for response. Nobody in the real world uses that much hyperbole. Next time you see one of these mails read it as being satirical and it could even bring a smile to your face. Something that I doubt ever happens with Botox Bob.

  • Comment number 30.

    @WOTW

    I think Sam_From_Hendon is a wind up. The paraphrasing is inconsistent and the "Brilliant Mervyn King" along with low interest rate mantra are totally contradictory to JFH. Too suspicious for me for these to posts to be from someone with that bias.

    Don't bite pal, although it does give you ample reason to put your point across, and very well done it is too.

  • Comment number 31.

    #23. At 11:39am on 07 Sep 2010, newblogger wrote:
    "#6

    Are you simply on here to contradict everything John from hendon has been saying?"


    You've sussed it too. See my post at #30, I'm very suspicious about this dude. The grammatic structure is clearly sarcastic.

  • Comment number 32.

    @5. At 10:52am on 07 Sep 2010, writingsonthewall wrote:
    ""That said, Barclays benefitted from emergency loans and guarantees provided by the Treasury and the Bank of England."
    Thank you Robert for reminding the clowns of Capitalism that this is the case for all UK banks."
    I'm confused - one of the (weak) arguments supporting the banks is that Barclays and HSBC did not need any form of payout or guarantee or rescue of any sort. I read Robert's line which you have commented on as basically saying that they had to have some form of government backing otherwise the excrement would strike the forced-convection apparatus.
    So: how much of the guarantees provided to Barclays were from the Treasury and BoE? It's a shame we couldn't employ similar methods to prop up industries which do create wealth.
    Isn't it time to strip down the entire system and attempt a rebuild? It can't be any worse than the current offering.

  • Comment number 33.

    #26. At 11:51am on 07 Sep 2010, yam yzf wrote:
    "7. At 10:56am on 07 Sep 2010, writingsonthewall wrote:
    HOW DOES A BANKER CREATE WEALTH?

    "Wealth is the abundance of valuable resources or material possessions or the control of such assets" from Wikipedia

    Let's see now, the most valuable resource at the moment is money and as, using your own previous comments, banks create money and control it, then they are doing 2 out of 3 so the general population can do the third."


    You were doing so well until then. Money isn't a resource, never has been, never will be.

  • Comment number 34.

    If the banks dont want to pay out the bonus and Diamond has still accumulated 100 mill, think of what he might have trousered for his hard effort.
    Reality is the bonus is indefensible. People are paid to do a job, if you dont like it then do something else. If you are not paid enough then find another job. Like everyone else
    Banking Industry always shouts about the contribution they make. Think most of us would prefer they didnt make their contribution and so didnt need a bailout and the rest of us dont face the financial cuts that are coming
    And before you all say it. Go to Switzerland, Monaco, Andorra or wherever the latest new financial centre with low tax rates is located. You lot are like the England football team - always tell people what you are going to do but never do it
    Tell the rest of us when you are packing up to move offshore and I am sure you will have a team of people willing to help
    Bye Bye

  • Comment number 35.

    #27. At 11:54am on 07 Sep 2010, writingsonthewall wrote:

    "Sleepwalking into Fascism folks - well not me, I will die before I allow a fascist Government to take control of our lives. How many Capitalists are prepared to die for their failed system which has brought us to these crossroads?"

    Hallelujah Brother.

  • Comment number 36.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 37.

    So despite all the destruction, suffering and then the rhetoric the fundamental situation is: no change.

    The tories are bought and paid for by these spivs.

  • Comment number 38.

    #31. NorthSeaHalibut wrote:

    #23. At 11:39am on 07 Sep 2010, newblogger wrote:
    "#6

    Are you simply on here to contradict everything John from hendon has been saying?"

    You've sussed it too. See my post at #30, I'm very suspicious about this dude. The grammatic structure is clearly sarcastic.


    If you don't like it complain to the moderators.

    From my point of view I take my stalkers as a compliment and to indicate that I hit the nail on the head too often to be ignored! Their very existence shows I think the poverty of their arguments!

  • Comment number 39.

    Dear writingonthewall an answer to how do investment banks create wealth. But from logic not knowledge! I'm an engineer not a banker.
    Banks raise capital for businesses. They lend to successful businesses, which grow creating assets, that are financing the capital. The bankers sell their interest, or the loan is paid off and the banks move on.

    In reality the bankers loan money to buy some oranges. These oranges are bought and sold at inflated prices, always increasing in value until someone looks at the oranges and goes, "They stink!" The market collapses, the value instantly disappears but the bankers flogged their interest to pension funds earlier that now have a huge deficit.
    So bankers should be heroes helping society but are actually robbers taking money from small investors, pension funds and old ladies.
    Its crap but its the best we have got.
    Bankers, sorry gamblers, even corrupt cricket!
    Of course sometimes it works properly. Capitalism that is.
    As much as I would love to be a socialist I look at my fellows and give up any hope of that.

  • Comment number 40.

    25. At 11:48am on 07 Sep 2010, a_sensible_comment wrote:

    "WOTW, I suspect most people have ignored your request regarding examples of bankers generating wealth on the grounds that your views are so clearly entrenched what's the point."

    Oh I think not - I am very open minded and here to be persuaded.

    "However, maybe just one example for you:

    1) Barclays were short of capital and a BANKER went to Abu Dhabi ( the ones with 10% of the world's oil reserves) not Dubai (the ones without a pot) and with his/her presentation and persuasion skills managed to convince Abu Dhabi that Barclays stock was cheap and would generate a very good return on capital should they put a decent slug of equity into the bank's balance sheet. This is a clear wealth transfer i.e. taking capital from Abu Dhabi to invest in Barclay's business. I'm guessing this won't satisfy your strict criteria as it doesn't necessarily involve "creation" although as a UK taxpayer I might add, I don't really care because Barclays (a UK business) now has access to capital that was previously sat in Abu Dhabi's coffers. But anyway, that's besides the point, let's now look at "creation"."


    So your first point isn't about wealth creation, but transfer of wealth from one source to another? - not a good start...


    "2) Barclays generates its earnings from a variety of activities including retail and corporate lending, traditional investment banking (i.e. M&A, bond and equity capital raising for clients, derivatives and foreign exchange trading for clients etc) as well as the controversial proprietary trading activities. All of these activities (apart from M&A) require capital."

    All these investments made by Barclays are for an expected return of capital with interest. However for that return to be generated the underlying activities must produce profit - do you agree?
    Therefore any form of loan is ultimately extraction from the underlying production (which does produce wealth) - just because derivatives are far removed from the actual activity, doesn't mean it's the same process going on.
    Barclays are in such a position to do this as they have 'accumulated wealth' - in order to understand why everything they do is wealth extraction you need to return to 'day 1' when the bank began lending capital. Barclays may have started out originally as a wealth creating business (maybe they sold hats) - but it's the scarcity of capital which generates their returns now.
    If capital was freely available then how would Barclays 'make money'? - the answer is they wouldn't - because their income is from scarcity not from anything productive.

    If capital was water there would be uproar that banks hoarded it and demanded an exchange of items greater than the value of that water in return - we would call it blackmail or profiteering. For productive activity - capital is like water as it allows the allocation of resources with the capital lent.
    On top of this banks don't actually own the capital they lend out (generally) - it's either savers wealth or wealth they simply 'create' through FRB. Of course advanced banks now do 'own capital' - but they're so greedy they can't help creating more capital based on expected future growth of the economy - which is exactly why when that growth never came (recession) the capital had to be withdrawn (it never existed and now it won't exist) - that is in effect the credit crunch.

    "3) Let's suppose that Barclays uses part of this additional capital from Abu Dhabi to make 1 loan to the kind of marginally profitable UK engineering company so beloved of the leftists, and that company can then use that loan to finance research into a successful new more efficient widget maker, which then goes on to corner the widget market. How is that not creating wealth?"

    You answered your own question - the manufacturing company created the wealth by fulfilling a (presumed) demand for widgets - what did the bank do apart from 'allow it to happen'? A privilige the banks has from it's previous exploits in lending (i.e. being in a position of having accumulated capital to lend)
    It's like a spiral, the more wealth you accumulate the easier it is to accumulate wealth.

    What banks are unaware of (because they're dumb terminals) is that the extraction of wealth has to come from somewhere, right at the bottom of this pile are the customers who bought the 'widgets' - and because the manufacturer had to pay back the bank more than the amount advanced (it's called interest my dear) thhose customers had to pay more than the widgets were worth and if they worked for the manufacturer they had to take less wages than they were due (for the value they created)
    Eventually this goes wrong because the 'suckers at the bottom' are also the customers - which is why consumption collapsed and we have overproduction leading to asset devalution - right now.

    You also had better watch out for that 'technology argument' - Capitalists think it's their saviour, but thanks to that other Capitalist principle of 'competition' the technology argument is actually a weight around their necks. Once all yor rivals have that technology too the profit margins are reduced across the industry. Think about a totally automated industry and tell me how charging a profit is a) justifiable and b) possible (because your rivals are going to be driving towards a 0 cost base.
    ...and then tell me profit doesn't come from labour (surplus value)...


    "You will of course no doubt now argue that the company could have just as easily gone straight to Abu Dhabi or maybe (more preferred for you surely) straight to an Ed Balls for the same loan."

    No - there are various different ways this could be achieved without involving the middle man of the private bank.

    "Well the answer is, the idea of 100s of UK engineering companies trawling the world looking for the most efficient provider of capital is ludicrous and exists only in the textbook world you seem to inhabit."

    Ever heard of the internet? - or do you think I'm actually writing this on a piece of paper and posting it to the BBC? You need to drag yourself into the 21st century fella - I can contact my neice in Australia in 30 seconds and find out what the weathers like in Melbourne and I'm no 'magician'. You have the cheek to suggested I'm outdated for 'living in a textbook'!
    Also you're hung up on money being the absolute driver for this - maybe the answer is to fulfill the demand for the widgets without needing to assume the risk involved that people may not be interested in them. However that would put all those sales and marketing people out of a job and we all know how useful they are!

    "The idea of going straight to Ed Balls is a more interesting proposition but again would seem to represent more of the USSR economic model, and I seem to remember that didn't work out too well for most people either - but at least in our nasty capitalist system we have freedom of speech which you do seem to enjoy exercising."

    Oh the classic line - confusing communist economics with Stalinist totalitarian regimes. Well as I informed another blogger the other day who was decrying centrally planned economies - what about China? Forget the politcal part - as an economy, the centrally planned element means they're able to take control of the Economy during crisis - unlike our Government which is paddling in the sea of disaster with it's best suit on - hoping the next wave won't be a big one.

    ...and if you want to talk about human rights, maybe you need to look more closely at the actions of so called democratic nations - did we vote to go join the US in an illegal war? Did we engage in torture? Are we killing (and killed) millions of innocent Iraqi and Afghani citizens? Do we have a record of 1000 deaths in police custody and not a single conviction?

    Seems human rights are very subjective - maybe we could argue about who is most heinous on the world stage - but in the Economic realm I think your arguments are done.

    If you disagree - I'm all ears - as I always am for any Capitalist supporter who wants to attempt to justify a contradiction as workable, when it clearly isn't.

  • Comment number 41.

    33. At 12:16pm on 07 Sep 2010, NorthSeaHalibut wrote:

    "You were doing so well until then. Money isn't a resource, never has been, never will be."

    Deefinition of resource

    re·source   /ˈrisɔrs, -soʊrs, -zɔrs, -zoʊrs, rɪˈsɔrs, -ˈsoʊrs, -ˈzɔrs, -ˈzoʊrs/ Show Spelled[ree-sawrs, -sohrs, -zawrs, -zohrs, ri-sawrs, -sohrs, -zawrs, -zohrs] Show IPA
    –noun
    1. a source of supply, support, or aid, esp. one that can be readily drawn upon when needed.
    2. resources, the collective wealth of a country or its means of producing wealth.
    3. Usually, resources. money, or any property that can be converted into money; assets.
    4. Often, resources. an available means afforded by the mind or one's personal capabilities: to have resource against loneliness.
    5. an action or measure to which one may have recourse in an emergency; expedient.
    6. capability in dealing with a situation or in meeting difficulties: a woman of resource.

  • Comment number 42.

    27. At 11:54am on 07 Sep 2010, writingsonthewall wrote:

    How many Capitalists are prepared to die for their failed system which has brought us to these crossroads?
    _______________________________________________________________________

    In a Capitalist society the capitalist doesn't do the dying. He passes the responsibility on and pays somebody else to do that sort of dirty work, (but then turns up to pick the deceased's pockets afterwards. Thinking he has the right to do so, his argument being he got there first. When in fact the people who really saw the money first, knew the decent thing to do was to leave it alone, for it to be passed on to the next of kin.)

  • Comment number 43.

    26. At 11:51am on 07 Sep 2010, yam yzf

    you're making the elementary mistake of confusing 'money' (which banks create) and 'wealth' - which they don't.

    This statement is wrong.
    "Let's see now, the most valuable resource at the moment is money and as, using your own previous comments, banks create money and control it, then they are doing 2 out of 3 so the general population can do the third."

    Money isn't a valuable resource- it's only value is the resources it represents whilst there is a belief that you can exchange that money for those resources

    You'll find out how valuable money is if hyperinlfation kicks in - then you will be happy to swap your money for any resource you can get your hands on.
    You can't eat it, drink it, smoke it or live in money - so tell me, what are the basic needs of man and how does paper with the queens head on it provide it?

  • Comment number 44.

    30. At 12:08pm on 07 Sep 2010, NorthSeaHalibut wrote:

    "Don't bite pal, although it does give you ample reason to put your point across, and very well done it is too."

    Even trolls have their uses.....

    I just want to know why they picked on Hendon - you know that sometimes truth is stranger than fiction.
    I feel sorry for John_from_Hendon who is actually a reasonable blogger and whos reputation is being tarnished by these cheap imitations.

  • Comment number 45.

    22. At 11:37am on 07 Sep 2010, writingsonthewall wrote:
    16. At 11:26am on 07 Sep 2010, the_fatcat wrote:

    "www.bbc.co.uk/news/world-europe-11204528

    Anyone still think there's no sign of the revolution?"

    Shhhhh - you'll upset the Hendonites.

    ..........
    Excellent, you can always rely on the french to stand up for themselves.

  • Comment number 46.

    31. At 12:10pm on 07 Sep 2010, NorthSeaHalibut

    I'd like to agree - it would certainly explain a few things and I certainly think Lindsay_from_Hendon fits this perfectly - but I think with SFH, we just have someone who is ill-informed and attempts to make a convincing argument via copying select bits out of another source and is desperate to suck up to those of higher 'earning' power in the vain hope that a) they'll offer a better paying job and b) rates will stay low enough to stave off an unaffordable increase in debt repayments that Sam clearly is at risk from.

    If indeed it is all a joke, it isnt a particularly well articulated or clever one. At least Lindsay_from_Hendon's is amusing from an entirely fictional viewpoint. I do however aim not to be drawn on it anymore - as it is getting too easy to retort against for everyone. It sort of feels like picking on the kid who can't fight back - a bit empty.

  • Comment number 47.

    Blimey!

    I think Sam-From-Hendon is a Mervyn King groupie.

    I wonder if any previous Governors of the Bank of England have ever had groupies before?

  • Comment number 48.

    @25. At 11:48am on 07 Sep 2010, a_sensible_comment wrote:
    "This is a clear wealth transfer i.e. taking capital from Abu Dhabi to invest in Barclay's business. I'm guessing this won't satisfy your strict criteria as it doesn't necessarily involve "creation" although as a UK taxpayer I might add, I don't really care because Barclays (a UK business) now has access to capital that was previously sat in Abu Dhabi's coffers. But anyway, that's besides the point, let's now look at "creation"."
    Who'll benefit from that redistribution of wealth? I won't. Will you?
    Non sequitur snipped.
    "3) Let's suppose that Barclays uses part of this additional capital from Abu Dhabi to make 1 loan to the kind of marginally profitable UK engineering company so beloved of the leftists, and that company can then use that loan to finance research into a successful new more efficient widget maker, which then goes on to corner the widget market. How is that not creating wealth?"
    Because Barclays didn't use any resources besides giving some "money". It didn't research, it didn't build, it didn't sell. It leeched.
    "...at least in our nasty capitalist system we have freedom of speech which you do seem to enjoy exercising."
    It would never occur to any nation that operates free speech to set up something like Speaker's Corner.

  • Comment number 49.

    @39. At 12:30pm on 07 Sep 2010, Ken Thompson wrote:
    "Dear writingonthewall an answer to how do investment banks create wealth. But from logic not knowledge! I'm an engineer not a banker."
    We're getting quite a few engineers on here :-)

  • Comment number 50.

    WOTW. As you well know in pure economic theory in general banks do not generate wealth (although they can contribute to GDP).

    However what they do do is facilitate wealth generation.

    For example:

    We have Fred the butcher who makes wonderful sausages. So wonderful that he sells out by 11:00 every day so he goes to Jill the farmer and says can I have 100 more pigs every day please. However Jill says sorry Fred I can't do that, although I make a profit on the pigs I sell you I don't have the money to feed that many piglets maybe if you come back in a year or two?

    At which point Bob the only banker in town pops his head round the corner and says don't worry about it I have Freds money in the bank (and Johns savings) as he doesn't need it at the mo I'll lend it to you and you can buy surplus pigs from Jack and feed from Mary. They will then put that money in the bank and I can lend that money to Fred so he can expand his shop and sell loads more sausages.

    So Fred gets more pigs and sells more sausages and has to employ more people.
    Jill sells more pigs and has to employ more people.
    Jack sells his surplus pigs
    Mary sells more feed and has to employ more people.
    And John gets a return on his capital.

    Theoretically Jill could borrow the money straight from Fred and John but that is often complicated (especially in the real world) and does not allow the "magic" ballooning of the money supply that a bank can get away with.

    You might say Fred ends up borrowing his own money surely that can't be right? That I will not comment on.

    Apologies if I have made any errors here there is a nice link of the web somewhere that explains the above stuff better than I have done but I can't remember where.

    As an aside Fascism is as much if not more the enemy of capitalism as socialism is. It distorts the markets and does breaks the fingers of the invisible hand.

  • Comment number 51.

    "6. At 10:56am on 07 Sep 2010, Sam_From_Hendon wrote:

    "I do worry when Government ministers make quotes such as "Bank taken over by casino,", this shows their ignorance of banking, an ignorance shared by many of your bloggers."
    ........
    When it comes to ignorance you seem to display a lot of it. Not only that but you refuse to accept you are wrong even when good evidence is placed in front of you, which is a sign of arrogance. Your knowledge of banking seems to have been obtained from the back of a cereal packet. Personally I pity you, the inevitable collapse of our monetary system will come as a surprise to you and you will panic as a result. Dont take my word for it, have a look at the articles on http://www.prosperityuk.com/prosperity/prosperity.html or http://www.bankofenglandact.co.uk/ There are plenty of others that have posted perfectly good similar links. But I doubt you will put in the effort.

  • Comment number 52.

    It is really depressing that a banker should be appointed trade minister. This government clearly is still hoping that everything will continue as before, that a country can survive indefinitly on ficticous wealth without making anything. The longer they believe that allowing an economy to be totally dependent on financial institutions is viable the less chance there is for any differnt action that might give Britain a future

  • Comment number 53.

    35. At 12:19pm on 07 Sep 2010, NorthSeaHalibut wrote:

    "Hallelujah Brother."

    I didn't lose my great grandfather in the war fighting fascists to now allow them in by the back door.

  • Comment number 54.

    22. At 11:37am on 07 Sep 2010, writingsonthewall wrote:
    16. At 11:26am on 07 Sep 2010, the_fatcat wrote:

    "www.bbc.co.uk/news/world-europe-11204528

    Anyone still think there's no sign of the revolution?"

    Shhhhh - you'll upset the Hendonites.
    >>>>>

    Woo - there's a strike in France. I do believe this is an almost annual occurrance in France so a bt tenuous for the forthcoming revolution (p.s I don't live in Hendon but maybe it's my spiritual home?)

  • Comment number 55.

    Does this mean that Barclays will be reducing further their savers' rates and upping them for borrowers (if lending at all) to pay for his vastly inflated remuneration?

  • Comment number 56.

    @7
    HOW DOES A BANKER CREATE WEALTH?

    It's not a difficult question surely - so why do I still not have an answer?
    ==================================
    Too easy, really. Banks don't create wealth. Retail banks (at least) provide credit as a service to wealth-creating activites, and extract from the users of that service.

    But to clarify this, we would have to define and use the term "wealth" properly, which the spin-meisters and confusopolists would never want.

    Wealth is not = GDP.
    Wealth is not = profit.
    Wealth is not = money.
    Wealth is not = industry.

    Wealth is perhaps better measured as an increase in well-being of individuals, and of their society.

    Banks, on the other hand, control industry, create money, spin the GDP until its dizzy and extract profit. Their recent uncontrolled activities in all these areas have lead directly to the in well-being of the majority of the population for the enrichment of the few.

    In other words, banks have waxed fat on the ideas, risks and industry of others.

    There would be no objection to that in any case, if there were levels of creativity, risk and industry associated with retail banking which made the price charged for their services a "fair deal". Not many people nowadays believe that banks provide a "fair deal".

    As to "investment" not being "gambling". Aren't we told, (often) that "the value of your investments may go down as well as up?" Investment is always a gamble, a risk, a "venture".

    I would have expected my life's savings to be safe "in the Bank". I would not have chosen to lend my life's savings to a gambler, in the hope that if he wins, I would get back a pittance, and if he loses, it wasn't his money anyway. But that is what "Casino" banking has forced on us.

    I certainly wouldn't expect the king to raise taxes from his subjects to pay off the gambler's losses. But that is what the "bailout" really was.

    Ah well, there you are then. That's what rewriting the meaning of words like "wealth" and "Bank" does for you.

    Back to the mushroom farm. Be careful out there ;)

  • Comment number 57.

    50. At 12:49pm on 07 Sep 2010, CorporateAnarchist

    What happens if suddenly people get sick from the sausages (I dunno, via some pork residing bug which isnt interested in capitalism) and demand for the extra sausages dried up? Fred's new employees will find themselves out of work as will Jill's and the extra pigs she bought will now be worth diddly. Mary is in the same boat too but Jacks alright (perhaps thats where the phrase came from?) as he sold his surplus pigs and got out at the top of the market. Bob the diamond geezer took a fee for facilitating it all so he's fine too. John however, goes to get his cash out since he was one of those employed on the back of the expansion of the sausage industry but discovers that since everyone else drew out their savings after losing their jobs too, and their assets being worth less since no-one can get hold of the cash to buy them from each other, the bank has gone belly-up (no pun intended) as it had lent out more than it could ever get its hands on at one time. Nothing like that'd ever happen in real life though. Mmmm...sausages.

  • Comment number 58.

    39. At 12:30pm on 07 Sep 2010, Ken Thompson wrote:

    "Dear writingonthewall an answer to how do investment banks create wealth. But from logic not knowledge! I'm an engineer not a banker."

    Some bankers are described as 'financial engineers' - bringing the word into disrepute.

    "Banks raise capital for businesses. They lend to successful businesses, which grow creating assets, that are financing the capital."

    'Raise capital' - what from the ground - akin to 'raising the dead'? The capital is given to them by savers (initially) until a bank has accumulated enough capital to finance from it's own pocket.
    "They lend to successful businesses" - well that's going to be a hard sell considering so many are going bust at the moment - are connaught a 'successful business' - what about woolworths, or any of the numerous other failed businesses littering our courts at the moment? - what about CDO's - were they a wise investment by these 'professionals'?
    Both argments fail, they do not create wealth, they create money, they don't even do that lending thing very well or we wouldn't have had a credit crunch.

    "The bankers sell their interest, or the loan is paid off and the banks move on."

    ...and with that you skip over the actual wealth creation - I mean how can you pay off more than you borrowed unless you 'created wealth' - which is exactly what the underlying business does (sometimes) - not the bank

    "In reality the bankers loan money to buy some oranges. These oranges are bought and sold at inflated prices, always increasing in value until someone looks at the oranges and goes, "They stink!" The market collapses, the value instantly disappears but the bankers flogged their interest to pension funds earlier that now have a huge deficit.
    So bankers should be heroes helping society but are actually robbers taking money from small investors, pension funds and old ladies.
    Its crap but its the best we have got."

    Best we have got? - I think you're confusing it with "the best we're offered" - certainly not the same thing.

    "Bankers, sorry gamblers, even corrupt cricket!
    Of course sometimes it works properly. Capitalism that is."

    Does it? - when does it work properly? I mean we're either in a boom or a bust - does your car have more than 2 speeds? and if it only had 2 speeds would you count that as 'working'?

    "As much as I would love to be a socialist I look at my fellows and give up any hope of that."

    I'm not promoting socialism, I am merely warning of the dangers of Capitalism. Don't worry anyone who doesn't accept Capitalism is bust will have to fairly soon as it's not going to be pretty over the next decade as it slowly dawns on them how much wealth has actually been extracted by the banking system and what the consequences are to them personally.

    Of course people feel they're insulated from it all - they have to - to oherwise they would have to get off their backsides and actually do some independent thinking for a change - which is hassle if you're used to being spoon fed everything you know.

  • Comment number 59.

    41. At 12:32pm on 07 Sep 2010, yam yzf

    mis·take
       /mɪˈsteɪk/ Show Spelled [mi-steyk] Show IPA noun, verb, -took, -tak·en, -tak·ing.
    –noun
    1.
    an error in action, calculation, opinion, or judgment caused by poor reasoning, carelessness, insufficient knowledge, etc.
    2.
    a misunderstanding or misconception.
    –verb (used with object)
    3.
    to regard or identify wrongly as something or someone else: I mistook him for the mayor.
    4.
    to understand, interpret, or evaluate wrongly; misunderstand; misinterpret.
    –verb (used without object)
    5.
    to be in error.
    —Idiom
    6.
    and no mistake, for certain; surely: He's an honorable person, and no mistake.

  • Comment number 60.

    OK, I will repeat myself again here.

    "What's more, Barclays weathered 2008's worst financial crisis in living memory far better than RBS and Lloyds: although Barclays needed to raise a colossal amount of new capital to protect itself against losses, it obtained the necessary funds from Middle East sovereign investors rather than British taxpayers."

    and

    "Even if Barclays Capital has a record of winning far more often than it loses, it sticks in the craw for many that the huge bonuses earned by Mr Diamond and his colleagues are arguably generated to an extent thanks to the state safety net."

    The fact Barclays is not nationalised is purely to two very lucky events:

    1. Failing to buy ABN AMRO - here big thanks to the Muppets from RBS who were even more "professional" and "deserved of their high bonuses" than the Barclays' lemons

    2. Not buying Lehman just before its collapse - big thanks to the old Gordie and Alastair duo for having better foresight than those highly paid "professionals"

    Just proves, what WOTW has been banging about for months, investment banking is just one huge parasitic casino. Barclays has just had more luck than the other participants this time round. Demerging and moving HQ to NYC? I truly look forward to that happy event. Americans are that much more heavy handed with their miscreants so maybe these gamblers will be brought down to heel in due course.

    Maybe, once the retail operations of the UK banks are demerged they will stop subsidising their associated casino units and start offering better rates to both borrowers and savers.

  • Comment number 61.

    42. At 12:33pm on 07 Sep 2010, spareusthelies wrote:

    "In a Capitalist society the capitalist doesn't do the dying. He passes the responsibility on and pays somebody else to do that sort of dirty work, (but then turns up to pick the deceased's pockets afterwards. Thinking he has the right to do so, his argument being he got there first. When in fact the people who really saw the money first, knew the decent thing to do was to leave it alone, for it to be passed on to the next of kin.) "

    Blimey fella - that is some 'well revolutionary talk' - are you deliberately trying to upset the Hendonites?

    Must be these 'dogs' who live in that 'dog eat dog world' I keep hearing about...

  • Comment number 62.

    Robert

    Everything else in your totally damning article is for me overshadowed by these few words, written as an aside:-
    "A banker who has pocketed £100m from the day job..."
    Ever since reading them I can't get them out of my head.

    What kind of society are we living-in in which we now bandy about such sums as these without most of us (most of the time) turning a hair? What sort of morality are we imparting to our children? What sorts of values?

    Most reasonable people would agree (I think) that if a person starts a business - by mortgaging his house, investing his own savings (and maybe some of his family's and friends too if they have enough faith in him to back him), borrowing up to the hilt, and so on - and by virtue of all the risk-taking and the guts and hard work that it takes makes his business a success, and that if through some combination of all that effort and sheer luck he manages to make a fortune, then (given that we have a capitalist system and haven't yet found a better one) he or she has deserved their financial reward, and that what he/she decides to pay him/herself is their own concern - because it was made with their own money and if they'd failed it would have been their own money that went down the tubes (as well as anyone else's who'd shared the risk).

    What has this man Diamond ever risked? I'd really like to know. All he has done so far as I can see is speculate successfully with other people's money at absolutely nil risk to himself. He's a successful croupier in other words, whom the casino-owners reward for raking in the punters' money.

    No one employed in that way (nor in any other way so far as I'm concerned) can possibly be said to have "earned" so obscenely disprorportionate a reward. How have we as a society ever come to accept that this could be so, and as a consequence that any individual can "reasonably" demand and expect to receive remuneration on such a scale? Where have we gone wrong (because wrong we've most assuredly gone, somewhere)?

    It's all down to financial deregulation and the bonus culture. Bonuses are a conspiracy against society, a confidence-trick from beginning to end. Ask yourself: what difference would it have made to the GNP of Great Britain PLC if no one at all had been allowed to earn a bonus? No one. Would it have been smaller? I doubt it, and furthermore we would have been spared a financial crisis caused - as this one has been - entirely by greed.

    My point is not that bonuses ought at some point to have been capped or outlawed because by then it would have been too late: the insatiable appetite (the culture in other words) would already have been in place. My point is that bonuses are by defintion a con-trick and ought never to have started to be paid. Once they began, the genie was out of the bottle and the mayhem soon got going full pelt.

    And no, I don't have any ideas how to put the genie back in the bottle. Does anyone?

  • Comment number 63.

    This is all so depressing .. not the item piece but the people writing in.

    Little 101 for those still living in la la land

    Financial markets are manipulated by the most devious and selfish of motivations
    Financial markets control the value of currency's
    Nation states function by the value of their currency's

    Result: Nation states are controlled by the most devious and selfish of motivations.

    Period.

    Since 1974 when the world reserve currency was decoupled from any tangible real value there was always going to be one outcome. It is as predictable as the masses misunderstanding the reasons for inflation.

    There will be no equilibrium across the globe until this modern day thievery phenomenon is vanquished.

    What am I saying! as if humans of this millenium are capable of social consideration and understanding ... OMG its me! I am living in la la land.

  • Comment number 64.

    45. At 12:42pm on 07 Sep 2010, Averagejoe wrote:

    "Excellent, you can always rely on the french to stand up for themselves. "

    ...and their fellow workers - unlike this rat infested isle where we have private sector suckers arguing with public sector workers about who needs to take the biggest pay cut and sacrifice to sort out the mess created by the affluent few (who are now moving to bermuda or somewhere)

    I can assure you the French public has no intention of paying for any banking crisis.

  • Comment number 65.

    Barclays had to sell of iShares and Get Middle Eastern money in because of much stricter stress tests and capital ratio requirements required of it which meant it needed to liquidate some assets.

    A lot of the banks were also unable to borrow money from the money markets so generated a larger csah buffer for working capital by selling assets.

    Investment banks make money by selling financial instruments. It is institutions and companies that by these to protect themselves from risk.

    The mathematics of this is pretty solid and was never a reason for the credit crunch.

    Everyone knows that the rating agencies rated lots of debt at AAA in the market which was then bought by banks because it looked cheap for the rating and the yield.

    The Rating agencies then turned round and said "Ooops, did we say AAA - investment grade?? We meant D - i.e. Junk, You'll never get anything back from those".

    Watch what happens to Standard and Poors, Fitchs and Moody's. They mislead everyone

  • Comment number 66.

    50. At 12:49pm on 07 Sep 2010, CorporateAnarchist wrote:

    ....if I may comment...

    "Theoretically Jill could borrow the money straight from Fred and John but that is often complicated (especially in the real world)"

    ...not any more...

    http://uk.zopa.com/ZopaWeb/


    "and does not allow the "magic" ballooning of the money supply that a bank can get away with."

    ...that's the real truth here.

    "As an aside Fascism is as much if not more the enemy of capitalism as socialism is. It distorts the markets and does breaks the fingers of the invisible hand."

    ...but only Capitalism can have the crisis required to plant the seed of fascism. For without Capitalism there wouldn't be any banks failing and there wouldn't be any leverage for corporations to influence Government down this route.

  • Comment number 67.

    # 41. At 12:32pm on 07 Sep 2010, yam yzf wrote:
    "33. At 12:16pm on 07 Sep 2010, NorthSeaHalibut wrote:

    "You were doing so well until then. Money isn't a resource, never has been, never will be."

    Deefinition of resource

    re·source   /ˈrisɔrs, -soʊrs, -zɔrs, -zoʊrs, rɪˈsɔrs, -ˈsoʊrs, -ˈzɔrs, -ˈzoʊrs/ Show Spelled[ree-sawrs, -sohrs, -zawrs, -zohrs, ri-sawrs, -sohrs, -zawrs, -zohrs] Show IPA
    –noun
    1. a source of supply, support, or aid, esp. one that can be readily drawn upon when needed.
    2. resources, the collective wealth of a country or its means of producing wealth.
    3. Usually, resources. money, or any property that can be converted into money; assets.
    4. Often, resources. an available means afforded by the mind or one's personal capabilities: to have resource against loneliness.
    5. an action or measure to which one may have recourse in an emergency; expedient.
    6. capability in dealing with a situation or in meeting difficulties: a woman of resource."


    Defeated your own argument, you see money isn't a resource, a resource is converetd to trading currency or traded itself. Trading currency could be money, beans or even sand if so desired.

    So, there you are alone on a desert island with a cave for shelter, one solitary but productive palm tree offering up one coconut a day and ten million quid in a suitcase, are you wealthy? Only when the next unfortunate inhabitant swims ashore hugging a barrel of fresh water do you pertain to wealth, now you have trading opportunities. Let me guess, will he want to trade with your money or coconuts, are they your coconuts to trade? Then the rescue boat appears on the horizon, who kills who first for the dosh I'd wager the biggest and strongest gets the wonga.

    The basic and crude philosophy of money, make your own conclusions.

  • Comment number 68.

    54. At 1:09pm on 07 Sep 2010, EmKay wrote:

    "Woo - there's a strike in France. I do believe this is an almost annual occurrance in France so a bt tenuous for the forthcoming revolution (p.s I don't live in Hendon but maybe it's my spiritual home?)"

    ...and London,

    http://news.bbc.co.uk/1/hi/england/london/8961537.stm

    ..and South Africa

    http://www.bbc.co.uk/news/world-africa-11161276

    ..and Greece

    ....and india

    http://www.dnaindia.com/mumbai/report_autos-to-go-on-strike-today-taxis-may-join-in-mumbai_1434494

    ...and the airline industry (not BA this time)

    http://www.arabianbusiness.com/596646-gulf-air-passengers-face-possibility-of-autumn-strikes

    Do you want me to go on? - it's going to be a long list if I do...might become boring for those who are already aware of all this.

    You can try to write off every event as 'just another regular occurence....' - but the longer this goes on the more you look out of touch with the world.

    It's the same technique used to downplay the recession by those who clearly don't understand you can see the size of it by the size of sticking plaster being applied.

    Bank of England keeps it's historically low interest rate for a record 18 months.

    Don't forget the public don't even know what's in the surprise package of Octobers spending review - any suggestion of job cuts will increase the solidarity of the workers as they have less and less to lose.

  • Comment number 69.

    @ 6. At 10:56am on 07 Sep 2010, Sam_From_Hendon wrote:

    > although Barclays needed to raise a colossal amount of
    > new capital to protect itself against losses, it obtained
    > the necessary funds from Middle East sovereign investors
    > rather than British taxpayers."


    So Barclay's lost a colossal amount of capital, but would rather be in
    the thrall of some foreign, undemocratic potentate than ask the
    people of Great Britain for aid?

    Hm... we can't host these treacherous, bloated firms anymore - they have to go.

  • Comment number 70.

    57. At 1:13pm on 07 Sep 2010, Hugh_Janus

    That is an excellent pig related piece. I am impressed with the how you managed to bring home the bacon on that one.

    No porkies or trotters in there my friend.

    Now how do all these pigs relate to banks?

  • Comment number 71.

    #52. At 12:56pm on 07 Sep 2010, cark wrote:
    "It is really depressing that a banker should be appointed trade minister."

    Accompanying Cameron, Osborne, Hague & Cable on the recent trade visit to India were the bosses of Barclays, Vodafone, SAB Miller & English Premier League. *Huge* companies trying to peddle goods to a *huge* market.

    So, the cream of our exports are: banking, phones, beer & footie! And we've proved that we are useless in at least two of these: banking and footie!

  • Comment number 72.

    62. At 1:18pm on 07 Sep 2010, torpare wrote:

    "What kind of society are we living-in in which we now bandy about such sums as these without most of us (most of the time) turning a hair? What sort of morality are we imparting to our children? What sorts of values? "

    I don't want to depress you but our childrens future prospects have all been reduced in order to pay for these obscene wages. When they cut education (which they will have to) in order to pay back the absent (extracted) wealth by such hubris - we will have directly impacted all our futures thanks to some peoples blind adoration of the wealth of others without ever questioning where or how it was accumulated.

  • Comment number 73.

    Well done Barclays.

    It is such a pity that politicians and so called BBC finacial presenters have so little knowledge of how banking works. Barclays by any measure is a great British success story - they might have benefited indirectly from various Government measures - but then that applies to every business that are borrowing from the banks.

    The ConDem Government has destroyed Connaught with the probable loss of 10000 jobs. That is a story the BBC should be talking about

  • Comment number 74.

    63. At 1:21pm on 07 Sep 2010, TheCynicalSasquatch wrote:

    "What am I saying! as if humans of this millenium are capable of social consideration and understanding ... OMG its me! I am living in la la land. "

    Humans will do what their environment requires them to do. If you place them in a system where selfishness and greed are rewarded, and in fact required for survivial - then that's how they will act.

    ...the solution is to change the system and the people will change with it.

    Ask yourself how man got through the early years in 3000bc without cooperation and social consideration. I mean if they had been capitalists then they would have died out as the 'strongest' exploited the rest until their deaths and then discovered self-reproduction was not possible.

  • Comment number 75.

    50. At 12:49pm on 07 Sep 2010, CorporateAnarchist

    WOTW has had the the exact point made to him before but he has never accepted it. Nor has he accepted that like any retailer who sells any good or services at a profit that there is any economic good. He continues to post extremely long rants.


  • Comment number 76.

    I believe that periodic banking crises are inevitable in the modern financial world.

    Putting aside the fallout from speculation and greed - governments, pension funds and insurance companies need to generate increasing returns to meet current and future obligations. These returns can only be secured by accepting greater levels of risk. Inevitably, some bad decisions will be made and huge losses will be incurred.

    The situation is aggravated by the ever increasing scale of the gambles (for that is what they are) that need to be taken to keep the system running.

    Unpleasant - Yes. Avoidable - No!

  • Comment number 77.

    Capitalism - the world over - the same results.

    http://www.bbc.co.uk/news/business-11211245

    You really cannot make this up - nobody would believe you!

    71. At 1:45pm on 07 Sep 2010, Charles Johnstone wrote:

    "So, the cream of our exports are: banking, phones, beer & footie! And we've proved that we are useless in at least two of these: banking and footie!"

    Charles, you forgot our other great export - crises of Capitalism - and in that field we're world beaters!

    Somebody line those apologists up...I'm ready for a turkey shoot.

  • Comment number 78.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 79.

    70. At 1:42pm on 07 Sep 2010, writingsonthewall

    Aside from bankers (and don't forget MPs) having their noses deeply in troughs, being as greedy as pigs, being fit for searing on a bbq and leaving an awful stink in their wake - they are entirely unrelated in every way.

  • Comment number 80.

    Writingsonthewall, do you have a job? How can you afford to spend so much time writing on this forum? You have written tonnes of stuff on here and always do.

  • Comment number 81.

    Capitialism is clearly the main force of good in the world.

    Paradoxically, only the selfish ideology a capitalism can create the result of lifting people out of absolute poverty, but also produce people like Gates (Donted $53bn to charity - eradicating malaria, Buffet - donated $47bn, and countless other.)

    I don't think people like Carngie was anything other than a capitalist.

    So what ever ideology you wish to die for it is likely to be a waste.


  • Comment number 82.

    ....oh and will the last person to leave Britain please turn out the lights.....

    NOT YET!

    http://www.bbc.co.uk/news/uk-11209143

  • Comment number 83.

    67. At 1:31pm on 07 Sep 2010, NorthSeaHalibut wrote:

    "3. Usually, resources. money, or any property that can be converted into money; assets.

    Defeated your own argument"

    Except if you look at the third word.......

    Like I said originally, there aer some who will never accept that banks create wealth and so, as others and myself have said, the reason no-one answers the question anymore is that the answer will never be accepted

    :-)

  • Comment number 84.

    73. At 1:52pm on 07 Sep 2010, Decentjohn wrote:

    "Well done Barclays."

    For what exactly? - or are you a random congratulator?

    "It is such a pity that politicians and so called BBC finacial presenters have so little knowledge of how banking works."

    Please enlighten us? - or maybe you won't, because you can't.

    "Barclays by any measure is a great British success story - they might have benefited indirectly from various Government measures - but then that applies to every business that are borrowing from the banks."

    Great success story (but might have benefitted from Government support) - are you for real?
    ...as for businesses borrowing from the banks - how else do you propose businesses function without access the to capital being hoarded by banks? - will some promises of payment be ok for your wages this month John?

    "The ConDem Government has destroyed Connaught with the probable loss of 10000 jobs. That is a story the BBC should be talking about"

    Well considering your support for Tony Blair, I'd say your Neo-liberal glasses are broken as they're only showing one colour!
    Didn't he actually support the cuts only yesterday? - shame, you can't tell one Neo-liberal from another these days - except that non neo-liberals are not in politics.

  • Comment number 85.

    While there have been some interesting discussions it has rather been navel gazing between bloggers.
    Usually comments are more about sorting out the mess.
    Barclays has sent a message to the government, whether meant or not, that it is not open to persuasion and doesn't give a damn about what politicians or the public thinks. I just hope they have their foreign capital so tied up it cannot be taken out again if the Barclays chickens come home to roost.
    The solution suggested is, as has been commented on before, to remove the gambling element from the domestic market. As the gamblers are on a winner, that's the major support for the lending.
    It doesn't matter who got what from where - we are where we are.
    Bonuses are a side issue - Mr Diamond's (appropriate name?) reputed 100 million are peanuts compared to the profits.
    What we need to know is how to reduce the risk factor without killing the goose.
    Yes I know I want my bread buttered on both sides but surely you guys and gals have an answer?

  • Comment number 86.

    Hugh said.

    What happens when Fred goes bust?

    Hopefully by the time this happens Jill has diversified and/or has enough money salted away (no pun intended) to survive the demise of Freds business. Mary has set up a bakery, John has retired and gone to Hendon. In the ideal world Bob would be living on the streets a broken man (just cos I can see the point of bankers doesn't mean I have to like them). As you say Jack was always alright.

    Its far better for businesses that sell bad produce to be terminated than for them to keep on producing poisonous goods nobody wants, to keep Fred (and his workers employed). All growth is built on the corpses, or if you want to be more optimistic comes from standing on the shoulders of giants.

    WOTW sayeth:

    ...but only Capitalism can have the crisis required to plant the seed of fascism. For without Capitalism there wouldn't be any banks failing and there wouldn't be any leverage for corporations to influence Government down this route.

    Not quite true. When the USSR broke down from being a pseudo socialist totalitarian state it quite rapidly headed towards a fascist one. Any intervening period of capitalism was not required. In fact as far as I can see the breakdown of a socialist state generally leads to a fascist regime (Spain, Argentina, China(? :-))) but that is probabably getting off topic. By the by from your reply to Hugh's post I believe you may be a Trotterskist

  • Comment number 87.

    75. At 1:57pm on 07 Sep 2010, Disco Slide wrote:

    50. At 12:49pm on 07 Sep 2010, CorporateAnarchist

    "WOTW has had the the exact point made to him before but he has never accepted it. Nor has he accepted that like any retailer who sells any good or services at a profit that there is any economic good. He continues to post extremely long rants."

    I think CorporateAnarchist was being sarcastic - if not then he has supported my argument quite well thank you very much.

    P.s. I only write long explanations because some Capitalists aren't to quick and need everything explaining to them in detail and over and over again until it sinks in.

    You'll note that the explanations of how ther system 'works' are a bit thin on the ground at the moment. All we have is "It works, I know it" - which isn't good enough for most of us who require intelligent reasoning and not simply banal rhetoric regurgitated.

  • Comment number 88.

    62. At 1:18pm on 07 Sep 2010, torpare wrote:

    "What kind of society are we living-in in which we now bandy about such sums as these without most of us (most of the time) turning a hair? What sort of morality are we imparting to our children? What sorts of values? "

    72. WOTW wrote:
    I don't want to depress you but our childrens future prospects have all been reduced.....without ever questioning where or how it was accumulated.

    That's just it though isn't it.... and it isn't just where and how it was accumulated - the more pertinent point is from when - i.e. the future. Basically they have accumulated their wealth (and continue to do so) from the future well being of the whole species. They have destroyed any hopes and aspirations those children will rightly have. I for one feel pretty confident they won't take it lying down. I don't know about this revolution, but call it what you will, there will be a significant price to pay when the next generation realises what we (this generation) have collectively held office during.

  • Comment number 89.

    76. At 1:58pm on 07 Sep 2010, Tony wrote:

    "Putting aside the fallout from speculation and greed - governments, pension funds and insurance companies need to generate increasing returns to meet current and future obligations. These returns can only be secured by accepting greater levels of risk. Inevitably, some bad decisions will be made and huge losses will be incurred."

    it's a lot to put aside....but regardless, all these activities do not reduce risk at all - they simply give the impression of reducing risk.

    Tell me how does your insurance company cover your risk when they go bust just before you need to claim? How does a pension fund reduce risk when they suffer massive losses just before you retire?

    They don't actually reduce risk at all - it's a myth. God (or mother nature) still unleashes hurricanes and floods - they can't stop them. They just presume that they will be able to re-allocate the resources to you following one of these events.
    ...however if those resources are not available - it makes no difference what cash payout you get.

  • Comment number 90.

    WOTW is sounding like one of those tramps sat drinking in the park shouting at passers by that the end of the world is nigh over and over.

    Most avoid, some prod him for fun, but he needs help.

    Move into the light... The light of capitalism and your problems will be over.



  • Comment number 91.

    80. At 2:04pm on 07 Sep 2010, SirLoseaLot wrote:

    "Writingsonthewall, do you have a job? How can you afford to spend so much time writing on this forum? You have written tonnes of stuff on here and always do. "

    Yes I do - and I can type faster than you can think. How can I afford to spend so much time on here? - well I'm actually working whilst I do it.

    You see despite the high salaries finance is the easiest job in the world. If I were in a real industry I wouldn't have time for this, but I manage to tell you all how it's all going wrong and still deliver everything I am asked to simultaneously.

    ...but you're right - time for a coffee break...

  • Comment number 92.

    # 49. At 12:49pm on 07 Sep 2010, Stuart Wilson wrote:

    @39. At 12:30pm on 07 Sep 2010, Ken Thompson wrote:
    "Dear writingonthewall an answer to how do investment banks create wealth. But from logic not knowledge! I'm an engineer not a banker."
    We're getting quite a few engineers on here :-)

    ------------------------------------------------------------------------
    Look like oily rags to me and some of them haven't been near a camshaft in a while ...

  • Comment number 93.

    81. At 2:05pm on 07 Sep 2010, Disco Slide wrote:

    "Capitialism is clearly the main force of good in the world."

    Prove it - how many wars have been started by Capitalist nations?

    "Paradoxically, only the selfish ideology a capitalism can create the result of lifting people out of absolute poverty, but also produce people like Gates (Donted $53bn to charity - eradicating malaria, Buffet - donated $47bn, and countless other.)"

    So Bill amasses billions in wealth and then 'generously' donates some of it back. Ever heard of an indian giver?

    "So what ever ideology you wish to die for it is likely to be a waste."

    Only a capitalist could think that as they don't see the value in morals - it's all about the money.

  • Comment number 94.

    83. At 2:10pm on 07 Sep 2010, yam yzf wrote:

    "67. At 1:31pm on 07 Sep 2010, NorthSeaHalibut wrote:

    "3. Usually, resources. money, or any property that can be converted into money; assets.
    Except if you look at the third word......."

    Converting money into money? - oh dear you're losing it....

    "Like I said originally, there aer some who will never accept that banks create wealth and so, as others and myself have said, the reason no-one answers the question anymore is that the answer will never be accepted "

    Well that's a load of nonsense, I responded in full to the earlier post about how banks create wealth and why I disagree - and so far there's no reply. Of course we won't accept an argument which is based on some dictionary definitions of words which don't actually string together as a presentable case!

  • Comment number 95.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 96.

    Of course banks create wealth.

    The whole system is designed so that bankers can pay themselves £billions (yes £billions even in the biggest depression since the big one) in bonuses each year which they use to get their grubby hands on real assets.

    If thats not creating wealth I don't know what is.

  • Comment number 97.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 98.

    81. At 2:05pm on 07 Sep 2010, Disco Slide wrote:

    Capitialism is clearly the main force of good in the world.

    Paradoxically, only the selfish ideology a capitalism can create the result of lifting people out of absolute poverty, but also produce people like Gates (Donted $53bn to charity - eradicating malaria, Buffet - donated $47bn, and countless other.)

    I don't think people like Carngie was anything other than a capitalist.

    So what ever ideology you wish to die for it is likely to be a waste.
    ------------------------------------------------------------------------
    But it takes a particular form of capitalism - almost an Old Testament Torah form of capitalism to be truly good for this world. And the Children of Israel struggled with those rules as has everyone since. We rarely agree on these blogs but recently normally opposing posters did mostly agree on one of RP's recent offerings that humans do tend to be greedy and selfish. It's our condition and it takes a lot to break out of it.

    One of the few rich people I know is incredibly generous but he is driven by the Christian version of that OT imperative.

    That said, acts of kindness and generosity - random or otherwise - are often done as unseen and quietly as possible.

    If we are going to learn something from the Credit Crunch & Banking Crisis it is that investing in people is really good and investing for the long term, building stuff, is also good. I am disappointed that the noise over 'Quaker values' disappeared so quickly from our media two years ago.

    But then it would do. No Quaker PR people to constantly phone, write or 'spokes' for radio, TV and newpapers. Nice quiet people, Quakers ...

  • Comment number 99.

    For those simply defending banks and the trading system and one blogger in particular quoting wikipedia on the creation of wealth think again. One of Britains most successful companies is privately owned, the founder dispised banks because they did not believe in him and now its an international company. That company is JCB in the top ten global earth moving businesses with operations in UK, India, USA, Brasil etc and thanfully with no control from banks or shareholder eiger to sell to the highest foriegn bidder where the banks again make the profits at GB PLC expense.

  • Comment number 100.

    Sadly WOTW I was not being sarcastic. I was just attempting to show in Noddy terms how a bank can facilitate wealth creation without creating wealth itself. I must admit defending the role of banks does stick in my craw somewhat but denying realities is what got us into this present position.

    If banks stuck to just transporting money, keeping it safe, facilitating wealth creation and didn't take too many liberties with FRB then I could just about live with them (bonuses would be somewhat smaller for a start). If I had my way no bank operating in the uk would have more than £1B in worldwide liabilities and £10B in worldwide assets.

 

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