Firestorm brewing on Horizon...

[Boomin33]

Think it was a 3 years or so ago I said something about storm clouds brewing on the horizon. my business took a huge pounding 6 months after that post.

Have had some worrying reports from a couple guys I know who own significant enough manufacturing outfits.

Basically forwarding emails from companies of the likes of Cargill, Coca-Cola, etc. Cancelling very large orders & very large projects in the last couple weeks. Battening down the hatches, basically.

Hope not, but could be starting signs of what will filter downhill next year...

keep a good supply of dry powder, guys ;)

[Nick Graves]

Thanks for the warning.

I expect the 2012-14 period of the 120-year grand super cycle to be an "interesting" one!

[havoc]

Not good - I've just started a new job - and worse it's immediately become apparent that I've been sold a pup and taken a thorough step backwards not the interesting step sideways I expected...so need to move ASAP, but don't want to move back into something I've already done as I'm at the point in my career I need to push it forwards.

Hmmm...

[NoelWatson]

I'm not sure what people expected after the biggest housing debt bubble in history, thanks to Greenspan, Brown and co, with the public and banks playing a lesser role. This situation hasn't imprived since 2008, with the UK Government continuing to introduce moral hazard - after Dave and cos announcement this week re FTBs, I worry that they are no better than the last lot. This will take a long time to unwind.

[Nick Graves]

It's the inevitable consequence of fractional reserve banking and "Keynesianism" at it's become known; the unsustainable expansion of th ecredit cycle needs to be contracted.

Politiciunts are at best self-serving & meddle in order to be seen to be doing something, whilst doing nothing of any consequence.

Fortunately, the economic cycle seems to continue regardless or them with an eerie accuracy & will brutally correct the bankrupt major economies of the west.

Most people are too busy watching strictly big apprentice to have a clue about reality.

[Geraint]

Good night was it, Nick? :laugh:

[markc]

Very cheery thread chaps ;)

Isn't 2012 supposed to the the end of the world anyway? In which case a financial meltdown matters not :) Wikipedia has all the details... http://en.wikipedia.org/wiki/2012_phenomenon

Cheers

Mark

[NSXGB]

Not worth me getting a new job then next year, might as well spend all my money and have some fun...



Very cheery thread chaps ;)

Isn't 2012 supposed to the the end of the world anyway? In which case a financial meltdown matters not :) Wikipedia has all the details... http://en.wikipedia.org/wiki/2012_phenomenon

Cheers

Mark

[Nick Graves]

Very cheery thread chaps ;)

Isn't 2012 supposed to the the end of the world anyway? In which case a financial meltdown matters not :) Wikipedia has all the details... http://en.wikipedia.org/wiki/2012_phenomenon

Cheers

Mark

I prefer to think of 2014 as the beginning on the next 60-year credit cycle - If they let the old one lay to rest...

In the words of the old song;

Pick yerself up,
Toss yerself off,
& start all over again.

[Papalazarou]

I prefer to think of 2014 as the beginning on the next 60-year credit cycle - If they let the old one lay to rest...

In the words of the old song;

Pick yerself up,
Toss yerself off,
& start all over again.


Very good advice Nick. If all else fails, masturbate.

Awesome.



cheers,

James.

[NSX 2000]

I did write a long reply to this, but lost it.

But in a nut shell I was out shopping Friday night and the shops were heaving, with the Apple store full to the brim with punters. On Saturday went to the west end to see a show and it was mobbed evrey where, could not get a table in any resturant for love nor money! As I said to the wife recession, what recession. Even walking back to the train station all the pubs and clubs were packed, and our train was full and it was not even the last train home!

However spoke to a chap in the car trade today and they are finding things hard at the moment, but also we are having some sign writing done and the company we are using have orders into the new year.

So my advice is have a wank at least you'll get a happy ending :D

[SILVER BULLET]

Sounds like a bit of a handful and very messy:eek:. Best advice that I can give is stop reading ,listening and watching the miserable media and just get on with life, I never did understand where our polititions learnt how to run a country, is there a special school somewhere ? if there is they don't do a very good job:no:,

Keep smiling,

Ian

[NoelWatson]

But in a nut shell I was out shopping Friday night and the shops were heaving, with the Apple store full to the brim with punters. On Saturday went to the west end to see a show and it was mobbed evrey where, could not get a table in any resturant for love nor money! As I said to the wife recession, what recession. Even walking back to the train station all the pubs and clubs were packed, and our train was full and it was not even the last train home!




See my comments re moral hazard. But at least that cheating rugby club you are so fond of is doing well!

[Hagasan]

I did write a long reply to this, but lost it.

But in a nut shell I was out shopping Friday night and the shops were heaving, with the Apple store full to the brim with punters. On Saturday went to the west end to see a show and it was mobbed evrey where, could not get a table in any resturant for love nor money! As I said to the wife recession, what recession. Even walking back to the train station all the pubs and clubs were packed, and our train was full and it was not even the last train home!

However spoke to a chap in the car trade today and they are finding things hard at the moment, but also we are having some sign writing done and the company we are using have orders into the new year.

So my advice is have a wank at least you'll get a happy ending :D

....well if London, the home of the Politicians bubble, is doing well then the rest of the country must be in great shape yes? Try telling a northerner (north of watford Gap will suffice) that there can't be a recession since all the theatres & restaurants are busy, I don't think they'll cheer up for that in the dole office.....London has always been a distorted view on the wealth of the nations people. Unfortunately a lot of the money is usually foreign in these parts or on lots of credit with people trying to "live the life" Oh hang on, wasn't that where a lot of this started......

I suppose at least folk op north can be northern w**nkers and the southerners, t***sers so at least we all get the same pleasures in life sans the taxman ;-) ...on te advice of Paul :-)

[markc]

But in a nut shell I was out shopping Friday night and the shops were heaving, with the Apple store full to the brim with punters. On Saturday went to the west end to see a show and it was mobbed evrey where, could not get a table in any resturant for love nor money! As I said to the wife recession, what recession.

I know what you mean, most shopping centre's, cinemas, pubs, restaurants and football grounds seem pretty busy when I go to use them! It seems to be the highly paid, upper echelons of the service sector, commonly and collectively known bankers, potentially missing out on their massive annual bonus's are talking up this financial disaster and in doing so making it reality. Yes I know it's not nearly as simple as this however, I think the "average man on the street" (if such a thing exists) hopes they all lose their overpaid jobs and rot in hell... shame the b#stards will take us all with them :angry:

Cheers

mark

[Nick Graves]

Sounds like a bit of a handful and very messy:eek:. Best advice that I can give is stop reading ,listening and watching the miserable media and just get on with life, I never did understand where our polititions learnt how to run a country, is there a special school somewhere ? if there is they don't do a very good job:no:,

Keep smiling,

Ian

Nah; the ejucashun system's not quite that sh it.

They surround themselves with sycophants who tell them what thet want to hear, they cop out of manning up with populist policies and leave a great pile of bills for the next lot to clear up. One day, a lot comes in & no-one believes their fibs any more & it all comes crashing down; as Mrs T said; eventually they manage to spend all of your money.

It'd be cheaper if we just had a red button to press on the telly to vote for stuff & turned Westimnster palace into a very exclusive hotel.

[Senninha]

It's about time the political lot took time out to watch that great movie, Dave. Here in lies the answers to many political puzzles, not least of which is how to balance the nations economy ...

http://www.imdb.com/video/screenplay/vi4137681177/

[TheSebringOne]

I know its a good to look at bad situation from a humerous side, but I'm getting pretty bored of all this grim news now,
so the comment James made really got me laughing & cheered me up until I hear the next set of grim news!

[Boomin33]

hmmm... i was just trying to say that capital expenditures seem to be taking a beating within the the Global 500 arena. These companies tend to have a pretty good grip on macro-economics ( or is it just that they are responding to last quarters earning report??? ) Was curious if anyone esle is seeing this.???

**whenever I meet with my Banking/Trading clients... the words Tough, Not Good, Depression seem to crop up every time... poor guys, huh :rolleyes: with bonus season nearly a month away....

Anyway... i'm with most of you. It's looks good out there at the moment.

The Masses are spending and these droves are the drivers behind strong economic figures. I'm just not sure where they are getting the money from. Analysts talk about how indebted they are; how costs of living are soaring, wages/take-home going down and savings are non-existent.

I was almost certain last summer that we would see poor retail figures this holiday season... but we've started with a huge BANG.. haven't we....

I'll take one last cynical stab before being outed as the charlatan that I am ... "Irrational Exuberance, and finally after years... QE filtered down to the physche of the people" - I says.
...or possibly after years of trying save for a 25% deposit on a house they've given up on the idea and spunked the lot at WestFields last weekend...

[NoelWatson]

I know what you mean, most shopping centre's, cinemas, pubs, restaurants and football grounds seem pretty busy when I go to use them! It seems to be the highly paid, upper echelons of the service sector, commonly and collectively known bankers, potentially missing out on their massive annual bonus's are talking up this financial disaster and in doing so making it reality. Yes I know it's not nearly as simple as this however, I think the "average man on the street" (if such a thing exists) hopes they all lose their overpaid jobs and rot in hell... shame the b#stards will take us all with them :angry:

Cheers

mark


I think Joe Public could start with looking closer to home before blaming the nasty bankers

[NoelWatson]

I'm just not sure where they are getting the money from. Analysts talk about how indebted they are; how costs of living are soaring, wages/take-home going down and savings are non-existent.




Surely that is obvious - they have been bailed out by the MPC. They could've used this breathing space to pay down debt, but instead they have continued to buy X5s on finance and blame everyone but themselves

[Senninha]

Does anyone know when / if / how the banks we now all own and bailed out to the tune of £millions have to repay this money back into the country bank? They seem to be releasing strong profits reports so surely some of this should be coming back to those who loaned it in the first place?

As for starting at home .. absolutely, do your budget, only spend what you have and stop living a life on credit (mortgages are the real life exception) ...

regards, Paul

[markc]

I think Joe Public could start with looking closer to home before blaming the nasty bankers


Surely that is obvious - they have been bailed out by the MPC. They could've used this breathing space to pay down debt, but instead they have continued to buy X5s on finance and blame everyone but themselves

It seems that working in the City and living in leafy Weybridge may have skewed your perspective Noel ;) Average Joe most definitely does not run a financed X5, he/she makes do with a 5-10yr old Focus or similar. They're fed up with hearing about these guys taking home (I refuse say earning) hundreds of thousands of pounds if not millions a year while helping their businesses lose billions only to get bailed out by public funds.

I'm not sure if I find these guys or f*ckwit footballers being paid millions more offensive but both of them highlight the downside of free market economics.

Cheers

Mark

[NoelWatson]

It seems that working in the City and living in leafy Weybridge may have skewed your perspective Noel ;) Average Joe most definitely does not run a financed X5, he/she makes do with a 5-10yr old Focus or similar. They're fed up with hearing about these guys taking home (I refuse say earning) hundreds of thousands of pounds if not millions a year while helping their businesses lose billions only to get bailed out by public funds.

I'm not sure if I find these guys or f*ckwit footballers being paid millions more offensive but both of them highlight the downside of free market economics.

Cheers

Mark

The people that are fed up hearing that the bankers are taking home millions need to put down the Daily Mail and seek the truth - not everyone is paid 7 figures. As for banks helping businesses lose money - you will have to elaborate. wrt to public funding, the public themselves have been bailed out massively with the cut in base rate as they struggle to service the debt they took on during the biggest bubble in history. Did the bankers make them take out the mortgages/loans?

http://www.thisismoney.co.uk/money/cardsloans/article-1714095/How-personal-debt-grew-to-14-trillion.html

How many punters were complaining when their house was increasing in value more than they were making in their day job? How many billions did people take out from their homes. If we are ever going to fix this, everyone needs to accept responsibility, from the central bankers to the man on the street.

[markc]

If we are ever going to fix this, everyone needs to accept responsibility, from the central bankers to the man on the street.

I say we stone/burn the bankers first, just in case it's their fault :D

[NoelWatson]

I say we stone/burn the bankers first, just in case it's their fault :D


As long as they get Krusty and Phil immediately afterwards

[Nick Graves]

Does anyone know when / if / how the banks we now all own and bailed out to the tune of £millions have to repay this money back into the country bank? They seem to be releasing strong profits reports so surely some of this should be coming back to those who loaned it in the first place?

As for starting at home .. absolutely, do your budget, only spend what you have and stop living a life on credit (mortgages are the real life exception) ...

regards, Paul

Nope; mortgages are part of the credit bubble & force up house prices to ludicrous levels.

That's part of the reason indebtness is 500% of GDP. Same as Japan's & far worse than the US or Yerp. TBF, it's as much the Gov't wasting money on benefits and olympics and diversity councillors and bail-out & wars & sh it; you cannot blame the great unwashed for wanting a decent place to live.

The alternative to fractional reserve banking is the islamic system & I know which I'd prefer. Good ol' moneylenders.

Sooner it all goes pop, the sooner we can start again on the next boom.


BTW; remember we still own all the bad debts of NR; only the good bits were sold to RB. It's a carve-up as usual.


Yours, G Gekko.

[markc]

As long as they get Krusty and Phil immediately afterwards

Surely we can do Ashley Cole, Wayne Rooney and their ilk before them? I mean Krusty even makes cakes these days :)

[NoelWatson]

you cannot blame the great unwashed for wanting a decent place to live


Agreed to a certain extent, but it went a lot further than that. Of course none of this would've happened if the central bankers had kept it under control rather than pretend there wasn't an issue.


http://realestate.aol.com/blog/2010/06/11/greenspans-no-housing-bubble-prediction-five-years-later/

[SILVER BULLET]

I just love this new political thread, it certainly brings out the expert in us dosen't it, i'm voting NSXCB next time:laugh:

[Nick Graves]

Agreed to a certain extent, but it went a lot further than that. Of course none of this would've happened if the central bankers had kept it under control rather than pretend there wasn't an issue.


http://realestate.aol.com/blog/2010/06/11/greenspans-no-housing-bubble-prediction-five-years-later/

You can almost take that back to the big bang in the 1980s; I don't think half of them had a clue what was really going on.

Also, the faustian pact between the banksters & the politiciunts; they both got rich printing money to buy the electorate.

The crash was meant to be due in the early 2000s; as a result of blowing up the bubble post-911, the feds have made for a far bigger implosion now. and the rest of the world has followed. Also, the US's faltering empire needed trillions printing to pursue its wars.

Thing is, the 60-year nature of credit cyles ought to be widely understood. But (I think it was Bob Beckman who said) the one thing history teaches us is that we never learn from history.

So you might as well enjoy the slo-mo train crash; there's bugger all we can do about it now.

[cue Eric Idle & the bright side of life]

[Boomin33]

...got an email last night that one of the manufacturing outfits I referenced in my 1st post.

"not accepting Banco Santander letters of credit unless they are confirmed by a major USA bank"
---opting to cancel multi-million dollar orders as opposed taking risk on building equipment that doesn't get paid for.
----- typical American View of the World... but


IMO Won't take much more for loss of confidence and a run of sorts on European Banks. = all hell breaks lose. ;)

how terribly exciting!! can't wait to watch the next 10 days unfold. obviously 'too big to fail' and it will be a positive end... but still... terribly exciting times ;)

[markc]

Hi Rob, you're in the recruitment game right? I might have to stone/burn you lot just after the superstar footballers and just ahead of the celebrity estate agents :)

[Boomin33]

Hi Rob, you're in the recruitment game right? I might have to stone/burn you lot just ahead of the celebrity estate agents :) ???

I add far more value than an estate agent???? I've single handly headhunted and presented teams who've invented products worth hundreds of $millions to their employers.. just saved a huge mess at the City of London on the infrastructure side, for gods sake... err... and Tons more.


give me just a little more credit than estate agents, and kill them a split second before me... please ;)


and when you do... and you find you don't have the resources to deliver on that huge project... you'll go.... dammit, why did I shoot myself in the foot, where's Rob??? ;)

[NoelWatson]

just saved a huge mess at the City of London on the infrastructure side, for gods sake


Some lavs needed unblocking at the BOE? :)

10778

[NSX 2000]

Some lavs needed unblocking at the BOE? :)

10778

PMSL

Very good Noel!

[havoc]

Rob, if you can recommend me anyone in your line of work in the Midlands who's any good (and has integrity!), I'd be grateful. Financial side for preference...


(Reason being I'm with Mark - there are genuine exceptions (I know 2 or 3), but in the main I would label RC's somewhere beneath cockroaches and anthrax, although that still puts them above EAs, investment bankers* and politicians)



* "Ordinary" bankers are pretty much like everyone else - they work for a living.

[markc]

give me just a little more credit than estate agents, and kill them a split second before me... please

Deal... and you get extra credit for not only having the good taste to purchase an NSX but also going for the best colour :) The rest of the Recruitment Consultant community shall be outed for the self serving parasites that they are (no offence :)) and burned at the stake :angry:

While I'm on my soapbox, anyone who "works" in HR or in the airline industry (particularly BA) will just behind you RC's in the queue for a fiery exit from this world. Ohh and solicitors, in my experience they FAR more useless than Estate Agents when you're trying to move house.

and breathe... I feel much better now :pleased:

[havoc]

Mark, my wife is in HR. But I guess us Accountants will probably be next in line, so that doesn't matter too much.

Out of interest, who IS going to be left after the revolution??? ;)

[dan the man]

I guess ill stay in the Whistler bubble and look at the only reports worth looking at - Snow reports.

I guess my only concern is house prices, as when they start to go up i will sell my UK house to fund my new place here... but how long do i have to wait . Oh well i guess i can get a few laps in in the meantime...

Worse things happen at sea chaps!

[markc]

Mark, my wife is in HR. But I guess us Accountants will probably be next in line, so that doesn't matter too much.

Out of interest, who IS going to be left after the revolution??? ;)

The HR folks, mainly ladies in larger corporations it has to be said, are one of the funniest groups in that they have no idea how the entire rest of the company see them i.e. as complete and utter waste of space, bless them :)

Yes, I'm afraid you Accountants all get allocated low numbers in the line for the furness :evil:

It'll be just the actual workers left after the revolution... whoever they are??

[NoelWatson]

as when they start to go up i will sell my UK house to fund my new place here... but how long do i have to wait


Have to wait for the unwind first

[havoc]

Dan, unless your house is London or London commuter belt, I wouldn't expect house prices to rise for probably 3-4 years...certainly not in excess of inflation, the way they were pre-bubble-burst.

I'd make plans around it - either sell-up now and re-invest elsewhere, or leave it as a rental and forget about it for the medium-term.

[Nick Graves]

They'll possibly be deflating this debacle for a whole decade. Or longer, if Japan is a guide.

[Boomin33]

Yep Dan... think we missed the boat on the selling Window. Last Summer created a little bubble for high-end cars as well as home sales. Houses in my area (ascot area of Berkshire) were going for 20% above 2007 peak prices. by the time I got wind of it and got mine on the market ( beginning of Sept ) it was too late. By October offers were coming in on homes in the area at a full 10% less than 4 months earlier. I had 2 offers. both a facelift NSX or two short of my asking price!!! = no thanks.

hmmm bummer. I didn't have to sell... but the pound signs were enticing

1. If you believe the sudden euphoria of the last few days then we could see some unexpected & welcome bullishness in the markets over the next 4 months. We then could tick by with little cause for Armaggedon calls in the markets. In which case I may try and flip car+house(s) in March / April time. So many factors depend on this though... across US, Europe, MiddleEast etc.... tooo many IMO

2. I'm with the guys here, unfortunately.. and if you are looking to sell at any of the market highs you've heard about in the past 6 months.... If news goes from bad to worse over the next 2 months... than it could be a few years before we get back to high sounding sale prices... BUT then again... this is England and on an island and it doesn't seem to follow any logical valuation path on property prices.. Good for us who are hold property.

there is my 2cents. and it probably isn't worth more than that ;)

I'm off to Val Thorens in 4 weeks for the Winter.... = ohhh yeahh... who cares about the economy, until next summer ;)

[Boomin33]

complete and utter waste of space Yes, I'm afraid you Accountants all get allocated low numbers in the line for the furness :evil:

It'll be just the actual workers left after the revolution... whoever they are??

Jesus, Mark... I fear for many of us the day you become King.:eek:

[markc]

Jesus, Mark... I fear for many of us the day you become King.:eek:

Haha, don't worry there's no danger of that ever happening... but if that you're worried about it you could always get a proper job ;)

W.R.T to house prices, it's about time some common sense prevailed in the UK. Huge gains fueled the false/fake/faux economy we built over the last 20 yrs and the easy borrowing it provided was, in hindsight, never sustainable. Too many people believed the "retire at 50" dream was possible by taking on an enormous mortgage and a few other "shrewd" investments. It even worked well for some people but like any pyramid selling scheme it unravels further down the line.

I'm really not as grumpy as I must sound here and my jibes at the Accountants, Recruitment Consultants, Human Remains and Solicitors among you are meant, mostly, tongue in cheek :D

Cheers

Mark

[Boomin33]

ahh... can see why some of US Manufacturers I know were calling b.s. on letters of credit from Satander ;)

Among the 31 banks on the European Banking Authority's list, six are from Germany -- Europe's largest economy. But Spain's Banco Santander (STD (http://money.cnn.com/quote/quote.html?symb=STD&source=story_quote_link)) faces the biggest shortfall of €15.3 billion.

http://money.cnn.com/2011/12/08/news/international/european_banks/index.htm?section=money_markets&utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+rss%2Fmoney_markets+%28Market s%29

letters of credit I was aware of were only on around $5M or so... so probably silly small amounts... but still.. they new this before it was reported mainstream...

[markc]

Did anyone watch "Storyville : Inside Job" last night (BBC 2)? It investigated the US financial system and the lead up to the big crash of 2008.

Unbelievable amounts of greed and legal (barely) corruption. The most amazing thing is the same people that drove thier companies into bancrupcy are still involved and when questioned still don't believe the did anything wrong!

Catch it on iPlayer

Mark

[Senninha]

For anyone who cannot understand the present financial crisis of the UK , the EU and indeed the whole western world economies. Please read the following which will explain everything.

Mary is the proprietor of a bar in Dublin . She realises that virtually all of her customers are unemployed alcoholics and, as such, can no longer afford to patronise her bar. To solve this problem, she comes up with new marketing plan that allows her customers to drink now, but pay later. She keeps track of the drinks consumed on a ledger (thereby granting the customers loans).

Word gets around about Mary’s “drink now, pay later” marketing strategy and, as a result, increasing numbers of customers flood into Mary’s bar. Soon she has the largest sales volume for any bar in Dublin . By providing her customers’ freedom from immediate payment demands, Mary gets no resistance when, at regular intervals, she substantially increases her prices for wine and beer, the most consumed beverages.
Consequently, Mary’s gross sales volume increases massively. A young and dynamic vice-president at the local bank recognises that these customer debts constitute valuable future assets and increases Mary’s borrowing limit. He sees no reason for any undue concern, since he has the debts of the unemployed alcoholics as collateral.

At the bank’s corporate headquarters, expert traders figure a way to make huge commissions, and transform these customer loans into Drinkbonds and Alkibonds.

These securities are then bundled and traded on international security markets. Naïve investors don’t really understand that the securities being sold to them as ‘AAA’ secured bonds are really the debts of unemployed alcoholics. Nevertheless, the bond prices continuously climb, and the securities soon become the hottest-selling items for some of the nation’s leading brokerage houses.

One day, even though the bond prices are still climbing, a risk manager at the original local bank decides that the time has come to demand payment on the debts incurred by the drinkers at Mary’s bar. He so informs Mary. Mary then demands payment from her alcoholic patrons, but being unemployed alcoholics they cannot pay back their drinking debts. Since Mary cannot fulfil her loan obligations she is forced into bankruptcy. The bar closes and the eleven employees lose their jobs.

Overnight, Drinkbonds and Alkibonds drop in price by 90%. The collapsed bond asset value destroys the bank’s liquidity and prevents it from issuing new loans, thus freezing credit and economic activity in the community. The suppliers of Mary’s bar had granted her generous payment extensions and had invested their firms’ pension funds in the various Bond securities. They find they are now faced with having to write-off her bad debt and with losing over 90% of the presumed value of the bonds. Her wine supplier also claims bankruptcy, closing the doors on a family business that had endured for three generations, her beer supplier is taken over by a competitor, who immediately closes the local plant and lays off 150 workers.

Fortunately though, the bank, the brokerage houses and their respective executives are saved and bailed out by a multi-billion euro no-strings-attached cash infusion from their cronies in government. The funds required for this bailout are obtained by new taxes levied on employed, middle-class, non-drinkers who have never been in Mary’s bar.


Now, do you understand economics in 2011?

[NoelWatson]

Did anyone watch "Storyville : Inside Job" last night (BBC 2)? It investigated the US financial system and the lead up to the big crash of 2008.

Unbelievable amounts of greed and legal (barely) corruption. The most amazing thing is the same people that drove thier companies into bancrupcy are still involved and when questioned still don't believe the did anything wrong!

Catch it on iPlayer

Mark

Will watch it - I hope it is not as bad as that one narrated by Matt Damon

[NoelWatson]

Naïve investors don’t really understand that the securities being sold to them as ‘AAA’ secured bonds are really the debts of unemployed alcoholics.

Now, do you understand economics in 2011?


Naïve? What happened to due diligence?

[m666 edd]

For anyone who cannot understand the present financial crisis of the UK , the EU and indeed the whole western world economies. Please read the following which will explain everything.

I like that, made me laugh and then get a bit annoyed at the banks / government again!

[NoelWatson]

I like that, made me laugh and then get a bit annoyed at the banks / government again!

At some point Joe Public may have to consider taking some of the blame. Otherwise he will never learn from his mistakes.

[m666 edd]

At some point Joe Public may have to consider taking some of the blame. Otherwise he will never learn from his mistakes.

I was expecting a reply along those lines. There will always be, how shall I put it - 'Less informed people'. I guess in the school syllabus there should be lessons on the value of money, economics and how loans work as a compulsory thing.

I don't remember doing anything money related at school.

[markc]

Will watch it - I hope it is not as bad as that one narrated by Matt Damon

It is the Matt Damon one.

Mark

[NoelWatson]

I was expecting a reply along those lines. There will always be, how shall I put it - 'Less informed people'. I guess in the school syllabus there should be lessons on the value of money, economics and how loans work as a compulsory thing.

I don't remember doing anything money related at school.

I agree that financial education would be good, but something else is needed. Why is it that UK seems to have these massive housing bubbles, whereas countries like Germany don't? Could it be that they believe that one needs to work hard to make money in life, whereas over here, a large percentage prefer to speculate.

[NoelWatson]

It is the Matt Damon one.

Mark

I will watch it again, but remember at the time thinking something along these lines

http://www.amazon.com/product-reviews/B0041KKYBA/ref=cm_cr_dp_hist_1?ie=UTF8&showViewpoints=0&filterBy=addOneStar

[markc]

At some point Joe Public may have to consider taking some of the blame. Otherwise he will never learn from his mistakes.

History shows time and time again that Joe Public needs protecting from him/herself on occassion. When presented with something that is "better" than they've had before they tend to embrace or vote for it en mass. How do you think Germany ended up with Adolf Hitler!

Mark

[Nick Graves]

History only shows that no-one ever learns from history! another CWOT subject like Accountancy, Human Remains, Marketing, Political & social sciences, planning, environmental studies, etc etc.

No-one will notice the time is right now for Adolf Hitler 2 & will vote for him when he appears, oblivious they are making the errors of their grandparents in order to avoid making the errors of their parents.

The rich will get even richer brokering the deal, though.

[havoc]

Unfortunately I'm with Nick.

Give people enough reasons (i.e. highly mortgaged house, two cars on the never-never, private school fees to pay...or even just 'must keep job to put roof over our heads and food on the table - if I get a criminal record I lose my job!') to accept the status quo ante, then gradually and insidiously move said status in the direction you want to take it. Most people will take the path of least resistance and let you take away their freedoms inch-by-inch.

It's already happening, here and in the US in particular. (No tin-foil hat here, and no hyperbole either...the changes ARE small, but they ARE real) And once gone, they're never returned unless enough people fight, properly fight, for them. And the working/middle classes accept every slight done to them, every tax, every lost benefit, every cut in the services they receive...

The French have the right idea...except the media castigate them for 'disrupting the country' and 'damaging the economy'. What have the Libyans done??? And the Egyptians and Tunisians? And does anyone think they were wrong?

[greenberet]

... the working/middle classes accept every slight done to them, every tax, every lost benefit, every cut in the services they receive...


In lots of developed countries (especially in the EU), about half of the money earned in the country is taken away by the government and spent where it sees fit: education, national security, public transportation, heath care, pensions, etc. However, the governments spend so much that taking away half of what is earned is not enough so they borrow money year after year so that they can spend even more than they take.

In theory, most government expenditures benefit all members of society pretty much equally. The police protect just about everyone, everyone can get health care at a hospital, everyone can use public transportation, etc. The benefits are spread relatively evenly but individual members of society pay into the system according to their ability. In Austria, about 75% of the population receive more health care/pension benefits than they pay into the system for. Education, national security, etc. are paid for to a large part by income taxes. In those areas, people estimate that about 95% receive more than they pay for. Overall, about 85-90% of the population are net recipients of government largesse and only about 10-15% are net contributors.

As hard as it is to accept - on the whole, the working/middle classes belong to that portion of the population that are net recipients of government spending. Governments are loath to cut that spending because whoever doesn’t get the benefits they feel entitled to will vote for another party at the next election. If 85% of the population are net recipients – that’s the majority that will get you elected. To pay for the election-time gifts, politicians can either tell the 10-15% net contributors to pay even more, they can put the government even deeper into debt, or they can do both.

In a recent interview on German television, a conservative politician said taxation is an art. The trick is to tax those with property or income as much as possible but just not enough that they get up and leave the country. Unfortunately, maximizing the taxes of those with property or income was not enough to pay for all of the election-time gifts so governments have been running deficits for decades.

The largest players in the financial markets are insurance companies and pension funds looking to invest their money somewhere. Understandably, they look for good investments so that they can pay out higher pensions to their members or require lower insurance premiums for a given level of coverage. That benefits all of us. After Greece, Portugal, Ireland, etc. racked up so many debts that the pension funds and insurance companies no longer wanted to lend them any more money, various bail-out schemes became necessary.

Now, despite electoral pressure from the 85-90% of the population that are net recipients, governments may actually 1) stop artificially boosting today’s economy by running big deficits, and 2) start using some of today’s income to pay down yesterday’s debts. Both of those factors will hurt today’s economy. But continuing to run large deficits to fund election-time gifts no longer looks tenable. Others may disagree.

[havoc]

Good post GB, agree with most of it.

However, I'd add one caveat - the middle-classes MAY be net beneficiaries on average, but if you look at the DINKY set, and even the two-income families (esp. those with private education and healthcare), they probably see themselves quite the other way around:-
- they don't really use the NHS as they're healthy at the moment and have private dentists. (And when they do, they find it's inefficient, inflexible (esp. unwilling to deal with people who work 9-5 for a living) and very variable in quality)
- they don't use the education system
- they hardly ever see the police except when they get pulled by Trafpol
- they've never needed (or indeed perhaps been eligible due to savings) for social security handouts**
- ...and stuff like defence is an abstract concept.

So the perception (for some perhaps the reality, if they ARE paying twice for health, dental care and education) is that they're net-contributors*. Tough one to square away, but I'm not contradicting the core validity of your post here!




* I still struggle to believe how much ADMIN and back-office the public sector has. Contrast with even the privatised transport and energy sectors (which themselves, IMHO, are admin-leviathans), and you've got BILLIONS of waste in there. Bureaucrats, paper-pushers, rule-setters. I'm leaving 'auditors' (in all senses) out of that list as they at least provide value.

** Extended family member now physically unable to work full-time due to rare (chronic) illness, but does not qualify for any state benefits. Take-home pay from part-time retail work (all she can do - trained as a chef, had to give it up as heat and stress exacerbate illness) is little more than she'd get if she was unemployed. Consultant has said her condition "does not qualify as a disability", yet you see regular cases of people faking "back problems" to get extra handouts, among other things (years and years ago an ex-GF's mum managed to claim disability allowance for agoraphobia (odd one, since they earned untaxed income buying-and-selling antiques at boot fairs etc.), and father claimed carers allowance "to look after her" - utter bollocks!!!)

[greenberet]

Good post havoc – I agree with all of it.

If you look at the total government budget and divide that by every man, woman, and child in the country, it defies belief how much the government spends per citizen.

Personally, I think it would be cleansing for a country to have a flat tax on all personal income over, say, GBP 10,000 or something. Wages, salaries, farming income, rental income, interest, dividends (that’s tough to square with corporate taxes, but I’m sure it can be done), realized capital gains, etc. with no loopholes. One income tax rate applicable to all the cash you earn. Full stop. Then everyone would pay their fair “share”. Not the same amount per person, but the same share. The person who earns 1000x as much as me would pay 1000x as much to fund national education, welfare, defense, etc.

I think most people could see that as being “fair”. People would see that even the “rich” are forced to pay their fair share. And then the citizens would have a motivation to pressure the government to be more efficient. No more USD 7000 toilet seats in the Pentagon? That’ll reduce your tax rate by 1%. No more government employees retiring with a full pension at age 35? Another 1% off your tax rate. You want magnetic resonance image scans available in hospitals under certain circumstances even if it increases your tax rate by 0.5% - OK. It’s always tough to decide what to cut and what to keep, but with the current tax system there is almost no felt linkage between the taxes you pay and what you get in return.

If government savings directly reduced everyone’s tax rate, I’m sure lots of bureaucrats, paper-pushers, and rule-setters would have to find gainful employment right after the next election. Which they wouldn’t like. On top of that, the politicians who still had jobs couldn’t be so cavalier in dispensing favors such as subsidies, allowances, and tax deductions to special interest groups whose votes they are courting. So politicians wouldn’t like having their hands tied, either.

It’s much easier to tweak a few percentages here and there than to seriously reform the government. Even in Greece, it looks like they’re doing more tweaking than fundamentally reforming the way their government is run. If the storm becomes stronger, maybe the continued unwillingness of insurance companies and pension funds to bankroll government deficits will force them to reform even if voter pressure never did. Maybe.

[havoc]

Lovely idea. Similar things have been proposed many times, in many countries.

Unfortunately, in tax circles* there's an unofficial theory. (Probably a similar one in law circles too)
"Much like entropy, legislation can only go in one direction - increased complexity. It is seemingly impossible to repeal tax legislation, only to pass more legislation to patch-up / extend / clarify / circumvent / obfuscate existing legislation. The consequence of this is that the legislation becomes increasingly incomprehensible to the layman, thus increasing the need for our services and therefore our fee income. Professionally we need to be seen to be moaning about this, but let's not do it TOO loudly, eh guys?!?"



* I try and avoid them wherever possible! ;)

[Nick Graves]

Exactly - I'd like NOT to mix in tax circles & would happily have my job abolished. I don't actually want to aid & abet the zombies.

Thus, I'm a great supporter of the 'flat' tax ideal. It's also a good way of legitimising the black economy, as opposed to the current system of fining everyone into bankruptcy & state dependency.

But the zombies are too abundant & would never let natural efficiency fix things.

[markc]

"Much like entropy, legislation can only go in one direction - increased complexity.)

Well at least entropy gives us, everyone and everything, nothing, literally, to look forward to :) Unless the report from CERN due tomorrow says the Higgs Boson doesn't exist in which case all bets are off

Always assuming that the world doesn't cease to be on 21st December 2012 of course :D

Cheers

Mark

[duncan]

"Well at least entropy gives us, everyone and everything, nothing," . . . Surely it's worse than that; whilst the system cannot reduce, our individual holding can, but that lost 'entropy' is gained by other entities, [fee income of which some appear so shy].
A bankrupt is therefore the most perfect illustration of the 2nd law of thermodynamics, he has taken the entropy of others, gained where they have lost and then lost it all himself, as it has to go somewhere it must leave others holding that worth.
All this presupposes, that in this version of entropy is it real and did exist.

[Silver Surfer]

Personally, I think it would be cleansing for a country to have a flat tax on all personal income over, say, GBP 10,000 or something. Wages, salaries, farming income, rental income, interest, dividends (that’s tough to square with corporate taxes, but I’m sure it can be done), realized capital gains, etc. with no loopholes. One income tax rate applicable to all the cash you earn. Full stop. Then everyone would pay their fair “share”. Not the same amount per person, but the same share. The person who earns 1000x as much as me would pay 1000x as much to fund national education, welfare, defense, etc.

I think most people could see that as being “fair”. People would see that even the “rich” are forced to pay their fair share. And then the citizens would have a motivation to pressure the government to be more efficient. No more USD 7000 toilet seats in the Pentagon? That’ll reduce your tax rate by 1%. No more government employees retiring with a full pension at age 35? Another 1% off your tax rate. You want magnetic resonance image scans available in hospitals under certain circumstances even if it increases your tax rate by 0.5% - OK. It’s always tough to decide what to cut and what to keep, but with the current tax system there is almost no felt linkage between the taxes you pay and what you get in return.




Hong Kong has a flat tax rate of 15%
They did so well last year that all citizen received a payout of $6000 HK dollars.

SS

[Nick Graves]

Yeah, but most people in HK work hard & are not benefit-addicted state zombies. It's be almost impossible to change the UK model now that GB has got people addicted to tax credits.

[markc]

... and in Monaco they don't pay any tax (income) at all. Even though most of our state zombies also see gambling (the National Lottery rather than the largely state run Casino) as their only "way out", we're not quite comparing apples with apples are we?

Mark

[greenberet]

Yeah, it’s really hard to take away existing benefits.

Here in Austria, the ruling coalition plans on sending each taxpayer an annual summary of what they paid the government and what they got back in return. We already get such a statement from the state “social insurance” companies that run the health care and pension systems (hence it’s public knowledge that 75% of the taxpayers receive more benefits in those areas than they have paid for). The plan is to expand that overview to include as many forms of taxes and state aid as possible. The official goal is to check whether anyone is cashing in the same benefits twice. The unofficial result is being able to see who the benefit-addicted state zombies are.

About half of farmers’ incomes are taxpayer-funded subsidies here and that’s not something they want splashed across the newspaper headlines. Since almost everyone who is a net recipient of government spending doesn’t want to be identified as such, the majority of voters are against the creation of the planned “transparency account”. Any party that wants to stay in office will probably rethink whether they really want to implement it and even if they do, they’ll probably pare it down so far that it becomes useless. Ah, the tyranny of the majority, as the founding fathers of the USA called it.

[havoc]

Things starting to unravel further:-
- French Minister getting desperate and flinging mud as a distraction measure
- The reason for the positive sale of Spanish debt on Tues/Weds being revealed as the 3-year ECB 1% 'subsidisation' of said debt
- Increasing dissent from more of the "26" re: fiscal union and centralised fiscal control
- Merkel suddenly being nice to Cameron!

The only way this will end at-all positively is if:-
- the EU leaders (Merkozy in particular) stop defending increased European integration,and in particular the sacrosanctity of the Euro;
- cut-loose the PIGS (Italy is in the opinion of many commentators still salvageable, and indeed is the key to stopping France from taking a HUGE bath, which will have seismic consequences in Germany and the UK) from the single-currency;
- said leaders enact CURRENT austerity measures, not 2-year distant ones which win votes but most emphatically NOT market confidence. Moody's etc. are far too savvy to be taken in by double-speak.

Personally, I don't hold out much hope for politicians stopping acting like politicians, esp. ones with <12 months to a general election!

Sell €, buy $ guys...

[greenberet]

The only way this will end at-all positively is if:-
...
- cut-loose the PIGS ...

As much as my gut would like to agree with you, my head doesn’t. The undisciplined PIGS would surely get their just comings if they were kicked out of the Euro zone. However, as soon as the Drachma, Peseta, etc. are reintroduced they would massively devalue, making it well on impossible for the Greek, Spanish, etc. governments to service their Euro denominated debts. If they default, all the banks that hold their debt would have to reduce the value of the bonds in their books, which would force them to reduce the value of their equity by the same amount. If they reduce the value of their equity enough, they will no longer legally be allowed to provide loans. To prevent a Lehman Brothers II situation, the governments of the more prudent Euro zone members would have to give the banks the money that the Greeks, Spanish, etc. didn’t. So the taxpayers in Germany, Austria, the Netherlands, etc. are going to foot the bill anyhow, whether the Euro zone breaks up or not. They are either going to give money to the banks or to the PIGS. If they give money to the PIGS, at least they can make them sign agreements to curb their profligate spending in the future. If they give money to the banks, I don’t think any similar agreements will be possible. So throwing money before the PIGS is probably less bad than bailing out the banks yet again.

Personally, I like having a common currency. However, it cannot work if 1) some governments are running 3% budget deficits and others are running 10% budget deficits, and 2) there’s only one central bank allowed to print money. The easy way out is to keep your own currency, allow your government to maintain a 10% budget deficit, and have your central bank print money (sorry, employ “quantitative easing”) to pay for it all. As long as your central bank can print money, you can be relatively sure that the government will service its debts. Your country can then build up a bigger debt burden before it’s time to pay the piper. But when the time comes, it’s probably going to be more painful the larger you let the bubble become before it bursts.

So my head tells me it’s better to give money to the PIGS instead of bailing out the banks again and to impose fiscal discipline now rather than let the central bank keep funding a government debt bubble. But a crystal ball would be very useful to know for sure. My heart tells me that it’s nice to drive my NSX over alpine passes into Italy for a long weekend and pay with Euros when I’m there. I could never get used to all those zeros on the Lira notes.

[havoc]

A different perspective - thanks!

You make one assumption I'm not convinced by - that the governments are going to bail-out the banks. That they've done it before makes it probable, but not definite. It would also be electorally-damaging for whichever government did it, so soon after the last lot (and let's not forget that soon after that happened the banks started paying big bonuses again!). Letting a couple of European banks fail might just make the others eat a little humble pie and see that they're not running the show...and it would only have short-term ripples through the economy, as the government could use the money it saved to leverage loans to industry/consumers (which will have a positive effect on the economy), rather than just bouncing between the banks and having very little effect.

I think your approach is more likely for political reasons (increasing European political integration) rather than economic ones though.



Me? Personally I'd like to see the Lira back...would make things a LOT cheaper than they were this summer! :D (£40+ for 2x pizza and 2x beer)

[Nick Graves]

Dead men walking, I'm afraid. It's time the banksters got a haircut - at the neck.

Sooner the whole lot goes bust, the sooner the recovery starts.