Banks - Lest We Forget

[nashoi]

If we have banks that are too big to fail, and each time bail them out to prevent failure, those banks will tend to behave in riskier ways in order to maintain the same level of risk.

A couple of months ago there was an interesting R4 doc which consisted of a series of interviews with half a dozen or so of the worlds leading economists. Unfortunately I can't find a link to it, but they all pretty much said the same thing, which roughly speaking was:

A cunning plan has solved the problem of banks being too big to fail. We spent all our money on the last bailout and so there is none left if Pete Tong makes an encore. In other words the banks that were once too big to fail are now too big to save.

This is a particular problem given that one effect of the credit crunch is to exacerbate the conditions which caused it in the first place. In response to this the UK and US governments have done nothing substantive in terms of regulation at all.

One of the biggest lies being told about the banking crisis is that no-one saw it coming. At a G10 meeting the finanace ministers of three countries (pretty sure it was Sweden, Australia and I can't remember the third) called for urgent regulation of the banks. Under pressure from their respective banking lobbies, who assured them nothing was wrong, the governments of the UK and US got all talk of regulation stricken from the records of this meeting. This was in 2007 Ooops.

[Loz]

Mick Mac Wrote:

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> Like Dysons. That company will clean up.

Dysons? I think they suck.

[Pearson]

hehe

[SteveT]

Whilst there are sophisticated, educated elements in China, they're numbered at around 60m out of a population of 1.3bn. Identifying an exception to this will not disprove this argument - the uneducated majority is still the powerhouse of their economy, and a very precarious model it is. wrote Huguenot.

It may be precarious but they have in a relatively short time more or less bankrupted the western world which does not compete with their 'slave rates' and the amount of influence they have around the world for basic resources is at best worrying.

They have mountains of money which they are spending on their domestic policies to maintain high levels of employment for their young vibrant work force.

I fail to understand your attitude as if they are not to be taken seriously when they are potentially the greatest economic power on the planet.

[????]

..the global economy has pulled millions and millions out of poverty in the last 10 years and is even beginning to do so in Africa at last thank goodness, so if western union members and the liberal itelligensia (ha ha) think we can carry on with retirement at 60, non-contributory pension schemes, 20 weeks fully paid paternity leave etc etc all funded by horrible wealth creating companies trying to be competitive in the modern global economy it shows how cloud cukoo they really are. Times have changed - for good. We ALL better start working harder.

[Mick Mac]

Yes - lets hear it for the Banks.

Hip hip .....

C'mon Sean at the back - join in.

[Huguenot]

SteveT... "[The Chinese] have in a relatively short time more or less bankrupted the western world"

This is crazy talk, you're trying to blame the Chinese for the financial crisis???

The US went nuts with a low tax, high spend government that was pissing cash away on various unsuccesful international wars. Because they had no cash, they issued government bonds some of which the Chinese bought because they had more money than sense and a substantial balance of trade problem.

Even so, China doesn't 'own' US debt. In total the US debt is around $13 trillion. China only owns $800bn of that. Before anyone does a nut job on that figure, Japan also owns $800bn, and guess what, the UK owns $400bn!

The US electorate has absolutely no intention of stopping their stupid spend spend spend mentality. Their debt is expected to be $18 trillion within 10 years.

If you want to know who's bankrupting the world, look to the US.

Either way, that has absolutely nothing to do with the sub-prime crisis and the credit crunch.

There's no question of 'not taking China seriously', it's a fifth of the world's population. I'm just saying that the challenge should be addressed in a sensible informed manner, not with knee jerk panic and a puke in the corner.

[louisiana]

Huguenot Wrote:

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>

>

> If you want to know who's bankrupting the world,

> look to the US.

Quite.

I find it amazing how willing the US seems to pursue expensive wars abroad while singularly failing on the infrastructure front at home. They really know how to piss money away on the wrong things.

What do you think are the chances that the US might default over the next ten or twenty years?

WRT China, I think the issues are much, much wider than debt, none of which are 'things we can blame the Chinese for'. They are just things that 'are'.

[SteveT]

This is crazy talk, you're trying to blame the Chinese for the financial crisis??? Wrote Huguenot

No that is not the case and I have written no such thing, what I am getting at is they have put the western world out of work because of their slave rates and our incapacity to respond and compete with same.

We can only blame ourselves for the position we are in, and the lack of response by successive governments since the war.................... although I'm unsure of which war.

Times have changed - for good. We ALL better start working harder.

wrote quids.

Payments for this industrious endeavour should be for a mere fraction of the wage we take home today, less than the slave rates in China whilst producing a greater output.

So goodbye unions, some layers of management, along with cars and three meals a day and obesity.

Hello more bicycles, more walking to work, a chilly home life, it seems more like the fifties already when no child I new went to school in a car.

[Huguenot]

"[The Chinese] have put the western world out of work"

That's not true either, China's manufacturing contribution has only been made over the last twenty years - a period when more people have been employed in the 'West' than at any time in history.

I think you're just thinking in black and white terms about manufacturing again SteveT. 75% of our labour market work in 'Services' to which China offers no competition.

The UK isn't in any 'position'. Our industry is based on high end technologies, not painted wooden trains and pillow cases. You need to let it go.

[Jah Lush]

[SteveT]

75% of our labour market work in 'Services' to which China offers no competition.

wrote Huguenot.

How do we create future wealth without exports, Huggers?

[????]

We export services - investment banking, legal, mergers & A consultancy, Insurance, Education is a net positive on BOalance of Payments for us. We're also in the plus on creative stuff I thing - Winey Aimhouse etc...all exported services Steve.

[mockney piers]

Not to mention tourism, software, research ... the list goes on, doesnt have to be forks and shoes, though again, quality clothing is another one we do (admittedly some of that is just stitching posh labels on to stuff made in Vietnam, but hey)

[Huguenot]

This from Philip Inman:

As the British Chambers of Commerce argues in a report due to be handed to ministers ahead of the autumn spending review, manufacturing is a bigger part of the economy than some reports suggest:

"UK manufacturing has largely been seen as a sector in perpetual decline with little economic future," it says. "The reality of UK manufacturing is a much more mixed picture ? very few people seem to be aware the UK is actually the sixth largest manufacturer in the world, that British manufacturing output reached an all-time high in 2007 and labour productivity in UK manufacturing doubled between 1997 and 2007."

"The picture is also confused by the extent to which manufacturing firms also deliver services, raising the question of whether a separate definition is even meaningful. Likewise, the outsourcing of many services that were once undertaken in-house by manufacturing firms has changed the structure of British industry."

John Lucas, policy adviser at the BCC, says we should welcome the shift away from making low-margin, low-paying consumer goods to highly specialised, high-margin parts and services that play a crucial role in making global manufacturing run smoothly. "We don't make Apple iPhones in this country, but we make the computer chips that go in them," he says.

[Brendan]

SteveT Wrote:

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> How do we create future wealth without exports,

> Huggers?

We lend ourselves shitloads of money and then wait for the payments to come rolling in.

[DaveR]

CBI predicts strong growth for UK manufacturing

[Loz]

A little tale that has been doing the rounds today...

Suppose that once a month, ten men go out for beer and the bill for all of them comes to ?100. If they paid their bill the way we pay our taxes and claim State benefits, it would go something like this;

The first four men (the poorest) would pay nothing. The fifth would pay ?1.
The sixth would pay ?3.
The seventh would pay ?7.
The eighth would pay ?12.
The ninth would pay ?18.
And the tenth man (the richest) would pay ?59.

So, that?s what they decided to do. The ten men drank in the bar every month and seemed quite happy with the arrangement until, one day, the owner caused them a little problem. ?Since you are all such good customers,? he said, ?I?m going to reduce the cost of your weekly beer by ?20.? Drinks for the ten men would now cost just ?80.

The group still wanted to pay their bill the way we pay our taxes. So the first four men were unaffected. They would still drink for free but what about the other six men; the paying customers? How could they divide the ?20 windfall so that everyone would get his fair share? They realised that ?20 divided by six is ?3.33 but if they subtracted that from everybody?s share then not only would the first four men still be drinking for free but the fifth and sixth man would each end up being paid to drink his beer.

So the bar owner suggested a different system. The fifth man, like the first four, now paid nothing.
The sixth man paid ?2 instead of ?3 .
The seventh paid ?5 instead of ?7.
The eighth paid ?9 instead of ?12.
The ninth paid ?14 instead of ?18.
And the tenth man now paid ?49 instead of ?59. 
Each of the last six was better off than before with the first four continuing to drink for free.

But, once outside the bar, the men began to compare their savings. ?I only got ?1 out of the ?20 saving,? declared the sixth man. He pointed to the tenth man, ?but he got ?10!?

?Yes, that?s right,? exclaimed the fifth man. ?I only saved a ?1 too. It?s unfair that he got ten times more benefit than me!?

?That?s true!? shouted the seventh man. ?Why should he get ?10 back, when I only got ?2? The rich get all the breaks!?

?Wait a minute,? yelled the first four men in unison, ?we didn?t get anything at all. This new tax system exploits the poor!?

So, the nine men surrounded the tenth and beat him up. Funnily enough, the next month the tenth man didn?t show up for drinks, so the nine sat down and had their beers without him.

But when it came to pay for their drinks, they discovered something important ? they didn?t have enough money between all of them to pay for even half the bill.

[Brendan]

How many beers do they get for a tenner each?

[Loz]

Not as many as SteveT got in 1950.

[*Bob*]

Loz Wrote:

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> A little tale that has been doing the rounds

> today...

Bullingdon Club?

[Loz]

*Bob* Wrote:

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> Loz Wrote:

> --------------------------------------------------

> -----

> > A little tale that has been doing the rounds

> > today...

>

> Bullingdon Club?

What-ho, eh. Pass the port, there's a good chap.

[Brendan]

Wich port? I thought we had bugger all to export.

[SeanMacGabhann]

That is the most half-baked allegory ever

[????]

Wast it the Adventure bar?