RE: Dear Chief Secretary, there's no money left (Full Version)

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Politesub53 -> RE: Dear Chief Secretary, there's no money left (5/17/2010 5:00:43 PM)

quote:

ORIGINAL: wittynamehere

OP, it sounds as if you're giving financial information without actually knowing much about it yourself, aside from what you've read on a couple websites this week. Do more research, and stay off BBC.com



Lady Ellen is quite right with her views on the budget. Much of what will happen has been discussed in the media. The Tories made few secrets about what they would do once in office, nor did the Lib Dems. Unemployment is rising and will get worse as the cuts bite. VAT will rise if they want to try and keep spending cuts to a minimum.

As for the BBC, they have some brilliant business editors, it was Robert Peston who had the scoop on Northern Rock. How about giving us your insights into the contents of the next budget ?



LadyEllen -> RE: Dear Chief Secretary, there's no money left (5/17/2010 5:04:57 PM)

Thanks for that PS

Although it must be admitted, what with being a Lib Dem party member and the owner of pan European businesses I of course based the OP on my own personal wild speculations and misinterpretations - after all its of no consequence to me is it, whats in the emergency budget, let alone whats happening in the wider European economy?

E



Politesub53 -> RE: Dear Chief Secretary, there's no money left (5/17/2010 5:08:44 PM)

No problem Ellen. Its no secret that the EU want us to raise VAT so it comes inline with mainland Europe.



DarkSteven -> RE: Dear Chief Secretary, there's no money left (5/17/2010 6:49:45 PM)

Watching the train wreck from this side of the Atlantic, knowing we'll be in for it as well some day...  [:(]



MistressJaynie -> RE: Dear Chief Secretary, there's no money left (5/18/2010 8:30:47 AM)

quote:

ORIGINAL: Politesub53

quote:

ORIGINAL: wittynamehere

OP, it sounds as if you're giving financial information without actually knowing much about it yourself, aside from what you've read on a couple websites this week. Do more research, and stay off BBC.com



Lady Ellen is quite right with her views on the budget. Much of what will happen has been discussed in the media. The Tories made few secrets about what they would do once in office, nor did the Lib Dems. Unemployment is rising and will get worse as the cuts bite. VAT will rise if they want to try and keep spending cuts to a minimum.

As for the BBC, they have some brilliant business editors, it was Robert Peston who had the scoop on Northern Rock. How about giving us your insights into the contents of the next budget ?


Well said.



vincentML -> RE: Dear Chief Secretary, there's no money left (5/18/2010 9:30:13 AM)

quote:

Labour spent, and the crisis came along... not Labour's crisis, a world crisis. That's just a fact. The seeds of the buy now pay later mentality - of store-cards, credit-cards, 100% mortgages, crazy house-prices, of buy-to-let, and all that consumerist fantasy-land, which has left so many so prone now - were sown, tentatively, in the 1970s, but were developed into a cultural hegemony, under Thatcher, in the 1980s.


It is fashionable to blame the current crises on the over-abundance of easy credit. And the fashion may be quite currect in this instance. But there have been 47 recessions and/or systemic bank panics in the USA since 1790 according to this wiki article . The history suggests that boom and bust, enthusiasm and despair are a built in characteristic of Capital Market Systems.

The "fix" has been some combination of agressive fiscal and monetary policy coordinated between the Federal Govt and the Central Bank. I have heard some wild guesses that the Federal Reserve has made available at its borrowing window some uncountable trillions of dollars during the recent crises. I cannot attest to the truth of that. Well, no one can since the Fed"s book is not audited. So, it may be a fantastic and fictional number. The Fed (our central bank) creates money out of the ether buy selling notes and bonds. Meanwhile, stock/bond/currency/commodity markets destroy wealth, as witnessed by the housing devaluation.

My question is two-fold: If huge amounts of wealth are destroyed as it is created why does it matter if the govt budget is out of balance? It seems a trifling thing.

Secondly, doesn't the Bank of England operate in a similar fashion? I would like to know.

Finally, an observation: whatever politicians do in the face of such monstrous markets seems to be unimportant until after the panic has occurred.

And Mistress Jaynie, I am not so certain that consumer credit spending is the culprit in the recent case. Although, the subprime mortgage bundling does seem a major contributor.

Open to any opinions and corrections. Just trying to understand it all.



Politesub53 -> RE: Dear Chief Secretary, there's no money left (5/18/2010 10:19:27 AM)

quote:

And Mistress Jaynie, I am not so certain that consumer credit spending is the culprit in the recent case. Although, the subprime mortgage bundling does seem a major contributor.


Vincent, sub prime lending was the only culprit, let alone a major contributor. Banks were dealing with financial devices they didnt really know or understand. Regulators had let financial institutions claim profits that didnt actually exist. The bubble grew, some of the banks realised so called stocks, in the shape of credit default swaps were actually useless, and that they were unlikely to get a return. This alone was the cause of the main panic. Once banks stopped lending to each other, the game was up.

I am unsure why you think this is the same as any other boom and bust, it isnt. Normally they are localised. This one was global.

As for your question on how the Bank of England operates, I am unsure what you are asking. I am probably missing something but please rephrase it, and I will have a go at answering for you.



MistressJaynie -> RE: Dear Chief Secretary, there's no money left (5/18/2010 3:00:32 PM)

quote:

ORIGINAL: Politesub53

quote:

And Mistress Jaynie, I am not so certain that consumer credit spending is the culprit in the recent case. Although, the subprime mortgage bundling does seem a major contributor.


Vincent, sub prime lending was the only culprit, let alone a major contributor. Banks were dealing with financial devices they didnt really know or understand. Regulators had let financial institutions claim profits that didnt actually exist. The bubble grew, some of the banks realised so called stocks, in the shape of credit default swaps were actually useless, and that they were unlikely to get a return. This alone was the cause of the main panic. Once banks stopped lending to each other, the game was up.

I am unsure why you think this is the same as any other boom and bust, it isnt. Normally they are localised. This one was global.

As for your question on how the Bank of England operates, I am unsure what you are asking. I am probably missing something but please rephrase it, and I will have a go at answering for you.


Spot on in my view, Polite; and, just to add, this particular global crisis was and is given an even deeper global character because now, unlike previously, the world really is intertwined and interdependent to a massive degree.

I take your point, Vincent; that Capitalism itself is marked by cycles of so-called boom and bust. It is; that's why, in some ultimate sense, it doesn't wholly work. It's chaotic and it's unpredictable; built upon an implicit dependence upon continually increased expansion - growth, that is; which means it must constantly exploit resources, exhausting them, finding new ones, exhausting those, or else rely upon innovation to provide new opportunities, etc. There's a nice opposition between those unrealistic needs and the strictures of ecology, of course; and the world is only just waking up to that.

Forgive me if I'm telling you what you already now. Plus, I don't want to caricature such things, as they are complex and each point requires further discussion, of course, but this is after all only a message-board and not a dedicated academic arena! In my view, David Harvey unpacks the main issues in discussions he formulated about the early Reagan years. A Google might help...

J

 



LadyEllen -> RE: Dear Chief Secretary, there's no money left (5/18/2010 3:16:20 PM)

My understanding V - and bear in mind I know nothing but what the BBC has told me - is that the Treasury sells bonds to the market by which it borrows money to be repaid some years (15 on average for UK I think) down the line at interest. The idea is that by the time payday rolls round the economy will have grown sufficiently that the bonds can be paid off with the interest from the increased tax take derived from the growth in the economy.

The Treasury then takes this borrowed money and the Bank Of England issues Sterling money against it which is then lent out to the banks at interest, who then lend it out to other banks at more interest and then to finance companies at even more interest before it gets to us. We pay the interest/generate added value and the money grows, generating tax revenues that go to paying off older bonds and growing the economy so that there is enough to meet the liability to pay off the newer bonds when they fall due.

The problem as I see it is that the money we have borrowed in this way has not gone to generate added value in the economy but has been used to fund government spending and to buy into a consumer economy and to gamble on the international financial markets.

The government spending was needed and welcome - the state of things when the Tories left in 1997 was dismal, though there are questions as to whether the volume of spending has seen proportionate improvement. As things appear much of it was used to create government funded jobs by which the employment figures could be buoyed in the absence of any real investment in the economy.

The consumer culture was also welcomed of course and as long as everything went on in the same way was supportable in terms of the liabilities people incurred. Not because people were suddenly prosperous so much but because, in my view, the government since 1980 had embarked on a programme of not building enough homes, so driving their values higher and higher and producing, on paper at least, sufficient equity to cover the liabilities.

What broke the system was the world banking crisis when it was discovered that so much of the stakes placed by the banks in the casino of financial markets - money borrowed from the Treasury - were worthless or at best highly questionable. Because no one wanted to own up to holding such stakes banks stopped lending to one another for fear of not being paid back and such interbank lending is what made the whole system work. Banks like Northern Rock in the UK were particularly exposed as they borrowed money in huge amounts every day on the markets - their operation was reliant on the availability of interbank lending. The result was that Northern Rock was bankrupt - requiring the Treasury to step in as lender of last resort and then the UK government to step in to nationalise the bank - so taking on its liabilities to the taxpayer. That this was necessary in order to prevent a full scale run on every bank and to protect investors was clear.

The next thing to happen though was that Lehman's was allowed to collapse, on the grounds that it was (apparently) the weakest over there and not all could be saved and others' collapse should have wider and deeper consequences. This then exposed Royal Bank Of Scotland (RBS) - which required more government intervention, and then Halifax Bank Of Scotland (HBOS) revealed its problems too. The government talked Lloyds into taking over HBOS - a scandal yet to be fully disclosed - and this took down Lloyds as well, requiring more government intervention. These were the big ones, but there were a few smaller cases too.

When the Icelandic banks collapsed this put even more burden on the UK government. Not only individuals lost money there and eventually were compensated by the taxpayer but just about every public authority in the UK that had invested its budget in the Icelandic banks as the highest return around. Although the government didnt compensate them, the fact of the matter remained that funding for public services was put at threat and the money had to be found from somewhere.

So here we are. All of that money used to prop up the banks - borrowed, all the losses incurred and replaced - borrowed, and the continuation of record public spending - borrowed, has put us right up the swanny. For now our bonds are still oversubscribed when they come available each month, but there must come a point when interest in them reduces on account of worry about whether we can meet the liability. At that point the cost of insuring credit to the UK rises and the markets want shorter terms and we start getting into the problem Greece has.

In summary we have pissed away billions and have not a thing to show for it.

Where we go to get out of this will be interesting. We need to rediscover the art of wealth generation - practically all of the growth in the UK economy for years has been the effect of borrowing - which requires the private sector to come to the rescue. Interesting there is that despite the billions pushed into the banks and specific instructions given to those banks, business types like me cant get finance for investment in the sort of activities that might drive economic growth - because the banks have taken the money and are using it to engage in the same casino gambling as brought the whole house down before, because no one in power dares to constrain them - my view is that the powers that be are scared witless of what stories might be told about the cosy arrangement that propelled this particular train off the cliff.

E



Aneirin -> RE: Dear Chief Secretary, there's no money left (5/18/2010 5:19:28 PM)

Of course with the proposed public spending cuts and redundancies, I kind of expect crime to rise, I do hope those that police are up to it, and the judiciary have some ideas seeing as the prisons are just about full already.

But given we are told the prisons are just about full, what exactly does this say about the last government, good at dealing with crime, or creating the conditions for crime to thrive ?

But if crime rises and police get stronger abilities, there lies the fulcrum of the balance, for increased policing can begin to look like a police state, which will inevitable turn the plebian against the lords and masters.

Civil war maybe ?



Politesub53 -> RE: Dear Chief Secretary, there's no money left (5/19/2010 2:42:42 AM)

There is not a chance in hell of civil war in the UK. Crime rose and the police got stronger powers under Labour as i recall. This despite the "Tough On crime, tough on the causes of crime" rhetoric from Blair and Brown.



LadyEllen -> RE: Dear Chief Secretary, there's no money left (5/19/2010 4:21:06 AM)

No doubt there may be civil unrest A - rioting and the like, but I wouldnt expect it this year; next summer is more likely. I expect we shall see mass demonstrations against the cuts and the overall situation in London that become riots, plus a few riots that become larger riots in the cities and larger towns.

I would expect this activity to be driven by wider political forces than in the past, but still dominated by socialist and anarchist elements. That we shall doubtless also see "race riots" is inevitable, as certain elements in certain groups try to pin the blame on others, proclaiming unfair bias in the system or inherent immorality of some sort or other. Look particularly here for Muslim youth to play a significant role - this is the group with the least to lose, the most to gain and the more easily indoctrinated in bad times - not simply against western culture but against anyone and everyone.

We shall have an insight into whether the government feels the above is likely on or around 22nd June. If the pressure on police forces to remedy their overtime costs is relieved, if the police get a payrise - this will indicate possible trouble to come for which the government wants the loyalty of the police to put it down effectively. Look too for defence spending numbers as they relate to army funding for similar but more serious contingencies; as PS says, civil war is extremely unlikely but IMO the Bangkok scenario could arise.

The only way a civil war or the conditions of one could arise here would be a situation where the entire economy collapsed. We rely on imports of just about everything here, including food. If the ships dont come, because we cant pay, then all bets shall be off. But however bad it gets we shall still be a long way from there I trust.

E



Aneirin -> RE: Dear Chief Secretary, there's no money left (5/19/2010 5:33:18 AM)

I believe it is all in the beer, take the beer away and then the quiet man might speak, for we all know the discussions that go on in pubs over a pint, discussions that inevitably fade into an alcohol induced miasma. This current attack on the so called drinking nation is in my oppinion a wrong action, for the powers seek to remove the public safety valve of alcohol. As to the problems supposedly caused by alcohol, a fact we are constantly being made aware of by the media, a good move would be Blair's dream of a continental style cafe culture has failed, we are not continentals, return back to the licensing hours of old, and with that hopefully the demise of every other shop front being a bar in towns. A result might be a reduction in policing costs, and less people encouraged to commit crime by excess alcohol, and then perhaps some free cells in prisons. Agreed alcohol is a problem in our society, but it is the last government that has enabled the majority of that, so experiment failed, we are Brits, let's go back to when there was a sense of normality. Unless there is a possibility that increased alcohol availability was seen as a catalyst for public unrest and there the increase of governmental interference and enhancement of the  political policy enforcers, the police.

But then, if the cuts hit hard that people will have less money, the question is, will alcohol still be readily available to even the poorest, as if it is, that will be a recipe for disaster, alcohol fuelled resentment, thugs that like to fight being the army of the political activist.

But then, the reason for all these cuts, was it the population of this country that enabled the situation to arise, is there a scapegoat, be it the politicians, the parties, the banks or the companies, who enabled the destruction of our economy and way of life ? Why is it the public are paying for this mess, why are they picking up the pieces ?

Who/what is the scapegoat, where does the blame lie, for surely where blame lies retribution and compensation should be sought. or is it protectionism exists.



vincentML -> RE: Dear Chief Secretary, there's no money left (5/19/2010 7:22:51 AM)

I thank you all ...popeye, Lady Ellen, Mistress Jaynee, Anerein .... also my dear wife without whom ... oh, sorry that's my academy award speech :)

You did confirm that your Treasury/Central Bank system works pretty much exactly like ours. So, here is my point: The proceeds that have crossed the window sill at the Federal Reserve to member banks (who then squander it as you rightly point out, LE) and the ghost money in the CDS market far and away overwhelm the Treasury deficit. The latter is like a bucket of warm piss thrown into the ocean imo. So, it occurs to me that balancing the govt budget by raising taxes or cutting public employee jobs is the wrong prescription for your country and mine. (Greece is a separate island because it does not have a central bank who creates money)

Our Congress has been rightly, again imo, attacking the problem by trying to pass legislation to establish capital requirements for portfolio trading by the banks and limiting their leverage which was as high as 47x or maybe greater in the cds market. There is also talk of erecting once again the wall between public bank functions (deposits, business loans, etc) and trading activities. The wall was in place here from 1933 to 1999. Basically, the Federal Reserve and the Bond Rating Agents were culpable while the banks ran amok in the casino. So, the treacherous condition continues despite what is done with the govt's operating budget, which is small potatos (to mix metaphors) A second bank panic is possible in the near future, don't you think?

Btw, I don't think the political environment of the moment is too favorable for the financial reform that is needed. Pretty skeptical I am.

Thank you all again. You were pretty much spot on in the information you gave me but it is more than I can respond to in this space, although I wish I could. There were some wonderful insights.

Regards....



pahunkboy -> RE: Dear Chief Secretary, there's no money left (5/19/2010 8:33:24 AM)

Well in the above matter. The voters have spoken. Govt is good- and the answer.

So just like the US, the UK gets what it deserves.    Which is more of the same.

Is anyone really surprised?

Fake accounting  has been with us for eons.

And per our RO observer- while you have a right to a trial-- you do not have a right to a perfect trial. I mean govt. 



vincentML -> RE: Dear Chief Secretary, there's no money left (5/19/2010 12:10:14 PM)

The Treasury has worked pretty well since 1933, Pa. Tis the private sector that has gone bonker I think.



pahunkboy -> RE: Dear Chief Secretary, there's no money left (5/19/2010 12:15:03 PM)

quote:

ORIGINAL: vincentML

The Treasury has worked pretty well since 1933, Pa. Tis the private sector that has gone bonker I think.


Was this part of the academy award speech?  :-0



vincentML -> RE: Dear Chief Secretary, there's no money left (5/19/2010 7:02:11 PM)


quote:

ORIGINAL: pahunkboy

quote:

ORIGINAL: vincentML

The Treasury has worked pretty well since 1933, Pa. Tis the private sector that has gone bonker I think.


Was this part of the academy award speech?  :-0



omfg, no! That was out on the red carpet before the Awards began. Weren't you watching TV? Crap, Pa. I'm disappointed. :(



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