OT: shortage of investment bankers
sm_jamieson
On the news this morning, a high up bod in RBS agreed top investment
bankers pay is rather hard to justify, but he said that is the market
- a shortage of top bankers. He said the banks have to pay the high
salaries else the bankers will leave. He implied that when one of
these guys moves job he takes with him lots of business or clients. If
that is the case, its understandable why they will pay to much - the
wage gets them a banker AND lots of clients.
Question:
1. Why do market forces not appear to work in this case to bring in
lots of other "top bankers" so pay levels come down ? Are the skills
really that rare ? Is there some distortion to the market, intentional
or otherwise ?
2. If they will leave where will they go ? If US (obama is trying) and
EU act together will they all go to the east ? Or just not bother to
work at all ?
Simon.
Peter Scott
No the shortage principle only works for us proles it seems. I once ran
a youth training centre and had trouble getting really good staff at the
salary offered. 'Do you get applicants?' was the reply from government.
'Yes'. 'No problem then'. I suggested that the same principle might be
applied to ministers' salaries. Null points!
Peter Scott
Bruce
<sm_ja...@hotmail.com> wrote:
>1. Why do market forces not appear to work in this case to bring in
>lots of other "top bankers" so pay levels come down ? Are the skills
>really that rare ? Is there some distortion to the market, intentional
>or otherwise ?
The financial services industry already takes most of Britain's
brightest people as they leave university. Unless you think there are
a lot of extremely bright people not going to university that you
could encourage to go, how would you increase the supply of top
graduates with the necessary literacy, numeracy and problem-solving
skills?
The other day I heard a professor of engineering at one of Britain's
top universities bemoaning the fact that the majority of his
engineering graduates who gain First or Upper Second Class degrees
don't choose engineering careers, but go to work in the City instead.
Apparently, their mix of abilities in numeracy and problem-solving is
incredibly attractive to employers in the financial services industry.
And the engineering graduates are apparently happy to go there to work
because their starting salaries are at least double what they would
get in engineering.
Unfortunately, this means that the engineering professions are denied
many of the best people. If you want to know why the UK manufacturing
sector has rapidly shrunk while the financial services industry has
hugely expanded, look no further.
stuart noble
It's pretty simple really. If I put a billion on Chelsea to win the
Premier League, and you put a billion on Man Utd, one of us will be
hailed as a successful investor and the other will retire to the Cote
d'Azur on his golden handshake.
stuart noble
I was told by a city slicker that "it helps to be as thick as pig shit
to work in the City". Anyone of a more sensitive disposition would a)
not sleep at night and b) not be able to look at himself in the mirror
next morning.
The financial services industry attracts the greediest, rather than the
brightest, people. Lawd Sugar (or whatever he calls himself) personifies
what we in this broken backwater of a country regard as "business".
Man at B&Q
3. Why do they not have "non-compete" contracts that do not allow them
to poach former clients when they move to a new employer? They're
common in many other jobs.
MBQ
The Natural Philosopher
As a fully qualified degree level engineer, I can utterly concur with
the above.
I never was paid a living wage until I paid myself one, by learning how
money works and starting my own businesses.
As long as the country could make more by financial engineering (=smart
bullshit) it didn't need engineering. It could import that. See the result.
Bruce
I wasn't talking about traders on the floor of the stock exchanges.
It is quite true that a Cockney barrow boy would be better suited to
that role than a highly qualified professional.
pcb1962
Because the client is free to put his business wherever he chooses, a
bank has no control over that.
d...@gglz.com
> The financial services industry already takes most of Britain's
> brightest people as they leave university.
Not true. Whilst the city does favour good graduates from highly
numerate disciplines, particularly from the Russell Group of
universities, it's only a small proportion (probably around 5%) that
go to the city.
And a lot don't last - I can think of several friends that have either
left or want to - saying the money just isn't worth what they have to
put up with.
> The other day I heard a professor of engineering...
Imperial by any chance?
Again I would dispute that very many go to the city, the culture
change from engineering to banking really doesn't suit most people
that choose engineering at university.
If the city has an under-supply of top talent - in spite of offering
vastly greater financial rewards than other sectors - then they need
to look at working conditions, their culture, how people are treated,
and what they need to do in order to attract people for whom personal
greed is not the biggest thing in their lives.
There's plenty of extremely bright and suitable people that choose
engineering or science research in indusrty, medicine, government
research centres, teaching or university lecturing - phenomenally
talented, reasonably well paid in most cases, but not excessively so -
and without money as the overriding motivation in their lives.
Dave Osborne
>
> 3. Why do they not have "non-compete" contracts that do not allow them
> to poach former clients when they move to a new employer? They're
> common in many other jobs.
>
Because on the whole they're not worth the paper they're written on.
There's a basic human rights principle (not sure if it's written down,
so can't quote chapter and verse) that you can't contractually prevent
someone from earning a living. This principle effectively overrides many
aspects of non-competition clauses. All the employee has to do is argue
that (during the period of the clause) they needed the money and banking
was the only skill-set they had which they could leverage to make money.
In terms of not poaching clients, all the employee has to do is tell his
clients he's leaving and how to keep in touch (nothing wrong with that,
could be for personal/social reasons) and the clients will choose to
stay with the old bank or move with the banker to the new bank. As long
as the old bank can't prove that the ex-employee induced his/her clients
to move or slandered/libelled the old employer, then there's no problem.
sm_jamieson
So if the real issue is clients tranferring with the employee,
presumably bankers that fail their clients should go out of the
picture. But that does not seem to be happening.
Simon.
Allthumbs
<sm_ja...@hotmail.com> wrote:
>1. Why do market forces not appear to work in this case to bring in
>lots of other "top bankers" so pay levels come down ? Are the skills
>really that rare ? Is there some distortion to the market, intentional
>or otherwise ?
I believe the problem is not that good bankers have rare skills but
that the banking sector is creaming off far too much of national
wealth in the first place and therefore able to pay very high salaries
in competition with other banks in the same position.
So the question to be asked is possibly "why don't other players move
in to provide these financial services at a lower price?" or possibly
"why would we expect a system called "capitalism" to behave otherwise
- the bankers are at the heart of capital, after all, they trade it".
We have seen cheaper suppliers move in in airlines, why not finance?
Maybe nobody outside understands it enough? After all its fairly clear
that the insiders themselves do not. Look at NRSROs, whose original
job was to do credit ratings in the US but now seek to control and
influence even foreign governments through ratings, lets invent a
fictitious one, lets call it "Standard and Piss Poor". These firms
gave AAA+ rating to bundles of US sub prime mortgages which included
debts of "junk" status, this error initiated the banking crisis. They
now tell Spain (whose PSBR is lower than most countries in Europe)
that its *sovereign* long term debt is no longer AAA+ because it has
high *private* sector borrowings and high current account deficits
*this year*. Logical? I think not.
Wiki:-
http://en.wikipedia.org/wiki/Nationally_Recognized_Statistical_Rating_Or
ganization
"The larger NRSROs have also been criticized for their reliance on an
"issuer-pays" business model, in which the bulk of their revenue comes
from the issuers of the bonds being rated. While this is recognized by
regulators as a potential conflict of interest (since the bond issuer
paying for the rating has an incentive to seek out the CRA most likely
to give it a high rating, possibly creating a "race-to-the-bottom" in
terms of rating quality), "
--
Mike
Allthumbs
wrote:
>The financial services industry already takes most of Britain's
>brightest people as they leave university.
that's because the banks have all the money, not because its the most
challenging area.
--
Mike
Allthumbs
wrote:
>It is quite true that a Cockney barrow boy would be better suited to
>that role than a highly qualified professional.
for a time many traders were sons of east enders, quick and sharp.
--
Mike
tim....
"Bruce" <docne...@gmail.com> wrote in message
news:og8lt5hktdm85h48e...@4ax.com...
> On Fri, 30 Apr 2010 02:14:17 -0700 (PDT), sm_jamieson
> <sm_ja...@hotmail.com> wrote:
>
>>1. Why do market forces not appear to work in this case to bring in
>>lots of other "top bankers" so pay levels come down ? Are the skills
>>really that rare ? Is there some distortion to the market, intentional
>>or otherwise ?
>
>
> The financial services industry already takes most of Britain's
> brightest people as they leave university.
No it doesn't. It cherry picks staff on the basis of things other than
"brightness". There's many a barrow boy who's made it in the city
tim
Allthumbs
>None of this has anything to do with the National Debt, which is purely
>due to the Government having spent more than it collects in taxes for
>some 10 years.
and the recession
>The State will almost certainly make a profit on the Bank
>rescues...
eventually but not yet
--
Mike
Bruce
Indeed, and on the trading floors it is still often the case.
Allthumbs
<timst...@waitrose.com> wrote:
>I'm told (knowing next to nothing about that myself), that these bundles
>included some junk, but some good stuff. Each bundle was rated on the
>best items within it. Daft or what.
"daft" sums it up. Unless you believe that somebody being *paid* to
credit rate by the bundle owners might have problems of cupidity
rather than stupidity?
--
Mike
pcb1962
> On 30 Apr 2010 13:36:07 GMT, Huge <H...@nowhere.much.invalid> wrote:
>
> >None of this has anything to do with the National Debt, which is purely
> >due to the Government having spent more than it collects in taxes for
> >some 10 years.
>
> and the recession
>
> >The State will almost certainly make a profit on the Bank
> >rescues...
>
> eventually but not yet
yes yet:
"The taxpayer is sitting on a profit of close to £10bn on its stakes
in Royal Bank of Scotland and Lloyds Banking Group after a surprise
surge in their share prices."
http://www.guardian.co.uk/politics/2010/apr/26/profit-taxpayers-bailed-out-bank-shares
Allthumbs
<pcb...@googlemail.com> wrote:
>> eventually but not yet
>
>yes yet:
>"The taxpayer is sitting on a profit of close to �10bn on its stakes
>in Royal Bank of Scotland and Lloyds Banking Group after a surprise
>surge in their share prices."
no, not yet. Paper share price increases do not fund current account
deficits.
--
Mike
Allthumbs
>especially Clinton in the US,
>who wanted poor people to be able to buy homes.
I should add (as you seem to want to see it in party terms) the roots
of the banking crash lie not in housing programmes but in the
Republican/Thatcherite belief that "the market is always right" and de
regulation.
--
Mike
Allthumbs
>Gordon was happy to lie about all of this because he's a gobshite.
lovely analysis, "gobshite" didnt come up in the FT that I noticed,
they think Brown far more financially capable than Cameron* or whoever
the other one is. That governments fund programmes from growth is
neither unique to Brown or a surprise. But it matters not, its a TV
beauty contest now.
*interested only in power for powers sake" according to them - not
what I expected from the Financial Times.
--
Mike
Bruce
>
>Also bear in mind that the Treasury will inevitably fuck up the sale
>of the shares and end up losing money.
Remember the sale of our gold reserves? Gordon Brown couldn't have
times that better, could he?
He sold in a falling market and obtained the lowest possible price.
Allthumbs
>> the roots
>> of the banking crash lie not in housing programmes but in the
>> Republican/Thatcherite belief that "the market is always right" and de
>> regulation.
>
>Nonsense. What we have today only bears a faint and distant relationship
>with a free market. In a real free market the banks would have been allowed
>to collapse,
Indeed, society had to step in when the loosely regulated market
failed.
--
Mike
js.b1
those about 30% will be shed year 1, a further 20% year 2. Graduates
were recruited from universities purely because they were ONCE the top
5% of society, that was the structure of graduate training &
investment BECAUSE they were the next senior management re ability.
They wanted the top 5% in a broad section of abilities.
Post 1986 saw a collapse in educational standards in O & A-Level,
particularly the 1990-1991 transition as a "means to hide
unemployment" to quote IBM. IBM recruited 0 in 1993, 0 in 1994 and 1
in 1995. BP to Mobil bankrupted all but 1 of the graduates they
recruited in that time as "no good" and kicked out.
1993 94 95 - top engineering graduates did not apply to UK companies,
those that did were told "to reduce their expectations". Young
Engineer of the Year for 3 years all emigrated (USA USA Germany) and
never returned.
The expectation amongst UK companies by 1995 was that the top
graduates will emigrate since there was "no financial future for them
in the UK". As Cambridge PPE put it, "the young will give up their
lives for us, so why not their futures?" which pretty much became
economic policy.
Other engineers do make the mistake of going to largely crap
engineering firms in the UK, and are given the choice of a)
Engineering or b) General Management which is an oxymoron. Others go
to consultancies where they read scripts, but fortunately Arthur
Andersen is gone now - but not its legacy. The basic problem is UK
industry is obsessed with marketing, aiming to sell 1000 not 1,000,000
and most of all not selecting people early enough based on strengths
AND allowing them to develop along those strengths as a "portfolio".
Quite unlike Germany & Japan.
The personnel department rule for graduates is thus 1) you recruit
them for something they have little aptitude for, pay them accordingly
them let them transfer to their area of aptitude for the same pay or
never let them 2) you do not recruit anyone who is a threat as it will
merely reduce jobs and undermine the carefully crafted hierarchy 3) no-
one is special such that they can achieve pricing power - this last
point destroyed ICI to ICL pretty much, everyone must be substitutable
4) analyse the top management based on every psychometric test, then
select people based on same, then wonder why it didn't work (BT IBM
etc). Efficacy of psychometric testing is actually poor, but do not
tell the Independent School ISIS that - it has been a wonderful boon
for turning out people most like them who end up teaching in schools
most like them rather badly.
Financial Services recruit then underemploy - the top computer science
graduates end up writing junk Javascript, IT companies such as HPQ
recruit "someone cheap" who "needs training to provide backend job
stability in the company" and "not a threat to existing staff". Hence
the disastrous "summer graduate wrote drivers for consumer IT products
which never worked" throughout much of the 1990s. A lot of companies
will not recruit people whose work is "threatening" because it
displaces jobs, pointless because in the end the WHOLE department gets
Outsourced, Rightsized or Dumped.
Recruitment agencies work on 2 principles, 1) delete everything the
company "does not want to see" 2) price based on that remaining, 3)
keep sufficient people on the books but with employment gaps so they
can be kept cheap. I always recall a major London recruiter at a
conference stating "the only reason to recruit graduates is to replace
those you already have with those cheaper". Hence 2005 v 2000 v 1995 v
1990 graduates after 5yrs have lower earnings than their previous
group. Inevitable, the average degree is a 2i which actually implies
an IQ of 125 (1st is 140) but the numbers have exploded. When
challenged the Vested Interest Body known as universities simply state
"if they are not given 1sts they will not get a job". When challenged
about graduate earnings they simply "well that is the salary they
would be earning eventually". It has become a hilarious work of
fiction.
Hence 1 in 2 graduate jobs go to non British graduates - so the number
of graduate jobs is actually no better, and most probably worse than
in 1990. Realise Universities define a graduate job as that which a
large number of graduates are doing... which is a bit like Alan
Greenspan reclassifying USA Burger Flipping from Service to
Manufacturing.
The problem with IB is it really requires multiple qualifications AND
business ability, the person would be equally good as a lawyer, an
accountant, an actuary, a tax consultant AND a business. You may find
all the former in a single person but a good business person is
actually hard to find and very often they are not via the graduate
route.
So overall the top graduates no longer even GO to British universities
despite what many may think, never mind not apply to British
companies. In 1995 major companies across several UK universities had
desperate telephone calls from companies stating the following "we
have not had applications from the section of people we should have,
the numbers are too low". They went into panic when they found some
had emigrated before collecting their degrees, Logica offered 12-16k
(and still offers about 16k now some 15yrs later) and can not retain
people unsurprisingly. It is joked the whole output of Lotus Elise
went to "once graduate companies" as they drove away at top speed to
brighter shores.
What engineer is going to work for 12-14k, rising to 28k after 10yrs
(North) or 32k after 10yrs (South) with 32k in debt plus probably
another 10k for a decent masters to even GET an interview whereupon
they are told "we do not like your degree/this university/your
school" (the standard line) when police sargeants get 35k & refuse
collectors seem to get some ungodly amount? Many graduate recruiters
in revenge at the quality of graduates deliberately hold them off the
graduate scheme for 8am-8pm six days a week, once that feeds back they
amusingly "demand" graduates apply to them yet "can not seem to find
the people they should have". On the contrary when you offer peanuts
you get monkeys. Who is going to touch engineering firms when
financial services offer far better? The "graduate pay soon rises"
vanished in 1990 and only returned for a very few who in the end
simply escalate to the international jetstream kicking off a ball n
chain tax, living cost & property cost culture.
Engineering degree + GOOD Management degree = 100k in India. No point
in staying.
Japan is rumoured to be starting the biggest societal change in
history - selecting people globally at "ground zeo" and creating a
portfolio of them within Japan. In return it's jobs for life will give
parks, hard work, sky high pay and the best people to work with. Treat
people like human garbage and they just walk. The best EE & MBA from
Imp runs a hire shop, the best EE from QMC owns 3 restaurants. If you
want to do engineering do Mech E, but realise Honda will not take the
top people "as we have nothing to offer", they went into IT, then
Cisco, then India, now "bounce around S.E.Asia for 5 times what the UK
would pay them even in the M4 corridor".
The UK created the biggest miss-allocation of cost in history by
expanding the universities, it was merely a means to engineer people
into debt for life and hide unemployment (which it is very good at).
The 400k "return" on a degree collapsed to 150k overnight and is
actually zero or negative for many occupations. Marketing manager 21k,
admin 13k, public sector 18k with security. Sadly we have turned our
public sector into an "expectation" with the result that UK society is
effectively Greek in that We Should Have. Sadly many are about to find
out we can not afford it. Private sector pension levels, plus loss of
widow's pensions are transferring vast future liability back to the
state. Graduates retire at 70 is actually not a joke, the figures do
not add up.
If BIS re 2040 deficit is 300% of GDP, we will need more than the IMF,
we will need an oil well the size of Ireland to pay for it. Falklands
thus far does not seem likely to be that big.
The big stink to next hit the UK will be insider trading which is rife
from business, civil service, politicians to financial services. It is
out of control with front running really quite ridiculous - if you
think politicians stunk over expenses, you should see their financial
front running. Obama has finally woken up to most of the crooked
systems being derived from The City, unfortunately the UK is still the
counerparty to vast sovereign debt exposure along with France.
In 1990 from Imperial to QMC it was stated openly by lecturers that
everyone in this room should expect to emigrate. Flat out, blunt, they
were told they were wasting their time. What is not so well known is
that many OTHER universities acted as "recruitment consultants" for
companies to "get people cheap". Private schools would strip CVs,
trust status so can not be sued and keep databases likewise.
Universities would award marks based on whether X had a job and Y
should do research - if they wanted you for research you were given a
2i but poor refs re company contacts so not picked up, when you
refused research you were told about the marking move. If one person
already had a job they were given a 2ii despite higher marks than
another person who had not who was given a 2i. If a Director parent
leant on the department they could publish a letter in a journal
editorial section claiming they came top on the course when in reality
they were bottom of the top third. The slave trade is not dead, it's
just a case of more financially engineered.
Anyone choosing a degree today, ask yourself a) what do you do with
that b) how do you pay for that c) which country do you go to with
that. Southampton Engineering shovelled the bulk of their engineers
into the financial services or foreign engineering jobs (M.E.) with
engineering firms simply ignored on campus offering "min wage plus
10p". 150,000 graduates emigrate a year excluding dental assistants
and similar "light/sub degree", unfortunately it is not the worst
ones :-)
Dumbing down of degrees has been barely masked.
Psychiatrist once required very little - but with degree quality
dilution so it required ever more academic qualifications and debt to
get the exact same job. Nursing must now be a degree. Paxman could
barely contain himself on several occasions from surfing to second
hand car dealing, the securitisation of toilet paper credentialism.
This is a global problem, but it is missing the point. The top 10% of
UK is 6M people, the top 10% of Asia is 600M people - that stuffing
more into dumber university courses is going to solve this is non-
sequitor, it merely hides unemployment and pacifies a nation via
covering them in debt and letting them grow through it. You have to
treat human capital as a portfolio and grow it, not shit all over it
and hope it grows through.
Arthur Andersen for one had conferences in 1993 "how to get a 1st for
£3 an hour", companies actually only picked people up if they were
going to a competitor - otherwise they would let them rot for a few
years then pick them up cheap. The university "keeping tabs" on a
portfolio of people it could trade for "consultancy fees". The system
is rotten and for the most part always has been, the boast of
academics became "whatever happens to you people, we still get paid".
Bank of England is busy researching why they young aren't exploding at
the dismal financial future, the reason I'm afraid is because they
know the State in the end gets the bill. About 5M on IB and similar is
the growing toll of the mess we are in. Sadly no political party has
the answer, it requires a culture change and educational system shred
& rebuild. Unfortunately market forces vs "human capital portfolio" do
not work too well, so we thankfully build plenty of airports. Last one
out turn off the light.
A lot of IB have jumped out of the UK, any financial services is a
risky job - it is "high-pay one day or 20k the next" since the
qualifications and experiences are rarely accepted by personnel depts
outside the City. So that reinforces the quick-buck mentality which
merely accelerates the property desperation and so in turn fuelling
it. A reinforcing systems loop that Peter Senge would perhaps not be
too proud of.
Still, all socialist roads lead to inflation, whether or not the
garbage graduates of ONS can add up. Sov Debt holders hate inflation,
and therein lies the problem for USA UK - perhaps the Princeton
Banking & Economist crowd are still fighting "preventing Japan
deflation happening here". Housing gets very expensive to hold up when
you are driving economic generations out of the country.
stuart noble
> Today is Setting Orange, the 47th day of Discord in the YOLD 3176
Is it by golly?
And after discord we have confusion, bureaucracy, and chaos. Seems like
a gloomy calendar to me. Have I missed something, or everything?
Bruce
Thatcher at least knew that when the City was liberalised and hugely
expanded following the 1980s "Big Bang", what was needed was firm and
effective regulation. That was put in place and stayed during the
whole time the Tories were in power.
However, when Blair and Brown were having their prawn sandwich lunches
with city types in the run-up to the 1997 election, Brown was
persuaded by the city types' relentless lobbing that the regulation
was too strict. It was forcibly suggested to Brown that, if he wanted
their support, he would have to give them what they wanted.
So, not wanting to fall out with the largest single sector of the
economy, which would eventually provide New Labour with a whopping 25%
of its total tax revenue, Brown dutifully gave the w/bankers what they
wanted. The strict regulation by the Bank of England came to an end
and was replaced by "light touch" regulation by the toothless
Financial Services Authority, starting in 2001.
Of course "light touch" mostly meant "no touch at all" and the
w/bankers could proceed unhindered with their ever riskier investments
using depositors' money. And the risky decisions that they made,
unencumbered by any effective oversight, led directly to the banks'
demise.
If you don't believe me, please refer to a recent speech during this
current election campaign when a prominent Labour figure admitted that
removing effective regulation was a highly regrettable mistake.
The prominent Labour figure? The former Chancellor of the Exchequer
and current Prime Minister, Gordon Brown.
js.b1
> However, when Blair and Brown were having their prawn sandwich lunches
> with city types in the run-up to the 1997 election, Brown was
> persuaded by the city types' relentless lobbing that the regulation
> was too strict. It was forcibly suggested to Brown that, if he wanted
> their support, he would have to give them what they wanted.
Indeed and likewise in America re Clinton & Bush.
Clinton states "his unspoken regret" was w.r.t. regulation.
April 29 (Bloomberg) -- A one-word deletion in the 1,565- page Senate
financial reform bill may help banks and inter- dealer brokers
maintain how they trade swaps in the unregulated $605 trillion over-
the-counter derivatives market.
A “trading facility,” as defined under the U.S. Commodity Exchange
Act, prohibits phone transactions, which is how swaps have been traded
for three decades. The banks that dominate the market profit by
relying on telephone-based trading because it’s less transparent than
electronic-trading systems, said Darrell Duffie, a finance professor
at Stanford University in California.
Moves swaps back to "pre big bang" makes them more covert from market
players compared to seeing a market makers book as with online
trading.
The financial services are lobbying very very hard and with a very
effective "big stick" of "you don't want the bank bailout debt hanging
around too long" they are likely to get what they want yet again.
Allthumbs
>Gordon's a loathsome, rubber-lipped lying gobshite
sorry, thats not my level of debate.
--
Mike
Bruce
<timst...@waitrose.com> wrote:
>In article <ncrlt5pnac7maq4pb...@4ax.com>,
> Bruce <docne...@gmail.com> wrote:
>
>> On Fri, 30 Apr 2010 14:57:39 +0100, Allthumbs
>> <checked...@live.co.uk> wrote:
>>
>> >On 30 Apr 2010 13:36:07 GMT, Huge <Hu...@nowhere.much.invalid> wrote:
>> >
>> >>especially Clinton in the US,
>> >>who wanted poor people to be able to buy homes.
>> >
>> >I should add (as you seem to want to see it in party terms) the roots
>> >of the banking crash lie not in housing programmes but in the
>> >Republican/Thatcherite belief that "the market is always right" and de
>> >regulation.
>>
>> Thatcher at least knew that when the City was liberalised and hugely
>> expanded following the 1980s "Big Bang", what was needed was firm and
>> effective regulation. That was put in place and stayed during the
>> whole time the Tories were in power.
>>
>> However, when Blair and Brown were having their prawn sandwich lunches
>> with city types in the run-up to the 1997 election, Brown was
>> persuaded by the city types' relentless lobbying that the regulation
>> was too strict. It was forcibly suggested to Brown that, if he wanted
>> their support, he would have to give them what they wanted.
>>
>> So, not wanting to fall out with the largest single sector of the
>> economy, which would eventually provide New Labour with a whopping 25%
>> of its total tax revenue, Brown dutifully gave the w/bankers what they
>> wanted. The strict regulation by the Bank of England came to an end
>> and was replaced by "light touch" regulation by the toothless
>> Financial Services Authority, starting in 2001.
>>
>> Of course "light touch" mostly meant "no touch at all" and the
>> w/bankers could proceed unhindered with their ever riskier investments
>> using depositors' money. And the risky decisions that they made,
>> unencumbered by any effective oversight, led directly to the banks'
>> demise.
>>
>> If you don't believe me, please refer to a recent speech during this
>> current election campaign when a prominent Labour figure admitted that
>> removing effective regulation was a highly regrettable mistake.
>>
>> The prominent Labour figure? The former Chancellor of the Exchequer
>> and current Prime Minister, Gordon Brown.
>
>Ha ha, yes. And the lying bastards have the nerve to blame this on
>Maggie. Still, it's a typical leftie tactic - you have a problem, just
>make up a lie about it.
Then they justify everything they do on the basis of "helping hard
working families". LOL!
The Natural Philosopher
> In article <eedlt51s30n7hqmgm...@4ax.com>,
> Allthumbs <checked...@live.co.uk> wrote:
>
>> We have seen cheaper suppliers move in in airlines, why not finance?
>> Maybe nobody outside understands it enough? After all its fairly clear
>> that the insiders themselves do not. Look at NRSROs, whose original
>> job was to do credit ratings in the US but now seek to control and
>> influence even foreign governments through ratings, lets invent a
>> fictitious one, lets call it "Standard and Piss Poor". These firms
>> gave AAA+ rating to bundles of US sub prime mortgages which included
>> debts of "junk" status, this error initiated the banking crisis.
>
> I'm told (knowing next to nothing about that myself), that these bundles
> included some junk, but some good stuff. Each bundle was rated on the
> best items within it. Daft or what.
>
What was the real problem, was in interpretng what was junk: essentially
the game is this.
A fractional bank prints money that it can lend out to people Lots of
it. It can lend ten times maybe what it actually has on deposit.
The world is awash with cheap money, which is used to finance cheap houses
the price of cheapp houses goes up.
More people want to borrow more money so as not to get left behind.
So they do. Houses go up, risky loans become safe as the value of the
house exceeds the amount on loan.
So far its a straightforward Ponzi scheme, but there is a risk that
eventually it will all get into a bubble and meltdown.,
So, these dodgy loans need to be moved on. They are gift wrapped in an
insurance policy, along with some quality loans, and passed along. The
insurance on them allows them to be 'de risked' and anyway, house prices
always go up.
These polished turds are then sold on to pension funds and the like.
So far, a two layered Ponzi scheme: the original mortgage companies have
chucked their shit into the pension funds. So far so good.
Then one day, house prices falter, and, worse still the insurance
companies backing these turds look set to fail. In fact the whole bloody
Ponzi scheme is starting to unravel, and the horrible truth dawns, that
the whole western economy is really one giant Ponzi scheme. Not only
that, but the very pesnion funds that teh turds ended up with afe
selling bankl sahers like crazy to cover their arses. Itsd all gettung
out of control.
So a scream - the final scream of Socialism - Sort out our Banks! or we
ae all without credit cards!! The GuvMint must sort It All Out.
So we do.
BUT the dreadful truth dawns. We never really had the money we spent at
all. It was an illusion. We were living on borrowed time, borrowed money
and the Dream of a Better Society all along, and crappy high street
consumerism, and fast running out, oil.
Lets hope when the phones and Internet stop working, and the lights go
out, people will pay engineers a bit more than bankers, who do nothing
productive whatsoever.
Any fool can make a million commission on a billion pound deal.
An engineer is someone who can do for five bob, what any damn fool can
do for a quid, and what a banker can't do for a million, and what a
Labour government can't even see the point of doing at all.
Clot
When there was no need to do so!
js.b1
http://europe.pimco.com/LeftNav/Featured+Market+Commentary/IO/2010/Investment+Outlook+February+2010+Bill+Gross+The+Ring+of+Fire.htm
Very off topic, but it shows a pretty honest take on the situation,
where we are, where we may go.
Andy Champ
>
> Inevitable, the average degree is a 2i which actually implies
> an IQ of 125 (1st is 140) but the numbers have exploded.
I must jump on that particular statement. You are implying that a 2(i)
from any university requires the same intelligence as one from any other.
Remembering that several won't even look at you without straight As at
A-level, and others will happily take you on with a couple of Es and a
fail - that's simply bullshit.
Andy
Bruce
wrote:
Exactly. No doubt he thought he needed the money to enrich a few
thousand more single mothers.
Tony Bryer
> Remember the sale of our gold reserves? Gordon Brown couldn't have
> times that better, could he?
>
> He sold in a falling market and obtained the lowest possible price.
I get seriously bored of this one being trotted out repeatedly. Of
course with hindsight he chose the wrong time, but if the Conservatives
were so clever they could have sold off the UK gold reserves in 1987,
collected 12 years interest on the money (at much higher interest rates
than now) then bought the gold back at half the price they sold it for.
http://www.the-privateer.com/chart/gold-pf.html
--
Tony Bryer, Greentram: 'Software to build on' Melbourne, Australia
www.superbeam.co.uk www.eurobeam.co.uk www.greentram.com
Clot
I do apologise, I had forgotten the urgence of that need.
js.b1
> js.b1 wrote:
> > Inevitable, the average degree is a 2i which actually implies
> > an IQ of 125 (1st is 140) but the numbers have exploded.
>
> I must jump on that particular statement. You are implying that a 2(i)
> from any university requires the same intelligence as one from any other.
Up until 1986 a 2(i) was comparable across the top universities and as
such formed a usable selection system for upper management candidates.
> Remembering that several won't even look at you without straight As at
> A-level, and others will happily take you on with a couple of Es and a
> fail - that's simply bullshit.
Exactly.
The basis of a 2(i) degree from the top universities used to be
indicative of an IQ 125, that was the academic basis. The numbers
claiming 2(i) now make that fundamentally impossible.
CSE v GCE were replaced by GCSE.
A levels in 1990-91 alone saw 1) 40% syllabus stripped 2) coursework a
significant component 3) recall alone sufficient to achieve a moderate
grade whereas in the past it was application to unique problems that
got the grades.
Degree in 1990 saw substantive stripping out, every year became a
virtual riot of staff refusing to strip anymore out - and 1994 saw a
considerable migration of top academic staff away from universities
more interested in quantity than quality.
This is why the backlash in 1993-94 was so severe by business, it saw
the somewhat cosy selection system they had relied upon vanish - and
people they recruited kicked out. There was considerable revenge at
universities & private schools, trashing the graduates was "the only
way to get back at the university" or "the only way to get back at the
school". BP Mobil bankrupted chem-eng after chem-eng, they were
picking the "ok, cheap" on the course rather than the top people who
actually emigrated. Business wanted a free ride and instead found
itself shafted. America broadly put it quite simply, what Thatcher did
to the Miners Major (and then Blair) had done to the graduates.
By 1993-94 the backlash at the universities was severe, convocation
ceremonies had parents booing the vice chancellors. I recall a 7ft+
tall head of IB (Schroders) blowing one VC off the face of the earth
at 1) the standard of people applying and 2) the top people who had
found out about those being bankrupted and not only not applying but
walking away from the UK. The City for one got very brutal on who it
would take from and not take from re blacklisting, until in the end it
basically ripped up the "take X Y Z".
The university response in 1995 was in some instances to give everyone
a 1st despite none having been awarded in the previous 10 years. That
resulted in some better 2(i) from previous years being kicked out only
to them requested to come back but already sodded off to Aus, Can, US
& HK. A very very large number of IB, consultants, accounts, tax
specialists, Quants & clients have quite bluntly "sodded off" to HK
from 2008. Sadly IB is a case of "recruitment lotto" for the employee,
retention of key employees on reduced pay during bad periods is not
possible - there is always a bull market somewhere or freelance work
with clients/contacts.
In 1993 the professional bodies such as I.Mech.E. wrote articles "what
value these shiny new degrees" - as they tried to maintain standards,
but within a couple of years rolled over for the fees I guess. It has
achieved little, except put a 1st behind every shop counter and a PhD
behind every repairer (PC World stuffed) - not just psychology but
Chem, Chem Eng, Civ Eng. Companies shut the door on many UK
universities and turned to Europe where Delft still meant Delft and
could be had somewhat less with a) speaking EU languages AND b) living
there. Too many learn a language but no company will take them over
someone who has (say) actually LIVED in Germany and knows full
technical german etc.
So the result is Assessment Centre usage.
Sadly I would rather universities be forced to use them than the
existing system.
The problem we have is universities only have to convince "virtually a
child" that the degree is worth doing, but the child is then left to
the task of persuading an *employer* which they will find considerably
more difficult! Frankly at 32k a time it is a ridiculous miss-
allocation of capital, but brilliant way of hiding unemployed
academics, assistants, infra, staff, students for years at a time. The
argument was "well it is better than doing nothing and they pay for
their own Benefit rather than claim one", no it is miss-allocation.
Asia has 400M people at the "top 10% of society", shovelling the top
50% of western society into university isn't going to achieve much
apart from add a lifelong cost to already disadvantageous earnings,
disadvantageous living & property costs. You instead have to identify
strengths and strip away social immobility (which has become chronic
in UK *and* USA) and treat the human capital as a portfolio. The
problem of course is The City Does Not Do R&D or Manufacturing :-) The
plan was that City Profits would provide social spending - except of
course the removal of so much profit rendered returns so miserable
(1990-2009) that The City has merely left the children of tomorrow a
bigger bill on smaller earnings.
Standard of living is declining per generation now, it peaked 2000 in
USA and probably 1988 in UK, debt can only replace earnings for a
time. Once debt exceeds 90% GDP you lose 1% GDP - Western countries
are peaked and it is going to get very stodgy going forward.
One other point about dumbing down degrees - it left the top people no-
further-educated and thus whilst of similar IQ to their pre-1986
counterparts somewhat less competent in the workplace which meant they
could be obtained cheaper. That was a fundamental argument by Arthur
Andersen at the time (1993). It made a lot of very top people utterly
pissed off, the number of people so bored they did everyone else's
course - and then just went binge drinking. By 1993 the people exiting
university were shocked by the standard of those entering, even major
universities - amusingly the 1986 graduates were shocked by the
standard of those 1993 graduates, and so it continued. One reason why
job specs can be hilarious, by 1996 a simple lab technician required a
MSc, 2(i) BSc and minimum wage was a payrise.
The only course that had its top people paid sufficient to retain was
Civ Eng, however within 2yrs a vast number of those emigrated.
International student quality equally declined 1993+ with europe
bluntly on the offensive.
It will go down in history as the biggest screwup except for "average
academic 55k, average graduate product 12k". The top CFD people in
1994 were on 14k in central london until 2 of the 3 ran left simply
because parents could no longer afford to subsidise the long chain of
graduate job costs. They now work at LMT, same goes for hellfire and
other missile developers, stacks of people just walked out fed up
having abuse hurled down the phone and called bluntly "trash".
UK made a lot of enemies, many went into financial services for
revenge and most certainly achieved it. The gov't wanted debt
expansion and virtual abolition of credit rules in return for votes,
the market gave them what they wanted. The gov't is as much
responsible as the IBs - both in UK & USA.
js.b1
> I get seriously bored of this one being trotted out repeatedly.
You may, but it was an example of GBs arrogance.
#1 - he dumped the gold off at min bid
#2 - he believe boom-bust were over
#3 - he failed to retain multi-asset class reserves
China-India-Brazil are building gold & commodity reserves.
#1 - Commodities are priced in USD & rise as USD falls (hedge)
#2 - Bonds may well have hit max-price, min-yield; next is falling
price (last bond bear saw 77%+ loss in principal)
#3 - USD as reserve currency gets difficult, China wants a new reserve
It is unlikely China will achieve a new reserve currency.
For one thing, USD may have a vast deficit - but since it is
denominated in the reserve currency the 1,000B$ that China has (and we
have a fair bit too) becomes China's problem in terms of collecting on
it.
Whilst UK is #2 re debt and Ireland is #1 it is the USA which has the
long term problem re debt, Lehman Bros short silver positions were a
real problem, JPM is heavily short gold. The reason is not to stop
"gold bugs" but to stop a run from fiat currency to precious metals by
the public, because it becomes a contagious diahorrea in terms of runs
on banks.
McKinsey list real UK debt as hitting 460% of GDP with Japan only
higher - mostly because of undeclared pension obligations re public
sector, not just bank bailouts. We have a "naval problem", we need
future generations to bail us out - but at the same time we need to
lock future generations below decks into higher debt, lower living
standards. Therein is one particular reason why brainwashing
schoolchildren to general media in "green as the cause" is so
important.
GB wasted the gold, some say Thatcher wasted the oil, nothing new :-)
Bruce
wrote:
>On Fri, 30 Apr 2010 15:02:22 +0100 Bruce wrote :
>> Remember the sale of our gold reserves? Gordon Brown couldn't have
>> times that better, could he?
>>
>> He sold in a falling market and obtained the lowest possible price.
>
>I get seriously bored of this one being trotted out repeatedly. Of
>course with hindsight he chose the wrong time,
It was a massive error of judgment to sell the gold at all. There was
no need to sell it, and every reason to keep it. The massive error
was made even worse by selling the gold in a falling market.
You don't need hindsight to detect a falling market.
After the decision was made to sell, the gold price dropped
substantially and the sale should have been called off, but Brown
still went ahead. After the first tranche of gold sales, the gold
price dropped still further and the second sale should have been
called off, but Brown still went ahead. After the second sale, the
price dropped still further but Brown still went ahead and sold more.
The Bank of England was never consulted on the sale.
The price of gold was at a 20-year low at the time of sale, and no
hindsight was needed to know that. Brown drove the sale through.
No justification has ever been provided by Brown, who lost Britain
�5 billion. China, who bought about half of the gold, profited by
about �2.5 billion.
In contrast, "Black Wednesday", when the Tories tried to keep the
pound in the ERM, lost �3.3 billion. That was said to be Britain's
greatest economic misjudgment but Brown's was clearly far worse.
stuart noble
I'm going to bookmark that and read it when I'm feeling more lucid.
What I can't figure out is who all the countries in the ring of fire
actually owe the money to. Other countries? Banks? British banks maybe?
Do we perhaps owe it to ourselves?
The Natural Philosopher
Its a very good question.
AFAICMO the way it works is this: a fractional bank gets hard earned
cash on deposit and lends 10 times as much to a dodgy mortgagee.
So in a sense the mortgagee owes the money to no one. because it was
juts printed on the spot, as it were.
The old game was to inflate the house price so that people who bought
houses stayed affluent, people with cash savings lost them due to inflation.
Fractional banking worked well as long as the whole economy kept on
expanding.
Lets say that by creating enough extra money for tomorrows needs and
pretending you had it, you could lend it to fund development of
tomorrows world.
However, that implies that the money is being invested in stuff that
will be of use tomorrow. And that further expansion is in fact possible.
If either of those two statements ceases to be true, you are in serious
trouble.
Consumer lending mushroomed: people were not borrowing to buy a house,
or build bridges: they were borrowing to eat junk food and governments
were borrowing to create make believe jobs.
The world was running out of oil, or cheap oil, anyway. Britain is
running out of land. Or cheap land anyway.
Now if everyone had had perfect hindsight, what should have happened is
a massive hike in interest rates, or taxes, about 2003, to reduce
consumer spending and stabilise house prices. Coupled with a massive
pull back in the public sector. To get the national debt down sharpish.
As it is, we have transferred the debt from the banks to the
governments, and Greece is the first to go.
You see its not so much living beyond your present income, its living
beyond your future income, that is the problem. And attempting to live
beyond the total income the world is capable of generating.
As people who listen to my rantings will remember I spent 3 years in
Johannesburg at the crumbling end of Apartheid, trying to understand the
economics and politics as well as earning a living: The problem was
stark. The country as a whole did not, and never could, earn enough GDP
to satisfy the aspirations of its population.
I am heartily sick of hearing about a 'Fairer' society. Africa showed me
once and for all that what happens if you fairly distribute GDP you end
up with universal poverty. Unless your population can be stabilised at a
lower than starvation level. BUT if you do that then its 'unfair' on the
country next door, that does not.
I.e. if we were to take the socialists 'fair world' ideal right now, and
apply it universally and globally, we would all be living below minimum
wages.
Debt and so called exploitation keeps us rich.
But debt financing cannot cope with a stable world population: That is
the problem. We are or have been borrowing to eat and spend against a
future that doesn't exist any more. Ultimately the East is the lender of
last resort, but why would they keep on lending so we can buy more of
their stuff, when we cant afford to even pay the interest on the debt?
This is finally the problem: We can print as much money as we like, and
lend it to people. WE can even lend it at zero interest rate. And in a
sense it costs nothing of any real value to do it, BUT what happens if
we do, is that debtors gain massively from free handouts, and savers end
up receiving no benefit: worse, galloping inflation can eat away at the
savers future rewards. This is (if you like) ultimately exemplified by
Zimbabwe.
If we try and control money supply, by demanding that borrowers and
spenders pay interest, then we risk destruction of the consumer economy.
It seems to me that what the world needs is a new system of economics
based on zero growth in many many areas. And a zero growth, or
contracting economy doesn't need want or should be allowed to have, debt.
We should be solving a housing shortage by restricting immigration and
birth rate. We should solve unemployment by having less people doing more.
How we solve a debt problem is really the business of financial
engineers to work out. In the end it isn't the real problem. The real
problem is we cant sustain growth. Not in Europe anyway. Not in
conventional terms.
Andrew Gabriel
sm_jamieson <sm_ja...@hotmail.com> writes:
> On 30 Apr, 11:42, Dave Osborne <DaveyO...@SPAMymail.com> wrote:
>> Man at B&Q wrote:
>>
>> > 3. Why do they not have "non-compete" contracts that do not allow them
>> > to poach former clients when they move to a new employer? They're
>> > common in many other jobs.
>>
>> Because on the whole they're not worth the paper they're written on.
>>
>> There's a basic human rights principle (not sure if it's written down,
>> so can't quote chapter and verse) that you can't contractually prevent
>> someone from earning a living. This principle effectively overrides many
>> aspects of non-competition clauses. All the employee has to do is argue
>> that (during the period of the clause) they needed the money and banking
>> was the only skill-set they had which they could leverage to make money.
>>
>> In terms of not poaching clients, all the employee has to do is tell his
>> clients he's leaving and how to keep in touch (nothing wrong with that,
>> could be for personal/social reasons) and the clients will choose to
>> stay with the old bank or move with the banker to the new bank. As long
>> as the old bank can't prove that the ex-employee induced his/her clients
>> to move or slandered/libelled the old employer, then there's no problem.
>
> So if the real issue is clients tranferring with the employee,
> presumably bankers that fail their clients should go out of the
> picture. But that does not seem to be happening.
Oh it does - a significant proportion leave the trading desks every
year, some having been very successful, but many more having failed
or been burned out.
--
Andrew Gabriel
[email address is not usable -- followup in the newsgroup]
The Natural Philosopher
> The only way the bank can "lend 10 times as much" is
> because it's borrowed the other 9 times as much from other banks, at a
> lower rate than they get from the mortgagees. That's how they make their
> money.
>
No. Google 'fractional banking'. 'tier 1' 'capital ratios'
etc.
A tier 1 bank is allowed to lend about ten times what it actually has
on deposit, on the basis that the assets it lends against will be worth
at least 90% of the money advanced.
The whole banking crisis, happened because it seemed that actually, they
weren't.
RBS was particularly pernicious, because they didn't use deposits to get
their capital adequacy ratios: they used short term debt (as you pointed
out).
Suddenly, npo one wanted to lend them money :-)
The problem is there is real disconnect between money and actual worth,
when you don't have e.g. a gold standard.
sm_jamieson
> In article <55ad6509-4aaa-4d2a-8e76-67f6497aa...@s29g2000yqd.googlegroups.com>,
the market for IBs is so small.
Simon.
Doctor Drivel
"Tony Bryer" <to...@delme.sda.co.uk> wrote in message
news:VA.0000491...@delme.sda.co.uk...
> On Fri, 30 Apr 2010 15:02:22 +0100 Bruce wrote :
>> Remember the sale of our gold reserves? Gordon Brown couldn't have
>> times that better, could he?
>>
>> He sold in a falling market and obtained the lowest possible price.
>
> I get seriously bored of this one being trotted out repeatedly. Of
> course with hindsight he chose the wrong time, but if the Conservatives
> were so clever they could have sold off the UK gold reserves in 1987,
> collected 12 years interest on the money (at much higher interest rates
> than now) then bought the gold back at half the price they sold it for.
>
> http://www.the-privateer.com/chart/gold-pf.html
Yep!!
stuart noble
> stuart noble wrote:
>> js.b1 wrote:
>>> An article worth reading...
>>> http://europe.pimco.com/LeftNav/Featured+Market+Commentary/IO/2010/Investment+Outlook+February+2010+Bill+Gross+The+Ring+of+Fire.htm
>>>
> AFAICMO the way it works is this:
Thanks for what the author of the above article would probably term a
"30,000 feet" view.
What I'd like to know is what happens at street level. The UK govt
issues a bond that gives you your money back plus interest after 5
years. The bonds are bought by, say, the Chinese, who have to spend
their surplus somewhere, and who have a vested interest in keeping us
afloat. The bonds also have a market value, but this is based on the
confidence created by the large Chinese holding. At some point the
market starts to doubt whether we can pay back the dosh. Is this what
has happened to Greece?
I spent a couple of years in Capetown in the early 60s and the
anti-apartheid view then was that, if the whole population had a stake
in the economy, the country would flourish. Doesn't seem to have worked
out that way, but it may be that Africa doesn't really lend itself to
economic miracles. Too busy with inter tribal squabbling and gang warfare.
js.b1
http://www.bondvigilantes.co.uk/blog/index.jsp
That has a slight bias re M&G, but good for "wibblings".
Greenspan & Bernanke (Fed) and the Swedish crowd are all Princeton
socialists - much of their work was around "1920s without 1930s" and
"preventing Japan deflation happening here". Consider, without the
perpetually rising housing market "ATM Cash Machine" we would
essentially still be in 1990s recession. Greenspan made the choice in
1995 to return to 1984-1987 since there was no economic growth and
bubbles are only visible in hindsight anyway.
From 1970s low labour foreign countries began to displace USA labour &
UK labour.
The credit driven consumer boom was a means to 1) replace earnings
with debt and 2) replace growth by transfer from children's future
growth at expense of their living standards (multiple occupancy, live
with parents, charged for university degrees which in many cases are
little more than secondary education spread over more years).
Unfortunately when you combine labour export with a credit driven
consumer boom you export GDP at an even faster rate. The net result is
out of "4$ spend" you only get "1$ domestic GDP and 3$ foreign GDP"
which results in ever more lax credit to achieve GDP *and* migrates
your "economic empire" to foreign GDP lands. The "solution" posed by
GB was to replace consumer spend with taxation & gov't spend, public
sector spending to hide the declining private sector. In the meantime
Charles Handy and others developed the "cloverleaf organsation" which
was merely a "cloverleaf society" where an oligarchy have perpetuity
and a slave class under globalisation is left to suffer the forex
imbalance eventual rebalance supplemented by all the debt they can
carry.
Essentially how to create an illusion in what is a secular migration
of economic leadership.
The growing concern is that countries are choosing perpetual debt &
devaluation - or at least trying to were it not for Euro membership
preventing it. Germany needs the Euro ironically to prevent its
currency appreciating relative to other EU countries and destroying
its manufacturing exports.
In the long term housing deflation will eventually take hold, but from
a much higher level - masked most likely by inflation. As yet we are
still trying to maintain a goldilocks economy based on credit binge,
indeed 2008 was not seen as a correction but merely an incorrect
action where stock & house prices must be restored to 2007 levels.
Transferring the bubble to sovereign debt was deliberate by banks,
since they were being virtually blackmailed by USA & UK policy into
"open the spigots and a-posteri credit ratings in place of a-priori
1984-style". The banks to estate agents of course knew it was a one-
way ticket in commission, bonuses and fees. GB thought he could spend
bankenstein profits indefinately.
The spanner is despite the UK being the global centre for money
laundering (CIA) and insider trading, eventually the financial empire
WILL migrate east which is why they are willing to pay *anything* to
keep people here: a blank cheque. When it does GB is going to be left
bare and the emperor will have no clothes.
GB might actually want to lose this election, so he can inherent the
votes of the next one.
What is stunning is just how far taxes have to rise & cuts have to be
made from 2010 to 2014.
Greece Portugal Spain Ireland all have relatively short duration gov't
debt - which means whilst they pay (paid!) little interest due to low
ST rates they are more susceptible to bond market perceptions. UK has
relatively long duration gov't debt, which provides a cushion
courtesty of the Debt Management Office. USA however has a ST duration
of 2-4 years which is horrific and means the USD could well get a
kicking from the bond market going forward - a run on the dollar. This
is particularly why China is buying commodities whatever-the-price
whatever-the-quantity so it has a "wash" with its USD holdings - if
USD tanks commodities explodes upwards, if commodities tank USD
explodes upwards (commodities are priced in USD, one reason for the
oil/commodity backed USD when the UK-Pound is backed by BoE alone).
When debt reaches 90% of GDP you lose 1% GDP, and this is going to
eventually stagnate western economies unless they choose the
inflationary route - but bond holders will absolutely murder their
bonds & currencies in return. Realise when you spend 50B on interest
payments it can very quickly become 100B and 150B from a very low rate
level.
Banks are providing the carry-trade right now, borrowing low ST bank
rates (2%) to loan gov't at high LT bond rates (5%) which gives them a
3% spread for bonus & recapitalisation city. Unfortunately when rates
do begin to rise this ends and you will see quite a "bowel movement"
in the market. The Bond market is what matters, stocks are small in
comparison - derivatives are going to be interesting re 650T$ as
someone will get on the wrong side having leveraged up on cheap debt.
The next 4 years will be ones where whoever gets elected is going to
age quickly & regret entering politics :-)
The Natural Philosopher
> The Natural Philosopher wrote:
>> stuart noble wrote:
>>> js.b1 wrote:
>>>> An article worth reading...
>>>> http://europe.pimco.com/LeftNav/Featured+Market+Commentary/IO/2010/Investment+Outlook+February+2010+Bill+Gross+The+Ring+of+Fire.htm
>>>>
>
>> AFAICMO the way it works is this:
>
> Thanks for what the author of the above article would probably term a
> "30,000 feet" view.
> What I'd like to know is what happens at street level. The UK govt
> issues a bond that gives you your money back plus interest after 5
> years. The bonds are bought by, say, the Chinese, who have to spend
> their surplus somewhere, and who have a vested interest in keeping us
> afloat. The bonds also have a market value, but this is based on the
> confidence created by the large Chinese holding. At some point the
> market starts to doubt whether we can pay back the dosh. Is this what
> has happened to Greece?
Yes.
One of two things happens. The price of the bonds drops so you cant sell
a pound bond for a pound, or no one buys them at all.
What this means is you end up paying a ruinous rate of interest.
Which makes the problem you borrowed FOR, worse.
Ultimately, you end up with no cash, and owing lots of money. Bust. Or
'in default' to use the polite term.
In the case of the UK the thing no party dares mention, is that if the
PERCEPTION of the markets is that the UK is a busted flush, then it wont
be able to borrow at all, or borrow at anything less than a massive
interest rate. At this point the government, if it actually exists, will
have no choice BUT to make massive cuts. There wont e.g. be money in the
bank to pay public sector wages.
This is where the conservatives are making more sense. They have to be
seen to be very ruthless, for fear of something even worse.
Like any business that owes the bank, if you aren't seeming to me
talking the problem seriously, the bank wont lend.
Publically, none of the major parties have presented credible savings
plans. However privately they admit that swingeing cuts are mandatory.
The temptation for Marx and Spender, will be to let the markets enforce
discipline, then they can blame it on 'market conditions' 'those
ungrateful banks' etc etc. The Tories would end less painful. But in the
short term very unpopular.
> I spent a couple of years in Capetown in the early 60s and the
> anti-apartheid view then was that, if the whole population had a stake
> in the economy, the country would flourish. Doesn't seem to have worked
> out that way, but it may be that Africa doesn't really lend itself to
> economic miracles. Too busy with inter tribal squabbling and gang warfare.
The country is more or less flourishing, but that's got nothing to do
with politics. And a lot to do with having coal, gold, and uranium.
The Natural Philosopher
> Another good link for people:
> http://www.bondvigilantes.co.uk/blog/index.jsp
> That has a slight bias re M&G, but good for "wibblings".
>
> Greenspan & Bernanke (Fed) and the Swedish crowd are all Princeton
> socialists - much of their work was around "1920s without 1930s" and
> "preventing Japan deflation happening here". Consider, without the
> perpetually rising housing market "ATM Cash Machine" we would
> essentially still be in 1990s recession. Greenspan made the choice in
> 1995 to return to 1984-1987 since there was no economic growth and
> bubbles are only visible in hindsight anyway.
>
> From 1970s low labour foreign countries began to displace USA labour &
> UK labour.
Aided by income tax rises and the rise of the socialist society, which
taxed labour and encouraged businesses to move abroad.
> The credit driven consumer boom was a means to 1) replace earnings
> with debt and 2) replace growth by transfer from children's future
> growth at expense of their living standards (multiple occupancy, live
> with parents, charged for university degrees which in many cases are
> little more than secondary education spread over more years).
And a way to create employment in a 'service sector' to replace that
lost in manufacturing/
> Unfortunately when you combine labour export with a credit driven
> consumer boom you export GDP at an even faster rate. The net result is
> out of "4$ spend" you only get "1$ domestic GDP and 3$ foreign GDP"
> which results in ever more lax credit to achieve GDP *and* migrates
> your "economic empire" to foreign GDP lands. The "solution" posed by
> GB was to replace consumer spend with taxation & gov't spend, public
> sector spending to hide the declining private sector. In the meantime
> Charles Handy and others developed the "cloverleaf organsation" which
> was merely a "cloverleaf society" where an oligarchy have perpetuity
> and a slave class under globalisation is left to suffer the forex
> imbalance eventual rebalance supplemented by all the debt they can
> carry.
>
Pretty accurate I'd say.
> Essentially how to create an illusion in what is a secular migration
> of economic leadership.
> The growing concern is that countries are choosing perpetual debt &
> devaluation - or at least trying to were it not for Euro membership
> preventing it. Germany needs the Euro ironically to prevent its
> currency appreciating relative to other EU countries and destroying
> its manufacturing exports.
>
> In the long term housing deflation will eventually take hold, but from
> a much higher level - masked most likely by inflation. As yet we are
> still trying to maintain a goldilocks economy based on credit binge,
> indeed 2008 was not seen as a correction but merely an incorrect
> action where stock & house prices must be restored to 2007 levels.
> Transferring the bubble to sovereign debt was deliberate by banks,
> since they were being virtually blackmailed by USA & UK policy into
> "open the spigots and a-posteri credit ratings in place of a-priori
> 1984-style". The banks to estate agents of course knew it was a one-
> way ticket in commission, bonuses and fees. GB thought he could spend
> bankenstein profits indefinately.
>
> The spanner is despite the UK being the global centre for money
> laundering (CIA) and insider trading, eventually the financial empire
> WILL migrate east which is why they are willing to pay *anything* to
> keep people here: a blank cheque. When it does GB is going to be left
> bare and the emperor will have no clothes.
>
He will be gone before then.
> GB might actually want to lose this election, so he can inherent the
> votes of the next one.
> What is stunning is just how far taxes have to rise & cuts have to be
> made from 2010 to 2014.
>
Yup.
Yep.
> The next 4 years will be ones where whoever gets elected is going to
> age quickly & regret entering politics :-)
Never mind the tossers at the top. They still get a salary.
I foresee 30% VAT and petrol at £2 a liter.
And 10-15% interest rates, and 20%+ unemployment.
Still with bugger all dole, at least a lot of the immigrants will piss
off back where they came from.
WE are all going to have to pay the money back or leave the country.
The only decision is whether its the productive export led workers who
pay extra taxes, thus stifling the recovery, or the public sector that
takes the hit, decimating services, but at least allowing some chance of
having an economy at all.
The Natural Philosopher
> In article <hrh0dm$qiv$1...@news.albasani.net>,
> The Natural Philosopher <t...@invalid.invalid> wrote:
>
>> Tim Streater wrote:
>>> The only way the bank can "lend 10 times as much" is
>>> because it's borrowed the other 9 times as much from other banks, at a
>>> lower rate than they get from the mortgagees. That's how they make their
>>> money.
>>>
>> No. Google 'fractional banking'. 'tier 1' 'capital ratios'
>> etc.
>
>
>> A tier 1 bank is allowed to lend about ten times what it actually has
>> on deposit, on the basis that the assets it lends against will be worth
>> at least 90% of the money advanced.
>
> buy my house. He thus has a mortgage with them. So where has *that* dosh
> come from?
>
hot off a printing press.
djc
> In article <hrh0dm$qiv$1...@news.albasani.net>,
> The Natural Philosopher <t...@invalid.invalid> wrote:
>> A tier 1 bank is allowed to lend about ten times what it actually has
>> on deposit, on the basis that the assets it lends against will be worth
>> at least 90% of the money advanced.
>
> But they make a transfer of real dosh to (say) me so that Mr Bloggs can
> buy my house. He thus has a mortgage with them. So where has *that* dosh
> come from?
It's a game of pass-the-parcel. Mr Blogs pays you, you deposit that
money in a bank, the bank (any bank, they are all part of the same game)
has money still. So long as you, and everyone else, believes the money
is safe all is well. If not you have queues outside Northern Rock. Who
cant pay out everybody's money unless every borrower is also standing in
the queue to repay their mortgage etc. In steps the government, with a
printing press, and so long as everyone believes the newly printed money
really is real money because the government (trust them!) say so all
will be well. If not... welcome to Greece...
--
djc
Andy Champ
>
> Never mind the tossers at the top. They still get a salary.
>
> I foresee 30% VAT and petrol at £2 a liter.
>
> And 10-15% interest rates, and 20%+ unemployment.
>
> Still with bugger all dole, at least a lot of the immigrants will piss
> off back where they came from.
>
> WE are all going to have to pay the money back or leave the country.
>
>
> The only decision is whether its the productive export led workers who
> pay extra taxes, thus stifling the recovery, or the public sector that
> takes the hit, decimating services, but at least allowing some chance of
> having an economy at all.
>
You didn't mention inflation above savings rates, to make sure that any
saved cash becomes worthless...
You might like to look at Argentina.
Andy
The Natural Philosopher
there is an answer to that: invest in non UK earnings companies.
I've got a tidy sum in a nuclear industry tracker fund. +10% this year
alone.
>
> Andy
Mark
wrote:
>On Apr 30, 9:34�pm, Andy Champ <no....@nospam.invalid> wrote:
>> js.b1 wrote:
>> > Inevitable, the average degree is a 2i which actually implies
>> > an IQ of 125 (1st is 140) but the numbers have exploded.
>>
>> I must jump on that particular statement. �You are implying that a 2(i)
>> from any university requires the same intelligence as one from any other.
>
>Up until 1986 a 2(i) was comparable across the top universities and as
>such formed a usable selection system for upper management candidates.
I doubt that. There was considerble difference between individual
courses at the university I went to (and a difference in their
entrance qualifications).
--
(\__/) M.
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