UKC

According one particular think tank cleaners contribute more to society than bankers, accountants or advertising executives: http://news.bbc.co.uk/2/hi/business/8410489.stm

"High-earning investment bankers in the City of London are among the best remunerated people in the economy. But the earnings they command and the profits they make come at a huge cost because of the damaging social effects of the City of London’s financial activities. We found that rather than being ‘wealth creators’, these City bankers are being handsomely rewarded for bringing the global financial system to the brink of collapse. While collecting salaries of between £500,000 and £10 million, leading City bankers to destroy £7 of social value for every pound in value they generate........

...Hospital cleaners play a vital role in the workings of our healthcare facilities. Not only do they clean hospitals and help maintain standards of hygiene to protect against infection but they also contribute towards wider health outcomes. The importance of these cleaners is often underestimated and undervalued in the way they are paid and treated. We estimated, however, that for every £1 they are paid, over £10 in social value is generated."

Discuss.

In reply to Removed User:

Already have.

http://www.ukclimbing.com/forums/t.php?n=385188

According to my own rather selective criteria, I generate £500 of 'social value' every time I set foot outside the door, placing me somewhere between Mother Theresa and Ghandi.*

*Measured after the death of both, during ten-second timeframes during which I thought nothing but nice thoughts.

In reply to Removed User:

The zero sum game that is our money system results in some being some being rich and their existence causing the poverty of everybody else, relatively speaking.

It's a bloody joke.

In reply to Removed User: I would like to see how they calculated all these figures, because quite frankly I don't believe that for every £1 a banker earns the country loses £7 , I mean basic economics would say that if this was the case there wouldn't be any banks left ( and I know some of them came close to collapse but lets not go there). The financial industry in the uk brings in a huge amount of wealth, alot more than people realise, if you removed the entire financial services industry the economy would suffer, we don'y have anything else going for us. Perhaps if you took the last year, and the amount of damage the banks have done you could arrive at the figures they quote. But I bet you if you looked at the amount of money the banks bought in prior to the recession it wouldn't be a £7 loss for every £1 earnt.

In reply to luke1986: just realised it is referring to the recession time line, and its looking at how much in effect it is costing the state, so its a load of rubbish to be honest, as I said before over there life time I bet the banks have generated more cash and contributed more to the gdp of this country than most other industries.

In reply to Removed User: Oh Dear, Wait til bladder sees this.

In reply to luke1986: I think the rigour of the analysis can be judged by this paragraph:

*Tax accountants
"Every pound that a tax accountant saves a client is a pound which otherwise would have gone to HM Revenue. For a salary of between £75,000 and £200,000, tax accountants destroy £47 in value, for every pound they generate."

In reply to Bob Hughes:

Brilliant. People paying tax they don't owe is a social good.

In reply to Martin76:

Probably depends on your interpretation of don't owe.

In reply to Martin76:


Indeed - but anyone who thinks that Mother Theresa is some saintly Wonder Woman is sadly deluded. There was a thing about it on the radio the other week. I was shocked.

In reply to EZ:
Or... what sort of economic system effectively plays towards and satisfies the fundamentals of human nature (a la Brave New World...)

However, considering we're now in a situation (national and global recession) where all the participants are gaining or suffering [relatively] together surely it would be referred to as non-zero-sum? Any trading that takes place, physically or economically is at least in completion seen as fractionally more valuable than the offering made, otherwise the trade wouldn't take place. Gain.

Unless you have another definition? Failing which your zero-sum is just Capitalism.

In reply to EZ:

if you really believe that, you know you have nothing to win and nothing to lose.

In reply to Cerulean: it isn't a zero-sum game. give a farmer £10 to buy seed, in a years time he'll have £30 worth of seed - he has added value.

In reply to Tobias at Home:

and let the banker sell him a derivative to hedge the future price of seed (for £5), lend him an extra £10 to buy more seed because the farmer's exposure to the price of seed is reduced and the farmer now has £45 of profit after a year and the banker has £5.

Meanwhile the supermarket who is scared of food prices going up can buy another derivative from the banker to insure himself. Bank makes another £5. Supermarket can now provide stable food prices to Joe Bloggs so Joe Bloggs can budget his finances better and can get a mortgage without worrying that he won't be able to pay for food over the next year.

Seems to me everyone is better off because the banker provided the derivatives.

In reply to luke1986:

just look at the last 20 years where hundreds of thousands of people have had strings of poorly performing pension schemes, endowments, saving-investment schemes etc that have returned less than if they had put the money in a building society

These guys have got rich destroying value and peoples hopes for the future

In reply to Tobias at Home:

Come on mate don't go providing sensible analysis, you'll put the pitchfork brigade off hunting down evil bankers and burning the glittering spires of capitalism.

In reply to Anonymous:


As Bob Diamond (the bravest banker) said recently; if people want their pensions and investments to make them money the only way of achieving this is exposing the funds to risk. Where there are no rate fluctuations there are no opoortunities to make money. Crucially remembering here that this is *your* investment, *your* money, that *you* entrusted to a scheme *you* were told about and given the paperwork on.

"The value of your investment may go up as well as down"

You can't always blame everyone else for something you couldn't be arsed to read.

In reply to Tobias at Home: A derivative, by which you mean an insurance policy against the price of wheat falling. Its a castle built on sand. When the market collapses the insurance company walks away (goes bust) unable to fund its commitments. The bankers £5 is safe and the farmer is left with nothing, in fact worse than nothing, he has nothing, less £5.

Or, the government steps in to save the insurance company, takes another £5 from the farmer to do so and the banker walks away with his £5 and a bonus of another £5 for being so f@cking brilliant and the farmer is now £10 in debt.

In reply to redsulike:
Ah, but why did he hedge? Because *he wanted to make money*.


But if the 'banker' loses his normal expected pay he leaves to go and help farmers in another country *make money* and everyone in this country suffers as a result.

In reply to redsulike:

But it's a castle that the farmer wanted to build.

All those bleating about how bankers caused the world economy to collapse, maybe should take a look at those feckless consumers who took out more credit than they could afford.

OH yes, it was those nasty evil bankers dangling cheap and easily available credit in front of their noses, and the poor weak-willed fools in their childlike innocence were unable to resist. By that rationale, let's go lynch tobacconists for making lung cancer so easy to acquire, and burn some off licences for foisting cirrhosis on an unsuspecting populace...

In reply to Cerulean:


Well he doesn't go to Germany or France, they are proposing taxes of 90% on bankers bonuses.

In reply to redsulike: how many trillions of dollars of insurance claims and of options exercises (for hedging) have gone through since they were created and how many trillions has the world had to bail out in the last couple of years?

if you don't believe that derivatives and insurance hasn't created many orders of magnitude more wealth over, say the last century, than has been destroyed in the last 2 years you are very foolish.

how would you feel driving around if car insurance was banned?

In reply to Al Evans:

no, (s)he goes to switzerland where banker's bonuses are taxed at a sensible rate.

In reply to Tobias at Home: Considerably more wealthy than I am now.

In reply to Cerulean: Let him f'ck off, because help like that we can do without.

In reply to Masood: Wanted? Sought out? Or was offered? Like the snake in the Garden of Eden. Did Eve 'want' 'need' or seek out the apple? Business failure should carry a term of imprisonment commensurate with the size of the losses. The financial services produce nothing, the shuffle money, but they do not make any or add value except on paper. If the castle is not built on sand it is built on a mountain of A4 and printouts.

In reply to redsulike:

Well that's one solution, but if you were to ask everyone in manufacturing and production if they wanted to stop hedging their forward price-risk I think it's unlikely you'd get many agreeable responses.

We could of course forget the whole finance thing and go back to how it was in the 70s and 80s....

In reply to redsulike:

With all due respect mate the only sand in this scenario appears to be that surrounding your head - wherever it happens to be buried.

In reply to Cerulean:


Hmmm, yes I know that. I knew that when I was persuaded against a repayment mortgage in the 90's and signed up for an endowment.

The trouble is that the quote is always in small print and the sales hype always emphasises the gains that investments have made up until then. Salesmen spent their time persuading customers that their investments would go up and didn't spend a lot of time outlining the consequences of a market crash.

The last few weeks I'd had the idea that the credit crunch had cost me a few hundred quid but I'd overlooked my pension fund which has plummeted 25% in value this year and I've got less than 10 years to go before I hoped to retire (some chance now). I'm thinking that I'd have been better investing my money in something safer and more tangible than the schemes sold to me by a bunch of morons with sharp suits and no clue.

In reply to Removed User:

I see you're firmly in the "it's somebody elses fault" camp. I remember a charming young chap in a sharp suit who came to my house one day to sell me a Northern Rock 125% mortgage product. I politely thanked him as I showed him the door and said I'd phone him when I'd made a decision....

This small print, salesmen, evil banker thing is all beginning to remind me a bit of the old women on Crimewatch who get beaten-up and robbed in their own homes;

"He had an ID card and he was such a charming young man."

The major difference being that anyone taking on a financial product actually had to ask for it.

In reply to Cerulean:

Not only did they have to ask for it, they had to sign their name on a dotted line to attest that they had read all the terms and conditions.

In reply to Removed User:

It's interesting to think of work as being either 'distributive' or 'generative'. In a wholly distributive sector something (let's say money) is moved around from one individual or group to another; for one group to acquires money it's necessary for another group to lose money. No new money is generated in the process. Banking is the ultimate expression of distributive work.

At the other end of the spectrum is generative work, in which the individual or group 'generates' (adds) something that was not there before, which is of benefit and does not require that anyone else should be deprived of that benefit. Surgery and teaching are extreme expressions of 'generative' work. Sectors like manufacturing fall somewhere between these polar extremes, though obviously trending strongly towards generative.

So you might say, with some justification, that those who generate the least are rewarded the most.
So it goes.

In reply to Blackadder:

Minor addition

In reply to redsulike:

so you truely believe that we'd be better off if everyone was driving around without insurance?

and if you were in an accident that left you paralysed by an unemployed person with no savings, how would you expect to be looked after?

In reply to Cerulean:


The majority of people who were sold endowerment mortgages in the late 80's early 90's (i.e those policies now coming to maturaty having gained precisely nothing in the last 15 years) went in to there bank/building society and asked for a REPAYMENT mortgage, you know the old boring kind of mortgage which you kept for 25 years and where the money you paid went to the lender to pay off your debt. They left with an endowerment mortgage after the person selling the mortgage said that letting them walk out with a repayment mortgage would be criminally irresponsable of them but not telling them that the first years payments went straight into his back pocket, that the first 20% of the rest went to a bunch of city fat cats (well they were a little thinner in those days) what ever the performance of the fund and if they bought the repayment mortgate the salesman got nothing.

Its rather like a woman walking into a doctors worried about a lump being told its nothing to worry about but this very expensive breast enhancement surgery will make it go away and then the doctor turning round and saying not my fault as she is dying of cancer 2 years later.

In reply to davidwright:

Well I'm certainly not here to defend 'bankers' per se and the issue you mention has been dealt with via the channels available as far as I know - as it would be with your cancer victim.

The point I was making is that 'we' default to blaming others for the decisions we have made when things go wrong. Of course there are valid scenarios for complaint, that's why the FOS is there, but 'read the small print' and 'be careful what you sign' have been around for decades.

In reply to Cerulean: And, incidentally, if you elect a party with a track record of economic incompetence, don't blame anyone but yourself if they completely f*ck it all up!

In reply to TerryG:
Sort of, but the act of distribution serves to move capital to where it can be generative.
The investor, or common account holder, has limited access to directly be involved in wealth creation. Another person may have the capacity to directly create wealth but lack the capital to realise this. The distributor brings these two together, the investor and his agent get a cut of the wealth creation for their part; they haven't created wealth per se but without them it wouldn't have happened.

In reply to Cerulean:

No it hasn't. The majority of missold policies are still out there with small profits/losses on them. The degree of proof you needed to show misselling meant that most cases weren't dealt with. The same is true of pensions. The main aim of these products and the selling was to move a lot of what had been safe low fee transactions into high fee stockmarket linked products. Up until the mid to late 80's the presonal pensions market was small to non-existant a big lobying effort by the financial services industry produced a set of government reforms that vastly expanded that market at the expense of the traditional mutual funds that had previously supplied those needs.

The major effect of the changes was to generate large amounts of fee income for bankers and insurance companies while generating little or no benefit to the consumer. This reached its logical conclusion in the states with sub-prime loans being used to replace social housing policies and red neck idiots being persuaded to gamble there state pensions on the stock markets. These policies and the self serving fraudsters that promoted them are the root cause of the current crisis

The majority of activity now on both the stock and futures markets is purely speculative in nature with no intention to actually take income from the stock or buy/sell the goods traded on the futures market. The sooner a tobin tax is introduced at a level sufficiently high to remove the margins these trades depend on the better for everyone.

In reply to EZ:
No it does not.

Do you think there is a finite amount of money in the world?

If you follow the supply and demand school of thinking (i guess you don't), then there is no upper maximum value for any oject, commodity, or service, as long as demand is higher than supply.

The finance sector creates wealth, by playing with investments to provide better than inflation (the annual rise in the amount of money available in a country) increases, and thus creating wealth.

They don't magically steal this money from some poor old lady.

In reply to The New NickB:

Nobody owes any tax.

We pay tax by agreement.

it's a fundamental pillar of UK (and western) society.

In reply to rusty_nails:

I sure as hell don't!

In reply to Cerulean:

The zero sum is the balance sheet equation that results in the same amount of money being owed as is owned. It has nothing to do with the trade that money facilitates. Nor is it capitalism; the same balance of moneys is present in communism, socialism and fascism. It is more fundamental than the politics that maintain the system. It is the framework upon which the political systems are built.

In reply to rusty_nails:

I am not moaning about bankers here:
Who gets to make the money?? Do you? Do I? Does that little old lady?
Generally most money is made by banks who take our promise to pay in return for it. It is a signed statement of indebtedness, say a car loan (ok that one could argue was not necessary) or a holiday loan (same argument) or a house loan (ahh, now we get to it).

Supply and demand works in a laboratory but there is no such thing as a free market. There is always coercion and weighty influence, especially when money is the commodity, as when the bank is selling a mortgage.

The finance sector doesn't create anything (except money, but lets not consider that for now). Every time a trade is made somebody gains a profit. That profit is taken from the purchaser. The purchaser offsets the deficit from their own funds and then passes it on to whoever they sell to, at a greater price so that they can also make a profit and so on until the final consumer gets the product who must bear the full weight of all of the profits taken from all of the transactions in the product's history.
Incidentally, derivatives are a clever way of hiding how little value (retrievable profit) is left in a mortgage so that they can be sold on again.

Bird and Fortune were (forgive the pun) right on the money with this offering from the South Bank Show. They have derivatives all sewn up:
http://www.youtube.com/watch?v=mzJmTCYmo9g&feature=related

In reply to desmond_burnett:

This is what stock markets, banks and futures markets should be doing. However somebody who sells a stock or a future on monday afternoon and buys it on tuesday morning after some contary anouncement to realise a 1% profit isn't doing that, they are at best gambaling on prices at worst engaging in fraud.

In reply to EZ:

You'll have to explain it in full then because at the moment this is simply 6th form alternative ramblings. I've studied game/ constant theory and your zero sum precis doesn't fit that.

In reply to Cerulean: It is a balance sheet. +ve on one side -ve on the other. Zero sum.

Game is just a simple name for it. It is not game theory.

In reply to EZ: I catch two fish and sell them to a chef for 5 pounds. The chef cooks a fish and sells me a cooked fish for 5 pounds. He now owns a fish. Unless you believe the fish has zero value, then 2.5 pounds has been created.

Money is not constant.

I am astounded at some people on UKC. Even after financial services imploded, people seem to think that value was actually added by the banking sector. I am astounded - they created no value - it was all a mirage over the last 25 years.

This article indicates the view of the ex-CEO of Barclays.

Former Barclays Chief Points Out Bonuses Were Paid Fraudulently

Well, because he is a man of probity and is writing in the UK, where the standards for libel are much lower than in the US, former Barclays CEO Martin Taylor does not use the F (fraud) word, but that is precisely the behavior he describes.

I know it is fashionable to depict the investment banking industry as ever and always dishonest (as former SEC chairman Arthur Levitt pretty much does today in the New York Times, indirectly), but differences in degree are differences in kind. It is one thing to nick your clients occasionally, when they might not notice, or when they are making so much money they wouldn’t mind all that much if they did figure out the bankster had arranged for a bigger cut than usual. It is quite another to take every one every way you can at every available instance. While neither is honest, one is petty cheating and pilferage, the other is rape and looting.

This is the nut of Taylor’s piece in the Financial Times, which is worth reading in its entirety:

City people have always been paid well relative to others, but megabonuses are quite new. From my own experience, in the mid-1990s no more than four or five employees of Barclays’ then investment bank were paid more than £1m, and no one got near £2m. Around the turn of the millennium across the market things began to take off, and accelerated rapidly – after a pause in 2001-03 – so that exceptionally high remuneration, not just individually, but in total, was paid out between 2004 and 2007.

Observers of financial services saw unbelievable prosperity and apparently immense value added. Yet two years later the whole industry was bankrupt. A simple reason underlies this: any industry that pays out in cash colossal accounting profits that are largely imaginary will go bust quickly. Not only has the industry – and by extension societies that depend on it – been spending money that is no longer there, it has been giving away money that it only imagined it had in the first place. Worse, it seems to want to do it all again.

What were the sources of this imaginary wealth? First, spreads on credit that took no account of default probabilities (bankers have been doing this for centuries, but not on this scale). Second, unrealised mark-to-market profits on the trading book, especially in illiquid instruments. Third, profits conjured up by taking the net present value of streams of income stretching into the future, on derivative issuance for example. In the last two of these the bank was not receiving any income, merely “booking revenues”. How could they pay this non-existent wealth out in cash to their employees? Because they had no measure of cash flow to tell them they were idiots, and because everyone else was doing it. Paying out 50 per cent of revenues to staff had become the rule, even when the “revenues” did not actually consist of money.

Now the real question is: why is anyone indulging this “talent” myth, the idea that the banksters ever deserved their outsized pay? And worse, they insist on their fraudlenty level of compensation as a new normal that must continue. Now I know some like the Epicurean Dealmaker get angry, and insist that Some Were Honorable, but let us face it: a credit tsumani lifted ALL boats, and people in fee businesses like M&A would have gotten far fewer deals done, and at far lower prices, were it not for the mania on the funding side.

We all need to start using the F word a lot more, because a great deal of what went on was criminal and needs to be described in those terms.

In reply to Tobias at Home:


Try telling that to the bank manager who wants your mortgage payments on the button every month. As far as an individuals indebtedness is concerned (their balance sheet) then they owe what they owe and no amount of debating changes it. If you don't come up with the doe you lose your house.

Also, there are other considerations in the tale that you recounted about the fish and the cook. You had to acquire the fish, that is a monetary value placed upon your labour. He had to cook the fish, that is monetary value placed upon his labour and cost of cooking facilities. The tale is oversimplified. Also it only explains trade, not indebtedness which is what I was talking about.

In reply to Blackadder:

Out of interest, how much tax would you pay? I'm guessing you find a flat tax rate to be most agreeable.

It amazes me that I earn twice as much as our building cleaners do. They arguably work as hard as I do and put in the hours I do. Even if they didn't, the discrepency between work input and salary gained between myself and others doing my same job implies that we are not all paid according to our worth/outputs. The extremely well off seem to argue they deserve their astronomical salaries when in reality they probably deserve a mere fraction, the rest being due to "inadequate information" so prevalent in the all singing, all dancing market.

In short, the argument that those receiving massive bonuses and salaries are "owed" or "earn" them and therefore do not deserve higher taxation is, to me at least, bullshit.

In reply to Cerulean:

No I'm not in that camp, I realise that to a degree, I should have known better.

I asked about a straight repayment mortgage in the early 90s and it was explained to me how much the financial landscape would have to change before I would be be better off with one rather than an endowment. It all made sense at the time. The bloke was a professional adviser giving me what he thought was good advice and I was just a punter with a limited knowledge and a limited amount of time to learn. I'm sure he was sincere, he was part of an industry where clever people like the ones that Tobias describes had come up with a terribly clever way of getting something cheaper. He believed the paradigm and convinced me to do the same. Of course some years later the financial landscape did change and I'm now looking for ways to make up the endowment shortfall.

I could say much the same sort of stuff about my pension as well.

Yes, to a degree I'm culpable but only to the extent that I trusted and followed the advice I was given by industry professionals.

So, as far as I'm concerned and many others in the same position as me, the terribly clever financial wizards that persuaded me to invest my future in their terribly clever schemes have actually left me worse off than if I had just followed my instincts and done the simple safe things and not the clever risky things that I was assured would make me lots of money.

So yes, the clever people in the financial services have cost me money while they made money for themselves from my savings.

I think that's a fairly succinct description of a parasite.

In reply to EZ: To be honest, my head is getting sore from hitting it against the wall...

Anyone who has had a credit card, insurance, interest free credit, mortgage or overdraft and says banks are parasitic is a fool. You don't like banks then don't use credit and keep your money under the mattress or, even better, barter for your food. Just make sure don't buy anything from any business that has utilised banks for credit to smooth out cash flow or any one of a hundred other reasons.

In reply to Tobias at Home:
Banging your head against what???
I never mentioned banks as being parasites. You seem to be confusing my argument with someone else's. I was careful to say that I wasn't berating bankers, nor have I complained about banks.

I do not denigrate banks for doing what they are there to do. That would be like saying to a pear tree "GROW APPLES DAMN IT!"

I despise the whole system.
Barter for all things is obviously untenable in this age of divided labour, but there are other alternatives. Your assumptions about what someone thinks is the answer just demonstrates a narrow minded view and an inability to accept another's opinion as being reasonable.

[I think you are playing out someone else's comment on another thread regarding debating with me. Unoriginal and not well founded nor have you been 'banging' it for long enough to warrant complaint. If you don't want to debate then explain why I am wrong so I can learn or agree with me so that I can be re-assured, but don't whine, if you must do that then just don't post.]

In reply to David Martin:

Off the top of my head, set the tax-free allowance at the poverty line (£12,000 at the moment, according to Al on the BA cabin crew strike thread) and a 27% flat rate on everything above that. More importantly, I'd simplify things a fair bit. For example, I'd look at doing away with NI as a separate "tax" and get rid of the reduced income tax rate on income from dividends (but maintaining the 10% tax credit if corporation tax has already been paid).

In reply to Removed User:

Where you feel you've been disadvantaged you will always think that way. Would you be calling bankers parasites if your house was paid-off and you'd made a fortune in equity, or if your pension fund was successfully invested and you could retire earlier than you hoped?

Think of it another way, from the fundamentals. You wanted to buy a house, you wanted to make money for a retirement fund. Could you have done it alone? These were both investments you wanted, forgetting that they may have not played-out as advertised. You wanted to make money from your money and somebody enabled you to do that, and you paid him for the benefit. The two main factors being you wanting to invest to gain and somebody offering to help you for a fee.

That's just life, you want something, you pay for it. Sometimes things go wrong.

In reply to davidwright:

The same applies David, no-one is forced to buy a house, no one is forced to take-up a pension. Lambasting the people who enabled you to make these investments is natural when they go wrong but it doesn't change the fact that you wanted to do it, you went into it with open eyes, and crucially hoped to gain by it.

The rest is just evolution, we learn from our mistakes and things are improved. Some new things develop, others fall by the wayside. You won't see many credit default swaps (CDS) knocking about in the future...

In reply to EZ:
I thought this was essentially your bag, I'm not a fan of the system either it's just that it's a fairly miserable existence if you opt-out. What are you alternatives? Genuinely interested...

In reply to Cerulean:

I dunno... They seem to be very much still alive.

In reply to Cerulean:

The point is though that I took their advice and didn't make money. They got it wrong. They always get it wrong.



And sometimes you're persuaded against your better judgement to do something that turns out to be the wrong thing.

In reply to Cerulean:
I agree with your prediction that the term "credit default swap" will be avoided but it's very optimistic to assume anything significant is learnt from financial disaster.
Irrational exuberance, hysterical pessimism, cyclical booms & busts punctuated by fraud have been permanent features of financial history. New ways of making/losing money have been invented but there's been a distinct lack of evolution (even in the area of fraud - look at the 100 years of Ponzi schemes listed on wikipedia).
My predictions is that the future will look like the past. There will be good times, there will be bad times and there will be fraud. I don't believe that human virtues and vices will change soon.

In reply to Removed User:

There's no point in debating with someone like this. It's the equivalent of trying to discuss international relations with someone waearing a tinfoil hat who insists that George W Bush was a robot controlled by an international conspiracy of lizardmen from the planet Zog who masquerade as Jewish bankers and eat human babies' souls.

I think fund managers usually charge a fixed percentage of your fund per year. That tells you that they prefer a fixed commission (think of it as a fixed annual tax on the investment) to a direct link between performance and management charge.

In reply to Removed User:

Not sure that I can agree when 10% of patients being treated get a hospital acquired infection.... 1 in 10 is a fairly significant figure!

In reply to Removed User:
Most of the time they don't get it wrong, there's a hell of a lot of very wealthy people in the world, a lot who have made on their money through wise investments, particularly in this country, and there's a whole financial industry named after it called Wealth Management. Unfortunately yoru average Joe blindly buying a house and a pension because 'that's what you do' doesn't attract a great deal of care and attention in the grand scheme of things, but we do have the FSA and OFT to keep that bit on the level.

Yeah sure, but realising the gravitas of the roof suddenly going from over your head, or the prospect of having to work til you drop dead *should* make people pay attention.

In reply to Blackadder:

Actually I find debating with Cerulean very interesting. He always has something worthwhile to say even if I don't agree with it.

In reply to Cerulean:

Actually people can be more or less forced to buy a house. Housing is a classic inelastic good. If you remove any method of getting a house other than a sub-prime mortgage and then push sub-prime mortgages as extending the ownership of assets and as creating an "ownership society" that is exactly what you are doing. If you do this while offering incentives to gamble your state pension on the stockmarket you aren't offering people the chance to gain anything you are drawing in more suckers to a ponsi scheme.

Prior to the mid 80's people bought and sold houses and borrowed money to do so. By and large people had pensions as well either through a work scheme or via a mutual if appropriate. Those products worked and did the job. That you had to have the income to pay back a loan and that the lenders wouldn't lend silly multiples of earnings merely acted as a break which limited housing bubbles.

Those things changed to allow bankers to gain more fee income and to make more money on their more dubious activities such as insider trading,stock pumping and other such market manipulations. The same pressures produced railtrack and other vast successes.

No the markets need to be regulated and taxed so as to increase the focus on investment in companies and decrease or eliminate the profits of speculation. The best way to do that is a Tobin tax. It is exactly what the tax was designed to do. Only then will they do the job they ought to do and not produce crashes like the current one via the froth of speculation. Unless that happens I expect to see another 2 crashes like this one in my life time.

In reply to Removed User: It must frustrate you to constantly aim for such a low level of wit, yet fail each time.

I applaud you for your perserverence.

In reply to Blackadder: Why are you always so insulting?

In reply to JanI: You see, what you call "insulting", I describe as "pointing out the obvious".

In reply to davidwright:
>
Can you elaborate on that?

In reply to davidwright:

Of course there'll be other crashes. Read The Black Swan? You're not going to change human behaviour overnight either.

I'm afraid I don't agree with, although I recognise, your point about people being drawn in to buy a house. The last crisis can largely be put down to adverse credit mortgages as you mention but this is an anglo-US capitalist phenomena and the markets exist to satisfy and thrive on the mortgage vehicle phenomena, whilst logically cycling back round to encourage it. If it makes money it will grow, not just as grass-roots but also at a serviced finance level. And without any sinister aspect it is all designed so that everyone gets money from it, bankers to your average Joe, and it was working in spades until 2008.

Banking, like lots of macro environmental industries thrive on the norm, the behaviour of the masses, and so design their functionality around making from it, the problem being back at roots level is that you're weird if you don't buy a house, it's odd, or your old man calls you a fool for not getting a pension - any pension. I've been sat in the pub in my lifetime and been called everything from different to risk-averse to idiotic simply for not getting a mortgage, and the same goes for pensions. Everyone has the will and ability to make their own decisions though, it's just that they don't, they need to conform, and that is why in this scenario when it goes wrong at the top everybody suffers. Much of Europe will climb out of the problem quicker than the US and UK because they'e not sucking at the teet of the housing ladder and pension investment. Unfortunately much of Europe bought in to the debt securitisation process at the high level and caught the same flu.

Individuality, we all have it, we shouldn't have to be coerced or encouraged or sold something we're not sure about. We don't *have* to do any of it.

In reply to Cerulean:

No this crash was not a Black Swan event. It is an event wholly typical of an under-regulated, under-taxed market driven by speculative trading rather than genuine investment. The only people who benefit from market instability are speculative and fraudulent traders.

The only people the market was working for prior to 2008 were the spiv like bankers. Everybody else was being taken for a ride. The US, UK and Ireland were the worst hit because they were the places who had altered their housing and pensions policies at the behest of the bankers who were making money out of the trades and the fees. The "ownership society" was pushed hardest by lobbyists working for the financial services sector. They might have acted without realising that the main result of pushing home loans and public sector pension revenues into the stock market was going to lead to a demand pull inflation of the price of assets they held as well as a vast increase in the fees they charged with out any benefit to the people who get worse pensions and have to pay more for their housing as a result. I could think that but I don't think they were that stupid nor were the those who's main daily activity was fraud that disinterested.

Much of Europe will climb out of the problem quicker than the US and UK because they'e not sucking at the teet of the housing ladder and pension investment. Unfortunately much of Europe bought in to the debt securitisation process at the high level and caught the same flu.

The European banks end up with much of this cr@p on their books because they were required to hold a lot of their assets as AAA+ rated bonds. Much of the garbage generated by lending tramps a couple of million to buy a beach front condo was rated AAA+ mainly by the people who issued it.

In reply to Postmanpat:

Its quite simple look at the fuss last year when VW managed to keep its activities quite from the fraudsters leading them to get shafted on trades they couldn't honour.

The easiest way to make profits from stocks is to see the value of the stock rise in the short term. Most of the ways of doing this successfully involve fraud of one sort or another usually trading on privileged information. The other is to turn your gamble in to a dead cert by seeing the whole market rise. This can happen if the economy is actually growing but even then there are usually a few duff bets. No by far the best way is to draw more money into the market creating more demand for a limited set of assets. Where is this money going to come from? well the two obvious sources are pensions and housing persuade people to put their mortgage payments into a stock market fund rather than actually use them to pay off the loan provides a lot of money to inflate stock prices. If you can pull the same trick with pensions so much the better. US social security funds up to about 2002 had been invested via a mutual fund mainly in US gilts after that time people were offred incentives to keep their pension funds out of that pot and put them into the stock market. oddly this coincides with the end of the dot com crash. The net effect was to use social and housing policy to turn the whole stockmarket into a massive ponzi scheme with the final sucker being some poor sod who is paying over the odds for there house and has had there state sponsered pension scheme closed.

In reply to davidwright:

That wasn't VW, it was Porsche and I, personally, thought it was (a) hilarious and (b) massively hypocritical of the hedge funds to squeal the way they did.

In reply to davidwright:
I didn't say it was actually, but you're right about the regulation and speculation, to a degree.

It's very short-sighted to say the market was only working for bankers, how on earth do you think you got all those cheap loan and mortage rates, pensions with 10 different risk bandings, Buy-to-let available to the common man? This is where you cross-over into 'them and us' territory.

I'd also like to know who these 'lobbyists' are and what exactly they were lobbying for...?

And the pensions were exposed to risk because people wanted them to perform better, I'm sure even if employers were making those decisions on employees behalf there would have been some [boring] presentation made about the changes, with an opt-out option. Oddly enough I've just missed our annual presentation about the changes because I was 'too busy', a common phenomena, and then we complain when it suddenly goes pop!

And 'fraud' is a specific crime, not an activity.

That's not right, the people tendering the products were not the ones rating them.

In reply to Blackadder:

I can see why David thinks these things are fraud when what essentially happened there was that Porsche hadn't declared the proportion of VW shares that it controlled (i.e three quarters), and so the traders may have indirectly and unbeknown to themselves borrowed shares from Porsche, sold them to Porsche, bought them back from Porsche and then returned them to Porsche. All of which ultimately hammered the VW share price.

Not against the law importantly though...

In reply to Cerulean:

Well, I laughed. Hoisted on their own petard was the phrase that came to mind.

In reply to Blackadder:


Interesting.

So, because the high-earners simply find means of tax avoidance (legal or otherwise) we should change the tax regime to suit them better?

Don't you think its a little unfortunate that those stung by this flat tax will be at the middle-lower end and unable to afford the accountant who helps them avoid taxation?

Should such a tax avoidance enterprise become available to the less well off, would you then be willing to revise the tax system so it better suits those of us who lose out under the flat tax regime?

It seems strange that the already wealthy should have a massive jump in their already substantial salaries while so many others struggle to get by. I don't see the resulting polarisation of society, the acceleration of this new class divide, to be healthy at all. More to the point, such vastly diverging incomes do not in my mind actually represent worth any more than they are an indication of productivity. It is hard to agree with the argument that the £800,000 a year banker is justified in feeling "cheated" by the taxman when his salary is reduced to £400,000 given his real worth is probably still only a fraction of that later figure.

In reply to davidwright:

I'm not really sure what you are getting at. Personally I would have though being persuaded to buy equities in 2002 would have been quite nice.
Are you implying some sort of collective conspiracy or what?

In reply to Postmanpat:



I understand the idea fine. davidwright is saying that in a ponzi scheme, just as in a chain letter or pyramid scheme, the last person to take part and invest (albeit borrowed mortgage money in this case) in the scheme is bound to lose their investment.

It is inevitable that in a ponzi scheme the later investors supply the former investors with their profits. That is the reason for setting up a ponzi scheme. It is not inevitable that all participants are knowledgeable, and so part of a conspiracy, of the mechanisms that they are facilitating.

In reply to Cerulean:

Re: Barter and other alternatives.

Sorry mate, but I don't want to get bogged down with that here. Suffice to say that I live a different type of participation that is neither opt out nor systemically dependant and goes some way to avoiding in it's nature causing the further systemic dependence of others.

In reply to EZ:


I know how a ponzi scheme works thanks. And I know thta you think that the whole money system is one. I'm asking David if he means that or something else.
If wealth is actually being created by making things and thus adding value it's quite possible values will go up independently of the creation of debt/money-but enough,what does David mean?

In reply to EZ:

You're doing that funny thing with your sentences again.
You sound like a small child with a secret, " I've got something SPECIAL but I'm not going to tell you what it is"

In reply to Postmanpat:


My mistake. It looked to me like you were accusing him of wearing tin foil.

In reply to Postmanpat:


What funny thing is that?


It is because of pillocks like you that I don't want to get embroiled in the subject as it is off topic and I don't feel like justifying myself amongst people who will just try to pick it apart. It is just the way that I live. The people who know me do not suggest that I think myself to have some special secret. In fact I openly talk about it with them.

Sorry Cerulean, I don't mean to imply that you are one of those pillocks. I appreciate that you may be genuinely interested.

In reply to EZ:

I'm being very polite. Why do you come on here if you think that people who ask you to justify your case are "pillocks" ? This is what is so weird. You come out with unusual views and then resent people questioning them (or "picking them apart" as you call it).

In reply to Postmanpat:

It is off topic. And you are, from recent experience, only being polite because I am not giving you any ammunition. I intend to keep it that way.


It is not justification of my case that I am talking about though is it. How I live my life has nothing to do with my case for this thread's topic. That would be justification of my life. That ain't up for discussion because of exactly this type of argument and I haven't even given you any detail to work with. You are moronic!


I don't resent people questioning them. People can question and I can decline to answer. It is not relevant to the thread anyway so I am not be evasive of any relevant point.

If you want to know then strike up a private conversation with me or start a thread on the subject and invite me to post. Doubtful eh!

In reply to EZ:
Of course it is. The way you live your life is based on your analysis of how the economic system works and how you think it should work so it entirely dependent on "your case"

You are moronic!

Er,no

I never go offline. May do the latter.

In reply to Postmanpat:


I may not post on it

In reply to EZ:

So I suspected......

In reply to David Martin: Look, go read this - http://news.bbc.co.uk/1/hi/magazine/8417205.stm


The highest 1% of earners in this country (that's people earning more than about £145k) account for 12.4% of total income and pay 24.1% of the total tax.

Do you want them to leave the country and pay their taxes somewhere else?

In reply to Blackadder:

Supposing somebody in the tax bracket you refer to pays a lot of tax for a long career. Supposing at some point it all goes pear shaped and the tax payer has to bail out their employer to the extent that exceeds the total tax income from that employer, share dividends & the employees etc over a long period (eg 5 or 10 years).
In those circumstances the employer/employee aren't covering their costs to the tax payer and it would be better of if they went forth and multiplied unless they can show some other benefit to the UK.

More succinctly - apply cost/benefit analysis.

In reply to md@r:

This doesn't really take into account that they then wouldn't be able to pay back the debt. Effectively the tax payer would be at a loss and the company would in your words have gone forth and multiplied... Surely a better solution would be for it to remain solvent, continue trading and employing people and thus re-contributing? I'd also point out that you may want to apply cost/benefit analysis to people in the lower income range and the terminally unemployed who don't want to work.

In reply to md@r: Let's dispense with the mealy-mouthed supposing. Answer me these two questions:

1. Do you believe that the eventual cost to the taxpayer of the banking bailout will exceed the tax revenues from that sector over the last ten years?

2. Do you want everyone earning more than £145k to leave the UK?

In reply to md@r:

If you have a system where you exit actors at a point where they have made a net loss you will always end up with a loss.

It's like continually playing in a casino until you've lost all your money.

In reply to md@r:
Though I don't have the figures I seriously doubt the end cost (once the banks have paid back their loans which they will for the greater part) of the bailout will be anything but a drop in the ocean compared to the decades of tax yield from these companies & their employees. While the CBA may not look great for 2008-2009 one has to consider that bank bailouts aren't exactly annual occurances...

So indeed their tax contribution does very much need to be figured in and it's ongoing presence considered desireable for any future govt.

In reply to desmond_burnett:

The Treasury agrees with you - their current assessment of the "worse case scenario" is £10bn.

In reply to Blackadder: Not sure, the treasury estimated long term impact as £20-50bn (the IMF $200Bn estimate was withdrawn with no little embarrassment to that body...)

But then the estimated tax yield from the city this year (which we can assume isn't exactly an all time high) is ~£60Bn.

In reply to desmond_burnett:

Revised down to £10bn in the pre-budget report.

In reply to EZ:

Barter? Did you do history at school? The Mesopotamian sheckel? Industrial Revolution? Gutenberg's printing? You've noticed the population of the world is approaching 7 billion these days I assume? I'd love to know how we'd cope just with 'barter'.


Ah come on, that's a tad selfish. Hippy commune, Mormon sect? Come on I'm interested. How do you cope outside the clutches of the establishment - whilst using a computer and the internet....? Are you in the UK?

In reply to EZ:

I am.

In reply to Cerulean:

...interested.

In reply to Blackadder:
Direct bailout cost - no, I hope it will be buy low, sell high.
Indirect cost of recession (how long is apiece of string) - yes.

no.

Do I believe "casino" bankers & hedge funds are good value for money for the UK or their customers?
Not convinced, see Warren Buffet on "advisors" on another thread, HM Treasury is expressing reservations.

Do I believe their is a role for derivatives to hedge risk?
Yes.

Do I believe that utility banking is essential?
Yes.

It would be desirable if "casino" banks weren't too big to fail to avoid the moral hazard.

In reply to md@r:

Wow, that's a surprisingly balanced response.


Do you think that the banks are solely or primarily responsible for the recession?


Desirable is an understatement.

In reply to md@r:

It's a moot point today anyhow. Half of London hasn't bothered today - snow.

In reply to Blackadder:

Solely responsible - no.

Primarily responsible for the trigger of NINJA loans and financial "products" derived from NINJA loans - yes.
I expect adults to take responsibility for their actions so I consider an institution/individual and not regulators to have the final responsibility for an institution/individual's actions.

Heavily but not exclusively responsible for the overall circumstances - yes.


I said desirable because I'm not sure it's achievable.

In reply to Blackadder:

PS wouldn't potential losses (gains?) on govt guaranteed "band bank" assets dwarf that figure

In reply to md@r:

Can you point to a bank in the UK which provided NINJA mortgages?

Do you think that the provision or ownership of NINJA-related assets played a significant role in the problems that led to Northern Rock, RBS and Lloyds Banking Group requiring the government bail-out?

In reply to md@r:

It's an inclusive number - i.e. that £10bn includes the gains and the expected losses from any government guarantees. The Treasury call it "the net fiscal cost of financial interventions."

In reply to Blackadder:

No, but then bankers & CEOs etc do like to talk about an international market in skills when comparing themselves with tehir counterparts in the US whilst refraining from comparing themselves to their conterparts in the rest of europe. So they've often lumped together internationally.


I think the UK banks fell apart when the NINJA triggered collapse in the US meant that nobody had the confidence to lend overnight in the UK. Lenders weren't confident that the borrower's assets weren't NINJA backed. The confidence was gone even if nobody in the UK had a NINJA backed asset.

In reply to md@r:

So you reckon that UK bankers are primarily to blame for NINJAs because of how they talk about the international market for banking skills?


good, so you understand the fact that brought down NR, RBS and LBG was a liquidity crunch, rather than massive losses?

In reply to Blackadder:
I hold bankers responsible for the success or otherwise of their products, their investments and their companies.

In reply to md@r:

Really? So, if a banker sells you a FTSE 100 Tracker and it loses money, you hold the banker resopnsible?


You're talking about mutual funds, hedge funds, etc?


Now, to what extent do you hold individual bankers at, say, Northern Rock, responsible for the fact that they were unable to continue rolling their short-term debt? Do youi hold just the Board responsible? What about the bank's foreign exchange desk? Or the branch managers? Or the individual counter staff?

In reply to Blackadder:
If they put a sprig of festive holly on t**d and sell me it I'd hold them responsible for the amorality or fraud and hold myself responsible for my stupidity.

NR - corporate responsibility is distributed according to role and position, isn't that obvious?

http://www.bloomberg.com/apps/news?pid=20601039&sid=adLL.WDgme8I

I thought of adding this to the conversation as there are so many parallels with what's happening in the UK.

In reply to Cerulean:

Regarding barter. I do not suggest that it would solve the problem. I didn't mean to imply that it would.

Yes I am UK.

In reply to EZ:

It's this bit I'm interested in:

"I live a different type of participation that is neither opt out nor systemically dependant and goes some way to avoiding in it's nature causing the further systemic dependence of others."

Ever been to the doctors, called the emergency services, posted a letter, public transport? Do you work, pay tax, have any assets - a house for example? Any offspring or pets requiring specific nutrition? All systemic dependencies.

In reply to Blackadder:

Lets look at it another way. Instead of income, look at wealth. The top 1% of people possess 21% of the wealth of the nation and pay 24.1% of the total tax. Doesn't seem so unfair to me, especially considering their income from this wealth is so huge compared with the median.

In fact, consider the 50% tax of bonuses over 100,000. People receiving these bonuses are getting 50,000, this is double the median income in the UK. Also, these bonuses are still way higher than throughout history. Finance always had a income premium compared with other occupations but this premium massively increased from the 1980s onwards.

In reply to Blackadder:


Yes Bladder, I saw that link the other day.

What I find strange is that they should want to leave the country simply because their earnings above a certain amount might incur a moderate increase in tax. They are hardly going to go hungry, they are not going to suffer.

I honestly don't know the answer to this question, but who pays for the limited liability status of companies that go bust? It seems the business world gets to profit quite well from the cushion that limited liability allows and, correct me if I am wrong, isn't this also built on tax?

In reply to Cerulean:

Currently if these things came up:

Not for anything but cut and shut emergnecy repair. Drug therapy is a no.

I don't see this as a systemic dependancy. It is a choice to use facilities that I pay for. Whether I have a choice in the payment is immaterial. The fact that I have to would imply me a fool not to use them.

Try not to.

Prefer to bike but it is private enterprise anyway.

Tell me how to live without [now] it in it's common form.
necessary because I have no choice (not offering advocacy or otherwise in my response)

Immaterial. Assets are not givien by the system

Again. Immaterial. The ethics of whether I would choose to supply their needs implies a value judgement.

You see why it is such a difficult subject witout a face to face or a private message conversation.

In reply to David Martin:

That's your justification for increasing taxes?


Really? Please explain to me how that works.