More money troubles

[Galbally]

Its been a while (at least 4 days) since I talked or thought about the Credit Crunch and its related catastrophes. Of course having moved 4 days on, the US stock market is down below 8,000, 542,000 people have lost their jobs, and GM and Woolworths are going bankrupt.

Over here in Europe, the Eurozone is in recession, and Britain is also sliding into a very serious recession. We all seem to be heading in one direction.

What are people's thoughts about where we are now?

[Oscar Namechange]

Galbally;1064646 wrote: Its been a while (at least 4 days) since I talked or thought about the Credit Crunch and its related catastrophes. Of course having moved 4 days on, the US stock market is down below 8,000, 542,000 people have lost their jobs, and GM and Woolworths are going bankrupt.

Over here in Europe, the Eurozone is in recession, and Britain is also sliding into a very serious recession. We all seem to be heading in one direction.

What are people's thoughts about where we are now?


There you go again galbally bringing us the festive cheer. We are not sliding anywere so much. Yes Jobs are going but that was to be expected. We are in the process of fiscal stimulation. fiscal injection, tax cuts, fuel cuts and grocerie's dropping by the week. Now tonight on the news I have just heard that the government has bought out 'The Bank of Scotland'.

I'm quite happy with what my Prime Minister has done and according to the polls, so is most of the country..:p:p:p

[chonsigirl]

I remember once remarking I thought stocks would hit this level, a sad thing in itself. The number of jobs lost is horrible. I do not know if it will spiral downward more, I hope not.

[Galbally]

oscar;1064654 wrote: There you go again galbally bringing us the festive cheer. We are not sliding anywere so much. Yes Jobs are going but that was to be expected. We are in the process of fiscal stimulation. fiscal injection, tax cuts, fuel cuts and grocerie's dropping by the week. Now tonight on the news I have just heard that the government has bought out 'The Bank of Scotland'.

I'm quite happy with what my Prime Minister has done and according to the polls, so is most of the country..:p:p:p


Sure, though 24,000 people lost their jobs this week alone in the UK, sterling is sliding rapidly against all the major currencies, the recently bailed out banks point blank refuse to give small British businesses the capital they need to remain in business, the interest rates are so low that its pointless saving money nor investing in anything to do with the UK or its currency, and the government proposes to borrow enormous amounts of money from abroad with no clear idea of what is really going to happen next, (or what they will do when next year the recession is worse, and they are not able to raise the money from foreigners they need to borrow to keep people in the lifestyle they are used to). These sorts of things can destabilize a country entirely Oscar, you do realize that? If I was you, I'd be worried, I certainly am, because we are in as bad a mess are you are; this isn't doom and gloom, its about looking hard at a very real situation.

[Oscar Namechange]

Galbally;1064668 wrote: Sure, though 24,000 people lost their jobs this week alone in the UK, sterling is sliding rapidly against all the major currencies, the recently bailed out banks point blank refuse to give small British businesses the capital they need to remain in business, the interest rates are so low that its pointless saving money nor investing in anything to do with the UK or its currency, and the government proposes to borrow enormous amounts of money from abroad with no clear idea of what is really going to happen next, (or what they will do when next year the recession is worse, and they are not able to raise the money from foreigners they need to borrow to keep people in the lifestyle they are used to). These sorts of things can destabilize a country entirely Oscar, you do realize that? If I was you, I'd be worried, I certainly am, because we are in as bad a mess are you are; this isn't doom and gloom, its about looking hard at a very real situation.


I apologise galbally. Events in my personal life have left me on a helium high and quite unable to take anything seriously. Even if Great Uncle Gordon sold Britain to the French for £1 I still wouldn't care. Everything is funny to me right now so best i go on the fluffy threads until i'm back to my miserable whinging self :p:p:p

[Galbally]

oscar;1064685 wrote: I apologise galbally. Events in my personal life have left me on a helium high and quite unable to take anything seriously. Even if Great Uncle Gordon sold Britain to the French for £1 I still wouldn't care. Everything is funny to me right now so best i go on the fluffy threads until i'm back to my miserable whinging self :p:p:p


Its alright Oscar, thats probably a lot better fun that worrying like me right now, you enjoy that helium buzz! :wah:

[along-for-the-ride]

I am concerned.

The company I work for has eased the amount of folks they hire. My boss has asked for volunteers in Personnel to work part-time. I didn't. Got bills to pay. I am thankful to still have a job. I am aware of the big layoffs that are happening across the company.

But, I've seen the price for gas drop to $1.79/gallon today.

The good, the bad, and the ugly. All are coming our way.

What can we do to plan for it?

[Oscar Namechange]

Galbally;1064690 wrote: Its alright Oscar, thats probably a lot better fun that worrying like me right now, you enjoy that helium buzz! :wah:


What's that Skippy??????

Gordon Brown HAS sold Britain to the French for a £1. :yh_rotfl

[Oscar Namechange]

along-for-the-ride;1064691 wrote: I am concerned.

The company I work for has eased the amount of folks they hire. My boss has asked for volunteers in Personnel to work part-time. I didn't. Got bills to pay. I am thankful to still have a job. I am aware of the big layoffs that are happening across the company.

But, I've seen the price for gas drop to $1.79/gallon today.

The good, the bad, and the ugly. All are coming our way.

What can we do to plan for it?


I'm sorry to hear that. I think it's going to be a lot tougher in America to climb out of a recession than it is here. I've been googling some figure's just now and we are not as badly affected as the financial forecasters predicted two months ago.

The only way i see Obama getting on top is to raise taxes. We are lucky at the moment as our PM has just announced he's cutting tax for the lower income workers. We are not so daft as to not realise that this money will have to be re-paid at some stage. Today, our government bought out another large bank with a big cash injection and yes, this all has to come from some-where.

Taxes will no doubt rise at some stage in the future but for now, the PM thinks that by cutting folks taxes and slashing mortgage rates, it gives everyone more money in their pockets which they will in turn spend in the shops, boosting the economy. I hope he's right? :):)

[Kindle]

Galbally;1064646 wrote: Its been a while (at least 4 days) since I talked or thought about the Credit Crunch and its related catastrophes. Of course having moved 4 days on, the US stock market is down below 8,000, 542,000 people have lost their jobs, and GM and Woolworths are going bankrupt.

Over here in Europe, the Eurozone is in recession, and Britain is also sliding into a very serious recession. We all seem to be heading in one direction.

What are people's thoughts about where we are now?


I am feeling a bit anxious about the economy, mainly because it seems to be affecting so many countries all at the same time. We are all too closely financially linked that whatever happens elsewhere affect us here, either now or eventually down the line.

The stresser is that we cannot even control what happens in our own country let alone what other country's will do to try and avert the coming disaster.

There are way too many variables involved here. Maybe if we had a crystal ball we could better tell what the future holds for all of us.

[guppy]

honest to god..this is what i think is gonna happen in 09. the stock market is gonna crash..all this bailout money to banks is only stalling what is gonna happen eventually..we , as americans, in general..have lived way beyond our means..banks operate on debt..they arent loaning..people arent buying..way to many businesses are in their death throws at the moment. Many businesses have held on as long as they can..hoping for a miracle..it hasnt appeared..in the next two months..we are gonna see a dominoe effect..one right after another going broke..even small town banks are millions in lost assests with foreclosures..if they arent loaning out money..to keep other people paying in..they arent gonna survive either..our country is slowly coming to a hault.

[guppy]

More than 2.2 million homeowners are more than 60 days late on their mortgage payments, according to the Hope Now alliance of lenders and credit counselors, and one in six homeowners owes more on a home than it's worth.

this is on msn..tonight..so 2.2 million families are thirty or less days from eviction..

[wildhorses]

Galbally;1064646 wrote: Its been a while (at least 4 days) since I talked or thought about the Credit Crunch and its related catastrophes. Of course having moved 4 days on, the US stock market is down below 8,000, 542,000 people have lost their jobs, and GM and Woolworths are going bankrupt.

Over here in Europe, the Eurozone is in recession, and Britain is also sliding into a very serious recession. We all seem to be heading in one direction.

What are people's thoughts about where we are now?


The stock market here has dropped nearly 50% this year. I would say this is quite serious. I am very worried about the future. It seems to me as though we are in some kind of free fall collapse. I hope I am wrong.

[Galbally]

oscar;1064692 wrote: What's that Skippy??????

Gordon Brown HAS sold Britain to the French for a £1. :yh_rotfl


Well I hate to tell you this, but France is run a lot better than Britain is, so maybe you will be better off!

Of course the food will be much better as well. :wah:

[AussiePam]

Merci, Galbers!! I'm glad I was born of peasant farmer stock, and know how to plant potatoes, and garlic... milk a cow, darn socks etc...

Nice to see some Americans no longer in denial too. I mean that's where all this started. Extreme unregulated capitalism gone mad. In a global

economy.

Australia has also been reasonably well run, the banks have had some rules, etc.. it's going to be tough, but the outlook here is not all black.

[Galbally]

AussiePam;1064924 wrote: Merci, Galbers!! I'm glad I was born of peasant farmer stock, and know how to plant potatoes, and garlic... milk a cow, darn socks etc...

Nice to see some Americans no longer in denial too. I mean that's where all this started. Extreme unregulated capitalism gone mad. In a global

economy.

Australia has also been reasonably well run, the banks have had some rules, etc.. it's going to be tough, but the outlook here is not all black.


Good woman, thats the spirit. Yes, you should be expecting about 230,000 Irish people over the next 12 months as Australia is the place being touted to go to escape the madness over this side of the world. That or Canada, the two old reliables. :-6

[AussiePam]

Galbers, I've a comfy sofa on the balcony with a view of Sydney harbour and a spare spade.. :sneaky:

[gmc]

Gordon brown is an idiot. He's bailed out tye banks but done nothing to put conditions on the banks so the banks are hoarding the cash and withdrawing agreed overdrafts and the like at short notice. The worst culprit in repossessing is northern rock who are also forcing borrowers coming to an end of fixed rates to re-mortgage elsewhere by refusing to allow them any of the lower rates they offer to new lenders but only the variable rate-something lenders are not supposed to do but to which the FSA turn a blind eye. Not a problem unless your house has dropped in value and you were one of those who borrowed 125% LTV (guess who the major provider of those was) and/or you've lost your job or are about to. The banks are targeting small businesses as easy victims to squeeze every last penny back they have agreed to lend them.

It was him as chancellor that set up the current financial regulatory scheme and while some of this is beyond his control his actions have made it far worse than it has to be. Prudence has been bent over a desk and is about to be shafted while being told it's all good. The takeover of HBOS is a travesty and unnecessary and is going to devastate the scottish economy-fhe and darling were english there would be accusations flying around that it was being done deliberately to spoil the SNP's case for independence.

Borrowing to get out of trouble only makes sense if you are investing to make a profit rather than just shoring up a leaking dam that is going to fall on your head. Over the last eleven years he has systematically raided private pension funds and put in a load of indirect taxes that affect ordinary people the most-taking away the 10% tax rate kind of shows he doesn't appreciate the impact of what he's doing.

None of this need have happened-anyone with half a brain could work out what was going to happen and there have been plenty of people giving warning. Yet still we let those morons behind all this stay in charge-cos we need their economic expertise:-5:-5

[buttercup]

Galbally;1064930 wrote: Good woman, thats the spirit. Yes, you should be expecting about 230,000 Irish people over the next 12 months as Australia is the place being touted to go to escape the madness over this side of the world. That or Canada, the two old reliables. :-6


6 of our friends left for Australia this year, 4 more go to New Zealand next year, 2 to Thailand, 2 to Bali. We ourselves looked at New Zealand in 2010 for a couple of years, doubt i could do any longer than that but its something my husband is keen to try.

[Oscar Namechange]

gmc;1064940 wrote:

The takeover of HBOS is a travesty and unnecessary and is going to devastate the scottish economy-fhe and darling were english there would be accusations flying around that it was being done deliberately to spoil the SNP's case for independence.






Why would he devastate his home constituancy? Surely, the take over of the HBOS was necessary when even the Chairman of the bank went on national news last night to say 'I'm Sorry'.?

The result of the Glenrothes by-election dispite the turn-out-showed that even in Scotland people are still willing to vote Labour and Gordon Brown rather than vote SNP.

I can't see how the SNP could ever win independence and i'm quite open to admit that Gordon Brown and the government would resort to 'dirty deeds' to ensure it would never happen.

[OpenMind]

I doubt very much that the tax cuts are going to help those who have or are going to lose their jobs. The low interest rates are not going to help those who have lost their homes and do not forget the stigma that non-payment of a mortgage places on these people. Talking about interest rates, unsecured loans are still up at 7% at least. That's over a 100% higher than 3%.

I myself am lucky to be working at the moment given that I do contract work. On the other hand, the people I contract to have international markets as well as home markets. Even so, my contract rates have dropped and I may not be able to meet my monthly bills. Christmas represents a period of dread for me as it will be two weeks at least with no income at all. In the past, I have always had a safety margin of dosh to fall back on for Christmas and incidental periods without work. In 2005, I was able to stay off work for 5 weeks comfortably while Warfarin levels were stabilised and pay for my car to have new discs, drums and pads all round (4 discs and 2 drums for the handbrake). Now I am living from week to week and it is a struggle.

Neither am I happy with the idea of the Government owning banks. This does not bode well with me.

I have not had the time to sit and analyse the economy for myself. Yet I have the strong impression that the current 'disaster' has been engineered and is not the result of free market forces. I don't watch TV much if at all, and I don't read the papers except for the email I receive from The Daily Telegraph. I have read recently that we, the UK that is, are one of the most heavily indebted nations in the world.

There have been a lot of changes in the law as well. One thing that I have noticed is that the Stutorial Instruments are no longer on the shelves in the reference libraries. Recently, I tried to find out what the law was governing such things as tea breaks for workers. I referenced the Stones Manuals. Well, it's no longer under Employment Law and I couldn't find what I wanted to know.

I think we are being subjugated. The law no longer favours the general law abiding citizen or someone who wants to protect their home. Now we have a financial crisis following after Gordon Brown's time as the Chancellor of the Exchequer. There's nothing like a financial crisis to keep people in line. especially in a society as fragmented as ours. A society that has been slowly fragmented since the second world war. So, it's not all down to Gordon Brown in my eyes.

[Galbally]

Unlike openmind I actually think that the only answer on this side of the world is that European governments impose rules on the banks that force them to keep lines of credit open to small and medium size businesses. The ECB or the BoE can deal with the problems of the larger companies on a case-by-case basis.

I tend to agree with GMC that the the idea that banks are being supported by massive amounts of taxpayer money, (which has to be borrowed and yet to be paid for by the tax payer), while the banks now try to shore up their failing asset books by crucifying the businesses that employ those taxpayers is crazy, and its based on a continuing failure to see that relying on private capital to do things for the good of the nation is a waste of time.

This is getting very serious, and if the banks force small and medium businesses to have to take on the burden of totally restricted credit (which for the most part has been run up by commercial and residential property developers and totally irresponsible financial companies), the banks will basically total the economy by killing the credit supply to make their asset books look better.

That will lead to massive economic dislocation and probably a depression within months. The banks won't act unless they are forced to, as they are private companies that are only interested in themselves and their share price. They intend to somehow reduce their terrible books by retracting as much credit as they can, to counter the massive property and international debts they have run up.

I think that the time has come to reassess the role of private banks in the wider national and global economy and the rules by which they operate. It may even come to total nationalization for some banks in some countries, (though that has its own problems as well), its not the best option, but we are getting into a very serious situation.

This is particularly so in the UK and Ireland actually as we are the furthest into this property madness in Europe, and we are now horribly exposed as economies. At least Ireland is in the Euro so there is little chance of a run on our currency because of the bad policies that have been adopted, unfortunately for Britain thats not the case, and I think Sterling is going to be the next crisis.

I think some of the sacred free market cows are going to have be slaughtered, and we need to have a totally different perspective on how to run the basic economy in the long term national interest, otherwise things are going to get much, much worse.

[wildhorses]

Galbally;1065395 wrote: Unlike openmind I actually think that the only answer on this side of the world is that European governments impose rules on the banks that force them to keep lines of credit open to small and medium size businesses. The ECB or the BoE can deal with the problems of the larger companies on a case-by-case basis.

I tend to agree with GMC that the the idea that banks are being supported by massive amounts of taxpayer money, (which has to be borrowed and yet to be paid for by the tax payer), while the banks now try to shore up their failing asset books by crucifying the businesses that employ those taxpayers is crazy, and its based on a continuing failure to see that relying on private capital to do things for the good of the nation is a waste of time.

This is getting very serious, and if the banks force small and medium businesses to have to take on the burden of totally restricted credit (which for the most part has been run up by commercial and residential property developers and totally irresponsible financial companies), the banks will basically total the economy by killing the credit supply to make their asset books look better.

That will lead to massive economic dislocation and probably a depression within months. The banks won't act unless they are forced to, as they are private companies that are only interested in themselves and their share price. They intend to somehow reduce their terrible books by retracting as much credit as they can, to counter the massive property and international debts they have run up.

I think that the time has come to reassess the role of private banks in the wider national and global economy and the rules by which they operate. It may even come to total nationalization for some banks in some countries, (though that has its own problems as well), its not the best option, but we are getting into a very serious situation.

This is particularly so in the UK and Ireland actually as we are the furthest into this property madness in Europe, and we are now horribly exposed as economies. At least Ireland is in the Euro so there is little chance of a run on our currency because of the bad policies that have been adopted, unfortunately for Britain thats not the case, and I think Sterling is going to be the next crisis.

I think some of the sacred free market cows are going to have be slaughtered, and we need to have a totally different perspective on how to run the basic economy in the long term national interest, otherwise things are going to get much, much worse.


I hope they do nationalize the banks. In fact I think it would be a good idea to nationalize all basics. This could include finance, healthcare, housing and food. Also they should not let any one company become too big because if they go down they take too big a chunck with them in terms of jobs and stability.

[Oscar Namechange]

wildhorses;1065561 wrote: I hope they do nationalize the banks. In fact I think it would be a good idea to nationalize all basics. This could include finance, healthcare, housing and food. Also they should not let any one company become too big because if they go down they take too big a chunck with them in terms of jobs and stability.


I have read 'Openminds' post, yours and galbally's and this is the one i agree with in main but i do agree with alot of 'Openminds' post.

The frightening side of the credit crunch and all the storie's of lost jobs, is that in my brothers proffession and who i work for, he is having record takings. He is a course bookmaker and they still flock to the races to gamble their money.

The truth is, Gordon Brown did not cause Britain's economic problems even as Chancellor of the Exchequer under Tony Blair. We have lived in a world of greed on the 'buy now pay later' train of thought. I have said it so many times before but no-body put a gun to these people's heads and told them to spend the plastic and live totally beyond their means. Of course greedy banks were going to take advantage of greedy people. Here, when the banks went tits up, they cried to our government to bail them out. We have just bought out 'The Royal Bank of Scotland' a massive lending bank. It's chairman went on national news last night to say 'Sorry' and they went crawling for a hand out from the government to keep them afloat. Gordon Brown has slashed interest rates and these are being passed on. No, it doesn't help people with fixed mortages but sorry, that's what happens when you predict that interest rates will rise and fix your mortgage to save you from rising rates. The one's without fixed rate mortgages are the one's who will now benifit.

Gordon Brown is now talking about 0% interest. His Chancellor, Alistair Darling is threatening the lenders with legal action if they do not pass the savings on.

[Oscar Namechange]

Galbally;1064646 wrote: and GM and Woolworths are going bankrupt.






It is not the governments fault that 'woolworths' are now in trouble.

They are guilty of re-branding, face-lifts and diversification when they got greedy. The never ending strive to appeal to wider audience's rather than stick at what was traditional and what worked for them for a generation. Exactly the same with other large High Street stores doing the same. Woolworths used to be exclusive but instead it tried to compete with the other giants i.e. M & S, Debanhams, John Lewis etc and found themselves in bitter competition.

But hey, when it all goes tits up, let's blame Gordon Brown.

The polls show Labour rapidly gaining on The Tory's and the result of the Glenrothes by-election should be a warning to the opposition. Gordon Brown trounced the SNP on their own turf. (yes gmc, there was a poor turn-out) but THE TORY'S LOST THEIR DEPOSIT.

A few months ago, the tory's were calling for a general election. Now it's Brown's advisors urging him to go to the vote based on his rising popularity.

HELLO..... TORY'S........ YOU LOST YOUR DEPOSIT!!!!!!!!!!





:yh_rotfl:yh_rotfl:yh_rotfl:yh_rotfl

[Galbally]

oscar;1065706 wrote: It is not the governments fault that 'woolworths' are now in trouble.

They are guilty of re-branding, face-lifts and diversification when they got greedy. The never ending strive to appeal to wider audience's rather than stick at what was traditional and what worked for them for a generation. Exactly the same with other large High Street stores doing the same. Woolworths used to be exclusive but instead it tried to compete with the other giants i.e. M & S, Debanhams, John Lewis etc and found themselves in bitter competition.

But hey, when it all goes tits up, let's blame Gordon Brown.

The polls show Labour rapidly gaining on The Tory's and the result of the Glenrothes by-election should be a warning to the opposition. Gordon Brown trounced the SNP on their own turf. (yes gmc, there was a poor turn-out) but THE TORY'S LOST THEIR DEPOSIT.

A few months ago, the tory's were calling for a general election. Now it's Brown's advisors urging him to go to the vote based on his rising popularity.

HELLO..... TORY'S........ YOU LOST YOUR DEPOSIT!!!!!!!!!!





:yh_rotfl:yh_rotfl:yh_rotfl:yh_rotfl


I agree that companies like GM and Woolworths and all the others that are going to go under have a large responsibility for their situation. The case of GM is interesting, in that here you have a company that is essentially just as important to the US economy as the banks, and yet the attitude toward it is completely different than to say AIG.

GM is undoubtedly the author of its own downfall, but then so was AIG and both were just playing the game of living in a self-created illusion of prosperity, everyone was. So why are GM told, "tough" while the banks and insurers get whatever they want, with only a slap on the wrist and some lectures in congressional committees?

At least in the States, they still have a domestic manufacturing base, unlike Britain, which has become an off-shore financial services arm of the US economy almost completely reliant on overpriced land assets, financial services, and estate agents, certainly in the south east.

I think its because the political class in Britain and America are mostly Lawyers and Economists and their focus has been almost entirely on short term financial and fiscal issues. The main problem that I see in the long run is that the US and the UK have allowed there economies to become imbalanced and rely far far too heavily on service industries, and financial industries.

That started with Thatcher and Regan and their worshipping of high finance and monetarist economic policies. Meanwhile countries such as Germany got on with the dull business of making new and better things and selling them abroad for a profit. Now Germany is the only Western country that actually has a trade Surplus with China, imagine that! A trade surplus with East Asia.

If you take the UK and Ireland now, we sit on land that is ridiculously over-priced, and thats the fundamental behind the whole thing. Why are houses 7-10 times an average person's salary? Because they were able to get the money to fund such crazy price levels, in fact they were funded to compete against each other as buyers, often by the same bank. Thats just unsustainable, and it has been from the start.

Until that credit-asset bubble is allowed to collapse there can be no starting again, because essentially all you are doing is propping up an economy of italian restaurants, fashion boutiques, and hairdressers based on a set of fantasy land evaluations, not based on people's productivity or wealth, but their ability to borrow money leveraged on their house essentially. That's fundamentally why this recession/depression was inevitable; and why we need to end the crazy ways we have been running things in the past.

I don't blame Gordon Brown alone, he is just one in a generation of politicans on both sides of the atlantic who have been seduced by economic beliefs that are delusional. The Western world isn't rich because of sophisticated financial instruments leveraged on land, and financed by Asians; its wealth was based on its use of capitalism linked with liberal rationalism and technology to boost the productivity and earnings of its peoples and companies, organized under a generally agreed rule of equitable law.

In the past, capitalism promoted this in the long-term; as investing in long-term gains in innovation and productive capacity has always paid off. I still think that Capitalism (with a capital C) is the only real way to stimulate economic activity and progressive innovation in good and services. But, it has to be organized differently, more sustainable and based on long-term growth, not short-term profit taking.

Unfortunately, in recent times, hubris and arrogance deluded westerners into believing that they could pay the Easterners to do all the hard work (with money borrowed from these same easterners' savings mostly), while we sat in fancy glass offices and counted the money. The situation is a bit like that of the French Aristocracy during the Ancien Regime; and we all know what happened to them, once the people on whose backs they lived off decided enough was enough.

If we don't abruptly change our economic and manufacturing philosophy, back to one that embraces a more balanced economy that actually produces things and a manufacturing based with people who understand engineering, science, maths and long term productivity improvements through innovation, we are going to end up impoverished backwaters living on past glories.

[Galbally]

This is a slightly alarming, but very well thought out article about how bad things really are, and how even now, most people are not really concious of what the full reality is for us.



From The Times November 22, 2008

Britain is in no position to laugh at Iceland’s problems

Patrick Hosking

Business commentary

Is Britain simply a bigger version of Iceland? Certainly the City of London is starting to look a bit too much like Reykjavik, but with taller buildings and fewer cod. It is an exaggeration, but not that much of an exaggeration, to liken the UK to the broken, bankrupt North Atlantic island.

Like Iceland, we boast a huge banking industry out of all proportion to the overall economy. Like Iceland, we have an unfunded depositor lifeboat scheme totally unequipped to grapple with failing banks. Like Iceland, our national output is dwarfed by the vast liabilities of our banks. Like Iceland, our banks for years scoffed at relying on domestic depositors to fund their activities and developed a dangerous addiction to wholesale money. Like Iceland, our Government is poised to go on a borrowing spree to try to soften the pain. Like Iceland, our currency is on the skids as foreign investors pull out.

Our problems are not nearly so extreme, of course, but we’d be foolish to feel terribly smug as the International Monetary Fund and Scandinavian neighbours go in to bathe Iceland’s wounds.

The scale of our problems has still not been understood. In essence the domestic banks are largely bust. The Government’s £500 billion bailout plan is primarily designed not to keep banks lending to small firms and to homebuyers but to prevent an unimaginable financial calamity.

Banks provide the very foundations and plumbing of the entire economy. A failure of confidence in them could still bring the entire capitalist edifice tumbling down.

It suits ministers, however, to maintain the bogus claim that the bailout is about sustaining bank lending. True, that would be a helpful side-effect, but is not the main purpose. Indeed, a gentle and gradual reduction in the indebtedness of individuals and companies is still needed.

At the risk of hyperbole, we should not be worrying about whether this is going to be a thin Christmas for retailers (it is), but whether Britain and the West are about to plunge into a years-long economic Dark Age – complete with mass unemployment and social unrest.

Taxpayers are already facing a loss of almost £10 billion on their investment in Royal Bank of Scotland, Lloyds TSB and HBOS even before the Government hands over a penny. That is what their languishing share prices are saying.

The recession has barely begun and the banks are on their knees. Scores of billions of pounds of bad debts are yet to come, as companies and individuals default on loans.

When in early October officials mapped out the bailout with banks, they insisted that those banks stress-tested their balance sheets for a serious downturn. In the six weeks since then, the outlook has darkened swiftly. The worst-case scenario imaginable then may well be looking like a central-case scenario now.

Richard Pym, executive chairman of Bradford & Bingley, the nationalised bank, told MPs this week that the bank had already stress-tested its mortgage book to see how it would cope with a 25 per cent drop in house prices (answer: £600-800 million of losses). But he no longer regarded this as sufficient and was busy putting much larger house price falls into his equations.

The fattened-up capital cushions of the banks will be enough for a while, but banks remain colossolly levered. It wouldn’t take much of a deterioration in their assets to wipe out all the fresh capital raised. The banks may well have to come back to taxpayers for more. They will be given it, too, albeit at the price of total nationalisation.

One third of Icelanders now want to emigrate, things have got so bad, a recent survey found. The proportion of Britons with similar wanderlust may not be so different before this economic agony passes.

[AussiePam]

Galbally;1065884 wrote:

In the past, capitalism promoted this in the long-term; as investing in long-term gains in innovation and productive capacity has always paid off. I still think that Capitalism (with a capital C) is the only real way to stimulate economic activity and progressive innovation in good and services. But, it has to be organized differently, more sustainable and based on long-term growth, not short-term profit taking.

Unfortunately, in recent times, hubris and arrogance deluded westerners into believing that they could pay the Easterners to do all the hard work (with money borrowed from these same easterners' savings mostly), while we sat in fancy glass offices and counted the money. The situation is a bit like that of the French Aristocracy during the Ancien Regime; and we all know what happened to them, once the people on whose backs they lived off decided enough was enough.

If we don't abruptly change our economic and manufacturing philosophy, back to one that embraces a more balanced economy that actually produces things and a manufacturing based with people who understand engineering, science, maths and long term productivity improvements through innovation, we are going to end up impoverished backwaters living on past glories.


Galbally - Let us sincerely hope that EVERYONE including world leaders, political and financial, read Forum Garden!!!!!!!!!!!!!!!!!!!!!!!!

[Oscar Namechange]

Galbally;1066008 wrote: This is a slightly alarming, but very well thought out article about how bad things really are, and how even now, most people are not really concious of what the full reality is for us.



From The Times November 22, 2008

Britain is in no position to laugh at Iceland’s problems

Patrick Hosking

Business commentary

Is Britain simply a bigger version of Iceland? Certainly the City of London is starting to look a bit too much like Reykjavik, but with taller buildings and fewer cod. It is an exaggeration, but not that much of an exaggeration, to liken the UK to the broken, bankrupt North Atlantic island.

Like Iceland, we boast a huge banking industry out of all proportion to the overall economy. Like Iceland, we have an unfunded depositor lifeboat scheme totally unequipped to grapple with failing banks. Like Iceland, our national output is dwarfed by the vast liabilities of our banks. Like Iceland, our banks for years scoffed at relying on domestic depositors to fund their activities and developed a dangerous addiction to wholesale money. Like Iceland, our Government is poised to go on a borrowing spree to try to soften the pain. Like Iceland, our currency is on the skids as foreign investors pull out.

Our problems are not nearly so extreme, of course, but we’d be foolish to feel terribly smug as the International Monetary Fund and Scandinavian neighbours go in to bathe Iceland’s wounds.

The scale of our problems has still not been understood. In essence the domestic banks are largely bust. The Government’s £500 billion bailout plan is primarily designed not to keep banks lending to small firms and to homebuyers but to prevent an unimaginable financial calamity.

Banks provide the very foundations and plumbing of the entire economy. A failure of confidence in them could still bring the entire capitalist edifice tumbling down.

It suits ministers, however, to maintain the bogus claim that the bailout is about sustaining bank lending. True, that would be a helpful side-effect, but is not the main purpose. Indeed, a gentle and gradual reduction in the indebtedness of individuals and companies is still needed.

At the risk of hyperbole, we should not be worrying about whether this is going to be a thin Christmas for retailers (it is), but whether Britain and the West are about to plunge into a years-long economic Dark Age – complete with mass unemployment and social unrest.

Taxpayers are already facing a loss of almost £10 billion on their investment in Royal Bank of Scotland, Lloyds TSB and HBOS even before the Government hands over a penny. That is what their languishing share prices are saying.

The recession has barely begun and the banks are on their knees. Scores of billions of pounds of bad debts are yet to come, as companies and individuals default on loans.

When in early October officials mapped out the bailout with banks, they insisted that those banks stress-tested their balance sheets for a serious downturn. In the six weeks since then, the outlook has darkened swiftly. The worst-case scenario imaginable then may well be looking like a central-case scenario now.

Richard Pym, executive chairman of Bradford & Bingley, the nationalised bank, told MPs this week that the bank had already stress-tested its mortgage book to see how it would cope with a 25 per cent drop in house prices (answer: £600-800 million of losses). But he no longer regarded this as sufficient and was busy putting much larger house price falls into his equations.

The fattened-up capital cushions of the banks will be enough for a while, but banks remain colossolly levered. It wouldn’t take much of a deterioration in their assets to wipe out all the fresh capital raised. The banks may well have to come back to taxpayers for more. They will be given it, too, albeit at the price of total nationalisation.

One third of Icelanders now want to emigrate, things have got so bad, a recent survey found. The proportion of Britons with similar wanderlust may not be so different before this economic agony passes.


Bollocks. The recovery in Britain is attainable and will continue to be. Gordon Brown and Alistair Darling have already riden the worst of the storm and the pre-budget report on monday is expected to be a £15 billion life-line of tax cuts and fiscal stimulation.

What i find most of the time that you and i galbally discuss Britain's econony, i am able to tell you what exactly my Prime Minister is doing. Yet, i hear nothing from you about what the Irish government is doing to climb out of the recession your in.

'Darling' has said the fastest way to help consumers and businesses is with straight forward changes to tax rates and thresholds. There is also a sign that monday's pre-budget report will unveil substantial VAT relief. Also to be announced is a large scale increase in a government scheme that gives credit to small businesses. By delivering immediate tax cuts , through an emergency Finance bill, it can only ease the downturn next year.. A £15 billion tax cut package could add as much as 0.4% back to economic output next year, avioding the depth of a slump.

Tax cuts and thresholds can easily be reversed if and when the economy recovers, meaning long term effects on the public finances can be neutralised.

Gordon Brown said yesterday that he refused to rule out full scale nationalisation if banks continue to refuse to increase credit to small businesses and familie's. The Treasury said that 'Darling' is ready to take legal steps to force banks to lend.

Now, what is YOUR Prime Minister doing galbally???

[Galbally]

oscar;1066668 wrote: Bollocks. The recovery in Britain is attainable and will continue to be. Gordon Brown and Alistair Darling have already riden the worst of the storm and the pre-budget report on monday is expected to be a £15 billion life-line of tax cuts and fiscal stimulation.

What i find most of the time that you and i galbally discuss Britain's econony, i am able to tell you what exactly my Prime Minister is doing. Yet, i hear nothing from you about what the Irish government is doing to climb out of the recession your in.

'Darling' has said the fastest way to help consumers and businesses is with straight forward changes to tax rates and thresholds. There is also a sign that monday's pre-budget report will unveil substantial VAT relief. Also to be announced is a large scale increase in a government scheme that gives credit to small businesses. By delivering immediate tax cuts , through an emergency Finance bill, it can only ease the downturn next year.. A £15 billion tax cut package could add as much as 0.4% back to economic output next year, avioding the depth of a slump.

Tax cuts and thresholds can easily be reversed if and when the economy recovers, meaning long term effects on the public finances can be neutralised.

Gordon Brown said yesterday that he refused to rule out full scale nationalisation if banks continue to refuse to increase credit to small businesses and familie's. The Treasury said that 'Darling' is ready to take legal steps to force banks to lend.

Now, what is YOUR Prime Minister doing galbally???


You misunderstand what I am trying to say. I am not slagging off Britain per se, or trying to say that in Ireland the powers that be have any more of a clue than they do in Britain, in fact I would say that your lot seem to be more proactive than the current Fianna Fail led Government in Dublin, my lot are going the Thatcher route of allowing mass redundancies and letting the boys in big money sweep up after the edifice has collapsed.

This isn't a political thing, and I don't have a strong opinion about Gordon Brown one way or the other, I am not an English tory. My point is that generally across the board in Britain, Ireland, the US, Europe, there seems to be still a large amount of denial about what has happened, and just how stark these problems we have now are.

I don't think David Cameron has any better idea about the problem than Gordon Brown, or maybe they both realize it, but are not in a position to really discuss the seriousness of it because of the panic it might cause if people realized the financial abyss we are all sitting on the edge of right now.

Thats why I am worried. I appreciate that your a big Gordon Brown supported (its not hard to see), and if he can steer Britain around this somehow then brilliant, I will be delighted because my own country and Britain are linked, as are all the EU countries, and we will either get through this together or not at all. I just don't see that the leaders are being completely honest about how bad this situation is.

What I would say is that we have structural problems in our economies that go back decades, as we have far too much emphasis on making a quick buck out of property and financial services, without much emphasis on long-term prosperity. Which is the major reason why our two countries are by far the most exposed in Western Europe to the current problems, and the least capable of getting ourselves out of it, without relying on borrowing like crazy to prop up consumer spending.

To be honest it starting to become apparent that the reality is that the model of global capitalism we have been using has essentially collapsed, it may seem like its still working, but thats just inertia in my opinion. The world financial system has completely broken down, the consequences are only really starting to filter through now; and the next economic period is going to depend on governments trying to keep economies going until some new paradigm for running private finance on a global (even a national) level can be worked out.

[Galbally]

Also Oscar, that article was in The Times, which is not a paper I always agree with, but you have to admit that standard of economic comment in the Times is somewhat better than that you get in "The Sun" or "The Daily Mail".

Not that I am going to harp on about the Newspapers, they all have their problems. Though if I was allowed to be in power, the first thing I would do would be to ban tabloid journalism. I'd probably have a crack at getting rid of mush of commercial television as well.

[OpenMind]

One of the important aspects to this financial plunge is that it is not just the UK or Ireland. Many countries have been affected in the same way and, from what I can see, for the same reasons. Not all countries, but enough to balance the odds.

Most of the European countries are not suffering as badly as the UK or the USA. There's a lesson to be learnt there somewhere.

[Oscar Namechange]

OpenMind;1067266 wrote: One of the important aspects to this financial plunge is that it is not just the UK or Ireland. Many countries have been affected in the same way and, from what I can see, for the same reasons. Not all countries, but enough to balance the odds.

Most of the European countries are not suffering as badly as the UK or the USA. There's a lesson to be learnt there somewhere.


Gordon Brown gets slated naturally due to his time as Chancellor under Blair.

I have been doing a huge amount of reading on this as for me to support Brown, i have to have faith in what he is doing, as does everyone.

Without googling the precise figures, Gordon Brown actually borrowed the least amount of money compared to any other Western country. It appears that he did see the warning signs and cut back on borrowing as Chancellor but now we are faced with a situation where to borrow, is the only option to avoid a deeper slump.

What i have asked the Tory's time and time again, oh and that deluded idiot, Clegg, is what is the alternative?

The Tory's are very quick to come out and pillor Brown on any government proposal but what are they offering as an alternative? Less borrowing means cutbacks plain and simple. The country needs fiscal stimulation weather we agree or not. If Brown does not borrow this from Saudi, we will have increased taxes making our lives more difficult to recover. The money can not come from anywhere else. If he does not borrow, taxes rise and cutbacks in health and Education will spiral the loss of jobs anyway.

In the pre-budget report tomorrow, Darling is to announce the first cut in VAT for Years. Without checking my facts, i don't believe that any leader has actually cut VAT and it's a huge step to get the economy going. The last time VAT was amended was under 'Norman Lamont' who raised it from 15% to 17 and a half %. The announcement tomorrow that Darling is to reduce VAT back to 15% is going to be a further boost to small businesses and the savings will be passed on in consumer goods. Brown is also urging other EU leaders to follow suit and kick start the European economy.

The future's bright..... The future's BROWN

[Oscar Namechange]

Galbally;1066948 wrote: Also Oscar, that article was in The Times, which is not a paper I always agree with, but you have to admit that standard of economic comment in the Times is somewhat better than that you get in "The Sun" or "The Daily Mail".

Not that I am going to harp on about the Newspapers, they all have their problems. Though if I was allowed to be in power, the first thing I would do would be to ban tabloid journalism. I'd probably have a crack at getting rid of mush of commercial television as well.


I also saw this article in the Times. It's meant to be The Daily mail that is doom and gloom but the Times is worse. Nothing wrong with tabloid journalism providing they have the facts. The Mail was very good when they reported on me.

I did not accuse you of having a swipe at Britain. I asked what your Prime Minister was doing merely as you seem to be in a far worse position than us. I can imagine that if Brown announced the notion that he was axing over 70 yr olds health care, he would be pillored.

If we go back to the loss of jobs and take Woolworth as an example. As i said before, diversification and massive borrowing led to their downfall. They owe £35 million. They went into a High Street bidding war with the other giants and lost out. I do get slightly miffed when anyone directly blames Brown for their downfall. This is a retail version of the greedy neighbour who has spent the plastic to the max, lived totally beyond their means and now crie's because the people carrier is about to be re-possessed.

Everything that Brown is doing has been to help familie's and small businesses. He has even now ruled that home owners will have three months grace before any re-possession proceedings can begin by the greedy banks and lenders. I don't remember a PM in history that has threatened the lenders with legal action if they do not pass on his cuts in interest rates.

I said it on another thread but again, the biggest mistake the Torie's, the Tory supporters and anyone else made was to take it for granted that Brown was just another Blairite and would carry on in the same vein. I think Brown has shown himself to be a completely different animal all together.

A slump is un-avoidable but growth in the economy and massive fiscal injection without the tax payer paying now, will boost output and avoid a real depression as i fear America is about to have.

Brown is also to announce the withdrawal of all troops in Iraq. The electorate was split under Blair with oppossition to the war. Pulling out, will see a massive swing to Labour.

Although Brown has ruled out a June snap election, David Cameron on friday put his team on high alert just incase.



Me??? A Gordon Brown supporter?? What on earth gave you that idea????

THE FUTURE'S BRIGHT........ THE FUTURE'S 'BROWN'

[OpenMind]

A 2&1/2% cut in VAT is only going to save the individual consumer £2.50 for every £100 spent. That's not going to make a lot of difference to people's spending power and certainly not for those who have already lost their jobs. On the other hand, losing the 10% income tax band made a lot of difference to everyone paying income tax.

Gordon Brown had 10 years to prevent or divert this disaster. The policies that are being introduced for this budget appear to me to be a part of a major political manipulation of the populace and industry. The policies may look good in the light of the current economic crisis, but this crisis should have been diverted, especially if, as you suggest, Oscar, Gordon Brown saw it coming.

A larger unemployed labour force along with those who have lost their investments in their homes weakens the populace. Wages stay low. A lot of the small businesses that have shut down will be unlikely to have the capital to start up again. Like the homeowners whose mortgages defaulted, those businesses dependent on loans or borrowed equity will be blacklisted.

[Oscar Namechange]

OpenMind;1067353 wrote: A 2&1/2% cut in VAT is only going to save the individual consumer £2.50 for every £100 spent. That's not going to make a lot of difference to people's spending power and certainly not for those who have already lost their jobs. On the other hand, losing the 10% income tax band made a lot of difference to everyone paying income tax.

Gordon Brown had 10 years to prevent or divert this disaster. The policies that are being introduced for this budget appear to me to be a part of a major political manipulation of the populace and industry. The policies may look good in the light of the current economic crisis, but this crisis should have been diverted, especially if, as you suggest, Oscar, Gordon Brown saw it coming.

A larger unemployed labour force along with those who have lost their investments in their homes weakens the populace. Wages stay low. A lot of the small businesses that have shut down will be unlikely to have the capital to start up again. Like the homeowners whose mortgages defaulted, those businesses dependent on loans or borrowed equity will be blacklisted.


Yes, it's futile to attempt to claim that Brown is not responsible for our economic problems. However i do still believe we are far better off than America or some countrie's like Iceland.

If he did indeed see it coming, i think the downward spiral had already begun globaly. He could have gone the other way and raised taxes and reduce borrowing in this budget but i just can not see an alternative now.

While Brown will continue to take the blame with the opposition, it has to be said that they have little to offer now.

Brown is not entirely to balme for our 'boom or bust' policy. Greedy banks, greedy lenders and frankly, greedy business's borrowing way above their means also pushed the button. Greedy consumers living beyond their means, in houses that now rely on two income's to pay for them.

My sympathie's are with the genuine folk who lived within their means and have paid their way. I'm sorry but i have no sympathy for the like's of Woolworths, left with a massive £35 million debt.

[Galbally]

OpenMind;1067353 wrote: A 2&1/2% cut in VAT is only going to save the individual consumer £2.50 for every £100 spent. That's not going to make a lot of difference to people's spending power and certainly not for those who have already lost their jobs. On the other hand, losing the 10% income tax band made a lot of difference to everyone paying income tax.

Gordon Brown had 10 years to prevent or divert this disaster. The policies that are being introduced for this budget appear to me to be a part of a major political manipulation of the populace and industry. The policies may look good in the light of the current economic crisis, but this crisis should have been diverted, especially if, as you suggest, Oscar, Gordon Brown saw it coming.

A larger unemployed labour force along with those who have lost their investments in their homes weakens the populace. Wages stay low. A lot of the small businesses that have shut down will be unlikely to have the capital to start up again. Like the homeowners whose mortgages defaulted, those businesses dependent on loans or borrowed equity will be blacklisted.


To be fair to Gordon Brown, obviously he is directly responsible for not preventing the City of London from doing what it has over the past 10 years. But then, I don't think that anyone in the entire political or economic class in Britain or America really understood how dangerous things were becoming with the way our economies were being run, and how the financial system was allowed to develop as globalization occurred. Also, given Britain's far too cosy relationship with America for decades, it would have been exceedingly hard for any British politician could argue against the mantra coming out of Wall Street and Washington about deregulated free markets, if only someone had it would be different now, but thats hindsight.

In short, Brown does have to take some of the blame, but I think this was truly a collective inability to percieve the truth that we have allowed a manner of living to develop based on a philosophy that was fundamentally unsustainable, and its fallen apart. What's important at this moment are solutions, we need the people who realized what was going wrong (and trust me, there were quite a few people who have been warning vociferously for years that we were headed for economic, social, and political disaster) to now come up with the most workable solutions to avert the worst of the short term problem; and in the longer term we need to take stock of an awful lot of things, and develop a better way of life, that won't kill us in the long run. Living within the means of our real resources has to be the first principal of that new lifestyle

.

[OpenMind]

Galbally;1067471 wrote: To be fair to Gordon Brown, obviously he is directly responsible for not preventing the City of London from doing what it has over the past 10 years. But then, I don't think that anyone in the entire political or economic class in Britain or America really understood how dangerous things were becoming with the way our economies were being run, and how the financial system was allowed to develop as globalization occurred. Also, given Britain's far too cosy relationship with America for decades, it would have been exceedingly hard for any British politician could argue against the mantra coming out of Wall Street and Washington about deregulated free markets, if only someone had it would be different now, but thats hindsight.



In short, Brown does have to take some of the blame, but I think this was truly a collective inability to percieve the truth that we have allowed a manner of living to develop based on a philosophy that was fundamentally unsustainable, and its fallen apart. What's important at this moment are solutions, we need the people who realized what was going wrong (and trust me, there were quite a few people who have been warning vociferously for years that we were headed for economic, social, and political disaster) to now come up with the most workable solutions to avert the worst of the short term problem; and in the longer term we need to take stock of an awful lot of things, and develop a better way of life, that won't kill us in the long run. Living within the means of our real resources has to be the first principal of that new lifestyle

.


Indeed, I have already made reference to the widescale nature of this financial fallout in an earlier post here. The other problem, of course, is that we don't have a free economy any more. Even if all the nations in the world took up free economic policies, the balance of financial resources are such that there are institutions and people running those institutions who hold power over those resources and can manipulate them at will. We will never have a free economy unless those institutions and their like are removed.

[Oscar Namechange]

OpenMind;1067477 wrote: Indeed, I have already made reference to the widescale nature of this financial fallout in an earlier post here. The other problem, of course, is that we don't have a free economy any more. Even if all the nations in the world took up free economic policies, the balance of financial resources are such that there are institutions and people running those institutions who hold power over those resources and can manipulate them at will. We will never have a free economy unless those institutions and their like are removed.


I have just read on line that the threat of legal action from Brown and darling has made one bank declare that it is to freeze overdraft interest.

Let's hope the rest follow suit very quickly.

[OpenMind]

oscar;1067482 wrote: I have just read on line that the threat of legal action from Brown and darling has made one bank declare that it is to freeze overdraft interest.

Let's hope the rest follow suit very quickly.


I thought they were supposed to lower the interest rates, not freeze them.

[Oscar Namechange]

OpenMind;1067484 wrote: I thought they were supposed to lower the interest rates, not freeze them.


Other banks have lowered the interest rates and those who are slow in passing on the government cut have been threatened with legal action so I'm quite confident they will follow suit.

For a bank to freeze interest rates on those with a heavy over-draft is even better news. It's got to be far better having no interest accumalating on your over-draft than even a small rate. This hopefully will be followed by other lenders and give small businesses and folk chance to repay their over-draft instead of just paying the lender never ending interest.

I've just heard on the 10 oclock news that the pre-budget staement tomorrow will say that the people who earn more than £150,000 a tear are going to be the one's who will pay higher tax to pay for the tax cuts for the lower income familie's.

Cameron is stuffed. If he opposes this, it will show the country that he is protecting the rich and want's to continue to raise taxes on lower income earners. He can't get out of it.

Brown will come out the hero. :yh_rotfl:yh_rotfl:yh_rotfl

[OpenMind]

oscar;1067568 wrote: Other banks have lowered the interest rates and those who are slow in passing on the government cut have been threatened with legal action so I'm quite confident they will follow suit.

For a bank to freeze interest rates on those with a heavy over-draft is even better news. It's got to be far better having no interest accumalating on your over-draft than even a small rate. This hopefully will be followed by other lenders and give small businesses and folk chance to repay their over-draft instead of just paying the lender never ending interest.






Thanks for clarifying that Oscar.

[Oscar Namechange]

openmind;1067984 wrote: thanks for clarifying that oscar.


what did you think of the budget?

[OpenMind]

oscar;1068160 wrote: what did you think of the budget?


I have not seen it in its entirety so I can't say really. I've heard bits and pieces on the news but I'm waiting till I see the whole thing.

[gmc]

OpenMind;1068640 wrote: I have not seen it in its entirety so I can't say really. I've heard bits and pieces on the news but I'm waiting till I see the whole thing.


You have to laugh-let's help sales by lowering vat so all the business have to waste money reprinting all point of sale they have already had printed in time for Christmas and pay overtime to staff to get all the price labels and signs changed.

One thing about Gordon Brown no one can accuse him of joined up thinking.

[Oscar Namechange]

gmc;1069172 wrote: You have to laugh-let's help sales by lowering vat so all the business have to waste money reprinting all point of sale they have already had printed in time for Christmas and pay overtime to staff to get all the price labels and signs changed.

One thing about Gordon Brown no one can accuse him of joined up thinking.


Do you really think that one of the pre-budget proposals included considering how many labels would have to be changed in shops ? :yh_rotfl:yh_rotfl:yh_rotfl



'Hey Alistair... we'll have to scrape the plans to reduce VAT... too many labels man.

[OpenMind]

I've got as far as Chapter 2 so far. The Government's main concerns are as follows:

"2.54 The global credit and commodity price shocks have adversely affected economic

growth and the financial and property markets in the UK, as they have around the world.

These developments also have significant implications for the public finances:

lower economic growth acts to significantly reduce tax receipts, in particular

from income tax, VAT and corporation tax due to lower incomes, consumption

and profits;

the financial crisis additionally affects the tax take from the financial sector,

which over recent years has generated about 25 per cent of corporation tax

revenue. Earnings and bonuses in that sector are also affected, reducing

income tax receipts;

sharp falls in house and share prices reduce capital gains tax and stamp duty

receipts;

the automatic stabilisers are working to support the economy, increasing

spending on social security benefits; and

higher than expected inflation since Budget 2008 has resulted in higher

social security expenditure, reduced tax receipts (due to higher allowances)

in 2009-10, and increased the cost of servicing index-linked gilts in 2008-09.

These pressures moderate significantly over the projection period, as inflation

is expected to fall sharply next year."



Neither is there any guarantee that the VAT decrease will be passed on to the consumer. If you work through the figures, what costs £100 now will cost £97.88 on 1/12/08. That's a saving of £2.12. However, businesses are not being forced to pass this saving on to the consumer. They will be able to add to the basic pre-VAT cost of the item being sold. Either way, the Government gets its wack.

I can't see how £2.12 per £100 spent is going to help the general public. Small businesses might benefit only if it does encourage sales. In the present climate, it is unlikely that businesses are going to push their prices up and take advantage of the VAT decrease that way.

The Government has also presumed that a certain portion of the public will increase their spending automatically.

"2.43 In addition, Chapter 5 sets out the measures the Government is bringing forward to

benefit those on low and middle incomes, helping to boost spending as these households tend

to have a higher propensity to increase consumption in response to an increase in income."

Ultimately, while the aforementioned £2.12 per £100 spent won't help small businesses or consumers much, the Government expects to do very well out of it from the perspective of the macroeconomy.

[Galbally]

Well I've left this thread alone for a couple of weeks to see what would happen. I know that in the current situation 2 weeks seems to be a long time. But anyway.

So now the US has cut its interest rates to practically zero, the first time it has done so in its history, or actually in the history of any western banking authorities (other than Japan in the early 1990s) and now the Fed is also going to just buy up bank's bad mortgage assets using these new piles of Dollar denominated money that it is going to start printing at presses somewhere on the East Coast.

I suppose the calculation the US is making is that it will be allowed to print a whole lot of money by the rest of the world (or that rich part of it that has invested its savings in US dollars and bonds) because the dollar is still the reserve currency, and no one wants it to collapse, so they will get away with it, unlike lesser nations (like Britain). I hope the rest of the worlds capital markets don't call the US Governments bluff on the dollar, and its own economic integrity.

Anyway, here we are folks, we are finally at the "printing more money" stage, this being done by the world's largest debtor nation owing well over 10 trillion, with the the worlds largest economy, and the most important global currency. Perhaps this is the right thing to do, I don't know, Ben Bernanke seems like a nice man, perhaps he is right and all those books he has read about the Great Depression will help, but it seems like one hell of gamble to me, and that tells me that they have little choice or they wouldn't dream of doing something like this.



So what's next?