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House Price Crash Forum


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Everything posted by aa3

  1. Right-o. I've heard KMPG are scaling back their private sector business, and focusing on government work now, namely those audits. As the private corps are getting squeezed hard, the gargantuan accounting fees are an easy way to cut back.
  2. I'm in accounting, the family business.. and I agree with you. It is asinine what companies are paying for accounting work from groups like KPMG. There is no reason Indian finance people couldn't do the exact same work, at least over 90% of the time. KPMG will send out junior staff - I'm talking people not even with an accounting degree, doing routine formula work, and charge over £100 an hour. For the big wigs its more like £400 an hour... Now they claim their knowledge is so great, so deep that it would be impossible for an Indian to learn it, but I dont' believe it. I honestly learned how to do accounting in a few months, its mainly just a matter of doing it with someone who already knows how. (even though we make fancy pants degrees of many years to learn these super secret methods). Quite a few jobs are going through government or other standardized forms and simply filling them out with the information from the company's books. Imo the reason financial work hasn't been outsourced yet is the companies are ran by finance guys. Who all assume that the UK trained accountant, their knowledge is so vast, their value so great, that ALL finance work must be done from UK trained people - even if it tens times more than elsewhere. Yet on other fields they just do a cost-benefit analysis. Its really teh same argument tradesmen used.. third world people would never be able to put together a manufactured product anywhere near the same as them. According to those tradesmen it would take decades of training and experience before a Chinese person(or Japanese and Korean before them), might, be able to learn their vast skills. Then we heard it from the software/IT guys. Then call center people.. Indians were incapable of ever learning to communicate in English.
  3. In a recession(or worse) I guess people no longer need to buy exotic financial instruments with a history of blowing up... but they still need to buy food, including all sorts of exotic foods available in the wonderful variety these supermarkets offer. I just wish there was legislation or something that all retailers had to pay higher wages. So no chain would be at a competitive disadvantage, as they'd all have to pay the higher base wages.
  4. These banks were making insane huge loans, even to risky borrowers with little tiny spreads over the central bank rate(especially considering their very high costs of business because of way out of line compensation). Considering the asset values have fallen or are going to fall 50% or more, once the defaults start it is going to obliterate them. Think of lending 400 million to a developer building 20,000 tract homes in the USA that are now nearly worthless. Deutche bank would only be able to collect a few tens of millions if it went down. Deutche Bank has like 2 trillion euro in assets and 2 trillion in liabilities. So if I assumed a 30% default rate, and an 80% loss of capital per default.. it would be a 24% capital loss.. which would be around 500 billion euros. Their total equity is listed as 37 billion euros. Someone put it even more simply. If we assume assets fall 50% across the board, the banks 'assets' are halved arguably. So 1 trillion euro in assets versus 2 trillion in liabilities. Then its just about hoping borrowers keep paying, even though they are underwater. In fairness to DB some of the assets and liabilities are mutual funds and the like they are managing for people or in customer accounts. So as those go down in value, so does the liability of the bank equally.
  5. It looks right overall. One thing I recommended when this credit crisis started with subprime, was load all the bad debts into one bank.. then just bring that bank down and default on the loans to the central bank. It means all that money that was created with those loans stays in the system without having to be paid back(+interest).
  6. With endless regulatory bureaucracy(10 years of studies, commissions, approval councils, courts for new plants if they get approved), heavy taxes, and a radical green movement trying to chase all industry out of the country through the governmetn agencies and courts... A company would nearly be breaching their fiduciary responsbility to shareholders to build plant in the UK. Thats why I don't think the UK will come back from this downfall anytime soon. A well educated populace is no longer a decisive factor, as many third world nations are becoming well educated, heck look at the 2nd world countries in eastern europe who are now in the global economy. On the bright side the regulatory and tax issues are changeable factors. But I think the current system will have to collapse before those get changed. To show how bizarrely out of touch the leaders are, they are still driving through tough new carbon taxes to fight global warming during a freezing winter, and epic economic blowup.
  7. Yes I'm a libertarian by nature, but who has read Marx and Lenin. Like you I thought Marx's analysis of the problems of capitalism in the long run was very brilliant. And that his solutions were worse than the problem in many cases, although he did have some good ideas - eg, the state central bank. Which the founding fathers of the US also gave the power to issue money to the congress. The downside of some of their seize private property and companies is communist societies have just stagnated and been unable to enjoy the advancing technology of capitalist societies. At best they import the tech from those other countries. Its a good point about the global nature of capitalism now, its only been about 20 years since all humanity went capitalist. I strongly agree with the state income for life. If you look at programs like welfare around the world about 2/3 to 3/4 of the program is always spent on administration. On the other hand Social Security in the United States, which everyone gets(once they are old enough), has overhead of less than 1% of the payments. Benefits that go to everyone are also far more popular(like public funded health services). Few are going to complain about welfare for the poor if they get the same amount. I also like your time limited spending voucher, its a great way to spur consumption without having people save(although the money gets into the system and will allow producers to save). I had a similiar proposal for the US auto industry. Instead of bailing out the companies, while consumers still can't afford to buy a new car... bail out the consumers with 500$ vouchers sent to every man, woman and child in the country. With a 2 year time horizon on them. The cost in the USA would be 150 billion$. Now not everyone would use the vouchers, but you put no limit on how many vouchers can be used to purchase one car. So soon a market will spring up where citizens can trade the vouchers for cash. Maybe they would buy the 500$ vouchers for 400$. The other side of the trade would be new car buyers could buy the vouchers for say 420$ for a 500$ voucher. It would nto harm capitalism's Shumpeteriun strengths. As there would be no demands on the customers having to buy a certain make of car. I'd like to see the guarunteed income across all the industrialized societies.. USA, UK, Canada, Aus, Japan, Korea, EU, maybe even China now. I suspect we'd see less pressure on the workforce supply too. Like some people deciding to only work 30 hours a week, instead of 40. Some people retiring a little earlier. Others deciding to pursue a more advanced degree. Which could help put some pricing pressure on wages.
  8. Very good ideas and points. This is the line we have to think down I believe.. I'll respond when I have more time later.
  9. Would you quit working if you got a £500 stimulus cheque? Heck even if you got an annual £2,000 tax free stimulus cheque(if that high level was neccessary) would you quit working? I admit at some level some people would stop working, but I think it would have to be very high. What I can see more likely is at some point people deciding to take more time off than otherwise. On a deeper level there is a fundamental change going on today compared to the past. Automation.. think of what a server farm can do for back office bank work, compared to tens of thousands of clerks in days gone by. Or the new car factories with robots everywhere which work around the clock. The problem is who buys the cars when the former auto workers are unemployed.
  10. I think you are right that the Japanese never really wanted Quantitative easing to work. Putting money on the bank balance sheets only will help if those balances are too low for them to lend. And that wasn't a problem in Japan, so I'm not sure what it did besides make very low bond rates even lower. On the other hand tax cuts and or direct cheques to the citizens of Japan would have gotten them out of deflation at some point. If 500$USD doesn't work, do the next one 1,000$, then 2,000$ to every man, woman and child in the country regardless of income. At some point it will break deflation. I will note that the relatively small stimulus cheques the US gave out in the spring of '08 had a clear measurable boost in the real economy. Its thought those cheques boosted the economy 3% above what it would have been that quarter. The cost of that was about 130 billion I believe ~1% of GDP...small compared to the endless bank bailouts. Heck they've thrown more into AIG alone.
  11. This crisis is not like other crisis, where a developing nation borrowed more than its productive capital could pay back. Or like a Zimbabwe where real production was falling off a cliff. The world has the productive capital, it just has hit a wall where people don't have enough money personally to buy the things they are producing. We hit a wall earlier in about 1990 with this problem, but got around it by starting a credit bubble. The mechanism for getting money to average people to spend was through credit expansion and asset inflation. With them borrowing against the rising paper value of their assets. Now that mechanism has hit a wall. Btw before that period of credit getting to average people, western societies were getting money to people through wages of industrial workers. The mass demand for washing machines, cars, refrigerators, electrical machinery, pipelines and so on meant masses of people working to make them. Those workers formed unions as there were more jobs than workers, and as productivity rose, the unions negotiated higher wages. It was a nice closed loop. But at some point, capitalism got around these wages with huge automation, free trade and the like. Now industrial wages are declining even as the productivity is growing as powerfully as ever. Those workers can't keep up with their buying, and the ones made redundant definately can not. Because of this we need a new paradigm for getting money into the hands of the people.
  12. The tax cut is a good way to do it. I've been saying for years before this crisis started that eventually we will face a severe deflation crisis. As technology is advancing so powerfully. My own solution is to print money and send it directly to the citizens of the country in equal amounts. Free market capitalism works wonders but does cause an accumulation of wealth by the few, and then the middle class can't afford to buy the products that they are producing so prodigiously. So send £2,000 directly to every citizen in the country. Heck I think the governmetn has committed to borrow or back up £560 billion in the last 6 months. Imagine if they sent 560 billion/60 million = £9,000 to every person in the country. A family of 4 would get £36,000. Think that would help the velocity of money, and consumer spending. And for people to make their mortgage payments. Of course such a high amount wouldn't be needed. The officials could just start flooding the country with money until demand picks up. The problem now is they are flooding the banking system with money, but average people aren't getting any of it. So the banks can't even lend the money out as the people can't pay it back anyway. Another way to do it is as you mentioned tax cuts. So the government would dramatically increase borrowing, and by reducing taxes it would put more money into the hands of people. It would sort of be regressive.. but a way around that is to do both tax cuts and stimulus cheques. It also should be done on a global scale, with the EU, UK, Japan, China and US all pushing money into the hands of their people.
  13. Before there ever was public schools the UK was the powerhouse of the world for knowledge creation. Now a leader on how we're all going to die from global warming.
  14. Hey a mainstream type of guy getting into the territory that us bears have been talking about online(for years). I think its a reasonable prediction, once masses of speculators are in forced sell position, and bankers are getting loaded with reposessions and want to clear them out because of taxes and maintenance costs, things can come down that hard. The mainstream economists also missed the cascading effects of a downturn. Many construction guys of all types, loan brokers, estate agents, building material suppliers and so on getting downsized or at least facing large reduction in wages.. making them unable to pay the mortgage and then their homes coming onto the market. An older acquaintance of mine who owns rental property in Florida and the UK and is rich from a successful business unrelated to real estate, claims he just purchased a Florida home that sold for 600,000$USD in 2006 for 50,000$USD. Bought it off a bank who wanted to get it off the books. Now the house was stripped so he estimates it will take 25,000$ to get it back into proper condition. Even if we take the 75,000$ cost that is an 87% fall in price.
  15. £6 an hour for Checkout girls. Minimum qualifications bachelor's degree in mathematics, computer science or equivilant. £5.50 an hour for Butcher's assistant. 2 yr diploma in culinary arts, up to date food safety certifications.
  16. Somebody should do a running tally of all the government borrowing we hear about. I think I will start a thread on it actually.. Off the top of my head, there has been(and I could be way wrong here): 350 billion bailout of the banks, (browns 'all in') 100 billion national deficit estimate 110 billion just announced to buy mortgage mbs So that would be 560 billion pounds. Which would be 560 billion pounds/365days/24hours = 63 million pounds an hour if all that is borrowed in one year. On the other side their asset column theoretically will go up some, those 110 billion mortgage mbs aren't worth 0, and the stakes in the bank may have some value. (although if they can never return to profitability the asset is worth 0).
  17. I think people are still thinking this is a normal correction, to be followed by a rebound later. In that case cutting rates so deep and psychotic bailouts are not the answer.. as they will cause huge problems as time goes on. However if you look at it like the country is on the edge of total economic breakdown, and its the only option to keep things going.. then the suicidal rate cuts make sense.
  18. I think the elites know if they actually let things correct it would bring down the system, as the problems are so systemic and they aren't able to deal with it. So they are going to ZIRP and bailing out any losses no matter how large or what impact on the currency or horrible distortions in the economy to keep the game going. It seems to me this will only keep the game going for a few more years at the most.. but for them a few more years is better than now, plus there is always the chance for a miracle in the meantime.
  19. Honestly there is some opportunity there if Ukraine is that cheap still. Once trade barriers come down there is no reason not to grow the crops there and import them. Also labour and just about everything else is probably cheaper in Ukraine as well.
  20. Good god that is obscenely overpriced. In other first world nations you can get farmland for 400 pounds an acre.
  21. On a cost of goods sold basis the gross margin must be huge.. llike the card costing them .50. But if they are an organization with 1,404 workers they are going to have like VP of human resources, an accounting department, marketing department, buildings management of some sort. And all those white colar employees are going to be making big money. Then audits, and legal work, insurance for employees and so on. They end up having to charge that price.. but then there has got to be a dis-incentive for customers to buy cards at some price. Having said all that, apparently the business is more viable than I would have thought, considering other posters talking about a plethora of card shops where they live. If some of the shops close down it may let the remaining ones increase their sales and or increase their prices.
  22. Its amazing to me in this day and age with the unbelievable costs businesses face in the UK.. that card shops could stay in business(as long as they have). Set costs like utilities, huge taxes for all sorts of things, fees, professional services and so on. You'd have to sell a hell of a lot of cards to pay just your accounting bill for example. Honestly a lot of companies like clothes retailers probably aren't far behind. To cover these rents and taxes you have to sell a hell of a lot of shirts a month. The only way is to charge a ton for them, and thats only going to happen if there are very few retailers in town, and they have pricing pressure. Easier said than done though, since barriers to entry are so low, and banks so eager to lend to competitors starting up or financing one of countless chains expanding to new locations.
  23. You guys are encouraging me to buy Tesco stock.
  24. Yep you expand like crazy in normal times using debt.. even buying competitors using debt. Any profit you make you buy up your own shares and give dividends to drive the share price up. And then when there is a big downturn you go under. Its why many commodity companies who were making money hand over fist for the last 5 years, are now on the edge of bankruptcy. If they had been banking profits in cash or government bonds, they could now buy their competitors for 50-80% off. Its the business school mentality, that I was taught when I went to business school. They can't stand the sight of capital just sitting there ready for a rainy day.
  25. My own calculations show we could replace the income tax with printed debt free money. The government would need to add that much a year to make up for rising productivity which would cause deflation. Plus I believe a society wants a moderate like 2% inflation each year. So each year the government would spend into the economy an amount of money to keep inflation at around 2%. In practice this means increasing the total money supply about 5-6% a year. It would be a stated goal, and the measured basket of goods completely open. It wouldn't be possible to have the spectacular asset bubbles because new money wouldn't be made with fractional reserves. Another way to do it, which I like, is to send the new printed money directly to the people. So if it was determined that 120 billion pounds needed to be put into the economy this year to keep prices stable, then the government would calculated 120 billion / 60 million = 2,000 pounds per person needs to be sent out this year. So monthly checks would be sent out to all citizens.
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