no accountant
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Yes, sorry no trolling. And I know a bit more than just reading headlines. Most of my clients are banks, so I've got a good idea, although I admit it's a bit second hand info.It was only after I posted my reply that you mentioned raising money at 4.15% and lending it at 5%, so how was I to know that unless I can see into the future? But since you raised it, it's cobblers; but it seems people have tried to point this out on the thread anyway.
And current accounts used to be profitable for banks. Now they're much less so as I said. But they don't raise much funding this way, so I guess I was talking about two different things. Apologies.
PS I'd a bit old for a troll. Joined this site in 2004!
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It appears the immigration cap on skilled workers from places like India will not apply to companies who (ab)use the Intra-Company transfer system.
Read Bastiat's chapter on Restriction
By restricting the movement of goods or labour all you do is make IT services more expensive for us. So if you're asking me to pay over the odds to give someone a job, I say no. For selfish reasons, and economic. If it would cost me £100 less to use imported labour/goods, I have £100 to spend on something else I want, and by buying it I give someone a job that he or she wouldn't otherwise have.
As Bastiat says, you looking at that which is seen, not that which is not seen!
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Disagree. Rigged markets are not free markets.Free just means you won't get attacked for refusing.You can overpay for stuff if you want.
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In a free market, the rules are the same.
That's the whole point of having one, more or less.
Agreed, and with one counterparty with different rules the customer is not 'free' to choose who they get the loan from.
Just imagine if one phone company was allowed to manufacture iPhones without license with might cost them £20, but the others had to follow the law and buy them from Apple for £200. The customer would always choose the cheap one. The customer doesn't have fair and free choice. It's not a free market, by definition.
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Ok, I see what you mean.There's more chance in getting your money back when you don't overload the borrower with debt, all things being equal there's less risk involved with £100k mortgage at 5% than at 15% as higher costs increase the risk of default.
But the problem with lowering rates is that the asset prices (houses, bonds, whatever) then get bid up to higher levels and the debt service cost rises to what people can afford.
eg.
i) 100k @ 15%
is the same monthly payment (ish) as
ii) 300k @ 5%
The difference is in (ii) that if house prices drop by a third you lose 100k, but in (i) it was only 33k. So (i) is inherently safer.
By extension you your argument it should be safer to have rates at 1% and the same house bid up to £1.5m?
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They obviously don't, not the most important ones: I'm not allowed to counterfeit money, the Central banks are. They just lent the government £200bn they haven't got. I could lend you £200bn too if the rules were the same.Unless you think that the rules of a free market don't apply to the people who call themselves a central bank, of course. I mean, they obviously do but I can't quite see why you would agree....
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Whatever, if I want 6% to lend money to her, but she can get 3% via the central bank (which prints money fraudulently) she will borrow from them, so any contract or otherwise is a moot point.And a voluntary arrangement to get something which isn't currenltly owned by either of them isn't a contract. It's an invitation, in fact.
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I agree it is sad.
Ironically it was Keynes that observed:
"Practical men, who believe themselves to be quite exempt from any intellectual influences, are usually the slaves of some defunct economist.
--John Maynard Keynes (1883-1946) in The General Theory of Employment, Interest and Money
as in 5m40sec in the excellence Keynes vs Hayek Rap:
(my Windows spell checker know Keynes but not Hayek. That says it all. We're all Keynesians now!)
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huh? Talk me through that one?all things being equal lower interest rates would actually reduce risk.
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Those with capital should decide what rate to lend at.
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So I can't lend some spare cash to a friend to help her start a new business? Or I have to risk my money with no compensation? That doesn't sound very free.A market free from coercion - a free market cannot have interest rates.
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Now we're at the crux of the whole problem. Our capital that we saved in savings accounts, pensions etc has be misallocated into property. This leaves less capital available for proper wealth creating activities. (Houses don't sit there and generate wealth every day!) And the result is the unbalanced economy we are now in.
And the capital we (or rather our fund managers, aka your bank manager) allocated to property has lost value, and we the depositors have to be bailed out by other taxpayer otherwise we get angry.
What a sad mess.
If we're allocated our capital into true and sound growth businesses we be in much better place right now. Our capital would be safe and would have grown in value, we wouldn't need bailouts, and the economy would be more balanced, with more hi tech manufacturing etc, and fewer temporary property millionaires.
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Exactly, my Austrian friend. I decide what rate I want from you if I lend you my money. Not some central planning BS. What right have they got to interfere with our agreement? The rate rises naturally if there's a big demand for money, i.e. a bubble.rates should not be set by some central planning committee, they should be set by what the market bears.
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The markets are global. The desperate search for yield to beat the low rates allowed all the crazy securisations to be brought be investors from all over the world. Why would a Norwegian pension fund buy a package of risky UK mortgages? Because they have to get yield. The central bank set rates so low that they are forced to. They have to pay their pensioners something. If rates were at 10% that would be fine, they wouldn't have to allocate money to such risky assets.That sounds reasonable, so you agree it's something other than interest rate policy that caused the collapse?
In fact that is whole point in the central bank policy - they lower rates so that people transfer money from safe boring assets to more risky business, with the intention of stimulating new business activity I'm doing it now, I've moved money from my saving account and brought an Emerging Market managed fund. If it get more than 1% per year I'm happy.
But on a macro scale, if you add up all the small movements of capital it is creating an emerging market bubble that may soon pop too. FT: HSBC raises alert on emerging markets
We're forever blowing bubbles (because of low rates).
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I'm not chasing any solution. I think we're f**ked. There's very little we can do now, monetary or fiscal.If interest rates are to blame both Germany and Ireland would have suffered from humungous real estate inflation, but this wasn't the case. The real world has tested your hypothesis and proven it to be flawed, but it doesn't stop you chasing a monetary solution.
So Ireland suffered from humungous real estate inflation, and Germany didn't, correct. But bubbles feed on themselves. If real estate in Germany has been flat for decades the bubble doesn't get going. Why invest in Germany if you don't expect huge returns? If Ireland has risen 20% in the last 12 months, invest there. Credit bubbles are dangerous and unpredictable physiological phenomena, but they need cheap money to get truly out of control and devastate economies.
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Great quote!To fight this recession the Fed needs more than a snapback; it needs soaring household spending to offset moribund business investment. And to do that, as Paul McCulley of Pimco put it, Alan Greenspan needs to create a housing bubble to replace the Nasdaq bubble.
Krugman, 2002
I'll use in the future.
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And the low rates set by the ECB caused a catastrophic boom in Ireland, Spain, Greece etc. What's your point?I disagree, the Fed's rate was higher than the ECB's until the middle of 01. Between that point and 05 they were about 100 basis points lower, then from 05 to the start of 08 they were consistently higher again.(Low rates may have suited Germany which joined the Euro at a rate that made them less competitive initially)
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Ask yourself, if rates were set at 10% would there have been huge credit and property boom?Interest rates aren't to blame.
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Why would you ask someone who caused the crisis to try to fix it? btw it's pretty much unfixable now anyway.
Blomberg: Bernanke Will Fail in Bid to Use `Poison as Cure,' Ex-Fund Head Burry Says
The poison was cheap money from 2000 to 2007. The cure is even cheaper money.
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Ron Paul vows renewed Fed audit push next year
..
. "Up until recently it has been modest but now it's totally out of control."
IMO the Fed are 100% responsible for the crisis. Holding rates far too low for far too long (2000 0 to 2007) with such predictably catastrophic results.
Why would you ask someone who caused the crisis to try to fix it? btw it's pretty much unfixable now anyway.
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Lky1, have read some Steve Keen (Sydney Universtiy) :
Are we It Yet Jump to Figure 8. Scary stuff.
It shows the percent of aggregate demand that comes from debt finance. I.e. how much of the economy is actually just temporary, people taking equity out their house and buy a BMW etc. In time they will have to use their income to pay back the loan, which will subtract from demand in the future. The future is now. That's the main reason that fiscal or monetary stimulus won't work. The drop in demand is huge and unavoidable.
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hear hear! Exactly. Agree with all of that. If all your points were implemented it would help a lot.Sensible LTVs, income multiples, debt service coverage ratios etc on the part of lenders as well as leverage and capital ratios at banks along with funding gap limits
Consider as well though that the rocket fuel have powered all the liar loans and insane income multiples was simply: cheap money. Interest rates were far too low for too long. It's the most fundamental way to make sure the economy doesn't misallocate capital. If rates were 9% from 2000 to 2007 the would be no Buy-to-let boom. The cashflow wouldn't work.
I think of it like providing free booze at a big party. Yes you can make lots of small rules to try and keep it orderly, No Shouting, No Jumping in the Pool etc. But the chances are these rules will be broken (Liar loans). The root of it all is the free booze. Take it away and see the difference it would make!
Same for the flood of cheap money that was consumed in the housing boom.
I blame, primarily, the provider of free booze - central bank policy (and those who gave them their stupid targets)
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thanks, v interesting.http://www.bcentral.cl/estudios/banca-central/pdf/v3/031-084LevLoBeck.pdf
An interesting read.
I do agree that many banks have moved beyond their traditional role as intermediaries and have become large, risk taking machines. The two functions need to be split to ensure the long term viability of economic growth.hmm, not so sure it's that simple though. As I said before the biggest risk on almost all bank's balance sheets is their residential and commercial loan book. When they get write downs on these that's what brought them down.
So how would you separate lending for mortgages and business away from the banks? That's kind of that they do isn't it?
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It's better than Dairy Milk.What is there to spend your money on? Feckin Toblerone (sp?)
Hsbc 'under Pressure' To Exit London
in House prices and the economy
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