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Togo Joe

Banking Transparency & Truth

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In an average year I borrow and lend about £5m. Sometimes I make money;last year I made a small loss. It's unlikely I'll borrow or lend £5m this year because on a risk/reward basis it's pretty pointless either way, lending or borrowing. I don't think you will see a resumption of lending for a long long time despite the begging/bullying of governments. Ergo consumption will not resume. Ergo unemployment. Ergo gissa a government job.

But profit or loss, I'm still in the game, and will be in 10 years time.

Not so with the Big Banks. And without going into detailed numbers, just think about what is going on. Take one Bank, Citigroup. Without going back to Meredith Whitney's early detailed analysis, consider the profits and losses only, which, off the top of my head were something like

2008 2007 2006 2005 2004 2003 2002

-$20bn +$3.5bn +$22bn +$25bn +$18bn +s17bn +$15bn

Do the same thing for British Banks.

What strikes you about these numbers ?

Most obviously, "Why would a $20bn loss sink you if you had made almost $20bn a year for the last five years ?"

The equivalent, scaled-down profits & losses would not sink me. If I had lost £2m last year but made £2m per annum in the five years previous, I'd be moaning but I wouldn't be begging. And even if I came a-beggin', you'd all tell me where to go. And rightly so.

So what are the explanations for the necessity of a bailout ?

Most obviously (and there might be many explanations) a) the profits 2002-2006 were fairy-story on paper profits B) the 2007 & 2008 figures are still grossly under/over estimated c) with no profit-centres performing, all overheads in terms of expensive offices and staff are ruinous liabilities so the next few years are dire therefore give up now d) you ain't getting your hands on the $100 bn we trousered e) modern banking is so fast-moving, so voluminous in transactions, that most managers have lost the plot f) assets are hard to value so the balance sheet is largely made - up. g) and so on & so forth.

Add in that at least two major European subsidiaries of a major American Bank never even kept an Asset Register and you get some idea of what is going on. An Asset Register for those who don't know is just like a List of Contents you might submit to your Insurer. It's the stuff you own. It's yours. In banking it's also the stuff people owe you but in any event you should keep track of what you own or is owed to you. But this Bank doesn't even know what it's got. They ring me up "Have you got any of our stuff ?". It's unbelievable. Actually, we don't but if we did, there's nothing to stop me doing a mad Paul Murphy chess combination and moving their stuff into BVI then Cayman then Trusts, then sprayed out into companies, then....by which time no auditor on earth will ever find it or establish legal title to it.

You ain't seen nothing yet. Most worrying , however, is the demise of the authority of supposedly smart people. It's all very well to crow that those Physics PHd boys are no better at numbers than a Housekeeper, but ultimately, we might end up with the demagogues and ranters and promoters of murderous Social Justice holding sway over the population. The Director with a Fat Cigar might be unpleasant, and I might agree, but his saving grace is that he probably can't be bothered to knock on your door at midnight and usher you into a black maria. There are plenty of people on the left who would just love to take tea with you and take you outside.

TJ

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It's simple really they hired the Enron accountants ;)

Billions in profits and yet all banks are on the brink of collapse it does raise some interesting questions.

However the biggest problem is that the CEO's all wanted to believe these magically mathematical models which just kept generating profits, it was too good to be true but when your getting tens of millions a year in pay then clearly it's working. The question of what happens if all this goes wrong was avoided.

Govts should be forcing the workers who took huge bonuses to give the money back to help prop up the insolvent banks.

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  • 284 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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