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We're Told The City Contibutes Billions To The Economy?


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I remember him. Can anyone honeslty tell me that if base rates didn't go so stupidly low, we would still have the problem?

are you saying that central bankers and central bank policy are the problem......or atleast a problem ?

Surely it's more about regulatory powers and procedures that are in place and that aren't sufficient.

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are you saying that central bankers and central bank policy are the problem......or atleast a problem ?

Surely it's more about regulatory powers and procedures that are in place and that aren't sufficient.

these powers are sensible and in place.

Bankers are praised as CLEVER when they find a legal loophole to avoid them, hide it from the regulators for years then claim its someone elses fault when they are bust.

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In two ways they create the wealth NOW by:

1. Booking profits up front for deals that will lose someone else money over years. Much like a credit bubble they take wealth from the future for use in the here and now.

2. Ripping the face off/aka screwing over foreign countries and corporate interests and bringing money into the UK country that way.

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The sort of traders who buy and sell for seconds are not investing in the stock, they are reducing volatility and the spread for other investors. Both of those are a positive.

You wouldn’t be too interested in a share if the buy was £10 and the sell was £5 as the share would need to double just for you to recoup the spread. High frequency traders and market makers help lower this spread and allow more efficient capital allocation.

Both helpful to everyone.

Of course they do.

High frequency traders lower costs for market participants by extracting money from market participants.

And although that sounds..er...counter intuitive, we can see that it is actually true because....you have asserted it to be. I have learnt a great deal from your response to the challenge to show that the financial sector creates wealth. You have asserted that it does by a number of mechanisms. It is often not clear how these mechanisms actually work. I think I have learned enough to have a go myself:

The City lowers the costs of company research and development by taking the fees that companies pay for financial services and spending it on rhubarb. If the rhubarb was not purchased no drug would ever have been developed.

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Seemingly every day I hear on the radio some bankster, or their agent, claiming that the City contributes huge sums to the economy. Telling us that it’s some engine of enterprise. The former point is usually met by the presenter with a silence of acceptance.

Well I'm confused! I see that the City is operating a very profitable business, if that's what it is, but where does all its profit come from? Where does the money trace back to? Despite their puzzling assertion that they create 'products', to this engineer they don't actually seem to make anything at all. I'm not sure they even lubricate the gears either. More that they jam a spanner in the works and charge a healthy fee for its 'expert' removal.

How, in any claim to create 'products' do they add value in any way.

What are you, City?

City contributes to the bankers bonus fund, the political bribe fund and young sarah's 'oh, mummy I realy must have a new pony for Christmas' fund.

the rest of us get rigged monopoly

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No one is perfect. Not all designs an engineer comes up with work. Some explode in his face. Likewise the city doesn’t perfectly allocate capital.

It just does it correctly more than not. That is how it makes its bread.

If the city was allocating money incorrectly more than correctly it would lose money.

That doesn't logically follow, does it?

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The City lowers the costs of company research and development by taking the fees that companies pay for financial services and spending it on rhubarb. If the rhubarb was not purchased no drug would ever have been developed.

there's a lot of rhubarb smoked on this forum.

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So for example housing market futures can't dictate the price and supply of property, but oil speculators/traders can dictate the price and availability of oil, because housing is politically influenced and oil isn't ? Is that what your saying ?

The housing market in the UK is fixed. It doesn’t matter if house prices cost £150k or £300k we will not see a great increase in building because the communist planners set quotas and stick to it like flies to shit.

Oil is global. An increase in price may not prompt some countries to allow more oil production but most countries will allow it. there is proof in real life. When energy went from 50 to $150 massive investment was put into looking for new unconventional energy. 5 years ago the tar sands were seen as a joke, no one thought shale gas could be extracted economically and coal gasification was just an idea in an engineers head. Today all those things exist and mean current and future production will be higher. So the spike in oil prices mean there is less likely to be future shortgages.

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not many skyscrapers owned by large businesses are there.

Precisely and not just in the UK.

Where ever I go in the world one thing that always strikes me is the opulence of their establishments.

A few years back I worked on a divestment on behalf of the company I was working for we had to get the banks invovled and lawyers of course. Anyway cut a long story short the deal was done for £100 million and I got my bonus of £5000.00 now to some that is a lot of money but what did the bankers and lawyers get, their fees were £2.5 million!!! At the post deal celebration we met up with the bankers and our lawyers in Manchester, we stayed in the Holiday Inn they stayed in the School House in Manchester (5 star one of only two in Manchester) I was drinking pints of bitter they were drinking pink champagne at £150 per bottle, of course I clued in and made sure I got involved so to speak but it was so striking the differance in attitude.

Now, for me we were the wealth creators we had built the business from some tiny acquistions in the early 90's and built it into what it was. The banks and lawyers were just the cog oilers, but it is clear that they take far to much out of the deals. I do not consider them parasitic, we need them, but their needs to be a rebalancing in terms of what value they actually add and thus what they take out.

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Today all those things exist and mean current and future production will be higher. So the spike in oil prices mean there is less likely to be future shortgages.

but the spike in house prices led, or was preceded by, a speculative rush to build lots of shiny city centre apartments, and while i'm no expert on city centre apartments, i'd suggest there is less likely to be future shortages in some areas juding by the scale of development.

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I remember him. Can anyone honeslty tell me that if base rates didn't go so stupidly low, we would still have the problem?

Low interest rates are a good thing. They don’t have to mean high asset prices.

If a country had lax planning laws then a house would cost no more than labour plus materials plus farmland.

There were many reasons for the boom and bust but also remember the boom part. Much more has been produced and built thanks to the boom than would have otherwise been possible. Just like the tech bubble left the backbone of the internet this bubble has left a lot more real assets such as homes and has quite literally had a hand at building nations. Do you think the Spanish who built nearly 8 million more homes will remember this recession in 30-50-80 years time? well those 8 million houses will still be standing and providing shelter for the Spanish

If our planning was more lax we would have had a lot more houses to show for this recession. Instead most in the uk have higher mortgage debt for spending on holidays and new cars both of which will be forgotten in a few years.

Edited by cells
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but the spike in house prices led, or was preceded by, a speculative rush to build lots of shiny city centre apartments, and while i'm no expert on city centre apartments, i'd suggest there is less likely to be future shortages in some areas juding by the scale of development.

Again thank you communist leaders. Planners decide what goes where and what it looks like and its size.

BTW the uk did not see a building boom like say Ireland or Spain or USA. We have been building 150-200k houses for ages before and during the boom. Spain or Ireland had true building booms.

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they don’t create wealth themselves but allow others to create it more efficiently.

Just like an engineer who designs a more efficient engine. The more efficient engine isn’t wealth but the business using the engine can go for longer and create more wealth.

What most bankers/investors/traders do is allocate capital efficiently. As engineers try to allocate resources efficiently.

I agree with their function! The problem is they don't charge a reasonable price and don't deliver a reasonable service. That is where the inefficiency lies!

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Precisely and not just in the UK.

Where ever I go in the world one thing that always strikes me is the opulence of their establishments.

A few years back I worked on a divestment on behalf of the company I was working for we had to get the banks invovled and lawyers of course. Anyway cut a long story short the deal was done for £100 million and I got my bonus of £5000.00 now to some that is a lot of money but what did the bankers and lawyers get, their fees were £2.5 million!!! At the post deal celebration we met up with the bankers and our lawyers in Manchester, we stayed in the Holiday Inn they stayed in the School House in Manchester (5 star one of only two in Manchester) I was drinking pints of bitter they were drinking pink champagne at £150 per bottle, of course I clued in and made sure I got involved so to speak but it was so striking the differance in attitude.

Now, for me we were the wealth creators we had built the business from some tiny acquistions in the early 90's and built it into what it was. The banks and lawyers were just the cog oilers, but it is clear that they take far to much out of the deals. I do not consider them parasitic, we need them, but their needs to be a rebalancing in terms of what value they actually add and thus what they take out.

I think even bankers would agree they probably get paid more than what is “fair”.

However the bankers you talk about make up a small % of the city. Most of what people consider “bankers” earn £100-150k inc bonus which sounds a lot but 40% of that is taxed away and renting a 2 bed flat in central-ish London costs a minimum of £20k a year for a shit flat. And most of these bankers work 70 hour weeks and are often top graduates of top universities.

Middle management in most businesses get £50-100k and do 40 hour weeks and can buy or rent a 4 bed semi for £10k pa instead of a 2 bed shit flat for £20k.

If they are making too much money whih it indicates there isn’t enough competition so we should be encouraging more city firms to start up, not driving more away.

BTW the city makes a huge amount of cash because it not only deals with the uk but many other countries. London allocates capital for many countries and foreign businesses and individuals. Most of the worlds currency is traded in London.

Perhaps 50,000 people provide this service to 7B people.

Any industry which provides a lot using a small number of people makes good money. The oil industry would be an example. From memory some 50,000 people work the north sea and they provide the country with most its energy. The oil industry makes a huge amount of money for itself but more importantly it also makes about £40B directly and indirectly for UK PLC.

Unlike oil which can be heavily taxed it is difficult to do with the city as you can trade financial produces anywhere but you cant move the oil field in the north sea to some other country.

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I agree with their function! The problem is they don't charge a reasonable price and don't deliver a reasonable service. That is where the inefficiency lies!

Maybe but if that is the case it indicates competition is low. Thus we should be encouraging more city firms to start up or come to London instead of less.

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Maybe but if that is the case it indicates competition is low. Thus we should be encouraging more city firms to start up or come to London instead of less.

I don't think it's the competition that's the problem, it's the level of regulation they're exposed to and the way they go about their business.

You compare it to an engineer making an engine more efficient, if engineers created principles on which a transport service fundamental to the economy broke down they would not have delivered a reasonable service.

The problem lies with the amount they re-invest in providing their service. When I say reasonable, I mean that if they charge a certain amount of money for a service, a good proportion of that should go towards ensuring a reliable system rather than just ensuring larger profits.

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"thanks for the list of what bankers should be doing, but arent."

- IT monkeys waste 20Bn on NHS computer that doesnt work

http://www.telegraph.co.uk/news/uknews/1542486/20bn-NHS-computer-system-doomed-to-fail.html

- Doctor amputates woman's arms after she checks in to deliver baby

http://www.abovetopsecret.com/forum/thread191856/pg1

- Nusrses too lazy to help patients

Nurses - http://www.dailymail.co.uk/health/article-396258/Are-nurses-angels-I-dont-think-so.html

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"thanks for the list of what bankers should be doing, but arent."

- IT monkeys waste 20Bn on NHS computer that doesnt work

http://www.telegraph...ed-to-fail.html

- Doctor amputates woman's arms after she checks in to deliver baby

http://www.abovetops...hread191856/pg1

- Nusrses too lazy to help patients

Nurses - http://www.dailymail...t-think-so.html

you are not wrong to point out other areas of shortcomings....doesnt make the case for bankers any better because other public services are just as mank.

thats like saying it is pointless to ground faulty aircraft as other faulty aircraft go un-noticed and are not grounded.

In an ideal World...ALL the markets would be efficient.

those that have to pay their way with real wealth creation either live or die...others, paid for by other peoples money, or lax because they assume the market will continue to support their laxness ( in the bankers case it was the case that if they were short of a few bob, they could borrow some more....and more...and more...till they couldnt)

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snips.

Middle management in most businesses get £50-100k and do 40 hour weeks and can buy or rent a 4 bed semi for £10k pa instead of a 2 bed shit flat for £20k.

snip

I assume this is your first recession.

Middle managers are the main lot to go first....waste is waste after all.

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I'm still waiting to here how high frequency trading lowers costs for other market participants by making money from those market participants. (whether it lowers the spreads or not is irrelevant as should be pretty obvious).

We are still waiting to here any evidence that the increased share of GDP that the City has extracted has been reflected in increased overall wealth creation.

We're still waiting to here why a bank need go bust if it didn't allocate capital efficiently, or conversely how it would be impossible to make money without allocating capital efficiently. It is perfectly possible to make money whilst destroying value.

All we have heard is a list of what bankers should be doing in Cell's idealised system, along with a few unsubstantiated proclamations that most of them, in fact, are doing these things.

Edited by mirage
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  • 439 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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