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Business Don't Need Credit Easing.....


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All this talk of credit easing is just another public relations exercise. To see just how vague and inarticulate this notion is, please see other thread where Andrew Neil destroys a treasury minister who cannot explain what credit easing actually is.

What small businesses need is not another line of credit. What will that credit do: Help them produce more things that nobody wants to buy? Keep them ticking over while creating more debt for themselves?

What they need is CUSTOMERS walking in and purchasing goods. That doesn't need credit to business. It needs more cash put in the hands of consumers so they can buy the goods already piling up unsold, whether it is cars, computers or holidays. Loans to small businesses will not solve this.

Credit "easing" is nothing more than PR bullsh*t.

Edited by VacantPossession
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All this talk of credit easing is just another public relations exercise. To see just how vague and inarticulate this notion is, please see other thread where Andrew Neil destroys a treasury minister who cannot explain what credit easing actually is.

What small businesses need is not another line of credit. What will that credit do: Help them produce more things that nobody wants to buy? Keep them ticking over while creating more debt for themselves?

What they need is CUSTOMERS walking in and purchasing goods. That doesn't need credit to business. It needs more cash put in the hands of consumers so they can buy the goods already piling up unsold, whether it is cars, computers or holidays. Loans to small businesses will not solve this.

Credit "easing" is nothing more than PR bullsh*t.

+1.000,000.

There are billions and billions floating out there already in personal and business accounts. People and businesses still need to buy goods and services and, for many of the things they buy, their buying cycle (frequency of purchase) will be largely unaffected.

At it's very peak, GDP shrank by 7.1% - horrible, definitely, but there's still a lot of money free in the world's 6th largest economy.

Business leaders - accept the fact that customers are harder to find so you have to work harder to find them. Accept lower gross and net margins for the next few years, build in capacity to your business slowly and when the dust settles, you'll be left with something brilliant.

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All this talk of credit easing is just another public relations exercise. To see just how vague and inarticulate this notion is, please see other thread where Andrew Neil destroys a treasury minister who cannot explain what credit easing actually is.

What small businesses need is not another line of credit. What will that credit do: Help them produce more things that nobody wants to buy? Keep them ticking over while creating more debt for themselves?

What they need is CUSTOMERS walking in and purchasing goods. That doesn't need credit to business. It needs more cash put in the hands of consumers so they can buy the goods already piling up unsold, whether it is cars, computers or holidays. Loans to small businesses will not solve this.

Credit "easing" is nothing more than PR bullsh*t.

Actually if you are interested in boosting innovation credit easing is good, because businesses need access to cash to develop new products.

I think that your view of businesses is somewhat simplistic.

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The global economy has now been completely re-engineered so that as little money as possible goes into the pockets of ordinary workers, who will actually spend it, while most goes into the coffers of the rich who will use it for speculation. Unless this is addressed, which it won't be because elites don't want it, businesses will find it ever more difficult to find customers. More credit won't help.

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It's obvious this situation is going to stay bad for several years.

It's paying the lease and the salaries/tax that drives businesses insolvent.

They can get rid of staff, but it will be the leases that bankrupt them eventually. Most won't be able to find someone to take over the lease (or if they do, the successor will go bust, and the landlord will come back to them).

It's terminal for the following: designer clothes shops, nail boutiques, expensive restaurants, any shops selling goods made in China (prices skyrocketing), etc.

Once all that's gone, it will be like the 1990's: high streets full of charity shops.

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Actually if you are interested in boosting innovation credit easing is good, because businesses need access to cash to develop new products.

I think that your view of businesses is somewhat simplistic.

I would agree with most small businesses don't need or want credit easing, because I would say most businesses that rely on UK consumers spending power are not looking to expand...the good ones are ticking over nicely without the extra burden of debt.

There are some specialised businesses that would benefit from cheap money, those with potential customers that are living outside the EU. ;)

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Actually if you are interested in boosting innovation credit easing is good, because businesses need access to cash to develop new products.

I think that your view of businesses is somewhat simplistic.

I wasn't implying that all businesses don't need credit. But the specific purpose of credit easing (as far as one can gather from its very poorly explained announcement), is to make it easier for small business to access credit. It has not been explained in any plausible way and therefore I think it is nonsense and will never make the slightest difference for the vast majority of businesses.

It might seem simplistic to you but the majority of small businesses are not suffering from the ability to make things. They are suffering a crippling reduction in customers because consumers are cutting back on spending. No amount of credit is going to stop that.

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The global economy has now been completely re-engineered so that as little money as possible goes into the pockets of ordinary workers, who will actually spend it, while most goes into the coffers of the rich who will use it for speculation. Unless this is addressed, which it won't be because elites don't want it, businesses will find it ever more difficult to find customers. More credit won't help.

Sadly, true.

Although unpalatable to many in power the best way to help the recover is to reduce the tax burden on the masses. Their consumption will feed the economy more effectively than an half baked treasury scheme which ultimately adds to the national debt. If necessary shift the tax burden away from the lower paid. Why do we take tax off the lowest paid only to return it as tax credits, is it to just expand the state's control over the masses, that's the way it looks to me.

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I wasn't implying that all businesses don't need credit. But the specific purpose of credit easing (as far as one can gather from its very poorly explained announcement), is to make it easier for small business to access credit. It has not been explained in any plausible way and therefore I think it is nonsense and will never make the slightest difference for the vast majority of businesses.

It might seem simplistic to you but the majority of small businesses are not suffering from the ability to make things. They are suffering a crippling reduction in customers because consumers are cutting back on spending. No amount of credit is going to stop that.

Just because it has not been explained to you properly or you don't understand the consequences of it doesn't mean it's nonsense.

I agree it is not sensible to lend businesses more money to make more stuff that they can't sell. But you need to remember most business owners aren't idiots. They are not going to borrow money and pay the cost of borrowing it unless they can see some return on that investment. I don't see the government offering free money. I see them offering a costed credit facility that the banks don't. This will enable small businesses to overcome short term cash flow spikes that they currently can't due to lack of bank funding, invest in plant to enable them to produce better, cheaper products, invest in innovative tools and people to create new products. I think that you would find very few business owners who would borrow money to buy more stock and fill warehouses with unsold goods.

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I would agree with most small businesses don't need or want credit easing, because I would say most businesses that rely on UK consumers spending power are not looking to expand...the good ones are ticking over nicely without the extra burden of debt.

There are some specialised businesses that would benefit from cheap money, those with potential customers that are living outside the EU. ;)

It always helps to have access to cash because it gives you greater flexibility. It also helps innovators having to sell out large chunks of equity up front for little cash.

I grew my business organically with no loans and with low cost (near free) equipment. Some people leverage up to their eyeballs and do the whole boom or bust thing. I can see the benefits/drawbacks of both approaches. I think there is a happy medium between the two which is preferable, and this requires access to credit.

Of course there are a lot of powerful VI's who will not be happy about this. People in VCT's for example might not like it, or so called business angels (maybe otherwise known as business parasities) as their control of capital allows them to acquire huge chunks of businesses at low cost and make millions in profit.

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Just because it has not been explained to you properly or you don't understand the consequences of it doesn't mean it's nonsense.....[]

No I didn't say I didn't understand it. Please don't patronise me.

Even the minister involved had not a clue how it was going to be implemented, with vague references to government purchasing bonds (a statement she immediately withdrew when pressed), and even more vague statements about providing a credit channel, but no plausible explanation about from where. This is the treasury minister whose job it is to promote this "easing". She was utterly out of her depth and could not provide one single example of how credit easing would be implemented in practice. I recommend you see the Andrew Neil interview on another of today's threads here to see how empty and unthought-through this is.

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That becuase its not been finalised yet. When its finalised details will be released until such time, lets carry on with some speculation. :D

Well here's a novel idea.

How about they work out the details before they announce the initiative?

It would make it so much easier to explain exactly why it would be a good idea.

Just a thought.

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Well here's a novel idea.

How about they work out the details before they announce the initiative?

It would make it so much easier to explain exactly why it would be a good idea.

Just a thought.

But that's so time consuming. Where as announcing policy on the fly and then getting your minions to implement it has the advantage that if it turns into a disaster you can just pass the blame back on down. It's a win win.

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No I didn't say I didn't understand it. Please don't patronise me.

Even the minister involved had not a clue how it was going to be implemented, with vague references to government purchasing bonds (a statement she immediately withdrew when pressed), and even more vague statements about providing a credit channel, but no plausible explanation about from where. This is the treasury minister whose job it is to promote this "easing". She was utterly out of her depth and could not provide one single example of how credit easing would be implemented in practice. I recommend you see the Andrew Neil interview on another of today's threads here to see how empty and unthought-through this is.

You deserve to be patronised because you show little understanding of how businesses work and the root causes of the problems we have in this country.

The solution is not to pump the UK customer base full of money so they can buy foreign goods and UK goods can remain uncompetitive. This is the kind of New Labour nonsense we have been engaged in over the past 10 years.

The solution is to make people want to buy UK goods not because people are jacked up on cheap money, but because those goods are the best, the cheapest, the most innovative. That starts with investment in business to make those goods. The UK needs to balance it's imports/exports, increase its manufacturing base and invest in high tech production equipment to negate the effects of cheap foreign labour, not pump it's customer base full of money in the vague hope that they won't buy plasma TV's from foreign countries but buy British goods instead. Britain is a nation of innovators. We have a long history of innovation. Our capitalisation on this innovation has been poor traditionally. We need to examine why and deal with it. We need inward investment to do this.

I don't know about the Tory plans for business investment. Yes, they may be incomplete and premature. But for me the intention of helping business and not doing more QE to line the bankers pockets is the important point. With investment in small business comes local jobs and local economic support. Jobs lost in the public sector will be replaced by sensibly paid ones (not £80K non jobs btw, but real jobs that have justifiable salaries in a competitive marketplace) in the private sector. There will be pain in the short term as we adjust to this new balance, but it's necessary. At the very least the Tories show they are going to attempt to operate on the basis of fiscal responsibility and using the sound basis of business expansion through innovation rather than pumping the economy up with non jobs and cheap credit like New Labour. For this they should be applauded.

So yes their plans sound vague and ill defined. But they sound a hell of a lot better to me than helicoptering in money to the consumer base so that we can get a last gasp of economic activity.

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You deserve to be patronised because you show little understanding of how businesses work and the root causes of the problems we have in this country.

The solution is not to pump the UK customer base full of money so they can buy foreign goods and UK goods can remain uncompetitive. This is the kind of New Labour nonsense we have been engaged in over the past 10 years.

The solution is to make people want to buy UK goods not because people are jacked up on cheap money, but because those goods are the best, the cheapest, the most innovative. That starts with investment in business to make those goods. The UK needs to balance it's imports/exports, increase its manufacturing base and invest in high tech production equipment to negate the effects of cheap foreign labour, not pump it's customer base full of money in the vague hope that they won't buy plasma TV's from foreign countries but buy British goods instead. Britain is a nation of innovators. We have a long history of innovation. Our capitalisation on this innovation has been poor traditionally. We need to examine why and deal with it. We need inward investment to do this.

I don't know about the Tory plans for business investment. Yes, they may be incomplete and premature. But for me the intention of helping business and not doing more QE to line the bankers pockets is the important point. With investment in small business comes local jobs and local economic support. Jobs lost in the public sector will be replaced by sensibly paid ones (not £80K non jobs btw, but real jobs that have justifiable salaries in a competitive marketplace) in the private sector. There will be pain in the short term as we adjust to this new balance, but it's necessary. At the very least the Tories show they are going to attempt to operate on the basis of fiscal responsibility and using the sound basis of business expansion through innovation rather than pumping the economy up with non jobs and cheap credit like New Labour. For this they should be applauded.

So yes their plans sound vague and ill defined. But they sound a hell of a lot better to me than helicoptering in money to the consumer base so that we can get a last gasp of economic activity.

So has this imbalance in the UK economy occurred since the credit crunch. For the ten years prior to the CC credit was easy to come by, would not reducing the regulator noose that we face day to day would have a greater impact. Companies like Tesco's are already seeing a downturn in the UK, that will only deepen as we move toward Xmas.

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I broadly agree with the Purple Slug. We can't have an economy structured around people borrowing money/being issued benefits to buy imported goods. Two thirds of GDP is Retail. This is a ludicrous situation to be in.

Keynsian solutions, say transport infrastructure investment, would be far preferable to such shallow solutions as cutting VAT.

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So has this imbalance in the UK economy occurred since the credit crunch. For the ten years prior to the CC credit was easy to come by, would not reducing the regulator noose that we face day to day would have a greater impact. Companies like Tesco's are already seeing a downturn in the UK, that will only deepen as we move toward Xmas.

No, we had 10 years worth of mal investment before that. 10 years worth of credit boom invested in public sector non jobs and casino gambling in the financial sector. Edit, if you went to a bank and asked for money for a manufacturing business during that time, they looked at you like you were something crawling out from under a stone.

So Tesco are seeing a downturn. The new reality. It's going to be hard. They need to realign themselves quick. Fortunately they are better equipped to deal with it than most small businesses.

I think the jury is still very much out on the Tories. As others have pointed out what have they actually proposed that's concrete ? All looking a bit woolly. However they are talking the talk about fiscal prudence and investment. Let's hope they at least try and deliver for the country and don't spend the time lining their own pockets, because if they ****** things up where the hell are we going to be in 5 years time ? Let's just hope they have the balls to stick to prudent management of the economy and investment in business, even if it hurts.

Edited by Gigantic Purple Slug
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I'm with the op on this one. There are company's out there with millions of pounds in the bank they would love to make and sell more stuff but the punters have no more money.

The time of borrowing money with interest is at an end, everybody wants to earn money with no interest attached.

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You deserve to be patronised because you show little understanding of how businesses work and the root causes of the problems we have in this country.

Yet more patronising from you. Look here matey, you are not the only person that is running a business. My post was a response to the SPECIFIC announcement of "credit easing". I stick to my point. This announcement was clearly made in time for the Tory conference and was clearly cobbled together without thought about how it happens or what it actually means. Again, I ask you to view the Andrew Neil interview (have you done that?) in order to understand how utterly without substance this announcement is, and how shallow are the thoughts behind it.

I also never suggested, as you assume, that I was promoting putting extra or artifiically conjured cash in consumers' pockets. I never said anywhere that I want consumers to spend. I merely said that the overwhelming reason why businesses are suffering at the moment is because they lack customers. You have extrapolated that falsely to assume I meant something more. For the record I am not in favour, just as you are not, of stimulating the economy by creating cash and giving it to anyone, and least of all consumers.

Again, I repeat I did not say businesses do not need credit per se. I said that what most businesses needed at the moment was customers willing to buy their products, and that is the overwhelming reason why at the moment businesses are struggling. I did not suggest those customers get a cash stimulus of any kind. Please cease lecturing me with your cod thoughts about business leverage, innovation and investment an rushing to conclusions. Please CAREFULLY read what I wrote and stop assuming what I said when I didn't. I have my own business and do not need your patronising primer on how it works. Thanks so much. In the meantime let me know if you can make head or tail of "credit easing" from the interview I referred you to, and to other vague announcements which are menaingless.

As a poster above pointed out. If the government is going to announce something radical, it is helpful to know what its details are before publicising it. Otherwise it appears to be empty PR.

Edited by VacantPossession
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So the point is businesses do not have enough customers?

So if you don't want to give customers extra puchasing power to enable businesses to get more custom what do you propose ?

As for being patronising, that's your opinion. This is a web forum. People give their opinions. Deal with it.

Well, when I said customers need cash, I meant they didn't need to be taxed out of existence, and by that I am talking about the disposable income of already hard pressed people who are paying for the greed of others through stealth and other taxes, while the villains of the piece get bail outs, bonuses and carry on regardless. I agree with those, increasing in numbers,who say there is very little that can be done, but if there is one thing it would be NOT to pour money down the funnels of giant corporations, only to be siphoned off at the side of the funnel by the executives of said corporations (see US car industry, UK car industry and Bank X.y and z.) Very little corporate or bank QE has reached the salient parts that needed it.

Coming back to small businesses, let us take a typical example of a computer supplier (not PC world etc but small suppliers), and there are thousands in the UK. Their margins are already quite tough, they have become very efficient at putting computers together, responding to bespoke orders, and generally give much better service than the online giants. No amount of credit will solve their problem of fewer customers. It's a prosaic example because 99% of UK business IS prosaic, whether supplying food to the supermarket or offering car repairs. The innovation you speak of is a very small part of the business essentials that represent the backbone of this economy. You cannot industrially innovate your way out of a recession, nor (as I imagine you agree) can you quantitively ease out of it either. A recession is identified by the difficulty in ordinary people having access to goods and services they could afford before it.

I think you made an assumption that I was an advocate for hand outs. I am not. However I do think that infrastructure is a good long term investment (roads, rail, transport, useful public utilities etc) and that would be infinitely more useful in the long run than rewarding banks for failure.

Like you I have never needed credit but that is because I run a business based on thinking, not consumption of raw materials. I suspect we agree on more than you might think, and I emphasise again that pouring cash into the economy is not the answer in my view. But all politicians are convinced they need to persuade people there is a magic way out of this, but there might not be. What remains therefore is who takes the brunt of the consequences for unparalleled rapaciousness of the Blair/Brown regime (and for that matter the late Thatcherite equivalent in 1990). Saying the answer is not obvious is more honest than pretending there is an answer, and that is the crass mistake this government is making, with much flailing about trying to find "positive" policies most of which are short term elastoplast.

On the question of being patronising, I've been on this forum on and off for a very long time. I can "deal with", as you put it, all sorts of opinions and views, but I try to avoid personal rudeness except where someone is obviously being gratuitously insulting or grossly bigoted. It'sold fashioned I know.

Edited by VacantPossession
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I don't think our society yet has the will to really finance a manufacturing development. I've been following China's rise closely for over 10 years now, and one of the interesting aspects is how they get into a new business.

Lets say for example Britain chose to manufacture train cars. And for arguments sake it would take £20 billion in capital to develop 2 corporations to world competitive status.

You choose a city they are going to be based in. The city and the banks then extend essentially unlimited credit to those 2 corporations to start setting up plant in the city. Then the banks and city also need to finance a host of supplier manufacturers.

Once you commit to having a certain business.. you have to go all the way. If 5 years in you get weak willed, start having doubts and stop lending more money, then for sure you won't make it. Once you are say £10 billion in.. you have to be willing to go the whole £20 billion, maybe more.

The thing is the rewards are also vast. You might have to finance deep these companies for 10 years before they start making some real money. Then you can pay back all the loans, plus interest, and have a huge industry in the city, that is a constant money machine. As its a vast world out there to sell the product. When you look at the GDP of the city, it is going to be be huge, because not only do you get the high level manufacturing, but you also get the supplier manufacturing, and the whole related sales and other support.

Say the industry ends up generating £5 billion a year in GDP for the city. Well that is 50,000 jobs that pay £100,000 a year.

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