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Vince Cable: Pure Laissez-Faire Does Not Work


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http://www.guardian.co.uk/politics/2012/sep/11/vince-cable-laissez-faire-work

A British bank potentially backed with public money will be created to shake up the market in business finance, Vince Cable will announce on Tuesday in a major speech setting out a new industrial strategy.

The business secretary said the government had a role as a catalyst in areas where the lending market "doesn't work well" .

He told BBC Radio 4's Today programme that there may well be government money behind it but he said the scale and scope was something he was still discussing with the chancellor, George Osborne.

Outlining an institution that could promote lending to companies that struggled to get long-term loans, Cable said he was working with the chancellor on "how big it should be, how it should operate, and what the sectors it services should be".

"We do recognise that there are areas where the current financial services market, the banking market, just isn't working for chunks of the British economy. Small business lending is actually contracting; we know the serious problems in the banking sector, and there are certain areas where the market has failed and we do think an intervention would help."

Cable will stress in his speech at Imperial College, London, that "the measure of the institution's success will not be the scale of its own direct interventions, but how far it shakes up the market in business finance and helps to ease constraints for high-growth firms.

"There is a real shortage of long-term 'patient' capital for businesses. Try and secure a loan for more than five years of venture capital and options are very limited especially for innovative, high-growth potential firms."

His remarks suggest that the bank is initially likely to be focused on small businesses but will do more than merely collate the government's existing funding initiatives.

In his speech, Cable suggests the bank could operate through alternative providers such as Handelsbanken, the Swedish bank operating successfully in the UK, the Co-op and Aldermore, a bank dedicated to help small and medium-sized firms.

Cable notes the latest official statistics show that in the last 12 months 33% of firms that applied for a loan were rejected. By contrast, he argues, "big firms by and large are able to raise short and long-term finance via capital and equity markets. Many successful smaller companies finance themselves through cash-flow."

He says: "The big banks including the big state-owned banks are preoccupied with repairing damaged balanced sheets."

Print printy.

They are never gonna stop.

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Nobody things "pure laissez faire" - whatever he means by that - "works" .

you always need a regualtory frmaework, contract law, property right enforcement etc etc.

But putting our money into a government bank to subsidise their pet projects is exactly what got spain into the big deep dark hole it is in now. What a splendid Idea.

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Nobody things "pure laissez faire" - whatever he means by that - "works" .

you always need a regualtory frmaework, contract law, property right enforcement etc etc.

But putting our money into a government bank to subsidise their pet projects is exactly what got spain into the big deep dark hole it is in now. What a splendid Idea.

pardon me, but what lending criteria will the new bank have?...on the one hand we need to pay enormous salaries to keep the talent in the UK, yet from the same spokemen, that talent doesnt do what is needed.

Now which is it...are they talented, or not?

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"There is a real shortage of long-term 'patient' capital for businesses. Try and secure a loan for more than five years of venture capital and options are very limited especially for innovative, high-growth potential firms."

Correct.

The Citeh doesn't give 2 sh1ts about British business or long term finance.

Unfortunately for Vince the Citeh's placeman in No 11 will squash it.

Well done for Cable for at least having a go though, but he'd be better off pulling the plug and kicking them out at this stage.

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"There is a real shortage of long-term 'patient' capital for businesses. Try and secure a loan for more than five years of venture capital and options are very limited especially for innovative, high-growth potential firms."

Because innovative, high-growth potential firms are also potentially high-risk, no-growth pits of capital destruction. If the people who make a living speculating on the viability of these businesses are unwilling to lend to them then what grounds are there for the taxpayer to do so?

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pardon me, but what lending criteria will the new bank have?...on the one hand we need to pay enormous salaries to keep the talent in the UK, yet from the same spokemen, that talent doesnt do what is needed.

Now which is it...are they talented, or not?

Just ask Gordon Brown. They're 'innovators' when their evil is hidden from public view, 'irresponsible' when not.

What they do doesnt matter to the politicians. What joe public thinks they do does.

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"There is a real shortage of long-term 'patient' capital for businesses. Try and secure a loan for more than five years of venture capital and options are very limited especially for innovative, high-growth potential firms."

Is there? I have £70k in precisely that kind of investment ....

If the country needs more, give us better tax breaks for it. And, more importantly, do something about the burden of red tape!

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Is there? I have £70k in precisely that kind of investment ....

If the country needs more, give us better tax breaks for it. And, more importantly, do something about the burden of red tape!

Indeed. Many businesses are awash with cash. There simply isnt any point in investing it because govt has forced prices to be unaffordable on everything and thus give non-existent yields

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Pure laissez-faire won't work?

Based on what experiment? When did we last give it a chance?

The London riots were a recent example I suppose- those with the will, the strength and the determination took what they wanted from those who were weaker, less strong willed or less determined.

It works- it's just that not many people want to live that way.

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The London riots were a recent example I suppose- those with the will, the strength and the determination took what they wanted from those who were weaker, less strong willed or less determined.

It works- it's just that not many people want to live that way.

You want to live in a dog eat dog world where people stronger than you take all your stuff though.

Either you got free markets wrong or you are an idiot.

Which is it?

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Correct.

The Citeh doesn't give 2 sh1ts about British business or long term finance.

Unfortunately for Vince the Citeh's placeman in No 11 will squash it.

Well done for Cable for at least having a go though, but he'd be better off pulling the plug and kicking them out at this stage.

Spot on. Financial transaction tax tapered to length of investment? HFT taxed highly etc? No idea if this would work. Have a friend struggling to raise substantial capital for innovative biotech startup. Have a never worked relative lent approx £1m on BTL for housing benefit dependant tenants.

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The London riots were a recent example I suppose- those with the will, the strength and the determination took what they wanted from those who were weaker, less strong willed or less determined.

It works- it's just that not many people want to live that way.

Surely the looters are equivalent to st.Vince and his blessed state extracting wealth from it's owners through violence rather than a business that wants something in exchange for something else.

Are you trolling or drunk?

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Spot on. Financial transaction tax tapered to length of investment? HFT taxed highly etc? No idea if this would work. Have a friend struggling to raise substantial capital for innovative biotech startup. Have a never worked relative lent approx £1m on BTL for housing benefit dependant tenants.

Not sure if this is the point you were making but isn't this the fault of the government not the banks?

If your job was to allocate capital based on payout and risk then lending to Btl investors makes sense because the government has enabled it to be so.

It's the flip side of the welfare state. It distorts all pricing and subsidises those who provide something easy that should be low cost at the expense of those who want to produce something innovative and will expect a return on it commensurate with risk.

Housing benefit means banks will get better returns at no risk on lending to Btl than by lending to risky ventures.

You can not apportion a single ounce of blame to someone for choosing the most rational course if action

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Not sure if this is the point you were making but isn't this the fault of the government not the banks?

If your job was to allocate capital based on payout and risk then lending to Btl investors makes sense because the government has enabled it to be so.

It's the flip side of the welfare state. It distorts all pricing and subsidises those who provide something easy that should be low cost at the expense of those who want to produce something innovative and will expect a return on it commensurate with risk.

Housing benefit means banks will get better returns at no risk on lending to Btl than by lending to risky ventures.

You can not apportion a single ounce of blame to someone for choosing the most rational course if action

When our financial system supports the rent seekers to such a great extent over the productive economy, we end up where we are. A government held to ransom by those extracting the rent, complicit in needing the support of those who benefit from wealth without work. Gandhi was right! (see sig) Vince's Bank doesn't stand a chance.

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When our financial system supports the rent seekers to such a great extent over the productive economy, we end up where we are. A government held to ransom by those extracting the rent, complicit in needing the support of those who benefit from wealth without work. Gandhi was right! (see sig) Vince's Bank doesn't stand a chance.

Without the state, the individuals trying to extract rent would have to get their own hands dirty. The government just presents an easy target for them to manipulate.

It's pretty unsurprising though. If you can convince people that they have democratic influence, while only offering them non-legally binding promises and a tick in a box every 4 years, you can pretty convince them of anything.

The question is, why only offer a state bank? Why not blow the doors of the banking monopoly, scrapping the licencing requirements, making it simple to start up competition? Why not make banks explicitly say whether the money remains yours or whether it becomes theirs on deposit? Why not remove state deposit insurance and allow organisations to demonstrate how they will protect your investment instead?

What Vince Cable hasn't suggested is more interesting than what he has. More credit, more printing, more socialised risks, more centralisation. What Vince suggests is no solution.

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  • 433 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% +
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      • Even
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      • up 5%



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