Thursday, September 11, 2008

The re-distribution of wealth has created filthy rich equal society….

Nothing Has Succeeded Like This Failure

Banking bonuses are partly responsible for the current global financial problem. There is no real counter argument and the ones bandied about all boil down to the same mindless excuse that international arms dealers use: ‘If I didn’t do it someone else would’. A vast proportion of bonuses were ‘awarded’ for reckless lending. The painful irony is that these bonuses will be reinvested for yet higher returns, creating more bubbles that will eventually burst spectacularly leaving the taxpayer to - once again - get out the mop bucket. This collateral damage is the cost of war - albeit economic.

Posted by neo-serf @ 12:57 PM (541 views)
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3 thoughts on “The re-distribution of wealth has created filthy rich equal society….

  • this article is absolutely rubbish! I am sorry to say this but this is capitalism. the bankers are the winner? what is he talking about? think of the bonuses in shares looked for 5 years of Lehman bankers worth now 10%…
    And yes let’s get rid of the city, let’s get rid of all the financial sectors, let’s make car again! ARE U JOKING??????

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  • I think this is a great argument/comment because it gets right to the center. When you think about the repayment of debt, who ever thinks about the silent beneficiaries. The bankers plumped up the chicken to 60x size (total global leveraging apparently check for yourself), then carved themselves a more than healthy slice. Now the chicken has shrunk back to an amputee runt, who is going to honour their deposits. Same as for housing, who is going to honour the 100K winners.

    Overpriced houses were bought from somebody. Of course. For every single punter who bought a house at an outrageous price somebody got the money.

    Both the bankers winnings and the house sellers winnings are in the bank. Maybe King can inflate these real winnings away. Maybe the pensioners and savers and workers can take the hit in terms of wealth. Maybe. This time it is a pretty heavy hit with unemployment consequences so we will see.
    In the UK there is no real distinction legally between money and money adjusted for inflation. In other words, the UK legal system ignores devaluation of the pound. The UK legal system also ignores inflation.

    This is why you can get taxed on your bank deposit despite losing in real terms. This is also why, mortgage relief for the unemployed is totally different from housing benefit for renters. Real interest, as in payment for borrowing, is your interest rate minus inflation. Current interest rate is 7% say, current inflation is 5%. The real interest rate is 2% (too low..). So if the government were to take over the interest payments of mortgage holders in effect they would be paying off the real capital. Not just the interest at all. We are suckered into this idea because we have no independant frame of reference.

    Where now for the UK. Perhaps the UK is going to borrow. Of course. I hope so. I will benefit hugely from any government printing, as it comes from existing savers and I am not in that group. Who pays the debt back ? People who are stuck in the UK. There are many, our financial masters if you will, who will benefit from the additional government funds and then leave. Great…

    This whole thing, for me, boils down to two options for the same adjustment.
    a) The people owing the money get relief and the people with deposits lose.
    b) The people with deposits don’t lose and the people owing are obliged to fulfill their 12 year debt payment schedules.

    At the moment we are essentially stripping pensioners of the ability to heat their homes over the winter and eat. For that reason alone Gordon Brown needs his other eye blinded plus a good f*cking kicking.

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  • The irresponsible lending that caused the current crisis is not just caused by bankers’ bonuses, though they have been a factor. Bank directors feared their shareholders’ wrath if they failed to match their rival banks’ short-term gains from such lending, and further down the management chain others feared the sack if they failed to meet lending targets. Fear rather than greed is the biggest motivator for making reckless loans.

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