There are lots of other things which could be done, but IMO that would point us in the direction of sustainable recovery.
Paul Please continue, would love to hear more of your sensible ideas on that.
It's a completely crazy system. But the perception of traders is of performance and possibilities. A shift of a fraction of one percent upwards makes them billions, downwards and they lose billions. How we would feel if moving our hand a fraction of an inch in the wrong direction would kill our client? It takes an exceptional person to handle that level of stress.
Somehow we've got this mad system. Not at all sure how we can get out of it!
Exceptional person? That's what they'd like you to think! There ARE people who could kill a client by moving their hand a fraction of an inch. They're called surgeons. And although well paid, they make NOTHING LIKE the money bankers make. Same goes for army officers, jet pilots, and many other jobs.
If a banker screws up, he will not get shot. He won't even wind up livinig on the dole in a grotty council flat on a sink estate where drug dealers wait outside his daughter's school gates.
These bankers are the most overrated people on the planet. The mythology they create about themselves remind me of the Middle Ages, when Catholic priests could do anything they liked, because the peasants thought the priest had power to send them to Heaven or to Hell as he pleased.
If the banks were taken into government control, and run on behalf of the Nation, the government could soon train a group of intelligent, public spirited people to take charge of them. After all, in World War Two they had suddenly to train several hundred thousand people, from all walks of life, to be army officers, and millions to be ordinary soldiers. It is all do-able if the will is there.
Hi Jnani
This one is a little controversial though practical, a lot of our problems stem from the hyped up housing stock prices.
I think it would be an excellent idea for the government to wind back all the price of houses to what level they where at say 20 years ago (before the price hype), in addition to that the government could force the lending companies who for obvious reasons encouraged the price hype for their own gains, to reduce the mortgages to the price level that each house would have been at 20 years ago and swallow the difference, the final thing the government could do to help stabilise this is to make it law that a property can only raise by 0.5% per year, this would change the status of houses from a good high earning investment to that of their original intention of being a home to live in.
This would in effect bring the housing stock prices back into the real world, as the price of a mortgages would drop dramatically, this would have a direct effect on what landlords could realistically charge for rent, a lot of people who invested in properties to make lots of money by renting them would find that it is no longer as lucrative as it was to only have one or two houses, that would put lots of affordable properties back on the market and ease the housing problems.
Exceptional person? That's what they'd like you to think! There ARE people who could kill a client by moving their hand a fraction of an inch. They're called surgeons. And although well paid, they make NOTHING LIKE the money bankers make. Same goes for army officers, jet pilots, and many other jobs.
If a banker screws up, he will not get shot. He won't even wind up livinig on the dole in a grotty council flat on a sink estate where drug dealers wait outside his daughter's school gates.
These bankers are the most overrated people on the planet. The mythology they create about themselves remind me of the Middle Ages, when Catholic priests could do anything they liked, because the peasants thought the priest had power to send them to Heaven or to Hell as he pleased.
If the banks were taken into government control, and run on behalf of the Nation, the government could soon train a group of intelligent, public spirited people to take charge of them. After all, in World War Two they had suddenly to train several hundred thousand people, from all walks of life, to be army officers, and millions to be ordinary soldiers. It is all do-able if the will is there.
Yes, I agree - surgeons in particular were who I had in mind. Personally I think they are exceptional and I don't think many people would be comfortable with the daily pressure of your patient's death being a millimetre away...
In my post I was merely pointing out how things actually are, as IMHO things are always way more complex than they may seem. In this case I was highlighting the fear instrinsic to the financial system. I never said I approved of it. Trying to understand how things actually operate has led to me being considered anything from a rabid right-winger to somewhere left of Stalin... 😀
OMG, we will all soon be living in the world of Mad Max.
OMG, we will all soon be living in the world of Mad Max.
I think maybe in a way we are - but don't want to admit it. 😀
Hi Richard just a quick response to your comment below:
The money isn't there. The UK's interest payments only on the national debt were £21 billion in the first half of this year. The bankers estimated bonuses (and I have no love for bankers) for this year are £7 billion. That wouldn't keep the UK going for 5 minutes.
So if you think we can afford the size of public sector we have, please let us know where the money is!
Heres a few ideas:
The financial services sector could repay the 50 billion they owe tax-payers. That would keep us going for a year. Alternatively, we could be charging interest, so there is a quid pro quo here, for real, rather than the empty promises of taking the money to lend, and instead using it to shore up (undeserved) bonuses. While theyre paying us in some way or another, we could be doing all, or any of the following:
Introducing a financial transaction (or Robin Hood) tax
You can read more about this here: http://www.robinhoodtax.org.uk/
Introducing a system of taxation which could benefit everyone by generating adequate revenue
This is a good read. Well worth the time
[DLMURL] http://www.neweconomics.org/sites/neweconomics.org/files/The_Great_Tax_Parachute.pdf [/DLMURL]
Addressing tax evasion estimated at £35 - £70 billion every year which would help pay that interest. I cant find figures on business tax evasion (Vodafone have just been let off £6 billion remember, so who knows what other favours might be happening)
Establishing a new economic model - the NEF (fronted by Will Hutton, whose fabulous book, Them and Us, is well worth reading. It suggests a whole new model (with no touch light taxation or privatisation in sight, thankfully) based on social enterprise, collective action, and ethical investment and development, not just establishing business for private gain.
The NEF have also suggested new regulations for banks, which would act as insurance, and ensure we dont get fleeced and the wrong people end up paying for it, ever again. You can read this here:
http://www.neweconomics.org/publications/better-banking
Recruit an extra 20,000 staff to work on tax collection who are likely to bring in an extra £20 billion a year. The costs of this, are far outweighed by the financial benefits
Hi Paul, also just a few thoughts also on your post
Public transport, this should be abolished and all the infrastructure sold to the private sector who knows how to run a business effectively and economically and if they go bust then someone else can step in to do the job.
The clauses included to protect the interests of shareholders during the privatisation of national rail services, have effectively resulted in customers paying rising rail prices year on year, because no provision was made in these contracts for shareholders to bear any responsibility for maintenance or development costs. Great model - really effective for the shareholders not sure about anyone else though. The experience of London Underground with PPP's show that where the private part of the partnership fails in its' obligations, the taxpayer (& fare-payer) once again gets to pick up the tab.There really is very little basis to suggest 'private good' ' public bad' - it's not that simple.
Unless of course, you have an example of where the private sector has successfully provided a service previously run by the public sector? If so, it would be really good if you could include statistics and quantitative evidence for where and when this been so successful, particularly the benefits for those the services are being provided to, as we were originally told that competition increased quality, choice and standards. You may wish to look at the American model of health care to reference this.
The whole point of the public sector is that it is not the private sector. It isnt meant, or designed to function in the same way, and to make sweeping statements about inefficiency of the staff employed is lazy and insulting.
You appear to have swallowed whole Philip Greens take on the efficiency savings to be made by overhauling purchasing practice in the public sector. Leaving aside the tricky question of whether Sir Philip will actually succeed in saving the state more than he and his family have saved themselves in avoiding taxes (in 2005 alone, 1.2bn was paid to his wife, avoiding British tax.) he made some good points. But he didnt say ALL public sector bodies, and ALL government departments were inefficient and wasteful. His report included some current examples of good practice that could be emulated by the rest of the sector, through a centralised purchasing body. But if everything is privatised, and localised, what happens to savings made through joint purchasing and economies of scale?
As for the idea of taking property prices back 20 years, am at a loss as to how you think this will help? What happens then those left in negative equity, in a depressed economy? How would another housing bubble be avoided in 5-10 years time? This issue is as much about supply and demand as it is about prices.
El
Heres a few ideas:
😮 That's not a post. It's practically a book. 😀
If I understood things correctly, we will actually get the bail-out money back - eventually. And we own a lot of shares in the banks, so might actually make a profit? One day...
Not sure where you get a tax evasion figure of £30-75b. The last figures from the National Fraud Authority give it as £15b. So not sure how 20,000 extra tax staff could find £20b. And how much of that lost tax could reasonably be recouped? People shift money overseas and then disappear, etc... And how much is ordinary (and over-taxed) people not declaring the odd £100?
Looked at the neweconomics doc. Savings of £26b - still only 6 months interest payments.
Completely agree on tightening up bank regs. And as Tony Blair & Gordon Brown turned a blind eye to the shenanigans in the financial sector, I reckon they should dig into their pockets.
Yes, I agree there is a lot that could be changed. But even if it were, we're still in a pickle, methinks.
Hi Elodie
Unless of course, you have an example of where the private sector has successfully provided a service previously run by the public sector?
Before the government nationalise transport in 1947, it was built and run privately, those who used the service paid for it out of their own pockets. IMO just about every industry that the government nationalised has gone to the wall.
The experience of London Underground with PPP's show that where the private part of the partnership fails in its' obligations, the taxpayer (& fare-payer) once again gets to pick up the tab.There really is very little basis to suggest 'private good' ' public bad' - it's not that simple.
As you rightly say the private sector is orientated by profit, where as the public sector never tries to make a profit or break even on any of its ventures, it is more about spending money than saving it with us picking up the bill.
If the whole of the transportation was moved back into the private sector, then we do not have to pay for it unless we choose to make use of it.
IMO if the government were to be paid bonuses for saving us money and penalised for wasting our money, then we would have a thriving economy.
As for the idea of taking property prices back 20 years, am at a loss as to how you think this will help? What happens then those left in negative equity, in a depressed economy? How would another housing bubble be avoided in 5-10 years time? This issue is as much about supply and demand as it is about prices.
It would take off part of the financial pressure which is fuelling the recession, people would have more available money to spend, so businesses can start to be developed to help them to spend it, the businesses will grow and employ people to make the goods or provide the services that people spend there money on and the economy starts to grow, this is not to sort out the governments mess, it is to get the country working productively and back on its feet.
As far as the equity status of housing, it is a money go round, if a house is deemed to be worth 50 grand and you want to sell it to buy another one, then you will be looking for a house around the same price range, now if the price is hyped up as we have seen over the last few years, they the 50 grand house is now supposedly worth 200 grand, so if you want to sell it and buy another house you are now looking for a 200 grand house in stead of a 50 grand house, they are the same houses.
In order for negative equity to become reality, the price of houses has to fall without the finances being adjusted, so you have a 200 grand house which is now worth 50 grand and you have negative equity of 150 grand.
What I said in my original post was the 150 grand negative equity would be swallowed by the people who had fuelled the hype, the banks and building societies, who were supposed to lend money on the real price of the structure of the house, not attempt to feather their own nest by lending money on hyped up evaluations which did not reflect the true value of the house.
The other thing I said to stop a recurrence of this was for the government to pass a law where once the price of houses had been redressed to a sensible level, that they would only be allowed to increase in value by 0.5% per annum, when prices are stabilised in this way there is no boom and bust but stability.
This cartoon explains why there is a Trillion Pound Horror Story:
RP
This cartoon explains why there is a Trillion Pound Horror Story:
RP
That's really good. Highlights a point that I was making - that in effect the financiers are using the world as their playground. Some of the solutions offered by people are unrealistic because we can't risk offending the bankers - if they decide they don't like us, we are totally f***ed. No country can go it alone. As far as I can see, the only solution is for all the major world economies to change the system. And I reckon too many of the politicians are too cozy with the financiers for that to happen.
Hi Paul
Thanks for your thoughts and response.
Well, by now (having sold most of the family silver) most nationalised industries have been privatised right back again, on the basis that this would increase competition, and so bring down prices for consumers. Yet, we hear that although the unit cost for gas has not risen, most energy suppliers are putting up prices, which more or less sums up for me the wisdom of privatising any kind of utility or public service. Water never used to be a commodity in the way it is now, just think what might happen if there is ever a shortage of that in Western Europe, and over our need to use water we have no choice…..
I don’t think, particularly in big cities (I live in London) use of the transport system is a choice - for most of people it’s a necessity. The UK economy and population in 1947 bears no relation to the UK now in terms of transport use and capacity needed, so of course there has to be a level of public investment. Aside from the implications on environmental policy of ‘choosing’ not to use public transport, if this principle was applied across the board what would this mean for health services, or education, the police (charge by call?) or other services provided (currently) by local councils. I think this is a slippery slope. IMO, this is a great article http://www.guardian.co.uk/commentisfree/2010/nov/17/corporate-grip-public-private-sector that expresses these concerns much better than I can).
As you rightly say the private sector is orientated by profit, where as the public sector never tries to make a profit or break even on any of its ventures, it is more about spending money than saving it with us picking up the bill.
I can’t agree on this point, although acknowledge our public services aren’t perfect. Public sector contracts are monitored for their effectiveness and demonstrating value for money, and if this isn’t there, the money will be withdrawn. If this wasn’t the case, the LU PPP wouldn’t have broken down, and, as it was, it was the private member of that partnership who failed to deliver on the terms of their contract, not LUL, so the taxpayer is footing the bill to compensate for the private component of that contract. There have certainly been scandals over public sector procurement, and things could be done better, but doing something better doesn’t have to mean that we turn services into commodities to be purchased. This is interesting reading http://www.guardian.co.uk/commentisfree/2010/nov/22/pfi-private-finance-refuse-debt particularly when thinking about just how procurement works…
It’s amazing to me that the public sector is pilloried on a regular basis for wasting money (which is not always inaccurate, but neither is it ‘true’ in a black and white sense) when, if you’ve ever been to a private sector bash or drinks reception, which can go to vulgar lengths in the amount of money to impress clients (that is their business after all), without any certainly that this will result in that new custom being won. But it’s their money right, to spend how they like? But is it their money, if they’re not paying a living wage to some of their employee’s? Is it their money if they’re not paying some of their suppliers the true value of the commodities or labour they’re supplying? Is it their money if they’re not paying all the tax they should? What about if their shareholder’s are taking a higher dividend than the profits made would mathematically allow for? Fundamentally, there is question over ownership here, and ‘private’ seems to cover profit and self interest, but not obligation to others in terms of true value.
On housing, the nature of a market is to whip up interest and set us in competition with each other for goods, and whether the need set up is artificial or not (market traders in every town do this) every market depends on supply and demand for how prices are set. Our housing crisis is an issue not just of hyperinflation, but of supply, and again, privatisation is a factor here – the sale of council housing, with no concomitant initiative to rebuild social housing of any kind. And if we can’t encourage the banks to lend the public money they were given with the intention of it being to assist small business and new homeowners, I can’t see how we can possibly enforce a payback of profit relating to property prices? Particularly given how private commerce works?
Hi Richard
Yes, I do go on 😀 (or so I’m told :p) but have written a book in response to Paul this evening, so have no more energy left to write another (you’ll be grateful to hear), or maybe only a small one!
It’s something I’m very passionate about, a belief in a political and economic system based on an ethics of service and collective good, the principle that no-one should be suffering at the expense of someone else where this is avoidable (yet this happens and is sanctioned every day, and is avoidable, given a different intention and will. That’s easy to dismiss as naïve (hardly very hard edged or market oriented now is it?) but markets don’t work as far as human welfare is concerned, and actually, don’t seem to work that well in terms of stability or prosperity, so now seems a good time to seek an alternative. If enough of us seek it, who knows? (Although the Eric Cantona for a run on banks didn’t seem to mobilise many of us!) And politics is a fascinating topic (well, to me anyway) - the debate never ends, and it comes down to choices, most of them ethical, moral and philosophical and even spiritual, so it’s relevant to every part of life.
Would agree with you that we’re definitely in a mess, although may have some differing opinions as to the way out. There may come a point where we actually have little choice but to seek alternatives, as this perhaps needs to revert to being a national issue with a genuine focus on our ability to trade and export something other than financial services. Without the pull of global financial interests this may be possible, as our participation is such a gamble, and clearly so precarious – the UK and USA are no longer the economic powerhouses they were, and even if the USA remains a major consumer and importer of goods, the chances are both economies are likely to be dwarfed in the coming years by the East, so we could begin, on a small scale to opt out.
And you’re absolutely right, the maths doesn’t entirely work to compensate for every penny of the deficit. But there must be money (even if it’s reserves), as we’ve just pledged to assist Ireland to the tune of £7 billion. This suggests it’s a matter of will, not just of available funds? Then again, does the maths work with economic policy being pursued by the Government? How do you ensure the percentage levels of growth predicted by the OBR, when your economic policy will result in decreases in tax revenue and very little public investment, an undermining of consumer confidence and spending in a largely service and customer oriented economy, and banks that won’t lend to burgeoning business? This is apparently going to be resolved through an easing of corporation tax, but what do private enterprises do with surplus money? I don’t get the maths on current government policy either.
Perhaps an implementation of some of these new approaches, would signal an intention of a new direction, which would be enough to start with? How can we know what kind of growth or expansion this may result in without trying it? And as it stands, in your own words, we’re all f****d anyway, so why not be brave?
The figures on tax evasion (probably predictably) are from the TUC, and you can find them on the COR website http://www.coalitionofresistance.org.uk/?cat=19 .
There finished! Do I win the award for longest, least readable posts? 😀
Finally thanks RP for the link, have seen it before and it’s a funny, & brilliant expose of the ludicrous system we have – the David Harvey lecture at the RSA is also worth a listen
All best to all,
El
Hi El - I think you've probably put the moderators in a coma, so if nothing else we can all start misbehaving here! :dance:
I totally agree that "markets dont work as far as human welfare is concerned" - my own feeling is that society as it is currently constructed doesn't do any of us much good.
I don't doubt that what you say is true - that there is much that could be tweaked in a different way. However, I stick to my main point, namely that the UK is enmeshed in the system - not only the general global currency markets but also our particular dependency on ther financial services sector as a source of income. If we don't do what that system likes, then we get punished.
People tried to do it a different way - Soviet Union, China, Cuba - but now they're all joining the club. If we decide to play by a different set of rules, who are we going to play with? There is no-one else! Seems to me that either we play the game or persuade everyone else to change the rules or we try to become totally self-sufficient.
WTF...! Is this true or is this a wind up? Comments please....
RP
Hi RP
Interesting, there was a letter in the Observer last Sunday, where the writer who was a former auditor suggested that around £14 trillion (per year?) is offshore in evaded tax, or just plain funny money, some of which would come from organised crime or those so wealthy they rise above pedestrian things like taxation, so I don't think it's that fetched, but it's very scary :eek:. Difficulty is accepting this route to 'salvation' would come with huge strings, and a whole new level of self interest from Foundation X, whoever they are......
Hi Richard
Re Cuba, Russia and China, Naomi Woolf's shock doctrine is a really good (if depressing!) read on whether these countries joined the club by choice or necessity. It also looks at the role of corporations in Iraq and Thailand, following the Tsunami. Really does give a powerful illustration of just how emeshed the world economy is with the interests of a tiny percentage of the world's population and how, as you suggest, not just bankers, but corporations use the econonmy as a playground.
Now, not wishing to induce any coma's 🙂 tonight's post ends here 😉
All best
El