Be Excellent To Each Other

In this case, they assessed the risk and decided no interest rate would be high enough to make the risk worthwhile. You can't force the banks to lend money.

You can if you own them.

Yeah but the money they've already lent, recklessly, is now being underwritten by taxpayers throughout the rest of the EU.

Fair enough don't lend more money if you don't want to, but don't expect your existing lendings to be secured on your behalf either.

Indeed, I picked up on this aspect on page 2:



I'd be perfectly happy if the banks were truly 'at risk' and therefore actually earning their interest payments, but they're not. Shit, I'd be happy to lend Greece shitloads of money, at a high rate of interest, if I knew said loan was underwritten by the EU/taxpayer, who wouldn't? What a joke.

That joke though, as ever, is on us. WE are the ones who are ultimately underwriting these loans - and doubtless we'll end up paying, too, even us Brits who aren't even in the fucking Euro Zone and we won't get any choice in the matter either.

Hey, it's OK though, because the banks employ people and pay (derisory, max. avoidance) tax on 'earnings' and 'profits' such as these, right?

We already are. For instance, we're in Ireland to the tune of about £7bn of emergency loans, plus whatever RBS and Lloyds have lost down the gaping hole that is Anglo Irish Bank. The UK is hugely exposed to the Irish economy.

Still, we could always tap the heir apparent to the Baronetcys of Ballylemon in Co Waterford and Ballentaylor (Co Tipperary) for a few quid.



In front of the Parliamentary Select Committee, the Chairman of Barclays claimed - with an entirely straight face - that far from avoiding tax, his company in fact paid £2bn in tax last year.

He wasn't asked why he conflated things like employer NI, PAYE on the employees, VAT and so on with the companys corporation tax obligations.

http://www.nytimes.com/interactive/2010 ... marsh.html

Britain isn't exposed to Greece very much. As Plissken notes, though, we're into Ireland for loadsamoney.

And, just to be clear, if that $867bn number is accurate, then if Ireland took every single cent that it earned in revenue and used it to pay back its debtors, it would pay them off in... three years.

Funnily enough, there is $1bn sitting in the middle of Dublin that no-one can touch. Just sitting there. Not even earning interest.

Whereabouts, out of interest?

*books flight*

How do so many nation states owe so much money to each other's banks? Is it just me who thinks this is fundamentally and completely fucked up?

Going into debt to progress a business or acquire a long-term asset is OK, but these national debts are just going to effectively impoverish millions of people for years, if not decades, to achieve absolutely nothing other than appeasement of the banks and the sacrosanct 'financial markets'.

I still don't understand why the governments of Europe can't simply call time on the whole lot, nullify the debts, and start again with a clean sheet.

Between us, surely we're capable of producing all the real stuff we need, food, goods, services and suchlike, all the things of actual value - what do we need the fucking banks for? They've had their shot and they've royally fucked it up, so game over.

The IFSC. (Irish Financial Services Centre.) Go to the main bus station (Busaras), leave at the main exit, turn right, turn right again, cross the road and walk past the shiny HQ of AIB. Call it 100 yards from the dropoff point.

http://goo.gl/maps/eXKv

Whenever a government wishes to spend more in a given financial year than it's getting in tax receipts, it issues gilts to raise that extra money. Someone has to buy them, and it's a lot more effective for the governments involved to get (for example) RBS to buy 5 million in Gilts and then sell those to their customers as low-risk low-yield bonds.

Is it in bags already? Would I need a trolley?

It is sat in several mainframes, doing nothing except gathering virtual dust.

When you say 'the UK is incredibly exposed', that's precisely the point: WE are exposed thanks to the sheer incompetence of (now nationalised) BANKS. It was THEY who took these ridiculous decisions in the first place, posted their so-called 'profits' off the back of unrepayable mega-debts that no-one in their right mind would've sanctioned, and it is WE, the hapless UK taxpayer - thanks to Labour's bail out and nationalisation - who will pay, probably to our collective ruination.

As I said, we should've let them go to the wall.



Heh, well I never. Kind of puts the nervous 'friend in need' speech to Parliament into perspective, huh.



Yeah, makes you want to vomit, eh? I think he also said 'the time for regret is over' or somesuch, too.

Even if they did actually pay it, £2 billion is a piss in the pond, for what we've been saddled with in return.

There isn't a word in the English Language that is sufficiently insulting and abusive that describes my utter contempt for these people and those of their ilk. Every man, woman and child in this country has been utterly shafted and most don't even know it, or even care. As for talk about 'we've nearly paid everyone back now!!!11!!', I really do have to hold my temper on such occasions.

Stop drip-feeding the info, Plissken.

Why is it there doing that?

Heh, check this out from Feb 2008 (post Northern Rock) - RBS posting a £10 billion 'profit' and whacking up dividend payments, despite plummeting core capital ratio:

http://business.timesonline.co.uk/tol/b ... 422341.ece



... And people wonder why the banks are so universally hated and/or question why some - many - think they are a curse, not a blessing? They'd be hated a good deal more I reckon, if the apathetic rump in this country bothered to do a little research.

We will be lucky to get that £7bn back, we will be really lucky to see £30bn of the $188bn that graphic says we are owed. It is absolutely, totally, gone, to pay for buildings that will be torn down and land that has lost 90% of its value.

The billion or more sitting in the IFSC is real money. Basically, you know that corporate avoidance trick that Microsoft, Google et al do. The one where revenue is booked as coming from Ireland, to avoid corporation tax? Double Irish or something.

The way it works is while 99% of the revenue leaves Ireland for the US and its shareholders, a tiny proportion has to stay in Ireland. This is why all Googles revenue is banked in Ireland, not the US. Then the US subsidiary pays fees to Ireland, the profits are subject to Irish corporation tax and not US.

Now the full amount can't be moved out of Ireland and back to the US. If it was, obviously the entire lot would be subject to US tax and not Irish. So what happens is that 95% of it is sent back to the US as subsidy of those fees and other stuff to reduce the corp tax bill.

(This is my very basic understanding of it.)

To make it work, some has to be left behind. The missing 5%. And because Google, eBay, Dell, Microsoft, Intel and lots of other companies use the Double Irish trick, that tiny proportion is getting pretty damned large. That is why I think the $1bn figure is too low, and this has been happening for a few years so it could be nearly $1tn now given the companies involved.

So, it just sits there. Doing nothing. Going nowhere. And now, funnily enough, it has got too large for the companies to spend. They couldn't spend it fast enough in Ireland to get rid of it or indeed justify it to shareholders or the taxman. (So no paying £1bn for a cow in the middle of Co Wexford.) It can't back to the US as stated and it can't go into the EU because they'll immediately lose a third of it in tax.

David McWilliams came up with a plan. If the companies invest the money in proper startups in Ireland, then for the first ten years, any profits made by those companies are tax free. After 10 years, the profits are taxed as normal, but any sales of the shares after that point are tax free. The startups can be anything, but they have to be real, proper investments, not in property but in real jobs, R&D and production.

There were various other things, making sure the company was always HQd in Ireland and so on, but I thought it was a hell of a carrot to dangle. The problem is, with the ECB and IMF running Ireland, it is a non-starter as most of the companies are US.

Try this one on for size Cavey,

'LOOK AND LEARN FROM ACROSS THE IRISH SEA!'

Still, at least he's not in charge of the UK economy now or anything.

Oh, shit.

http://www.timesonline.co.uk/tol/commen ... 733821.ece





That's why the government makes sure we're kept as stupid and ignorant as possible.

Everyone gets their tellies and their internet and their X-Factor and their braindead red-top newspapers, most folks, even when they do have the means to fucking EDUCATE themselves a bit choose to do no such thing.

Old news mate, but there again, precisely the same - indeed worse - can be said of Brown/Balls - and critically, they were the ones in power (and Salmond, come to that).

Making hideous errors of judgement when in Opposition is one thing, but when in Government (having the full benefit of all possible information and briefings, as well as resources) is quite another. (Not that I don't think Osborne is a prat who's never had a real job, mind, but I daresay even he's preferable to a hapless old postie who doesn't understand VAT or the very architect of our current doom, but there we are. VAT reduction anyone...? Worked so well the last time, £12 billion well spent! ).

To be fair, it earned praise from the "independent Institute of Fiscal Studies" at the time:

http://www.ft.com/cms/s/0/f7010204-ed8e ... fd2ac.html

It wouldn't be the cleverest idea, though, if the likelihood of them defaulting is so high. You're effectively giving the money away.

Another excellent piece in The Guardian:

http://www.guardian.co.uk/commentisfree ... ill-hutton

Greece is being being lent on harder than the Germans were after starting a fucking world war, the banks gotta get their cash though!





And one of many excellent comments - http://www.guardian.co.uk/discussion/co ... k/11228179

Greek tragedy threatens pensions and investments

This is an angle I hadn't really considered, I must admit. Cavey/AE/other "the banks should have been allowed to fail" folk-- do you have pensions? Would you still come down against bailouts if the lack of one wiped out half your pension saving at a stroke? Don't forget these investment vehicles are not protected by the government's guarantees for bank account deposits. The money would be gone.

Considering the current situation is putting pressure (real and/or otherwise politically convenient) on the State pension pot, then someone has to lose somewhere.

The constant need to Beat the Street and put short term profit ahead of long term in order to keep pension funds happy causes a lot of problems.

I have a private pension, BTW.

How else would a pension fund increase its worth to pay for those drawing on it? A quick glance around at some PE funds seems to show that they are outperfoming interest rates at present. That seems a good deal to me, even after the 20/2 cuts the funds take.

Tragically, that's banks for you, isn't it? This is precisely what we've been talking about.

I truly hope I'm wrong, I really do - and that's a distinct possibility since, as stated, I know nothing about the world of finance (but did know enough to see this coming a mile off - hence I have no pension, money invested in 'real' things like bricks and mortar, and very few debts). But, I really don't see any alternative to total meltdown in terms of the Euro and EU banks. Greece IS insolvent. Any talk of their somehow being able to repay debts of this magnitude - ever - without any wealth creating activities that I can see, is just bollocks, just as it was with Iceland. They're kidding themselves and more to the point of course, Greece is merely the tip of a huge, ruinous iceberg. The EU and banks cannot bear to contemplate this, but they're going to have to at some point (soon). Idiotic, irresponsible lending is at the root of all of this and ordinary people are going to see pensions, savings the lot - wiped. Furthermore, I think that anyone who thinks they're getting a public sector final salary pension in 20 or 30 years is living in cloud cuckoo land IMO, as I've been saying for years.

The way I see it, at least if we'd bitten the bullet the first time, there was money in the pot to ameliorate the aftermath. Now that we've spunked however many of hundreds of billions, still with the likely end result, we will have the worst of all possible worlds. To me, it really is looking that bad - but I admit, I don't know what I'm talking about.

Ultimately, 'ordinary people' have to pick up the tab, just like they always do. It just hasn't dawned on most of them yet - especially in Germany and France.

Still, doubtless we'll get the same 'no-one could ever have seen this one coming' BS that we got last time.

The thinking is, as far as I can see, that the cost of propping up failing banks or countries is always going to be less than the cost of a full, total banking crash or sovereign debt crash. We're starting to get cash back from the propped up banks, as are the US with their TARP thing, and Greece and Iceland might be able to start paying it back in the next few years, whereas if we let them fold the domino affect might well have truly, utterly shafted everyone far more than now.

Sadly, I don't think "bricks and mortar" are any more bubble-and-crash proof than anything else. There are a hell of a lot of people in the US or Ireland that invested in property and are now left with assets they can't sell or rent, although if you were more sensible and did it in a long term, less speculative manner you should be better off ( but that'll be true of shares or whatever as well ).

I take your point mate, but an actual house, with land, that you actually live in, has surely got to be a safer bet than ultimately abstract investments such as shares or money.

Ah - I suspect he was assuming (as I was) that you'd bought a second one.

No, not necessarily. Over middling periods of 5-10 years or more, low-risk investments in FTSE100 or blue chip funds typically outperform the housing market -- notwithstanding the current housing bubble, which didn't burst, but easily could have.

Ever tried to sell a house in a hurry? As an investment vehicle they also suffer from poor liquidity, and there are (of course) numerous examples in history of housing busts. The liquidity problem is particularly egregious if you're talking about the house you live in, as you can't sell it without finding somewhere else to live, incurring further costs.

No mate.

I remember reading this awesome paragraph in a paper once, but I can't find it online anywhere, but it went something along the lines of (numbers made up, but representative):
If you invested £50,000 in 1940 in a high-risk investment account, it would be worth £330,000 in 2000.
If you invested £50,000 in 1940 in a low-risk investment account, it would be worth £325,000 in 2000.
If you simply put the notes in a briefcase under your bed, the value of the collectible notes themselves would be over two million pounds in 2000.

Yeah, but we're talking about an impending game changer here - I don't think the share market will look too clever if it all goes off (neither will housing to be fair, but I can live in a house even if its value has dropped massively, I can't live in a share certificate).

Like I said, I'm no expert and that's probably very obvious. I have a simplistic, somewhat rustic outlook on most things.



Well, you can always re-mortgage and people will always need houses, at the end of the day.

You did live through the early 90s pricing collapse, right? 40% drop over about eight years.



I mean, when I look at that colossal peak on the right hand side, I don't get any warm fuzzies about houses as investment.

Not true in the Irish case. Much of the property was built as pure speculation by a comparatively small number of developers. Sure, some Irish bought into the properties but ultimately, their crash was developer and banker driven. (Pretty much 100 people broke an entire country.)

This is the interesting thing - we have one big global financial crisis but lots of individual reasons. Ireland was developers and bankers. The US was Wall Street using CDSs to inflate a bubble. The UK was cheap credit. Greece was simply spending money they didn't have.

The only common theme is that trick accounting and fancy finance led all of them off the cliff.

I don't see it that way. I don't argue with your earlier analysis that each country had a different link that was the weakest in their chain; but I contend that they didn't all fail through their own weaknesses. Rather, the global interconnectedness of the modern banking systems meant once one country failed, the others come under more strain until the second failed (around whatever stress point was worse for them), which brought more pressure to bear on the third, and so on.

Like hikers roped to each other falling off a cliff, one fall over, who drags the second over, who drags the next.

Of course, the big value of investing in property is that you get to live in a big fuck-off house. Shuffling shares around in an online portfolio doesn't get me a cinema room.

Unless you bought in 95, of course.

* extended simile alert *
Which is why, as far as I can see, Germany and the ECB are busy hammering in pitons and ice screws for Greece now, even though they're standing a hundred yards from the edge, just in case Greece pulls down Portugal who pulls down Spain who pulls down Italy. If that happens, the whole lot of euro-climbers might get dragged down, and maybe even the tree they've tied the end of the rope to ( the IMF? ) might not be able to hold them back.

Hang on Cavey, if you have no pension and no investments other than your own house, what are you expecting to live on once you retire?

I'm sure you must have other investments, or just a massive wodge of cash or something, but those will surely be equally risky unless we go back to a barter economy, without the marvellous tax breaks afforded on pensions...

Oh, I don't agree with this either, I think you need to go back one more level to find that the reason CDOs were created were to disguise junk mortgages and the junk mortgages in turn were created as vehicles for a huge increase in foreign investment from formerly poor third world nations throughout the late 90s and early 00s, as I talked about earlier in the thread.

In fact, this same increase in the Giant Pool of Money probably also created the pressures that gave the Greeks such lackadaisical access to personal and commercial credit, might well have funded some of the Irish development bubble, and contributed to our own housing bubble too (by a similar mechanism to the US, where pressure from investors for more places to put their money in solid currencies translated into pressure on mortgage lenders to say 'yes' to sketchier and sketchier deals).

To my mind, that's the root cause of things, or at least one more level closer to the root cause. I've never seen any alternative explanations that can account for the timing of the thing. Wall Street had decades to go nuts for mortgage-backed CDOs in an attempt to commit financial seppuku; why did it do it when it did?

Even then I'd be concerned about getting out now and not waiting for a potential market readjustment (although if that was going to happen it seems it would already have done so, but still, if my life's savings were in my house I'd be hella nervous).

Aye, and let's not kid ourselves that Britain is immune because it's not in the Euro. Our financial system is still inextricably linked to those of the other European nations, as well as many, many more across the world.

Er... 'fraid not mate, everything is stuffed into the house. Rightly or wrongly, I've never trusted pensions.

I've (hopefully) got another 20 years of working left in me and the mortgage is paid as of now - so I'll use this time to build up a retirement investment (probably another property in about 3 years or so). But if all else fails, I can sell the big house and get a small one, live off the proceeds and whatever derisory pension the State deems to give me by then.

Probably didn't explain myself properly. CDOs/CDSs were trick finance, packaging the same thing up and selling it many times over, then when that gravy train looked like halting, re-packaging shit and selling it as gold. It is the same reason I hate shit like leveraging (as used by Glazer/Hicks and Gillette in football) - it isn't real money.

A large part of Ireland was accounting trickery - Anglo Irish said, originally, that they needed €5bn to cover their losses - it is probably twenty times that. Their "valuations" that pumped up the bubble consisted of coming to an agreement with the developer on how much they could make off empty land and then booking it as profit. They were borrowing from other banks on the last day of the month and repaying it the next morning in order to make their results look good. (Yup, Anglo was taking out massive payday loans!)

So to phrase it better, I think there was individual patterns of misbehaviour throughout the global industry that took a lot of people with them.

Do SIPPs still exist? In that way you could invest your retirement savings in what ever you fancied, but still get the pretty decent tax breaks ( and they're well worth getting, especially if you're paying higher rate tax at all ).

It already has done so, house prices are well down on their 2006/07 peak (which your graph only went up to 2006) for the realistic people. The perceived value may still be high by the people who are waiting it out, but they get a rude awakening if they actually have to sell.

I bought my house up north for £140k in 2006, it's currently on the market for £130k, but if I actually wanted to sell it tomorrow, it would have to sell for £100k.
I don't need to sell it so i'm waiting it out, but the crash has already happened.

I fucking wish.

ECB/IMF load Greece's debt onto taxpayers to protect the private banks.

http://www.guardian.co.uk/commentisfree ... ut-default

Greece WILL default, it's just a question of when, the banks want to make sure they've got their money out when it happens, (or as much as they can), and fuck the real people in the real economy.

This whole clusterfuck has to be the wake-up call, political movements - (hell, even fucking revolutions) - need to be started so that governments regain control over the issuing of the currency of their nations, instead of having it created as interest-bearing debt by private banks.

Surely as long as you're earning, you can remortgage a house you have 100% equity of?

(Or if you're 55 or older - still 11 years off for me - you can have a lifetime mortgage?)

Oh well, I'll stick to engineering methinks. (I'm STILL glad that I haven't sank my cash into some pension that probably won't even exist when I finally get to retire, though).

Cheers mate, yes, I was vaguely aware of this - just about to reach the point of 'zero debt' in a year or so, hopefully, so will start to look at a vehicle like this to buy a 'real' (small) house for rental etc.

I'm not crazy enough to think that any of us in our thirties now will be retiring in our 60s on any sort of public or private sector pension scheme (that said I am paying into one, just on the off chance, lolz), personally I think there's going to be a spectacular collapse in society before then, and not just of the financial kind.