The Economic Crisis

[Rich]

I'm not an economist, far from it in fact, that's why I still have to go to work and earn a wage, nothing abnormal about that, and no medals required either, however, I would like to draw an analogy with the present economic environment.
As the "crunch" has taken effect, we have tightened our belts here, we have changed our shopping habits and have "traded down" if you like, for instance, we now purchase a lot of our weekly shopping from Aldi, no shame in that, just common sense, but when the economy takes an upturn, we will still shop at the likes of Aldi, that makes good sense, a lesson learnt there.
the point I am trying to make, and the analogy I am trying to draw is this;

When things start to get "tight" surely the first thing the government of the day(whoever that may be) should be doing is trying to make things easier for the citizens that it presides over, as a household, we have made compromises, as a country the government should be doing the same, stop ALL overseas donations, stop listening to Brussels, stop sending our soldiers to defend countries that have no regard to the UK, stop spending on the olympics when we obviously can't afford and don't need it, in short, concentrate all efforts on the UK, when we are back up and running at speed, then by all means, be charitable, but let it begin at home first, after all, we do pay THE taxes.

Regards,

Rich.

 

[Digit]

All that Rich is part of what Jake described as a 'sophisticated' society.
It might worth pointing out that a 'sophisticate' was on old name for a prostitute.
Unless someone can show me a benefit to a company in the trading of shares the market appears to me to be as artificial, and unnecessary, as the trade in so called fine art.
If I preserve a Shark in a case full of formaldehyde why would it be 'worth' less than Hirst's effort?
Why does the value of a 'Van Goth' that has been identified by experts as genuine suddenly become worthless when proven to be by a lesser artist whose work was obviously as good as Van Goth's was for it to have been accepted as genuine.
A teacher contributes to our society, as does a doctor, a police officer or a fireman.
In what manner does a share trader contribute anything?
I hope that they do but as far as I can understand the system they are parasites who contribute nothing.

Roy.

 

[Rich]

According to the OED, the word sophisticate, means to corrupt something from it's original form, sophistry is much practiced by government AND lawyers.

Regards,

Rich.

 

[Digit]

But remember Rich the OED tends to report current usage. Look up 'Hussey' or 'Hussy'.
To most it is a derogatory term for a woman, but in fact it originally was referenced to 'housewife'.
Or look up 'peculiar', or 'awful'. All have changed their meaning over the years.

Roy.

 

[Rich]

But remember Rich the OED tends to report current usage. Look up 'Hussey' or 'Hussy'.
To most it is a derogatory term for a woman, but in fact it originally was referenced to 'housewife'.
Or look up 'peculiar', or 'awful'. All have changed their meaning over the years.

Roy.

Re Brewers dictionary of phrase and fable 1928.

Sophist,sophistry,sophism, sophisticator, etc.
these words have quite run from their legitimate meaning.before the time of pythagoras (BC 586-506) the sages of Greece were called sophists(wise men) Pythagoras, out of modesty called himself a "philosopher"(a wisdom lover).
A century later protagoras of Abdera resumed the title and a set of quibblers appeared in Athens who professed to answer any question on any subject and took up the title discarded by the wise Samian.
From this moment, Sophos and all it's family of words were applied to "wisdom falsely so called", and philo-sophos to the modest search after truth.

Rich.

 

[Grinding One]

Correct me if I'm wrong Jake, for as I said I'm no expert here, but how does a company benefit from the trading of shares?
If I buy into a company share issue at say five pounds per share, and a few months later they are being traded on the market at six pounds per share, what does the company get, anything?

Roy.

I`ll try to help out here,If I start a new company and it does good,such as Apple Computers.Well I could have bought stock in it when it first started up for around 40.00 a share....waited 2 years and the stock was worth 4 times that much,so I could have sold it then and If I bought a lot of shares I would have been very wealthy.Some of the employees were on board with stocks giving to them on preformance...these people are all millionairs now.
Bill Gates started in a Garage and he retired in a castle.I never saw it coming and my kid was telling me to buy stocks back then...

 

[RogerS]

Correct me if I'm wrong Jake, for as I said I'm no expert here, but how does a company benefit from the trading of shares?
If I buy into a company share issue at say five pounds per share, and a few months later they are being traded on the market at six pounds per share, what does the company get, anything?

Roy.

If a company wants to raise capital they can either borrow it or issue shares into the open market. If the open market (ie the ability for people to buy and sell shares in a company) did not exist then the company could not issue any shares, there would be no shareholders, there would be no company.

As I've asked in an earlier post, all very well to jump up and down and cry 'Not fair. Bloody bankers. Blah de blah' .......but, folks, maybe suggest an alternative otherwise this thread will degenerate into another 'whinge-city'.

 

[Jake]

If a company wants to raise capital they can either borrow it or issue shares into the open market. If the open market (ie the ability for people to buy and sell shares in a company) did not exist then the company could not issue any shares, there would be no shareholders, there would be no company.

Well, there are private companies of course, but they tend either to be organically grown smaller companies, or reliant on the private equity industry - itself totally reliant on securitisation andor hedge fund money.

Ah, what does it matter. These people aren't interested in learning, they just want to slag off things they don't understand, and people they don't know for doing jobs they couldn't do.

otherwise this thread will degenerate into another 'whinge-city'.

Interesting use of the future tense.

 

[RogerS]

But...did anyone have a fixed rate mortgage? If so then chances are that that was funded via the very financial vehicles that are getting everyone so vexed.

I do have a fixed rate mortgage (with Nationwide).
Care to explain why this is all my fault?
....

I didn't say that. I said that the supply of fixed rate mortgages which many people like to use (a form of hedging in itself!) only became available as a result of the sophisticated trading mechanisms that many are now keen to criticise.

 

[Steve Maskery]

If I buy into a company share issue at say five pounds per share, and a few months later they are being traded on the market at six pounds per share, what does the company get, anything?

Roy.

It benefits the company in several ways.

Firstly it makes the shareholders richer. On paper, at least. They can, within certain rules, sell some shares, take the money. If they have timed it right, they can buy back the shares later when they are not so expensive. That's how the shareholders benefit.

The company itself also benefits. Companies usually have to borrow money from the bank to fund their operations. Not all, of course, but it's very common. It's also sensible, because if a company is producing a 15% return on its capital employed, but only paying 8% for the capital, it's making a profit with someone else's money. The bank is getting a return and so is the company. Everyone is happy.

The more the company is worth (i.e. the higher the value of its shares) the easier it is for the company to raise money from the bank.

If, however, the shares fall, become worthless or are impossible to trade, then the bank will be less willing to lend (because of the higher risk), any lending is likely to be more expensive (say 10%), which means less profitability.

HTH
Steve

 

[Digit]

Thank you Steve, that explains how the current set up works. But regrettably doe not alter my opinion about the artificial nature of the market.
Take this as an example, overnight, world wide, the commercial trading of shares is halted. Banks are very unlikely to cease loaning money to a company simply because of that, they have other parameters besides share values, which can be manipulated by speculative buying and selling, as we have seen this last few days.

Roy.

 

[lurker]

Why is it that "they" will not learn from history?

Be it Tulip bulbs, south sea bubbles and at least 4 biggies in the past century. Greed gets the better of common sense.

Its not 10 years since the Japanese economy crashed after property prices got hyped up beyond all reality. They still have their tail between their national legs out there.

 

[Digit]

Remember the vast profits and losses a few years back Lurker on gene therapy?
The 'St Trinian's' motto was 'there's one born every day!'.
Personally I don't give a damn if they trade sh*t, (somebody would buy it) provided they don't damage the livelihood's of people like yourself.
It was reported that the collapse of Lehman's Bros bank netted one partner? 190 million$/£s?
Unless he knows something I don't know he can't take it with him nor live long enough to spend it, so what is he trying to prove?
As many readers of this forum will know I was diagnosed with cancer some time ago, the medical treatment and kindness that I received could not have been bettered what ever my finances, and the 190 million would have little or no effect on my chances of survival. The Man's a parasite!

Roy.

 

[RogerS]

Flobadob.

I must have missed the Ladybird Guide to the Free Market when it came out.

 

[Digit]

I must have missed the Ladybird Guide to the Free Market when it came out.

Send me your address Rog and I'll post you my copy! :lol:

Roy.

 

[RogerM]

Getting back on topic, the last time we faced a housing bust in 1991, I was manager of a large building society branch. Senior management had been a bit complacent and a new CEO was recruited who could only be described as a thug. He was hell bent on growth at any cost, and introduced 100% mortgages, self-certification, and lowstart mortgages where rates were kept artificially low for 5 years, but the interest shortfall accumulated and was then capitalised. He then beamed at us and said that as he had done something for us to help us to lend, we now had to do something for him. My branch lending target for the following year was increased by a factor of 6 - i.e. lend 6x more than in the previous year. We were told that if we were not succesful our successors would be.

I wrote to my Regional manager, who was one of the "old school" and who had always been a tight lender when he had been a branch manager, and asked why with property facing a downturn were we introducing a "fraudsters charter" with the new product range, and that the only way that the targets would be even approached would be if any assessment of ability to pay was thrown out the window, in which case arrears would go through the roof the next year. I didn't get a written reply, but a phonecall the following morning to say that it was not my job to question policy but to implement it, and when I mentioned the threat to the arrears balances I was told that if I didn't lend to target I wouldn't be around the next year to worry about the arrears. Despite lending very close to target I was made redundant the following year, and despite collecting a trophy (which I still have) for running the top performing mortgage branch I collected my P45 3 months later.

No surprises that this particular building society has long since lost its independence. One would have thought that having seen the causes of the debacle of the early 1990s management would have learned a lesson, but just enough time has elapsed for all the senior positions to have gone to the younger set - and 18 years on none of them have seen a property bust. The only thing we learn from history is that we never learn anything from history.

 

[Grinding One]

Well here s some good news for a change,50 billion of the cost of the bail out are going to outside the US investors and European Banks...US taxpayers helping out the other counties again before our own.Just Why Do I have to pay taxes only to give them away to other countrys??? I didn`t make the loans....
Looks like its time for another mind my own business sit in the corner and shut up session :evil:

 

[Digit]

There are occasions when we ask the same questions over here as well my friend.

Roy.

 

[BradNaylor]

Getting back on topic, the last time we faced a housing bust in 1991, I was manager of a large building society branch. Senior management had been a bit complacent and a new CEO was recruited who could only be described as a thug. He was hell bent on growth at any cost, and introduced 100% mortgages, self-certification, and lowstart mortgages where rates were kept artificially low for 5 years, but the interest shortfall accumulated and was then capitalised. He then beamed at us and said that as he had done something for us to help us to lend, we now had to do something for him. My branch lending target for the following year was increased by a factor of 6 - i.e. lend 6x more than in the previous year. We were told that if we were not succesful our successors would be.

I wrote to my Regional manager, who was one of the "old school" and who had always been a tight lender when he had been a branch manager, and asked why with property facing a downturn were we introducing a "fraudsters charter" with the new product range, and that the only way that the targets would be even approached would be if any assessment of ability to pay was thrown out the window, in which case arrears would go through the roof the next year. I didn't get a written reply, but a phonecall the following morning to say that it was not my job to question policy but to implement it, and when I mentioned the threat to the arrears balances I was told that if I didn't lend to target I wouldn't be around the next year to worry about the arrears. Despite lending very close to target I was made redundant the following year, and despite collecting a trophy (which I still have) for running the top performing mortgage branch I collected my P45 3 months later.

No surprises that this particular building society has long since lost its independence. One would have thought that having seen the causes of the debacle of the early 1990s management would have learned a lesson, but just enough time has elapsed for all the senior positions to have gone to the younger set - and 18 years on none of them have seen a property bust. The only thing we learn from history is that we never learn anything from history.

Thank you Roger.

Your story illustrates perfectly what has gone wrong with the banking 'industry' in the last 25 years.

Time was when your local bank branch was run by a 'Mr Mainwaring' figure who was a respected pillar of the local community. He has now been replaced by a combination of gelled haired spivs, call centres, and life insurance salesmen.

If you wanted a mortgage, you went to your local mutual building society, where you had to prove your worthiness for a loan by building up a substabtial deposit in a savings account and demonstrating a salary sufficient to make the monthly payments with ease. Most of these societies are now merely departments of high street banks following precisely the kind of negligent and fraudulent lending policies described above.

Some may call this progress. I do not.

I am not advocating the overthrow of the entire capitalist system; merely suggesting that banks and their employees might operate in a vaguely professional manner, rather than being motivated entirely by rapacious greed.

Interesting article by Boris Johnson here.

http://www.telegraph.co.uk/opinion/main ... do2301.xml

Cheers
Dan

 

[Steve Maskery]

...US taxpayers helping out the other counties again before our own

That's a Tuesday morning joke, right? Just look at your National Debt to see who is helping out whom.

And yes, ours is the same.

Both your country and ours have lived beyond our means for far, far too long, and now the chickens are roosting in their own back yards.

S