Sunday Telegraph - Business Section

[Tugger]

If a 'certain airline' were in trouble, in addition to the borrowing issues highlighted by Albert Tatlock, our government's 'open skies' policy, whilst certainly inviting competition, has too many airline businesses fighting for too few customers. This leads to an obvious loss of revenue for re-investment.

 

Like many businesses on the island there needs to be some level of protection to ensure that an adequate and cost effective service is maintained. That is not to say that there should not be some level of competition, just some control over the number of businesses allowed to operate and where they fly to?

 

I couldn't agree less. The Manx government could fuck up a cup of coffee. Giving them control over who flies in and out is a recipe for (i) corruption and (ii) letting some incompetent civil servant fuck up the market for us all.

 

Don't put the market in the hands of the government. They WILL ruin it for you

[Grumble]

Chinahand - thanks - yes, that makes sense.

 

Of sorts.

 

Luckily I'm good with my hands - all this financial malarkey makes my head hurt.

 

I think we should go back to being a cash society - neither a lender nor a borrower be - save for what you want rather than risk a rainy day and not making a payment. And ride donkeys, of course...

[Albert Tatlock]

Albert GDP is a value added figure - I own a company - I borrow and spend £1000 making a profitable item - I sell the end item for £1100 - my contribution to GDP £100 my debt £1000 - the ratio of Debt to GDP 1000% - relevence of this to what you are going on about - no idea.

Now I'm even more convinced you work for some government forum-spin agency, or are not thinking this through.

 

You're missing the whole point. Where did the £1000 you borrowed come from? - isn't it possible that it didn't actually exist in the first place and was generated as credit from thin air on a banks computer keyboard? - in other words it could have been secured on 97 other accounts - or more likely from credit, based on probability of repayment - think about it! The bank will never be asked to give everyone all their cash on the same day so both are possible - so it is easy for them to manufacture credit (money). Banks have been deregulated and can generate credit as they please.

 

Plus most of the time the credit issued by banks does not turn into goods as you describe (the tangible) - it actually 'dissapears' into the system where it used to bet on other currencies. The bulk of the money remains on computer systems and is never cashed out. Are you really saying that the £10 Billion paid out in bonuses in the city this year is based on the tangible? What is actually happening is that there is an attempt at present to turn the intangible into the tangible by artificially inflating property prices - property which cannot be exported - unless it is sold to overseas investors who can then charge its British occupants extortionate rents - in much the same way foreign owned British utility companies operate today. People are then seeking credit based on the intangible i.e. borrowing further against their property.

 

The whole system is based mainly on the intangible, and will inevitably go pop - simply because the UK continues to move away from manufacturing the tangible goods you described above e.g. for export to exchange for real cash or other tangible items. The bulk of the British people are now 'employed' on pushing around the intangible - that's why it's all smoke and mirrors. If we didn't have PCs to provide jobs to maintain this illusion - and weren't so reliant on maintaining current house prices to protect our 'investments' -most British people would now be out of work. If you rounded up 100 people in the pub, there's probably only 5 in a 100 of us that actually produced anything tangible at all today.

[Cambon]

ALBERT TATLOCK - Read this post carefully.

 

Still off topic, but a high proportion of bank provided debt (not sure how much) doesnt actually sit on the bank's balance sheet but is taken off balance sheet through debt securitisation issues, which put simply means that the banks bundle up lots of small loans and issue bonds to investors priced to reflect the underlying risk of credit default. So for example a bundle of first mortgage property loans would carry a lower risk than a bundle of unsecured credit card loans. Who are the investors buying these bonds - they are in the insurance and investment companies which manage our pension contributions.

 

This is where the next credit crunch will come from, and the first indications of it appeared a few weeks ago in America with signs of sub-prime mortgage default. For sub-prime mortgage read high risk second mortgages.

 

This is closer to reality. You suggest that banks make money out of thin air. That is not the case. However, they do compile figures based on assets and deposits and make loans based on this. The above statement is exactly why everyone who has a SIPP should be monitoring it every day and be warned the "burst" is not far away. Just yesterday the USA announced that house prices had fallen for the third straight quarter and are now at the lowest for two years. This is very bad news and will have a knock on effect over here eventually. The best place for your pension (for the time being) is in a deposit fund. After the market "corrects" itself then go back into equities cautiously.

 

On another related point, high interest rates are indeed bad for most businesses but good for banking as it encourages foreign deposits. I mean, if you take out a loan in Japan where interest rates are virtually 0, then deposit it in Austrailia, where rates are quite high, it is money for nothing! This is happening all the time. Unfortunately it is big business that does it and the Austrailian equivalents of you and I who are paying for it.