So we dont add value by making stuff anymore, its made by cheap labour in the third world. So they can grow their economy by producing real products which we buy because they are cheaper than we could make them.

How do we afford this, well we borrow the money.

Its a merry-go-round of a mess really.

Best to insulate yourself from it. Pay off your debts, save for when your out of work and keep riding your bike.

Basically, money was and is still increasingly being used to make money, rather than finance making real things that are then sold to make the money + profit back.

olddog – Will Hutton had a great phrase for it ‘The present economy is just money, talking to itself’

The finance sector, since the crash, has relentlessly lobbied both main parties to ensure theres no real reform, and its business as usual. So the political establishment (both parties are far too cosy with the City, and too dependent on it for their funding) have caved in and given them all their wishes, cynically placing their paymasters interests far above the electorate which has genuinely suffered as a result of their folly (while they haven’t).

Yesterday A load of people basically said ‘none of the above’, to the main parties and voted UKIP (a party run by a former banker – truly beyond Irony). But most people didn’t even bother to do that

I’m sure its all completely unconnected 🙄

Best to insulate yourself from it. Pay off your debts, save for when your out of work and keep riding your bike.

And learn to pitch a tent, catch fish and make fire 😀

The London house price bubble suggests neither government, banks or consumers have learnt a thing from five years ago, which doesn’t bode well for sustained economic growth in the future…

So we dont add value by making stuff anymore,

Fortunately, not true

olddog – Will Hutton had a great phrase for it ‘The present economy is just money, talking to itself’

Great (sic) quote but quite untrue

So we dont add value by making stuff anymore,

Very not true.

What we do though is buy the simpler parts that go into the products that we design and build here. The ones that require skill and knowledge to do. FWIW, that’s why IP protection is so important and why the US has recently decided to start going after Chinese people stealing that information.

It does make me laugh that we have a political party in power, and a rabid press, that says the unions were/are too powerful, but is so relaxed about the power and influence of the financial industry. You really couldn’t make it up

Basically, money was and is still increasingly being used to make money, rather than finance making real things that are then sold to make the money + profit back.

A Victorian invention afaik.

It’s not a right wing conspiracy, this, just a natural progression. Everyone in the west who’s in charge, and everyone who’s not currently in charge but might be next year, has an interest in maintaining the status quo. And everyone who doesn’t, isn’t in a position to change it. It’s just natural that the machinery of change tends to end up belonging to those with the least reason to use it.

Trimix – Member

So we dont add value by making stuff anymore,

Interesting fact for you- UK manufacturing measured by value added reached an alltime high just before the recession. I’ve not got current figures, fair to assume they’ll have fallen but the trend is still going to be growth not decline let alone death. The UK remains one of the world’s biggest manufacturers despite its relatively small size. That won’t last, it’s built on the historic advantage and it’s basically impossible for us to outcompete the developing world in the long term… But that’s no criticism. Brazil might well have passed us in the last few years, no wonder.

What we do though is buy the simpler parts that go into the products that we design and build here. The ones that require skill and knowledge to do.

Worth repeating.

Lots of high value stuff made here in UK.

Much of the low value stuff that goes into the high value stuff is made elsewhere.

So the global credit crunch occurred because people Borrowed money that they didn’t have and couldn’t afford to pay back and spent it on cars and TVs instead of renovating their properties ?

Think I FTFY properly.

Think I FTFY properly.

Thanks. I’m starting to understand why the banks and financial institutions across the world collapsed much better now.

I think the term everyone is looking for is Global Value Chain.

Northwind – how were the figures calculated and were they adjusted for inflation? It may be that the added value of manufacturing sector has been increasing, but doesn’t mean that financial sector hasn’t been increasing much faster.

It is true that the West tends to contribute to the top of the value chain and that is where the big money is – but the problem is that a lot of the money we make from production isn’t in manufacturing as we would think about it.

It’s primarily two things: (1) design, R&D, engineering – (2) things like brand development, management and promotion, sales and marketing and a load of financial stuff that sits around manufacturing now. This is highly profitable as long as you protect your brand identity, and creates high value jobs – but these are relatively few in number. Think about the Apple model – where all the jobs are and where all the money goes. The labour is in China and that is where the real value is added, but he money comes back to the US where a relatively small number of high paid workers do very well as do the shareholders (albeit that Apple is a bit weird in this respect with its odd dividend policy)

The problem is you end up with an apparently wealthy nation, but with lots of people without meaningful work

olddog – Member

It may be that the added value of manufacturing sector has been increasing, but doesn’t mean that financial sector hasn’t been increasing much faster.

That’s it in a nutshell- manufacturing has grown as an absolute but declined relatively. But realistically, since we already punch above our weight in manufacturing, increasing that at an even higher rate is hugely difficult so if you want to rebalance the economy, that’s likely to mean weakening the economy.

The problem is you end up with an apparently wealthy nation, but with lots of people without meaningful work

I work in Marketing and can also confirm that these kind of jobs where you don’t produce physical, easy-to-quantify-the-value-of outputs are full of people who just bullshit for a living – and any value they may or may not add is ephemeral and therefore easy to give an illusion of value whilst actually not doing anything which adds to the wealth stock of the nation 😀

I’m sounding more and more like my Dad but I get the horrible feeling our wealth is a total illusion and the whole pack of cards could come down shockingly fast when people realise just how much of an illusion it is…

It’s lazy to blame “the bankers”, “the rich” etc etc.

How about personal responsibility? Let’s look closer to home to the idiots who borrowed more than they could afford to repay? What happened to honestly appraising your own circumstances, rather than trying to keep up with the Jones’s and debt loading?

andyrm – folk ripping the arse out of their credit card(s) and then defaulting is pretty annoying, though I’m not sure it was at the heart of the financial crisis any more than traders winding up companies to make the debts/responsibilities go away. That was mortgages mostly wasn’t it ?

if their bank or financial adviser says “go for it (and pay me my commission) – at the rate prices are rising you’d be mad not to, and those repayments will look tiny in ten years”, why would they doubt that advice ?

Best to insulate yourself from it. Pay off your debts, save for when your out of work and keep riding your bike.

What he said!

You can’t really insulate yourself from it though, I’ve never been an irresponsible borrower but it didn’t stop the company I worked for almost going out of business and me losing my job (that’s not a moan incidentally, I got a bag of redundancy money and I hated the place, but it’s a good example)

Let’s look closer to home to the idiots who borrowed more than they could afford to repay?

But luckily bankers were far too clever to lend these idiots money, right ?

So what went wrong ?

No they were not, that’s a key point. Furthermore gov and regulators put incentives in place to encourage them to do this in the past

(If you don’t learn the lessons of history…..)

Ditto, if IR were to return to “normal” levels now rather than the artificially suppressed current ones, the gov policy of encouraging home owners might prove to be short-sighted once again. The stats are scary on the impact on the UK mortgage market.

The stats are scary on the impact on the UK mortgage market.

And what depends on the UK mortgage market?
1. Consumer confidence
2. Consumer spending (underpinning the current ‘recovery’)
3. Retail banks’ revenues? A collapse in which would likely lead to another financial crisis.

The more I read the more it seems we’re in a hell of a bind – if house prices don’t keep rising, the recovery is over, if they do the bubble will pop and we’ll be in crisis. If IR increase, we’ll be in crisis, if IR stay as they are, the house price bubble will pop…

Didn’t I hear excessive lending led to a housing market crisis which led to a massive global meltdown a few years ago? 😯

You don’t have to think about this too hard to realise that if Gideon felt it necessary to launch as risky a policy as Help To Buy as his pre-election pitch, then the underlying recovery clearly doesn’t exist and we must be in some very serious trouble underneath

It will take a long time before we are out of the woods. We are currently reliant on “exceptional” monetary policy, mis-priced risk and the theft of money from savers. The lesser of several evils “some” might say.

The wealth effect of rising asset prices (houses, equities etc) on consumption is obvious as is the reverse. Sadly, the current growth is a typical ST UK version – plus ca change….

Meet the new boss, same as the old boss. 😀

[video]https://www.youtube.com/watch?v=Rp6-wG5LLqE&hl=en-GB&gl=GB[/video]

It’s all too serious. In no more than 5 words, tell us what caused the financial crash. I’ll go first

“Clever people, working in finance”

Lipstick on a financial pig

“Artificially low rates, excess liquidity”

Capitalism is boom and bust

Labour carried on with deregulation.

Capitalism is boom and bust

No, capitalism is risk

boom and bust is greed & self delusion meeting reality

Edit: and theres your five words

People = short term thinking