[Closed] Who owes all this money to who? (economics dimbo content)

The money is largely owed to the Rothschild Banking group

HTH

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In the beginning.....

The banks worked out they make shit loads more cash by lending more to people even though it was riskier

Governments allowed this to happen even though they knew it was risky

The banks made shitloads of money

People borrowed more and quite a lot spunked it up the wall and couldn't pay it back

The banks made shitloads of money still but some started to wobble because their clients didn't pay back the money they'd borrowed

The wobble got bigger but the banks made shitloads of money

The wobble got really big and a lot of banks (whilst still making money) were at risk of going under

So, and this is the best bit, it's exquisite,

The governments who let the banks do the risky stuff because it made more money bought the banks out and took on their toxic debt so that the banks could stabilise and go back to making shitloads of money

The governments, through a variety of methods of taxation and cuts, are recouping that aquired debt from us, the public

The best indicator that this is working is when the banks start making shitloads of money again.

Ever get the feeling you've been used?

I'd love to educate you but I kind of like your ideas. Hopefully someone comes along who understands economics, or at the very least likes to think they do 😆

The governments who let the banks do the risky stuff because it made more money bought the banks out and took on their toxic debt so that the banks could stabilise and go back to making shitloads of money

This is the bit we all love to whinge about from our armchairs, but if the govts hadn't done it we'd be in a much bigger mess. Or at least have gone through worse.

Pretty much what Yossarian said , just add .
Some UK guys were getting concerned as to what was happening to the uk banking sector, so they switched their focus to the US , and lent billions to millions , who also could not afford the repayments .and lost the lot.

Add in the factor the big bankers knew UKgov would underwrite the debt it was like going to Vegas , betting on Black , loosing , then getting your money back for another go. Repeat.

BTW you are also a grammar dimwit. Should say 'to whom' not 'to who'.

The banks made shitloads of money

This is the bit that confuses me.
If the banks make shitloads of money where does that go?

Its virtual money they made - doesnt exist in the real world other than on balance sheets as a number .

Its like a cheque you cant cash !

This is the bit we all love to whinge about from our armchairs, but if the govts hadn't done it we'd be in a much bigger mess. Or at least have gone through worse.

Of course if the banks had been properly regulated in the first place it's unlikely any of it would have happened at all...

I'm just so glad that the banking sector has learnt its lesson and turned over a new leaf.

betting on Black , loosing , then getting your money back for another go. Repeat.

Yes except that in this case the gambler has a stake in the house and vice versa.

Chez, as I understand it a lot of money gets 'written off' as in you owe me, but you can't pay it back so I have to give up on it. And then banks are worried that this might happen a lot so they hoard cash. Plus a big bank failed, which meant that anyone who had money in it lost that money, didn't they?

When you have your money in a bank, they don't actually HAVE your money they just give you an IOU. And when banks or any of us make money we don't really make money we make IOUs.

It's because people have forgotten the advice of Dickens:

[i]“if a man had twenty pounds a-year for his income, and spent nineteen pounds nineteen shillings and sixpence, he would be happy, but that if he spent twenty pounds one he would be miserable.”[/i]

“if [s]a man[/s] everyone had twenty pounds a-year for his income, and spent nineteen pounds nineteen shillings and sixpence, [s]he would be happy[/s] the economy would stagnate and development would be incredibly slow

I dont understand the 'virtual' bit..

My (and presumably, your) hardearned cash is 'real' when you pay it into the bank, whether it be to pay off a loan or just as ready wonga in your current account for buying orange fives and beer/cake.

who in the bank (or whom, for the peds) has got my dosh?

this is an interesting question and I'm always for asking the obvious that never seems to get asked...
I'd imagine property developers wouldnt be too happy with the one-off cut in house prices.

anyway, when people do the banker bashing, they must remember that these guys were just taking what they could get away with. why would banks have morals?
people were doing it in their own small fashion right down to individuals, in my view- buying a new sofa and tv on credit that you couldn't really afford- isn't that all linked into it?

when we moan about cuts etc etc, we should really be moaning that we have allowed ourselves to get into a situation (exacerbated by Tony Blair, Gordon Brown, Mandy after Tories before them) where we're at ransom to the banks and they know it.
I couldnt give a toss if some private investment fund manager gets a million bonus so long as when he fails we dont have to bail him out.

perhaps we should go back to smaller scale, slower or limited growth...
😐

Can someone explain to me why we consider this to be a new phenomenon, having seen the worst of negative equity the last time the Conservatives were in power, and having paid into the wonderful sounding endowment mortgage for 20 odd years, it would appear that the financial services industry is designed to seperate me from any money I may have as efficiently as possible.

...and now it appears that freezing my wages and cutting my pension will get us back on the straight and narrow.

My (and presumably, your) hardearned cash is 'real' when you pay it into the bank

No, it's not.

Can someone explain to me why we consider this to be a new phenomenon

It's not a new phenomenon, but the root causes are different each time.

Whom.

I don't know the answers to your questions - much good my A-Level in economics has done me.

Can I throw an idea out there, though?

There are plenty of people in my own organisation who would doubtless describe themselves as "hardworking, decent folk", who nonetheless take a full hour's lunch break at 1pm every day, even if we have a 2:30pm deadline, because they feel entitled to it. Instead of working through to the deadline and [i]then[/i] taking a break.

Endless disputes over "no but yes but no but I took 55 minutes yesterday so I'm allowed to take 65 minutes today" - no focus on outcomes/what's necessary in light of the job at hand.

Is this tendency, embedded in our laws and culture, when writ large, what's driving the general tendency for firms out East to eat us alive?

Just throwing it out there - the suggestion that a lot of people I work with who consider themselves hard workers, don't [i]really[/i] know what hard work is and the legal system perpetuates this.

I at least admit that I'm just [i]not[/i] a hard worker...

Is this tendency, embedded in our laws and culture, when writ large, what's driving the general tendency for firms out East to eat us alive?

No, cos there are many many people who DON'T do this. Me and many of my colleagues included.

Is it really embedded in our culture? Ever worked in London? Startup tech company?

The reason Eastern companies are taking business is that they have huge numbers of workers desperate to work terribly long hours for what is by our standards peanuts. Cos the cost of living there is a lot lower and there are billions of PROPERLY poor people struggling to live.

anyway, when people do the banker bashing, they must remember that these guys were just taking what they could get away with. why would banks have morals?
people were doing it in their own small fashion right down to individuals, in my view- buying a new sofa and tv on credit that you couldn't really afford- isn't that all linked into it?

It's about risk management really. One guy buying a sofa on hp he can't afford probably considers the negative impact on his credit rating for a few years to be worth it should things go tits up. The banks made a very obvious decision to loan everyone lots of money that if it went tits up, really tits up, would be bailed out by governments shit scared about the result of not stepping in. The governments watched on as this unfolded but didn't intervene because to do so would have risked to ire of both the banking industry and the public who were both pouring warm custard over themselves and whooping loads.

my logic of the dickens quote is for people to get £20 for doing nothing.

if they work or add value to that £20 then more people with £20 to spend will buy from this bloke, therefore increasing [i]his[/i] income, to spend on stuff he needs/wants.

My point is, I work, I guess a lot of you all work, get paid a reasonable wage and have done every week since I left school.
Yet why is it that I will never be able to afford my own home, unlike the generation before who are now on their second or third homes, bought on profits that they never 'earned'?

Jhw that does my nut in ..

My industry is such that i get paid some days to sit on stand by watching dvds and other days inhave to go 110%

Some folk i work with just wont do the work when its needed and think every day should be a dvd day and when you get tough with them your in the wrong.

no sense of ownership for a job .

If I bought say.. some Star Wars toys when I was a kid, I might've paid £9.99 for them. Now they might be worth £50 because they are collectible and rare. If someone wanted to pay me £50 should I refuse and only accept £9.99? Or less, cos they are old?

Ahh, molgrips, what you are saying then is that my 'hard cash' wages are in fact just money that my employer has borrowed?

If thats the case, where's the money that I have earnt for the company with my sweat? surely i must be adding value to the company with my toil, otherwise theres no point in giving me a job?

now i'm learning!

No, not really. Your employer doens't need to have borrowed money.

Most money just isn't cash. Say I bought a star wars toy in 1983 for £10, now it's worth £50 - ok? I'll sell it to you for £50 but I owe JHW £50 cos he fixed my bike, so I'll just tell him to get the money off you. You however paint his hallway for £50 and all our debts are settled, but no cash has changed hands or has ever existed bar the original £10.

You are adding VALUE to your company by working, and the company is telling your bank that you can buy more stuff - not actually handing over coins.

jhw, im not talking about management culture or employee culture..

or maybe its because people watch dvds instead of adding value to their company that the world has gone bust!

if you are in a contract with an employer to do x amount of work per week with y amount of lunch breaks, why should the company (or employee) expect anything different?

if you are in a contract with an employer to do x amount of work per week with y amount of lunch breaks, why should the company (or employee) expect anything different?

If I were paid to paint a hallway, say, I'd do the hallway and nothing else.

If I were paid to fix a computer program (as I often am) I need to keep working until it's fixed. Now I have a contract that states X number of hours, but if my company really really needs it done then it's hardly fair of me to eff off after X hours and leave them in the poo.

My company needs my help, and I need its money. They trust me to sort things out, and I trust them to help me out when I need it. For example when I'm not on an assignment they cut me plenty of slack much like trail_rat's.

Yet why is it that I will never be able to afford my own home, unlike the generation before who are now on their second or third homes, bought on profits that they never 'earned'?

I have a theory.

A couple of generations back, we had a family unit with a 'breadwinner' and a 'home-maker'.

We decided this was sexist and that women could go to work if they wanted. Which is great. Except, in the 80s lots of families then decided that they [i]both[/i] wanted to go to work and live the life of riley on their double income.

Over a generation's time, the cost of living rose, property prices skyrocketed, but wages relatively didn't. Because everyone had two wages coming in, no-one noticed.

Fast forward to today, we've now got a situation where both halves of a couple [i]have [/i]to go to work just to make ends meet, no-one can afford houses anyway, and the next generation of kids are all feral because there's no-one looking after them.

So it's all the DINKYs fault. We're all earning a fraction of what we should be.

molgrips, thats what i mean about adding value, you have profited from your slightly dusty luke skywalker by realising the potential to increase its value, albeit that you had to keep it for 10 years to do so.
At the end of the day the £50 is an arbitrary amount, if I can get paint for jhws house for £2 and spend 2 hours doing it costing me £8..

and jhw grabbing a CRC freebie out of his garage and spending 2.5 hours fitting it (at the same £4 per hour)

There are lots of people chasing fewer houses. So the ones who can pay more are the ones who have cash lying around; whose Great Aunt died and left them a few hundred Gs, the ones whose brother has made it big on the markets and can pay for a stake in the house etc etc etc. Us poor normal schmoes don't stand a chance.

mol

if my company really really needs it done

then they will really really pay the overtime, TOIL etc to get it done.

I agree with what you say, most people (including me) give more than they receive to their employers, but that is not what is causing the world to go down the poopipe, because at the end of the day, after working 20hours and getting all those computers fixed and walls painted, i (you) do not have any control of house prices or job stability.

cheez0 - I didn't do anything to add value to my toy though - its value appreciated on its own becuase everyone else decided it was desirable.. and there were people around who were prepared to pay £50 for it.

That's what's happened to houses.

What was the question again? I've lost myself in economic analogies.

but that is not what is causing the world to go down the poopipe

No.. people being lazy is not the problem. I reckon people are working harder than ever tbh.

Eurozone debt web: Who owes what to whom?

http://www.bbc.co.uk/news/business-15748696

Everyone seems to owe it to each other. They should just nationalise all the banks and let it cancel its self out.

yeah, but you DID do something mol, you had to STORE luke in a safe place, away from thieving scrotes and plastic-eating mice

that costs money and of course theres the 'opportunity cost' that you could have bought something else more valuable, like beer and cake.

Fast forward to today, we've now got a situation where both halves of a couple have to go to work just to make ends meet, no-one can afford houses anyway, and the next generation of kids are all feral because there's no-one looking after them.

So it's all the DINKYs fault. We're all earning a fraction of what we should be.

And all those DINKY's are hogging the jobs to pay for their kids university education, car insurance, recreational drugs, house deposits etc and consigning them to a life of unemployment or low paying jobs.

yeah, but you DID do something mol, you had to STORE luke in a safe place, away from thieving scrotes and plastic-eating mice

Maybe I kept him in an air conditioned guarded locker.. but maybe I just left it in the loft and forgot about it. Some things (like say whiskey or plants - ever see how much big trees cost to buy) need attention and looking after, but some things don't - like other people's antiques.

Um, DINKY stands for Double Income [b]No Kids[/b], which might make the whole paying for their kids university education a wee bit silly...

oops. good point 😳

Here's an interesting read.

http://www.cracked.com/blog/5-ways-we-ruined-occupy-wall-street-generation/

Yossarian was nearly right.

It's not that people "spunked it up the wall"

It's that every time someone borrows money, they agree to pay it back with interest.

The only way that interest can be paid on all the due loans is if the economy has grown sufficiently to pay them AND/OR the people (including Government, banks etc) borrow even more money to pay them off.

The current problems are essentially down to the fact that so much money was lent/borrowed that there really was no prospect of it ever being paid back, but because our financial system is so sodding complicated no one really knows who is holding the bad debt.

If like me you are also a realist rather than an economist, you might take the view that actually, one of the reasons that the economy is not growing fast enough to keep this giant Ponzi scheme on the road is that we actually live on a planet with finite resources and that there are in fact limits to growth, which we are currently bumping up against.

And if you do believe that, then it also follows that even if there is some short term fix to get the economy growing again it is only delaying the inevitable - which is that our entire economic system needs to be rebuilt differently, because what we've got no longer works.

This is really interesting - the views on why it's all the banks fault.

What we have at the moment is two separate issues:

1. Bad bank debts mean they are very reluctant to lend money

2. Governments have for years spent more money than they are earning.

Now the money in he bank is subject to what is called the multiplier effect. If I have £100 and I put it in the bank, I still have £100, but so does the bank. The bank lends it to Jack so he has £100 as well. He wants it to buy a car, but can't find one to buy straight away so he puts it in different bank. Then that bank lends it to Tom. Now there is only one lot of £100, but actually five people have it and can all spend it. So there is £500 out there boosting the economy.

Now if the bank thinks that Jack is a bad risk, they won't lend it to him, they will keep hold of it. Suddenly my £100 is not worth £500 to the economy, it's worth £200 and the economy effectively shrinks because of reduced economic activity. This causes lower corporate profit and job losses, so less people have their £100 to put in the bank etc.

Now separately the governments were going to be in trouble anyway as you cannot continue to spend more than you are earning forever. Bailing out the banks did not make a lot of difference as the numbers involved are relatively small. What did make a difference was the reduction in taxation and increase in social security payments because of the reduced economic activity. Suddenly you have less money to pay the interest on your debts, so you make cuts in your current account expenditure (i.e. you employ fewer people and spend less on building roads, hospitals, schools etc) which compounds the problem.

So there are two alternatives:

1. Everyone including the governments gradually pays off their debts (reduces the bank multiplier effect) until we are a sustained level of borrowing again.

2. The government continues spending in order to stimulate the economy, but has to raise more money to pay the interest on its debts. In other words - increase taxes. Now the popular view is to raise taxes on the rich - after-all the poor have no extra money to give. However, what is rich? When the government wanted to stop child benefit for 40% tax payers there was outcry. So at what level? £100,000? Problem is there aren't enough of them earning at this level to make enough of a difference to tax receipts.

So there you go.

I don't think anyone has mentioned "wages", which is [i]extremely[/i] important with regards to the economic mess we're in.

Since the neoliberals took control of British governments 30 years ago, wages as a percentage of GDP, have been driven down, through mostly a combination of attacks on trade unions and very high unemployment. In the case of the bottom half of earners it has fallen by a quarter over the last 30 years.

Now lower wages was obviously highly desirable to the neoliberals as it can lead to substantial increase in profits, however, it has two undesirable affects. Firstly it's risky politically - governments want to be re-elected, but much more importantly, it exposes the paradox of overproduction/underconsumption.

Low wages can be very bad for the capitalist because whilst low wages might very well increase their profits, they need consumers with reasonable purchasing power to buy the products and services which make them their profits.

The solution ? ......."easy credit". You drive down wages and keep them low, but then lend money to people so that they can buy the things they need, whilst also encouraging them to buy what they don't need.

Profit is made from selling goods and services, and profit is made from lending people money to buy goods and services. It's a win-win situation. Or so it would seem. It is of course typical short-term neoliberal bollox. It was, and is, completely unsustainable, and the bubble of credit-fuelled booms has finally burst. Good and proper.

And one of the reasons getting out of this mess is proving so difficult is because "easy credit" is no longer easily available. So now we have people who can't get credit, on low wages, nearly 3 million unemployed, and everyone is being told to "tighten their belts".

Who's gonna start buying stuff ? Apart from the wealthy who don't stimulate economic activity enough to make a significant difference anyway. We're ****ed. Time for revolution I fear. Only that won't happen just yet, so expect things to get a lot worse. Good luck out there.

Say I bought a star wars toy in 1983 for £10, now it's worth £50 - ok? I'll sell it to you for £50 but I owe JHW £50 cos he fixed my bike, so I'll just tell him to get the money off you. You however paint his hallway for £50 and all our debts are settled, but no cash has changed hands or has ever existed bar the original £10.

I like boriselbrus's post the best. Shows how difficult things can be, and that it's not just a simple case of some greedy people screwing the rest of us.

Now the money in he bank is subject to what is called the multiplier effect. If I have £100 and I put it in the bank, I still have £100, but so does the bank. The bank lends it to Jack so he has £100 as well. He wants it to buy a car, but can't find one to buy straight away so he puts it in different bank. Then that bank lends it to Tom. Now there is only one lot of £100, but actually five people have it and can all spend it. So there is £500 out there boosting the economy.

BUT - the important bit that you fail to mention - FOUR lots of interest to be paid back when all the loans are repaid!!!!!!

Having all of that money out there sloshing about in the economy is only affordable if the economy is growing fast. Once the economy stops growing faster than the interest is mounting, then the more times that the money has been "multiplied" (in your terms) the worse mess you are in.

Your solutions are not possible - there isn't enough wealth to pay down the debt - there will be defaults, but no one knows for sure where and to what extent.

it's not just a simple case of some greedy people screwing the rest of us.

It certainly was a case of greedy people screwing the rest of us.

The current debt crisis was spelled out (forecast) in great detail by plenty of people, years ago - but no one in power wanted to listen. The banks didn't care as they were raking in cash. Politicians, even if they knew what was coming didn't want to act because this is NOT a zero sum game. Politicians have been involved in a game of chicken and we have ended up in a head on crash.

I can recommend this book:

[url= http://www.amazon.co.uk/Coming-First-World-Debt-Crisis/dp/0230007848/ref=sr_1_1?ie=UTF8&qid=1322773904&sr=8-1 ]The Coming First World Debt Crisis - by Ann Petifor[/url] - published in [b]2006[/b]!!!

It is written for the lay person and lays out her [b]prediction[/b] of pretty much exactly what has happened over the last 3 years.

yossarian - Member
In the beginning.....

The banks worked out they make shit loads more cash by lending more to people even though it was riskier

Governments allowed this to happen even though they knew it was risky [b]and they were getting massive amounts of tax from the banks in order to build hospitals, pay policemen, buy nuclear missiles etc etc etc[/b]

and they [b]also wanted to borrow[/b] massive amounts of [b]money[/b] from the banks in order to build hospitals, pay policemen, buy nuclear missiles etc etc etc

FTFYT

😆

Aye rightplacerighttime - that too 🙂

Your solutions are not possible - there isn't enough wealth to pay down the debt - there will be defaults, but no one knows for sure where and to what extent.

Yes, exactly.

No-one knows for sure what is best and no-one knows what will happen...

The current debt crisis was spelled out (forecast) in great detail by plenty of people, years ago - but no one in power wanted to listen

Every time something happens all the smart-arses go on about how so many people predicted it but no one wanted to listen, but now I'm the clever clogs because I'm pointing it out. However, people ALWAYS write books predicting impending doom and some of them get lucky.

Same happened in the dotcom boom. People saying 'oh I'm so clever I predicted this' well everyone knew it was coming, but no-one knew when and everyone also knew they could make tons of cash before it did go belly up.

The thing is, everyone wants to make money. The only difference between them and us is that they have more resources with which to do it.

I blame the governments. Starting with, but not limited to, Thatcher. However, you can't blame them too much because they need the economy to boom to get voted in.

You know what, actually.. I blame the electorate. Thick buggers who don't know sh*t from shinola when it comes to economics and government and yet we are the ones who have to be appeased.

Stupid, isn't it?

molgrips, you're wrong.

Every time something happens all the smart-arses go on about how so many people predicted it but no one wanted to listen, but now I'm the clever clogs because I'm pointing it out. However, people ALWAYS write books predicting impending doom and some of them get lucky.

To be honest, you din't need to be an economic genius to work out that all the easy credit and massive mortgages lifestyle on the never-never etc was going to lead to serious problems. People buying homes at the top of the market, then wondering why they've now got negative equity. People borrowing way more than they earned, then wondering why their TV/Car/Home is repossessed. People wanting the champagne lifestyle with only Babycham wages....

I blame the governments. Starting with, but not limited to, Thatcher. However, you can't blame them too much because they need the economy to boom to get voted in.

Erm no. When Thatcher got re-elected in 1983, the economy was most certainly not booming. In fact it was worse than it had been when she first got elected on '79.

Don't under estimate turkeys ability to vote for Christmas. Specially when the media tells them on a daily basis that it's good for them.