Bank bailouts and banker bashing

Not passive, no, but they are part of the transmission mechanism which is what it sounds.

The fundamental cause of the crisis was central banks flooding the world with liquidity at a time if artificially low interest rates. The other factors exacerbated the impact of this – including down (in cases) to the behaviour of individuals. But they are more symptoms than causes.

Good job we are not flooding the markets with liquidity and a time of artificially low interest rates again, isn’t it!?! 😉

@jambalaya et al:

You should.

So you’re prepared to talk about something for 5 pages over several days and not to watch an investigation or discussion of the merits or otherwise of the system and mindset that encompasses it….

That sure says a lot.

You should.

That sure says a lot.
Watched two movies this weekend as part of a film festival and have the Art of Killing on this list for this week so a bit “filmed out”. I find a lot of these conspiracy theory type works so full of BS I struggle to last 5 minutes. I can watch Michael Mooore. I asked if you could point towards a summary, this is 90 minutes of almost certain tosh.

Trade for ourselves ? Pretty much impossible as it’s against our terms of employment contracts (conflict of interests / distracted etc) , we can make longer term investments and do asset allocation in our pension etc but not actively trade.

Well the ultimate bailout may be coming to a country near you soon – nationalisation and capital controls a la greque

The debt burden on Greece is completely unsustainable, so the sooner they just get on and default the better (for them in the long term).

Have you somehow forgotten how the Euro and the EU works? Germany says kick the can down the road – yet again – until we get to Greek Exit/Euro crisis part 974, a few months down the line.

It’ll look exactly the same as now, with exactly the same people having exactly the same Mexican Stand Offs. But whats the alternative? We can’t have anyone doing anything as daft as actually addressing the fundamental structural problems of an unsustainable single currency model now, can we?

Currently it’s the IMF playing hardball, so it doesn’t really matter what Germany think.

I have my own pitchfork, which bankers are we bashing? 😈

here’s the TLDR for the film

https://en.wikipedia.org/wiki/Four_Horsemen_(film)

Currently it’s the IMF playing hardball, so it doesn’t really matter what Germany think.

Yes and no. They are also saying the EZ need to face up to more debt restructuring, which is Germany’s “red line”.

Currently it’s the IMF playing hardball, so it doesn’t really matter what Germany think.

Some discussion that the EU will agree a temporary solution which allows the IMF to be paid back and taken out of the equation.

Slovakian ministers speaking up again – I paraphrase “why should I ask the citizens of Slovakia who earn wages of euro 400-600 pm (800-900 min wage in Greece) and have pensions of 250-400 (500-700 in Greece) to give the Greeks euro 1bn when they are not prepared to take a cut in their wages or pensions”

debt restructuring, which is Germany’s “red line”.

Not sure that’s a German red line just that they are not prepared to consider such a thing unless Greece demonstrates it’s made some real changes and actually delivered on financial promises

This sums up my view, from Anatole Kaletsky who used to write for The Times, published last week From Farce to Irrelevance

First and last paragraphs

The good news is that a Greek default, which has become more likely after Prime Minister Alexis Tsipras’ provocative rejection of what he described as the “absurd” bailout offer by Greece’s creditors, no longer poses a serious threat to the rest of Europe. The bad news is that Tsipras does not seem to understand this. To judge by Tsipras’ belligerence, he firmly believes that Europe needs Greece as desperately as Greece needs Europe. This is the true “absurdity” in the present negotiations, and Tsipras’ misapprehension of his bargaining power now risks catastrophe for his country, humiliation for his Syriza party, or both.

…..

The latest Greek negotiating strategy is to demand a ransom to desist threatening suicide. Such blackmail might work for a suicide bomber. But Greece is just holding a gun to its own head—and Europe does not need to care very much if it pulls the trigger

Not to get into this discussion again, but that view is not shared universally. The fact is that nobody knows what effect a Grexit will/would have. However, as time goes by more and more big hitters are lining up behind the Greek view, including the IMF chief economist, and this morning’s FT
http://www.ft.com/cms/s/0/5e38f1be-1116-11e5-9bf8-00144feabdc0.html?siteedition=uk#axzz3d6QgTokm

@ed thanks for that link. @gofaster I’ll skip the movie as total sh1te – fractional reserve baking is a nonsense theory and as for the war on terror being a scheme to increase debt to banks that’s even further out there. I couldn’t last 5 minutes never mind 100

@DrJ yes agreed we don’t need to go through all that again and I do appreciate there are different views on the best outcome for Greece and we mustn’t forget what’s best for the broader EU which may be a debt forgiveness deal for Greece (but that’s very troublesome if Greece is not propeapred to undertake the very necessary reform and they’ve showed no sign they would) or it may be cutting Greece free thus allowing them to leave the euro as a lesson to other members that you must honour agreements and not break the rules.

Ha, oh man, that’s the last time I bother trying to get you to take your head out of its bubble. Neither of those things are in the first 5 minutes of the film, so you didn’t even try to watch it, you looked it up and let other people tell you what you wanted to hear.

Also, Fractional Reserve Banking isn’t mentioned by name in the film, but if you mean the method in which banks accumulate and ‘generate’ money which is described as normal in the film and which is what Wikipedia seems to describe the same way then how can you say it’s a nonsense theory?

As for wars being ways to make money for those in command, they’re usually nothing else. It’s not a conspiricy theory when your government is filled with defence and banking lobbyists….

I might bother typing the actual content of the film up, buy I’m not sure if there’s any point…

Sometimes I wonder if we will just destroy ourselves.

I’ve think I’ve asked this before Jam, but clearly as you don’t believe that money=debt, and that there is the same in deposits in banks as there are loans (if you think that fractional reserve is a fiction) why did banks need bailing out by us?

you understand that they asked for money from Govts because they couldn’t service their debt..? Right?

Nick, I do not think anyone believes that money and debt are synonymous and I know that jambalaya is well aware that the volume of loans do not equal the volume of deposits – far from it in many cases.

The reason for bank bailouts was varied but essentially a combination of liquidity and/or capital shortages.

Fractional Reserve Banking is clearly the dominant system in the banking world. However, many incorrectly assume the fact that the system can create money “out of nothing” means that an individual bank can create money out of thin air. Anyone who has ever had to fund a transaction knows that this is very far from the reality.

I’m no expert in the field, but these guys seem to know what they’re on about:

This suggests similar:

The truth is out: money is just an IOU, and the banks are rolling in it

Aaah, I see my suggestion that the system is flawed isn’t only falling on deaf ears.

Four Horsemen, watch it…

@gofaster – been offline so only just catching up on the thread. I’ll post up a reply later, perhaps I should have been more diplomatic in my post but I do disagree strongly. @jive’s positivemoney.org is actually even more non-nonsensical than the fractional reserve / money out of thin air argument, it quite simply would not work. Four Horsemen is 100 mins long, me watching it just isn’t going to happen.

Fair enough Jamby, since you’re an expert in the field, can you explain to us:

a) If fractional reserve banking is not the system we’re under, what is?

and

b) What in your views are the major flaws with positive money’s proposals?

OK – Knowledge speaks and wisdom listens and all that….

When you have a minute or whatever explain why this is not true.

Stat from 4 Horsemen – 97% of money is debt.

Why not watch the part on Banking, which is only 1/4 of the program?

@jive not sure what label you want to give banks but money isn’t created by banks, they are founded with equity investment (real money) and then attracting deposits and borrowing if necessary before lending those funds. It’s all real money. One of the fundamental flaws of the positive money model is something banks do which is maturity transformation. Depositors like to and able to get their money back straight away whereas companies and mortgage holders want to have loans for longer periods. Quite simply under positive money there would not be sufficient depositors willing to lend for 5 (corporate loans) or 25 (mortgages) years. It just wouldn’t work.

@gofaster, so I watched 40 mins. To be honest I couldn’t see a coherent argument aside from a series of pot shots at favourite targets. The “poor” today are far wealthier than they have ever been and generally supported by generous welfare payments, even in the U.S., than they where 100 years ago. This notion that somehow their money has enriched the rich is nonsense. Likewise that somehow banks have become wealthy at the expense of the non-bank sector. Just look at technology, staggering wealth both personal and corporate has been created by new businesses which didn’t exist 50 years ago. On the bailout, it’s been hugely profitable. Banks where lent money to keep the, afloat and they’ve repaid it with interest. In the UK the figure is a profit of £14bn. Bonuses, there are many much better paid businesses than banking even in the UK and U.S. And of course in countries like France and Germany banking is relatively poorly paid but they still had a crises, they still have a capitalist economy. In the UK bonuses contribute £8bn pa in taxes, that’s a big and important contribution to the state. At the end of the section there was a graphic attempting to show that banking had an undue influence on US politics but all it showed was that banks where I the minority amongst funding contributors.

The 97% of money is debt claim – frankly no idea where that comes from or how it was calculated. Seems rubbish to me. Even in Greece deposits in banks where €140bn which is half of the entire debt of the country which everyone acknowledges is huge.

No doubt there was too much debt in 2007, no doubt banks played their part in that. However these various theories which suggest the whole system is somehow a conspiracy or fundamentally flawed is wrong. Capitalism has delivered huge improvement to in the quality of life and has become the dominant system as it works. Not faultlessly but it works.

In the UK the figure is a profit of £14bn.

Still repeating this rubbish, it seems I was ahead of my time. FT

I appreciate your considered reply.

@mefty in the UK and the U.S the governments/states have made huge profits from the bailouts never mind the differential in outcome between bailout and no bailout. The UK asset protection scheme alone made circa £5bn with banks paying large premiums and the government not having to pay out a penny. All the liquidity loans have been profitable and nine have defaulted. The only blot was that RBS was rescued at too high an equity price but the overall calculation is hugely positive.

@gofaster thanks I understand we can disagree, there are senior economists in the film who I disagree with although I think it’s been cut together quite cutely as many of those interviewed are not actually making the point the film maker is trying to.

It is true that excessive detect and borrowing has been a focus of the regulatory changes post the crises, we all recognise that needed to be curbed

Jambon a minute!!

Number of global billionaires has doubled since the financial crisis

According to Oxfam, the world’s rich are getting richer, leaving hundreds of millions of people facing a life “trapped in poverty” as global “inequality spirals out of control”.

The report found that the number of billionaires in the world has more than doubled to 1,646 since the financial crisis of 2009, and Oxfam says is evidence that the benefits of a return to economic growth are “not being shared with the vast majority”.

The influential report is supported by Bank of England chief economist Andrew Haldane and Nobel Prize-winning economist Joseph Stiglitz. It notes that since 2009 one million women have died in childcare due to lack of basic health care, and that 57m children are currently missing out on any form of education.

Recession rich: Britain’s wealthiest double net worth since crisis

Britain’s billionaires have seen their net worth more than double since the recession, with the richest 1,000 families now controlling a total of £547bn.

While average UK incomes have yet to recover from the worst economic crisis since the Great Depression, with thousands still flocking to food banks, the financial elite have emerged not only with their fortunes intact, but holding a larger than ever slice of the cake.

Explain please

Total income per Rothschild 14.3 including asset protection etc , total funding cost according to OBR (hidden in note 5) 17 bn = (2.7) billion. Stop digging, there ain’t no gold at the bottom of that hole.

Yes but not too frequently – only big conviction trades and no ST stuff.

(It was a full time job quite a few years ago! )

I had a feeling that was the case. Something about your writing in economics/finance/political threads gave it away 😉

Seems mefty might be onto something…

FactCheck: will we make a profit from the bank bailouts?

So the Treasury has been paying out interest to investors on the gilts for about seven years now. How much has this cost?

The Rothschild report doesn’t tell us. The only reference is in a brief footnote: “Stated before the cost of funding the interventions.”

Of course, if we include that loss of £17bn in the final balance sheet, it more than cancels out the £14bn surplus ministers are keen to talk about, and means the taxpayer has suffered a net loss overall.

Rothschild eh… Handy that the heir to the Rothschild Empire is a mate of the Chancellor, George Osborne (and the guy who got Tony Blair the Prime Minister gig, Peter Mandelson)

Wrong branch of the Rothschild family, his dad sold his stake in the bank following a family dispute. BTW the Oxfam report is pretty shoddy it classes highly paid recent grad in the US as living in poverty because of the extent of their student debt.

Hey ho, was a good excuse to crack out some photos, maybe this will help clear things up:

Meet the remaining heirs of the Legendary Rothschild Dynasty

Stop digging, there ain’t no gold at the bottom of that hole.

Touche 🙂

Can’t see where they are getting that £17bn cost number from, will dig some more.

Asset Protection Scheme was profitable to the tune of £5bn – zero cost
All loans are profitable and the bulk of the support was loans (eg special liquidity scheme made £2bn profit net of costs)
Equity investments in RBS £46bn and Lloyds £20bn need to be funded but at 2% (very rough gilt rate) that’s about £5bn cost or if funded short term half that amount.

The US did a better job not least as they didn’t bash the banks with extra taxes (levy) as that just kills the stock price which isn’t smart if you (the government) own large amounts. For example;

Profit on stakes in Citi / Bank of America / Bear Sterns $12bn
Profit on AIG bail out $23bn ($5bn equity profit, $17bn profit on loans)

@jive the super rich are indeed getting richer faster than the less well off in the developed world but the fact is that the “poor” (in Western terms rather globally) are much better off than they where 25, 50 , 100 years ago. It’s a very clear long term trend – the less well off are getting richer. The developing world is growing rapidly in terms of wealth (China India etc) and in many cases in terms of population. India has grown from 400m people to 1.25bn in 50 years, most of those 700m extra people are very poor. If you want to paint a picture of wealth inequality it’s not hard – throw in a Zuckerberg or three and a 1bn newly born very poor people in the developing world and there you have it. Does that really tell you anything ?

It tell us that austerity is a mechanism whereby wealth is channeled from the masses to the few…

@mefty here is a piece from Channel 4 news Fact Check

As I said all loans will be profitable, more interest collected than paid on any government debt funding. The question is what about the RBS and Lloyds stakes. From a table in the C4 piece

RBS investment £45.8bn value £35.7bn (note the 4.5bn in fees from RBS I have excluded as that’s the profit from the asset protection scheme) plus £1.7bn in other income – so a loss of £8.4bn. If we assume that £45.8bn is funded at 2% that’s another £5.5bn in costs.

I still get no where near the £17bn in costs being quoted by some.

The Channel 4 piece suggests the profit might be only £9bn not £14bn but in any case far more than the £20bn to £50bn potential loss Labour spoke of in 2009. Had the Tories sold RBS off as soon as they came into office they would have made a profit on it. I know as I was an RBS shareholder at the time and following the shares quite closely.

It tell us that austerity is a mechanism whereby wealth is channeled from the masses to the few…

Austerity is a mechanism whereby governments try and get spending under control vs their income. Government spending is generally to the benefit of the poor/middle classes, so cutting it hurts them. People like Zuckerberg aren’t impacted by austerity as they don’t rely on government spending. So the gap between the super rich and the poor widens. Not following austerity means you end up bust and that’s far worse for the average citizen.

From the same Channel 4 piece (the link to which I supplied in the post with the photos)

Of course, if we include that loss of £17bn in the final balance sheet, it more than cancels out the £14bn surplus ministers are keen to talk about, and means the taxpayer has suffered a net loss overall.