The banks, of course, have their own take on the issue. The American Bankers Association thinks banks "need the flexibility to provide information in a way they believe best suits their products and customers. Their profits depend on you not knowing how they make money off of you. Over in the U. Up for grabs are "billions of pounds" in hidden fees, according to one former banking executive.
And by "pounds," we mean "dollars" in American. Nobody is all that happy with cable companies right now, for a number of reasons, all of which are they're assholes. And with the rise of Netflix, Hulu, and other services, more customers are giving cable the pixelated finger and going Internet-only. So, in order to bring customers back in, cable companies are increasingly offering cable-and-Internet bundles at reduced prices. You'll get a special introductory rate for the first 12 months, after which you're perfectly free to switch if Two years.
They were just kidding about the 12 months.
The Tragedy of the American Military
In March , the FTC charged DirecTV with fraud for promising special one-year rates, then requiring customers to sign up for two-year contracts. Pissed off and want to switch companies? DirecTV thanks you for the new island they just bought! As of a few years ago, 80 percent of their profits came from dial-up subscriptions -- yes, really. Why do people still pay for dial-up with AOL, exactly, especially when their own CEO said that two-thirds of its customers don't even use the dial-up? Apparently, it's because AOL 1 uses automatic subscriptions, and 2 makes canceling a huge pain in the ass.
People would rather be lazy than save a few dozen bucks a month, it seems. Jeran Ranz. And just like with the banks, there are plenty of hidden fees. So when you're buying cable, make sure to be smart and shop around Thank goodness for the extra-lube fee they charge you before they screw you! Have you ever noticed how mobile phones cost a couple hundred dollars at a phone company's store, but if you want to buy one on your own, it costs as much as a Lamborghini?
This is because the phone company agrees to lower the cost of the phone substantially, as long as you agree to their two-year contract. That great deal must be why customers find it so hard to leave their phone carriers Whatever number you thought, it was too high: The real numbers are a staggering 1. Their Skeletor-like grip on their customers comes from these two-year contracts, and the fact that phones basically never last for two years anymore.
If your phone breaks down with four months left on your contract, you'll be forced to go without a phone or buy out the remainder of what you owe This tempting offer of eternal servitude isn't just limited to phone companies: Even Apple is getting in on it with the iPhone. This doesn't even get you phone service, though; you have to go to the phone company and buy that separately. No contracts, no bullshit! Digital Vision. So, basically, if you don't want to be screwed, your best bet is two tin cans and a really long string. Remember when you signed up for a gym membership, telling yourself that this would be the thing that turns your life around?
Then you went exactly one time before spending the rest of your evenings on the couch eating Doritos? Odds are you do, because you might still be paying for it. One gym chain, Equinox, was sued for making its memberships too difficult to cancel. For one thing, the gym demanded that all cancellations be done via certified or registered mail, while the law states that customers should be able to cancel at the gym itself, while spinning around and flipping everyone the bird. Equinox was also required to tell customers up front how much they'd be paying in total, and tell customers that they had three days to cancel.
Neither of those things happened, presumably because Equinox didn't feel like telling customers their gym membership could probably buy them a small car. Meanwhile, someone actually went undercover at a Gold's Gym franchise in California just to see how hard it is to cancel a membership there; the answer, as it turns out, was "basically impossible. And even if you are able to decipher the ancient runes of your contract and figure out how to cancel, you could still be on the hook for the rest of what you owe, and they will send out collection agencies to extract that straight from your frail, unhealthy body.
We hate reading as much as the next person, but maybe it's worth it to make sure we're not being taken for a ride on a stationary bicycle. Let's be real: Most of you have more student loans than you would like. And you're stuck with this debt until it's paid off; thanks to some Avatar -level law-bending on the part of the loan companies, it's very hard to make that debt disappear even if you go bankrupt though it is possible , despite prevailing myths.
You'd think that would be enough for the loan companies, but the real world still needs its share of cartoon villains to twirl their villainous mustaches. Bethesda Game Studios. For example, if you ask companies servicing your loans to put your payments toward higher-cost loans first , you might get the response of laughter, "Yeah, sure, whatever," or the loan company proceeding to do fuck-all.
You might also find yourself saddled with late fees for no reason, or having documentation simply "go missing," as if it were abducted by agents in a black van in the middle of the night. More likely than not, the company servicing your loan won't tell you that there are better repayment options out there. One report found that even though 51 percent of students are eligible for some sort of debt relief, only 15 percent actually take advantage of it. Instead, most companies suggest forbearance, wherein you can avoid payments for six months but interest keeps building up, meaning you ultimately have to pay more.
For some reason, the loan companies never sat down and thought, "Maybe we should tell them they don't have to give us all this money? As a result of all this fuckery, more than a quarter of student loan borrowers are either delinquent or default, ruining their credit and what remains of their Ramen budget. And when you fall behind on payments, the companies will put you through Hell to get that money back from you, as if they're doing their best Godfather impersonation.
Second, no, you won't, because you can't. You're not actually allowed to choose your loan servicer; the government and the loan companies make that decision for you. Your student loan debt will get sold and resold for decades after you sign the paperwork. In other words, there's an excellent chance you'll produce new humans and send them to college before you actually manage to pay off your own student loan debt. Also, follow us on Facebook.
Browns biggest most recent error was not calling an election when he had the chance to command credibility. Now he looks like afrustrated angry child blaming everyone else and upset for his own self inflicted mistakes. He will get no help from the USA as they are already seeing past him to the next incumbent here, hence the reception he received, polite but irrelevant.
History and the game has moved on unfirtunately the British Prime Minister is locked in the 's and boy doesn't it show! Complain about this comment Comment number 9. There are currently new projects out to tender with a capital value of GBP 13bn. Complain about this comment Comment number Good article Stephanie, sparing us from some of the more lurid headlines we've experienced recently. It would be interesting if you could include some figures for Australia and Canada. These are also 'Anglo-Saxon' countries with relatively free market economies.
Unlike the UK, they ran budget surpluses through the good years, and had much tighter regulation of the banks during the boom. As far as I know, their governments have had to put exactly zero into keeping their banks solvent. After your interesting article on how thrift and savings won't necessarily give Germany a better time in the recession, it would be interesting to see if low debt and solvent banks also turned out to be less of an advantage than they would first seem.
Thanks for this very interesting analysis. In response I have worked out what the potential "return on investment" is for the government. Are the reports referring to different things? Do the IMF numbers refer to all instances of governmen, such as states, counties and cities etc.? Or, are different formulas being used? What else? I have no argument to make, pro or con. Do we know the full extent of the banks bad loans made overseas? Also the cost of PFI and public sector pensions liabilities need to be included. The solution in the late s was high inflation to erode debt away, but that would not be good for all those on a low income or relying on savings.
The debt will be reduced by high inflation, some defaulting, high taxation and public spending cuts which is a great future that we can all look forward to. Much better to spend the money on improving infrastructure like new high speed railways, build the Severn barrage, gear up for an electric car economy as fossil fuels decline and build some nuclear power stations.
- How can prospective tenants with a low credit rating be approved?.
- Trend Breakers: Discovering and Choosing True Friendship in a Lonely World!
- The Fed - Finance and Economics Discussion Series (FEDS) - .
This would help to get the economy moving again and the UK would have something worthwhile in the future. Stephanie, As you say, until the asset for Treasury Bills deals are matured, further bank losses stemmed, the BoE has sold back its private assets and the HMG has sold back our bank shares to the private market , the interest on the public debt calculated,one is not going to know the final tally. Listening to Mr Timms on the Lloyds bail-out he says we have a long way to go to restore the gap in lending capacity left by non UK banks and non bank financial institutions who were supplying credit but have now legged it home.
Gordon says this deficit was billion in Summer HMG now see it as their role to step into the gap and bridge the difference. How much more is there to finance to close the gap. I suppose the gap narrows now with credit demand falling. You simply inflate them into insignificance. I see the cure for the banks is going to be rather bad for the rest of the people in the UK.
How much would it have cost to create a national commercial bank to lend to business and consumers, then simply allow the bad banks to collapse? This is all very interesting. There seem to be two schools of thought developing: - the one that thinks that it won't be too bad as there is both profit and loss in these numbers, and - the one that fears that that this is all inflationary. It seems you pays your money and you takes your choice. I think that both are overstated, there is still a lot of this to run before it gets better, and that this is all an experiment anyway. It is not just an economic issue any more.
It is now definitely a social issue as unemployment and poverty grows. It is gradually becoming a political issue of quite dramatic proportions. The policy and attitudes we have now will be different in a few years time. Whilst it will be interesting to observe the developments we will also be fearful of the potential outcomes. When looking at future debt as a percentage of GDP it is not just the debt that has to be forecast - so must the GDP be forecast. However, it may be that there is a structural adjustment and GDP in developed countries has to drop back more towards the GDPs of lesser developed countries as globalisation becomes a leveller of economies.
Since the cost of fighting the wars in the 20th century all but bankrupted Britain and would have done so if the US had not propped us up it is scant comfort that the debt ratio after all this will be less than the ratio after the wars. The real issue here though is RISK. The government now has two huge and ailing banks attached, whose balance sheets dwarf that of the government itself. Quite small drops in the value of those banks' assets could lose us all a great deal of money.
Or another way to put it. The banking sector is a liability to the UK, not an asset. And the very idea the BOE will make a profit? They can print money how on earth can the concept of profit be applied? This is a genuine question, and it won't be the first time that it's been asked. No disrespect intended. A couple of points that you might like to address for us, Stephanie. How much "independence" does the Bank of England enjoy at present? It appears to be little more than a puppet for Parliament at present, despite its much vaunted autonomy. And exactly how much "per capita" are we in debt as a nation today, Monday 9th February?
You've forgotten your history Stephanie. One of the US war aims was the destruction of the British Empire, which it achieved by bankrupting us. The misery of the 50s in Britain, reflected in your chart showing us repaying incredible amounts of debt, was the consequence of the deal that Keynes our negotiator! We have paid a heavy price for the rosy glow that we like to illuminate that war with I don't think we need to worry too much about the literal cost of paying this debt off - Darling has already agreed to monetise bn of it and that is just the start.
Add in a dollop of inflation and our national debt ratio will be the least of our worries. Re mine 4 and JadedJean What is recovery? There's no way we can plan to get there unless we know where 'there' is. As such, we should be able to ask the Government for their vision of ther future Either they have one and don't want to tell us it's only our money they're spending after all , or they don't have a vision again it's only our money they're spending after all. So what is their vision for mortgage lending I've read and heard alot of contradiction.
Just face it, we are utterly screwed. The very real Elephant in the living room has arrived and his name is Peak Oil, why are we hiding it from the people? There is no way to grown our selves out of this mess over the next decade or more - the era of cheap available energy is over. Our Current financial system will either: continue us to complete collapse which it will try it's hardest to do BAU or we change the system and struggle through with what oil and gas and coal we have left and use it to build a better future, a new future of energy independence even if it requires a short term command economy.
It's time to press the 'reset' button. Cancel all dodgy debt. Wipe out all ill-gotten savings. Why prolong the agony?? At pm on 09 Mar , true-liberal wrote about inflation in response to 1 How much hyper inflation? Can't we make a guess about how much inflation? However the figures suggest we need 15 years see 1 so ignoring compounding effects which only make things worse we will need percent inflation in the 3 years or about 70 percent a year!
Mervyn King or his successor - soon please hasn't a hope in hell of managing the inflation he needs to create! If interest rates take a year to 18 months to have any effect - he had better raise them NOW to 15 to 20 percent or more if he hopes to control the hyperinflation he wants to create - and raise them by 2 to 4 percent a quarter for a year or so before lowering them by a percent per quarter for a few years. These figures may be shocking - but if the whole concept of money is to be saved and trade is to continue it is inevitable! If the Bank of England fails to do this or something very similar the market will destroy our currency and we will all be paupers for twenty years or more and saving and all property and investments and pension funds will become worthless.
Hope this is not too depressing! This is the price we are paying for the absolute stupidity of the last fifteen to twenty years of wrong economic management. It is still my view that it would be far better to keep interest rates high now by high I mean 5 to 8 percent - and rescue the repossed into public housing. Do it a month or two and the interest rates will inevitably be much much higher. Inflation is pretty much on the cards. The main problem is not so much how much British Pounds are worth, but what Britain creates to trade with the rest of the World. We need Consumers who can afford to buy goods in the Shops, and we need a balance of Imports and Exports.
The Gov't should be making a priority of finding products and or services that Britain can provide for the rest of the World. Wage Inflation amongst the ordinary workers is not something to fear. Collapsing businesses is something to fear, as it creates a downward spiral that is very hard to reverse. I have suggested a forty percent pay rise for the Public sector ,and I stand by that, as such money would circulate many times thro the Private sector generating profits and jobs for others.
Pension reform in the Private Sector needs to be undertaken to ensure each employee gets a minimum level of Pension instead of just the fat cat Company Directors. The Public Sector pension terms should be applied as the minimum the Private Sector should aspire too, rather than being used as a scapegoat and distraction from the City workers greed.
Rich people should remember it is unwise to throw stones whilst standing in Glasshouses. And as a side note, no one gets to Heaven by stealing to become Rich, likewise, no one achieves Heaven, Paradise, Elysium , Valhalla call it what you will thro the use of Guns and Bombs. I'm quite sure the Valkyries never retrieved cowards JadedJean 25 Well, here, at least, is something we see eye to eye on. Where we don't agree, it seems, is cause and remedy. Now you can see why Gordon Brown would rather lend companies billions to spend on PFI projects, rather than simply spend it direct.
PFI, Railtrack and Public Sector pensions push us higher than anyone but Ireland - and everyone knows they are bankrupt and it is only because they are so small that no-one pushes them over the edge. They would with Britain. But then off-balance sheet funding is one of those nasty banking tricks Gordon would never condone! As I posted earlier on the QE2 blog It's all just a super gigantic Ponzi scheme I suppose it may cure the illegal immigrant problem!
Fiddling while Rome It is obvious what the solution is. Stop the nutty projects and wasted expenditure so beloved by the public sector. Put it to the digital vote. After all GB is proposing subsidising internet connection for the digitally divided. Say, keeping a school open. Or say special needs education which is throttled. Do you agree some govmnt dept needs X thousand chairs from the most expensive brochure available Y or N or would a somewhat cheaper brochure do. Do we need another Millenium dome type extravagansa Y or N.
Do you want the Olympics Y or N. Deary me, do you want 14 billion plus on invading Iraq and Afghanistan or would you prefer this sum to be spent on infrastucture development in those countries and avoid the casualties on both sides. Do you think subsidising a pass plus driving course for young drivers at 20 quid a go when the real bill is a go is sensible when there is no real evidence given that it improves their driving, could it be that those prepared to pay are safety motivated and those that pay 20 may not be.
Or what about building a multimillion garden centre miles away from urban centres so it has no chance of working financially, QED, needs millions is bailouts and is then paraded as a conference centre as though we need more conference centres. Should your LG be getting involved in a multimillion commercial development which has the risk of moving to a public money bailout of the private sector partner, otherwise it would be grabbed by the private sector as an investment opportunity from the start.
Does city ABC really need a 60 million arts centre which is an experiment and highly likely to fail, thats why there hasnt been one there before, QED, ends up as a coffee shop. Do you need a very fancy footbridge on a site that has never had a footbridge before, no evidence of need, so when built very very very light use. What a surprise. Do you need a poor quality rusty metal sculpture on every roundabout in a town Y or N. Would you prefer some plants. Do you object to low energy street lights being swithced off to save the electricity bill when other savings could be made leaving oaps in the moonlight in the winter, when there is moonlight that is.
Do you want your towns swimming pool shut because the 30k budget for repairs is being wasted on redoing the road markings done a matter of weeks ago because an official could not schedule the roadworks with the road marking the first time around. Need I go on. How much do you want to save. How much tax, some taken from workers on the minimum wage, do you want to waste. Its not exactly rocket science. Now up to 40 percent.
Unfortunately the public sector budget is due to implode not expand. There is no magic pipe from the sky feeding money. Where do you think the money comes from. Who do you think is going to be paying for the extra 1 million approx unemployed benefit claims for example.
If you work in the public sector and pay tax all you are doing is returning a small proportion of the taxpayers money supplied in the first case to pay your salary. All taxes ultimately come from the private sector, that is the problem. If you had not noticed the private sector is having a problem so tax income to HMG is reducing and will continue to reduce for sometime. Although may be a while before the banks will be paying tax.
Cost effective? Value for money? I wonder what the poor taxpayers of the future will think. Am I the only person in the country who is happy with QE? I love all the solutions being proposed.
The big fix — Greater Fool – Authored by Garth Turner – The Troubled Future of Real Estate
Bring on massive increases in public sector pay, bigger pensions for ex-government workers sic and please expand public works projects. All this plus QE print money to buy government debt will inevitably destroy the pound. I almost wish I had voted nu-labour, though I suspect a vote for either of the other two major parties would have been as good. My silver groat is happily appreciating as the country goes round the u-bend.
My temptation to expound the obvious solution is almost under control although I do worry that one of the minnows, Iceland, Ireland etc. The numbers are way off the mark. How much will it cost? More than you've got. More than anyone has got.
More than the whole world has combined by far. And the longer the crisis goes on, the more obvious that will become.
What's more, there is only one place that counts because until that part of the problem is fixed, nothing else can be either. And that problem is the US housing market. The scheme was built on an inverted pyramid. At the bottom of the pyramid are just a couple of trillion dollars loaned to people to buy homes they couldn't possibly afford. Liberals wanted them to have homes like better off people.
Conservatives' friends made money on each loan no matter what. And the regulators said the economy didn't need them anymore, the market could regulate itself. That would have been bad enough but on top of that came leveraging on those debts, in effect insurance policies guaranteeing that they would be paid back. Bundled together and tied in a ribbon of lies by ratings agencies, Investment banks thought they were buying a birthday cake when they actually were buying a ticking nuclear time bomb set to go off as the mortgages defaulted.
How much? In the US I think around 62 trillion dollars worth. So by not fixing the 2 trillion dollar problem, a 62 trillion dollar problem was created. US banks leveraged themselves 10 to 1 while European banks gambled 20 to 1 and even 30 to 1.
Recommended For Your Pleasure
On top of that is another layer of investment instruments called derivitives that are so complex that few if any people actually understands them. Some guess over trillion dollars. So until the US mortgage problem is fixed, the rest just gets worse and worse. AIG is right in the middle of it and what started out as a few tens of billions of US government bailout money is now billion with no end in sight.
When will the US government stop throwing good money after bad? Evidently much of the guarantees were made to their banks. How will it end? Nobody knows. We could just pay off those houses but nobody who would have to pay for it thinks its fair for people who couldn't afford a house to get one for free paid at taxpayer expense because they lied to get a loan. So that just leaves inflating the hell out of the currency so that these loans are paid back with very cheap newly minted easy to get plentiful dollars.
Until we see a huge round of inflation, this is only going to keep getting worse and worse. If the stock market crash tracks true to the one in the early s, expect DOW to by around this time next year and many familiar large corporations dead in their graves. If you won't mark real estate values to market, what will you mark it to, a fantasy of how it was in ?
I'm sure many brokers and bankers of the era felt the same way about Morning Stephanie, well, I see from this blog that you are at it now. Producing figures just like HM Treasury to prove any point that you like. It's all in the future so nobody can dispute your conclusions what a sad lot you economic journalists are. Meanwhile, back in the real world, all the stock markets around the world are reaching historic lows all at the same time Note for posterity, all the economic measures taken so far around the world haven't worked. Why do I say this, well investing in stock markets is simply a matter of confidence?
You can't fight market forces , they always win in the end. So now we have it, the market doesn't believe that now is the time to invest gamble so we will spiral further down to capitulation The IMF can only solve isolated country problems almost by definition. It cannot solve a global problem so I see that once again our beloved Chancellor has his finger on the pulse asking for the rich nations to give more to the IMF. You couldn't make this stuff up. I also note that serious questions are being asked of the bailed out banks in the US as to what they bought with their billion tax payers dollars!
It seems like quite a lot was invested overseas rather than in the USA. When are the BBC journalists going to ask and get answers about where the monies invested by UK tax payers have gone? Please stop this journalistic fantasy and get some real statistics on what is going on right now not in 5 years time. Time to take some more medicine for my ulcers. Because of our greed, the euphoria of financial wealth, through get rich schemes! Perrish the thought for those that survive and the legacy carried on to future generations. The insanity of doing the same things over and over again!
History is a great teacher if only we take notice and learn from past mistakes and apply the knowledge of past events. However, selective amnesia proliferate around the global economies to ensue the blame game. Though with the decline value of sterling, Quantitative easing and New Deal are these the solutions or is it game over and time to cash in the chips.
And revaluate the meaning of money and financial wealth in this so called 21st Century. Finally, are we prepared to explain the financial and social problems we have created now to our childrens, childrens and the burden of debt they shall inherit! Stephanie: How much is it all going to cost? It is going to cost a lot of money Dear Ms Flanders, You've really got the green ink brigade going this time. Perhaps they should have a web-site of their own at which they can come up with an authorised version, and let us know the results.
Meanwhile, the rest of us can analyse more rationally what policy-makers are actually doing, why they're doing it for the reasons they've given, perhaps? Keep up the good work. Wow, an almost cheery view of the future. Unfortunately the skeptic in me is nagging away in the back of my head, asking awkward questions like, "isn't this the same bunch who keep updating their forecasts because everything has got far worse than they expected even quicker than the expected?
When computer models come out with a result that is so against what common sense says, then I would re-check the computer. To consider afew points: The government only kept debt within their guidelines by moving large chunks off inti PFIs which are now being bailed out, hence the starting debt level was fudged.
The BoE has begun QE, which is as good as certain to send inflation through the roof. Good news to get rid of existing debt. Not so good if you're a net importer and expect to have to roll over alot of debt in the future. I canot see that GDP will recover to the la la levels they reached pre-crash. So far every prediction for GDP this year has been wildly optimistic. Look outside and ask yourself, where is any GDP increase supposed to come from? While the banks may recover eventually and the bailouts paid back, this will take time and how much of the liabilities taken on for these bailouts fall due before then?
Finally this government seems incapable of cutting back on public spending. I assume that the IMF figures assume some "prudent" reductions in order to reduce debt? Sorry to rain on the parade but this analysis just does not line up with what I perceive as reality.
- A Sociological Perspective from the 19th Century to the Present.
- Asian Lanterns.
- Financial Samurai 401(k) Retirement Savings Guideline!
- Approved | The Economist.
Either way the outcome is strongly dependent upon the regulatory system that gets put in place. According to the blog this would lead to the bailouts running a loss. Please note that I don't wish to rubbish the analysis, just point out that the conclusion is unclear as it depends far too much on future events.
At least the author has attempted to floow his line of reasoning through. The last comment is "interesting", like saying "don't worry if you're up to your eyeballs in debt, what you owe is only a small proportion of your earnings potential over your lifetime". Having been in debt and worked years to get out of it, I cannot agree with that statement.
This idea that the tax-payer could somehow profit from the bail-outs is completely barmy. Alll through this crisis the government and BBC have been putting the most optimistic case. Every time they have been proved completely wrong. It is pretty obvious to me that what we are currently seeing is the inevitable collapse of paper money.
While this is clearly going to be catastrophic at least we will have the satisfaction of seeing all those banking and ministerial pensions becoming worthless. The UK economy is irretrievably ruined and the idea of any kind of recovery within the next 10 years is laughable. Call me a doom-monger but we will see who is right. So let's start the ball rolling This is the sort of thinking that got us here in the first place, we borrow money from banks that sourced it overseas, we spend it within the UK This is NOT a closed economy, we sell things other countries make, to ourselves It really is a silly idea!
We must keep them alive, even if we do not make any return on the investment. You estimate the tax payer will make a return on investment when the government sells its share holdings sometime in the future. However, you admit you don't know when the government will be able to sell its stake and you don't know at what price the government will sell its shares. Fair enough, no-one can know that at this point in time. My concern is the toxic asset insurance scheme. The total bad debts insured by the tax payer are around GBP bn. That's a lot of money.
There may be other banks and insurance companies which will need help in the future. It is true these GBP bn worth of potential bad debts will not crystallise all in one go, or may even be less than estimated. However, there is also a risk they could be more than anticipated or crystallise faster than expected. The point is no-one knows. If the tax payer is forced to buy all the bad debts of the banking and insurance industry, where are we going to get all this money from to pay for it? The economy is slowing down sharply and tax receipts are falling.
If we haven't got the money we can't spend it on buying the banks' bad debts Balance sheets with holes in are the worst possible scenario one can encounter in business. Given the size of the banks' balance sheets around the world not just in Britain and the high degree of risk associated with their lending and the open derivatives trades that no-one actually fully understands - the people who create them and deal them don't fully understand them the potential hole in the combined balance sheets of banks and insurance companies is absolutely enormous.
It really is a potential black hole in the world economy. It's all very very frightening. We are caught in a terrible debt trap, and only time will tell how bad the losses will be. It is too soon to talk about making any profit on the bail-outs. Right now we are in a fight for survival.
All that matters is survival. There is no magic way out of the trap. Someone has to pay for the losses. We can only hope the cost is affordable, and spread out over many years to give Britain enough time to pay. It's a case of make do and mend, and taking each year as it comes. All we can do is hope. The trouble with the various mathematical models is that they don't or can't consider all the variables particularly the impact of small changes in behaviour by millions of people, so What is the impact of, for example, CFL light bulbs.
I've been given a load by the electricity companies, I've bought them at high cost but the last lot were 35p. The average cost of acquisition is less than 50p. Yahoo, down the shops or pay off the credit card. But that's also reduced revenue for the suppliers This impacts on GDP doesn't it? It impacts on GDP elsewhere. Millions of people all over the western world are doing this sort of thing. They didn't nip across state lines on a shopping trip where sales tax was lower because the round trip at 15 miles to the gallon wiped out any savings.
They saved their cash for the petrol to get to work. This reduced demand and why would you buy a new car when you're not going to take the old one out so much? Would it be a stretch to suggest that medium to long term city centres will become more attractive, that the vast expanses of american suburbs will empty? Is it possible that the UK won't be seen as an attractive destination to work or live in the future? Is it possible that I might find a UK national waiting at table as times toughen? I don't mind that its not the case.
Is it possible that the unintended consequences of a weak pound further diminish demand through millions of tiny daily choices? Is it possible that plastic bag manufacturers are having a hard time? Could I get thin if food prices continue to rise? Will I buy homegrown spuds or swede rather than mangoes from peru?
Will peruvian farmers reduce the cost of the mangoes? Will they grow fewer as demand reduces? Its those herd or swarm like minute changes that we can't predict that throw the models out. What's worse is we, in our isolated way can't predict what all those other mrsbloggs13c2 equivalents in china of brazil or japan might do, individually. They might all want a Dualit toaster or an AGA.
With luck, some of the might. Nevertheless, I have no idea how this or future governments are going to pay for the accumulated debt, on or off balance sheet without raging inflation. For myself I have been looking at my estimates of likely optimistic outcomes and doing so by using arithmetic. To my way of thinking it is quite reasonable to estimate the likely level of inflation that will be caused by the dramatic easing in the restraints in money supply. Further, it is my belief that we are deluding ourselves that any of the actions taken by the regulatory authorities are any form of managed or intellectually consistent response to the collapse in the World's financial systems.
They are doing today things that up until last year would have been seen as heresy or insane. You write "realistic range of the possible outcomes looks like" - can you tell me how you will repay the gigantic gifts of money your regualtors have given to the banks? It is also my feeling that all of the 'dirty linen' within the accounts of the banks is far from being visible to the public as yet. There appears to be trillion of unsaleable and thus un-valuable and thus worthless synthetic financial instruments CDS CLO etc. As to your implication that it is being in some sense 'disloyal' to everybody else by analysing the economic mess - we obviously differ.
I am unable to see it as wrong to point out that you and your car are driving towards a precipice. The purpose behind my analysis is to highlight the, in my view, undeniable 'fact' that we are still digging a deeper hole and that is the wrong thing to do. We must stop digging. Just in case that my metaphor is too obscure: too lax an interest rate environment and ignoring asset price inflation helped get us to where we are today - so the remedy of an even laxer interest rate regime cannot be any form of solution - we are just multiplying the errors of the recent past and the inevitable destruction it will cause will also be multiplied.
We have to live within our means, not at some time in the future but NOW, also as part of this we must have real positive interest rates. More positive spin from Stephanie! The question is how will we or even can we repay it? The countries finances are a wreck and only those in the cushioned, pension protected, rarified atmosphere of the BBC dont seem to see it. It seems to me that we are still no further on, in understanding our total exposure after this article. What are the figures for?
This is a question more important than how exposed are the Banks? We need to know how exposed are we? Do the Government even know? I agree strongly with 51 verymuchso, and also agree that knowingandmaking is worth a read. Thanks Stephanie Flanders for balanced summary. As far as I can see most people have not yet suffered a massive decline in their knowledge, skills and resourcefulness mass long term unemployment would be a threat-but we are a long way from that , most people still seem to want more stuff and services, even, dare I say, a better house.
The economy has not come to an end. We are suffering the after effects of an asset price bubble - but it looks as though policy makers are doing better job than in 30s and Japan in 90s to get us through it. GDP will fall a bit but then will grow again. This is clearly not as bad as facing a World War or a new 30 years war!!
Above all we should not be depressing our children with talk of dismal even apocalyptic future. After watching the Cuban missile crisis in early secondary school I have tended to be optimistic on matters as slight as economic downturns. Stephaniue Flanders "Hitler did a lot more damage to Britain's public accounts. Go figure. At am on 10 Mar , MrTweedy wrote: We are caught in a terrible debt trap" So bankrupt the banks.