Did HMRC really spend about £8m trying to reclaim tax from Harry Rednap? If there was only £200k in his dog's offshore account the most they could have hoped to get back is £80k. I'm sure if they had promised to turn a blind eye to all his other dealing he would have gladly slipped them that much and everyone would be happy.
Much like the benefits story, this annoyed me on first reading but then I got thinking and my basic smattering of macroeconomics rose to the surface.
If they did spend £8m, then that government money goes into general circulation. Ok it starts with lawyers but they spend it on suits and stuff and then the tailor can afford to go to the pub and the whole multiplier effect kicks in. Before you know it the ecomony is off and running. Much more subtle than, say, the BoE just printing another £5b.
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Quantitative easing etc.
(49 posts) (15 voices)
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Posted 9 years ago #
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I failed O level Economics (along with all the rest). So, can someone who successfully managed to slide through the whole exam thing tell me: what is the difference between QE and what Edward Heath did in the 1970s which was subsequently condemned by all as merely 'printing money'
Posted 9 years ago # -
What did they do with it? Pay off debts/save it? Obviously weren't poor enough, were they?
Hmmm! The BoE have printed all this extra money. How do they slip it into the economy? No seriously, how do they get it onto the streets?Posted 9 years ago # -
Just a stab in the dark from one who knows bugger all about it, but perhaps through banks and cash machines?
Posted 9 years ago # -
Anonymous
offlineUnregisteredI wrote this but didn't post it because I wasn't sure if it was wide of the mark:
Bank flops out its money hose
The Bank of England has taken the brave decision to flop out its money hose again, and spray an extra 50 billion quid up the economy.
While the money will inevitably have to be paid for by the British public one day, for now it provides a life-line to bankers, fund managers and financial investors, who can once again make a fortune from imaginary money being moved around on paper.
Nigel Wantage, an ex-grocer from Leeds, was initially disappointed that quantitative easing wouldn’t pay for his family to eat properly this month. But after his bank had a quiet word with him, he now realises there are others in greater need.
“It’s the currency speculators I now feel most sorry for”, he opined. “Some of them haven’t had a money wash in weeks. When you hear how rising fuel prices have affected running costs for massive yachts, it certainly puts my little ‘food and shelter’ problems into perspective.”
Whilst some accept that adults and children may end up slightly indebted for generations, experts generally agree that the public shouldn’t be trusted with money anyway. “They’ll just waste it on boring things like potatoes or electricity”, said a spokesman for the bank. “I don’t see how that can help the key ‘private jets’ and ‘diamonds-as-big-as-your-hand’ sectors?”
Governor of the Bank of England Mervyn King is optimistic that the plan will work this time. “Quantitative Easing injects money directly into the economy, without any of it getting into the hands of the filthy proles.”
“And while it doesn’t actually benefit the people who are saddled with the responsibility of paying it back, it definitely goes somewhere. You just can’t prove where: that’s why it worked so well the last thirteen times.”
Did I get it all wrong?
Posted 9 years ago # -
And there lies the problem BJ
Because the money is now concentrated in just a few greedy pockets there is no longer a trickledown effect to feed the wider economy. You won’t see any of it.
The super-rich have everything they will ever need, they don’t actually need to spend any of their money – they already have anything/everything money can buy. You won’t see any of it.
It just sits there accumulating, growing by the day. You won’t see any of it.
They are involved in an enormous pissing contest – they don’t actually need the money, the bonus, the shares, the dividend – that’s irrelevant when you are as rich as they are. They couldn’t spend their fortunes in a 100 life times so the only thing left is the hierarchy, the pecking order. They crave status. They need their enormous egos massaging and if it means millions of people on the scrapheap...then the scrapheap it is.
That is the danger when only a handful of people control the money supply – the money stagnates. You won’t see any of it.
Hitler and Stalin were basically the same person, coming from different directions but using the same argument. Expect more tears.Posted 9 years ago # -
I failed O level Economics (along with all the rest). So, can someone who successfully managed to slide through the whole exam thing tell me: what is the difference between QE and what Edward Heath did in the 1970s which was subsequently condemned by all as merely 'printing money'
The difference is sort of that the QE is only used to buy assets (bonds) that when they mature will pay back to BoE the money they spent and they can then destroy that money again. This is different (long term) to creating money and spending it on services, wages, etc, that you can never get back.
There is masses and I mean $4,000,000,000,000 (4 Trillion) being held onto by various companies around the world because they think now is not a good time to invest. QE has the effect of holding money that is sitting about doing nothing more expensive (it loses more value) so encourages those companies to spend money and create jobs. It is a bit like force feeding a constipated man loads of prunes in the hope that something starts moving somewhere, only in that example, you won't want your prunes back afterwards.
Posted 9 years ago # -
Anonymous
offlineUnregisteredThank you Immunis. You should have your own slot on Radio 4.
Posted 9 years ago # -
yeah thanks Immunis. I'm hoping that will make more sense tomorrow when I may be sober.
In the meantime ............did you get as far through education system to discover why it is that some people (that'll generally be the spivs and chancers in 'financial services ; I accept those descriptions may reveal a certain bias) need to have money shovelled on them, in quantities that require heavy duty earthmoving equipment, just to do their job? With many others (I am astonished by the multi tasking dynamic abilities of the teachers in my local infant school) as I know no extra wedge changes hands as there is no 'bonus time'
right I'm off .............
Posted 9 years ago # -
Many moons ago, my uncle, a self-made millionaire, told me that to make* a lot of money 'you have to be able to do things that other people can’t do or won’t do’ e.g. neurosurgery in the first instance, or working 20 hours a day to grow a business in the second, which is what he did, for years. (As a consequence, he got one of the first Toyota franchises in the UK, and from that point, he never looked back).
The thing is, I can’t see that those people getting enormous bonuses fit either category; they don’t have unique or rare skill sets, and they certainly aren’t short of competitors for their jobs. The argument always goes that top bankers will move abroad if they don’t get their bonuses; let them go, I say. They are replaceable. And what about chief execs in the public sector? Why the hell should they get more money than the PM for being glorified Town Clerks or hospital managers?*As differentiated from inheriting it.
Posted 9 years ago # -
I failed Economics 'O' level twice, both times with grade 9. I don't often get the chance to boast about it, but I think this qualifies me to be perfectly placed to start my own business.
Immunis, we shared an employer a few years ago. It was getting very top-heavy when I was there, with fewer and fewer competent techies doing the difficult stuff. There were several good managers, btw. Strangely, with the takeover, the managers are still there but most of my techie colleagues have been asked to leave.
So, if I understand QE correctly, it's a method of encouraging companies to spend money (on executives) and create more (executive) jobs. Understood very clearly.
Posted 9 years ago # -
Talking of job creation, in the final 2 years of Gordon Browns administration, the NHS created 49,000 new managerial posts. Why? Had the NHS been severely understaffed before? No, it was so the incoming administration could be accused of ‘savage cuts’ to the sacred cow that is the NHS. Don’t get me wrong, I believe the NHS is a good thing, but its cynical manipulation by politicians of all stripes virtually guarantees that it will remain a third-world health service indefinitely. When Professor Sikora of the Hammersmith Hospital says that you can get better cancer care in Mumbai than in Manchester, things are seriously awry. Social medicine doesn’t have to be inefficient and incompetently run, many of our European neighbours do it very much better than we do. The problem, as often, is the politicos. Sigh.
Posted 9 years ago # -
Thanks Immunis, I think I'm beginning to get it now. And Gero: Thanks, I now do not expect to see any of it.
My take is that unless we manufacture something the economy is bogus. It should be based on taking something base and adding value, using skilled labour, by fabricating it into something desirable and useful (and tangible) such as food or machinery. An economy based purely on service and finance is just moving the same money around rather than creating value.
OK so I am a shop keeper (service industry). But I am the end of the distribution chain for wine producers. Its grown, fermented, aged, packaged, distributed and consumed in a continuous cycle of added value with sunshine as the main fuel. Now that is an ecomomy.
If I was selling financial products there is nothing tangible being created and any "added value" is false.Bah! The only thing I remember from my MBA economics is that a stable economy requires between 1 and 2% unemployement so lets not chuck money at that one.
Posted 9 years ago # -
Not the longest thread but do we get a prize for having the most long contributions to a thread?
Posted 9 years ago # -
Best QE description here http://www.bbc.co.uk/news/business-16974497
Quoting Sinnick
Immunis, we shared an employer a few years ago. It was getting very top-heavy when I was there, with fewer and fewer competent techies doing the difficult stuff. There were several good managers, btw. Strangely, with the takeover, the managers are still there but most of my techie colleagues have been asked to leave.I was a techie when I joined a dozen years ago, became a business analyst during an early wave of techie removal and have been employed to work out the changes required on some of the IT systems from government and FSA changes for most of the last 6 years. Thank the FSA for keeping me in a job.
Management culture in a bank is an odd thing, as it seems that to be a manager with a career you need to change your role every 2 to 3 years or you are considered deadended. This means that the managers whom have a deep understanding of the area that they are in charge of are those that are more likely to be looking for a way out. I assume that this is the same management culture that is pervading the entire global financial industry as I have noticed it is stronger with those that are brought in than those that are long termers within my organisation.
I don't think there is basically anything wrong with retail banking or corporate banking in terms of providing financial services to the public and companies. There is an interesting historical precedent for what happens if you get rid of all the bankers. At some point in the middle ages the French royal family was in massive debt to the Jewish bankers (Christian lending for profit not being legal then) they solved the problem by throwing all the Jews out of the country and tearing up all the debt contracts, effectively stealing the money. The Jews where invited back into France within 20 years as the economy had completely failed due to a lack of financial services.
There are two problems with modern banks. The first is that a lot of investment banking is on the bank's own book (i.e. with their own money) and at this point the bank has stopped being a service and started being a gambler. This is where the government wants to split the banks to retail (service) and investment (gambling).
The second problem is when banks get into a bidding war for market share and sell money losing products (see Northern Rock, RBS, HBOS, etc as prime examples of this in selling loans to people and companies that could not pay them back).Last note here:
Every banking product is basically the buying and selling of the availability of money, the more complex a financial product is, the more somebody else is taking a cut for setting up and running the product. I.e. You giving somebody money and expect a profitable return or you need money now and are willing to pay for it.
As soon a customer doesn't understand what is happening to the money then you can assume that enough is being taken by somebody that the product is bad news for that customer.Posted 9 years ago # -
I agree with all you say on this.
It used to be that managers earned respect by knowing all that went on below and above their responsibilities, but nowadays they are focussed on unrealistic targets in ridiculous timescales, and haven't a clue about what really happens.
I remember a few years ago seeing some mandatory notices by Halifax on the Stock Exchange, reporting share allocations as part of executives' bonuses. There were something like 50-100 individual named bonuses each of around £1,000,000. Nowadays, I believe one has to subscribe to see this info.
I fully agree with the separation of retail sevices and investment. Just one of many adjustments to eliminate banks' dodgy practices. IMO.
Posted 9 years ago # -
Hats off to the comments on here, Gerntimous and Immunis especially. Back when he was funny, Ben Elton used to do a good rant about how the (then newly deregulated) city was just gambling.
Over the last decade I've heard several friends in accounting, mortgage and building industries saying that property values were being inflated by easy loans, massive loans were being sold to people without the means to pay it back just to get commisions, and that any ecconomy based on "washing each others shirts" was going down in the end. And yet the "masters of the universe" still expect massive bonuses for having their heads so far up each others arses that they could not see it. I wouldn't pay them to count the contents of a piggy bank.
As Beau says, the basis of an economy is you make something or provide a service, and add value. Everything else is gambling, just with varying degrees of risk vs knowledge of the market.
And Immunis, don't get me started on management these days. Time was when there was a path to there that meant management had a fair idea of how the world below them worked. Received Harvard business school wisdom these days says that managers are generalists and can run any business, from manufacturing to banking, no need to understand the detail. The road to Hell is paved with MBAs.
Posted 9 years ago # -
"the basis of an economy is you make something or provide a service, and add value. Everything else is gambling”...
unfortunately, there are areas of the economy that don’t fit precisely into either category - education and healthcare, for example. I for one would not like to see the benefits of either measured in purely economic terms, and wonder whether such a value would even be quantifiable.Posted 9 years ago # -
JFR - Education and Healthcare = providing a service. They may be paid for by the state, but are still services, and ones that add value to people's lives. Yes, not always quantifiable in purely cash terms, and let's hope that never becomes the main qualifier for them, but health and education are real things with real outcomes done by people for financial remuneration. Then those people spend their wages buying stuff that other people make. Unfortunatly they also increasingly have to spend it on pension funds and investments with charges that are out of proportion with returns, charges that are then used to pay out of control bonuses and pay levels to what are basicaly professional poker players. You just have to hope you backed the right poker player.
Posted 9 years ago # -
If people are just a random collection of hydro-carbons (I accept I may not have got the technical term exactly right) why do we bother spending on retired, sick and old people? Unless they have a valuable skill, or they're consuming enough stuff to be an important cog in the economic machine, why don't we just let them die? OK, maybe invest the cost of injecting a gramme or two of 100% pure to get them out of the way and free up another home and/or job. Argument against?
Posted 9 years ago # -
Quaz; I see your point about the service aspect. Certainly I don’t believe healthcare or education can be quantified financially, nor should they. But nor should they be equated with making widgets or selling burgers. Education isn’t just about churning out wage-slaves and consumers, it’s about things like instilling values - the failure to do so is costing our society very dearly, I suspect. As for my own field, health-care, statistically, most of the ‘consumers’ of health care are elderly and beyond their economically productive years. A utilitarian argument for restricting their access to health-care will, I daresay, be made with increasing frequency as the ‘baby-boomers’ hit retirement. But it makes me feel uncomfy, to say the least, and I’m by no means a liberal.
Posted 9 years ago # -
@dvo4fun, you've touched on the untouchable & unmentionable subject here.
We look after our retired, sick & old people because that's what we want of ourselves, our family, our friends & acquaintances, and we're humane as well as human. And this also helps others across the planet, who deserve the same as we provide for our own. I fully agree.
And in the long term, all these saved people (including my own) will have a longer, healthier, productive lifespan, a larger surviving family, a better lifestyle. And each of these factors multiplies their demand for limited planetary resources, such as water, food, energy. This demand increases at an unbelievable rate, which is accelerating beyond what is available. And I'd do the same as they demand, in the same circumstances.
So, who's for making some hard decisions ? Not I.
Posted 9 years ago # -
Perhaps we should be limiting the number of children being born?
That would help reduce the demands upon the planet's finite resources, and it's been a relative success in China.
But if we were to do that, where would the necessary financial input for our aging population come from?I would think that there are no politicians prepared to suggest compulsory euthanasia for anyone who is no longer a "valuable" member of society. It goes against one of the very things that makes us human.
Even among animals, the more social species look after their old.Posted 9 years ago # -
Not much to argue there JFR. I think you could actually make a very positive argument financial argument for the UK healthcare model vs the US, but I wouldn't want to, as they are different countries with different leagal and political structures. Plus I can't be ars*d to start googling the stats and playing with Excel and it's not flogging burgers, so it's "Strictly Bar room".
As for education, Even 20+ years ago my state comp education was more about turning out good little wage slaves with a few "golden candidates" for Oxbridge to make the alumni list look good, with a few commendable exceptions who made their leasons shine. It must be worse now under the target culture when they just add up the points overall. I was talking this over recently with an acquaintance who went to private schools, and he got browney points for being bad but arguing his way out of it with aplomb. Different world.
Posted 9 years ago # -
Jeni, I don't for a minute believe you argue for "Logan's run". We can work past 65, stop breeding so fast, develop green/energy saving tech, fusions reactors, and for more resourses or room we need to expand into space, mine the asteroids, live on other planets and build stuff to head on out to new planets that we are only just discovering.
That or sit on our backsides with solar and wind power fueling our servers as we watch TV or the internet and wait for the Cockroaches to out evolve us.
Posted 9 years ago #
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