economic situation is dire

[peterms]

I know you hate the bankers Peter but FS is still our largest industry, 10% of GDP and 11% of Treasury revenue. It's not that great to simply piss it up the wall for no good reason, besides which some of the proposed UK regulation (particularly ref bank capitalisation levels) is more stringent than the EU actually want.

The figures which are given and which you repeat are wildly overstated. There was never any question whatever of the entire finance sector being threatened - just a tiny fraction of it. And yet we are told that a tenth of gdp was at risk. It's utter bollocks.

Will Hutton debunks this nonsense:

Much of British finance in whose name Cameron exercised his veto – routine banking, insurance and accounting – was wholly unaffected by any treaty change. The financial services industry in Britain constitutes 7.5% of GDP and employs a million people; the City represents perhaps a third of that and, in turn, that part threatened – if it was threatened at all – some fraction of that. This is a tiny economic interest. If the coalition is serious about rebalancing the British economy, it is preposterous to place a fragment of the City at the forefront of our national priorities...At worst, a dozen foreign investment banks and a couple of dozen hedge funds, along with their bonuses, might have been affected.

It is of course the hedge funds which have become the largest backers not just of the tory party, but also of people like Liam Fox, Adam Werrity and the like. It is these hedge funds and their tory beneficiaries who were at risk, not the UK national interest.

[tonyh29]

The figures which are given and which you repeat are wildly overstated.

so to be straight awols figures must be wrong and the figures you quote must be right :confused:

[mjmooney]

Ever wondered what a trillion dollars looks like? Well, given that a UK billion (1,000,000,000,000) is different to a US billion (1,000,000,000) I'm guessing that there may be a similar discrepancy over trillions.

Be that as it may, I thought you might like to read these (Sebastian Faulks-inspired) musings from my Good Lady Wife...

Wednesday, 14 December 2011

How Much is a Million?

Do you know what a million dollars in banknotes looks like? Or perhaps a billion, or even a trillion? No, neither did I, until I read about it last night. For anyone remotely interested in the financial crisis, banking, or even just current affairs, A Week in December, by Sebastian Faulks, is a cracking good read.

Don’t worry; you have not come to the wrong place. This IS the Arcturus Global Finance blog and not a book-club blog. But yes, believe it or not, I don’t spend all my spare time thinking about banking, regulatory compliance and Basel III. From time to time I do actually like to relax and read a book or two.

Unlike Sebastian Faulks’ other, better-known books (The Girl at the Lion D’Or, Birdsong and Charlotte Grey) A Week in December is set very much in the 21st century, and although it was first published in 2009 is still very relevant to current stories that are dominating the news headlines every day. The protagonists include a young lawyer, a London tube train driver, a Polish premier-league football player and his internet porn-star WAG, a dope-smoking, reality TV obsessed teenage boy, and a hedge fund manager working on the killer deal of his life.

The story hinges around a dinner party attended by all the main characters, and one thread in the conversation at the party really caught my attention.

I don’t know about you, but I don’t know what a million dollars looks like. I don’t know what a billion dollars looks like either, let alone a trillion. Come to think of it, I don’t very often even get to look at a £50 note. Most of the banknotes in my wallet are fives, tens and twenties. They don’t tend to last long once they get there, so there is very little opportunity for me to have a good look at them.

To get back to the book, the conversation turns to financial affairs, and one of the characters asks how high a stack of million dollars, in tightly-packed $100 bills, would be. It turns out that the answer is just four and a half inches. Now that is a nice, compact little stack. Small enough to fit inside a handbag. That was a surprise, because to me a million dollars is an unimaginably high amount of money, although I guess it would keep me in Marks & Spencer clothing and ready-meals for the rest of my life.

Anything higher than a million starts to become an even more nebulous concept. When I think about a billion or a trillion, the true magnitude of the numbers is even harder to grasp. For me it becomes almost an irrelevance, because I will never have access to such huge sums. Even if I did, I would never be able to spend it all, though I am willing to have a jolly good try.

No, as far as I am concerned, for all practical purposes, £1 million, £1 billion, £1 trillion dollars, are all just vague, unimaginably enormous amounts of money. So a trillion doesn’t seem that much different from a million. Which is why it came as a big shock to read that a $1 trillion stack of $100 dollar bills would in fact be seventy one miles high. Quite a substantial difference from the four and a half inch $1million dollar stack!

Thank you very much, Sebastian Faulks, for opening my eyes! It’s just a well that I am not in charge of a multi-billion dollar hedge fund. More to the point, it is just as well that I am not an accountant or an auditor.

We take an awful lot of things for granted, like assuming that politicians actually know what they are talking about, and that financial regulators have a grasp of what really goes on in the world of investment banking, including just how titanic the sums of money involved are. If not, they could do a lot worse than starting the educative process by reading this book.

Arcturus Global Finance - Banking Reform Bulletin

Anybody fancy doing the math(s)?

EDIT: Just done it. For a US trillion (1,000,000,000,000) it's about right.

For a British trillion (1,000,000,000,000,000,000) it would be million times higher, i.e. 71 million miles high.

[tonyh29]

Which is why it came as a big shock to read that a $1 trillion stack of $100 dollar bills would in fact be seventy one miles high. Quite a substantial difference from the four and a half inch $1million dollar stack!

if someone cares to give me a $1 trillion worth of $100 dollar bills I'm prepared to give it a go ...

[peterms]

The figures which are given and which you repeat are wildly overstated.

so to be straight awols figures must be wrong and the figures you quote must be right :confused:

It's a simple point. To claim that the entire finance sector of the UK is at risk from tighter regulation is plainly untrue. The organisations and practices which are at risk are investment banks and hedge funds. Therefore to claim that 10% of gdp is under threat is misrepresentation.

Unless of course you can see some reason for believing that the entire UK finance sector is at risk from tighter regulation? If so, what risk are we talking about?

[tonyh29]

The figures which are given and which you repeat are wildly overstated.

so to be straight awols figures must be wrong and the figures you quote must be right :confused:

It's a simple point. To claim that the entire finance sector of the UK is at risk from tighter regulation is plainly untrue. The organisations and practices which are at risk are investment banks and hedge funds. Therefore to claim that 10% of gdp is under threat is misrepresentation.

Unless of course you can see some reason for believing that the entire UK finance sector is at risk from tighter regulation? If so, what risk are we talking about?

Wasn't the EU treaty more about a French / German attempt at Fiscal Union (and adding a levy on transactions ?) ... to my knowledge regulation of financial services wasn’t even on the table ?

[mockingbird_franklin]

If The Eu were indeed proposing re-regulation of investment and retail banking, to bring back the safegaurds that had been in place up until they started to be dismantled about 25 years ago then it's something I'd actually support, And I'm very much against an awful lot that the EU does and proposes, those safegaurds were in place for a reason and did there job perfectly well, removing them really worked out well didn't it (well i guess it did for those bankers who made fortunes from the bubble they helped create and got off scott free when it burst), but politicians actually doing things that might just be of good to the people they supposedly represent and work for, not so sure that's happened too often in the last 50 years, so it would be unlikely to be the case.

As an aside, I'm sure I recently read a report that questioned this whole national interest line being fed to us over the protection of our financial sector (which should actualy read investment banking sector because that is what is really being talked about), in it a point was made that actually the sector that employs the most people and provides the most tax pounds to the treasury is in fact manufacturing and not finacial services, and I'm sure it's never cost the tax payer a fraction of what the investment banking sector has cost since 2008. Bit why let the truth get in the way of a good lie, especially when lots of (what used to be our) good money is being paid out to political parties to tell it.

[peterms]

Wasn't the EU treaty more about a French / German attempt at Fiscal Union (and adding a levy on transactions ?) ... to my knowledge regulation of financial services wasn’t even on the table ?

I don't think you're following this.

Regulation wasn't on the table until Cameron introduced it - using the threat of veto to try to hijack the discussion and get concessions to protect hedge funds from regulation.

Hence the part of the discussion between AWOL and me which went

his approach will mean that other countries will now be more determined to impose tighter regulation on the City, to teach him a lesson. That will be a very positive outcome, though the exact opposite of what he intended.

I'd suggest that such an insistence by other members would be the catalyst to a fast track UK exit from the EU entirely. I know you hate the bankers Peter but FS is still our largest industry, 10% of GDP and 11% of Treasury revenue. It's not that great to simply piss it up the wall for no good reason, besides which some of the proposed UK regulation (particularly ref bank capitalisation levels) is more stringent than the EU actually want.

[tonyh29]

Countering the views of pundits who argue that Britain risks isolation within Europe, Merkel said London still had a role to play in several significant areas.

"Britain is not only an important partner in foreign and security affairs. Britain is a partner in many other areas - in competitiveness, in the internal market, in trade, in [fighting] climate change," she said in her parliamentary address.

another argument bites the dust ?

[drat01]

Edit: Bloody link not working Grrrrrrrrr!!!

[tinker]

We import more from Europe than we export, who has the most to lose?

If we stay outside and leave the markets unregulated then where will all the money go? I would guess to the UK. Its a risk but its one either way IMO.

For what its worth I would rather stay out of Europe and stay a democracy. To be ruled by unelected politicians is the beginning of the end.

[bickster]

To be ruled by unelected politicians is the beginning of the end.

We've been ruled by unelected people who pay politicians for decades.

It's more a case of which corrupt system do you prefer.

[peterms]

Credit Agricole write off €2.5bn bad debts, withdraw from 21 countries, cut 2350 jobs. FTSE down. Gold and silver prices fall. French ministries cancel petit fours at office christmas parties.

[blandy]

Countering the views of pundits who argue that Britain risks isolation within Europe, Merkel said London still had a role to play in several significant areas.

"Britain is not only an important partner in foreign and security affairs. Britain is a partner in many other areas - in competitiveness, in the internal market, in trade, in [fighting] climate change," she said in her parliamentary address.

another argument bites the dust ?

Hardly, for 2 reasons.

1. Arguments never bite the dust in this thread

2. Merkel saying UK still has a part to play in security ...etc... isn't the same as saying that on the financial stuff, they won't just ignore us completely and decide what they want and then go and do it and if it affects us, then, well, tough, we weren't there 'cus we took our ball home.

[kidlewis]

perhaps Merkel realises that she needs to keep us a bit closer than arms length considering Germany will be pretty peeved if they have to dig into their pockets more as a result of "isolating us" as a variety of people are suggesting.

At the end of the day if the UK is to be a significant contributer through the IMF or some other source to fund other countries debts then they cannot just cast us off.

Money makes the world go round, or at least a lack of it.

[tonyh29]

now obviously at present the US is up shit creek along with the rest of us but this comment piece here does pose some thought ...

Yes indeed, Britain is on the outside: left out of this idyll of anti-competitive regulation and tax harmonisation. I can remember when the greatest Eurosceptic nightmare was a “United States of Europe”. They should be so lucky. The United States of America has nothing like this ferociously imposed central control over the budgets of its member states. Nor does it require tax harmonisation among them. The states of the American union have independent tax systems: apart from federal income tax, the taxes that US citizens pay are determined by the states they are in. Some of those states have high property and death taxes – others (like Nevada, where the revenue from gambling pays for almost everything) have low ones. Some have sales taxes and specific duties which others do not. Hence the great American tradition of driving across state lines in order to buy cheaper alcohol.

Those states which have competition on their immediate borders from others with, say, lower retail taxes, lose custom. But most importantly, some state governments impose much lower business taxes than others. By lowering their corporation taxes, once-poor states have managed to encourage inward investment and become not-poor. This internal competition increases prosperity in the private sector and incentivises efficiency in the public sector. Which is precisely the opposite of what tax harmonisation will do to EU member states. If Ireland, for example, is forced to give up its lower rate of corporation tax (because the EU regards that as an “unfair” competitive advantage), it will lose the capacity that it might have had to recover under its own steam.

Without being able to devalue their currencies, or to slash their taxes in order to attract investment and commercial activity, the poor countries of Europe will be locked permanently into disadvantage and dependence. They will be forced to accept austerity programmes while being deprived of any of the fiscal mechanisms for improving their own economic condition. And if they behave in what the EU decides are incorrigibly delinquent ways, they may even have their elected governments replaced – so the democratic mechanisms for political change will go, too.

Full Article (Torygraph)

[bickster]

It seems the cracks are beginning to appear in this now. This idea that it's 26 countries onto 1 is nonsense, there's a fair few countries seemingly not going to approve it. Until the full text is revealed the Irish can't guarantee that they won't have to have a referendum on the matter, if they do it will be a huge task to get the people to vote for it. There are a good few other countries seemingly opposed to the plan now too. Even Merkel's coalition partners appear to be very cool on the idea putting her in danger at home. Sarkosy looks odds on to be ousted by the Socialists in this years election and they are saying they would immediately want to renegotiate the treaty. Other countries such as Sweden, Czekoslovakia, Denmark and Poland face difficult times trying to get this treaty to be approved on the home front. It's not quite the Europe united against the UK picture that was originally painted.

[kidlewis]

It seems the cracks are beginning to appear in this now. This idea that it's 26 countries onto 1 is nonsense, there's a fair few countries seemingly not going to approve it. Until the full text is revealed the Irish can't guarantee that they won't have to have a referendum on the matter, if they do it will be a huge task to get the people to vote for it. There are a good few other countries seemingly opposed to the plan now too. Even Merkel's coalition partners appear to be very cool on the idea putting her in danger at home. Sarkosy looks odds on to be ousted by the Socialists in this years election and they are saying they would immediately want to renegotiate the treaty. Other countries such as Sweden, Czekoslovakia, Denmark and Poland face difficult times trying to get this treaty to be approved on the home front. It's not quite the Europe united against the UK picture that was originally painted.

when you have a europe with very different social and cultural differences, different political parties in power and countries with very different financial problems I personally didn't think anything different.

The scaremongering has come from both opposition parties and other countries against each other.

The golden question is how do you give confidence back to markets, businesses and the like?

[tonyh29]

Good to see fulham starting the campaign to get out of Europe

[tinker]

Good to see fulham starting the campaign to get out of Europe

Lets just hope SHA do the same.