economic situation is dire

[trimandson]

You're anti-union

That may be due to circumstance actually.

I'm in management in a large company, where the unions are always threatening to go on strike. In fact, they have just announced another strike ballot today :evil:

and yet we're trying to keep the company afloat, we really aren't trying to screw the workers. I've had my pay frozen just like the rest of the workers, and i lost around £6k in my annual bonuses which the workers haven't lost. Yet the union doesn't see that, or the fact that we are currently making a loss.

You work in banking?

And frankly, I'm anti-union now, simply because ours seems to be full of the most useless people I've ever met, absolute drongos, and I'm fairly sure it's one of the biggest in the Uk (if not the biggest).

I'm not trusting someone with my job, my payrise, my security if they can't even send an email properly. Fools.

[ender4]

You work in banking?

no, in a media company.

And frankly, I'm anti-union now, simply because ours seems to be full of the most useless people I've ever met, absolute drongos, and I'm fairly sure it's one of the biggest in the Uk (if not the biggest).

I'm not trusting someone with my job, my payrise, my security if they can't even send an email properly. Fools.

[snowychap]

i lost around £6k in my annual bonuses which the workers haven't lost

I'd hazard a guess that the workers who haven't lost this would give a limb to be in that position.

[snowychap]

I believe in the free-market with proper regulation

Please explain how a market with regulation is a free market (or, indeed, how any market can practically be a free market).

[ender4]

A total free-market is that you let the market decide everything - no rules or regulations stopping the market working to the best of its ability.

This is the ideal case in theory, a pure efficient working of the market.

In reality this cannot be allowed to occur, as you need safety rules, environmental legislation, you need to make sure basic services are provided to those who can't afford them, you need to provide access to the market for those who have no access. This can still be a free market, but working within a framework.

Too much framework, and it impedes the efficiency of the free-market.

Not enough framework, and it won't benefit the wider population.

[Awol]

i lost around £6k in my annual bonuses which the workers haven't lost

I'd hazard a guess that the workers who haven't lost this would give a limb to be in that position.

Indeed, I believe the system is called 'promotion'.

[ender4]

i lost around £6k in my annual bonuses which the workers haven't lost

I'd hazard a guess that the workers who haven't lost this would give a limb to be in that position.

i'm not debating that, i'm sure they would.

But the point i was making was how the unions are jepordizing (sp?) all their workers jobs, rather than protecting them.

[snowychap]

A total free-market is that you let the market decide everything - no rules or regulations stopping the market working to the best of its ability.

This is the ideal case in theory, a pure efficient working of the market.

In reality this cannot be allowed to occur, as you need safety rules, environmental legislation, you need to make sure basic services are provided to those who can't afford them, you need to provide access to the market for those who have no access. This can still be a free market, but working within a framework.

Too much framework, and it impedes the efficiency of the free-market.

Not enough framework, and it won't benefit the wider population.

Thank you for confirming the point I was making (i.e. that it is not a free market).

Even considering your perspective above, I don't know how you could even consider applying that kind of label to the deregulated gas/electricity markets (or, for that matter, trains, telecoms, &c.).

Indeed, I believe the system is called 'promotion'.

[snowychap]

Indeed, labour always make silly choices and the tories very smart ones......like this mess the tories created

National Express loses rail route

Except it isn't National Express that have lost it (though it is really), it is NXEC, a special purpose vehicle with limited liability, which means that National Express can continue to run those franchises which are making them money and dump this one (if I have read Peston's blog correctly - link).

[Gringo]

Indeed, labour always make silly choices and the tories very smart ones......like this mess the tories created

National Express loses rail route

Except it isn't National Express that have lost it (though it is really), it is NXEC, a special purpose vehicle with limited liability, which means that National Express can continue to run those franchises which are making them money and dump this one (if I have read Peston's blog correctly - link).

True. Adonis said he was exploring avenues where they could also take the two remaining franchises back.

It is quite ridiculous that the govt would enter into such commercial agreements. It's only two years that metronet collapsed leaving the taxpayer to pick up the £4bn losses whilst the companies running the sham walk away with no losses, and even carry on picking up mainentance contracts both on the undergorund and on overground railways.

Privatising the profits whilst nationalising the losses.

Ring a bell.

[snowychap]

Privatising the profits whilst nationalising the losses.

A kind of state-sponsored economic terrorism.

[leviramsey]

Social market hybrids, by and large, tend to produce the worst of both worlds...

[snowychap]

Social market hybrids, by and large, tend to produce the worst of both worlds...

Only because they tend to be exploited by the few. :winkold:

[leviramsey]

Sweden cuts deposit rate to negative 0.25%

There has been a lot of ludicrous recommendations recently to combat deflation by making deposit rates negative. I did not think any central bank would be dumb enough to try it. I thought wrong.

Today, Riksbank, Sweeden's central bank, cut the deposit rate to -0.25% effectively charging savers interest on deposited money:

The weak development of the economy requires a somewhat more expansionary monetary policy. The Executive Board of the Riksbank has therefore decided to cut the repo rate by 0.25 of a percentage point to 0.25 per cent.

Economic activity abroad is very weak and this hits Sweden hard. Exports have fallen substantially and the situation on the labour market is continuing to deteriorate rapidly. The information received in recent months points to the economic downturn in 2009 being somewhat deeper than the Riksbank forecast in April.

The decision on the repo rate will apply with effect from Wednesday, 8 July. The deposit rate is at the same time cut to -0.25 per cent and the lending rate to 0.75 per cent.

The global economy is in a mess because of the lack of savings not because of an excess of it. People spent money they did not have, pushing asset prices to ridiculous levels. Banks, in belief that asset prices would keep rising exponentially, increased leverage. Now consumers everywhere are retrenching in the wake of the collapse, a much needed phenomenon.

In light of the above, punishing savers with negative deposit rates is the height of stupidity.

It would be fitting if there was an immediate run on deposits. And if that happens what will Sweden do? Halt deposits? Sweden risks (and deserves) a currency collapse and bank runs for this insane effort. Look for capital flight in Sweden.

We should all be rooting for the demise of Sweden lest Bernanke or some other Central Bank clowns try the same thing. The risk is that Sweden does not immediately suffer for this stupidity and that Bernanke tries to do the same thing.

One thing is certain. This is eventually going to blow sky high. Let's hope it does before Bernanke gets the same brilliant idea.

Of course, in the case of Sweden and Germany, we're seeing that it's far worse to be dependent on selling stuff to bubble economies than it is to be in a bubble economy itself.

My suspicion is that the US will probably bottom in the next 6 months... the UK will take a bit longer, since UK consumers have continued borrowing to a far greater extent than have US consumers; I figure that it will probably be late 2010 or early 2011 before the UK bottoms. I have my doubts as to whether Germany's manufacturing-based economy will ever recover fully: more and more of the infrastructure spending from developing nations that drove Germany over the past decade or so will move to those same developing nations, the luxury goods sector will probably not recover until you get more major economies into bubble mode (probably not for a decade or more... I see both the US and UK economies being essentially flat once they bottom for at least half a decade and perhaps more than a decade), and given that neither the CDP nor the SDP seem much inclined to make the sort of structural changes that would allow Germany to be less dependent on manufacturing (and it's going to require essentially a total redesign of society... the sort of thing that only a dictatorship (hopefully along the lines of MacArthur in Japan as opposed to other dictators through history... of course we all know what led up to the MacArthur regime in Japan!)).

The USA will come out of this OK (partly because of the good timing of the bubble bursting... had things gone on for another couple of years, then I think the USA would have collapsed)... the UK probably will too, but most likely less so (depending partially on whether we see greater transatlantic or transchannel gravity)

"God watches out for drunks, fools, and the United States of America" -- Bismarck (though why he'd be redundant, I don't know...)

[snowychap]

It's a good job that the UK are well covered within the first two categories.

[johnvillan]

thedailymash

BUT WE LOVE THE MADNESS, BANKERS TELL DARLING Print Email this story

BANKERS have rejected Alistair Darling's plea not to return to the 'madness' that caused the recession, insisting they bloody love it.

Maisie: Two grand

In a keynote speech the chancellor said the high-risk, bonus-driven culture of the past must not be repeated, as bankers across the City of London laughed and laughed and laughed.

Julian Cook, from Donnelly-McPartlin, said: "What Mr Darling completely fails to understand is that I'm not right in the head.

"This is a picture of my daughter Maisie. I can let you have her for two grand and I'll even throw in the garden swing. You see what I mean? I am **** up."

Martin Bishop, from Madeley- Finnegan, said: "It's the madness that gets me out of bed in the morning. Without it I'd go mad."

He added: "There are two reasons why people get into banking. One, you get access to some really excellent pens, and two, the absolutely enormous amounts of money.

"If you take away the money then I may as well go off and become something worthwhile like a nurse. Or a prostitute."

Shadow chancellor George Osborne said a Conservative government would radically overhaul the financial system while at the same time ensuring it remained 'nicely unhinged'.

Meanwhile commentators who earlier this year had predicted the end of capitalism were last night staring at the rock solid inevitability that everything was hurtling back to exactly the way it was.

link

P.S. leviramsey you are hopfull, i dont think the US Dollar will be quite the same in 6 months.California is already issuing IOU's and you have pased the crippling H.R. 2454: American Clean Energy and Security Act of 2009. I dont think the UK will be too far behind the USA under the expert guidance of Gordon (going down with the ship) Brown.

.telegraph

China's banks are an accident waiting to happen to every one of us

Fitch Ratings has been warning for some time that China's lenders are wading into dangerous water

By Ambrose Evans-Pritchard

Published: 5:38PM BST 28 Jun 2009

Comments 77 | Comment on this article

A growing number of experts are casting doubt on China's ability to pull the global economy from recession

China's banks are veering out of control. The half-reformed economy of the People's Republic cannot absorb the $1,000bn (£600bn) blitz of new lending issued since December.

Money is leaking instead into Shanghai's stock casino, or being used to keep bankrupt builders on life support. It is doing very little to help lift the world economy out of slump.

Fitch Ratings has been warning for some time that China's lenders are wading into dangerous waters, but its latest report is even grimmer than bears had suspected.

"With much of the world immersed in crisis, China appears to be one of the few countries where the financial system continues to function largely without a glitch, but Fitch is growing increasingly wary," it said.

"Future losses on stimulus could turn out to be larger than expected, and it is unclear what share the central and/or local governments ultimately will be willing or able to bear."

Note the phrase "able to bear". Fitch's "macro-prudential risk" indicator for China threatens to jump from category 1 (safe) to category 3 (Iceland, et al). This is a surprise to me but Michael Pettis from Beijing University says China's public debt may be as high as 50pc-70pc of GDP when "correctly counted".

The regime is so hellbent on meeting its growth target of 8pc that it has given banks an implicit guarantee for what Fitch calls a "massive lending spree".

Bank exposure to corporate debt has reached $4,200bn. It is rising at a 30pc rate, even as profits contract at a 35pc rate.

Fitch traces the 2009 bubble to the central bank's decision to cut interest on reserves to 0.72pc. Bankers responded to this "margin squeeze" by ramping up the volume of lending instead. Over half the new debt is short-term. Roll-over risk is rocketing. China's monetary stimulus since November is arguably more extreme than the post-Lehman printing of the US Federal Reserve, though less obvious to the untrained eye.

Under the Taylor Rule, US policy remains tight (for the US). China's policy is loose (for China). New loans doubled in May from a year earlier, almost entirely to companies.

China's Banking Regulatory Commission fired a warning shot last week. "The top priority at the moment is to stop explosive lending. Banks should carefully monitor the process of credit approval and allocation, and make sure that loans flow into the real economy," it said.

Unfortunately, 40pc of the "real economy" consists of exports, mostly to the US and Europe, the consequence of a mercantilist export model that has qcrashed and burned. Chinese exports were down 26pc in May.

World trade may be stabilizing at last after contracting at faster rate than during the early Great Depression. But it will not rebound fast in a world where the US savings rate has risen to a 15-year high of 6.9pc. A trade policy based on the assumption that debtors in the Anglosphere and Europe's Club Med can ruin themselves for ever is absurd.

Andy Xie, a Sino-bear and commentator for Caijing, said Western analysts are in for a rude shock if they think that China's surging demand for raw materials implies genuine recovery.

Commodity speculators have been using cheap credit to play the arbitrage spread between futures and spot on the oil markets. They have even found ways to trade lumber to iron ore by sheer scale of leverage. "They've made everything open to speculation," he said.

Mr Xie thinks the spring recovery is an inventory spike, to be followed a double-dip downturn into next year as stimulus wears off.

Reformers know what must be done to boost consumption. China needs a welfare revolution. But creating a social security net takes time, and right now Beijing is facing a social crisis as 20m jobless workers retreat to the rural hinterland.

So the regime is resorting to hazardous methods to keep excess factories humming: issuing a "Buy China" decree: using a plethora of export subsidies; holding down the price of coke, bauxite, zinc and other resources to lower production costs (prompting a complaint from America and Europe); and suppressing the yuan, again.

Protectionism is a risky game for a country that lives off global trade and runs a surplus near 10pc of GDP. Mr Pettis said he fears China is nearing its "Smoot-Hawley moment", repeating the US tariff blunder of 1930 that brought the world crashing down on Washington's head.

Two facts stand out about China's green shoots. While the Shanghai composite index is up 70pc since November, Chinese imports are down 25pc from a year ago. China is still draining real stimulus from the global economy.

If the world's biggest surplus state ($400bn) is too structurally deformed to help offset the demand shock as Western debtors retrench, we are trapped in a long deflation slump.

link

China might go down the plug hole too.They are massively exposed by underwriting American borrowing and are trying to swap has many Dollars for the basket of world currencies. Have you noticed the state sponsored shopping trips and wholesale purchase of raw materials paid for in Dollars over the last few months.

[johnvillan]

double post

[Gringo]

In desparate times we will find innovative ways for the state to pay for our mistakes

CBI urges job suspension scheme

Business leaders have called for the government to do more to stem rising job losses, including introducing an "alternative to redundancy" scheme.

The CBI wants struggling firms to be allowed to suspend employees' contracts for up to six months.

Workers would then be paid the equivalent of twice the rate of Jobseekers' Allowance - half paid by the government, half by the employer.

But the TUC questioned whether employees would lose redundancy rights.

Unemployment in the UK reached 2.22 million in the first quarter of 2009.

The CBI warned that unemployment will rise to 3.03 million by the second quarter of next year unless more is done to help save jobs and businesses.

The CBI calling for state intervention - how bazaar

[johnvillan]

telegraph

QE just acting as a sugar rush for insolvent banks that deserve to fail

The UK is in the midst of the most dangerous economic experiment for generations. Yet it's the subject of no debate. Since March, the authorities have been using "quantitative easing", or QE. This involves the Bank of England expanding its balance sheet from nothing in order to purchase debt instruments from the market.

By Liam Halligan

Published: 8:45PM BST 04 Jul 2009

Comments 43 | Comment on this article

The idea is that the proceeds of such sales boost the money supply and kick-start lending. By decreasing the supply of gilts in the market, QE is also meant to push up gilt prices, driving down the yields that determine borrowing costs right across the economy – not least for commercial loans and mortgages.

At this point, people in my position are supposed to explain that QE isn't "printing money". I'm not going to do that. For the only difference between the UK's current policy and Zimbabwe-style economics is that QE involves the creation of electronic balances rather than actual notes.

That last paragraph will have caused a sharp intake of breath among my friends in the higher-echelons of the UK's economics profession. Unable to dismiss me as a "non-economist", they'll say I'm being alarmist – perhaps due to some kind of personality trait.

I would suggest they sit down, turn off their mobile phones, take a cold look at the evidence and then ask themselves if they've got the guts to help expose the madness of the current policy consensus – the debt-funded fiscal boosts, the non-conditional bank bail-outs and, above all, QE.

Over the past three months, the Bank has spent £106bn of QE funny money. By the end of July, it will have purchased the £125bn of assets it has so far been authorised to buy. At this week's meeting of the Monetary Policy Committee, interest rates will be held at 0.5pc. But, with the original QE "pot" almost gone, the Treasury and Bank could well signal there's more to come.

I accept the start of QE caused share prices to rally and business sentiment to improve. But that sugar rush has gone. The harsh reality is that despite the huge inflationary dangers posed by QE, the credit crunch is getting worse.

The Bank of England has more than doubled the monetary base since March, yet mortgage approvals remained at 43,000 in May – consistent with house prices falling at double-digit annual rates. Lending to non-financial companies contracted 3pc last month.

Banks are keeping the QE cash on reserve or lending it to their own off-balance sheet vehicles (the ones stuffed with sub-prime toxic waste). So rather than helping solvent firms and households access credit, QE is re-capitalizing, by the back door, banks that are otherwise insolvent and should be going bust. Gilt yields haven't come down either. The 10-year yield remains where it was before QE began, having been much higher in the interim.

Around a third of the Bank's QE purchases are, anyway, from overseas investors – doing nothing to ease credit in the UK. Such sales by foreigners reflect mounting concerns about the UK's wildly expansionary policy stance and sterling's related medium-term fragility.

As someone who spends a lot of time talking to overseas asset-managers, I can't tell you how often I'm asked: "Liam, why this money-printing? Have your politicians gone mad?" I can only reply that I ask myself the same thing.

There is, in extremis, an argument for QE, but only to buy commercial paper, not sovereign debt. When used to re-purchase gilts, QE allows governments to carry on borrowing like crazy, rather than facing up to the reality the country must balance its books.

When QE was announced, the emphasis was on the commercial debt purchases the authorities would make. In the event, gilts have accounted for a staggering 99pc of the total. That's why QE will inevitably lead to high inflation – whatever nonsense is spouted about "withdrawing the monetary stimulus".

History shows you can't get the inflationary toothpaste back in the tube. That's why price pressures are rising – and gilts yields refuse to fall.

At the outset of QE, the Tories called it "a leap in the dark" – failing to reveal if they backed it or not. Since then, HM Opposition has been silent on a policy that's destroying the last vestiges of this country's policy-making credibility.

Such credibility is what keeps inflation benign and borrowing costs low. By providing a solid macro-economic platform, such credibility is vital if this country is to create the jobs and wealth that will be so important to our citizens in the years to come.

Such credibility, tough to win, is easy to lose. Because of QE, the UK is now losing it – at breakneck speed. Yet those who will form our next government are silent – not yet in power, but complicit in this grotesque policy vandalism.

link

We are only putting off the inevitable high inflation and eventual mega crash.The world should have let the banks fold.

[Gringo]

Worst of the recession 'is over'

The worst of the UK's recession is over, according to the British Chambers of Commerce (BCC) business group, but talk of a recovery is premature.

Its report, based on a survey of 5,600 companies, found there had been "welcome progress" in confidence levels between April and June.

But the BCC still expects unemployment to reach 3.2 million by 2010.

Yes confidence is up, wooopee.

Confidence is up because people keep saying the worst is over, no statistical evidence - just like a year ago when they were claiming the end of the house price crash was nigh because "the rate of falls was stablising". Destocking has completed which means the big falls have finished - it doesn't mean that the fall has finished. Many companies will fail to survive on their new sales levels, and the undemployment lag will cost them further sales.

The only evidence people can point to with regards to calling the bottom is the stock market. Which is of course all based on confidence.

So is this a confidence trick?