economic situation is dire

[snowychap]

Is this a 'positive news story'?

Royal Bank of Scotland to give huge bonuses

THE state-owned Royal Bank of Scotland is planning to hand out record bonuses of up to £5m each in a snub to struggling taxpayers.

The move would see the average employee in its high-risk investment banking arm take home £240,000, with the top 20 staff in line for payments of between £1m and £5m.

The payouts by the investment banking division — from a total pay and bonus pot of £4 billion — would top the deals awarded at the peak of the financial boom in 2007 and are 66% higher than those paid last year.

RBS, then headed by Sir Fred Goodwin, had to be rescued from collapse by the Treasury last October with an initial injection of £20 billion. The taxpayer now has a 70% stake in the bank.

Any suggestion of bumper bonuses will put RBS on a collision course with UK Financial Investments, which oversees taxpayers’ investments in banks. It would have to approve the payments.

The RBS plans are the latest sign that the bonus culture is returning to the City just a year after the financial system was saved from collapse.

The banks that have survived the financial crisis are now making huge profits in areas such as debt and currency trading, where instability in the global economy has created opportunities.

Some traders in specialised areas are making bigger profits than before due to the chaos created by the collapse. After a series of forced mergers, there are also fewer competitors in a number of areas, allowing the banks to charge clients higher fees.

RBS is expected to lobby hard to be allowed to make the payments, claiming that dozens of its top- performing executives have been poached by rivals offering even bigger pay deals. Almost a third of the bank’s wealth management staff in Singapore walked out last week over fears they would receive lower than expected bonuses.

...more on link

[snowychap]

Record recession for UK economy

The UK economy unexpectedly contracted by 0.4% between July and September, according to official figures, meaning the country is still in recession.

It is the first time UK gross domestic product (GDP) has contracted for six consecutive quarters, since quarterly figures were first recorded in 1955.

But the figures could still be revised up or down at a later date, because this figure is only the first estimate.

GDP measures the total amount of goods and services produced by a country.

Quarterly growth of 0.2% had been expected in the figures from the Office for National Statistics (ONS), although expectations had been tempered by recent figures showing no growth in retail sales in September, and a 2.5% decline in industrial output in August.

...more on link

[Gringo]

Oh dear. I wonder what that does to Alaistair's borrowing requirements estimates.

[snowychap]

Oh dear. I wonder what that does to Alaistair's borrowing requirements estimates.

Well, he was on the tellybox earlier saying that he had never expected growth until the end of the year. Unless I completely misheard him.

[ender4]

It's not cheating...

It is in my book. :winkold:

i always pass my changes through the auditors, and make sure they are happy with it.

a couple of examples:

i'll be more prudent with bad debt and increase my provisions, to lower profit. This is a very easy place to move up & down, especially if you have a variety of customers.

i might release various other provisions (built-up during the good times). Increasing profit.

we have changed the length of time we have depreciated assets over (proving that they will last longer than we first thought), thereby increasing profit.

we have written of assets that we have decided are obsolete, to lower profit.

Goodwill, branding, intangible assets are another place you can play with numbers (up or down).

increase/ decrease obsolete stock provisions.

These will all be for the statutory accounts, and we will pass them all through the auditors.

[snowychap]

All of those things are to give a more accurate reflection of the position of the company.

If you selectively decide only to do some and not others to falsify the picture then you are not giving a true and accurate reflection of the position of the company.

If a message comes down from your FD that the expected position as shown by the current management accounts is going to produce a profit figure which is 20% less than the board want and they require you to find ways by change of policy towards bad debts, accruals, depreciation and anything else to manufacture the figure that they want then that's verging on shady in my book.

Then again that's why I probably had so many 'discussions with my boss' when I was doing accounts.

[ender4]

If you selectively decide only to do some and not others to falsify the picture then you are not giving a true and accurate reflection of the position of the company.

If a message comes down from your FD that the expected position as shown by the current management accounts is going to produce a profit figure which is 20% less than the board want and they require you to find ways by change of policy towards bad debts, accruals, depreciation and anything else to manufacture the figure that they want then that's verging on shady in my book.

it might be verging on shady, but thats what happens in most companies i know (rightly or wrongly). :oops:

Its accepted practice & legal.

Of course, you can only do it in one direction for a year or two, over time you will need to balance it out, or you get to a stage where you haven't got anything left to play with.

[snowychap]

Objectivity?

[tonyh29]

Oh dear. I wonder what that does to Alaistair's borrowing requirements estimates.

Well, he was on the tellybox earlier saying that he had never expected growth until the end of the year. Unless I completely misheard him.

he did say today he stood by his budget forecast that growth would be under way by the end of this year" however that wasn't what he said previously when he stated he expected the UK to start expanding again by the end of the year and record a 1.25% expansion next year.

mind you his boss on one of his days off from saving the world said "I think you'll see figures pretty soon that shows the action that Britain is taking yielding effect" that was on Sept 27th .. oh Dear Gordon still what do you know about economies ...I though that Britain was best placed to weather the recession. ?

[Gringo]

Down in the pleasure centre,

hell bent or heaven sent,

listen to the propaganda,

listen to the latest slander.

There's nothing underhand

that she wouldn't understand.

Pump it up until you can feel it.

Pump it up when you don't really need it.

Extra £25bn to stimulate economy

The Bank of England's rate-setters have decided to pump an extra £25bn into the economy in their quantitative easing (QE) programme.

They also kept interest rates unchanged at 0.5% for an eighth month.

The Bank has already spent £175bn on QE, which involves printing money to buy assets from banks and other companies to stimulate the economy.

The extra £25bn will be spent over the next three months, which is a slower rate of spending than before.

In the previous three months the Bank had spent £50bn.

"It would be interesting to learn why the committee has gone for a smaller expansion of asset purchases than previously," said Philip Shaw, economist at Investec.

"That might reflect some concerns over the medium-term inflation background or a big split on the committee."

[Gringo]

Free Market Economy FAIL

Free market flawed, says survey

Twenty years after the fall of the Berlin Wall, a new BBC poll has found widespread dissatisfaction with free-market capitalism.

In the global poll for the BBC World Service, only 11% of those questioned across 27 countries said that it was working well.

Most thought regulation and reform of the capitalist system were necessary.

The article also goes on to disucss

There were also sharp divisions around the world on whether the end of the Soviet Union was a good thing.

but that probably belongs on another thread.

[tonyh29]

but that probably belongs on another thread.

that Ukraine answer is quite a shock ...

[Gringo]

but that probably belongs on another thread.

that Ukraine answer is quite a shock ...

I think it might have something to do with the average gas bill going through the roof. Yet the EU are continuing to push for Ukraine inclusion.

[Awol]

but that probably belongs on another thread.

that Ukraine answer is quite a shock ...

I think it might have something to do with the average gas bill going through the roof. Yet the EU are continuing to push for Ukraine inclusion.

The most likely scenario for the Ukraine is partition eventually, the relative support for the EU and Russia is qute evenly split between the East and West of the country, the East being populated largely by people who are ethnically Russian. Who gets the Crimea would be a potentially sticky issue though.

Sorry, miles OT now!

[Jon]

Free Market Economy FAIL

Free market flawed, says survey

Twenty years after the fall of the Berlin Wall, a new BBC poll has found widespread dissatisfaction with free-market capitalism.

In the global poll for the BBC World Service, only 11% of those questioned across 27 countries said that it was working well.

Most thought regulation and reform of the capitalist system were necessary.

Go Frenchies! :nod:

[trimandson]

5000 jobs to go at Lloyds within the next year.

[legov]

Im just 17 so sorry but Asia where I live seems like its booming again...I just dont get it. Im no economist, sorry.

[johnvillan]

The Telegraph

Société Générale tells clients how to prepare for potential 'global collapse'

Société Générale has advised clients to be ready for a possible "global economic collapse" over the next two years, mapping a strategy of defensive investments to avoid wealth destruction.

By Ambrose Evans-Pritchard

Published: 6:12PM GMT 18 Nov 2009

Comments 51 | Comment on this article

Explosion of debt: Japan's public debt could reach as much as 270pc of GDP in the next two years. A bullet train is pictured speeding past Mount Fuji in Fuji city, west of Tokyo Photo: Reuters

In a report entitled "Worst-case debt scenario", the bank's asset team said state rescue packages over the last year have merely transferred private liabilities onto sagging sovereign shoulders, creating a fresh set of problems.

Overall debt is still far too high in almost all rich economies as a share of GDP (350pc in the US), whether public or private. It must be reduced by the hard slog of "deleveraging", for years.

"As yet, nobody can say with any certainty whether we have in fact escaped the prospect of a global economic collapse," said the 68-page report, headed by asset chief Daniel Fermon. It is an exploration of the dangers, not a forecast.

Under the French bank's "Bear Case" scenario (the gloomiest of three possible outcomes), the dollar would slide further and global equities would retest the March lows. Property prices would tumble again. Oil would fall back to $50 in 2010.

Governments have already shot their fiscal bolts. Even without fresh spending, public debt would explode within two years to 105pc of GDP in the UK, 125pc in the US and the eurozone, and 270pc in Japan. Worldwide state debt would reach $45 trillion, up two-and-a-half times in a decade.

(UK figures look low because debt started from a low base. Mr Ferman said the UK would converge with Europe at 130pc of GDP by 2015 under the bear case).

The underlying debt burden is greater than it was after the Second World War, when nominal levels looked similar. Ageing populations will make it harder to erode debt through growth. "High public debt looks entirely unsustainable in the long run. We have almost reached a point of no return for government debt," it said.

Inflating debt away might be seen by some governments as a lesser of evils.

If so, gold would go "up, and up, and up" as the only safe haven from fiat paper money. Private debt is also crippling. Even if the US savings rate stabilises at 7pc, and all of it is used to pay down debt, it will still take nine years for households to reduce debt/income ratios to the safe levels of the 1980s.

The bank said the current crisis displays "compelling similarities" with Japan during its Lost Decade (or two), with a big difference: Japan was able to stay afloat by exporting into a robust global economy and by letting the yen fall. It is not possible for half the world to pursue this strategy at the same time.

SocGen advises bears to sell the dollar and to "short" cyclical equities such as technology, auto, and travel to avoid being caught in the "inherent deflationary spiral". Emerging markets would not be spared. Paradoxically, they are more leveraged to the US growth than Wall Street itself. Farm commodities would hold up well, led by sugar.

Mr Fermon said junk bonds would lose 31pc of their value in 2010 alone. However, sovereign bonds would "generate turbo-charged returns" mimicking the secular slide in yields seen in Japan as the slump ground on. At one point Japan's 10-year yield dropped to 0.40pc. The Fed would hold down yields by purchasing more bonds. The European Central Bank would do less, for political reasons.

SocGen's case for buying sovereign bonds is controversial. A number of funds doubt whether the Japan scenario will be repeated, not least because Tokyo itself may be on the cusp of a debt compound crisis.

Mr Fermon said his report had electrified clients on both sides of the Atlantic. "Everybody wants to know what the impact will be. A lot of hedge funds and bankers are worried," he said.

link

[tonyh29]

UK borrowing ballooned by a higher than expected £11.4bn in October, official figures show.

The record rise for the month takes public sector net borrowing for the financial year so far to £86.9bn, the Office for National Statistics said.

The gloomy figures come a day after the Government unveiled a Fiscal Responsibility Bill - putting plans to halve the UK's deficit within four years on a statutory footing.

But thinktank the Organisation for Economic Co-operation and Development has warned that while Britain is starting to pull out of recession unemployment could hit 9.5% in 2011.

October is usually a strong month for Britain's public finances due to corporation tax revenues, but the depth of the recession has hammered the Treasury's tax take.

The figures showed a record 13th successive month of declining current receipts - down 9% to £41bn- but spending on factors such as unemployment benefits has risen.

This has pushed up the Government's total current expenditure to £48.6bn, while net debt has reached £829.7bn - £134.6bn higher than a year ago and equivalent to more than 59% of GDP.

Public borrowing is already forecast by the Treasury to reach £175bn this year but the figures could have to be revised higher by Chancellor Alistair Darling in December's pre-budget.

This comes after the shock initial estimate of a 0.4% decline in output between July and September when the economy was finally expected to pull out of recession.

The OECD has warned Britain needs to come up with a concrete plan to cut the ballooning budget deficit.

oh dear another Labour myth dies out ....

[Awol]

The Telegraph

Société Générale tells clients how to prepare for potential 'global collapse'

Société Générale has advised clients to be ready for a possible "global economic collapse" over the next two years, mapping a strategy of defensive investments to avoid wealth destruction.

By Ambrose Evans-Pritchard

Published: 6:12PM GMT 18 Nov 2009

Comments 51 | Comment on this article

Explosion of debt: Japan's public debt could reach as much as 270pc of GDP in the next two years. A bullet train is pictured speeding past Mount Fuji in Fuji city, west of Tokyo Photo: Reuters

In a report entitled "Worst-case debt scenario", the bank's asset team said state rescue packages over the last year have merely transferred private liabilities onto sagging sovereign shoulders, creating a fresh set of problems.

Overall debt is still far too high in almost all rich economies as a share of GDP (350pc in the US), whether public or private. It must be reduced by the hard slog of "deleveraging", for years.

"As yet, nobody can say with any certainty whether we have in fact escaped the prospect of a global economic collapse," said the 68-page report, headed by asset chief Daniel Fermon. It is an exploration of the dangers, not a forecast.

Under the French bank's "Bear Case" scenario (the gloomiest of three possible outcomes), the dollar would slide further and global equities would retest the March lows. Property prices would tumble again. Oil would fall back to $50 in 2010.

Governments have already shot their fiscal bolts. Even without fresh spending, public debt would explode within two years to 105pc of GDP in the UK, 125pc in the US and the eurozone, and 270pc in Japan. Worldwide state debt would reach $45 trillion, up two-and-a-half times in a decade.

(UK figures look low because debt started from a low base. Mr Ferman said the UK would converge with Europe at 130pc of GDP by 2015 under the bear case).

The underlying debt burden is greater than it was after the Second World War, when nominal levels looked similar. Ageing populations will make it harder to erode debt through growth. "High public debt looks entirely unsustainable in the long run. We have almost reached a point of no return for government debt," it said.

Inflating debt away might be seen by some governments as a lesser of evils.

If so, gold would go "up, and up, and up" as the only safe haven from fiat paper money. Private debt is also crippling. Even if the US savings rate stabilises at 7pc, and all of it is used to pay down debt, it will still take nine years for households to reduce debt/income ratios to the safe levels of the 1980s.

The bank said the current crisis displays "compelling similarities" with Japan during its Lost Decade (or two), with a big difference: Japan was able to stay afloat by exporting into a robust global economy and by letting the yen fall. It is not possible for half the world to pursue this strategy at the same time.

SocGen advises bears to sell the dollar and to "short" cyclical equities such as technology, auto, and travel to avoid being caught in the "inherent deflationary spiral". Emerging markets would not be spared. Paradoxically, they are more leveraged to the US growth than Wall Street itself. Farm commodities would hold up well, led by sugar.

Mr Fermon said junk bonds would lose 31pc of their value in 2010 alone. However, sovereign bonds would "generate turbo-charged returns" mimicking the secular slide in yields seen in Japan as the slump ground on. At one point Japan's 10-year yield dropped to 0.40pc. The Fed would hold down yields by purchasing more bonds. The European Central Bank would do less, for political reasons.

SocGen's case for buying sovereign bonds is controversial. A number of funds doubt whether the Japan scenario will be repeated, not least because Tokyo itself may be on the cusp of a debt compound crisis.

Mr Fermon said his report had electrified clients on both sides of the Atlantic. "Everybody wants to know what the impact will be. A lot of hedge funds and bankers are worried," he said.

link

Holy crap, that can't be a very realistic scenario, can it?!? I know the article focuses on finance but if that came to pass I'd be expecting four horsemen to be following close behind.