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Modern economics

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Alan H
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Re: Modern economics

#641 Post by Alan H » June 28th, 2012, 10:29 am

Latest post of the previous page:

Dave

In a similar vein: One law for the rich.....
Alan Henness

There are three fundamental questions for anyone advocating Brexit:

1. What, precisely, are the significant and tangible benefits of leaving the EU?
2. What damage to the UK and its citizens is an acceptable price to pay for those benefits?
3. Which ruling of the ECJ is most persuasive of the need to leave its jurisdiction?

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Dave B
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Re: Modern economics

#642 Post by Dave B » June 28th, 2012, 12:56 pm

Yeah, those with money, position and/or privilege seem to think themselves above the law it seems - that makes them criminals in my book.

A commentator said that £290 million was no great amount for Barclays to find. Perhaps poetic justice should apply again, force them to increase their deposit interest by 0.5% with no increase in their lending rate. That would put a few quid back in their customers' pockets and cost them a packet. They can recover of that some by reducing all the dealers' and bosses' salaries and commissions by 25%!
"Look forward; yesterday was a lesson, if you did not learn from it you wasted it."
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Alan H
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Re: Modern economics

#643 Post by Alan H » June 28th, 2012, 1:22 pm

Dave B wrote:Yeah, those with money, position and/or privilege seem to think themselves above the law it seems - that makes them criminals in my book.

A commentator said that £290 million was no great amount for Barclays to find. Perhaps poetic justice should apply again, force them to increase their deposit interest by 0.5% with no increase in their lending rate. That would put a few quid back in their customers' pockets and cost them a packet. They can recover of that some by reducing all the dealers' and bosses' salaries and commissions by 25%!
Waste of time. In the end, it's the customers who will end up paying.
Alan Henness

There are three fundamental questions for anyone advocating Brexit:

1. What, precisely, are the significant and tangible benefits of leaving the EU?
2. What damage to the UK and its citizens is an acceptable price to pay for those benefits?
3. Which ruling of the ECJ is most persuasive of the need to leave its jurisdiction?

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Dave B
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Re: Modern economics

#644 Post by Dave B » June 28th, 2012, 5:33 pm

Just to rub salt in it!

What happens to those millions Barclays, and perhaps others, will pay in fines? They will effectively be spread out amongst all the banks! They are put towards the running costs of the FSA which is wholly funded by the industry - so they get it back in reduced fees. Seems Osbourne has ideas about this - but I won't hold my breath that it will be the private investor who gets it.

What is Nick's opinion on this?
"Look forward; yesterday was a lesson, if you did not learn from it you wasted it."
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Dave B
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Re: Modern economics

#645 Post by Dave B » June 28th, 2012, 6:15 pm

Seems that Bob Diamond, the boss of Barclays who got ("earned" may be too strong at the moment) many millions in salary, bonuses and options has bitten his own arse and kicked himself in the mouth. Last year he gave a speech where he said that the time for the banks to stop apologising had come and that we should trust them to police themselves (paraphrasing).

Ha, ha - got any other jokes Bob?

Now, perhaps the "I" word applies here, but which one? "Incompetent" or just plain "Ignorant"? Both the same in the final analysis I suppose.
"Look forward; yesterday was a lesson, if you did not learn from it you wasted it."
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Alan H
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Re: Modern economics

#646 Post by Alan H » June 28th, 2012, 6:22 pm

Dave B wrote:Just to rub salt in it!
Then there's Farepak:
The collapse of Christmas saving scheme Farepak had the makings of a modern-day parable. The corporate giant profiting at the expense of the vulnerable consumer; the bank being paid back in full while customers got just 15p in the £1; company directors walking away unpunished.

Farepak's customers could barely have been more defenceless. Through regular payments, more than 120,000 of them had saved an average of £400 each to put towards their Christmas festivities. The sums were not huge, but the importance to the customers was.
Alan Henness

There are three fundamental questions for anyone advocating Brexit:

1. What, precisely, are the significant and tangible benefits of leaving the EU?
2. What damage to the UK and its citizens is an acceptable price to pay for those benefits?
3. Which ruling of the ECJ is most persuasive of the need to leave its jurisdiction?

Fia
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Re: Modern economics

#647 Post by Fia » June 28th, 2012, 10:37 pm

That Christmas I remember wondering just how much the bankers spent on their festivities, and whether they'd ever been in a position where the only way they could have had any jot of festivity was to save a very little as often as could be afforded.

To me there's no doubt that there's one law for the rich and another for the poor :angry:

Nick
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Re: Modern economics

#648 Post by Nick » June 29th, 2012, 1:21 am

Dave B wrote:Just to rub salt in it!

What happens to those millions Barclays, and perhaps others, will pay in fines? They will effectively be spread out amongst all the banks! They are put towards the running costs of the FSA which is wholly funded by the industry - so they get it back in reduced fees. Seems Osbourne has ideas about this - but I won't hold my breath that it will be the private investor who gets it.

What is Nick's opinion on this?
How kind of you to ask, Dave! :D

Too late at night to go into as much detail as probably necessary, so I'll just say my piece, and come back to support my arguments another time.

1) Barclays derserved to be clobbered.

2) Other banks are probably going to be clobbered too.

3) I think there should be criminal cases brought against the perpetrators.

4) I don't think the fines should necessarily go to the government. Increase the cost of regulation and the clients untimately suffer.

5) The FSA are also at fault. Why are their rules and procedures such that it went unchecked for years? But there seems to be no comeback against these blood-sucking bureaucrats public employees.

6) Gordon Brown was responsible for taking regulation away from the Bank of England. Can we prosecute him too...?

7) Given the fact that what has caused all the fuss is the manipulation of the markets, what are we to make of the colossally bigger balls-up of the entire world economy by politicians who have sought to bypass markets and market mechanisms, and brought the world economic system to its knees?

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Dave B
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Re: Modern economics

#649 Post by Dave B » June 29th, 2012, 9:56 am

I can only agree with enough of your points with only the minorest of quibbles, Nick.

If there are criminal charges against the fiddlers in these cases, and those charges stick, should not the "proceeds" from that, now criminal, action be reclaimed - i.e. any bonuses or commissions paid to those dealers. The law exists to recover such proceeds, even houses and cars have been seized in other cases - apply that here.

I recognise that even if the cost of the fines etc. were taken out of the banks profits (and bonuses/commissions if I had my way) someone has to suffer (and my company pension provider, and there myself, might be one of those) but it does grate that the fines initially benefit the industry that committed the crime in the first place. And I do think that the person with ultimate power also has ultimate responsibility for the overall ethics of the organisation - even in detail. That person has the power to make internal discipline strong enough to deter illegal actions - if he/she does not they he/she shares the responsibility for them as well.

Hit the responsible people in their own wallets - just like we would be if we attempted to get something out of the bank by false accounting etc.

Perhaps dealers should have to be personally licensed, they are doing work that has global impact and can cause millions to suffer - not a lot different from arms dealers in some ways - people can suffer and die from poverty caused by purely commercial speculation. Then they lose their license if they make a cock-up or commit a crime.

Nick, should the monitoring and regulation of the financial industry be tightened even further considering this case and the fact that the, very few, auditors allowed to check the accounts of the biggest companies have proved a little less than efficient or objective according to some pundits?
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Sel
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Re: Modern economics

#650 Post by Sel » June 29th, 2012, 2:57 pm

My brain has a tendency to oversimplify complex ideas but here is a thought or two. I am prepared to be shot down.

The income and total wealth of the top 1% has grown exponentially over the past 20 years. Could this be due to the fact that, at the business level, they charge too much for their products and services and pay too little to those who actually do the work? Walmart comes to mind immediately.

Perhaps it is time that labour laws be created to relate somehow to profit. ie: after a certain point profit must be shared with workers and common stockholders. CEO pay could be set at a reasonable multiple of average employee wages. I recall my Dad telling me in about 1970 that CEO's made about 19 times the wages on the factory floor. Not an unreasonable amount.

That way wealth would be more fairly distributed and the tax base would grow as workers share more of the wealth.

I know...too simple and fraught with problems but could these ideas not form a starting point in attempting to correct the huge inequalities forming in our societies?
"The good life is one inspired by love and guided by knowledge." Bertrand Russell

Nick
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Re: Modern economics

#651 Post by Nick » June 29th, 2012, 4:07 pm

Dave B wrote:I can only agree with enough of your points with only the minorest of quibbles, Nick.

If there are criminal charges against the fiddlers in these cases, and those charges stick, should not the "proceeds" from that, now criminal, action be reclaimed - i.e. any bonuses or commissions paid to those dealers. The law exists to recover such proceeds, even houses and cars have been seized in other cases - apply that here.
I have no problem with that at all, Dave.
I recognise that even if the cost of the fines etc. were taken out of the banks profits (and bonuses/commissions if I had my way) someone has to suffer (and my company pension provider, and there myself, might be one of those) but it does grate that the fines initially benefit the industry that committed the crime in the first place.
Except, Dave that the crime was not committed by "the industry", but by certain people within it.

Let's take a parallel hypothetical example: Food hygeine, say. The whole industry has to comply with rules to stop certain bad practices. For those who want to comply, and would comply anyway, without the law, the whole regulatory jamboree just costs them money. Which is just an extra cost, for no benefit. For the firm or their customers. The rules are there to protect the consumer. I do not think it is unreasonable that those who comply should have some benefit from those who make the regulation necessary in the first place. If the good guys have to pay hefty fees, which are not offset in any way by fines, then it just pushes up the costs of the industry, which are passed on to clients and policyholders.
And I do think that the person with ultimate power also has ultimate responsibility for the overall ethics of the organisation - even in detail. That person has the power to make internal discipline strong enough to deter illegal actions - if he/she does not they he/she shares the responsibility for them as well.
This is a bit of a grey area, and would require much more consideration than we can give it here. If Bob Diamond knew about it, then he is guilty too. If he didn't, then any guilt by association must depend on how reasonable it is to pin it on him. Maybe he is responsible, because of company policy he has laid down, but maybe he did everything that could be expected of him, and was shielded from the dodgy dealings. It depends, but neither outcome looks good for Bob, does it?
Hit the responsible people in their own wallets - just like we would be if we attempted to get something out of the bank by false accounting etc.
Agreed, and prison too.
Perhaps dealers should have to be personally licensed, they are doing work that has global impact and can cause millions to suffer - not a lot different from arms dealers in some ways - people can suffer and die from poverty caused by purely commercial speculation. Then they lose their license if they make a cock-up or commit a crime.
I think you'll find that they already are personally licenced. Those responsible won't get a job in this town any time soon!
Nick, should the monitoring and regulation of the financial industry be tightened even further considering this case and the fact that the, very few, auditors allowed to check the accounts of the biggest companies have proved a little less than efficient or objective according to some pundits?
Regulation is very difficult to get right. Making it "tighter" may just make it more difficult for the industry to operate, without improving any ethical outcomes. As for the auditors, if the directors didn't know, then auditors might not be to blame either. Dunno. I'm inclined to think the responsibility lies with the FSA, who have responsibility for the operation of the market, rather than the auditors who concentrate on each firm. But as I say, regulation is tricky.

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Re: Modern economics

#652 Post by Dave B » June 29th, 2012, 5:54 pm

OK, once again you have made some good points - not sure that I fully agree with all of them though. Or, in other words, if the dealers are licensed and they carry out actions like this then they should be banned from working in any way in any part of the financial industry.

With regards to the industry being like the Curate's Egg: to my mind if they are all deprived of the benefits of the crimes of the staff of some of them then all of them might just clean their act up. The competition between them is the driving force for these crimes but I get the impression that, a bit like politics, games they all play to two sets of rules, the legal ones and their own.

I do get the impression, as some more knowledgeable people have said, the financial industry is more a matter of making the biggest pile of money they can, individually and collectively, and not a lot to do with getting manufacturing industry rebuilt, reducing starvation, improving health etc. It's like collective fag cards - piles of money are jusr so much junk unless they are actually doing something constructive.

I often wonder what the fat cats do with these telephone number rewards for fouling up the world - what do you do with another million or two? Buy another mansion so you have a different one for every day of the week? Buy a new personal jet for odd days to go with the one you have for use on even days?

But, like that person who angered the share holders, how do some of them justify any bonus at all if, compared to the rest of the industry, the performance of the company is going down, how many actually EARN these buckets of money by improving things?
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Alan H
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Re: Modern economics

#653 Post by Alan H » June 29th, 2012, 6:01 pm

Dave B wrote:...if the dealers are licensed and they carry out actions like this then they should be banned from working in any way in any part of the financial industry.
They'll just move abroad. :D
Alan Henness

There are three fundamental questions for anyone advocating Brexit:

1. What, precisely, are the significant and tangible benefits of leaving the EU?
2. What damage to the UK and its citizens is an acceptable price to pay for those benefits?
3. Which ruling of the ECJ is most persuasive of the need to leave its jurisdiction?

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Re: Modern economics

#654 Post by Dave B » June 29th, 2012, 6:10 pm

Alan H wrote:
Dave B wrote:...if the dealers are licensed and they carry out actions like this then they should be banned from working in any way in any part of the financial industry.
They'll just move abroad. :D
Yeah, that's why there should be a global policing organisation! But it will require a company with a "relaxed" attitude towards people who fiddle things like that to take them on.

If what someone on the radio said about the latest confab over the Euro is true London's future as a prime financial centre may be limited anyway, if the plan works. Can't remember the details but interest will possibly shift onto the continent.
"Look forward; yesterday was a lesson, if you did not learn from it you wasted it."
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Re: Modern economics

#655 Post by Alan H » June 29th, 2012, 7:04 pm

Dave B wrote:
Alan H wrote:
Dave B wrote:...if the dealers are licensed and they carry out actions like this then they should be banned from working in any way in any part of the financial industry.
They'll just move abroad. :D
Yeah, that's why there should be a global policing organisation! But it will require a company with a "relaxed" attitude towards people who fiddle things like that to take them on.
It was intended as a nod in the direction of the usual mantra of "if we don't pay them enough or if we impose too much regulation, they'll just move abroad and then where would we be...?" :laughter:
If what someone on the radio said about the latest confab over the Euro is true London's future as a prime financial centre may be limited anyway, if the plan works. Can't remember the details but interest will possibly shift onto the continent.
London is far better placed geographically than, say, the Börse in Frankfurt because London is a few microseconds ahead of them for trading with the US.
Alan Henness

There are three fundamental questions for anyone advocating Brexit:

1. What, precisely, are the significant and tangible benefits of leaving the EU?
2. What damage to the UK and its citizens is an acceptable price to pay for those benefits?
3. Which ruling of the ECJ is most persuasive of the need to leave its jurisdiction?

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Re: Modern economics

#656 Post by Dave B » June 29th, 2012, 7:19 pm

Alan H wrote:London is far better placed geographically than, say, the Börse in Frankfurt because London is a few microseconds ahead of them for trading with the US.
I get very, very worried when the economy of the world rests on who is microseconds ahead of who else. :sad2:

Money, that medium of exchange for work done or produce supplied, is now an entity in its own right, traded for what some collection of gits thinks it is worth. And the rest of us suffer whilst they fill their trouser pockets to bursting point or fuck it up altogether. Greed combined with incompetence.
"Look forward; yesterday was a lesson, if you did not learn from it you wasted it."
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Alan H
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Re: Modern economics

#657 Post by Alan H » June 29th, 2012, 7:32 pm

Dave B wrote:
Alan H wrote:London is far better placed geographically than, say, the Börse in Frankfurt because London is a few microseconds ahead of them for trading with the US.
I get very, very worried when the economy of the world rests on who is microseconds ahead of who else. :sad2:
Ditto.
Money, that medium of exchange for work done or produce supplied, is now an entity in its own right, traded for what some collection of gits thinks it is worth. And the rest of us suffer whilst they fill their trouser pockets to bursting point or fuck it up altogether. Greed combined with incompetence.
It has become an end in itself (for some, anyway), rather than a means to an end.
Alan Henness

There are three fundamental questions for anyone advocating Brexit:

1. What, precisely, are the significant and tangible benefits of leaving the EU?
2. What damage to the UK and its citizens is an acceptable price to pay for those benefits?
3. Which ruling of the ECJ is most persuasive of the need to leave its jurisdiction?

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Re: Modern economics

#658 Post by Dave B » June 30th, 2012, 8:16 am

Nick, you mentioned above that not "refunding" the FSA fines back to the industry, and so reducing their fees overall, would cost their customers more in the end.

The other side of this is: if a better, maybe more expensive, regulation system prevented things like the Rate Swap Scandal, currently forcing lenders to pay compensation, from happening in the first place would not the overall effect be a profit? Less commission and bonuses might be paid to those involved in these deals, fewer companies would collapse (as reported) due to losing out on agreeing to these so called investments etc. etc. I am sure that the above mis-selling scandal is not the only dodgy deal in the pipeline.

Whatever happens its mostly us ordinary people who end up paying for it in some way, but I would rather shell out for something that actually helped reduce the (mostly personal) greed (that seems to be the main factor in many of these cases) and possibly increased the number of jobs (or at least reduced the loss) and productivity in this country.

Some Yank politician said on the radio that London was too lightly regulated (I agree) and that it was the origin of all the financial disasters, which is definitely the kettle calling the pot black since it was the American sub-prime mortgage scheme that we are told triggered the whole thing off. Politicians will be the first against the wall, followed closely by the bankers, come the revolution! :wink:
"Look forward; yesterday was a lesson, if you did not learn from it you wasted it."
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Re: Modern economics

#659 Post by Nick » June 30th, 2012, 9:51 am

Sel wrote:My brain has a tendency to oversimplify complex ideas but here is a thought or two. I am prepared to be shot down.
You're much too nice for me to shoot you, Sel. :kiss:
The income and total wealth of the top 1% has grown exponentially over the past 20 years. Could this be due to the fact that, at the business level, they charge too much for their products and services and pay too little to those who actually do the work? Walmart comes to mind immediately.
Not really, Sel. The reasons are complex and multiple. Reasons include the internationalisation of world trade (which these days includes football, music and TV etc.), historical accident (Middle Eastern oil wealth), industrialisation (think Chinese and Asian billionaires) and political upheaval (Russian oligarchs) and so on. There has also been a "hollowing out" of jobs in the middle, because of automation, the internet and so on. It has also been a result of government policy, which has pushed up property prices.

Also, if you look at the world population as a whole, income distribution has become more equal not more unequal. Times are changing in quite dramatic ways.

In general, business does not "charge too much", because if it did, they would be undercut by competitors. And it seldom makes commercial sense to pay employees much above the norm. Not least, that there would be smaller profits to invest to create new jobs.
Perhaps it is time that labour laws be created to relate somehow to profit. ie: after a certain point profit must be shared with workers and common stockholders.
I think compulsion would be fraught with problems. But there may be measures which could be taken, such as shareholder approval of board-level salaries and bonuses. But (in spite of recent shareholder revolts) I doubt it would make much difference. The effect of an extra million on board-level remuneration makes no dicernable difference to the share price. The loss of a good CEO, for example, could wipe 5% off the value of the company. I don't really have any ideas to contribute...
CEO pay could be set at a reasonable multiple of average employee wages. I recall my Dad telling me in about 1970 that CEO's made about 19 times the wages on the factory floor. Not an unreasonable amount.
Not unreasonable, certainly, but likely to have odd consequences. Not least, a whole swathe of lower paid employees being sacked and their jobs outsourced. And why should the head of a retail bank (one of the boring type) be restricted in how much salary he can have, compared to, say, the CEO of a premier division football club, where a significant proportion of employees are on multi-million pound salaries?
That way wealth would be more fairly distributed and the tax base would grow as workers share more of the wealth.
Sadly, probably not. More likely to reduce economic activity and reduce the size of the cake. Just look at minimum wage and employee "protection" legislation. The higher it is, and the more there is, the worse the unemployment, and hence the worse the distribution of thenation's (smaller) income.
I know...too simple and fraught with problems but could these ideas not form a starting point in attempting to correct the huge inequalities forming in our societies?
I'm pleased you are asking the questions, even if answers are illusive.

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Re: Modern economics

#660 Post by Nick » June 30th, 2012, 9:58 am

Dave B wrote:Just to rub salt in it!

What happens to those millions Barclays, and perhaps others, will pay in fines? They will effectively be spread out amongst all the banks! They are put towards the running costs of the FSA which is wholly funded by the industry - so they get it back in reduced fees. Seems Osbourne has ideas about this - but I won't hold my breath that it will be the private investor who gets it.

What is Nick's opinion on this?
Dave, I need to revisit your original post. The key bit of information which is missing is (I think) your appreciation of what is covered by the FSA. It is not just "casino banks" (which is a stupid slogan anyway), but includes the trustees and advisers of your own company pension scheme, mortgage providers and life assurance companies which pay out hundreds of millions to widows and orphans, quite literally. The more costs of doing business are increased, the worse it will be for the consumer. Not oly having to pay extra for basic services, but also stifling new entrants and innovation.

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Re: Modern economics

#661 Post by Dave B » June 30th, 2012, 10:17 am

. . . The key bit of information which is missing is (I think) your appreciation of what is covered by the FSA. It is not just "casino banks" (which is a stupid slogan anyway), but includes the trustees and advisers of your own company pension scheme . . .
I know that, Nick, in fact I think I mentioned it somewhere.

I wonder how much prelaunch testing there is of these dodgy products, not onlt for potential gain but for collapse and all effects of that?

I would love to know the real cost of these things to all of us, the cost of court cases, receiver's fees, police investigation etc., not just what the banks will claw back from us to pay for the fines and losses etc. their employees cost them.
"Look forward; yesterday was a lesson, if you did not learn from it you wasted it."
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