Reply to: A bit of economic panic and ...

[sasguru]

Which is why markets are to be trusted more than governments.

Yes and the markets are saying globalisation is bad for the West.

[DodgyAgent]

I know

But fan of capitalism and globalisation as I am, it can still only work in the long run if everyone in the West reduces their standard of living drastically.
The economic problems in the US and UK and Europe are due to most people in those countries paying themselves much more than they are worth and living beyond their means.
The markets are forcing that correction now, I fear.

Which is why markets are to be trusted more than governments.

[sasguru]

Just a technicality , the objective of having a dig at you guys was still achieved

I know

But fan of capitalism and globalisation as I am, it can still only work in the long run if everyone in the West reduces their standard of living drastically.
The economic problems in the US and UK and Europe are due to most people in those countries paying themselves much more than they are worth and living beyond their means.
The markets are forcing that correction now, I fear.

[Board Game Geek]

Entrepreneur gets idea.

Entrepreneur puts business plan together

Entrepreneur fails to raise finance, however if he did

Entrepreneur finds customer

Entrepreneur builds factory

Entrepreneur employs English workers to build goods.

Entrepreneur swamped by taxes and red tape

Entrepreneur closes business and goes on the dole

[DodgyAgent]

Note the big flaw in globalisation as shown above.

Just a technicality , the objective of having a dig at you guys was still achieved

[sasguru]

They are but a small cog in a large wheel.

Here you are Alf, Janet & John guide to how businesses are created

Entrepreneur gets idea.

Entrepreneur puts business plan together

Entrepreneur raises finance

Entrepreneur finds customer

Entrepreneur builds factory in China

Entrepreneur employs Chinese workers to build goods.

Entrepreneur employs salesmen to sustain and increase business

Entrepreneur makes money and invests in IT

In the Long run Entrepreneur goes bust because unemployed chavs in his home market don't have jobs (because all the jobs are in China) and can't buy his product [/B]

.

Note the big flaw in globalisation as shown above.

[DodgyAgent]

And here was I thinking that it was the workers who created the wealth.

They are but a small cog in a large wheel.

Here you are Alf, Janet & John guide to how businesses are created

Entrepreneur gets idea.

Entrepreneur puts business plan together

Entrepreneur raises finance

Entrepreneur finds customer

Entrepreneur builds factory

Entrepreneur employs workers to build goods.

Entrepreneur employs salesmen to sustain and increase business

Entrepreneur makes money and invests in IT

Entrepreneur goes bust because of expense and uselessness of IT

As you can see the workers are very low down the pecking order when it comes to "creating" wealth. Granted they fulfil a more important role than the IT people, but really workers are ten a penny.

[AlfredJPruffock]

And it is the capitalist financial systems that create the very wealth that priviliged little knuckleheads like you can pay the tax out of in the first place.

And here was I thinking that it was the workers who created the wealth.

[BrilloPad]

Out of interest is the reserve ratio actually as low as 10% of deposits for a retail bank? I thought is was probably higher than that. I realise that it's comprised of differing instruments of course and it could well be that it is as low as 10% in physical hard cash.

Certainly the ratio of debt to total deposit for our retail banks was generally "only" in the 1.5-2:1 ratio according to panorama last night; but I don't know if that includes potential derivative exposure above and beyond the nominal debt value.

http://en.wikipedia.org/wiki/Reserve_requirement

United States at 10% - UK is voluntery but in 1998 was 3.1%.

http://www.feasta.org/documents/moneyecology/box1.htm

"the BoE abolished its minimum reserve ratio in 1981. It now agrees a reserve requirement individually with each bank. This reflects both the level of competition the bank is experiencing from its foreign rivals, and the lending and other risks that it is perceived to be running. This change has weakened the BoE's ability to control the money supply by varying the reserve ratio."

Sounds like something that can be easily manipulated.....

[Bob Dalek]

How many members are actually on this Forum regularly? Now Zeity's gone, I think it's about 10!

[ASB]

If everyone with money in LTSB decided to take it out tomorrow, do you think they would be able to honour their obligations?
No because they only have to keep around 10%.

HTH

Out of interest is the reserve ratio actually as low as 10% of deposits for a retail bank? I thought is was probably higher than that. I realise that it's comprised of differing instruments of course and it could well be that it is as low as 10% in physical hard cash.

Certainly the ratio of debt to total deposit for our retail banks was generally "only" in the 1.5-2:1 ratio according to panorama last night; but I don't know if that includes potential derivative exposure above and beyond the nominal debt value.

[sasguru]

Any bank would fall if everyone came there because they take in short money and lend long.

However some "banks" started using leverage in order to take in little but lend a LOT more - this increased their risk profile, not only they they can fall (as any other bank) from people coming there to take their money out, but they also exposed themselves to huge losses that can come due to leverage. Nobody notices this while they make huge profits due to leverage, however when the market turns they would usually lose a lot more than they made - that usually kills those "banks".

People don't just come to take their money out all of a sudden - if banks is sound they won't, but if it's some dodgy crap like NR then sure as heck they would.

You get the 10% thing though, right? A couple of posts ago you didn't seem to.
No bank is sound. It's all a confidence trick.

[AtW]

If everyone with money in LTSB decided to take it out tomorrow, do you think they would be able to honour their obligations? No because they only have to keep around 10%.

Any bank would fall if everyone came there because they take in short money and lend long.

However some "banks" started using leverage in order to take in little but lend a LOT more - this increased their risk profile, not only they they can fall (as any other bank) from people coming there to take their money out, but they also exposed themselves to huge losses that can come due to leverage. Nobody notices this while they make huge profits due to leverage, however when the market turns they would usually lose a lot more than they made - that usually kills those "banks".

People don't just come to take their money out all of a sudden - if banks is sound they won't, but if it's some dodgy crap like NR then sure as heck they would.

[Incognito]

I know you're a bit slow and thick, so read my lips:

That is the definition of a BANK: an insitution that lends more money than it has.
Has been so since banks first came into existence and will continue to be so.

Atw, you should give it a rest. You are coming across as the mad Rasputin you are and are rapidly becoming the laughing stock on this forum.

Funny that, but I couldn't see your lips move no matter how many times I re-read that.

[sasguru]

Retard, some banks cross the limit and become hedge funds - they lend so much more than they have using such high leverages that they lose their right to be called banks, usually it become obvious when they fail utterly like Lehman Brothers who have got enough derivative liabilities to solve problems of AIDS, hunger in Africa and new alternative energy sources to boot.

People only realise who the real bank is when the big crisis comes around - look around, how many banks are still standing? LTSB is definately a bank - they were conservative (as any bank should be) and it is them who buys gambler H-SOB thingy, I'd prefer they don't but clearly they pay very little and will get support.

Is B&B a bank? No they ain't. They just happened to be called such.

If everyone with money in LTSB decided to take it out tomorrow, do you think they would be able to honour their obligations?
No because they only have to keep around 10%.

HTH