Reply to: I'ma struggling to understand what the endgame shall be - Bank bonuses 'to run to bil

[OwlHoot]

... is an idiot who should stick to iMacs and generally STFU when adults talk about things such as economics and finance.

Oh, the irony.

[AtW]

Ye of naivety brought up on porridge and babushka’s dumplings.

Banks will dodge bonus tax | Pre-budget report | The Spoon | Comment is free | guardian.co.uk

"In 2010, banks paid 50 per cent tax on bonuses above £25,000 paid to staff. Labour’s tax yielded £3.5 billion for the Treasury, before lapsing as the previous government intended. "

Source: Ed Miliband: tax bankers' bonuses - Telegraph

So bonus tax worked, at least once when it was introduced and they could not react quickly enough with "tax optimisations"...

[AtW]

Ye of naivety brought up on porridge and babushka’s dumplings.

Banks will dodge bonus tax | Pre-budget report | The Spoon | Comment is free | guardian.co.uk

The date on that article is 9 Dec 2009 - it was SUGGESTION that amount of money raised from bonus tax won't be high.

Here is what actually happened: Budget 2010: Bank bonus tax raises £2bn | Business | The Guardian (note date AFTER tax was in force)

"Darling was also forced to admit that his early estimates for the one-off 50% tax on bankers' bonuses were far too low and that instead of raising £550m it had actually brought in £2bn. He is using this windfall to fund his £2.5bn growth package to stimulate the ailing economy."

Primary Conclusion - bonus tax raised more money than anticipated.

Secondary conclusion: Paddy is an idiot who should stick to iMacs and generally STFU when adults talk about things such as economics and finance.

[Jog On]

I think a lot of people were to blame for the credit bubble. I remember people going into BTL on "no money down" deals and putting deposits on credit cards and calling it leverage.

The whole culture was out of control and like all other bubbles came to a rude awakening and had an unpleasant aftermath as we've all seen and are still seeing. Yes the banks and financial people had a lot to do with it, but the govts didn't act to keep things in check and Joe public enjoyed some fat times as well without much of a plan of how to prepare for the poo hitting the fan

I spent money i didn't have and to some degree I do feel that the banks had a big hand in that when they gave me credit facilities I didn't ask for and aggressively sold me fininacial products I wasn't looking for. But at the time I enjoyed the money and ignored the voice at the back of my mind telling me that this was going to come round and bite me in the behind one day. It did - and I blamed the banks for a while but I'm glad now that I don't any more, I knew what I was doing was irresponsible and ignored that instinct. I think many other people did as well and I think a lot of these people are blaming 'the bankers' for decisions they made.

It was a bubble that burst and now we're in the correction. People need to stop pointing fingers and just get on with it. I didn't see anyone complaining about bonues when the good times were rolling. As annoying as it may be, maintaining a bouyant financial sector is key to getting back into the next bubble..

The bailed out 'public' banks could have paid it all back by now but why haven't they? Because the govt wants to see it's stake in the banks rise for a good 5 or so more years. Dirty Spekulants!

[Paddy]

Yes, that's why Govt does not mind those bonuses to paid upfront in full: that's why Liebor let City do whatever they wanted so long as they generated short term money.

Ye of naivety brought up on porridge and babushka’s dumplings.

Banks will dodge bonus tax | Pre-budget report | The Spoon | Comment is free | guardian.co.uk

The most direct and obvious way to avoid a bonus tax is to stop paying it as a bonus. Pay it early, like one of the Asian banks who stumped up two years of bonuses ahead of the announcement (I would imagine UK banks doing the same could be charged with incitement to riot). Alternatively, pay the bonus in the form of a salary or after, say, a five-year period.

It is manifest here that there are infinite loopholes in the definitions of bonus and salary alone, making this an unenforceable tax. Worse still is that the salaries into which these bonuses may be filtered are themselves subjected yearly, along with the bonuses, to fiendishly clever avoidance schemes of standard tax laws.

Financial heads always boast of the enormous amounts of money their industry pours into the government coffers. I would wager that most of the nation, if not the world, would be astounded at the difference between what should be paid and what is paid.

There are myriad ways to avoid tax: share and options schemes are among the most popular. Shares are issued in a shell company, sometimes offshore and by virtue of investment in this fictional entity, one can end up paying capital gains tax rather than income tax.

[AtW]

I thought bonuses are taxed at the 50% top rate of tax anyway.
I.e. banker gets £1,000,000 bonus
he takes home £500,000
government gets the other £500,000

Yes, that's why Govt does not mind those bonuses to paid upfront in full: that's why Liebor let City do whatever they wanted so long as they generated short term money.

[Spacecadet]

I thought bonuses are taxed at the 50% top rate of tax anyway.
I.e. banker gets £1,000,000 bonus
he takes home £500,000
government gets the other £500,000

[Freamon]

Do you know what is M1, M2, M3 ???

Yes.

An example. If MF’s TAT Shop prints a £100 gift voucher and sells it for cash. MF gets £100 and there is a voucher that can be gifted to friends, exchanged for services etc until one day someone daft enough decides to buy something at TAT Ltd. MF would be printing money just like the banks do with cheques etc, these days it’s just printed figures.

No. Banks cannot just "print £100" and lend it out. They have to have the £100 first.

A gift voucher is not cash. Firstly it cannot be used to tax. Secondly I believe according to accounting rules, the shop has to keep the £100 in the bank until the voucher has been redeemed.

Money supply - Wikipedia, the free encyclopedia

Thirst for Justice - The banks lend 70 times their capitals

For example, with $1 million in cash reserve, a chartered bank can lend $10 million in credit, or bookkeeping money (not paper money, but figures written in bank accounts).

This explanation is also incorrect. With $1 million in cash reserve, a bank can lend out $900,000.

If that $900,000 turns up as a deposit at another bank (which is likely), that bank can lend out $810,000. And so on.

[Paddy]

This explanation...

...is bollocks.

Banks cannot count loans they have made as part of their capital. They also cannot lend out "10 times as much" as their capital instantly.

The banking system allows the total amount of money lent to be a multiple (10x or more) of the total amount of capital, but a bank cannot instantly lend their deposits out 10x over. They can lend 90% of the deposit. This loan money will then appear somewhere else in the banking system as someone elses deposit, at which point that bank can lend out 90% of it (81% of the original amount) and so on.

The explanation above makes it sound like an individual bank can make massive profits simply by lending money it doesn't have. This isn't true.

Do you know what is M1, M2, M3 ???

An example. If MF’s TAT Shop prints a £100 gift voucher and sells it for cash. MF gets £100 and there is a voucher that can be gifted to friends, exchanged for services etc until one day someone daft enough decides to buy something at TAT Ltd. MF would be printing money just like the banks do with cheques etc, these days it’s just printed figures.

Money supply - Wikipedia, the free encyclopedia

Thirst for Justice - The banks lend 70 times their capitals

Today, over 95% of our nation's monetary transactions are done by cheque, and less than 5% by cash. This is what allows the banks to lend more money than they actually have. For example, with $1 million in cash reserve, a chartered bank can lend $10 million in credit, or bookkeeping money (not paper money, but figures written in bank accounts). The only restraint to this creation of credit is the fear that too many people show up to the bank and ask to be paid in cash, since the bank could only repay in cash about one consumer in ten. One of the ways for the banks to protect themselves against such a possibility is to encourage depositors to leave their money at the bank as long as possible, by paying higher interest in fixed deposits, which are tied up with a bank for one, two or three years.

[Freamon]

Cough.

What about J P Morgan? They've been flogging silver they don't have. Isn't that like fraud? "wrongful or criminal deception intended to result in financial or personal gain"

Not under current regulations. Short selling has been around as long as the markets themselves. If JPMS wants to sell contracts for silver they can't deliver, that's their risk to take. He who has sold what isn't hisn', must buy it back or go to prison.

[scooterscot]

They also cannot lend out "10 times as much" as their capital instantly.

The explanation above makes it sound like an individual bank can make massive profits simply by lending money it doesn't have. This isn't true.

Cough.

What about J P Morgan? They've been flogging silver they don't have. Isn't that like fraud? "wrongful or criminal deception intended to result in financial or personal gain"

http://forums.contractoruk.com/gener...cks-fraud.html


Tell you what I'll sell you me brand new Maserati for an immediate cash sum of £10k, delivery is in 2018.

[Freamon]

Fractional-reserve banking - Wikipedia, the free encyclopedia

Fractional Reserve Banking

http://www.marketoracle.co.uk/Article14123.html

This explanation...

When you find out how our banking system really works, you should be furious! First of all, banks operate on a system called the “fractional reserve system.” What that means is the banks only have to have 10% in assets of the money they lend out. So, if they lend you $100,000 to buy a house, all they are required to have in assets is $10,000. By the way, they cannot lend out any of their $10,000 in assets. But here’s the swindle. that $100,000 they lended to you goes on their books as an asset! That means they record your promise to pay as an asset and now they can loan out ten times that much or $1,100,000. Then the process starts again…once they loan out $1,100,000 that is recorded as an asset, now they can loan out $11,000,000…and on and on and on.

So, you might be wondering where all that money is coming from if they are only required to have 10% in assets. The answer is..IT COMES FROM THIN AIR! Literally! Banks print money from nothing. The original $100,000 lended to you by your bank is nothing but numbers on a computer screen which you are expected to pay back from your hard work with interest

...is bollocks.

Banks cannot count loans they have made as part of their capital. They also cannot lend out "10 times as much" as their capital instantly.

The banking system allows the total amount of money lent to be a multiple (10x or more) of the total amount of capital, but a bank cannot instantly lend their deposits out 10x over. They can lend 90% of the deposit. This loan money will then appear somewhere else in the banking system as someone elses deposit, at which point that bank can lend out 90% of it (81% of the original amount) and so on.

The explanation above makes it sound like an individual bank can make massive profits simply by lending money it doesn't have. This isn't true.

[Doggy Styles]

Would the powers of the BoE have spotted the rise in the use of dodgy financial instruments? CDS didn't exist before the late 90s, so I doubt there would have been any tools to measure the growth in them. The tools we had were sufficient in measuring the old definitions of money and the expansion of such, but pretty useless with these new get rich quick devices. The liquidity ratios they may have been able to do something about and the likelihood of banks becoming casinos. However given all the power they wield I'm sure any Government (especially a less socialist one) would have been persuaded boom (and tax receipts) would last forever. No I don't buy the "it wouldn't have happened" argument.

Banks were the problem, then to a lesser degree Governments for being duped. That's not to say all Bankers are immoral shysters, some deserve their remuneration.

The BoE had a better chance than the tri-partite arrangement that replaced them, in which no-one knew who was monitoring what.

Nobody could have stopped banks doing what they did, since they were working within the law. It follows then that changes in the law were required, and that is why our government was at fault - changing to a weaker system that missed the danger signals, and therefore not acting to stop the dangerous activities.

When the BoE had carte blanche and schemes had to be approved by them, they occasionally used to make what some bankers at the time thought unreasonable interference in their operations, simply on the basis that "it didn't smell right". You might think that dictatorial and unfair, but for the most part it worked.

[Paddy]

Like most conspiracy theorist websites, the explanation of FRB from this one is completely incorrect.

The banking system issues multiple IOUs to depositors and borrowers, yet these IOUs are based on the same initial deposits.

Fractional-reserve banking - Wikipedia, the free encyclopedia

Fractional Reserve Banking

http://www.marketoracle.co.uk/Article14123.html

[Freamon]

TheConspiracyZone : THE FEDERAL RESERVE SWINDLE: WHAT IN THE WORLD IS WRONG WITH OUR MONEY?

Like most conspiracy theorist websites, the explanation of FRB from this one is completely incorrect.