Outraged at politicians and bankers

[dikkertjedap]

I feel so outraged ... living standards of many people are badly affected by the governments measures (as indeed acknowledged by Cameron although he argues that he has no choice), Barclays announcing big pay increases for its staff (20 per cent on average) but no longer interested in lending to small businesses (article in Times yesterday). Monetary Policy Committee of the Bank of England does not do anything to control inflation (so what are they for if they are not willing to do the only job they were set up to do?). Weak pound will mean that trade deficits will keep widening, and low interest rates will mean that external finance will be expensive. What an absolute mess!!!!!!

Well, and look at the latest news on the German economy .... German unemployment lower and going down, British unemployment going up. German has a trade surplus, Britain a massive deficit. So Germany is able to export perfectly well with the relatively strong euro .... In Germany there is confidence, in Britain everything is build on the thin air of the financial sector which the politicians don't seem to want to tackle. The German economy relies on the production and exports of quality products not thin air.

I am sympathetic, particularly on pay. But the lending thing is more complicated - government says that banks have to hold more capital and reduce risk. It's hard to lend MORE to small business (ie high risk businesses) when banks are legally obliged to reduce risk and lend less...

Judging by your name and posts re using a private paediatrician for all your needs, you are hardly compelled to stay in UK. Why not go somewhere else where you feel that the gvt is more friendly?

You are also somewhat confused re your economics. A weak pound should be good for the trade deficit, as it makes Brit exports more competitive. There is a J curve effect meaning it takes time to come through, but it should come through in the end. Currency devaluation is corrective response to weak trade balance.

The BOE should probably be raising rates though they do rely on inflation predictions 2 years forwards, rather than inflation today. However, they do keep missing and explaining it in terms of one off factors, so I do agree with you there.

We need to cut costs a lot, especially in the public sector and, eventually, lower taxes, when it is affordable, to encourage private enterprise.

Larry is right - the country was perilously close to a sovereign debt crises. Which would have meant the IMF, cuts of the scale that make the ones in Ireland seem tame and a collapse in confidence.

As far as i can tell, the loans to banks are in the form of shares and will be drip fed back to the market and return a handsome yield for the tax payer. However, taking away all of that as a country we were still spending billions a month more than we earned. It was unsustainable in a recession, it was even more unsustainable when we were in a boom.

As for the BOE. Many of today's inflation figures include the rise in VAT and also things outside of interest rate control (oil, imports etc). All an increase in rates would do is further squeeze the money supply making it even harder for businesses to borrow. Anyway, a little inflation would not be a bad thing.

Thanks Larrygrylls, you mean you foreigner dare to criticise us so sod off ...

No a weak pound is clearly not helping, the pound has been weak a long time now and the trade deficit is only widening. UK manufacturing is virtually destroyed it is just a shadow of what it used to be. Lots of goods need to be imported hence the huge trade deficit.

Costs might need to be cut, but that doesn't need to mean that you have to make all cuts at once - laying off loads of people, further depressing demand, you just go in a downward cycle. This is the opposite of what is happening in countries like Germany, the Netherlands.

And yes, I am seriously considering to leave. I think the UK is going to be very grim especially for future generations if this goes on. Nothing to be proud off, and not too late for the politicians to do something about as long as they can understand concepts like intergenerational transfers and understand that future generations will end up for our follies (which are still ongoing because the UK is still not willing to reign in the bankers). I am absolutely appalled.

Larry is correct- a weak pound makes UK goods cheaper so is positive for exports. If the pound was strong, the trade deficit would be worse.

Agree that we've destroyed our manufacturing base but that's hardly new news- we've been at that game since 1945- and in fact the decline was compounded by the strength of sterling relative to the US$ and Euro. It's not as though Cameron just destroyed it all since last May.

Future not especially bright, but that's economic cycles for you. The west has its turn, Asia is rising and all that. better brush up on your Mandarin.

"Barclays announcing big pay increases for its staff (20 per cent on average)

According to the BBC website, Barclays announced a 20% increase in "staff costs". That does not necessarily equate to salary/bonus/pay increases. Could be pension, shares, national insurance, health care, anything. Maybe they recruited more people (thereby reducing unemployment). Or could even be redundancy pay.

Funnily enough, the Daily Mail headline says that Barclays pay has increased 20%. Not been reading the DM have you OP?

FWIW, I know someone who works for Barclays (not a banker!) and had no pay rise in spite of working their socks off.

And I'll say it one more time...Barclays may have benefited from UK government action taken to prop up the banks but DID NOT get direct UK taxpayer funding!

Dikker,

I kind of do mean that. I like having foreigners in the UK. I have worked in an international industry for many years (banking) and my friends are very international. I do, however, know a few (especially bankers) who stay because they are well remunerated but love to criticise everything about the UK. Personally I cannot see myself moving to France or Germany, presumably because it suited me to do so, and then slagging off my adopted country.

Anyway, what would you like politicians to do? I am curious as to your prescription?

They are not lending so much as that is one of the reasons we are up shit creak at the moment - they can't get is right in the publics opinion - don't be risky and lend money but don't not lend!

Sorry to hijack but Larry, you're wrong. Why shouldn't anyone who pays taxes complain if they want. Possibly their outside perspective might help. I am British abroad and feel that if I pay tax, I have an opinion. I slagged off the UK when I lived there, should I cease to have critical faculties because I move?

The problem is Dikker that we are where we are.

The coalition inherited this problem but to be fair its been 30 years plus in its making. We've been running deficits for donkeys year.

The banking mess is relatively recent but is nowhere near as bad as people think. Its just they've become a convenient scapegoat for people's anger. Something the politician's are happy to let happen so voters fury isn't at them for a change. The main problem is most people don't understand the difference between liability and debt. That said a lot of people (politicians included) don't understand what a deficit is either.

So the real question is how do we move forward from here? The only solution given we cannot borrow more and there are not enough "rich people" around to continually tax, is to cut our spending. And you can see how popular that is at the moment.

We're a nation which has been addicted to spending beyond our means for 30+ years. Like a drug addict, we're finding it hard to quit.

Oh and as for inflation, the problem is that usually inflation is stoked by overspending. So the BOE raises interest rates so we're paying more in loans/mortgages etc to effectively remove money from the economy.

However, this situation is different. Inflation has gone up not because we've money to spend but because of a triple whammy of tax rises (VAT), oil price rises and quantitive easing (ie. printing money).

So if they raise interest rates like they'd normally do, we're forcing people who are already struggling to pay even more. businesses will not want to borrow money as interest rates have gone up and consumers have no money, let alone confidence to spend. The result is to stare down the barrel of another recession.

Katey,

Of course you can have an opinion but it is a matter of how vociferously you voice it. If it is nuanced and constructive, that is one thing. If it is a general "this place is awful and they are all such idiots" then I think they have every right to feel you should go back to somewhere you find it more conducive to live (assuming you have a choice).

That's the irony, isn't it. I didn't find South London particularly conducive to live either I think that if you are part of the solution (wherever you live) then being vociferous is part of that. When I came to my new country I volunteered with youth at risk and in addictions. I also worked for low pay, in bad conditions in a homeless shelter. So, I felt very justified in complaining about the shocking social care here. Had I sat on my arse doing nothing about it, I wouldn't have felt justified (neither here, nor in the UK). Only Dikker knows how much they contribute (in taxes and participation) and therefore how much they get to shout!

Niceguy,

The problem is more complex than that. The interest people pay on loans is a combination of the bank rate, the yield curve and credit spreads. There is only one of these controlled by the BOE. The yield curve is controlled by supply and demand for gilts by the investment community. The credit spread is theoretically controlled by people's desire to take and assessment of credit risk. Something seems to have gone wrong in credit spreads though, in the sense that we have a bimodal distribution. Banks and large businesses pay virtually zero but individuals (on mortgages) and SMEs pay a record large amount, even when they are good risks. If the BOE raises rates, they will do virtually nothing to the wealthy (no debt) or large industry and banks (unless they raise them A LOT, of course) but they will kill SMEs and cause a property collapse.

It is a genuinely tough dilemma with no clear solution. Personally I favour the government encouraging a whole load of new banks who do not have to take usurious profits to build up broken balance sheets. At that point, the BOE can raise rates.