So where has all the money gone?

[Bugsy2]

I just don't get it & I need someone within an economics sort of mind to explain - please!
We live on planet earth, there are currencies circulating all around the world, people buy & sell things. How can it be that 10 years ago the economic outlook was good & certainly in the West most people were buying houses, getting more wealthy & everything was fine & dandy. Now, it is all doom & gloom, countries are going bust, people are losing their homes & its all going tits up. So where has the money gone? Who has it, where was it, where did it go to?

The other thing to bear in mind is that if the West did start to slip into a recession and demand dropped, then China, to support its own manufacturing, would revalue the Yuan which would make Chinese labour more expensive and some jobs would flow back to the West.
For the past 150 years, industrial output has been based on outsourcing manufacturing to countries with cheap labour
"Made in Japan"
"Made in Hong Kong"
"Made in China"
But now we've been all the way round the world and the circle will start differently - we in Europe will be serving the economic might of China.

I'm still trying to digest whether a Tobin tax within the EU is a good or a bad thing.
I'll ask my Dad his views - answer in a few weeks!

A Tobin tax applied globally (or at least amongst G20 nations) would be a good thing.

A Tobin tax applied just within the EU would be disastrous for the EU, especially the UK.

Polarmonkey "BRIC middle class is unlikely to get caught up in a similar credit crunch as

1. Their banking system have a much healthier funding structure than developed economies.

1. Interest rates charged in these countries are higher and more adequately reflect the risk in lending.

1. And because individual credit is much lower in these countries."

And also, IMO, that these countries (to varying degrees) have relatively little welfare provision, so people save a higher proportion of their income to pay for healthcare, education and retirement. They can't just spend all their wages at Gucci and expect the state to pick up the tab for the necessities. In particular, this has held back the growth of domestic demand in China because people are saving the money that they could be spending on cars/fridges etc. However, it also leads to quite healthy balance sheets at household level.

Niceguy2
I think you are right but I'm not sure.

A Tobin tax may well reduce the number of trades and synthetic trades that happen in the EU (primarily London admittedly)
BUT the German and French stock exchanges show that it can be done.
Yes London will be hit
IF
the greedy City bods actually DO up sticks and leave.
But I have sincere doubts that they will.
All the ones who get away with Non Dom Status in this country but are otherwise given free access to Europe would have to move to Dubai or equivalent - with their wives, children, pets and mistresses
the NYSE may not have a Tobin Tax but it does have the SEC which is why the Hedge Funds are here - where regulation is much softer

If trading volumes decreased, yes the tax flows from the City would drop BUT so would a great deal of the volatility in the markets that buggers up our pensions and savings.

Buffett buys shares for the dividend yield.
It might not be a bad thing if more people did the same.