Sir Keir’s Kerfuffle

[1andrew1]

Originally Posted by Pierre

There's an age old saying.

Borrow to Invest is the road to success

Borrow to Spend is the road to the end.

Unfortunately the investing bit should have been done over a decade ago and then maybe we wouldn't be pissing all our cash now.

It should be an on-going process.

[nomadking]

Originally Posted by Chris

Bollards.

Investment (if done wisely) facilitates innovation and efficiency, leading to increased profits and, where there is sufficient competition or adequate regulation, lower prices. Consumer electronics are probably the best example of this, as the innovation and efficiency cycle is constant and rapid.

If you’re going to appeal to capitalism at least try to understand how it works.

The money invested has to be repaid and, that reduces taxable profits. Eg Amazon is spending so much investing, it takes time to have a taxable profit in the UK. Amazon was making losses for a long time, because of their level of investment.
If you borrow, the capital has to be repaid.
It can take years to see an overall profit from any investment.

[Mad Max]

The Tories will regret the day they got rid of Boris.

Originally Posted by nomadking

The money invested has to be repaid and, that reduces taxable profits. Eg Amazon is spending so much investing, it takes time to have a taxable profit in the UK. Amazon was making losses for a long time, because of their level of investment.
If you borrow, the capital has to be repaid.
It can take years to see an overall profit from any investment.

Your comments are so riven with basic misapprehension and non-sequiturs it’s hard to conduct any meaningful discussion here. But allow me to try, just one more time.

The whole point of debt financing is that the investment opens an income stream that didn’t previously exist (or radically improves one that did). That new income stream pays off the debt as well as increasing profitability. If it isn’t increasing profit reasonably quickly then in most businesses it isn’t a good investment. In a competitive market (or a properly regulated monopoly) that increased profitability allows the business to operate more competitively by pricing their product or a service more attractively. Thus, to return to consumer electronics as an example, your living room TV costs about half as much (allowing for inflation) as it did 20 years ago. Innovation in a competitive market reduces prices, despite the cost of repaying debt finance.

Companies like Amazon are very good at hiding enormous profits behind constant reinvestment which reduces their tax liability but this is an accounting trick, entirely besides the main point at issue here. They’re shuffling their own money around.

[1andrew1]

Originally Posted by nomadking

The money invested has to be repaid and, that reduces taxable profits. Eg Amazon is spending so much investing, it takes time to have a taxable profit in the UK. Amazon was making losses for a long time, because of their level of investment.
If you borrow, the capital has to be repaid.
It can take years to see an overall profit from any investment.

If we follow your model then we will have zero investment and we will have to import 100% of our energy needs which is not practical.

The regulator should ensure that it is worthwhile energy generators investing in generation capacity and this will include the cost of borrowing. To be fair, this has been very low over the last 10 years.

This is not the same as companies like Amazon which have sought to build up global scale very quickly before competitors copied their idea in new markets. They've sacrificed short-term profits for longer-term ones hoping investors will be happy with an increased share price instead of dividends.

[nomadking]

Originally Posted by Chris

Your comments are so riven with basic misapprehension and non-sequiturs it’s hard to conduct any meaningful discussion here. But allow me to try, just one more time.

The whole point of debt financing is that the investment opens an income stream that didn’t previously exist (or radically improves one that did). That new income stream pays off the debt as well as increasing profitability. If it isn’t increasing profit reasonably quickly then in most businesses it isn’t a good investment. In a competitive market (or a properly regulated monopoly) that increased profitability allows the business to operate more competitively by pricing their product or a service more attractively. Thus, to return to consumer electronics as an example, your living room TV costs about half as much (allowing for inflation) as it did 20 years ago. Innovation in a competitive market reduces prices, despite the cost of repaying debt finance.

Companies like Amazon are very good at hiding enormous profits behind constant reinvestment which reduces their tax liability but this is an accounting trick, entirely besides the main point at issue here. They’re shuffling their own money around.

So Amazon are not building lots of warehouses and delivery networks? They are spending the money.
How long would it take the investment required to build a nuclear power station to be fully recovered?

Companies have previously pulled out of plans to build new nuclear reactors - including the one at Wylfa on Anglesey.


These reactors take a lot of time and money to build, so the concern has often been around the financial risk.

[jfman]

Originally Posted by Pierre

There's an age old saying.

Borrow to Invest is the road to success

Borrow to Spend is the road to the end.

Unfortunately the investing bit should have been done over a decade ago and then maybe we wouldn't be pissing all our cash now.

I don’t think that the heavyweights of economic theory would be worrying too much about your fortune cookie economics there Pierre.

That said I do agree with your last point. If only there was a Government we could point to for their failed policies a decade ago.

Originally Posted by nomadking

So Amazon are not building lots of warehouses and delivery networks? They are spending the money.
How long would it take the investment required to build a nuclear power station to be fully recovered?

As I said, non-sequiturs all over the place. I could answer both your points but you’d only put 2 and 2 together and get fishcakes, so I decline to do so.

[1andrew1]

Originally Posted by jfman

I don’t think that the heavyweights of economic theory would be worrying too much about your fortune cookie economics there Pierre.

That said I do agree with your last point. If only there was a Government we could point to for their failed policies a decade ago.

Sunak and Truss keep on asking the same question too. A shame there's no one they know whom they can ask.

[richard-john56]

Originally Posted by Mad Max

The Tories will regret the day they got rid of Boris.

I am waiting for the day we can get rid of the Tories.

[Pierre]

Originally Posted by jfman

I don’t think that the heavyweights of economic theory would be worrying too much about your fortune cookie economics there Pierre.

True, but as economic theories go, it’s one of the most basic. Along with “buy low, sell high” a basic theory that Brown failed to grasp.

[1andrew1]

Originally Posted by Pierre

True, but as economic theories go, it’s one of the most basic. Along with “buy low, sell high” a basic theory that Brown failed to grasp.

You would need to be Captain Hindsight to have known that the price of gold would rise.

[jfman]

Originally Posted by Pierre

True, but as economic theories go, it’s one of the most basic.

I’ll agree, it’s pretty simple largely like the proponents of it.

---------- Post added at 18:25 ---------- Previous post was at 18:23 ----------

Originally Posted by 1andrew1

You would need to be Captain Hindsight to have known that the price of gold would rise.

If you think that’s bad wait til you see the bill for Rishi borrowing and failing to hedge against interest rate rises. It’s slightly more complicated than Pierre’s fortune cookie and Wall Street DVD will offer though.

Originally Posted by Chris

The whole point of debt financing is that the investment opens an income stream that didn’t previously exist (or radically improves one that did).

We are still talking about water here ?
I'm curious what new (or vastly improved) income streams would new reservoirs have bought the water companies ?
Would we now all be using vastly more water (thus paying more) or would we all just be paying more for the same amount of usage ?
Either way, it just seems like we would be paying more.

[Sephiroth]

Originally Posted by Damien

Labour's plan announced: https://www.bbc.co.uk/news/business-62542541

They're saying freeze the prices as they are now but will part pay for it by scrapping for £400 payments people were going to get over the winter. The other thing that's interesting is that Labour are saying part of it will pay for itself because it'll help control inflation if energy costs are kept down.

That is so fanciful, Iirc, he said that if inflation is brought down, then the interest payments saved will contribute to the bill.

He knows that's political clap-trap. There are non-energy inflationary pressures (wheat for a start) and how does he think the wholesale price og gas will fall? And how is it all going to be paid for other than taxes down the road?