Economy is worse under us, says Cable

[chris9991]

'Money makes the world go round'

[Chrysalis]

Originally Posted by Russ

I'm often reminded of a conversation I overheard a year or two back on a train by two city banker types, one saying to the other that the people who hoard and save their money are the selfish ones as apparently (according to these two) what people ought to be doing is "spend spend spend" to get the economy moving.

Idiots.

they are right on that.

I have said it many times. If everyone were to just save their cash, then its a recession. The economy works when money changes hands.

Thats why doing things like welfare cuts doesnt help the economy as thats stopping enforced money circulation.

That is why 1 million pounds is better given £100 to 10000 people then 1 million to 1 person.

Hang on a minute. Welfare is paid out of taxation. Taxation is money taken out of the economy. Taxation, especially excessive taxation, puts the brakes on the economy because the system of collection and redistribution is less than 100% efficient (money goes on things like utility bills for HMRC offices etc, not entirely into the pockets of welfare recipients).

Spending of money generated by work (ie wealth creation) is what stimulates our present economic system.

[danielf]

I think Chrysalis means that people on welfare are more likely to spend the money they have, and those being taxed are (slightly) more likely to save some. Hence the example of the distributed £1,000,000.

[Dai]

Originally Posted by Traduk

There is little isolation in the banking network on either a countrywide basis or internationally. There is still an unknown sized elephant in the room called CDS (credit default swaps) which are highly leveraged traded instruments which are guestimated to insure the potential of sovereign debt failure for trillions. The sweat over the Greece situation is how to stop the triggering of those globally interlinked deals which are what has been described as weapons of mass financial destruction. The banks are into these instruments up to their eyeballs and beyond. They do not even know how big their risks are and would only know when the pass the parcel started with telephone number sized claims swirling around.

Good grief !!!
I've just started reading up on these things.

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

That's seriously scary stuff.

"Credit default swaps have existed since the early 1990s, and increased in use after 2003. By the end of 2007, the outstanding CDS amount was $62.2 trillion, falling to $26.3 trillion by mid-year 2010."

[Traduk]

Originally Posted by DaiNasty

Good grief !!!
I've just started reading up on these things.

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

That's seriously scary stuff.

"Credit default swaps have existed since the early 1990s, and increased in use after 2003. By the end of 2007, the outstanding CDS amount was $62.2 trillion, falling to $26.3 trillion by mid-year 2010."

Puts a different perspective on why Greece and the other PIIGS should be handled with great care

In trading generally even with gearing a little is risked often with the hopes that the eventual cumulative gains will add up to a lot. The super whizz kids in the major banks, always hungry for fast returns, created cannot lose instruments. The trouble with such instruments is that invariably because they are so safe they require risks of a great deal of money for a little reward. LTCM (long term capital management) went down that sort of route and vanished into the abyss with the Fed picking up the bill.

Humans never learn and betting on a supposedly sure thing with the ranch is the way to destitution. Shame the banks weren't limited to using just their own money

If the consequences of CDS being triggered wholesale is a potential financial Armageddon you can be sure that irrespective of all the posturing on the global stage, that it will be avoided. I wouldn't lose any sleep over it but it does show how just stupid or short term orientated the brightest and best can be.

The problem was they decoupled risk and reward - if they got it right, they got huge bonuses; if they got it wrong, they didn't lose anything (except, occasionally, their jobs).

[mertle]

Originally Posted by Chris

Hang on a minute. Welfare is paid out of taxation. Taxation is money taken out of the economy. Taxation, especially excessive taxation, puts the brakes on the economy because the system of collection and redistribution is less than 100% efficient (money goes on things like utility bills for HMRC offices etc, not entirely into the pockets of welfare recipients).

Spending of money generated by work (ie wealth creation) is what stimulates our present economic system.

your right to degree but THEY SPEND too and on the back of this JOBS CREATED.

Its worse in the disabled section how many been chucked off have been on motobility scheme. A system which is been staple diet for the motor industry.

Even those who aint likely got car to help transportation equally spent into that. Some buy disability equipment such motorbility scooters aids. How many have sky/virgin media as entertainment.

If you want to absolutely hit the bones every public sestor is basically welfare job from taxpayers. But EVERYONE PUT MONEY into economy help DRIVE IT.

Just shame narrow mindedness lose sight of this government dont see it that way.

People on lower wages likely to spend more if they get small say insignificant windfall would go out treat themselves.

Those bankers had more sense than the government maybe some bankers not all idiots.

It would be interesting how many companies would lose out if funds was throttled back. I personally know 5 main companies myself from garage, insurance etc. Thats not including food/goods you buy for shopping.

Its amazing when you analyse bills what you spend how many companies you provide they rely on your business money. That ceases yes maybe cushion 1 or 2 but add 1,000's and country hits issues. Private sector workers whinge about public sector/unemployed/pensioners/disabled start losing there jobs. Shame people dont see the bigger picture at times.

[Ignitionnet]

mertle the public sector should be the size required to provide the essential municipal services and other services that are best provided by the state, such as health care and national level education, and no larger.

It's crazy suggesting that the private sector should pay higher taxes so that the public sector keeps people employed, or that welfare be higher purely to give its recipients more money to spend.

The more money that's left in people's pockets the more disposable income they have to spend as they see fit, the more of that they have the better off those producing things people want to buy will be, and they in turn create jobs.

There are of course a ton of issues at the moment, largely due to corporatism, but the public sector is massively oversized right now, it was swelled dramatically over the past decade and could do with a trim as there was quite literally not the infrastructure or resource to efficiently assimilate the influx of money and people.

[Chrysalis]

Originally Posted by Chris

Hang on a minute. Welfare is paid out of taxation. Taxation is money taken out of the economy. Taxation, especially excessive taxation, puts the brakes on the economy because the system of collection and redistribution is less than 100% efficient (money goes on things like utility bills for HMRC offices etc, not entirely into the pockets of welfare recipients).

Spending of money generated by work (ie wealth creation) is what stimulates our present economic system.

depends who is taxed from, the poorer someone is the more likely they will spend all their income. Thats basic logic as someone who is on JSA eg. will likely spend 100% just on essentials.

Whilst someone paid 100k a year their tax in all likelyhood would just goto savings if not on tax. Even at 20k a year, someone on 20k a year is less likely to spend all their income than someone on 4k a year.

Money in savings does nothing for the economy.

Not true - savings are used by the banks to fund mortgages and loans.....

[Chrysalis]

Originally Posted by danielf

I think Chrysalis means that people on welfare are more likely to spend the money they have, and those being taxed are (slightly) more likely to save some. Hence the example of the distributed £1,000,000.

exactly.

---------- Post added at 22:01 ---------- Previous post was at 22:00 ----------

Originally Posted by Hugh

Not true - savings are used by the banks to fund mortgages and loans.....

not really, they create that money. Plus not really much loans going out at the moment

I could put another way.

If everyone had just enough to live on, basically they could not 'afford' to save anything. There was no millionaires/billionaires, recessions would be much rarer as money would always be circulating instead of rotting in bank accounts. Inflation would also likely be lower as banks wouldnt be creating money all the time to replace the money in billionaires bank accounts. Its money that works an economy, it has to be circulating and what people dont understand is things like welfare and the public sector is enforcing the circulation. Those jobs eg. in the NHS that people moan about (admin workers) is enforced cirulation to those workers in their pay packet who then will spend that money. They will also pay tax circulating ti back in again and that goes onto welfare claimants who would otherwise be spending nothing. If every welfare claimant was kicked of benefit tommorow the likes of tesco would probably lose 1/4 of their profits over night.

Well, what do you think happens to the money in savings accounts?

re loans - my daughter and her future husband have just been granted a £150k mortgage, with the rate depending on what deposit they can find (3.6% on 20%, 6.2% on 10%)

[Chrysalis]

It gets loaned out but most of loans are created money, only a small % is based on deposits.

Everytime in history where banks dont have deposits to loan out they allowed to just create the money anyway, so its hardly a showstopper for them. Not to mention the richest people dont save at the likes of barclays they will go offshore anyway.

whilst I am reffering to savings in general, the bulk of the problem is that the top 1-2% of richest people horde 90% of the money. When money is created the same thing is inevitable, 90% of it will always end up at that top 1-2%, when its there its out of the economy lost, it has to be replaced with new created money and hence inflation.

[mertle]

Originally Posted by Ignitionnet

mertle the public sector should be the size required to provide the essential municipal services and other services that are best provided by the state, such as health care and national level education, and no larger.

It's crazy suggesting that the private sector should pay higher taxes so that the public sector keeps people employed, or that welfare be higher purely to give its recipients more money to spend.

The more money that's left in people's pockets the more disposable income they have to spend as they see fit, the more of that they have the better off those producing things people want to buy will be, and they in turn create jobs.

There are of course a ton of issues at the moment, largely due to corporatism, but the public sector is massively oversized right now, it was swelled dramatically over the past decade and could do with a trim as there was quite literally not the infrastructure or resource to efficiently assimilate the influx of money and people.

There should be a balance for sure but the public sector jobs there because private sector dumped a load of jobs. Yes there should be essensial service but at what costs. Thats why its needed balance.

Not saying welfare payments increase drastically to claiments but merely pointing out we all contribute whether we work, ill, elderly or unemployed. They pay taxes not direct but inderect.

I agree Corporitsm is biggest obstacle set new thread about book coming out about RACE AGAINST the MACHINE comes out monday done by 2 MIT researchers. It worryingly what they say.

Not saying it was right to create the quango culture be it came about as many taxpayers moaned or merely papers championed a cause. That peple should work do something useful rather be on dole. Government struggling to get private sector come up with jobs so the quango culture came about. Government embarked on inflating public sector workforce job creation to get people work rather then let them sit around. Afterall people wanted it.

Now poeple moan it cant support it I agree the balance maybe wrong

However there many calling people who not working too now we have situation they dont want them on dole either what is government supposed to do if private sector wont employ in the quantities required.