BEWARE! THE BANKS ARE OUT TO GET YOU!

[Stanley]

Most of them are Kev, there are areas in the country where prices are actually falling. However, the London problem is big enough to affect the whole economy, it's like a separate country now in terms of economic importance.

[Stanley]

See this ARTICLE in the Telegraph about the number of mortgage holders that are in danger from interest rate rises. A bit overblown I'll grant you but a small dark cloud that is rapidly growing on the horizon. The one certain fact is that the lenders will not suffer. Who was it who said that banks are institutions that lend you an umbrella but ask for it back when it starts raining? This is going to loom larger in the run up to the 2105 election and cause many to ask questions about the 'economic recovery'.

[Tizer]

I can comment on house prices because we've recently sold Mrs Tiz's parents' house in London to pay their nursing home fees and we've been helping a relative look for a house here in the south-west. Selling the London house was an eye-opener and we've never experienced a sale like it. We had at least a dozen offers with people falling over themselves to raise their offer. It started with a very low, silly offer and then progressed upwards rapidly. Every offer came from someone with a foreign surname, mostly sounding Middle East or thereabouts and mostly seeming to be developers (the house was in a bad state and needed a lot of work doing). In the end we accepted an offer from a doctor who wanted to do up the house to live in and told the others to go away. It gave M&D sufficient money for the nursing and we preferred to see someone buy the house for themselves than do it up and sell on.

Looking for a house here is totally different. Agents tell you the market is moving upwards and you need to get in quick but the truth is different. Some people will panic after seeing newspaper reports and rush to buy but there are good houses here that just aren't selling and I guess it's same elsewhere outside the major cities.

Yes, there is danger ahead for mortgage holders, especially because banks have continued to provide some folk with 125% mortgages while making it difficult for others to get anything. But a bigger danger, flagged up by the Financial Times, is the rise in bad debt being sold on by European banks - apparently it's back to the levels of just before the credit crunch.

Well, Credit Suisse have upset the US authorities. The bank is now effectively a `criminal' which raises concerns for other banks who, theoretically at least, are not allowed to trade with `criminals'. It also means that the US government is allowing a `criminal organisation' to operate as a bank. What a mess! But at least the US authorities are willing to do something about it and give Credit Suisse the biggest bank fine ever. Here we just let the banks get on with it...wonderful laissez faire, I guess they'll simply move to the UK!

[plaques]

It could be argued that the long term affect of pushing £370 billion into the economy through quantitative easing is now being felt in the housing market. Since the extra money supply has diluted the value of capital goods then the way to recoup the loss is to raise prises. With housing, the supply is fixed therefore wind the price up (inflation) to maintain the capital value. Eventually this will read across to other capital value goods. The loser, as always, will be those at the bottom of the heap. What’s that chaps name who according to the Mail newspaper wrote 700 pages of total poppycock. Something beginning with P…?

[Stanley]

Interesting experience selling in London Tiz and I agree entirely with your thinking. P, sorry but before you describe Piketty as having written 'poppycock', read it. If he's wrong so am I and I usually agree with you so by extension.....
See this LINK for yet more rate rigging, this time it's the Euro. Amazing that nobody said a word while all this fraud was going on..... Does anyone doubt that in the end they will recoup the losses on fines from the customers? We need to see executives being led out of the building in handcuffs, if it was Benefit Fraud the book would be thrown at them. Perhaps Joseph Goebbels was right about the Big Lie.

[David Whipp]

I think an irony alert is in order on Plaques post...

[Stanley]

I thought so as well but thought I would tweak him in return.... As far as I am concerned Thomas Piketty is God and the grenade he has lobbed into political economics is already causing ripples. The Republican Party in the US are already having conferences about the repercussions of his research because it's such bad news for them. Be sure that it is being discussed here as well even if it's not acknowledged yet.

[plaques]

Sorry Stanley if I gave the wrong impression about Piketty. I was quoting what the "Mail". said. It was 1st may when I was explaining to my friend the logic behind Piketty's book when he open up the "Mail" to see a full page article in effect saying "don't bother to read it, I've read it for you and its 700 pages of Poppycock".

[Bruff]

Would be interesting to see whether the 'poppycock' conclusion is similarly evidence-based. Or whether the article makes mention of for example Prof Pickett's lineage - his parents were of, and very active in, the French hard-left. That's usually reason enough for distrust, or to rubbish, or otherwise traduce in Mail-land. Ralph Milliband was a Marxist you know.......

Yes, we still get frightened by the thoughts of 'reds under the beds' in this country. Scared of the Unions and he like. Hilarious if it wasn't so tragic a manifestation of well our immaturity I suppose, but there we go.

Richard Broughton

[Pluggy]

If Stanley says one thing and the Mail says the polar opposite, I'd stand by Stanley every time.....

If you took the bigoted, inaccurate and overblown articles out of the Mail there wouldn't be a lot left in my opinion. The Mail saying Piketty's book is 700 pages of poppycock sounds like as good a reason as any to buy it and read it.

[Stanley]

Thanks for the explanation P. I knew you were too sensible to take such a bigoted view. Good point Richard! They would be hard put to to construct a credible rebuttal! As I've pointed out to Tardis on the politics thread, the present trajectory of wealth accumulation at the top and impoverishment in the lower percentiles is impossible to defend. Piketty attacks the old concepts of 'trickle down', the efficacy of poverty in encouraging improvement, the concept that the wealthy achieve their position because of merit etc. and acknowledges that they are so deep seated and convenient for the Right that they will never be voluntarily abandoned. His conclusion is that in the absence of political will changing under the attack of reality, the only alternative is unrest and conceivably revolution. It says something that the Republicans in the US are taking notice. We don't know what is going on in the back rooms at Westminster but there are intelligent people there amongst the dross and sooner or later we will see the effects, they are evident in political writing already. So, do we take the Mail's assessment as accurate or actually read the book and make our own minds up? My assessment is that whoever wrote that it is 'poppycock' had either not read and understood Piketty's thesis or is basically lazy and dishonest and relying on the 'truths' he/she was inculcated with from birth. They call it Tory DNA!
Thanks to Pluggy, a very flattering assessment but I think he might be on the right lines.... (But I would say that wouldn't I) I know that 600 page door-stoppers aren't everybody's cup of tea but I'd urge everyone to at least get hold of a copy and read his conclusions. That's more than the Daily Mail did.... Bit like Marx, many people quote 'Das Kapital' but have never read it. It's no coincidence that in many ways Piketty re-affirms some of Marx's main conclusions while pointing out that he was writing in a different time and without the data resources available now. KNOWLEDGE IS POWER!!

[Bruff]

As I understood it, a lot of this 'trickle-down' concept is wrapped up with that chap Laffer, who famously drew his eponymous curve on a restaurant napkin. Intuitively, there is some sense to the thing in that if one sets a tax rate of zero one obviously gathers no tax; if one sets a tax rate of 100% one also gathers zero tax as what's the point of bothering? The brilliance, or idiocy depending on your point of view, is to then draw a neat bell curve between the two points and declare a 50% tax rate the optimum rate for maximising tax revenues. I say 'idiocy' because so far as I am aware there is minimal empirical evidence for the curve and associated optimum tax level yet folk, typically on the right, quote it all the time. Which wouldn't be a problem if this was couched as essentially a political choice and so a choice with an agenda. But if you are going to wrap that choice up in some veneer of 'academic' legitimacy, then don't be surprised if folk burst out laughing.

On 'poppycock', it's worth noting that last week The Guardian had an OpEd piece by Kitty Ussher (ex-Hon Member for Burnley [Lab] with associated expenses difficulties), arguing that Picketty's thesis was essentially invalid in Britain. Within a few moments, her central counter-argument was quietly demolished, shall we say, 'below-the-line', first by a demonstration of her cherry-picking her timelines to suit her thesis - a very common trick among politicians and which the current government has elevated to an art form. And second by the rather more prosaic suggestion that 20-odd years worth of research by a Professor and his doctoral and post-doctoral students, in any field of study, is not generally rebutted through a newspaper article knocked off in an idle 10 minutes.

Richard Broughton

[Tizer]

"..cherry-picking her timelines to suit her thesis" and ignoring "20-odd years worth of research" are two of the most frequent strategies used by climate change deniers too.

[Stanley]

Quite! Richard, one of Piketty's main planks in his argument against 'trickle-down' as a reason for allowing wealth in the top 10 percentile to flourish with low taxation is the fact that the major discontinuity of the last 60 years was the steep rise in GDP and consequent redistribution of wealth in the period 1950 to 1980. This coincided with progressive taxation of the highest incomes, strict regulation of the banks and redistributive government policies taking advantage of rapid improvements in technologies. He points out that the average growth rate we can expect if we study the historic curve and extrapolate from that is about 1.5% for the rest of the 21st century, far below the average increase in the top capital holder's stocks of wealth due to interest of between 3 to 5%. The disruptive factor in 1980 was the advent of Reagonomics and the Thatcher government following suit. They both argued for 'trickle down' but in fact what happened was trickle up as the top 10% sucked in wealth from the lower 90 percentile. Hence the gradual erosion of middle class incomes as well as that of the worst off. The Credit crisis of 2008 was the natural outcome of these policies coupled with venal banks and the interesting thing is that the large capital holders, despite the shock of the Credit Crunch soon started to recover and are now holding a greater proportion of the nation's wealth than they were in 2007. You are quite right in saying that the basis for this is 20 years research and access to the most comprehensive data and the computer power to analyse it. To attempt to demolish this level of scholarship in a ten minute sound-bite is puerile and can safely be ignored.
On a more local note, there is an interesting letter in the BET this morning from a young man called Aaron who spent the last of the money in his account ordering his weekly groceries from Asda who cocked up the order and left him without food or funds. Then followed the usual litany of phone calls, broken promises and complete ignoral of his plight. Apart from the incompetence, what a PR disaster! Why didn't the local manager say we'll send the order and sort this out once you have food in the house.

[Tizer]

They're at it again...BBC News today
Barclays Bank fined £26m for gold price fixing
Barclays Bank has been fined £26m by UK regulators for gold price fixing. The Financial Conduct Authority (FCA) said the bank had failed to "adequately manage conflicts of interest between itself and its customers", in relation to fixing the price of gold. The FCA said one trader, who has been sacked, exploited weaknesses in the system to profit at a customer's expense....The FCA also fined the individual trader £96,500. ..."A firm's lack of controls and a trader's disregard for a customer's interests have allowed the financial services industry's reputation to be sullied again," said Tracey McDermott, the FCA's director of enforcement and financial crime. "Barclays' failure to identify and manage the risks in its business was extremely disappointing."
http://www.bbc.co.uk/news/business-27536127

[Stanley]

And note that it was the trader who was sanctioned and not his superiors who were supposed to be keeping tabs on him. Either they aren't doing their job or else they were quite happy to let it go on as long as it was profitable to the bank. I am reminded of a cartoon about Blair and Iraq that referred to something Nye Bevan said about Eden during the aftermath of the Suez crisis. (Click to enlarge)

[Tizer]

Reuters, 27th May 2014:
IMF's Lagarde says bank reforms slowed by fierce industry pushback
"Progress in completing banking reforms to plug gaps highlighted by the 2007-09 financial crisis is too slow and is being hampered by fierce industry lobbying, the International Monetary Fund said on Tuesday."

"`A big gap is that the too-big-to-fail problem has not yet been solved,' Lagarde said, referring to the belief in markets that governments will still step in to rescue the biggest banks to avoid the mayhem seen when Lehman Brothers collapsed in 2008. The IMF estimated that the implicit subsidy or cheaper funding costs from being too big to fail amounted to about $70 billion in the United States and up to $300 billion in the euro zone. Mark Carney, chairman of the Financial Stability Board, a regulatory task force for the Group of 20 economies (G20), has said he wants the too-big-to-fail phenomenon "cracked by Christmas" but faces challenges in Europe and Asia."
http://uk.reuters.com/article/2014/05/2 ... PI20140527

[Stanley]

I like that woman, she seems to talk sense.....

[Stanley]

Good article this morning in Private Eye 'In the City' on higher executive's remuneration. Piketty gets a mention as well. The grenade he tossed into economics is gradually having its effect.....

[Stanley]

See this LINK for the news that Mark Carney expects interest rates to start rising this year. He is being very wary but signalled a small rise, say .25%, followed quite quickly by more.
This is bad news for overstretched families with mortgages and even worse news for the Tory campaign leading up to the 2015 General Election. As I have suspected for a while, the 'economic miracle' could start to unravel during the campaign..... Expect howls of outrage.

[Stanley]

See THIS for one of the reports about Wonga sending out fake solicitor's letters and charging clients an 'administration fee' for them. My question is, what exactly does a bank have to do that will result in instant closure! Apart from the 4,000% interest charges and relentless pursuit of clients, surely this is out and out fraud. Everyone agrees that these parasites are a bad thing but absolutely nothing is done about them!

[Tizer]

My question is, what exactly does a bank have to do that will result in instant closure!

Exactly my first thought when I heard the report. The company should be shutdown. It made up the names of law firms and told outright lies. If I'd done that when I ran my own business I would have been very quickly out of business and probably in jail. I suspect Wonga would have been in much deeper trouble if it were in America; we're too soft and there's an awful attitude here that it's `clever' to come up with a scam like this.

Meanwhile, as the stinking bubbles rise to the surface of Wonga's pool another smell rises from Barclay's `dark pool':
http://www.bbc.co.uk/news/business-28030351
"A fraud lawsuit against Barclays in the United States has been filed by the New York attorney general. The lawsuit alleges the bank falsified documents and misrepresented benefits it was offering to big institutional clients, including pension funds. It relates to the bank's "dark pool" trading operations, which allow clients to trade large blocks of shares while keeping prices private. Barclays said it was taking the allegations "very seriously". Prosecutors said Barclays misrepresented the kinds of investors that were using the dark pool. They said the bank claimed the pool was closed to aggressive traders, but in reality it was not. They also said the bank had misled ordinary investors by claiming it would use a stock exchange or dark pool that "would best execute their trades" at any given time, but in fact the trades were "nearly always" routed to Barclays' own dark pool so the bank could make more money."

[Stanley]

Barclays said it was taking the allegations "very seriously". The standard response when asked a difficult question. Stating the bleeding obvious. I heard the reports as well and considered posting but knew someone would pick it up. If this follows the usual track we will find that other banks were using the same Cunning Wheeze. Another version of the 'insider information' gambit where favoured clients get valuable market intelligence. Kick-backs? No proof but there must be a suspicion.

[Stanley]

The case of the fake letters sent out by Wonga was bad enough but see this LINK for similar practices by the Student Loans Company who have been sending threatening letters out supposedly from a law firm called SLC but which was in fact a pseudonym for the company itself. A Cunning Wheeze and the legal eagles are arguing that it is permissible. Meanwhile, the Law Society is saying that Wonga should not be allowed to get away form the fake letters scandal simply by paying compensation. I agree, there should be sanctions against those responsible for allowing the practice. After all this was not an error, there were over 40,000 letters. This was policy and a concerted campaign.

[Stanley]

See THIS for news about another big fine imposed by the US authorities. BNP Paribas have admitted to money-laundering and the fine is expected to be the biggest ever imposed on a foreign bank, about £5billion.