Govt want to return lending to 2007 levels.

Generali

fc123 wrote: »

As I understand it from The Standard reporting the Govt have attached 3 conditions.
1; no dividends until debt to govt repaid; banks say no...say need to pay divs to pension funds...to pay the pensions.

2; restrictions on top peoples pay and bonuses; banks not keen.

3; restore lending to businesses and homebuyers (don't know if they include BTL in that); banks not keen as want to reduce risk.

I may have it wrong.

But he who pays, says....so will govt ask for £££ back if they can't agree?

From what I heard on the news earlier, the Government is now saying that there has been a misunderstanding and the banks can pay dividends on ordinary shares (assuming that they have made payment on the Preference shares first but then that is how preference stock works - they get paid first which is why they are 'Preferred').

I'm starting to get the distinct impression that the UK and US are trying to make this whole bailout as murky as possible so they can deny whatever they feel is expedient at a later date. I'm a pretty sharp bloke and know a fair bit about banking but I'm finding it very hard to follow what is being said through the evasions, denials and double-speak.

fc123

Generali wrote: »

I'm starting to get the distinct impression that the UK and US are trying to make this whole bailout as murky as possible so they can deny whatever they feel is expedient at a later date. I'm a pretty sharp bloke and know a fair bit about banking but I'm finding it very hard to follow what is being said through the evasions, denials and double-speak.

That makes me feel better as I am struggling to fully understand what's going on.....the sums seem so huge and I can't really understand the gain to the ordinary person....apart from preventing the country going bust...but would it really without the bailout?

Generali

fc123 wrote: »

That makes me feel better as I am struggling to fully understand what's going on.....the sums seem so huge and I can't really understand the gain to the ordinary person....

The sums are huge, absolutely collosal in fact. And the Government still hasn't stated how this is going to be paid for. This is real money and if it is spent on bailing out a bank it can't be spent on anything else. Taxes will have to rise or Government spending fall as a direct result of the bailout.

fc123 wrote: »

apart from preventing the country going bust...but would it really without the bailout?

Well you need credit for any sort of economy as we understand it to work as it oils the wheels of trade as I'm sure you are aware. I bet your business would find things much tougher if you had to pay cash for everything. In fact I bet that your business couldn't survive it. That doesn't mean that the existing banks have to provide that credit. My solution would have been to let the banks fail that couldn't survive and have the BoE act as lender of last resort to the rest. If they're all bust then the BoE could provide credit in the short term to keep things running.

fc123

Generali wrote: »

Well you need credit for any sort of economy as we understand it to work as it oils the wheels of trade as I'm sure you are aware. I bet your business would find things much tougher if you had to pay cash for everything. In fact I bet that your business couldn't survive it. That doesn't mean that the existing banks have to provide that credit. My solution would have been to let the banks fail that couldn't survive and have the BoE act as lender of last resort to the rest. If they're all bust then the BoE could provide credit in the short term to keep things running.

The credit bit is key.
We have had to gear up for the e-tail thing with zero access to credit apart from the factory who waits for invoice to be paid. We pay for cloth up front.
We negotiated advance payments after stuff sold well from customer...or we couldn't do repeats.
It's a new way to trade. It worked like this in the 90's.

IF next order completes to schedule and all goes well...we will run our business pay as you go only.....so if something goes wrong...only lose profit to us on last order.

Unless you mean no bank transfers....so I have to drive all over the country collecting envs of cash and dropping them off. Possible but inconvenient.;)

At what point will the benefit cheques bouce? Could it get that bad?

Generali

fc123 wrote: »

The credit bit is key.
We have had to gear up for the e-tail thing with zero access to credit apart from the factory who waits for invoice to be paid. We pay for cloth up front.
We negotiated advance payments after stuff sold well from customer...or we couldn't do repeats.
It's a new way to trade. It worked like this in the 90's.

IF next order completes to schedule and all goes well...we will run our business pay as you go only.....so if something goes wrong...only lose profit to us on last order.

Unless you mean no bank transfers....so I have to drive all over the country collecting envs of cash and dropping them off. Possible but inconvenient.;)

I mean you being advanced credit by your suppliers until you've sold some of the stock (or at least tried to!) and your suppliers being given credit by the factory they're buying from and the factory getting credit from the people they buy the cloth from and so on.

fc123 wrote: »

At what point will the benefit cheques bouce? Could it get that bad?

It's an interesting question. A lot of money is being chucked around at the moment without any coherent source of funding. What plan does the Government have if they can't sell their Gilts (Government bonds)? Interest rates will almost certainly start to rise in the Gilt market as they borrow more and more cash. That will have the knock on effect of increasing interest rates on all other sorts of borrowing (this is known as crowding out). As interest rates rise, more people will lose their jobs and the benefits bill will increase.

The problem comes if this becomes a sort of death spiral. The benefits bill rises increasing borrowing which increases interest rates which increases the benefits bill.... If that point ever arrives then yes, the dole cheques will either bounce or cease to be written.

MrsE_2

tomstickland wrote: »

Even the Council of Mortgage lenders think it's "not prudent".


http://newsvote.bbc.co.uk/1/hi/business/7667072.stm

Seems crazy to me.

Call me cynical, but could it be that they just want to restart the party so it's all wonderful in time for an election?

They know they will be long gone when the **** hits the fan:rolleyes:

dopester

tomstickland wrote: »

PM Questionshttp://news.bbc.co.uk/1/hi/uk_politics/7671776.stm

Another freak-show from Labour.

They are even congratulating themselves for the minimum wage rising. A monopolistic wage rate that is 20 percent too high for prevailing conditions will generate still more unemployment with deflation ahead. If they remain employed, near enough everyone ought to prepare themselves for pay-cuts, not wage inflation.

BTW - I hope the freaks on this forum, that were so aggressive in accusing us of "wishing it to happen on people"... when we repeatedly have warned for 6 months + of the huge increases of unemployment approaching..... (so that people could apply caution and re-position themselves as best they could, for savings or examining other employment - and not for FTBs to buy houses)... can examine their own consciences if people acted on your happy days ahead outlook.

moanymoany

Peston doesn't think the big lending spree is going to happen - what will Brown Darling do if they dig their heels in and say no to lending at 2007 levels - ask for OUR ball back?

http://www.bbc.co.uk/blogs/thereporters/robertpeston/

baby_boomer

The government have now acquired another tool by which they can interfere in the real economy for political ends .

And just how independent is a Bank of England MPC which has cut interest rates by 0.5% as part of a global response co-ordinated by Gordon before inflation rises to 5.2%?