Niave Question

kriss_boy

If businesses boomed in recent years off the back of easy credit and silly people becoming grossly in debt then doesnt that mean when credit is hard to come by those businesses will collapse?

The government seem desperate to save the motor industry but what if the british public just cannot afford to buy cars right now? Maybe we just dont have the demand to support that size of industry.

Even if we do all use this scrappage allowance and buy new cars when the money has to come from elsewhere. We have to make cuts on other things.

I guess what Im trying to ask is that is it possible the country is running at a loss with no way of ever breaking even. We only have X amount of disposable income to spend you know.

Im trying to understand how the economy works in 4 paragraphs.

Dont we a proportion of the public to be in debt, to fund businesses and keep people in jobs.

Cleaver

C'mon Kriss, you should know the rules by now. Only the following questions allowed:

1. Are house prices going up or down?
2. Are BTLers scum?
3. Not being racialist but do you think immigration is a big problem for our economy?
4. What's the average UK salary?
5. I've heard Felixstowe Docks is in trouble, anyone heard anything?
6. What's a sockpuppet?
7. Where did my thread go?
8. Is Aberdeen different to the rest of the UK with regard to property prices?

And that's it.

Sorry, not very helpful am I? I can't answer your question, I'm not clever enough. I read a book recently that I've forgotton the title and author of that I gave to Lostinrates (who might be able to remind me - 'll do some googling in the mean time), that was full of economics essays, one of which was trying to explain in very simple terms why it's good for countries to be in debt, and why it doesn't matter that much (in a nutshell).

I'll get back to you with a name when I find it so you can check it out. In fact, ask Lostinrates if she's finished with it and she can send it to you!

shakerbaby

kriss_boy wrote: »

If businesses boomed in recent years off the back of easy credit and silly people becoming grossly in debt then doesnt that mean when credit is hard to come by those businesses will collapse?

The government seem desperate to save the motor industry but what if the british public just cannot afford to buy cars right now? Maybe we just dont have the demand to support that size of industry.

Even if we do all use this scrappage allowance and buy new cars when the money has to come from elsewhere. We have to make cuts on other things.

I guess what Im trying to ask is that is it possible the country is running at a loss with no way of ever breaking even. We only have X amount of disposable income to spend you know.

Im trying to understand how the economy works in 4 paragraphs.

Dont we a proportion of the public to be in debt, to fund businesses and keep people in jobs.

What amazes me is where have all the companies profits gone which they banked during the good times? Do businesses not save revenue for a rainy day?

chucky

shakerbaby wrote: »

What amazes me is where have all the companies profits gone which they banked during the good times? Do businesses not save revenue for a rainy day?

this may give you a bit of an explanation of how things work :rolleyes:
http://en.wikipedia.org/wiki/Dividend

bo_drinker

shakerbaby wrote: »

What amazes me is where have all the companies profits gone which they banked during the good times? Do businesses not save revenue for a rainy day?

They didn't, but they may do now??

Dave101t

you answered your own question really:
'off the back of easy credit' - this was easy business for them and highly profitable. now times are harder they still make their money, just not as much, and not as easily.

if your talking about financial institutions, they credit score people to gauge the risk, but they can be caught short on unsecured debts, which is why they like to have collateral or even requiring a guarantor is becoming more popular again.

shakerbaby

chucky wrote: »

this may give you a bit of an explanation of how things work :rolleyes:
http://en.wikipedia.org/wiki/Dividend

Wow every single last pence in profit goes on dividends? What an insight, thanks. :T

kriss_boy

I guess what Im trying to say is haven't many companies boomed at the cost of other peoples debt.

You go down the town centre (if you dare) and you'll see 02 shops, T-mobile, Orange, vodaphone etc and you think jeez how do these places make money? Sure 10 years ago when there was a boom in mobile phones they must have been raking it in. But now I bet people are more frugal with them, keeping the same handset year after year.

Same with electrical shops as things are way cheaper on the internet. Think of the job losses as stores have closed and went online with less staffing.

Is it possible the total disposable income of this country just isn't enough to sustain all of the businesses that are trouble right now?

If there was a job for every person in the UK then would the economy run more efficiently? Or isnt there enough money to pay everyone in the UK a full time wage?

Dave101t

they make money of fools with more money than sense, and thats an industry that shall never go bankrupt.

chucky

shakerbaby wrote: »

Wow every single last pence in profit goes on dividends? What an insight, thanks.

we're getting there with you, step by step... :T

don't forget profit also get's re-invested too.. :money:

shakerbaby

chucky wrote: »

we're getting there with you, step by step... :T

don't forget profit also get's re-invested too.. :money:

Ah so you never really answered my question in the first place. Thanks. I just hope you're not this professional at work. :beer: