Systemic Insolvency, Liquidity Problems

Thrugelmir

grizzly1911 wrote: »

I have seen many small businesses and start that ups that aren't necessarily viable apart from in the minds of the owners. That was in the relatively good times.

Around 20 years I worked for an SME that secured £1.5 million of venture capital from 3i. (Back in the days 3i lent to almost anyone).

Even then, 3i worked on the principle that out of 20 investments. One would be a star performer. 3 would produce better than average returns. 6 would do little better than tread water or grow slowly. The remaining 10 were highly unlikely to produce a positive return on the investment and hard a high probability of failing totally within 5 years.

grizzly1911

Thrugelmir wrote: »

Around 20 years I worked for an SME that secured £1.5 million of venture capital from 3i. (Back in the days 3i lent to almost anyone).

Even then, 3i worked on the principle that out of 20 investments. One would be a star performer. 3 would produce better than average returns. 6 would do little better than tread water or grow slowly. The remaining 10 were highly unlikely to produce a positive return on the investment and hard a high probability of failing totally within 5 years.

That is on the basis of money advanced. At that sort of level you would also expect a degree of management financial control as well.

Drop the bar somewhat and IME I would suggest those odds weaken too, and that also discounts those propositions that didn't get past the "Bank Manager" because they didn't meet even basic criteria.

Graham_Devon

Generali wrote: »

IMO it's because taxpayers are bailing out savers.

Many savers are taxpayers.

grizzly1911

Graham_Devon wrote: »

Many savers are taxpayers.

And it gets taken off them at source, little chance to avoid/mitigate like some other income streams.

gingeralan

HAMISH_MCTAVISH wrote: »

Then they really shouldn't complain when that safety mechanism kicks in to prevent them losing everything.

Savers would have lost all their money had the taxpayer not stepped in to bail them out.

Part of the price of getting to keep the money is low interest rates.

You seem to think that low rates are bailing out borrowers, who would otherwise default. If that's true, then it's not borrowers being bailed out at all, it's savers. Because if they default, then you lose your money that the banks lent them on your behalf.

Or in other words, you should be more worried about the return of your capital, rather than the return on your capital.

We wouldn't have lost, the FSCS would have paid out on claims upto the 85k limit. The money wasted in bailing out banks is significantly more than if they had just used this system, which ultimately gets the money from other solvent banks.

Graham_Devon

HAMISH_MCTAVISH wrote: »

Now you expect the rest of us, taxpayers, to bail you out for your poor investment decisions,( ie, you lending your money to an institution, your bank, that became insolvent) by covering your losses.

Why?

Genuine question Hamish. You have often cited your support for a debt jubilee. I.e. QE money used to wipe out debts.

However, when it comes to savers, you suggest you have a problem with taxpayers "bailing out" savers (which didn't happen directly anyway).

Why would you support a debt jubilee, but not support savers being able to keep their cash for what you call a "poor investment decsion".....which leads to another question.... what other decision could people have taken if not to save with banks?

HAMISH_MCTAVISH

Graham_Devon wrote: »

Genuine question Hamish. You have often cited your support for a debt jubilee. I.e. QE money used to wipe out debts.

Can you link me to even a single example where I have supported a debt jubilee?

grizzly1911

Graham_Devon wrote: »

Why would you support a debt jubilee, but not support savers being able to keep their cash for what you call a "poor investment decsion".....which leads to another question.... what other decision could people have taken if not to save with banks?

As you point out savers are merely depositing money they are not investing money speculatively through shareholding in banks.

The limited return doesn't reflect the risk of capital loss.

If banks were considered untrustworthy and weren't "backed" by the state (at least to the limit what ever that may be) then people wouldn't put their money in them.

dtsazza

grizzly1911 wrote: »

On the basis that Governments are by and large democratically elected to collectively meet the needs of all in the society, they then govern, then shouldn't all be expected to be "looked after".

This seems to be a question that's been raised by the current situation - just what is the role of government, and how far do its responsibilities extend?

How much should someone expect to get provided automatically by the state, and where does the line begin that they need to start exchange their labour/output for more things?

What is a "need" and what is a "want"?

Does the government need to directly supply needs, or does it merely need to ensure that the opportunity exists for everyone to fulfil their own needs (e.g. through personal application)?


All valid questions, and I'm sure people will have different opinions on the answers, and thus what constitutes the electorate being adequately "looked after".

Thrugelmir

grizzly1911 wrote: »

That is on the basis of money advanced. At that sort of level you would also expect a degree of management financial control as well.

Part of the deal was that a non-exec chairman was appointed with a background in the industry along with a non-exec director with finance background. Both of their choosing.