Why is the recovery so slow?

Cheshire Cut

The bankers who caused such stratospheric damage to the country, indeed the world, will only wake up when some, ideally many, are behind bars serving very long sentences. In the showers they might learn how the rest of us feel - well and truly shafted.
It beggars believe that a criminal case for something serious cannot be brought against the likes of Fred Goodwin. In banking, it seems you get rewarded for what would be corruption, fraud or a string of other crimes in any other walk of life.
I am a Conservative voter and not anti-business in any way but the lack of concerted action in the UK against the people who deprived taxpayers of not billions but trillions is truly astounding. Or do Fred and his friends know too much.

Hugo Chav

The reason the economy is going down the loo is clearly spelled out in Dr. Tim Morgan's report:

http://www.tullettprebon.com/Documents/strategyinsights/Tim_Morgan_Report_007.pdf

daniel maris

Well, this is a good corrective to those here who think that the banks have nothing to do with the crisis we are in.

However, I am not sure that these sorts of practices are the key concern. I think the key concerns are:

1. Osborne's scaring of the public thorugh threatened job cuts - resulting in "anxiety saving".That was a really stupid approach he adopted.

2. Continued mass immigration which places huge infrastructure cost burdens on the economy and reduces per capita wealth - again feeding into the "feelbad" factor.

3. The government's attack on working conditions, again spreading a sense of insecurity.

4. A failure to put in place structural measures that will encourage economic development and growth e.g. nationalisation/regionalisation of banks, creation of something like the old national enterprise board.

5. Commitment to free trade which is ultimately what collapsed our economies in teh West. We cannot compete with Cheating China - with its oppression of trade unions, dirt cheap labour, state aid or direction and counterfeiting culture. The sooner we realise that the better.

Hugo Chav

The link hasn't pasted in full. After 007 it should have .pdf

Baron

Bounderby, sir, what’s keeping you from quitting the job you have, joining the ones you admire, get yourself a tent, a placard, shout ‘down with capitalism’, the societal system that made you, by the sound of it, if not rich than at least comfortable.

Why should the Barclays deal be bad, it’s in the energy industry, it addresses the issues other corporates will have to tackle, i.e. rationalization, cost cutting, delivering the same services as before more efficiently, it’s not funded by the taxpayer, more to the point, if the deal boosts Barclays bottom line, the Treasury may benefit, the bank’s still headquartered in the City, isn't it.

Baron

and another thing:

your ceaseless yapping about the collapse of lending to the SME sector is beginning to irk, the banks have tightened up on risk management, they are desperate to avoid falling into another trap, you recall their lending to ninja customers (no income, no jobs, no assets), prodded by the politicians, who believed one can multiply wealth by sharing it?

If the government were to at least tweak the conditions in which the SME operate here the banks may change their lending practice, without such changes who could blame them, they lend, the outfit makes it, becomes successful, demand for its output grows, a Chinese company spots it, steps in, kills the UK based outfit stone dead on price because it’s labour costs are substantially lower, no health and safety, other compliance, no NI, no paid maternal, paternal leave for weeks….

Rhoda Klapp

No recovery until I feel confident again. Never mind all the economic theory and restricted lending and proposed government interference in this or that market. Joe Public has his hands firmly in his pockets. He is not going to start spending to oblige Tesco, Top Shop, Barretts or anyone else, least of all George Osborne. The reasons Daniel mentions are all factors in lack of confidence. Maybe the biggest factor of all is the feeling that there is another shoe to fall, that we have not seen the worst news yet.

Why is the govt spending like there's no tomorrow, unless there isn't?

Baron

Cheshire Cut, my blogging friend, you make Baron despair.

Blaming the bankers for the ‘stratospheric damage’ is akin to blaming the builders of the gas chambers, bombs, tanks, other structures of annihilation for the death of millions during WW2, the reason nobody got kicked for the financial insanity is self evident, it’s the politicians whose share of the blame ranks the highest, the bankers were merely willing facilitators of the politicians’ hunger for tax money, cash needed for their pet projects, for buying votes, for pursuing dream like economic policy of ‘no boom, no bust’.

you may well be right, it’s a pity we haven’t nailed few, many of the bankers, for it seems many of the unwashed are now conflating bankers bad judgment with banking per se, we desperately need the latter, in particular if it brings in foreign earnings, we have little else to substitute banking with other wealth generating industries, it takes time to re-direct an economy of our size.

Hugo Chav, sir, thanks for the link, it should be a required reading for everyone.

Yow Min Lye

Many Republicans in the United States - men like Ron Paul and Pat Buchanan - woke up a long time ago to the fact that Wall Street is no friend of the values that true Conservatives espouse.

It's high time that true Conservatives here in Britain learned to view the City with the same degree of healthy skepticism.

Rhoda Klapp

I have yet to disagree with anything written by Rhoda Klapp and it is always pacy and amusing.

Give him/her a blog.

Richard of Moscow

High oil prices, thanks to QE, and high energy bills, due to unjustifiably high taxes. Low growth is inevitable, and the only question is whether it is down to government stupidity, government corruption, or both.

DavidDP

"the banks have tightened up on risk management, "

That explains why they are lending to a company with a junk rating, then. What? Oh.

AliC

recover is slow because

taxes are too high
there's too much red tape
QE has pushed up raw material prices and energy prices.
Business folk are nervous that the govt isn't supporting them by changing the above...
Europe mess makes everyone nervous.

AliC

http://www.tullettprebon.com/Documents/strategyinsights/Tim_Morgan_Report_007.pdf

I don't feel well after reading this. The truth at last. Should be compulsory reading.

Biggestaspidistra

http://www.tullettprebon.com/Documents/strategyinsights/Tim_Morgan_Report_007

Indeed, it should be required reading.

David Holmshaw

The "upfront fee" for a loan of 11.5 billion is 152 million. My calculator says that's 2 percent. So if you want a business loan of, say, 200,000, you need to offer the bank manager an "upfront fee" of 4,000 pounds? Funny, that's just the way it works here in Thailand and the percentage is even pretty much the same.

Herbert Thornton

I remember Harold MacMillan observing, years ago, that in the aftermath of war, and all the destruction it causes, there generally tends to be a great surge in prosperity.

Macmillan didn't try to explain it. Instead he commented - "It's all very curious."

Now we see a situation where government creates enormous sums of pretend money out of thin air, and bankers borrow it and lend it, and they all treat it as an extremely skilled exercise in Economics and High Finance. To my mind it's very much like a scenario composed of smoke and mirrors. Nonetheless it's generally treated as if it were not smoke and mirrors at all, but reality.

What's it all going to lead to? I think it's all very curious.

Sir Everard Digby

This is a classic sign of the advance of corporatism.
The concentration of wealth and power in the hands of a small minority at the expense of everyone else tends to lead to stagnation because there is little incentive,due to the lack of competition or stimulation to innovate.

I suggest that the banking sector is the obvious example of this philosophy,in collusion with government.

As our productivity is milked for the benefit of the few,we will decline towards third world country status. It is a deliberate policy,for which the likes of Blair were well rewarded.

Remember that Mervyn King ahs been talking about 'a slow recovery' since 2009 and continues to do so. This is a smokescreen.

Corporatists control us through debt,war and taxes. Blair gave us all three.

Cameron is showing no signs of dealing with any of them. And he will not,as he is a corporatist too.

The City is no friend of innovation or free enterprise. Never has been,never will be.

Yes, the bankers took what looked like huge risks and plunged us into recession. They don't care because the corporatist agenda could not lose whatever the outcome. Either more concentration of wealth/power in the hands of the few,or more debt and taxes to control the populace.

Bailing out the banks was merely another step along the path and further welded the state to the private sector industry.

Money which should have gone to small businesses has been siphoned off as part of the grand plan. It's also not been spent in the UK.

Boudicca

I'm deliberately not spending. Petrol has gone up by 35p a litre since the GE - caused by QE/depreciation. Fuel duty/VAT accounts for about 80p of every £1.36 litre. I'm not buying VAT products when I can avoid it. The local charity shops are well stocked - I can buy Next, Per Una etc at a tenth of the price when new.

My savings, which are suffering from negative real interest rates, are being protected as best I can.

WHEN Osborne cuts taxes, I might start spending.

Ian Walker

Baron, the banks are not only not-lending* to 'risky' small businesses, they are not lending to any small businesses at all. The system of having small business advisors who made a passable attempt at understanding their customers has been replaced** by anonymous "credit teams" who refuse any requests for a loan and instead offer a 30% business credit card.

Even better, when this credit card is turned down, they can legitimately (in their eyes) turn to the government and say that they're not seeing any strong demand for credit from SMEs.

(*apologies for the double negative)
(**the SBAs are still there, but instead of being able to make decisions they are just frontmen now)

Mark M

It’s only surprising that you’re surprised. With the government ready and willing to bail you out at a moment’s notice, it’s a one sided bet. Would you back Man United or Wigan if you knew you’d be refunded any losses but get to keep any gains?

Employment Issues

Why don't the coalition scrap sunday trading laws? There would be a large uptake in demand for flexible supermarket staff.

2trueblue

Because there is no REAL money.

Baron

Ian Walker, sir, an acquaintance of Baron’s has just gone through a punch up with his bank trying to switch him from an overdraft to a loan, you’re right the banks aren’t blameless, their business model in this area stinks, it seems they’ve either lost or haven’t sufficiently trained enough staff capable of proper risk assessment locally, think it isn’t their worthwhile to engage seriously in the SME domain.

Amongst the reasons why, Baron reckons there are two big ones, in a globalised world where things are put together many miles from places of their consumption, the banks cannot but prefer lending to businesses that aren’t fighting with one hand tied up behind their back, also, they know they will need the cash when the big stuff hits them, when the rollover of maturing paper, of whatever origin, arrives, they’ll need the billions.

Baron

David DP, sir, good point except the list of companies rated below Kinder Morgan includes Goodyear Tire, Ford, Micron Technology, AMD (Advanced Micro Devices, a competitor to Intel), many others, and GM was once also rated BB. None of them have difficulty securing finance, at a cost, of course.

Alsoo, one has to be careful with rating by people who not that long ago assigned much higher than BB investment grade to paper that turned almost overnight not just into junk but worthless shite. You have a look how the agencies rated the paper issued by the Zorbas back in 2007. The point here ain’t that they do a bad job, simply that their judgment cannot escape to be doped with the prevailing mood in the society.

Picking on Barclays by this chap Bounderby smells to Baron of a touch of envy, could he be labouring for a City competitor that was in the running, didn’t get it?

Carrstone

In your quiet desperation you shouldn't blame the banks; you wouldn't expect your plumber to have a socially sensitive ethics, do you? Instead blame the meddlesome enabler and therefore yourself, for you elected him. Thoreau was right when he said, "I heartily accept the motto, "That government is best which governs least"; and I should like to see it acted up to more rapidly and systematically."

TomTom

"large uptake in demand for flexible supermarket staff."

Name a supermarket without a hiring freeze.

Better still, allow mass default on credit cards so people can go out and buy more

Cheshire Cut

Why are posts, and some articles, being infiltrated with underlined links to advertisements by Lloyds. It happened to my earlier post under this topic and a later article by Peter Hoskin, and doubtless elsewhere. Are they paying for this or is it commercial hacking by a bank owned in part by the taxpayer, not that we had any say in its purchase.

kirkbride

The most important reference in the article was to the Occupy Wall Street movement. We know the banks are essential and that the people at the top are crooks - unfortunately also untouchable because what they did was not illegal.
The Occupation movement around the world starts from the obvious unfairness of the Joes paying for the arrogant life styles of amoral bankers and their political friends. We should strongly support the protesters. I am not a socialist and I am not asking for more useless welfare. But something has to make the bankers fear for their livelihoods and possibly their lives.
The French revolution is a good comparison - the monarchy did nothing an unfair situation and was guillotined.

Baron

Sir Everad Digby, you of the blue blood like Baron, when you have a minute tell the barbarian from the east who, you reckon, is the ultimate beneficiary of most of the equity (the shares quoted on the exchange), of the gilts, most of the other paper issued by the corporates, the Government, most probably of a large chunk of the real estate, too.

You may find it’s the great unwashed, it’s their ISA, their pension, their life insurance and stuff, it’s worth remembering that the reciprocal thing to debt is savings, savings are but a delayed consumption, the debt is ultimately owned by someone, a large chunk of it by us, we put some money aside to indulge in spending it ourselves at a later date, passing it to the next generation. The money you say was ‘siphoned off as part of the grand plan’, was, surprisingly’ in part to safeguard the hoi polloi, too.

Agreed, some of us have got enriched beyond the fair, the just, the deserving, that has to be put right, but putting it right by hurting ourselves in the process feels like reckless foolishness to Baron, wouldn’t you agree?

Please download the pdf. Suggested by Hugo Chav, scan it, it’s worth it.

and also this:

Carrstone @ 12.57 makes a valid point, Baron gladly seconds it, perversely, we rely too much on the Government rather than ourselves, silly really if you consider the Government can only do things if it has the money it takes from us, in a sense, we are paying a middleman who has its own agenda that often doesn’t coincide with ours.

Baron

kirkbride, the one with an eye for the guillotine, your heart tells you right, your thinking errs, the occupy mob may be barking at the right guilty oaks, awaking the dormant consciousness of the masses, it ain’t enough, it won’t solve anything, it’s one thing to line up the bankers, pick every other one for kicking or worse, then what, ha? The occupying crowd have nothing constructive to offer, the tea drinkers at least are homing on cutting government spending, hence taxes, the ones you like want to break things up, that’s it.

Capitalism is fugging awful, Baron should know, he like everyone else also tasted the unfairness of it, it’s still better than any alternative tried by the unwashed anywhere before, trust Baron, he got a taste of a different construct, too, it’s not the avenue we want to explore in spite of the boils, warts and stuff of what we have.