Is the end nigh for the Euro? [vol. 3]
Discussion
Steffan, you do understand the difference between 'investors' and 'depositors' right? Deposits in UK high street banks WERE and ARE risk free precisely because the taxpayer will pick up the tab. FFS were your "40 years in finance" on the till at Asda? Jeez at least Claudia is brief and we don't have to trawl through pages of flatulent repetition.
fblm said:
Steffan, you do understand the difference between 'investors' and 'depositors' right? Deposits in UK high street banks WERE and ARE risk free precisely because the taxpayer will pick up the tab. FFS were your "40 years in finance" on the till at Asda? Jeez at least Claudia is brief and we don't have to trawl through pages of flatulent repetition.
Not quite. Limited risk, perhaps, but not risk free and depending on how consolidation in the industry has progressed, perhaps not certain to be as risk free as people may think.Moreover some of those people - probably all who are exposed to the risk - will be taxpayers too. In fact anyone without an opportunity to make money from ready transactions on gambling on market movements will likely take some sort of hit. Whether that is short term or long term remains to be seen. The smart money will ensure that it can never be implicated in profiteering. (Which, of course, suggests that the Banks have been anything but smart in recent times.)
We cushion much of this with the compensation culture of course, rewarding people for not being in full control of their lives. On which basis there should be massive compensation due to all those who thought that money deposited in a bank and earning interest was a 'safe bet' having been encouraged to 'save' by successive Governments. Of course the Governments only wanted people to save to prop up the banks and therefore the finds available for lending - mostly to Government to support its inherent profligacy and ineptitude.
More recently they seem to be less concerned about that. Why?
Well, there was a time when they had limited information about where the cash was and limited access to grab it when they needed to. Things could be arranged but took time. Government had been unable to control effectively and in a timely way where the apparent spending power they had been allocating to the "public" had gone.
Now, based on various pretexts not the least of which is "Money Laundering" and their encouragement of the requirement of a fully traceable bank account (with open access by HMRC in the offing) they have followed through on Brown's initiative and have, or will have, far greater control over what they can get their grubby paws on quickly should they need it. It helped to speed things up of course that they had the banks over a barrel and, indeed, were proxy owners of parts of the system.
Naturally they still have to go through the process of making it look like they are independent arbiters of the reasonableness of the Financial sector's performance towards it customers but one can't help but think that a few juicy "fines" now and again must help to top up coffers somewhere by what is a form of taxation dressed up as something else. Just a cost of doing business I suppose, as far as the banks are concerned. They must see it all over the world. The "No Risk" customers will pay along with the investors and the pension funds who are invested in the banks ... oh, we are back to those elderly people in the photo waiting to get their money out of Northern Rock. (An interesting misnomer that one. Would it have attracted so many clients had it been called Northern Sand?)
A truly successful individual below the ultra-rich minority of wealth would die owning nothing and owing heavily. They would be ahead of the game and should have been able to "enjoy" the benefits and use of assets that extended borrowing would allow. Had they not taken that opportunity of enjoyment from the scam we should assume they have failed as people.
Of course they would have needed to trample over everyone else to access the lines of credit but one assumes they would be happy to do that as they scuttled as high as possible up the pyramid expectancy.
They would also want to be sure that their particular pyramid was not likely to become unstable and turn upside down. Well, not until they had escaped to another one. Of course, escape may not be so easy ...
LongQ said:
fblm said:
Steffan, you do understand the difference between 'investors' and 'depositors' right? Deposits in UK high street banks WERE and ARE risk free precisely because the taxpayer will pick up the tab. FFS were your "40 years in finance" on the till at Asda? Jeez at least Claudia is brief and we don't have to trawl through pages of flatulent repetition.
Not quite. Limited risk, perhaps, but not risk free and depending on how consolidation in the industry has progressed, perhaps not certain to be as risk free as people may think.Interest rates paid to savers are paltry and should be higher imo, the best I could get (when I last looked) from Barclays for my slush fund/future car purchase account was 0.1%, that's as close to zero as makes no difference.
Edited by RYH64E on Saturday 23 August 10:13
LongQ said:
fblm said:
Steffan, you do understand the difference between 'investors' and 'depositors' right? Deposits in UK high street banks WERE and ARE risk free precisely because the taxpayer will pick up the tab. FFS were your "40 years in finance" on the till at Asda? Jeez at least Claudia is brief and we don't have to trawl through pages of flatulent repetition.
Not quite. Limited risk, perhaps, but not risk free and depending on how consolidation in the industry has progressed, perhaps not certain to be as risk free as people may think.Moreover some of those people - probably all who are exposed to the risk - will be taxpayers too. In fact anyone without an opportunity to make money from ready transactions on gambling on market movements will likely take some sort of hit. Whether that is short term or long term remains to be seen. The smart money will ensure that it can never be implicated in profiteering. (Which, of course, suggests that the Banks have been anything but smart in recent times.)
We cushion much of this with the compensation culture of course, rewarding people for not being in full control of their lives. On which basis there should be massive compensation due to all those who thought that money deposited in a bank and earning interest was a 'safe bet' having been encouraged to 'save' by successive Governments. Of course the Governments only wanted people to save to prop up the banks and therefore the finds available for lending - mostly to Government to support its inherent profligacy and ineptitude.
More recently they seem to be less concerned about that. Why?
Well, there was a time when they had limited information about where the cash was and limited access to grab it when they needed to. Things could be arranged but took time. Government had been unable to control effectively and in a timely way where the apparent spending power they had been allocating to the "public" had gone.
Now, based on various pretexts not the least of which is "Money Laundering" and their encouragement of the requirement of a fully traceable bank account (with open access by HMRC in the offing) they have followed through on Brown's initiative and have, or will have, far greater control over what they can get their grubby paws on quickly should they need it. It helped to speed things up of course that they had the banks over a barrel and, indeed, were proxy owners of parts of the system.
Naturally they still have to go through the process of making it look like they are independent arbiters of the reasonableness of the Financial sector's performance towards it customers but one can't help but think that a few juicy "fines" now and again must help to top up coffers somewhere by what is a form of taxation dressed up as something else. Just a cost of doing business I suppose, as far as the banks are concerned. They must see it all over the world. The "No Risk" customers will pay along with the investors and the pension funds who are invested in the banks ... oh, we are back to those elderly people in the photo waiting to get their money out of Northern Rock. (An interesting misnomer that one. Would it have attracted so many clients had it been called Northern Sand?)
A truly successful individual below the ultra-rich minority of wealth would die owning nothing and owing heavily. They would be ahead of the game and should have been able to "enjoy" the benefits and use of assets that extended borrowing would allow. Had they not taken that opportunity of enjoyment from the scam we should assume they have failed as people.
Of course they would have needed to trample over everyone else to access the lines of credit but one assumes they would be happy to do that as they scuttled as high as possible up the pyramid expectancy.
They would also want to be sure that their particular pyramid was not likely to become unstable and turn upside down. Well, not until they had escaped to another one. Of course, escape may not be so easy ...
DJRC said:
Damn it Long...you have figured out my gameplan!
Very interesting and erudite post from LongQ who has expressed the reality of the real risk to depositors and investors that the banking system and singularly logical comments on the reality of life in the UK and how to better it effectively.It is of course, nonsense to suggest that there is no risk to bank deposits currently. Whilst the Banks continue to carry on in the inadequately controlled way they have been for many years, the only real guarantee is provided by the Taxpayers. Who are already down Billions as a result of those guarantees and bailing out the banks last time. Without which the banking system could not function. And directly as a result the taxpayers are saddled with a debt that will take decades for the taxpayers to repay. I do not understand how anyone can say there is no risk to putting money in the banks when the UK taxpayer is already Billions poorer because of that risk?
Quite how individuals can suggest that there is no risk to bank deposits given the reality of the last ten years is beyond me. But clearly people do. Given the strength of feeling that some indicate I presume they just cannot accept the reality. In the current system bank deposits are at risk and without the support of the Taxpayers in 2007 there would have been massive failures in the banking system. This system still relies upon that guarantee and I cannot see this changing.
DJRC's pithy comments are also very informative and were 40 Years younger I would be with him all the way. The truth is that world supervision of Banking failed en masse in the last ten years and I am personally very doubtful that the real lessons have or indeed will be learned..
As LongQ says the individual's who grab as much as they can and look after No 1 are in fact best served by this system. As DJRC says it is up to the individual to make what he can for his loved ones and family and ensure they are always protected. Back in the days when I was running seriously successful business long ago I introduced a key man insurance policy on all the senior staff which paid out a substantial sum to the family . That meant tha a sudden death was not a financial problem for the family of our senior staff. Unsurprisingly two individuals did die in service and there is no doubt that the immediate solvency this insurance provided was immensley helpful to the family. Saved that firm a huge amount to wrangling to try and protect the family from the loss of income and cost very little per head.
This is of course the antithesis of the actual reality of the nonsense and blathering that the dishonest Socialists in politics worldwide use to ensure they are first in line, on the gravy train and feathering their own nests. As Mr Orwell said, some people are more equal that others. The actual truths of the reality of Socialism are not at all palatable. Self help must be the best protection. It is up to each individual to protect his own.
Edited by Steffan on Saturday 23 August 11:26
DJRC said:
Damn it Long...you have figured out my gameplan!
Well I think you may be safe if you present evidence that your huge debts (should they be uncovered prior to your demise and so put your future attempts at living into jeopardy) was entirely the fault of the "Banking System" or some other external force (HMRC or European equivalent?) thus engendering widespread sympathy whether or not it would be justified.If you hope to pile up enough cash to reach the higher levels of the pyramid I would recommend seeking
Tumbril insurance with a view to obtaining at least some sort of protection from the financial barbarians once they see and hear about what has "really" been going (allegedly) and decide to reclaim their pieces of the action.
There seem to be many signs around that nihilism and an anarchic approach to life in general are becoming more prevalent than they have been for a while. One might wonder if we are approaching a Tipping Point?
RYH64E said:
LongQ said:
fblm said:
Steffan, you do understand the difference between 'investors' and 'depositors' right? Deposits in UK high street banks WERE and ARE risk free precisely because the taxpayer will pick up the tab. FFS were your "40 years in finance" on the till at Asda? Jeez at least Claudia is brief and we don't have to trawl through pages of flatulent repetition.
Not quite. Limited risk, perhaps, but not risk free and depending on how consolidation in the industry has progressed, perhaps not certain to be as risk free as people may think.Interest rates paid to savers are paltry and should be higher imo, the best I could get (when I last looked) from Barclays for my slush fund/future car purchase account was 0.1%, that's as close to zero as makes no difference.
Edited by RYH64E on Saturday 23 August 10:13
Whilst the more obvious risk is for long term deposits to be exposed it would be just as possible for a short term deposit - say the proceeds of a property sale or a pension pot transaction purely as examples - to bounce the amount in a licensed provider's accounts over the £85k limit on the day it crashed or had assets sequestered by some autonomous political tinkering.
No doubt there ways of avoiding that potential fate - for a fee or two.
LongQ said:
RYH64E said:
LongQ said:
fblm said:
Steffan, you do understand the difference between 'investors' and 'depositors' right? Deposits in UK high street banks WERE and ARE risk free precisely because the taxpayer will pick up the tab. FFS were your "40 years in finance" on the till at Asda? Jeez at least Claudia is brief and we don't have to trawl through pages of flatulent repetition.
Not quite. Limited risk, perhaps, but not risk free and depending on how consolidation in the industry has progressed, perhaps not certain to be as risk free as people may think.Interest rates paid to savers are paltry and should be higher imo, the best I could get (when I last looked) from Barclays for my slush fund/future car purchase account was 0.1%, that's as close to zero as makes no difference.
Edited by RYH64E on Saturday 23 August 10:13
Whilst the more obvious risk is for long term deposits to be exposed it would be just as possible for a short term deposit - say the proceeds of a property sale or a pension pot transaction purely as examples - to bounce the amount in a licensed provider's accounts over the £85k limit on the day it crashed or had assets sequestered by some autonomous political tinkering.
No doubt there ways of avoiding that potential fate - for a fee or two.
The compensation scheme doesn't cover new "taxes" though, as the more wealthy savers in Cyprus found out when the State appropriated their funds in return for junk.
turbobloke said:
LongQ said:
RYH64E said:
LongQ said:
fblm said:
Steffan, you do understand the difference between 'investors' and 'depositors' right? Deposits in UK high street banks WERE and ARE risk free precisely because the taxpayer will pick up the tab. FFS were your "40 years in finance" on the till at Asda? Jeez at least Claudia is brief and we don't have to trawl through pages of flatulent repetition.
Not quite. Limited risk, perhaps, but not risk free and depending on how consolidation in the industry has progressed, perhaps not certain to be as risk free as people may think.Interest rates paid to savers are paltry and should be higher imo, the best I could get (when I last looked) from Barclays for my slush fund/future car purchase account was 0.1%, that's as close to zero as makes no difference.
Edited by RYH64E on Saturday 23 August 10:13
Whilst the more obvious risk is for long term deposits to be exposed it would be just as possible for a short term deposit - say the proceeds of a property sale or a pension pot transaction purely as examples - to bounce the amount in a licensed provider's accounts over the £85k limit on the day it crashed or had assets sequestered by some autonomous political tinkering.
No doubt there ways of avoiding that potential fate - for a fee or two.
The compensation scheme doesn't cover new "taxes" though, as the more wealthy savers in Cyprus found out when the State appropriated their funds in return for junk.
How there can be serious suggestions that all is well and money is safe in modern banking given there indisputable facts is really outside my understanding give the losses of the UK taxpayers (US!) and many other individuals affected as in Cyprus? Clearly all is not well and definitely remains not well.
In 2007 I was personally involved in opening some fifty Bank Accounts for a serious investor with 3 million in Nat West. Over a month we opened fifty bank accounts and spread the money around as fast as possible using as many independently licensed deposit takers individually guaranteed by the BofE as possible. It cost him a fair bit to secure his money in the imminent danger of a real collapse.
But that process did dramatically increase the security of his deposits. They were still not totally covered because so many banks operate under umbrella licences which would reduce the payments to one event perhaps covering four or rive entities. But they were very much better secured. But still nothing like a cast iron guarantee that the BofE proffer. How is that secure?
That is why this still lingers in my conscious. Suggesting that the was no risk were daft then and remains daft. There is a hell of a risk if the system collapses and having been as close as that to the edge, who really believes that the guarantee would protect savers? Fact is there very nearly was a most serious collapse seven years ago and the chestnuts were whipped away just in time. The real risk remains the same to this day. There are no cast iron guarantees for depositors from modern banks.
LongQ said:
At the moment I think it is still £85k per person per licensed institution. The question for anyone with more than £85k scattered around is whether the institutions they have selected are operating under different licences. Or so I understand it.
Whilst the more obvious risk is for long term deposits to be exposed it would be just as possible for a short term deposit - say the proceeds of a property sale or a pension pot transaction purely as examples - to bounce the amount in a licensed provider's accounts over the £85k limit on the day it crashed or had assets sequestered by some autonomous political tinkering.
No doubt there ways of avoiding that potential fate - for a fee or two.
It's a risk, so there's probably an insurance broker out there willing to underwrite it for a fee, like any other indemnity normally bought during a house sale. An as-yet untapped market perhaps?Whilst the more obvious risk is for long term deposits to be exposed it would be just as possible for a short term deposit - say the proceeds of a property sale or a pension pot transaction purely as examples - to bounce the amount in a licensed provider's accounts over the £85k limit on the day it crashed or had assets sequestered by some autonomous political tinkering.
No doubt there ways of avoiding that potential fate - for a fee or two.
Edited by hidetheelephants on Saturday 23 August 16:44
Steffan said:
do not understand how anyone can say there is no risk to putting money in the banks when the UK taxpayer is already Billions poorer because of that risk?
.
That's precisely the damn point. Deposits in uk high street banks are safe (from the banks apparent inability to manage it prudently) because the government will bail depositors out with taxpayers money, or freshly printed money if needed. They already did so. Why do you imagine they wouldn't again? The reasons for doing it before haven't changed, the banks just got even bigger. The failure of a British high street bank would lead to a total seizure of your capital markets, the collapse of all your other banks and the subsequent failure of just about every business bigger than a whelk stall. You're more likely to get hit by lightening, you can stress about that if you want. IMO the biggest, yet still very small, risk to uk deposits is some way down the line a tax or haircut over and above negative real rates to pay for your unending state profligacy. I wouldn't hold your breath for a higher return for that risk though..
fblm said:
Steffan said:
do not understand how anyone can say there is no risk to putting money in the banks when the UK taxpayer is already Billions poorer because of that risk?
.
That's precisely the damn point. Deposits in uk high street banks are safe (from the banks apparent inability to manage it prudently) because the government will bail depositors out with taxpayers money, or freshly printed money if needed. They already did so. Why do you imagine they wouldn't again? The reasons for doing it before haven't changed, the banks just got even bigger. The failure of a British high street bank would lead to a total seizure of your capital markets, the collapse of all your other banks and the subsequent failure of just about every business bigger than a whelk stall. You're more likely to get hit by lightening, you can stress about that if you want. IMO the biggest, yet still very small, risk to uk deposits is some way down the line a tax or haircut over and above negative real rates to pay for your unending state profligacy. I wouldn't hold your breath for a higher return for that risk though..
Less than ten years ago the entire banking system very nearly collapsed and but for government intervention and more importantly the taxayers support the system would have collapsed. And there were huge costs to all the taxpayers and those huge costs remain the taxpayers responsibility and will take literally decades to repay. How can you describe such matters of fact as of no consequence?
I do not understand how anyone can say that bank deposits are risk free given the facts. Clearly that is what you believe. I cannot agree for the many reasons stated. Maintaining that the collapse of banks is an impossibilty when in the last few weeks a Portugese bank had to be bailed out by the government in Portugal or fold with massive losses to the Portugese taxpayers I do not understand. One of our partners in the EU and clearly such examples abound currently. If you think ths cannot happen in the UK then I think you are wrong. It has happened in the UK within the last ten years.. Regrettably it may well happen again. I hope it does not. But clearly there are risks to depositors funds in banks.
RYH64E said:
fblm said:
Deposits are safe.
You are ignoring the fact that deposits over £85k aren't safe, low risk maybe but not no risk.I don't agree that its a given that failing UK banks will automatically be 100% bailed out by the taxpayer under any circumstances, there's a good argument that allowing a bank to fail would remind both bankers and depositors that there is risk involved, I believe the term is moral hazard. Personally, I'd have let one or more go bust.
Deposits are guaranteed up to £85k per person per license, that's a fair enough limit imo but not enough to 100% cover many small businesses (my own included). I try to keep a minimum current account balance of £200k for my own peace of mind, but it can be significantly higher when customers get round to paying me. Barclays going bust isn't a risk that causes me to lose any sleep, but after the debacle of 2008 it isn't something that can be completely ruled out.
Deposits are guaranteed up to £85k per person per license, that's a fair enough limit imo but not enough to 100% cover many small businesses (my own included). I try to keep a minimum current account balance of £200k for my own peace of mind, but it can be significantly higher when customers get round to paying me. Barclays going bust isn't a risk that causes me to lose any sleep, but after the debacle of 2008 it isn't something that can be completely ruled out.
Article said:
The Dutchman who chairs the group of eurozone countries, Jeroen Dijsselbloem, said the heavy losses inflicted on depositors in Cyprus would be the template for dealing with future banking crises across Europe.
. . .
While ministers held back from cast-iron promises at the height of the financial crisis, they repeatedly dropped strong hints that amounted to virtually the same thing.
"The worst thing the British Government could do would be to allow a customer to lose a single penny from their bank account," Mr Silva said. "Why? Because banks contribute a greater proportion of tax revenues here than anywhere else in Europe – the Government needs to protect this source of revenue."
But he said a "tax" on bank savings – as opposed to losses in the event of a bank failing – were another matter. "The precedent has now been set in Europe. I can see Spain following Cyprus's example."
Such a tax would be much lower than the losses that Cypriot savers face, perhaps 1pc on balances of more than £5m, Mr Silva speculated.
But he said Britain should never impose them. "The Prime Minister should stand up and say: you'll never lose money you've saved in a British bank and we will never tax it."
http://www.telegraph.co.uk/finance/personalfinance/savings/9959615/Could-British-savers-face-a-Cyprus-style-raid.html. . .
While ministers held back from cast-iron promises at the height of the financial crisis, they repeatedly dropped strong hints that amounted to virtually the same thing.
"The worst thing the British Government could do would be to allow a customer to lose a single penny from their bank account," Mr Silva said. "Why? Because banks contribute a greater proportion of tax revenues here than anywhere else in Europe – the Government needs to protect this source of revenue."
But he said a "tax" on bank savings – as opposed to losses in the event of a bank failing – were another matter. "The precedent has now been set in Europe. I can see Spain following Cyprus's example."
Such a tax would be much lower than the losses that Cypriot savers face, perhaps 1pc on balances of more than £5m, Mr Silva speculated.
But he said Britain should never impose them. "The Prime Minister should stand up and say: you'll never lose money you've saved in a British bank and we will never tax it."
RYH64E said:
I don't agree that its a given that failing UK banks will automatically be 100% bailed out by the taxpayer under any circumstances, there's a good argument that allowing a bank to fail would remind both bankers and depositors that there is risk involved, I believe the term is moral hazard. Personally, I'd have let one or more go bust.
Deposits are guaranteed up to £85k per person per license, that's a fair enough limit imo but not enough to 100% cover many small businesses (my own included). I try to keep a minimum current account balance of £200k for my own peace of mind, but it can be significantly higher when customers get round to paying me. Barclays going bust isn't a risk that causes me to lose any sleep, but after the debacle of 2008 it isn't something that can be completely ruled out.
That is exactly my view. Why that recent event, still less than ten years ago, is so easily forgotten in banking discussions I have no idea. This clearly demonstrates that the risks are very real and very recent. I cannot understand anyone not realising there are risks in modern banking. Not least for the poor savers who put their faith in banks. I particularly agree that one of the banks should have been dropped like Northern Rock because then the lessson might have been learned that, collapse through the losses that incompetence and over trading by banks produces, will not necessarily be subsidised by the state. Deposits are guaranteed up to £85k per person per license, that's a fair enough limit imo but not enough to 100% cover many small businesses (my own included). I try to keep a minimum current account balance of £200k for my own peace of mind, but it can be significantly higher when customers get round to paying me. Barclays going bust isn't a risk that causes me to lose any sleep, but after the debacle of 2008 it isn't something that can be completely ruled out.
Which is in fact what has happened because currently the taxpayers are the fall guys in alintrusive. In this case the taxpayers, pickedup the tab without warning, consideration, compensation or even consultation.
As it happens FBLM seems to have taken his ball in because he cannot reply to the many helpful posts advising him of the actuality of the real risk in modern banking. That is his choice, but it does mean we are less likely to have to keep correcting his incorrect assertions. We will also not be able to discuss the dangers of Zero rate interest rates as an academic point, which is presumably where this matter would have lead. Not a subject I am over fond of anyway, personally.
IMO once interest rates fall to a level whereby the value of money itself is threatened, then I think that the collective failure of our political leaders en masse has already allowed the economy to fall to a pathetic point which by any reasonable management of the economy in a reasonably constructive way, ought to have anticipated and prevented years before. Perhaps the worst feature in all of this, as a comment on the inadequacy of our politicians, is that NONE of them at the time of the crisis in 2007 could actually see what was coming.
Tony Blair and co made the mess by buying votes and allowing totally unaffordable mortgages and bank lending to go on and on unchecked in the grossly overblown and over traded banking markets and that this was repeated throughout the Western world. What is particularly galling, is that none of the opposition made any real complaints about this at the time either. Total failure by our banking institutions was supervised and regulated throughout the entire process. Inadequtly and ineffectively but at huge costs. Much good it did us.
No one was really in effective control of any of this as the events subsequently proved. No one were ally understood the sgraceful nonsense going on at te time. The mess that resulted and cost the taxpayers billions should have been the joint responsibility of all those politicians. Modern politics has become devoid of any sense of responsibility or concern about anything except staying on the gravy train that politics has become. I somehow doubt we will be seeing any apologies or recompense.
As DJRC suggests the time has come for individuals to look out for themselves. Because regrettably no one else will do so. Take every possible opportunity and make the most of your chances. Be aware that the promises of government are just hot air designed to keep them on the gravy train. They look after theselves. We must look after ourselves. And above all be aware of the critical essentials. Never, ever, trust or rely on the government. They Will Always Let You Down.
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