OT: shortage of investment bankers

[sm_jamieson]

Well if there is a large turnover of employees thats one reason why the market for IBs is so small. Simon.

[Doctor Drivel]

[stuart noble]

Thanks for what the author of the above article would probably term a "30,000 feet" view. What I'd like to know is what happens at street level. The UK govt issues a bond that gives you your money back plus interest after 5 years. The bonds are bought by, say, the Chinese, who have to spend their surplus somewhere, and who have a vested interest in keeping us afloat. The bonds also have a market value, but this is based on the confidence created by the large Chinese holding. At some point the market starts to doubt whether we can pay back the dosh. Is this what has happened to Greece? I spent a couple of years in Capetown in the early 60s and the anti-apartheid view then was that, if the whole population had a stake in the economy, the country would flourish. Doesn't seem to have worked out that way, but it may be that Africa doesn't really lend itself to economic miracles. Too busy with inter tribal squabbling and gang warfare.

[js.b1]

Another good link for people:

has a slight bias re M&G, but good for "wibblings".

Greenspan & Bernanke (Fed) and the Swedish crowd are all Princeton socialists - much of their work was around "1920s without 1930s" and "preventing Japan deflation happening here". Consider, without the perpetually rising housing market "ATM Cash Machine" we would essentially still be in 1990s recession. Greenspan made the choice in

1995 to return to 1984-1987 since there was no economic growth and bubbles are only visible in hindsight anyway.

From 1970s low labour foreign countries began to displace USA labour & UK labour. The credit driven consumer boom was a means to 1) replace earnings with debt and 2) replace growth by transfer from children's future growth at expense of their living standards (multiple occupancy, live with parents, charged for university degrees which in many cases are little more than secondary education spread over more years). Unfortunately when you combine labour export with a credit driven consumer boom you export GDP at an even faster rate. The net result is out of "4$ spend" you only get "1$ domestic GDP and 3$ foreign GDP" which results in ever more lax credit to achieve GDP *and* migrates your "economic empire" to foreign GDP lands. The "solution" posed by GB was to replace consumer spend with taxation & gov't spend, public sector spending to hide the declining private sector. In the meantime Charles Handy and others developed the "cloverleaf organsation" which was merely a "cloverleaf society" where an oligarchy have perpetuity and a slave class under globalisation is left to suffer the forex imbalance eventual rebalance supplemented by all the debt they can carry.

Essentially how to create an illusion in what is a secular migration of economic leadership. The growing concern is that countries are choosing perpetual debt & devaluation - or at least trying to were it not for Euro membership preventing it. Germany needs the Euro ironically to prevent its currency appreciating relative to other EU countries and destroying its manufacturing exports.

In the long term housing deflation will eventually take hold, but from a much higher level - masked most likely by inflation. As yet we are still trying to maintain a goldilocks economy based on credit binge, indeed 2008 was not seen as a correction but merely an incorrect action where stock & house prices must be restored to 2007 levels. Transferring the bubble to sovereign debt was deliberate by banks, since they were being virtually blackmailed by USA & UK policy into "open the spigots and a-posteri credit ratings in place of a-priori

1984-style". The banks to estate agents of course knew it was a one- way ticket in commission, bonuses and fees. GB thought he could spend bankenstein profits indefinately.

The spanner is despite the UK being the global centre for money laundering (CIA) and insider trading, eventually the financial empire WILL migrate east which is why they are willing to pay *anything* to keep people here: a blank cheque. When it does GB is going to be left bare and the emperor will have no clothes.

GB might actually want to lose this election, so he can inherent the votes of the next one. What is stunning is just how far taxes have to rise & cuts have to be made from 2010 to 2014.

Greece Portugal Spain Ireland all have relatively short duration gov't debt - which means whilst they pay (paid!) little interest due to low ST rates they are more susceptible to bond market perceptions. UK has relatively long duration gov't debt, which provides a cushion courtesty of the Debt Management Office. USA however has a ST duration of 2-4 years which is horrific and means the USD could well get a kicking from the bond market going forward - a run on the dollar. This is particularly why China is buying commodities whatever-the-price whatever-the-quantity so it has a "wash" with its USD holdings - if USD tanks commodities explodes upwards, if commodities tank USD explodes upwards (commodities are priced in USD, one reason for the oil/commodity backed USD when the UK-Pound is backed by BoE alone).

When debt reaches 90% of GDP you lose 1% GDP, and this is going to eventually stagnate western economies unless they choose the inflationary route - but bond holders will absolutely murder their bonds & currencies in return. Realise when you spend 50B on interest payments it can very quickly become 100B and 150B from a very low rate level.

Banks are providing the carry-trade right now, borrowing low ST bank rates (2%) to loan gov't at high LT bond rates (5%) which gives them a

3% spread for bonus & recapitalisation city. Unfortunately when rates do begin to rise this ends and you will see quite a "bowel movement" in the market. The Bond market is what matters, stocks are small in comparison - derivatives are going to be interesting re 650T$ as someone will get on the wrong side having leveraged up on cheap debt.

The next 4 years will be ones where whoever gets elected is going to age quickly & regret entering politics :-)

[The Natural Philosopher]

Yes.

One of two things happens. The price of the bonds drops so you cant sell a pound bond for a pound, or no one buys them at all.

What this means is you end up paying a ruinous rate of interest. Which makes the problem you borrowed FOR, worse.

Ultimately, you end up with no cash, and owing lots of money. Bust. Or 'in default' to use the polite term.

In the case of the UK the thing no party dares mention, is that if the PERCEPTION of the markets is that the UK is a busted flush, then it wont be able to borrow at all, or borrow at anything less than a massive interest rate. At this point the government, if it actually exists, will have no choice BUT to make massive cuts. There wont e.g. be money in the bank to pay public sector wages.

This is where the conservatives are making more sense. They have to be seen to be very ruthless, for fear of something even worse.

Like any business that owes the bank, if you aren't seeming to me talking the problem seriously, the bank wont lend.

Publically, none of the major parties have presented credible savings plans. However privately they admit that swingeing cuts are mandatory. The temptation for Marx and Spender, will be to let the markets enforce discipline, then they can blame it on 'market conditions' 'those ungrateful banks' etc etc. The Tories would end less painful. But in the short term very unpopular.

The country is more or less flourishing, but that's got nothing to do with politics. And a lot to do with having coal, gold, and uranium.

[The Natural Philosopher]

Aided by income tax rises and the rise of the socialist society, which taxed labour and encouraged businesses to move abroad.

And a way to create employment in a 'service sector' to replace that lost in manufacturing/

Pretty accurate I'd say.

He will be gone before then.

Yup.

Never mind the tossers at the top. They still get a salary.

I foresee 30% VAT and petrol at £2 a liter.

And 10-15% interest rates, and 20%+ unemployment.

Still with bugger all dole, at least a lot of the immigrants will piss off back where they came from.

WE are all going to have to pay the money back or leave the country.

The only decision is whether its the productive export led workers who pay extra taxes, thus stifling the recovery, or the public sector that takes the hit, decimating services, but at least allowing some chance of having an economy at all.

[Tim Streater]

Righto - but not 'til I've had coffee. :-)

But they make a transfer of real dosh to (say) me so that Mr Bloggs can buy my house. He thus has a mortgage with them. So where has *that* dosh come from?

[The Natural Philosopher]

hot off a printing press.

[djc]

It's a game of pass-the-parcel. Mr Blogs pays you, you deposit that money in a bank, the bank (any bank, they are all part of the same game) has money still. So long as you, and everyone else, believes the money is safe all is well. If not you have queues outside Northern Rock. Who cant pay out everybody's money unless every borrower is also standing in the queue to repay their mortgage etc. In steps the government, with a printing press, and so long as everyone believes the newly printed money really is real money because the government (trust them!) say so all will be well. If not... welcome to Greece...

[Andy Champ]

You didn't mention inflation above savings rates, to make sure that any saved cash becomes worthless...

You might like to look at Argentina.

Andy

[The Natural Philosopher]

there is an answer to that: invest in non UK earnings companies.

I've got a tidy sum in a nuclear industry tracker fund. +10% this year alone.

[Mark]

I doubt that. There was considerble difference between individual courses at the university I went to (and a difference in their entrance qualifications).