“You’ll have noticed how many people at the Occupy events mentioned the need to pay down the deficit and engage in austerity policies (not)! ”

And that in a nutshell is why the great majority of people look on these protests and do a mental facepalm. It’s a bunch of trade unionists and students with a smattering of assorted other lefties, and none are livinbg properly in the real world and can face up to the fact that governments have caused this second crisis by spending too much and running too excessive deficits.

“4. Since the banks are a key focus of the protests, solutions such as a Robin Hood Tax are a useful example of what might be offered up. ”

The Commission has estimated the bill from the financial transaction tax could be anywhere from 0.53 to 1.76 of GDP.This is the estimated impact of the 0.1% tax on securities – excluding effects of relocation of securities markets to outside the EU. According to the Commission’s own modelling, for every 1 Euro raised in securities tax – and spent within the EU – the EU’s GDP will shrink by 20 Euros.

The Commission does not provide an assessment of the 0.01% tax on derivatives, even though they estimate that relocation of derivatives markets may be between 70% and 90% of current volume.

The powers that be have already pulled away from directing revenue towards good causes and have stated it would be used to shore up the financial system.

Frankly you are either stupid or grossly grossly incompetent.

@1

Fuck off, Tyler

@2

There should be more than simply saying that a Tobin Tax would driver certain types of investment away. If we want to rebalance our economy away from the financial sector and reduce the risk of further severe crashes we need to include a risk factor in our assessment of the financial instruments being used and find some revenue to go towards the development of SMEs and startups. A Tobin Tax could provide a revenue stream and could be directed against the riskier financial transactions.

“and can face up to the fact that governments have caused this second crisis by spending too much and running too excessive deficits.”

Goldman sachs of course had nothing to do with the fraudalant behaviour of Greece.

“There should be more than simply saying that a Tobin Tax would driver certain types of investment away”

Like:

It will cause the lose of hundreds of thousands of jobs
For every one unit redirected as tax twenty units of GDP are lost
It pushes the cost of everything up right across the economy
It will generate no more than 35 billion
The commission hasn’t even done a full assessment
Any revenue generated will disappear over night- oddly enough to bail out French and German banks.

Are you stupid? Yes, to rebalance our economy away from the financial sector is an urgent requirement but to do this we need “growth” – these taxation measure are self cannibalization, this is not growth.

For god sake when are unaccountable idiots like owen ever going to be held to account? He has been asked time and time again to explain aspect of this tax that do not add up, after struggling with most basic of economic theory in trying to do so he has simply refused to answer anything.

@ Cherub

Wonder if Sunny blocks your comment for being abusive (as he has mine on occasion). I doubt he will given you’re on his side as it were….

Regardless….if that’s the best you can come up with, i think i’ll live.

Suggest you read what don has said @5 though before you plow on with meaningless leftist drivel about Tobin/FTTs.

if I believed in any Gods [I don't, but hey..] I’d be howling at them right now

Ok, either Hague is a complete asshole or he is magnificently missing the point.

@Tyler: moment of revelation for you. Listening? Cool, here goes

National debt isn’t especially important. It doesn’t matter very much.

pretty much every nation that exists is in debt. Some considerably more than others. American debt is currently more money than exists, and it doesn’t matter shit. The US owes Japan alone more money than could ever possibly be paid off, and Japan doesn’t care. It doesn’t matter.

what *does* matter, rather a lot, is what people do with debt. Where The System has gone horribly, violently wrong, is in people making an awful lot of money selling debt as equity, by lying about it. Telling people ‘yes, you can totally borrow £100,000 and still afford to breathe every month’, while knowing full well it will be near impossible to pay it off.

effectively, people using gratuitous level of debt as positive money. This is a ‘toxic asset’. It’s like going to a supermarket and buying 5 chickens for the price of three, then discovering when you get home they’re so off they have maggot farms in them.

Banks figured out a while back that a really good way of making money is to have a perpetual debt cycle. Give away £1000, and have the lender pay you back £1,250 over a year. Give away £6,000 and have the lender pay you back £12,000 over 6 years. You may have noticed banks will offer bigger loans when you’ve paid off smaller loans.

that’s a good income for the bank not doing very much.
but the banks got greedy, and got stupid, and offered £10,000 [say, £18,000 return] to people who could only afford to pay back £12,000. That causes a shortfall in the money the bank expects to get back. The bank then has less money on hand, and struggles to switch money around. Struggles to make investments, struggles to keep up with its own lending. And still pays its own Execs £million bonuses.

the crash happened because pretty much every bank in the world was doing this. Selling mortgages worth vastly more then their properties, two years of payments short, to other banks at premium rates. Failing to disclose that loans were routinely defaulting.
Banks stopped trusting each other, stopped giving money to each other, because *they all knew each other were doing this*.

the clever, nasty people at the top were completely aware of this, and placed bets that those packages would fail. Then the /very/ nasty people put together packages of toxic assets [remember, this is debt dishonestly sold as profit] and bet against /them/.

it’s a bit like sending a pro boxer into the ring knowing he’s heavily concussed, pretending he’s on the form of his life, and betting your entire life savings on the other guy.

the entire banking sector has been doing that for years. It has cost people and governments billions of £. It has caused rather a lot of people to lose their homes and jobs. And the banks are still doing it.

now. Governments are reacting to this by giving all their money [which is actually my money, your money] to the banks. Who are still making bad bets on it. Governments are then putting /less/ money back into their own populations and taxing them more, because they just gave the banks all the money.

and the bankers are still paying themselves £millions for having achieved this.

and the governments are now telling us they won’t do anything about bad banking practices for several years.

that is what the protests are about.

Excellent post which largely sums up the situation I feel. I personally support the protesters, but I think the anger is misdirected in this post though. I don’t think the protesters are angry that the banks are still profiting whilst the 99% are suffering. The way I read it is that the government bails out businesses and banks to the tune of billions because “they’re too big to fail” but constantly refuse to help the man on the street when they’re in trouble and infact do to the exact opposite, squeeze more money out of us than ever before. That’s my take, I may be wrong.

@7 Steven

I’m an interest rate trader….I kind of know what caused the current financial crisis. You don’t have all the details right.

The 2008 crisis had its roots in several places. Interest rates were set too low by Greenspan, the 1994 CRA in the US forced banks to offer mortgages to people who otherwise would probably not be able to afford them (and in the process created the subprime mortgage market) and as you say banks made poor decisions about who and the amount the lent out, not least because the view was that the housing market in the US would keep going up (which makes subprime mortgages fine as the remortgage is less than the cost of the house).

Banks and more importantly FNMA and FHMC were under pressure to lend more, and other investors (mainly pension funds) wanted to get involved in the housing mortgage market in a convienient way, so CDOs became the vogue – its easier to trade a large block of loans than looking at each one individually.

Yes, a few “nasty” people bet against mortgages, but apart form a couple of high profile cases this really was a minority and pretty circumstantial to the crisis. More importantly the models banks used to price and value the CDOs used historical data, so massively underestimated the chance of collective default and overestimated their value. Again, I’m sure a couple of banks actively sold pups, but quite a few banks were hugely long CDO tranches and took massive losses themselves, because basically they got their sums wrong.

When housing prices stopped going up as fast, and a lot of the subprime/ALT-A mortgages resets came up, defaults rose massively ina short space of time. CDOs started falling over, and banks mortgage books started taking huge losses (primarily retail banks, though a few investment banks got heavily caught up as well). This lack of trust, not knowing who had what and what financial state other banks were in led to the money markets effectively shutting down. This last bit is what put paid to Lehman’s and Bear Stearns.

Banks weren’t lending inflated amounts against properties – the properties themselves were inflated in value as everyone rushed to buy. When the bubble burst though, then everyone was trying to sell/foreclose at the same time driving a falling market down faster and harder.

Fast forward 3 years and now we have a crisis centered around government spending.

The amount of government debt really does matter.

During the period since the 2001 dotcom bubble governments have enjoyed good GDP growth, yet still managed to run deficits every year. Most now have massive structural deficits and quite high debt/GDP ratios. More worryingly, there is huge spending off balance sheet as well, and consumers are heavily indebted.

This crisis is centered around investors worrying that countries are going to be unable to pay back their debts. Fiscal incontinence coupled with a severe recession, and the solution governments have come up with is “more debt”.

That might pay to the voting public, but to investors it’s like being served a sh*t sandwich.

And the amount of debt really does matter – it stifles GDP growth in the first case (debt interest payments) – and if the problem is let totally out of control it can cause more severe problems. Look at the PIGS countries for a start, but even Japan has got an enormous problem, as even with their super low interest rates debt financing still takes up the lions share of their tax revenues. It’s not sustainable.

As for the government giving “all” their money to the banks? It seems you are singing from the left wing hymm sheet here. Yes, banks have been bailed out, but the current cost to the taxpayer in the UK is 5-10bn. In total. Of which most will eventually be recovered. The ANNUAL budget deficit when Labour left office was 150bn.

And why are quite a few banks in trouble now? Oh yes, it’s because they were forced to hold (by government regulators) lots of government debt as liquid assets and collateral against loans they’ve made…..and much of that EU debt has gone bad, so again banks and other investors are going to take losses, but this time thanks to governments being in or close to default. Yet these selfsame governments want the banks to hold more of this junk (Basel 3) AND make more loans, which would require larger capital reserves. Can you not see the problem here?

The latest bank bailouts are because they’ve lent money to governments who can’t pay it back, yet by law banks are forced to hold a lot of this paper and to do any lending have to…..its a catch 22 and at least this time the banks really are fairly innocent.

Hi Owen, as a member of two TCU affiliated unions, can I ask if the TUC has yet led a delegation to Occupy LSX ? I hope so – after all, they have spontaneously declared support for our November 30th strikes, so some reciprocal friendship would only be polite. Plus last time I saw Paul Kenny, he was promoting occupations and protests – so best show some support in person as well as verbally ?
Plus, we will all need some post-picket focus on November 30th. If the Occupy LSX people can hang on that long, wouldn’t a good midday rally for strikers in London be the St Paul’s/LSX area ?

(that would be TUC affiliated unions – excuse the fat fingers)

nothing – they are just spoilt kids.