Vat

[spionfox]

All stems from Thatcher this IMO

FFS - how many years has she been gone

 

[Darth Vodka]

Riiight, bank liquidty is down to them loaning too much money and credit default swaps were the shady way of banks disposing of debt to one another, i know all of this.

you mean lack of liquidity?

CDSs: they're not shady at all, it's just insurance - you transfer credit risk, they're one of the simplest instruments in banking

if anything the banks didn't have ENOUGH CDSs...they weren't hedged enough and overexposed to credit risk

This is down to people not paying back the money loaned to them, however the blame lays at the door of the banks and the government that deregulated it all.

bang on...it was the Clinton administration who insisted banks deregulate so that their poverty-stricken democrat voters could own houses...

 

[drew]

I've never gotten my head around hedge funds. But if someone insures a debt and its defaulted on where does the money come from?

 

[highland fox]

FFS - how many years has she been gone

What she has snuffed it ? Great wheres the bunting ?

 

[Steven]

My ideas would be controversial but have a positive effect. Sadly we're in the EU up to our necks so it can;t be implemented.

1) Limit the number of non UK staff per business to a percentage/ratio based on turnover.

~Wait for other countries putting extra tariffs on UK goods and services

2) People out of work will be given a three strikes rule. Refuse a job three times and have their benefits cut by %50.

~Watch the crime rate shoot up

3) Introduce business tax breaks on NI contributions for new employees. Set a limit per company based on staff levels to ensure hiring and firing doesn't take place.

~Good idea

4) Nationalise all banks (we might as well!) All eventual profits go back into the system.

~Watch them become uncompetitive internationally and rely on gouging the UK consumer for profit

5) Increase tax on fags and booze.

~Possibly

6) Lower tax on fuel for business usage

~No way as lorries will become another form of warehousing

7) Increase corporation tax

~I would just incorporate elsewhere under existing double taxation treaties

8) Tax Non-Doms

~They would move

9) Increase benefits for foreign business investment such as car companies.

~Good idea but would prefer domestic investment

Sadly the current incumbent are basing policies on getting back on Joe Publics good side rather than trying to get us out of this shit. None of the above will help them win an election but it may get us out of the shit in the long run.

 

[Darth Vodka]

oh and raise inheritance tax...

 

[Macky]

Riiight, bank liquidty is down to them loaning too much money and credit default swaps were the shady way of banks disposing of debt to one another, i know all of this.

This is down to people not paying back the money loaned to them, however the blame lays at the door of the banks and the government that deregulated it all.

Riiiiiiiiiiiiiiiiiiiiiight, so if you know all this then you'd know that is hyper-simplistic to say that the lack of bank liquidity is due to some people not making loan repayments?
It's straight out of "Economics for red-top readers vol.1"


...and my 'Riiiiiiiiiiiiiiiiiiiiiight' was much more patronising than yours.

 

[drew]

I refute your claims that i read "redtops".....

Whilst there are a multitude of other reasons to the problems you can't say that its not attributed by people borrowing money they can't afford to pay back and the banks lending money that they can't afford to lose, or can you?

I'm not trying to say i'm right and you're wrong, i am genuinely interested in other people opinions as to why we're in this mess. All you've done is said you're wrong.

 

[FoxCovert]

Maybe it's time "How To Manage Money" was introduced into the curriculum

That will never happen, it suits those in power for the mass of the people to be financially ignorant.

 

[FIF]

That will never happen, it suits those in power for the mass of the people to continue to be ignorant.

Fixed

 

[FoxCovert]

Fixed

Eh?

 

[Darth Vodka]

I've never gotten my head around hedge funds. But if someone insures a debt and its defaulted on where does the money come from?

you seem to be asking two questions: what are hedge funds and what are Credit Default Swaps...

hedge funds take private money and try and make more money from it. they do this by betting on whatever they like and hedging is just allaying some of your fears by a counter bet

if someone defaults on a loan you have made to them....

right...if i, Darth Vodka loan money to Melts...it 10,000 GBP and Melts agrees to pay 5% per annum and then pay me back the 10k after ten years...

now...i'm suspicious of Melts paying his coupon (the initial 10k is called the nominal and the annual 5% is the coupon)

so i say to you, Drew, "how about i pay you £50 every year and if Melts doesn't cough up his coupon...you pay me (say) £200" and you say "ok"

then the money flows (initially as the nominal) to Melts, then coupon flows to me every year and the CDS premium to you

if there is a default...you pay me a payment...otherwise at the end, the nominal comes back to me from melts

got it?

 

[drew]

What if melts doesnt pay you a penny? You've lost 10k? But gained 200 from me?

 

[Brauny Blue]

PRUDENCE :icon_roll

The end of boom & bust :icon_roll

 

[FIF]

PRUDENCE :icon_roll

The end of boom & bust :icon_roll

dear

 

[Steven]

you seem to be asking two questions: what are hedge funds and what are Credit Default Swaps...

hedge funds take private money and try and make more money from it. they do this by betting on whatever they like and hedging is just allaying some of your fears by a counter bet

if someone defaults on a loan you have made to them....

right...if i, Darth Vodka loan money to Melts...it 10,000 GBP and Melts agrees to pay 5% per annum and then pay me back the 10k after ten years...

now...i'm suspicious of Melts paying his coupon (the initial 10k is called the nominal and the annual 5% is the coupon)

so i say to you, Drew, "how about i pay you £50 every year and if Melts doesn't cough up his coupon...you pay me (say) £200" and you say "ok"

then the money flows (initially as the nominal) to Melts, then coupon flows to me every year and the CDS premium to you

if there is a default...you pay me a payment...otherwise at the end, the nominal comes back to me from melts

got it?

How do I assess the risk?

 

[Darth Vodka]

What if melts doesnt pay you a penny? You've lost 10k? But gained 200 from me?

200 a year...less the premium i pay you for the CDS

 

[Darth Vodka]

How do I assess the risk?

credit risk from Melts?

an agency such as Standard & Poor will have assigned him a rating such as AAA (good)

if you work for an investment bank or hedge fund, there will be a Credit Risk department evaluating risk

but a lot of it is down to your judgment...maybe you think the CDS is over priced or under priced in the market and hence enter into them yourself...

if you think Melts is a solid payer...you set yourself up as the seller of melts CDS...and cream in premiums from everyone as his fish sales rocket

if you think Melts is about to go bust...but the market doesn't you buy loads of Melts CDSs and laugh as he defaults and you coin it in

as for the repaying of the nominal itself...banks tend to collateralise...i.e. hold a nominal from another deal somewhere to lessen the effects of full on bankrupcy (like Lehmans)

any more for any more?

 

[lazzer]

I bent my wookie !

 

[highland fox]

I bent my wookie !

I think there is an ointment you can get for that these days