h2g2 The Hitchhiker's Guide to the Galaxy: Earth Edition

Morning all,

With all the dire talk and predictions of economic slowdown, hints at recession, and the credit squeeze, which are leading to vastly reduced prices for some goods, Are we seeing an end ( or the beginnning of ) to the rip off prices we have been paying when money was cheap?

Looking at some of our local shops, the reductions in prices must indicate huge previous mark -ups in retailing. There is no reason to assume that the same will not apply to service industries too;- especially when food, and fuel are set to rise substantially. Can we assume that the belt tightening which is probably going to follow will result in keener and more realistic prices for goods and services?

We can all moralise about the greedy bankers who have invented 'new' schemes to make money - largely to boost their personal bonuses, but look for a moment at the greed which goes on all around us.

Consider the price you pay a dentist for false teeth, or a 'bridge', then 'phone your local Dental Lab who make them and try to find out what the dentist pays to the makers - you will be horrified at the mark up!

In short , can we hope for a more realistic cost to sales price ratio which might benefit us all?

Novo

Possibly; but won't it be the case that there'll be less money going around anyway due to recession so it won't actually make that much difference?

Myself, I'll be happy if my local pubs stop charging London prices for a pint of beer .

I received yet another indication of the scum that passes for a banking industry this morning.

A letter arrived for my daughter, who is away at university.

The bank are informing her they are charging her £30 for being overdrawn on her account and she is now £100 overdrawn.. However a little investigation shows that in fact my daughter went £5.00 overdrawn.

In other words this 'business' has now charged her £95 for lending her £5 - for a week.

I thought usary was illegal - I'm pleased to hear that more and more people are reverting to cash. It can't be cloned, and it can't be used to trace your spending patterns and whereabouts.

In the meantime the chancellor lends £50bn on our money to support the banks who might be losing money due to their bad business decisions - like charging people £95 for borrowing £5. Which they will doubtless end up marking down as a bad debt so they can tell us all how terrible hard up they are.

I thought they were businesses and shares in a business can go down as well as up.

Isn't this exactly the kind of charge that has been repeatedly successfully challenged and the banks have paid it back? I am pretty sure there is a complaint form somewhere online to help you claim that money back.

Does she know you open her bank statements? I'd have killed my parents for opening my post while I was at uni, unless I had specifically asked them to open and read something to me!

From working in a bank in the past I can tell you that pretty much everyone who came to the bank to discuss their charges got them refunded, with a quick check to make sure that they know what it was that pushed them over and how they intend to make sure it doesn't happen again.

The trouble is that people are reluctant to go to their banks until they get really angry, when it's often too far down the line to fix straight away. My suggestion for your daughter is to do that- go straight to her branch. Well, her nearest branch, anyway. Fingers crossed they can get it straightened out, possibly put a tiny overdraft in place so that if she just dips over again the same thing won't happen again.

I think you first need to work out what you except a reasonable margin of profit to be.

Total spend on energy has risen even when inflation is taken into account but has our total energy usage got anything to do with it or is soley down to suppliers ripping us off? I brew up in a house with on gas fire and water for baths was heated on bath night. Now I live in a house that has a radiator in every room and hot water on demand

Banks make extortionate charges but they pretty much all operate the same way and us as consumers sign up for it. Arent we as much to blame for buying into that system?

One thing I do know is that for the last 15 or 20 years certain papers have run over and over again peices moaning about "rip-off Britain" but Polish workers come here pay tax at source and VAT etc then pay taxes back home on their earnings too. The situation here cant be that bad if people are willing to come here pay three lots of taxes and stil think that the wage levels here are worth it can they?

Or have I been mislead?

McKay, you're confusing retail and investment banks. The reason the govt are pumping money into the economy is that if all banks go tits up then it would be extremely unpleasant for the whole economy, *NOT* because it gives them a licence to charge students overdraft fees.

As for prices in general going down, well, you tend to get sales when demand is weak. For banks *and* supermarkets, if they're making relatively large profits (compared to turnover, most definitely not in absolute amounts) then there would be a hell of a lot to complain about. Of course, Novo will have these figures to hand?

This article from the FT is a bit technical but it blows the whistle on what has gone wrong and how the taxpayer is picking up the bill.

http://www.ft.com/cms/s/0/6370dc22-0ce2-11dd-86df-0000779fd2ac.html

It is a good article WA, but I seemed to miss the bit where the taxpayer picks up the bill.

>I am pretty sure there is a complaint form somewhere online to help you claim that money back.<

There are several, even the BBC website has one;

http://news.bbc.co.uk/1/hi/business/6170209.stm


However, there is a test case running at the moment and no banks are acting on these claims until the case is concluded (and possibly appealed against if the banks don't get their way)

http://news.bbc.co.uk/1/hi/business/7178766.stm

That report says that there should have been a resolution around Easter, that has still not yet happened.

Can you guess whose case is in the pending file?

The point about super-senior debt was that it is the banks' own lack of risk management that is contribuitng towards the capital/credit squeeze. A £50bn taxpayer bale out is much easier than rights issues and balance sheet right downs that might effect careers and bonuses. Of course they are pushing at an open door with a PM who's claim to fame is to have been the most successful Chancellor in all of eternity. Blahh....

WA, if you think that this 'bale out' is because it 'might effect careers and bonuses', you're a moron. It isn't, it's to stop the banks' -ups from sending the whole economy into recession.

Although that doesn't square with your 'attack Brown at any cost' attitude, so I guess you can ignore it.

Hi Pedro,

Your red underpants are showing........

Novo

Hi Novo,

Red scants or not, attacking the government for trying to prevent a recession is just total horseshit. It's their *JOB*.

If someone started a thread on why GB's a , I'm sure we could all pitch in, even if from different parts of the political spectrum, but not for this.

An entertaining economist's guide* to why having money floating around the economy is very important.
http://web.mit.edu/krugman/www/babysit.html


*not actually an oxymoron in this case, honest.

Morning Blicky,

Having worked in manufacturing all my life until 60, I can tell you that {in plastic products for industrial use ) we worked on the fact that the Raw Material should ideally be 40% of the selling price, so the operating costs of the factory would effectively add another 30% or so , thus we looked at a 30% profit. naturally after taxation we ended up with around 10% of the selling price as actual profit. Since the turnover was in the £ millions the nett figure looked quite good, but in reality it was the middle men, or those who used our industrial products who made the killing.

However, consider my Example of dentists who pay say £50 -60 for a lab to make a set of teeth and charge clients £200 and much more if you are 'Private'.

It is the end provider to the public that makes the killing.....

Think Tesco e.g. who batter farmers and growers down in price, then take a look at their profits.

Novo

>> Think Tesco e.g. who batter farmers and growers down in price, then take a look at their profits.>>

From http://news.bbc.co.uk/1/hi/business/4435339.stm

The UK's biggest supermarket chain posted underlying pre-tax profits of £2.03bn ($3.83bn), up 20.5% on 2004...

Tesco's overall turnover increased 12.4% to £37.1bn, with sales in the UK making up £29.5bn of that figure.

Looks like about 6% or so (underlying) profit to me, which is hardly excessive. Which makes you wonder
a) What their accountants are up to?
b) Are they taking a hit to shaft other businesses in the short-term?

Hi Pedro,

Loved the baby sitting link!

Tesco spends large amounts of what would be profit , o buying land for the future and on opening new stores from Lands End to John O'Groats.

Presumably therefore they are happy with the nett margin because the actual operational profit provides for investment - or have they borrowed it from the banks? - in which case there will be repayment costs involved anyway.

BTW, I only use Tesco as an example because they are so well known. Most people have missed my fundamental point however, which is that when money is cheap, we get charged the price the seller thinks we will be prepared to pay. This doesn't usually reflect the cost to the retailer . Lets forget about dentists for a minute and perhaps consider vets, who will happily charge you a pound or two for an injection of antibiotics for your pet, when the injection costs him only pence.

Am I getting it across now?

Novo

Novo, in the example you gave of your own manufacturing days, your company wanted the raw materials to make up 40% of the final price, to make a 10% mark up. (Which I think is a reasonable profit to aim for, yes?)

Unless you know the mark up vets make, or the operating costs for dentists, how can you say they're ripping you off?

EG, the vet might have to pay for a fridge which keeps different medicines at different temperatures, and very accurately too, in a fridge which costs £5k and consumes a lot of energy. And he might also pay for a nurse and a PA, as well as an accountant to do his books etc., as well as for the supply of needles.

Is this *so* different from your own example?

PS, agreed about Tesco. If they invest a lot of potential profit, it usually finds its way onto their share price, which is what most investors really look at.

Yes. because the raw material costs at dentists and vets are, I claim, much much lower than 40%., and as a factory we had staff, canteens, insurance, accountants, phones, cars, trucks etc to pay for too.

However , you're still missing the point that I am struggling to make , which is simply that when money is cheap we will happily part with it, without quibbling about the price. However when money is harder to come by just look at all the tempting offers around , at much reduced prices. If the goods can still be sold at lesser profit in a 'sale' then presumably we were overcharged initially?. Try having your family Xmas in mid January and it will save you a fortune e.g.

Take the internet for example. Once Amazon got books online running, how quickly did W H Smith, and other booksellers start the lower pricing , or the BOGOF type offers.

Take a look at some of the new mobile phone deals on offer now, specifically yesterdays Independant advert in conjuction with T Mobile.

I know that capitalism and the economy is about making hay while the sun shines, but just how much hay have companies been making?

Novo