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

Oh yes meant to add. Old people do count. We all get old and infirm. That seemed to have been forgotten. Either that or we die; live fast die young and have beautifulish corpses..

We finally woke up from the Thatcherite cloud cuckoo land.

>Two banks HQed in Scotland, you mean<

Yes I know that Pedro, of course. But I bet you - it's a wake up call to those who wanted independance from the arrogant English. How would they have faired without us. A bit like Iceland I imagine.

It'll be interesting to see how the coming bi-election now plays.

<>

An independent Scotland wouldn't have propped up their two biggest banks? And why do you think the SNP's monetary policy would have been like that of Iceland?


As for the by-election, I bet Labour do much better than they would have last month. Better the devil you know 'n' aw that.

>And why do you think the SNP's monetary policy would have been like that of Iceland? <

Because Alex Salmond was forever giving Iceland as an example as to what an independent Scotland could be.

And I missed it!

Didn't know that, should really pay more attention to the old guy. He does talk a lot of shite on economic stuff, Mr Salmond. The SNP were going to give 1st time buyers £2k a coupla years ago. The result would've been an increase of almost exactly £2k on the flats 1st time buyers buy. Go figure, the guy used to be an economist apparently..

An independent Scotland couldn't have *afforded* to have propped up RBS and HBOS.

The idea that they are Scottish banks is a bit of a myth, really. Where do you think the people who work for Nat West live? Or for the Halifax as was? Or Birmingham Midshires? Or Clerical Medical?

Salmond's proposal to take the BOS out of HBOS is ... romantic, shall we say? BOS was a local financial institutution in 2000, and it took the HBOS merger to make it a national one. You can argue whether or not that was a good thing either way. But bits of HBOS would be easier to unpick than others. We saw them dispose of the Australian bank without a blink, but not all of HBOS can be split that easily.

I don't know a lot about the ins and outs of banking to be honest. But I'd have thought at a time like this when public confidence means so much, that common or garden perception needs to be taken very seriously.

The *reality* of Scottish banks, yes is quite likely a myth. But many people see the *brand*. If something is called 'Royal Bank of Scotland' or whatever, people associate that with conservativeness, safety, caution. I should imagine a lot of people might put their money in something because of what it represents. If such a thing were to fail, it would have huge consequences.

It seems to me that at present, perception need to be taken account of as well as hard economic reality.

Only a tiny number of people properly understand the reality of what a financial institution really is. But people want to feel confident and safe in a 'name' or 'brand'. Companies play on that all the time, eg those silly 'Scottish Widows adverts'. It cuts both ways.

But it should bring home to Scots the hard reality that they just can't go it alone realistically now, if they want their brands protected in the global economy.

But then neither can Britain. I fully expect a gradual, overtime, closer relationship with Europe now, and a moving away from looking towards the US....so long as we are pretty much in charge..

But the European model of a more mixed/state interventionist style economy seems far more realistic now to a lot of people I think, rather than more US style laissez faire capitalism. It's just no longer politcally acceptable. We really are part of Europe. Look at what the Republican ideologues in the US were really wanting to happen.

Effers "The final end of the Thatcherite *dream*"

Sorry Effers, but I think Gordon Brown was the man who claimed to have broken the economic cycle of boom and bust. And he has - by nationalising the banks. Now he can control where investment is directed. Part of the HBoS bail out is the guarantee of jobs in Scotland - did he do that for the North-East when Northern Rock went down ?

Suddenly he is popping up in the Midlands saying that manufacturing must be at the heart of our economy - where was he when Peugeot was dumping 4,500 jobs and sending them to Poland ? How does he square that with taxing Jaguars and Landrovers to death ? (I don't really object to taxing luxury cars, but land rovers are working vehicles in many areas.)

"We really are part of Europe" Indeed Germany walked out of meeting saying 'we'll all stick together' then guaranteed contents of deposit accounts - we all saw how much money shot off to Ireland when they did that - I'm sure Germany was thinking of the European ideal when they did it. Like spit.

>Sorry Effers, but I think Gordon Brown was the man who claimed to have broken the economic cycle of boom and bust.<

What Gordon Brown may or may have not have said in the past is now utterly irrelevant. We're into new territory and *everything* has changed. You may as well quote Queen Victoria on Lesbianism....'Ladies don't do that sort of thing.'

McKay absolutely everything has changed. Yes I felt the need to say it twice.

******

>"We really are part of Europe"< McKay, quoting me, without the full context, hence,

I also most precisely said ...

>I fully expect a *gradual*, *overtime*, closer relationship with Europe now,<

Note 'gradual', note 'overtime'

I might also have added, *inexorable* Because I think that's the way the land lies in the future.....gradually, overtime and inexorably.....IMO.

The Mirror's headline today was "Brown saves the world"

Now how much would the Sainted Tony hate seeing a headline like that about Brown and not about his holyself?

Made me feel warm and happy for hours that did.

B

There's a decent case to be made for Brown causing this mess. It's a wonder the people who hate him haven't made more of it.

Mmmmm.

More of a perfect storm than a single cause, surely?

As I understand it the US law changed a few years ago, and that was what mean the US mortgage lenders could the US banks were allowed to wrap their dodgy mortgages up in securities and sell them on. Which of course meant there no consequences for the guys selling mortgages to dodgy customers. And it was Thatcher who de-regulated the banking system in the 1980s which permitted the banks and building societies sell products they'd no experience of and didn't really understand and offset their loans with complicated securities which looked good on paper, but which were festering swarms of evil pus underneath. (I exaggerate for comic effect).

This bring us back to the US mortgages - this whole thing was very predictable from the nature of the products they were selling.

How does ending up with no home and $62k of unsecured debt in just two years sound?

If you were buying a $225,000 house your US bank would happily lend you $250,000 on the basis that the value would increase over time. It would also give you a discount on interest-only payments for the first two years *so that you were paying below base* - say 2.5% instead of 5% (I don't know what US interest rates have been so the %age may be wrong). Your first two years' payments are therefore in the region of $500 per month for a house worth $225k with $25k of negative equity. Guess what happens to that extra $600 per month interest that you've been "let off"? It's added to the sum outstanding, so at the end of the end of your first two years your $250,000 loan is $262,500. Your special deal is over so your monthly payment goes up from 2% to 5% which is about $1100 per month. *And you still aren't paying back any of the capital*. Add in capital repayments and your monthly payment jumps from $500 to $1500 overnight. In the meantime because life's a bitch and other people are in the same sort of sh!t, the value of your house has actually gone *down* from $225k to $200k. But you owe $262.5k on it so even if you do sell it, you owe the bank $62,500 and have nowhere to live.

The only people I can think of for whom that would be a good mortgage product is a couple about to set up in private practice as dentists in the US. However these products were an easy easy sell - live in a $250k house for $500 a month and have $25,000 cash back - who wouldn't want that? The products were mis-sold to people who could only just afford the $500 per month. The agents and bank employees selling them did it to get commissions and hit targets. The banks rolled up the debts into these securities and sold them on, so they didn't care about defaults.

The securities were sliced and diced in a way which made it impossible to tell who actually held the house as security, (ReddyFreddy did a masterly summary of that side of the thing here: F19585?thread=5935091&skip=20&show=20#p696150999 ). This meant that when the customer defaulted it wasn't clear who was entitled to foreclose. On the occasions when foreclosure notices were issued, the customers would walk out on the situation leaving their keys behind, and then the organisations holding the security (like the UK banks, for example) would decide it wasn't worth the costs of foreclosing, and there'd be an empty house who no-one owned and which no-one would or could sell. Not surprisingly squatters would move in and would be used for drug-dealing or manufacture, or it would just get torched. Bang goes the neighbourhood.

This is not to say that Gordie's not culpable, just that there was a lot of other stuff driving it outwith his control, most of it in the US.

B

http://news.bbc.co.uk/today/hi/today/newsid_7675000/7675405.stm

The original premise for this thread (the public sector pension burden in the UK) summarised rather well on BBC Radio 4's Today program this morning.

Take a listen. Can you think of another way to fix this, other than forming a national government and compulsarily converting it all to the defined contribution basis that the sustainable economy's now founded on?

The most striking of the many messages here might be that a significant proportion of Britons are already having to pay more in tax to support public sector pensions than they can affoed to put into their own. That's extreme injustice, surely?

Ben, I agree. I don't think GB was culpable beyond (?) giving banks rope to hang themselves. But he should take some of the blame because he had a good hand in causing an asset price boom (eg he took house prices off the inflation measure in '97 or '98). What really surprises me is that people who can't stand him haven't mentioned it much. *That* seems a bit odd.

Pinniped, how about immigration? The basic problem stems from an ageing population. Lots of immigration would delay it. QED, if a wildly implausible/controversial/unpopular answer. It also has the plausibility factor of replacing one problem with another. (Not saying it will or should, just that it's a possibility.)

Isn't using immigration to solve a pension problem just digging the hole deeper and deeper? And with a predicted 2 million on the dole, what jobs will they do?

<>

Maybe, or even probably. Otoh, problems tend to get replaced by other problems rather than being 'solved'. I vaguely remember reading that a lot of Poles are going home, because a) the Polish economy is seeing a shortage of the plumbers etc, and with their economy growing faster than ours (cos it's easier playing catchup), the wage differentials are less than they were; and b) cos they never intended to live here for ever anyway. That situation could be repeated by (eg) Bulgars in the next few years, and from further afield further in the future.

<>

In the next year or two, probably nothing. In the next decade or three, well, that's a different story..

As a long-term policy, (50-100 years) immigration makes sense, but it has to be controlled far more than it is now. For a start, we should be looking at a stable, sustainable population level rather than the pell-mell growth we've been experiencing. With the economic crisis we're facing at the moment, immigration pressures are liable to exacerbate problems.

It's actually perhaps a blessing in disguise. A moratorium on immigration for five years will see us through the recession and also the next Census. With more up to date population figures, it would allow a coherent policy to be developed.

In the very long term, immigration just puts the problem back, because the developed world has an older population than the developing world. As the 3rd World gets richer, they'll face the same problems.

What would a sustainable population be? From a taxable viewpoint, 80m 25-year olds would be much better than 20m 60yo-s. Will environmental pressures change that by 2050? I'd bet hmmmm.

But will that be the case if environmental problems are 10 times worse then? Maybe. If they're 1000 times worse, definitely. Finding out how much worse they'll be is the crucial factor. Basically, we don't know which trends will be the important ones in the long run, so maybe the demographic trend pinniped mentions will (probably imo) be replaced by something else in a coupla decades, although it won't go away. We'll learn to deal with it by higher taxes, enforced savings (the same thing?), or immigration, or longer working lives or something (I must stress this is in the long term, which isn't what pinniped is talking about. I *think* he's talking about the transition from our current position to what will have to happen eventually).

Spooky coincidence - http://news.bbc.co.uk/1/hi/uk_politics/7677419.stm

However, that system doesn't touch immigration from the EU.