23 June 2009
It Is Scandalous That The Tories Are Scoring Points On Executive Pay.
Cameron and Osborne's mates in the city are hedge fund 'short' betters. They brought down the banks and the economy. They fund the Tory party. They earn MILLIONS! For these guys to be running rings round Brown and the Labour party is laughable. But it shows just how crap Gordon Brown is.
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Neil, the hedge funds were not the problem, it was the banks. Nor do short sellers cause any problems unless there is massive coordination to artificially drop a stock price, (a vanishingly rare event that I believe would be illegal anyway).
ReplyDeleteAgreed, a severely crippled snail could run rings around Brown but the targets of your missplaced ire actually have some idea of what they're talking about.
Falco - was it right to ban 'short' selling for a month as Darling did? Otherwise we might well have seen Barclays fall as well.
ReplyDeleteWhat good does this betting on share prices do? What does it actually produce for our economy?
Isn't it just rich people using their wealth to bully the markets?
"Isn't it just rich people using their wealth to bully the markets?"
ReplyDeleteNo.
"What good does this betting on share prices do?"
It exposes genuine weakness' in firms that they would prefer to keep hidden. There's no point shorting a good comany, you'd just loose your shirt.
"What does it actually produce for our economy?"
It makes the market more efficient. Hard to put a value on that I agree but you can at least say that it does produce X value.
"was it right to ban 'short' selling for a month as Darling did? Otherwise we might well have seen Barclays fall as well."
I don't believe that it was right to ban shorting but it is fairly complicated. The banks got into the state they did because of an implied guarentee from the government. If you know that you're going to be bailed out if you fail then you might as well adopt a high risk strategy. With Brown encouraging bank mergers and increased lending you reached a point where not only were the banks more likely to fail but that it really would be a disaster if they did. It's at this point that you have to make the choice between bailing out the banks, banning shorting so that there would be less evidence of bank weakness, etc., or, having set the banks up for a fall, going ahead and letting them take it. Obviously everyone went for the first option and so far as lessening short term pain is concerned it was the right thing to do. However, it does mean that this kind of risk is likely to build up in the system again and who knows what that will cost to sort out.
Falco- some wise words, but it does seem to back up what a lot of us lefties have been saying - that excessive pay comes from our pockets whether in the private or public sector. Short selling is just speculating and we all know where that got us in the housing market. Surely bubbles are a fault of capitalism, not something to be lauded. Sometimes we have to accept that making money is bad for us - speculative profit is paid for by those who actually produce something.
ReplyDeleteFirstly, what is "excessive pay"? I view "correct pay" as:
ReplyDeletevalue added - (costs + profit)
Provided pay does not exceed that formula I think it would be hard to claim it is excessive, (though how to calculate "value added" and what level "profit" should be are open to argument).
In the private sector if you view the CEOs pay as excessive then you are always free to take your business elsewhere, there is no compulsion to pay for it. Obviously that is not the case with the public sector, (including nationalised banks). Regarding the banks particularly, it should be made clear to them that there is no possibility of a bail out if they fail. That way you would have more, smaller banks, most of them operating a lower risk strategy. If one of them goes to the wall, too bad, its a problem for the shareholders but not the economy at large.
"Short selling is just speculating and we all know where that got us in the housing market."
Love the conflation of the housing market problem, (it went too high), with short selling, (helped correct prices down). There is nothing wrong with speculating but you have to accept that people can loose just as much as win. That's not a bug it's a feature.
As with the bubbles, you are bound to get them and this need not be a drastic problem. Corrections show the market is working, not that its failed, (assets aiming towards the stratosphere forever would show market failure). However, you run into big problems when the government keeps trying to stave off minor crashes. There is no cure to "boom and bust", (bet Brown regrets that one now), but if you keep patching up the bubble then there is hell to pay when it does burst.
"Sometimes we have to accept that making money is bad for us - speculative profit is paid for by those who actually produce something."
Making money is not a bad thing and speculative profit is paid for by risk taking. The thing about speculation is that its not always profit, there's often a loss. Do you really want to ban people making and loosing money?
"if you view the CEOs pay as excessive then you are always free to take your business elsewhere"
ReplyDeleteNot really. How can I watch top live Premier League Footy on the TV without paying Sky and Murdoch? There are loads of products you can only realistically get from one or two companies. I hate Coke and Pepsi drinks, but wherever I go, unless I want to die of thirst I have to drink their sugary/aspartame rubbish.
How can anyone EARN 9 million quid in a year? You might excuse somebody who actually invents something or produces something but bankers CAUSED the recession with their mismanagement.
"If one of them goes to the wall, too bad, its a problem for the shareholders but not the economy at large."
So all those savers who lost their money and are rioting in the streets are NOT a problem. Are you really saying you would have let Northern Rock, RBS and HBOS go bust? The whole banking system would have collapsed around our ears - no ATMS or lending, businesses going bump by the second. Return of the soup kitchens and millions starving might be just a 'market correction' to you, but to most it is complete and utter madness. I think this is where your economic theory comes a cropper when it hits reality.
"So all those savers who lost their money and are rioting in the streets are NOT a problem."
ReplyDeleteThere's already the depositors guarentee in place so no, they won't have lost their money.
"Are you really saying you would have let Northern Rock, RBS and HBOS go bust?"
RBS and HBOS were allowed, even encouraged, to get "too big to fail". What I'm suggesting is that you remove the implied guarentee and then banks would be both smaller and more risk averse. Northern Rock going to the wall wouldn't have been such a problem, the depositors would would have got their money back quickly and other deptors paid off as the mortgage book was run down and largely paid off. The crisis element wouldn't have been any worse because we were already deep in the mire. However, you can't have a flagship employer going bust in a Labour area can you?
"How can I watch top live Premier League Footy on the TV without paying Sky and Murdoch? There are loads of products you can only realistically get from one or two companies. I hate Coke and Pepsi drinks, but wherever I go, unless I want to die of thirst I have to drink their sugary/aspartame rubbish."
You can decide if you are willing to pay to watch those matches and you can drink water/anything else instead of coke. With the public sector you are forced to pay even for things you don't want at all. Imagine if sky had nothing but wall to wall hungarian folk music, (I'm assuming your not a big fan), but that you were still forced to pay for it, that's the equivalent.
"How can anyone EARN 9 million quid in a year?"
By adding more than that in value to the business. Whether they actually did so or not is another matter but as I said above; if you don't believe it is justified you are free to spend or invest your money on something else.
CEOs made the banks go bust, how did they earn anything? Sky has a monopoly, Coke and Pepsi and Disney and many other corps are ubiquitous, they are everywhere. You would have to live like a hermit to avoid them. It is effectively impossible to not buy a product that hasn't been advertised. We all pay for Sky and ITV whether we watch them or not. The average is about 300 pounds per household. Much more than the licence fee. I pay for private healthcare as all their nurses are trained by the state, ditto private education. The list goes on
ReplyDelete"CEOs made the banks go bust, how did they earn anything?"
ReplyDeleteAs I said before, you don't have to use a bank if you think the CEOs are overpaid.
"Sky has a monopoly, Coke and Pepsi and Disney and many other corps are ubiquitous, they are everywhere. You would have to live like a hermit to avoid them.
It is effectively impossible to not buy a product that hasn't been advertised. We all pay for Sky and ITV whether we watch them or not."
Neil, this is just wrong. You don't have to give money to any of these people. Don't open your wallet, it's not that difficult. The fact that there is advertising on TV does not mean that we have to pay for it, only cost effective advertising is used for any length of time. Sky has a monopoly on the football, (not keen on the Folk music then), but it is still up to you whether to pay for it or not. Fun as the football may be, you can live without it, so you do have a choice.
"I pay for private healthcare as all their nurses are trained by the state, ditto private education. The list goes on"
You may pay for the nurses training but you get the benefit of the tax contributions from those who go private. Education particularly, it is a great saving for state education that private exists. Parents still have to pay for state education but if their children don't use it then there are more resources for the rest.
Those who do go private have a legitimate point of complaint that we ignore because the state likes to tax them; why should they have to pay for something they don't use?
falco, i would love to do a cost/benefit analysis for the taxpayer of private ed and health. I am convinced the taxpayer loses out, especially as they are tax exempt. We all know people at the top do not pay their share of tax, so don't let them fool you into thinking they are hard done by. It is the poor who are heavily taxed. You miss my point about Sky - whenever i buy a product that is advertised i pay for these media. I do not have to watch them. I would have to walk round with a dossier on all products and where they were advertised. Obviously this is impossible in practise. In theory i have choice, in reality i have to choose from what is available in reality. The corps own everything, i wiuld have to go and live in the arctic to avoid them.
ReplyDeleteIt would indeed be interesting to do a cost/benefit on some areas such as health, (I think it is unlikely that private patients pay less in than they get out). However, on education it's pretty cut and dried.
ReplyDeleteAll taxpayers pay into a fund to provide education. Every child is eligable for a slice in the form of comprehensive education. Some people go private and therefore do not take this slice. It doesn't matter that most private schools are charities rather than business', there's no tax exemption on paying school fees.
The other issue seems to boil down to the fact that everything you buy is sold by business', (who else were you planning on buying from), they all advertise and this advertising cost forms part of the product cost. However, they are advertising because they believe that they will get a higher than 1:1 return on their money. Sucessful advertising should end result with lower unit costs.