HMRC warning..

[BeeLZeebub]

Not really John .... there would be no transfer of wealth from customers/savers who are divorced from a savings/lending process which would generate wealth in the event of positive returns on the investment.

... you can't get away from the fact that, except for someone who 'prints money', if the wealth of one person (or company, or country or whatever) increases then there has to be a corresponding decrease in wealth of one or more other people (or companies, countries etc.). At any point in time, there is a finite and defined amount of 'wealth' (money or assets) in the world, and all one can change is how it's distributed.

Kind Regards, John.

Wow John, that was like reading an old text book Although I grant you that the definition of wealth is not agreed upon, thinking has changed since we left the gold standard in 1931 !!! Fractional reserve lending means that deposits create deposits, which create (or facilitate the creation of) wealth. Alternatively, think of it in practical terms: if a bank issues a loan to an individual, what mechanism is in place to ensure that the bank's savers reduce their consumption, and by the same proportions? The answer of course is that there isn't one ....

 

[JohnW2]

Although I grant you that the definition of wealth is not agreed upon, thinking has changed since we left the gold standard in 1931 !!! Fractional reserve lending means that deposits create deposits, which create (or facilitate the creation of) wealth.

Again, I don't pretend to fully understand that, either - so maybe economists use some definition of 'wealth' that leads to your statements being true (per that definition).

However, let's reduce this to understandable everyday language and the world as perceived by Joe Public. To him, 'wealth' means 'money+assets', so lets talk about 'money+assets'. If one person (or bank, or company or country) gets more of it, then one or more others has surely got to end up with less of it - unless you have somehow apparently created money or assets at no/minimal cost (e.g. by printing money)?

Kind Regards, John.

 

[EFLImpudence]

Isn't 'increased wealth' merely the 'agreed/assumed/perceived 'increased value' of the share price of a company (or asset)?

'Your company' may borrow vast sums of money from a bank for a huge project (build a channel tunnel?) then pay yourself handsomely and the workers and suppliers normally.
Unfortunately (you maintain) there are not as many customers as you had hoped so 'your company' cannot afford to make the repayments so 'your company' is declared bankrupt.
As it is 'your company' which is declared bankrupt 'you' are allowed tp keep the money you have stashed away.

The bank moves the sum not repaid from one column in their books to one headed "write-off" so that their books 'balance'.
As long as the share-value of the bank does not decrease then nothing has changed. That is as long as the shareholders do not decide to sell because it was only an unforseen circumstance not a case of gross negligence or corruption (as were recent events).

Meanwhile, you have become rich. You provided jobs for many for a time and the country now has a channel tunnel which could now make a profit because the only expenses are for maintenance.
Where did this 'increased wealth' come from?

There is no such thing as money. It is just a figure which you are allowed to spend.
We cannot all be wealthy because we may all decide to stop working and the system would not work.

Imagine that because of a computer glitch your bank account was credited with a million pounds and no one ever realised.
Where did this 'money' come from? Would it make a difference to the world?
You may reply that it is not really there - but it is.

 

[BeeLZeebub]

Well, we have been confining the definition of wealth to "money and assets" ... it gets overly complicated otherwise

If you freeze time, then at that very moment there is a fixed stock of assets and cash; but money is constantly created (and destroyed) by the banking sector: a loan is spent on a car, part of the layout goes back into the bank, a new loan is then created, it's spent on paying a sparky, he then pays some of it in to the bank and so. So for a given deposit, it generates a stream of money creation. As per my other example, can you then see that as the cash pool is expanded, there is no negative wealth impact on depositers? If you arranged a loan tomorrow and swapped it for a widgit maker - that is an investment that is wealth creating. How would this engineer any, let alone an equal sized, reduction in the wealth of your bank's other depositers?

Economies grow in this way, wealth is created ......

 

[BeeLZeebub]

EFLImpudence
"As long as the share-value of the bank does not decrease then nothing has changed".

There would be a major hole in the bank's balance sheet requiring a rights issue and which would lower its lending capacity. Something else must have lifted the stock price !!!

"Where did this 'increased wealth' come from"?

It was created by a rather ugly process. But created nonetheless (albeit not on a balance sheet basis)

"There is no such thing as money. It is just a figure which you are allowed to spend. We cannot all be wealthy because we may all decide to stop working and the system would not work".

The first part of this statement might be true from a narrow perspective, the second is some sort of conspiracy theory

"Imagine that because of a computer glitch your bank account was credited with a million pounds and no one ever realised.
Where did this 'money' come from? Would it make a difference to the world? You may reply that it is not really there - but it is"

Well it came from the glitch, but it could be wealth generating ... after all, there's no difference between this and applying for a loan aside from the paperwork

 

[ban-all-sheds]

ask yourself 'how does an electrician create wealth?'

They don't.

 

[17thman]

ask yourself 'how does an electrician create wealth?'

They don't.

That is the most idiotic misunderstanding of economics that i have ever heard.

An electrician will creat wealth by what ever they earn, due to their marginal propensity to consume. some will be spent at "chez julien" or the "harvester" Oh my god!! some people get employed and then can spend it on ipods or electricians. Electricians might have a good year and spend it on a holiday. OMG, travel agents get commision and spend it on blacberry apps and plumbers. Elecricians might have 3 good years and decide to move house and the estate agent s will employ people and the kitchen fitters and plumbers will benefit from improvements. the removal men get a job too.

A nice job at thje weekend for an electricain changing a fuse board because someone wants to spend some commission that they earned off selling a visa terminal contract to an electricain.

An electrician decides to employ some one because people want to spend some money, the employees tax then goes to the government to pay for the civil service worker.

In 30 years of understanding economics, i have never heard so much carp. the private sector runs this country, without it....There would be no economy. Do you not understand without it, that there would be an ever decreasing circle

 

[scousespark]

The wealth creation bit comes from investing in industry. There is precious litle of this.

That doesn't 'create wealth'. It merely moves wealth from the customers of that industry to the industry's companies, directors employees and investors.

Kind Regards, John.

The banks provide the finance to enable companies to conduct their business. Not all of the revenue goes to the shareholders. The staff are paid and then spend elsewhere. So it goes on. At the minute, the flow from the banks is being restricted by the banks themselves.

 

[scousespark]

At the same time, the bank takes £45,000,000,000 and loses it in a bigger casino. Luckily, they are a business, so they go to the government, who lends them the money (meaning everybody in the country lends to the bank). Then comes bonus time. The bank is still operating, so the gamblers get a massive bonus. The rest of the staff get their bonus too.

This year their bonus is lower, even though the bank doubles it's loss.

I'm sure BeelZeebub can explain why this is okay

The wealth creation bit comes from investing in industry. There is precious litle of this.

Your blaming banks for being forced to make use of lax regulations to do anything in their power to compete in a break neck industry? If there were no regs in the electrical industry, what do you think would happen? Casinos? I take it this non-commercial, moral stance prompted you to halt payments into your pension prior to 2008 and to sell your house given your indigination at its inflated price? Or is it a retrospective 'thing'? And why would I defend bonuses for failure? You see what you're doing? You're assuming that this is industry practise arent you? Should I assume you're a dodgy spark because some idiot wired my house badly?

The fact RBS got to the point where it needed such a bailout can't be justified by stating they did it because there was no restriction.
They lost £2 billion pounds and the traders shared a multi million pund bonus kitty (albit reduced from last year). In any other sector, the bonus would have disappeared with the profit, not been reduced. The only reason there is money to share is the bank got such a massive bailout.

 

[JohnW2]

That doesn't 'create wealth'. It merely moves wealth from the customers of that industry to the industry's companies, directors employees and investors.

The banks provide the finance to enable companies to conduct their business. Not all of the revenue goes to the shareholders. The staff are paid and then spend elsewhere.

Quite. As I said, when a company conducts business, no matter how that is facilitated, wealth (per lay understanding of term) moves from the company's customers to the company itself and, usually, in large part then to company's "directors, employees and investors". That includes 'the staff'. Hence, as I said, per lay understanding of the term, no 'wealth' has been created - it has been shifted from the customers/clients of the company to others.

It may well be that, in the absence of investment from banks (or whoever), the company cannot conduct business, and therefore no shift of 'wealth' occurs - so by not investing, the shift of 'wealth' may be prevented. However, I don't see that any 'wealth creation' will have been prevented, since I don't see that any would have existed even with investment.

Economics has always been a bit of a mystery to me, and it seems that the discipline's definition of 'wealth' may be part of that mystery

Kind Regards, John.

 

[17thman]

will the uneducated ever understand that the movement of money is wealth creation by definition. If you had the best idea in the world that could even change humanity. No banks, no investment, no enterpenuers, no idea comes to fruition, no improvement, when you really look at it, socialist, communist, labourisms, big government etc is anti darwinism, which i am sure as any self respecting scientist/spark would appreciate is completely wrong

 

[JohnW2]

will the uneducated ever understand that the movement of money is wealth creation by definition.

I don't usually class myself amongst the 'uneducated', but I will certainly accept that if that is the official definition (you have written 'by definition') of 'wealth creation' (hence also, by implication, of 'wealth') then the above is obviously a self-fulfilling, hence 'correct', statement.

Kind FRegards, John.

 

[EFLImpudence]

will the uneducated ever understand that the movement of money is wealth creation by definition.

Not in itself.
Only if the use of it increases the value of something else.

If you had the best idea in the world that could even change humanity. No banks, no investment, no enterpenuers, no idea comes to fruition, no improvement, when you really look at it, socialist, communist, labourisms, big government etc is anti darwinism, which i am sure as any self respecting scientist/spark would appreciate is completely wrong

 

[mikhailfaradayski]

yep, all that wot he said.

A different thought:-

What do we think this warning/threat will do do the current operation of Part P notifications and then electrical safety as a whole?

More hard done to sparks coffing up more money and being less inclined to stay on the radar?

An increase in non-registered (and possibly) cowboy installs on a cash only nod'n'wink basis?

 

[JohnD]

the movement of money is wealth creation

It's wonderful to hear that a bank robber is creating wealth, and so is an extortionist, and so is an embezzler.

I for one would not agree with your definition.