Is there an answer to the economic conundrum?

[AronSearle]

As a prime example I have an apartment bringing in £475 a month and I put it up for sale at 75k
I had many interested buyers all wishing to purchase but none of them could get the banks to lend.

And that has "what exactly" to do with businesses with sound models not getting loans?

People are no longer able to get 100% or 95% mortgages, that's why mortgage approval is bottoming out.

Some say this is a good thing, as 100% and 95% mortgages were part of the issue.

You also have the recent announcement that the banks are failing on their promises to lend

An announcement by a politician, must be trustworthy.

I also had a friend who works in HBOS and he was in charge of a business lending unit in Leeds. They closed his department down because they simply weren't lending any money and he was shifted down to London to handle a new group that dealt with enquiries from Foreigners mainly Chinese who wanted to open British Bank accounts.

Any "WHY" are they not lending as easily now, over easy lending being what caused the crash, I wonder if those two facts are related?

An leading edge UK independant automotive engineering firm, designs a component for high end cars, which is technically far superior to the current component, revolutionary even. The current component is manufactured outside the UK by a foreign firm.
The new component wows the likes of Bentley, JLR, Aston Martin, who all place orders, completely filling the order books at a handsome profit. The firm goes to the bank, as they need investment to manufacture in the required volumes. Bank says no. Engineering firm informs clients, clients cancel orders, firm goes bust.

an anecdotal story from some guy who is bound to say how great his product is, it couldn't possible be because his business model sucked donkey balls.

I mean. clearly it must be a great product with the relevant patents if no one at all is willing to invest in it.

We won't know, because everyone is taking the government line "banks are not loaning to business" hook line and sinker.

Do we actually know this, do we know why?

 

[skyboy]

As a prime example I have an apartment bringing in £475 a month and I put it up for sale at 75k
I had many interested buyers all wishing to purchase but none of them could get the banks to lend.

And that has "what exactly" to do with businesses with sound models not getting loans?

People are no longer able to get 100% or 95% mortgages, that's why mortgage approval is bottoming out.

Some say this is a good thing, as 100% and 95% mortgages were part of the issue.

You also have the recent announcement that the banks are failing on their promises to lend

An announcement by a politician, must be trustworthy.

I also had a friend who works in HBOS and he was in charge of a business lending unit in Leeds. They closed his department down because they simply weren't lending any money and he was shifted down to London to handle a new group that dealt with enquiries from Foreigners mainly Chinese who wanted to open British Bank accounts.

Any "WHY" are they not lending as easily now, over easy lending being what caused the crash, I wonder if those two facts are related?

An leading edge UK independant automotive engineering firm, designs a component for high end cars, which is technically far superior to the current component, revolutionary even. The current component is manufactured outside the UK by a foreign firm.
The new component wows the likes of Bentley, JLR, Aston Martin, who all place orders, completely filling the order books at a handsome profit. The firm goes to the bank, as they need investment to manufacture in the required volumes. Bank says no. Engineering firm informs clients, clients cancel orders, firm goes bust.

an anecdotal story from some guy who is bound to say how great his product is, it couldn't possible be because his business model sucked donkey balls.

I mean. clearly it must be a great product with the relevant patents if no one at all is willing to invest in it.

We won't know, because everyone is taking the government line "banks are not loaning to business" hook line and sinker.

Do we actually know this, do we know why?

Blimey Aron what proof do you need and why have you missed out the bit about the banks having a net 96 billion surplus.

The banks are consolidating their position right now building up their reserves. This is to protect themselves from any future unseens after recent experiences. It's commendable for them to do this as they also have the money belonging to the man in the street in their coffers , however this means while consolidating they are NOT lending.

The over easy lending has nothing to do with businesses needing money now.

If you are struggling with economics here is a simple example..

Company X invents product Y
The success of product Y means shops Z want to buy lots and can even sell all they can get their hands on.
However Company X cannot produce enough Goods as they have to pay their staff wages that have now increased (more staff) and for the raw materials and for the extra product BEFORE they get the money back from the shops for the goods they have ordered.

The business is sound , the demand is there to be met , the profit and loss calculations are perfect there will be a net 20% after all overheads and oncosts . . but the company fails to supply because it is hampered when the banks fail to support with lending and the money runs out for the wages.

Its a very basic economic scenario known as the 'Death Valley Curve' for obvious reasons and it kills off many potentially highly profitable companies.

 

[Micilin]

Skyboy - Agreed on the banks lending being vital.

It's also a factor why many companies go bust coming out of recession (often said more than going in to recession)

With increased demand stretching cashflow, as well as need for wage increase or more staff etc etc

We also have the scenario where unpaid invoices can cripple a good business and a bridging loan would help with cashflow.

 

[trollmaster2000]

[an anecdotal story from some guy who is bound to say how great his product is, it couldn't possible be because his business model sucked donkey balls.

I mean. clearly it must be a great product with the relevant patents if no one at all is willing to invest in it.

We won't know, because everyone is taking the government line "banks are not loaning to business" hook line and sinker.

Do we actually know this, do we know why?

No, it came from an engineer working for one of their clients mentioned earlier. The product is patented, the business model was sound and sustainable (the likes of JLR & Bentley wouldn't be placing orders otherwise). The bank decided to take their ball home and that was that.

 

[AronSearle]

Blimey Aron what proof do you need and why have you missed out the bit about the banks having a net 96 billion surplus.

Which banks, why are they not lending.

What is this 96 billion surplus, "net balance of the flow of cash is into the banks from interest and charges £96 billion a year more than it lends out. "

and how much money have they lent out overall vs deposits, 50/50, 10/90?

Not much use presenting one number from one year, in an overall much larger industry.

The banks lent out far far more money than they had, maybe they are topping up their reserves to what they should have been.

Do I know, no, but no one here clearly does, so excuse me if I don't just but the government line that "they need to lend more" or "should lend more".

The banks are consolidating their position right now building up their reserves. This is to protect themselves from any future unseens after recent experiences. It's commendable for them to do this as they also have the money belonging to the man in the street in their coffers , however this means while consolidating they are NOT lending.

So banks overlent, and are now making sure they are not so overexposed to another crash, so they don't fail.

You want them to lend this money, what do you want, the banks to lend stupidly, or to lend sensibly.

Cake and eat it etc...

If you are struggling with economics here is a simple example..

The business is sound , the demand is there to be met , the profit and loss calculations are perfect there will be a net 20% after all overheads and oncosts . . but the company fails to supply because it is hampered when the banks fail to support with lending and the money runs out for the wages.

Me struggling with economics?

Clearly you know you stuff, why don't you go tell this to all those banks, they obviously hire a bunch of idiots that know nothing about economics, all those people that daily access business loans, studied finances, see the spreadsheets.

Clearly they can't grasp the simple facts, you obviously know something they don't, i'm sure they will appreciate the expertise of a keyboard warrior telling them "youz needz to loans moar"

 

[newfireplace]

Its basically going to be a lost generation throughout Europe. Its dififcult to see how living standards will rise for at least another 2 decades, maybe 3 or 4. Euroepan countries as single entities cannot compete with the US, China and India, all three countries as big or far bigger than almost all of Europe put together. The cost base in the Asian countries is siginificantly lower which European countries cannot compete with unless they are willing to accept lower wages and tehrefore, almost certainly, lower standard of living.

Countries like China and India are going keep cost advantages for at least another 3 to 4 decades before wages start comparing with Europe.

If this report's predictions come true, it won't look good for the UK and other European countries. Between now and 2050 the UK's output will double but countries like India and China will see their output increase 15-25 times between now and and then. For example China is expected to see their GDP increase from $4.6 trillion trillion in 2010 to roughly $70 trillion in 2050 whereas the UK is predicted to increase from $2.5 trillion to $5.1 trillion.

http://en.wikipedia.org/wiki/BRIC

 

[Norcon]

An eu delegation went cap in hand to the chinese a few years back for a handout and were basically encouraged to go and take a running jump.
They were told thier social economic model is unsustainable and needs reforming.
For that to have a chance of happening we need the break up of the eu.
Another world war will have come and gone before that happens imo.
So yes there is an answer. WAR

 

[enyam]

If this report's predictions come true, it won't look good for the UK and other European countries. Between now and 2050 the UK's output will double but countries like India and China will see their output increase 15-25 times between now and and then. For example China is expected to see their GDP increase from $4.6 trillion trillion in 2010 to roughly $70 trillion in 2050 whereas the UK is predicted to increase from $2.5 trillion to $5.1 trillion.

Make sure your pension is invested in the far east then because it isn't doing jack all on the occident stock markets.

 

[joinerjohn]

When the banks were bailed out, it was on the express understanding that they would lend money to small firms. This failed to materialise to any great extent. Ministers did mention this and banks agreed to lend more money, but haven't significantly increased lending.

http://www.dailymail.co.uk/news/article-2137618/70-firms-folding-day-banks-STILL-refuse-lend.html

http://www.publications.parliament.uk/pa/cm201212/cmhansrd/cm120207/debtext/120207-0003.htm
A quote from Hansards.

Evidence has shown that investment and credit lending by those banks has decreased by 6% in real terms, whereas investing and giving more credit would be a real step to boost the economy. At the end of the day, some of the banks have been bailed out with public money.

Anyway, one thing the British government could do, is to stop , or at least curtail Foreign Aid. They give money to India and Pakistan, (who have nuclear weapons and space programs) WTF?? Why should we give money to countries with a bloody space program, when we don't even have one ourselves?

 

[skyboy]

various stuff.

Me struggling with economics?

Clearly you know you stuff, why don't you go tell this to all those banks, they obviously hire a bunch of idiots that know nothing about economics, all those people that daily access business loans, studied finances, see the spreadsheets.

Clearly they can't grasp the simple facts, you obviously know something they don't, i'm sure they will appreciate the expertise of a keyboard warrior telling them "youz needz to loans moar"

My apologies Aron it was wrong of me to be so facescious

However:-

My friend who was the business manager of the Leeds Bank told me that they no longer make buy to let loans (hence my flat still in my hands).

Not they look at each case individually but an outright veto on buy to let loans.

I don't suppose that turning people down when they asked took much work with a spreadsheet or amortization calculations when all they had to do was say 'computer says no'

 

[Micilin]

Clearly you know you stuff, why don't you go tell this to all those banks, they obviously hire a bunch of idiots that know nothing about economics, all those people that daily access business loans, studied finances, see the spreadsheets.

Clearly they can't grasp the simple facts, you obviously know something they don't, i'm sure they will appreciate the expertise of a keyboard warrior telling them "youz needz to loans moar"

Bit off the point there,

The banks are not interested in the economy. They are interested in their business. Their internal targets are what matters, not the UK's growth. So whther they are better ecnomists than the poster here is largely irrelevant.

It is part of the govts job to provide pressure of some sort (incentives or penalties)so that it is in the banks' best interest to lend to small businesses. That is create conditions favourable for growth.

 

[newfireplace]

When the banks were bailed out, it was on the express understanding that they would lend money to small firms. This failed to materialise to any great extent. Ministers did mention this and banks agreed to lend more money, but haven't significantly increased lending.

http://www.dailymail.co.uk/news/article-2137618/70-firms-folding-day-banks-STILL-refuse-lend.html

http://www.publications.parliament.uk/pa/cm201212/cmhansrd/cm120207/debtext/120207-0003.htm
A quote from Hansards.

Evidence has shown that investment and credit lending by those banks has decreased by 6% in real terms, whereas investing and giving more credit would be a real step to boost the economy. At the end of the day, some of the banks have been bailed out with public money.

Anyway, one thing the British government could do, is to stop , or at least curtail Foreign Aid. They give money to India and Pakistan, (who have nuclear weapons and space programs) WTF?? Why should we give money to countries with a bloody space program, when we don't even have one ourselves?

Actually, I believe India refused aid from the UK this year saying they didn't need it. What's more, aid is often tied to projects. For example, say the UK gives substantial aid to Nigeria, in return, the Nigerians will give UK companies access to oil and gas fields, and other natural resources. Aid is almost always tied to favours in return, not to mention often need to be paid back with interest, albeit on favoural terms.

 

[newfireplace]

China owns substantial American debt which could come back to haunt the Americans sometime in the future. Owing so much debt to any one country can be very hazardous. But for now China just needs to play along because if they wanted to hurt America, in return they will be hurt, too, because America buys up so much of China's produce. Its not in China's interest to have a weak American economy for now.

I always think its a dangerous thing if you allow foreigners to buy so much property in your country such as residential, retail, and other business products like loans. A small but signficant amount of American economy is at the mercy of the Chinese. The Chinese will now use this as a bargaining tool against the Americans in the future.

 

[joinerjohn]

All nice and dandy though newfireplace, but as you point out , India refused the aid, so why was it offered in the first place? Doesn't the British government not realise they don't need it?
Is someone keeping Cameron in the dark? Does he actually read the papers?

I suppose this foreign aid, comes out of the bloody money the UK has to borrow in the first place.

 

[AronSearle]

When the banks were bailed out, it was on the express understanding that they would lend money to small firms.

You might want to check that, where was this written?, where was this agreed, who "understood this"?

Just political mumbo jumbo speech.

Only 2 Scottish banks were bailed out, so why would the other banks be under any obligation to loan more?

Was there any actual agreement, or just politicians wibble wobbling on stage?

China owns substantial American debt

The banks are not interested in the economy. They are interested in their business. Their internal targets are what matters, not the UK's growth. So whther they are better ecnomists than the poster here is largely irrelevant.

It is part of the govts job to provide pressure of some sort (incentives or penalties)so that it is in the banks' best interest to lend to small businesses. That is create conditions favourable for growth.

Communist claptrap.

Every business is in it for themselves, neither newsagents, craft shops, big oil or banks, they make decisions based upon their own needs, not the economy.

Individuals are the same, nobody decides to buy a widget because it's good for the economy or not, they buy it because they want it.

Scuse me if I don't want businesses told by ignorant populist politicians how they should spend their money.

I mean how can everyone so quickly forget that a large part of the banks crash was because of the government encouraging bad loans = and bad bank merges.

My friend who was the business manager of the Leeds Bank told me that they no longer make buy to let loans (hence my flat still in my hands).

Could that possibly be because rents are falling and such mortgages are seen as risky?

No no no, eviiiiil banks!!!

Wait, why don't I spend 0.5 seconds googling it and see what I find.

http://lmgtfy.com/?q=buy+to+let+mortgage+collapse

when all they had to do was say 'computer says no' icon_wink.gif

Yea, it's not like they spend millions of pounds designing these computer systems and inputting data into them.

No, these computers are just magic 8 balls.



My bloody head is pounding with flue, yet I still have the sense to google stuff before spouting out my opinion.