Huffy Flounce

Oh plus Spacey, if he cares to throw in a Toonie or three.

People come to Board where I work and say all sorts of financial gobbledegook to get investment - it always boils down to "If we give you £300k will you REALLY turn it into £6m inside 4 years?" followed by "If that's true - would you invest your own money?"

It usually makes people pause.

Ha ha, I'm not down for oil drilling in this day and age, though God knows there is one whole Hell of a lot of it in the Alberta Tarsands.

If you want to invest in my zero-point quantum energy reactor project on Kickstarter, however, please do.

Is this you with a lemon and two nails??

If you want to find out what happened to his other eight nails, you should check out the Kickstarter he did before this one.

Dalty wrote:Is this you with a lemon and two nails??

Two nails, lemon, salt... and Tequila!!

It's been ages since I've been to a good lemon party.

Is that like a Mars bar party?

Maybe. I don't know. You should Google them both and see if the hits you get are similar.

I did.

http://www.urbandictionary.com/define.p ... +bar+party

By no small coincidence, that actually jibes with the thread title, if not it's original intention.

And there is a yummy snack!

A Mars Bar a day, helps you work rest and play!

True dat!

I am not personally down with the lemon party, however.

Even though I have just come to the realization that the bar I'm currently in is...how shall I say this...extremely accepting of the love that dared not speak its name, in an earlier time.

Space Tycoon wrote:..extremely accepting of the love that dared not speak its name, in an earlier time.

You have met Pochahontas?

Interesting article from the Times:


Banks have swapped one addiction for another
Ed Conway

We may believe our money is safer, but another crisis could expose our fragile defences

Did you know that the hole at the heart of Britain’s financial system is now completely repaired?

The “customer funding gap”, as the Bank of England calls it, was one of those early warning alarms that almost everyone ignored until the crisis hit. Up until the early 2000s, every penny lent by British banks to their customers was supported by deposits in their vaults. But by 2008 the banks had doled out £350 billion they simply didn’t have. It was this funding gap that did for Northern Rock and a swathe of other lenders when things turned nasty.

Since then Britain’s banks have gradually repaired the damage, scaling back lending and luring in depositors, and today the central bank’s own private calculations show that the funding gap has been completely eliminated.

Hurrah. Nor is this the only encouraging news from the world of banking. The amount of capital set aside by banks has increased significantly since 2008. Mortgage-backed securities, which used to account for a third of all US mortgage lending (you know, the dodgy stuff in The Big Short), now support only 1 per cent of lending. The gross market value of derivatives — the “financial weapons of mass destruction” beneath the system — has more than halved, and is now $15.5 trillion, the lowest since 2007.

By now you’re no doubt spluttering into your newspaper, or iPad, or computer. It is one thing to say the system is in a better place than in 2008. It is quite another to claim that it is safe. It is not.

Those derivative positions are still terrifyingly high. And if markets are to be believed, the system has rarely been riskier. Since the start of the year financial stocks have fallen 18 per cent in the US, 20 per cent in the UK and 31 per cent in Japan. Credit default swaps, which measure the probability of default, are now higher for some banks, notably the German giant Deutsche Bank, than during the crisis.

It feels a lot like 2008, right down to the way investors are behaving, panic selling in the complete absence of news and then, like yesterday, buying back half the stocks.

So let’s get this straight. This is not 2008. It is not great; actually it may, in certain ways, be even worse (we’ll come to that), but it is not 2008. Back then, the entire financial system faced a widespread liquidity and solvency crisis. The world’s biggest economy was on the brink of depression. Neither of those two things look like happening again soon. Economic growth in the US, and for that matter the UK, is steady if unspectacular; employment has rarely been higher.

And when it comes to finance, the concerns this time around are mostly bank-specific rather than system-wide. While the US did a decent repair job after the crisis and Britain did OK, in Europe many banks remain weak, unreconstructed and, in some cases, riddled with cronyism. Some (especially a certain German behemoth) were still getting their fingers dirty with dodgy derivatives long after such instruments had dragged down Lehman Brothers.

This is not to say there are no system-wide concerns. Essentially a bank’s business model involves taking in deposits and lending that money out at a slightly higher rate. Negative interest rates, therefore are not good news for their bottom lines.

And while banks have more capital than in 2008, they still have nowhere near enough to protect them from another earth-shattering crisis, as Sir John Vickers pointed out yesterday. More worrying still, the very instruments they have packed their balance sheets with might well prove their undoing next time around.

Chief among them are “cocos”, or contingent convertibles. These are bizarre financial vehicles which might have come straight out of Franz Kafka’s imagination. By daylight they look a lot like safe, dependable bonds but when a bank nears collapse they suddenly change into far less attractive equity or, in some cases, evaporate entirely. No-one seems to know what happens when they are triggered, or who will be left with the bill.

Sure, banks may have fewer derivatives, but they now have hundreds of billions of these cocos ticking away in their vaults. It is rather like an addict who has given up drugs but replaced them with bootleg alcohol instead. To make matters worse, this time around the dodgy stuff was pushed on the banks by the very regulators supposed to be protecting them.

All of this is worrying, no doubt. And with bank shares falling in tandem with oil and commodity prices, the effect is admittedly rather scary. But this time, unlike in 2008, at least the plumbing that underpins the global financial system doesn’t seem at risk of imminent collapse. And even if China does slide into a Japan-style slump, that ought not to be terminal for global growth either. After all, Japan’s slump has been going for a quarter of a century now and the world has kept turning.

The real worry, though — the one that could make this worse than 2008 — is something else. In economics and finance, what matters above all is faith. What made all the difference six years ago was that when things got really scary, most investors believed that the central bankers and politicians had what it took to turn things around. Today, 637 rate cuts and $12.3 trillion of quantitative easing later, that faith has diminished. Contrary to popular assumption, central bankers and politicians have plenty of ammunition left. But unless people believe that they are willing to wield it confidently and effectively, we are in big trouble.

Ed Conway is economics editor of Sky News