Monk Posted 13 February 2014 Posted 13 February 2014 Free markets are those with no governmental intervention. Completely different to efficient markets - which are about prices reflecting information. What you are talking about re smoking and football is efficient markets theory, not free market theory. From Investopedia: Definition of 'Efficient Market Hypothesis - EMH'An investment theory that states it is impossible to "beat the market" because stock market efficiency causes existing share prices to always incorporate and reflect all relevant information. According to the EMH, stocks always trade at their fair value on stock exchanges, making it impossible for investors to either purchase undervalued stocks or sell stocks for inflated prices. As such, it should be impossible to outperform the overall market through expert stock selection or market timing, and that the only way an investor can possibly obtain higher returns is by purchasing riskier investments. Definition of 'Free Market'A market economy based on supply and demand with little or no government control. A completely free market is an idealized form of a market economy where buyers and sellers are allowed to transact freely (i.e. buy/sell/trade) based on a mutual agreement on price without state intervention in the form of taxes, subsidies or regulation. In financial markets, free market stocks are securities that are widely traded and whose prices are not affected by availability. In foreign-exchange markets, it is a market where exchange rates are not pegged (by government) and thus rise and fall freely though supply and demand for currency.
Monk Posted 13 February 2014 Posted 13 February 2014 interesting, thanks. Should there be a cap on remuneration? Surely you jest?
Merging Cultures Posted 13 February 2014 Author Posted 13 February 2014 Free markets are those with no governmental intervention. Completely different to efficient markets - which are about prices reflecting information. What you are talking about re smoking and football is efficient markets theory, not free market theory. Also, your analogy about football misses the point entirely - the 'value' of a stock to the shareholder is measured by its price fluctionations. The 'value' of a football match is more complex than that - based on emotion and desire. It's not just about supply and demand. Supporting a crap team is not irrational. I am not disagreeing! Free markets have no Government intervention. The theory that promotes free markets is that they are efficient because of perfect competition, firms can enter and exit freely and consumers know what exactly they are buying, creating the mutual agreement on price. In reality, Governments have to intervene because markets are not efficient, due to potential negative externalities. Therefore, free markets do not exist and we've never had free markets. I already posted what EMH is! My analogy about football is quite correct, as I said our bias (due to emotion and desire) makes us act irrationally. Surely you jest? He can ask the question. There is no judging here. Instead of questioning his intentions, why not offer an answer?
ozleicester Posted 14 February 2014 Posted 14 February 2014 Surely you jest? Not in the least, people talk about capping footballers and sports people... id rather pay for overpaid footballers than overpaid bankers Edit: Actually, no need for a cap, just link wages to the, "good done for society" instead of "income generated for greedy ****" and id be happy to see them get as much as they want.
Monk Posted 14 February 2014 Posted 14 February 2014 If you cap banker's bonuses, just because you don't like them, where do you stop? You'll end up stifling innovation throughout the economy. If I start a company selling widgets, and in 5 years the company grows to £10m profit per year - why can't I pay myself a £1m bonus? If I start a hedge fund or brokerage and in 5 years time the company grows to £10m profit per year - why can't I pay myself a £1m bonus? If I'm IPO specialist at an investment bank and I help launch a big company onto the stock market, making the bank £10m, should the bank be able to pay me a £1m bonus? If I'm the CEO of a bank and the bank goes from making a massive loss to >£150m profit a year (which lloyds announced yesterday), why shouldn't the shareholders award him a £1m bonus? My point is - where do you draw the line? Do you just cap wages flat out because you don't want people to be wealthy?
ozleicester Posted 16 February 2014 Posted 16 February 2014 I think the main reason for the GFC and the continuing issues is an expectation of ever increasing profit increases. Our world is now dominated by the stockmarket and its results. (due to our superannuations etc being linked). This has forced our corporations, companies etc to demand ever increasing profits, which in turn has led to cost cutting. If i remember correctly, when we were living back in the UK in 10/11 there was a bus or tram company that manufactured in the midlands, they closed down and moved offshore because the local councils stopped ordering from them and the the ordering was stopped due to pressures to buy cheaper overseas manufactured buses/trams. Therefore, 100s (possibly thousands of linked workers) lost their jobs, the council then had to provide support and assistance to the families of the unemployed. (sorry for a long wordy post, im trying to get to the point) Companies are doing the same as the councils above, cutting costs, looking for the cheapest option in order to raise the share price. So rather than capping wages, which i can see has issues, perhaps we can cap profits and give tax breaks for socially aware alternatives, for example, A bank in australia has just handed its 6 months results... a profit of ... 4 billion...FOUR FVCKING BILLION dollars in 6 months. they dont need 4 billion profit... lets cap it at.. lets say... $2 billion, then tax the living shit out of it... 90% of the remaining 2 billion? and they can reduce that down to say... 50% for every $ they invest in the australian community Just a thought... basically really really high "superprofit" taxes
Strokes Posted 16 February 2014 Posted 16 February 2014 less taxes, less regulation, less reliance on financial markets and no EU.
The God Emperor Posted 16 February 2014 Posted 16 February 2014 I think the main reason for the GFC and the continuing issues is an expectation of ever increasing profit increases. Our world is now dominated by the stockmarket and its results. (due to our superannuations etc being linked). This has forced our corporations, companies etc to demand ever increasing profits, which in turn has led to cost cutting. If i remember correctly, when we were living back in the UK in 10/11 there was a bus or tram company that manufactured in the midlands, they closed down and moved offshore because the local councils stopped ordering from them and the the ordering was stopped due to pressures to buy cheaper overseas manufactured buses/trams. Therefore, 100s (possibly thousands of linked workers) lost their jobs, the council then had to provide support and assistance to the families of the unemployed. (sorry for a long wordy post, im trying to get to the point) Companies are doing the same as the councils above, cutting costs, looking for the cheapest option in order to raise the share price. So rather than capping wages, which i can see has issues, perhaps we can cap profits and give tax breaks for socially aware alternatives, for example, A bank in australia has just handed its 6 months results... a profit of ... 4 billion...FOUR FVCKING BILLION dollars in 6 months. they dont need 4 billion profit... lets cap it at.. lets say... $2 billion, then tax the living shit out of it... 90% of the remaining 2 billion? and they can reduce that down to say... 50% for every $ they invest in the australian community Just a thought... basically really really high "superprofit" taxes where's the incentive to improve quality of services and products, increase their value, take on more staff and expand if you've got a ceiling to how much you can make. you also assume that the state is going to be altruistic in its spending of these tax revenues. whats to stop the government from giving this revenue to the people who'll make it worth their while like big business. government is ultimately as self serving as any private company and have a poor track record of picking winners.
Zingari Posted 16 February 2014 Posted 16 February 2014 If you cap banker's bonuses, just because you don't like them, where do you stop? You'll end up stifling innovation throughout the economy. If I start a company selling widgets, and in 5 years the company grows to £10m profit per year - why can't I pay myself a £1m bonus? If I start a hedge fund or brokerage and in 5 years time the company grows to £10m profit per year - why can't I pay myself a £1m bonus? If I'm IPO specialist at an investment bank and I help launch a big company onto the stock market, making the bank £10m, should the bank be able to pay me a £1m bonus? If I'm the CEO of a bank and the bank goes from making a massive loss to >£150m profit a year (which lloyds announced yesterday), why shouldn't the shareholders award him a £1m bonus? My point is - where do you draw the line? Do you just cap wages flat out because you don't want people to be wealthy? i don't think anyone minds bonuses for excellence , it's the payouts for failure and doing nothing particularly spectacular that causes the consternation . The examples you give are obviously new wealth creators , but most CEO's are just transient guardians of an existing profitable organisation.
Rincewind Posted 16 February 2014 Posted 16 February 2014 Agree. It is when they fail, the company lose money and jobs and they are paid a golden handshake then take up another similar role at another big corporation. If the average Joe Bloggs mucked up they would be given the sack and find it difficult to find another job. Sometimes the old phrase could be right. It isn't what you know but who you know.
MooseBreath Posted 16 February 2014 Posted 16 February 2014 i don't think anyone minds bonuses for excellence , it's the payouts for failure and doing nothing particularly spectacular that causes the consternation . The examples you give are obviously new wealth creators , but most CEO's are just transient guardians of an existing profitable organisation. Can you give some examples? Surely if these banks are so profit crazed they would pay as little as they can get away with? So if they're paying high bonuses that shows that they consider those people worth the money. People may disagree with that from the perspective of someone who has literally no understanding of what those people do and why are so valuable, but any opinion based on that kind of ignorance is obviously worthless.
Zingari Posted 16 February 2014 Posted 16 February 2014 Can you give some examples? Surely if these banks are so profit crazed they would pay as little as they can get away with? So if they're paying high bonuses that shows that they consider those people worth the money. People may disagree with that from the perspective of someone who has literally no understanding of what those people do and why are so valuable, but any opinion based on that kind of ignorance is obviously worthless. what sort of examples ? if you mean banks giving bonuses fot unspectacular results you don't really have to look far http://www.bbc.co.uk/news/business-26131799
MooseBreath Posted 16 February 2014 Posted 16 February 2014 what sort of examples ? if you mean banks giving bonuses fot unspectacular results you don't really have to look far http://www.bbc.co.uk/news/business-26131799 That doesn't give you any indication at all as to the performance or results achieved by those who are receiving large bonuses
Rincewind Posted 16 February 2014 Posted 16 February 2014 Never mentioned banks. I said 'It is when they fail, the company lose money and jobs' I did see the same story as Zingari where staff were made redundant but bosses were paid bonuses..No connection of course. Lucky you were not one of them Moose. But if your company directors paid themselves increased bonuses then laid you off you would be happy for them and praising them.
MooseBreath Posted 16 February 2014 Posted 16 February 2014 Never mentioned banks. I said 'It is when they fail, the company lose money and jobs' I did see the same story as Zingari where staff were made redundant but bosses were paid bonuses..No connection of course. Lucky you were not one of them Moose. But if your company directors paid themselves increased bonuses then laid you off you would be happy for them and praising them. Very simplistic way of looking at things as ever kenny.
Zingari Posted 16 February 2014 Posted 16 February 2014 That doesn't give you any indication at all as to the performance or results achieved by those who are receiving large bonuses William Wright, investment banking columnist at Financial News, also criticised Barclays' decision to increase its bonus payouts. "Barclays can talk until it's blue in the face about it being in the longer-term interest of shareholders, but from the outside, it simply looks wrong," he said. Treasury Select Committee chairman Andrew Tyrie also waded into the debate over Barclays' decision to increase its bonus pool. "Shareholders need to make up their minds whether aggregate remuneration is justified by the return on equity," he said. Shouldn't the onus be on them to give complete transparity to customers to justify the huge bonuses rather than you and I just guessing why or if they deserve them or not . The results look pretty unspectacular to many commentators and nothing like the examples that Monk used in his post as justification for them.
Webbo Posted 16 February 2014 Posted 16 February 2014 Never mentioned banks. I said 'It is when they fail, the company lose money and jobs' I did see the same story as Zingari where staff were made redundant but bosses were paid bonuses..No connection of course. Lucky you were not one of them Moose. But if your company directors paid themselves increased bonuses then laid you off you would be happy for them and praising them. So Barclays have decided that they can run there business with less staff therefore cutting costs and you think that's a failure that they ought to have their bonuses cut for? You presumably think that employing more people than they need leading to higher costs, lower competitiveness and eventually less business/profits is a good thing for the company?
Monk Posted 16 February 2014 Posted 16 February 2014 I think the main reason for the GFC and the continuing issues is an expectation of ever increasing profit increases. The financial crisis was caused by many things, but to me, lack of regulation in financial services was easily the biggest. You can't cap profits on corporations - for a start it would destroy every single private pension in this country. In terms of pay vs performance re the other posts - I think you have to bear in mind that it's the shareholders who have the say, not the customers. People forget that running multinational corporation is a huge responsibility and they will be paid the going rate. Also a company can perform well and still make a loss. Lloyd's are a classic example where they have paid huge fines for PPI which is several years in the past, but on a day to day basis have performed well. If you don't reward those top people at the going rate you risk losing them.
Monk Posted 16 February 2014 Posted 16 February 2014 Shouldn't the onus be on them to give complete transparity to customers to justify the huge bonuses rather than you and I just guessing why or if they deserve them or not . The results look pretty unspectacular to many commentators and nothing like the examples that Monk used in his post as justification for them. What's it got to do with the customer? Do you not buy a can of coke because their directors earn too much?
MooseBreath Posted 16 February 2014 Posted 16 February 2014 William Wright, investment banking columnist at Financial News, also criticised Barclays' decision to increase its bonus payouts. "Barclays can talk until it's blue in the face about it being in the longer-term interest of shareholders, but from the outside, it simply looks wrong," he said. Treasury Select Committee chairman Andrew Tyrie also waded into the debate over Barclays' decision to increase its bonus pool. "Shareholders need to make up their minds whether aggregate remuneration is justified by the return on equity," he said. Shouldn't the onus be on them to give complete transparity to customers to justify the huge bonuses rather than you and I just guessing why or if they deserve them or not . The results look pretty unspectacular to many commentators and nothing like the examples that Monk used in his post as justification for them. What results are you talking about? Have you seen a breakdown of the results achieved by each person who has earned a bonus? We're talking about a massive business here, you can't judge individual performance based on headlines.
Zingari Posted 16 February 2014 Posted 16 February 2014 What results are you talking about? Have you seen a breakdown of the results achieved by each person who has earned a bonus? We're talking about a massive business here, you can't judge individual performance based on headlines. Yes but basically we just have to take their word for it that they deserve them . that's all i'm saying really . You can believe they do and others may believe they don't . Genuine question Moosey , who actually decides who and how much and on what basis bonuses are paid. To a real outsider like me it all looks very arbitrary and nothing more than an old boys school back scratching network. When i saw the co-op bank chief being interviewed a few month ago he looked nothing short of a complete idiot . How on earth did he get and keep the job ? Who thought him even capable of scratching his own arse let alone run a bank .It makes me really question the ability of those that made the decision to give him the job, and presumably they are still there .
MooseBreath Posted 16 February 2014 Posted 16 February 2014 Yes but basically we just have to take their word for it that they deserve them . that's all i'm saying really . You can believe they do and others may believe they don't . Genuine question Moosey , who actually decides who and how much and on what basis bonuses are paid. To a real outsider like me it all looks very arbitrary and nothing more than an old boys school back scratching network. When i saw the co-op bank chief being interviewed a few month ago he looked nothing short of a complete idiot . How on earth did he get and keep the job ? Who thought him even capable of scratching his own arse let alone run a bank .It makes me really question the ability of those that made the decision to give him the job, and presumably they are still there . If you believe that the banks are excessively motivated by profit then you can't also believe they just give out million pound bonuses unless it is well deserved. You can have one loony ranting point but you can't have both. I don't know who decides what bonuses get paid to who but you'd expect the larger bonuses are signed off at a high level. Quite possibly by the chief exec Antony Jenkins who was interviewed in the article you posted on the BBC and explained that they need to be competitive on pay. You say it looks "arbitrary" but in truth you know nothing about it, so if anything is arbitrary then it's your loony theory. What's the name of the co-op guy you don't like?
MooseBreath Posted 16 February 2014 Posted 16 February 2014 Oh Paul Flowers, an advisor to the labour party, minister and cokehead. You're right, I wouldn't trust him with a fiver. But his background doesn't suggest an old boys network to me. He's from some place on the south coast, went to bristol uni (very much ordinary) then rose up the ranks all the way to the board after having been elected, where he earned a salary of just over £100k. Not exactly illuminati stuff there I'm sure you would agree
Zingari Posted 16 February 2014 Posted 16 February 2014 Oh Paul Flowers, an advisor to the labour party, minister and cokehead. You're right, I wouldn't trust him with a fiver. But his background doesn't suggest an old boys network to me. He's from some place on the south coast, went to bristol uni (very much ordinary) then rose up the ranks all the way to the board after having been elected, where he earned a salary of just over £100k. Not exactly illuminati stuff there I'm sure you would agree Yeah , you're probably right , but surely if he can "rise through the ranks" and fool the board into giving him a top job what is there to suggest there aren't more that just have kept cleaner noses ? He might still be there if it weren't for the stories about his personal life coming out. anyway if you want to believe they're all there on merit and deserving of what they get , that's fine by me , i just don't
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