MANGANESE BRONZE, Black Cab Manufacturer in Administration

Manganeze Bronze is the company that owns the company that manufactures the City of London's Black Cab. It is manufactured in Coventry. Identical cabs are also manufactured in Shanghai by Geely, one of China's biggest vehicle manufacturers.  Geely supplies the world with the black cabs whilst Manganeze bronze supplies the U.K. only. This was as a result of an agreement by Geely and Manganeze Bronze in 2007. Geely owns 20% of Manganeze Bronze as a result of an agreement which gave them rights to produce the legendary black cab.

After the sale of part of the company to Geely, Manganeze Bronze sold the production plant in Coventry to a property company. Manganeze Bronze has been renting the building back since. This would raise question marks in many people's eyes as to whether Manganeze Bronze was seriously continuing long term interests of production of the cabs in the U.K.

Although selling off the plant may have short term benefits to Manganeze Bronze, such as cash flow the long term problems and added costs should have been predicted. The new owners of the plant are leasing the plant, obviously at a cost which the property under ownership by Manganeze Bronze would have been far lower.

Manganeze Bronze had been attempting to make a finance deal with Geely which would allow the Coventry plant to continue manufacturing.

The company has just announced that it is going into administration, after a failure to negotiate a deal that was acceptable to Manganeze bronze.

..............................................................................


What is most significant about this is how predictable it all seems to be.........


From the day Geely began manufacturing the cabs, they became competition to Manganeze Bronze. In fact, unfair competition in that Geely had far more freedom with the world as a market bar the U.K. whilst Manganeze Bronze left them selves with only the British Market to sell to. This was obviously part of the agreement when Geely bought 20% of the company.

The final straw for Manganeze Bronze happened when Geely could not offer a deal acceptable to Manganeze Bronze to refinance the company......The problem is Geely could have a new market for their cabs if the plant in Coventry was to close....London and the U.K. The place where the cabs began........Geely therefore have an incentive not to hand over the finance.

As for other investors....................Well who is likely to want to invest in this after the hole that Manganeze Bronze has dug the business into, by giving away too much of the market to Geely ?

The apparent short sightedness of Manganeze Bronze executives raises question marks as to what the long term plans for this business really were.......................

......................Unfortunately, this all looks like it may have been a master plan to move production of these cabs from Britain to China. May be I am wrong. But this type of thing has gone on all round the world in many different industries. It's resulted in many different industries moving from countries like the U.S. and the U.K., oversees...................Many of them had been bought in order to close them down ! Much of the finance comes from banks who probably don't always know what is being planned. But without any doubt, many of the banks often know exactly what is happening.

British Gas / N Power to Raise Consumer Price by 9%

 The British privatised power industry is again beginning to increase prices for the U.K. consumers. Both British Gas and N Power are raising their prices in the region of 9% in the coming weeks.

The graph below shows the difference in price for U.K. consumers (Customers of the biggest 6 electricity providers) and the wholesale price over the past five years.

The graph shows that where the wholesale price dropped two-thirds through 2011, the big electric providers pretty much maintained their prices.

This price level has been maintained through 2012 even though the whole sale price has at times during this period has decreased significantly, which will have increased income for these companies.

So here are the influential factors...............

THE REGULATORS

The problem with these private companies is that there is little to prevent these companies raising their prices to improve profits. We have all seen what is a failure by so called regulators, who seem to have plenty of talk and waffle about what should be happening, but in reality, rarely have any affect.
Strangely, the F.S.A., the U.K. banking regulator seems to suffer what seems to be identical problems to Ofgem, the U.K. power regulator. The idea is that billions of pounds of our taxes go to these regulators for them to prevent us from being ripped off by the businesses in these respective industries. However the slowness of their reactions, often total lack of reaction to some situations, and also their often what seems to be un-justified defence of their industries or businesses with in them, will draw conclusions to many cynical people that the regulators, are merely to create a buffer between complaining cusomers and those industries. Therefore allowing these private companies to keep their priority of making money, and not being inconvenienced by pesky customers.

THE GOVERNMENT

 There are added costs which are as a result of penalties against new green policies which are also adding to the costs of these businesses. The problem is that, if companies are being given penalties whilst they do not comply to new higher standards, this is actually a hinderence to the companies becoming greener ! The potential investment is going to the government. This could have the affect of the companies not investing enough in green energy and could risk the company's existence in the future.
Either the government has not given this enough thought, or the scheme is purely a way for the government to get more money out of these companies due to many avoiding paying taxes, and has little to do with green energy.

PRIVATISATION

Before all these companies existed, both electricity and gas were provided by national owned companies. If it was like this today, there would not be a number of companies apparently competing in the same market to buy gas in bulk, power stations, fuel for the power stations etc. Basically, this means privatisation pushes up the price as the sellers of these commodities knows that if one business is not willing to pay a certain price, another company probably will. Privatisation has therefore not really improved competition on the retail side, which is one of the apparent advantages according to people like David Camerron, it has simply increased competition on the wholesale side. Instead of Russia only being able to sell to one national business in any particular country, which would create more stability in this market, the Russians know there are many different buyers within each country where privatisation is rife, such as in the U.K. Therefore claims by various politicians that privatisation is a more efficient way of supplying our power are completely without foundation.

BORROWING

Companies in a good position to lever money out of their customers, for example in the power industry tend to get into major debt. This is because the banks know that we all need heat and electricty, and therefore know that the companies are likely to be able to increase their prices to recover money to pay off loans and other costs associated with the debt such as interest payments. Therefore the businesesses can easily get money from banks to buy other assets including other companies, or simply get a mortgage simply to pay off existing debt ! However, the banks enthusiasm to lend to these businesses can bring major difficulties to these companies. However, a temporary solution could be to encourage competing companies to also get into debt. This strangely enough would create temporary stability as competing companies would be in the same situation. This would be quite easy if you were to tell the executives of these companies that the debt could fund a nice pay rise as well as some new assets such as company cars ! However, this would be to the customers cost as they will be paying the usual costs of running the business as well as some un-necessary costs associated with debt. This is likely to result in many customers not being able to fuel their homes. If people are going to die as a result of the needs to feed bankers bonuses and the life style of the executives of these companies, those people can expect that the majority of the voting public are going to want to see a change in the way our vital sevices are provided. .......................Many of these companies are in debt and they have been run badly, on the finance side of the business at least, due to banking and various types of inefficient investment. That is investment that creates un-sustainable demands on a business. There is a possibility that some of these 'business people' who I really have to correctly refer to as landlords of the services mentioned (No offence to landlords intended, but they are their to syphon profits from these businesses whilst doing little to earn it, just like landlords), could find themselves being upstaged by operators who could run these services, with much lower costs. Due to a much more responsible attitude to finance. Electricity companies, gas companies, water companies, health companies could be run at much lower costs if it wasn't for demands associated with interest and returns on investment generation, along with leverage from banks. In short, they would have to be run in the way a nationally run  business would be run.

....Before you say that privately opereated businesses perform better than national run businesses, well you may have an argument if I didn't know better. It's true that many National businesses may appear to  have struggled as compared to private businesses when you judge them buy surplus cash or profits There are a number of reasons for this..........

The first is that ,the companies didn't need to make a profit.
 Prices charged to customers were based on the costs of providing the service. To charge much more than the actual cost would have been greed. Yet politicians defending privatisation will use this as there ace whenever privatisation of industries comes under scrutiny. They will always bring up the profits the new privatised businesses acheive in comparison to the lack of profit or surplus cash from pre-privatisation.........The businesses were not trying to make a profit.........Hence prices did not keep rising..............They employed more people, and those people were not treated like slaves, doing the work of would be redundant staff.

Second...... Loyalty or responsibiliy to the customer.
National  companies have employed more people than their private counterparts. Afterall the services that are being provided are for the people and you would not want any of those people to be left without heating, water, electricity etc. As a national company, if some body was being left without any of these services , then as a provider, you would not be doing your job. So the priority of these industries was to provide a service to the people. And that is all the people.
 Today things are different. These private businesses are now controlled by people who directly or in-directly have investments in them. Whatever form is financing these business, they are all affectively in debt to any one who has shares in them or to the private equity company that may own it, along with the banks who hand the debt to private equity companies to buy them. (This is un-related to any extra debt which the company may have which  may be used to buy assets, or use for running costs.)
Debt to investers, share holders, private equity managers, banks (Private equity companies constantly borrow money and then re-finance before the previous debt is paid off. Therefore if a company is owned by private equity, it will constantly be in debt ! This makes the banks a kind of share holder in a lot of these utility companies.)

The responsibility to investors, share holders, private equity companies, pension funds and banks means that supplying a service to all the people is no longer a priority. The customer is secondary to all of these investors.

To acheive returns on investments and to pay off debt to banks, these companies are run at a minimum cost as far as staff are concerned. National companies would have more staff. But the companies were nationally owned, and a few extra staff would have been no major problem. The people paying for them know that they, or family members need jobs.

So may be private investment can make a business reduce the costs to the public. But, this has nothing to do with private investment or the way executives run these companies when privatised. The same kind of measures could have been adopted if there was a need to do so by the government, whilst they were in control.

If national run companies were expensive to run,  then much of this wasted money would be down to the government departments not giving them enough attention. Also some near retirement people were probably employed along with disabled people. The privatised businesses are less likely to employ these people, as they will be looking to acheive something closer to 100 % efficiency from their wages budget. (This is not to say that people with disabilities are less able to do the job, but they are less likely to take on a person if there was any doubt)  In fact being of age or having a disability are not the only characteristics which may cost you your job if a business is intent on cutting costs. Just being British could become a disadvantage as many investment incentivised companies actively seek foreign workers. The foreign workers accept lower wages due to the extra value their wages have when sent back to their home country. This is a situation that many british potential workers living in a country where homes are targeted by investors putting an un-realistic pressure on prices, and costs of living have difficulty competing with.

GOVERNMENTS DISTANCED FROM THEIR RESPONSIBILITIES BY P0RIVATISATION..........................



THE FINANCIAL WORLD INFLUENCING THE WRONG KIND OF GOVERNMENT
CANDIDATES...................................



THE MEDIA & PRESS MIS-LEADING THE PUBLIC ON THE PROS & CONS OF PRIVATISATION AND INVESTMENT IN BUSINESSES......................................



 

The Bank of England's For Ever Low Interest Rates; Who Really Benefits?

Why does the Bank of England continue with a low base interest rate, giving home owners with mortgages a much easier time than those who may want to buy homes, but are curretly renting?

The only logical reason I can put this down to is that the low interest rates are not to help the home owners but to help another type of customer of the banks. This is business linked to the stock markets which includes the buyout business.

Many big businesses ( many of which have recently gone bust like the oil refinery company Petroplus ) are vastly affected by interest rates.

Vast privatised industry based businesses would have collapsed just like Petroplus recently, if it wasn't for the low interest rates. Many of these businesses were loaded up with debt by the banks in the build up to the financial crisis and there has been little change since then.

It looks like the home buying market has been near to sacrificed so this commercial buyout and stock market activity can thrive. Obviously, the low interest rates haven't saved all of the companies that have been loaded with debt. Some of the victims of this debt include National Health Trusts. Many are close to collapse even with the low interest rates. If these trusts do collapse, it won't be due to the excuses that will be given to  the press and media by these businesses and the banks. It will be a pure matter of lacklustre banking practices.

Currently, house prices are still dropping in the U.K. We know that there is no shortage of demand for homes. Despite the ongoing recession  and economic crisis lots of us still have jobs and could certainly afford the costs of buying a house. The continued falling prices is only increasing the affordability for a reasonable proportion of the population.

There have been a number of schemes from the government, but these would seem to have gone almost unnoticed by the banks.

But still, the banks continue to refuse to lend to would be home buyers.

If the banks' only source of income was the lending for home loans, this wouldn't be such a problem. But this is not all they do. The problem is that if the banks can not see much income from mortgages, they have the option of using the money to be gambled on the stock markets or big company buyouts. This isn't to say they can't make money from home loans. I am absolutely sure they still could. Its just that the stock markets are more profitable. For reasons explained on other posts, the buyout world is just a way for the banks to be drip fed by every one of us through the businesses they lend billions of dollars to !

 The other influential factor is that banks are required to hold more money than they used to. This was a correct decision by the governments. But how have the banks dealt with this new requirement ? Well it's clear a sacrifice would have to be made whilst the banks re-accumulated cash on their balance sheets. The problem with the stock markets is that they are pumped up with cash that's invested from all kinds of sources. But for the stock markets to operate, the level of cash needs to be maintained at a high level. To reduce this cash by 5% could cause a catastrophic crash in the stock markets and this would affect the 'stock market' values and shares of companies.

I am fairly sure a  sacrifice has been made to conserve the stock markets and its at the cost of the people's ability to buy their own home. As I mentioned earlier, if banks, like building societies used to in the past, only lent to the public without entering the stock markets, then the banks would be lending mortgages now. We wouldn't have the housing crisis and the the dropping prices. Banks would be earning profits from this business, though not as much as they do currently. What really matters is the economy would be in a lot healthier state. The stock markets would not look so good. But they really only serve the finance world whilst creating problems for everyone else.

It would be disturbing to think people are being deprived of their own homes in order to protect businesses which have been loaded to the hilt with, in the majority of cases pointless debt and also to protect the availabiliy of cash to be used by stock brokers in the stock markets. But if you try to find any other logical explanation for the policies of the Bank of England, you might be looking for some time. The idea that many people have is that for some reason, the government likes to help home owners. But the help given to home owners by the banks has absolutely no logic what so ever. Its not helping first time buyers get on the housing ladder. Yet politicians will pass this policy off as their way of helping home buyers. Its rubbish. It helps home owners but not new buyers.

 Many home owners are paying far less than the cost that would be paid by a person renting the same home. Whilst this goes on, home prices are still falling in the U.K. Unbelievably rent is still rising ! There are no benefits to the housing market.

Big businesses have been collapsing not so much due to economic conditions but due to the debt they have been burdened with. If it wasn't for the low interest rates, many more businesses would have gone out of business.

The low interest rates are therefore hiding the real damage done to big businesses by the banks and the governments which have given  the banks too much freedom. Without this cold tap that the Bank of England turns on and off, the economy in the business world would look a lot worse .... if they didn't have the policy to cool things off a bit. The problem is, this may cool things down, but it doesn't deal with the problem. These problems have not gone away, they are just being temporarily hidden. Lots of companies are in major debt and its there to stay,...atleast for some time.

-What is worse is that as you will see in the coming months in X-ECONOMICS is that the low interest rates are not just protecting businesses with existing debt from the build up to the financial crisis but is being taken advantage of by buyout companies, hedge funds and financial people currently who are generating new business due to the low interest rates. The low interest rates are actually encouraging the banks and the other financiers involved to continue to load debt onto major companies.......This debt will undoubtedly cause problems and prolong this recession as the costs of these companies are rising due to this debt..................Pay and bonuses will cotinue for the bankers involved.....and the people often referred to by the press as entrepeneurs, will also benefit with increased wealth....................Reward only for  irresponsiblity, stupidity and greed !

The irritating aspect of this for would be home buyers is that it isn't that the banks are not lending. Banks are lending, but not to buy homes. They are lending for the corporate buyouts like the one that affected Robert Wiseman Dairies a few months ago( - and yes it looks like this has had a bearing on the farmer protests recently. See other posts)  They also lent a fortune for the floatation of 'Face Book'. The banks use investors money to buy the company and then sell it off as individual shares. The banks over valued it but there was certainly was no holding back by them, even though every one seemed to think it was over-valued. Still, they won't have lost money as the price only crashed after the banks had parted with the shares !  The banks' biggest asset is probably the press and media who give this type of business too  much free advertising. In the mean time if you want money to buy a house, your best bet is to set your self up an internet based e-mailing service and then sell it to the world with the help of the banks.They'll only be too glad to help.


-----------------------------------------------------------------------------------------------------------------------

(If you was to beleive the Prime Minister of the U.K. David Cameron you may beleive that there is now , as he put it,a fire wall between investment banking and retail banking. I have to say that if this really happened it would cause a crash in the stock markets. Once your money is in a deposit account, it can be borrowed for all kinds of investments, which include private equity, hedge funds, stock markets etc. If this division between investment banking and retail banking really did happen there would be a sudden surge in mortgages and a boost to the housing market. This would cause a total collapse of the stock markets.What has happened I beleive is the that the potential housing market's investment has been used to prop up the stock markets! This is partly a result of the banks having to hold on to a larger reserve of cash. A decision had to be made and they made the right decision for the banks but the wrong one for the people).

-------------------------------------------------------------------------------------------------------------------------

 However, having said that, many companies of the type that were originally nationally owned industries are not so affected by their debt quite as much. This is because, if the debt is rising, the price charged to customers just keeps rising to cover the rising costs.

The really important point Im trying to get to is this. Rail travel providers, gas ,electricity, telephone and water companies are all constantly getting into debt due to new so called investment by new investors. Yet we are suffering increases in prices constantly by all of them even while the interest rates are at an all time low !  The economy is currently subsidizing these companies by reducing the interest they are having to pay on their debt !

If we are suffering price hikes of say 8% within one year, which are figures which have been quoted for price rises to both gas and rail travel for a couple of companies in the U.K. in 2012, then what the hell is going to happen when their costs go up even more when the interest rates go back up?

These business have got it easy at the moment due to the low interest rates. I can only see the situation getting worse atleast for the customer.......

There is a possibility banks take advantage of these companies due to the importance of them to all the people. Therefore they are more willing to lend for new buyouts or the purchase of a new contract , like the finance for 'First Plus' to buy the contract which Virgin did not bid high enough for in the past week. It is absolutely apalling that the government has handed this contract to the business which was willing to borrow the most money to buy the contract. They out bid Virgin who had been running it for 15 years. The only message this sends from the government is ; If you win one of these contracts, make sure you charge the customers enough so you have enough in reserve to win the next bid ! Therefore encouraging the operator to rip off the customers.

So much for the government's schemes to get people back to work. They seem more attracted to schemes to make sure they won't be able to afford to get to work !

It is of real concern that the British government's lack lustre policies just seem to encourage more of the same behaviour which, despite other excuses and explanations that may have been made, contributed to the economic crisis which we are now stuck with. And I emphasize the 'stuck' part because this 'recession' is going no where !

One of the 'problems' for the banks when lending to ordinary home buyers is that when the costs go up, the home buyers have little in reserve to find extra cash to cover the increased costs. ( For example when interest rates go back up). This means there will be the home reposessions which not only nobody wants, but it brings bad publicity to the banks.........

But if the banks lend to businesses we all depend on, there is more scope for the borrower to cover rising costs such as rising interest rates. The business just has to raise prices to cover the rising costs and tell the media and press that the rising prices are as a result of economic conditions. A companies demize may be blamed for the same reasons !

......but in this situation they use the press including the 'Financial Times' to manfacture excuses to divert attention away from the banks to other parties such as the recession or economic crisis.

Basically, the banks putting businesses out of business is an accepted part of the business world. But only because the bankers and the executives of these companies along with the press and media who religously listen to these executives and bankers have managed to cover up the real reasons for businesses to collapse, often without warning to those with investments in those companies.

The home buyer finance market is therefore suffering as a result of illusions that are being created in the business finance world. .....
....This will probably contine until the ordinary people with deposit accounts and pension funds choose to invest their money where they know how it will be invested...............

Mitt Romney; Would He Make a Good President for the U.S. ?

Much of Mitt Romney's campaign to become the next president of the United States is based on his business back ground.

He has claimed that he has created jobs during his business career.

Mitt Romney has spent his business career mostly in the private equity and buyout business. This has involved using mountains of invested money to buyout companies and re-sell them later at a profit.

What is for sure is that he has created unemployment as many of the companies he has loaded with debt have gone bust and employees have lost their jobs.

 He has also been responsible for thousands of redundancies which have been made in companies after acquistion by Bain Capital. This is standard procedure for these companies.

Bain Capital have been successful in making money for investors, but this is not as difficult as you may think it would be for a number of reasons.

1......If you are aware of a growing amount of money going into this type of business, it creates a supply and demand issue for the mountain of cash. Growing funds in the lead up to the financial crisis meant it was relatively easy to buy a company and sell it within a few years at a nice profit. Much the same way as there was a lot investment in property which had the same result on house prices. (The mountain of cash is money that has accumulated in all kinds of investments including pension funds and deposit accounts- Basically growing investments in general).

2......If you were struggling to find a buyer from another buyout company then there is always the option of a floatation on the stock markets. Stock markets don't tend to think things through so much as the stock brokers and hedge funds work much more short term. Many companies end up being floated on the stock exchanges after Mitt Romney's team have loaded them up with debt. And many collapse shortly afterwards.
 (It is difficult to understand this should go on without being outlawed, but part of the reason it continues is that the press and media seem to turn a blind eye to what is really going on. Much of this is due to the support given by the press and media to the stock markets.  The truth is the stock markets are used as a dumping ground for companies that Private Equity Firms, Hedge Funds and other types of buyout company want to off load because they want to use the capital to invest elsewhere !)

3........ Cutting costs of an acquired company are easy when you know you are not going to keep it for long. One way is making redundancies. Another way of accumulating cash and cutting costs is selling parts of the company off.

So you see there is nothing difficult about the way Mitt Romney has earned his money. I don't see how being president of your country and a back ground of private equity go together. If Romney becomes president it will be because he has successfully misled the United States People.

Mitt Romney and the company he formed, 'Bain Capital' are responsible for;-
 ...................Thousands of redundancies
....................A number of complete business closures
....................Companies getting into massive unjustified debt
....................A lower standard of product or service by many of these businesses
...................Increased prices due to added costs by Bain Capital and increased debts

Although Mitt Romney left Bain Capital some years ago he still receives a pension of many millions of dollars based on the profits of the buyout and private equity business.

Much of the money for his election campaign will come from damage that he and his company has created which probably dates back to what will probably be seen as the beginnings of the 2007 financial crisis. Yes, I believe it goes back to the eighties and the private equity and buyout business was very much at the very beginning.

Should he become President ?
The answer is a definite no.

 But of course he does give millions to charity. But surely, we all would if we were worth $200 million. If he makes it to president then the press and media will have done a terrible job in explaining his real credentials. Its really important that the way these types of business work, is made clear to all the people. Because what we really need is companies like Bain Capital to stop running the world, which is what they are doing currently.

The Co-op take over 700 Lloyds Bank Branches

The British government has claimed this sale as something to celebrate, but I have real doubts about whether it is going to be of any real benefit  to the British public.
Here are a few of the comments that have been made about this buyout......

Chancellor George Osborne said,"This is another step towards creating a new banking system for
britain that gives real choice to customers and supports the economy." ................................

The treasury also claimed this buyout , "... forms part of a raft of measures to reform the banking system and improve competition."

"The sale of hundreds of Lloyds branches to the Co-Operative creates a new challenger bank and promotes mutuals."

"This follows the sale of Northern Rock to Virgin Money in January and represents another important step towards a more competetive banking sector."

Some of the other comments made about this by the press include:-

"If this deal goes ahead it will see Co-op land  a 10% slice of the U.K.'s high St banking pie. That's a sizable figure and will give them real clout as a main stream lender.....This could be a really significant development for small firms looking to restore traditional relationship banking, where the tick box lending criteria approach will hopefully have no place."

--------------------------------------------------------------------------------------------------------------------------

Lloyds are currently 40% owned by the tax payer.

First of all, Lloyds were expecting £2 billion for this sale, but will actually only receive a fraction of this amount. It is actually going to cost a maximum of £750 million. Only £350 million will be paid initially. The other £400 million is to be paid over the next 15 years! But this mortgage payment is dependant on the success of the combined Verde Group banking business. It may never be paid.......................................................................................................................

Secondly, the Lloyds Banking Group has in recent years spent a lot of money on up-dating the systems running the banks. However, the Verde Group Banking business has not been updated to the same level as it is much the same as when Lloyds bought the banks. So the sold off banks are un-likely to be able to compete with banks that remain in the Lloyds Banking Group. This will pose a challenge to the claims made by the conservatives that this is going to bring in much needed new competition in U.K. banking. Im strugling to find reasons how this will happen.

Thirdly........The Lloyds Banking Group combined with the Verde Group Banks, which are about to be sold, amounts to many banks which the Lloyds Banking Group probably does not actually need. The reason being that, due to the continued stagnation in the housing market, many of these smaller customer friendly banks have become comparitvely redundant as far as the actual banks are concerned. What I mean is, although we need our local banks, to the big banks, the smaller banks have become more of an inconvenience. Because wages are generally paid in electronically, the banks know that our wages will still arrive even with a lot less banks in our towns and villages. When banks were giving out lots of mortgages they needed the local branches so they had a place so you could sign the papers for 25 years of debt for your dream home. However, until something revolutionary happens in banking, for many of us the idea of buying a  dream home has long passed. For many, the idea of buying any delipidated shoe box of a home is a dream out of reach. I think Lloyds have calculated that they can concentrate on corporate buyouts and stock markets, without the need to hand out money to ordinary individuals. (No need to be too pessimistic. The whole point of this blog is that there is an answer, but it is un-likely to come from the big banks or the governments.......Not without a push from the people...). What I am trying to say is, the European rule which is forcing the sale of these banks by the Lloyds Group seems almost convenient for the long term Lloyds Banking Group. If they were not to be sold off, many probably would have been closed at some time in the future.

Forthly....... Probably one of the most niggling things about this deal is that Lloyds are going to remain as a  kind of landlord to the Verde Banking Group  banks.The Co-op is going to have to pay an annual commercial rate bill to the Lloyds banking group, expected to be many billions of pounds a year. Exact details are yet to be disclosed along with the management teams pay structure. For this reason there is little chance of the Co-op actually becoming competition for the Lloyds banking Group to worry about. Because if this was to happen, Lloyds could just increase the costs for the Co-op. So much for the much needed competition that George Osborne seemed so optimistic about.


Fifthly.........If I thought this was going to make a positive difference to the economy and make more home loans available to home buyers, I would be the first to recomend people to open an account with the Co-op bank. Regretfully I can not see this happening so I could not recommend people to start switching their account. The only way I can see this working is if the Co-op was to give stop gap loans whch are more profitable due to higher interest rates. This would work for the bank as they could take business away from 'money shops', log book loan companies and pawn shops. This certainly will not have any real benefits to the economy, as the only loans that make economic sense for the ordinary people is for loans to buy homes. However , I don't really see the Co-op as a competetive force to compete with the big banks.  So the claims of George Osborne and the treasury on this buyout have little foundation to actually fulfil their claims. I hope I am proved wrong. Unfortunately, I don't think I will be.


Sixth.........Lloyds will continue the 'back office' work for the Co-op bank. This is likely to thwarte any adventurous new strategies, for example.........to start lending for home purchases instead of the mostly pointless speculation on the stock markets which has continued to thrive despite the recession. If the Co-op was to proceed with this 'new strategy' it would for certain bring in new account holders who are currently with other banks. But this change in direction could have affects on the stock markets which would be negative. A sudden rise in home loans would have a negative affect on the sacred stock markets. This would have a negative affect on bonuses of bankers, stock brokers and also a temporary affect on interest on various types of investment products that are predominantly linked with stock markets. It would also affect businesses related to the buying and selling of big business (buyouts). I know you are probably thinking that banks lending for home loans should earn bonusus just as easy as the stock markets.......No...Because home loans take a long time to get the money back........As much as 30 years.....Compare this to a corporate buyout of a large company.....It won't take as long to get the money back. Because the buyout business is an industry its self which is backed and supported by stock markets. When big business people buy businesses they will usually be hoping to sell them within a few years at a profit, to another business with another load of borrowed money.........Very similar to stock brokers and hedge funds buying shares of companies.......Again any money lent for this type of investment gets returned to the banks quicker to be used for the next investment.  Lots of the bonuses the top bankers get comes from the success in these shorter term investments. If a bank can provide the finance for a buyout and then provide the finance for the next investor to buy the same company they make money from fees from both deals, but also early repayment fees etc. These buyouts provide lots of good for the bankers, but these buyouts do little for the rest of us apart from add a few pennies of interest to investments at the expense of higher costs for products and services we use and often job losses to make the savings to pay off the interest on the loan to buy the company!..
If account holders want the Co-op to lend money for mortgages, they are probably going to have to tell them that they require this as a condition of the account holder placing their money in the Co-op's banks. Failing that...It will probably need the forming of a peoples bank that does the things the people want. It could be the pheonix from the flames of David Camerron's big society ! Though I some how doubt that he would back this new peoples bank due to his completely biased relationship with people in the current international banking industry.- See "David Cameron has Worked Out What Caused the Economic Crisis !" in X-ECONOMICS.

 Roll on the next building boom!

U.K.'s Farmers Protest Over Reduction in 'Milk-gate' Price. Have the banks had an influence?!

Dairy farmers in the U.K. have recently been protesting about the price being paid for each litre of milk they are producing. There are mixed feelings from the public about this, going by recent debates that have been going on in the media and press. The thing is, most be people will not have been told all the factors which are involved in this scenario. The businesses involved are giving their own version of what is going on which is then re-iterated to us by the Financial Times, The British Broadcasting Company, The Daily Telegraph and all the rest of them. If the journalists don't have experience in areas outside of journalism, the chances are it will be easy for certain types of 'business' people to use them not to keep the public informed, but to create a smoke screen over goings on which they may wish to keep from both the public and potential investors.

Before going any futher, the press and media is far more important in these kinds of situations then most of the people working within it could possibly realise. It is therefore vitally important that the reporters collect all information available from both sides of an argument. If this doesn't happen it will affect the decisions made by political parties and also the general  publics' votes when it comes to voting time. And we will end up with the wrong people in government or possibly potentially the right people, but people who have been misled by the people who have been feeding them information such as the press and media.

So, if you are a reporter for the press or media, lets get this one right, otherwise we are at risk of losing all our farmers!

                          --------------------------------------------------------------------------------

A lot of the attention by the press and media is focusing on the big supermarkets, but this attention would seem to be mis-placed. The big supermarkets have been blamed by many news papers for squeezing the price that the farmers are receiving. If these news papers had done a bit more research, they could have come up with some important influential factors which have been over looked....
First of all let's look at the Supermarkets, and their reaction to what has been going on....

The Co-operative is one of the smaller buyers of the milk being produced by the farmers, but was one of the first to promise to increase the price they would pay. Also there was no hesitation by Morrisons and Asda to increase the price paid after the protests kicked off. So then, it would seem there was another outside factor influencing the situation. So let's look a little deeper.

Robert Wiseman Dairies processes 30% of the U.K.'s fresh milk, but they are not a retailer to the public as they are a processor which buys milk from farmers and then sells on to retailers. Robert Wiseman Dairies in fact supply milk to the Co-op supermarkets! The Co-op does not pay the farmers directly, but pays Robert Wiseman Dairies who then pay the farmers.

Therefore, there is no guarantee that the increased payments promised by the Co-op will actually reach the farmers. Regardless of this is ; Why did the processor not anticipate this problem arising? The willingness of it's customers to actually pay more............

The problem with lots of businesses which become ....merely vehicles for the investment of billions of dollars, Euros and pounds is that the people who actually run them are little more than landlords,... of that business and often don't have the nouse to really have the understanding of the business they are seen to be running..........

There is one factor which the 'free markets' promoted by many politicians, bankers and capitalist investors do not take into account. That is the 'human factor'. This is the idea that 'the people' want what is right , and this is not necessary what the capitalist motives of the bankers and other beneficiaries of capital want!.......

On 16th January 2012, Robert Wiseman Dairies was taken over by the dairy conglomerate Muller for the price of £279.5 Million.....

....The way this works is that the buyer borrows the majority of the purchase price against the subject company, and puts that company in debt. (Its an internationally accepted financing rule that needs to change). Basically, since Muller bought the company, Wiseman has become in debt to banks. When Muller bought the company, it borrowed money which Wiseman will have to pay back with the added interest payments. The interest will obviously affect its running costs which will have an an inevitable affect on the price it can buy milk and the price at which it can sell. Either the selling price for its end product will have to rise or the running costs will have to be some how reduced.

So, to summarise - the costs of running Robert Wiseman Dairies has increased substantially in the months that have recently passed. It would certainly be possible that the dairy will either have to increase its prices or lower it's costs so the resultant accumulated cash can be used to pay back debt and associated costs such as interest on the debt.

Also note that the mostly borrowed finance was handed over by banks who clearly had no anticipation of problems concerning the products of the dairy which could have an adverse affect on the company's well being. The reason I say this is that on 29th June 2012, Robert Wiseman Dairies released the following statement (just six months after the buyout):-

"Wiseman Confirms Milk Price From August 2012."

"Robert Wiseman Dairies  has given it's dairy farmer suppliers a months notice of a 1.7pence per litre reduction in the 'farm gate' milk price to take effect from August 1, 2012."

"The decision follows a collapse in value of the cream in each litre of farm-gate milk over the last 12 months. From it's peak the commodity fell in value by the milk price equivalent of more than 5ppl (Source:Dairy Co Datum)"

"Wiseman had hoped that the need for  further adjustment to it's milk price following a 2ppl reduction which took affect in June could be negated by a sustained and significant rally of commodity market values"

"But whilst markets have improved from the lows of recent weeks, they remain at levels not seen since early 2010, when the average DEFRA milk price was 24.19ppl. Wiseman's standard litre price from August will be 24.73ppl."

"Pete Nicholson, milk procure directorment director at Robert Wiseman Dairies said,"We know that this news will come as a major disapointment to Wiseman Milk Group members. We have done everything we can to minimize the reduction in our farm-gate milk price, but we must now reflect the substantially lower returns from the markets which we serve."

One week after Robert Wiseman Dairies reduced their 'milk gate' price, both of the U.K.s other big milk processors reduced their 'milk gate' price. They are Arla and Dairy Crest......  Arla supply Asda......Without being some kind of mind reader , it is difficult to give a clear picture of what is going on. But, it is possible that Arla, and Dairy Crest saw the Robert Wiseman 'band wagon' going passed and decided to jump on it!... After all, it would only result in bigger profits for both these companies.

------------------------------------------------------------------------------------------------------------------------

Okay then, I am no expert on the milk production business or farming, but going by the information made available to us by the press and media, and also this statement by one of the U.K.'s biggest milk processors.

Although Robert Wiseman Dairies does not control the market, it certainly has a major influence. Yet the above statement would have you beleive that Wiseman are at the mercy of  the stock markets. I beleive this to be a load bull. Demand for cream may well have dropped in the U.K., but this has been happening over the last couple decades as people have turned to a more healthy diet. This should not be an issue that has had the negative affect that Wiseman claims.

 The real reason for Wiseman to be squeezing the price of the milk it buys I beleive is because....
...The debt it is now carrying as a result of the recent buyout has influenced a drive to cut its costs. One of those costs is obviously the farmers providing the milk which it processes.

As mentioned in  the above statement, Wiseman has already pushed down the price in June and is going to again in August. So then, what are the big supermarkets' position whilst this is happening. Well that is fairly clear. If a big milk processor which apparently processes 30% of our milk reduces the price it pays, then the supermarkets are understandably going to expect a comparable reduction in the price they pay.

To bring this to a swift conclusion.......

Wiseman are a major player in milk production in the U.K., but due to the recent buyout which will have involved masses of debt being added to it by major banks, it needs to cut its costs to pay back its debts and to keep its investors happy. However, some of the supermarkets who are buying milk direct from the farmers appear to have turned and gone in the opposite direction. The effect this could have on Wiseman is to say the least worrying.

The Dairy farmers that Wiseman uses are under contract to supply milk to Wiseman, it would seem at the price that suits Wiseman as long as a period of notice is given.

If Wiseman sticks to this next price reduction in August there is a chance dairy farmers will go out of business.
However, if the farmers stick to their guns and refuse to supply the milk to Wiseman this would cause major problems for Wiseman.

What is most probable is that a compromise will be reached which will most certainly reduce profits for Wiseman. The problem is, will the company's inability to control the market cause problems with paying back its debt and therefore put the company and the jobs of all the employees at risk ?
If this was to happen the main stream press and media may well tell every one that market forces were to blame. This would be the wrong explanation. The difficulties are being caused by the banks loading the business with debt. Debt that is totally un-necessary. This debt is now risking the livelihoods of British farmers. Whilst much of the press and media only help the banks cover up the real reasons behind the farmers protests.

If you can't get your head round this Idea that bankers and some business people will get some kind of satisfaction from putting businesses we depend on in financial difficulty, you need to find out about some of the benefits of doing this...

See posts on private equity, hedge funds and buyouts in this the X-ECONOMICS  blog and also the ANTI-CRISIS ECONOMICS blog. You soon will ! 
                                          


.

The F.S.A.'s Contribution to the Barclays 'LIBOR' Scandal!

The F.S.A.'s Contribution to the Barclays 'LIBOR' Scandal!

It looks like our banking regulator, the F.S.A. had a chance to resolve this without the United States financial regulators getting involved. You might have noticed that our American friends are generally pretty diplomatic when having to deal with our inept politicians. But I think we know that as patient as the Americans often appear, its likely to come as a surprise when they do decide to take decisive action where they think it necessary. In this particular circumstance I think the Americans lost their patience, and from what I know about the F.S.A. I am not the least bit surprised!....

When I read about this it was difficult to understand why the press and media has suddenly made such a fuss about this story as it has been around for so many years. I heard about it a couple of years after the financial crisis, but obviously no fines had been dished out at that time. The press and media have just not bothered to cover it since. Either that or have been encouraged not to due to a fragile international financial system which could be further damaged by further bad publicity whilst people were still running away from banks with there money.

There is a possibility the Americans delayed their actions for some years in order to prevent damaging publicity to the world of finance.

From what I have read in the British press, some important details of this story have been left out by most of the journalists covering it. The bit  being over looked is the part the F.S.A. played in this fiasco. They have been aware of the goings on for a long time but would appear not to have taken any action until the U.S. sent in the Financial Industries equivalent of an air strike!

 The way I understand what has happened from memory is this;

Basically what has happened is that the U.S. financial regulator informed the United Kingdom Financial Services Authority that Barclays had been manipulating the 'LIBOR'. This is the agreed  rate for interbank lending which varies, but all major banks contribute their own opinion to what the level should be. Barclays wanted the rate where it was most profitable for them. This, a few years ago would have normally been fairly high, as Barclays would have more surplus cash then other banks in the U.K. This is because Barclays had more depositors than any other bank. They would therefore regularly be on the lending side of interbank lending deals. Hence, the higher the inter-bank lending rate, the higher Barclays profits and bonuses would be. However, more recently they have been trying to lower it. This is because of Barclays' rapid growth into an investment bank.

Barclays Capital currently has more assets under mangement than any other investment bank in the world. In 2008 it was just about in the top 10 ! This is what Goldman Sachs were known for. Barclays have however caught up with Goldman Sachs, and left them behind as far as investment banking is concerned. So this is why their tune has changed as far as the inter-bank lending rate is concerned. They need more money for their lucrative buyout business. Barclays have helped create a shopping spree for corporate buyouts, since the housing market collapsed.
 (This is great news, atleast some one is benefiting from the collapse of the housing market!...... But then again its probably part of the cause of the stagnation in the housing market.............)
  Along with new restrictions on banks having to hold cash, Barclays need cheap money from other sources to continue their buyout bonanza. Barclays had apparently been bribing management at many other banks to raise or lower the 'bar' for the lending rate depending on  their requirements at the time.
(You can see more on this in ' The Legacy of Bob Diamond' soon to be added to the blog posts.)

Any way, the American authorities kindly informed the F.S.A. as to what they believed Barclays were up to. I also understand they specified that they wanted the F.S.A. to take appropriate action.
Im not sure what happened between then and now, but the way understand it is that the U.S. authorities were giving the U.K. authorities a chance to deal with the situation. My guess is they were not satisfied with the F.S.A. and so decided to take action themselves.

The way its supposed to work is that the F.S.A. and the Bank of England are supposed to regulate the British Banks and take actions where required. It looks like the Americans have decided to take action on Barclays themselves despite the in-action of British Authorities. This would then be a kind of 'activist' fine which Barclays would not have been expecting. The choice Barclays probably have is to pay the fine and straighten out their procedures or lose billions in the way of business. I would speculate that the fine by the F.S.A. is in response to the action by the U.S. regulator. How would it look now if they were still to do nothing?

When you take into account the length of time the F.S.A. took to deal with the 'miss selling of PPI', it would be easy to understand why the U.S. regulator became frustrated and reacted accordingly. It took four years for the F.S.A. to come to the conclusion that mis-selling was taking place in British banks.

For the LIBOR scandal the U.S. regulator fined Barclays £230 Million whlist the F.S.A. only fined them £60 Million.

It makes you wonder if; If the Americans didn't get involved, would the FSA ever have done any thing about it?

On second thoughts, may be it doesn't!

The affects of raising the lending rate in the lead up to the crisis could certainly have created problems for smaller banks such as Northern Rock who are known to have borrowed fortunes from other banks. Was it a contribution to the crisis?
It could be an addition to what is becoming a very long list.

There have been conflicting messages on this story depending what you read or who are speaking to. But be aware that when top management start bringing traders into their explanation as to what is going on and blaming them , I don't think you will need me to explain that traders are not going to be making decisions that will affect the destiny of many trillions of dollars. The big decisions are made by the top people thats why they are paid many millions.

 Eighty percent of a top bankers job is justifying their actions, or confusing the public so they don't know what they are really doing. Ten per cent is just public relations, - feeding it to the press who generally eat it up and then feed it to the generally un-suspecting public.

(Percentages expressed are estimates at time of posting which may rise or fall in due course)

By the way, happy independance day to all Americans following this blog!