Jeremy,

My thoughts were a bit disjointed, I think they still are.......
I seem out of step but I'm happier that way.

I was having a go at debt as a means of living, not in any way decrying having a car. Permanently paying a portion of one's income to bankers, credit card companies, is like living on less income than we earn and giving it away to the moneylenders. That's all.
I was pointing out to Prof Eman that because these people employ staff as he pointed out, it doesn't matter because they contribute nothing to our standard of living in terms of material possessions and general well being.

Not too sure about 50% of our GDP coming from finance, sounds like another con trick to me. If we are persuading people overseas into paying us interest, or insurance premiums, or commission on share trading, or pension funds, or commodity trading in far away places at a profit then it's their loss and our gain, but it's not real wealth, we are just moving some of their money into our pockets with a legal conjuring trick.

Goods and services is a very wide definition. And who is measuring GDP, the office of statistics?
If it raises our standard of living / brings us more happiness/ better standard of health care, then it is positive and can be counted towards our GDP. If it brings money in from overseas, even though it's borderline criminal, it can be counted towards our GDP. Robbing our own people, moving money from my account to some crooked bank manager cannot be counted towards the GDP no matter how subtly it is done. Flooding our homes with thousands of electronic gadgets that we throw away in less than 12 months, employing hundreds of people on landfil sites to bury all this junk to pollute the ground and water supplies with cadmium, lithium, lead, mercury, wierd paint and refrigerant chemicals, & non-rotting plastics cannot be counted towards our GDP.

EngineerTony

I am dismayed that you cannot see the huge contribution to our wealth and development that is brought by having a functioning banking system.

You talk of a a corrupt bank manager taking a slice of your money, but by taking a loan you are effectively "renting" his banks money for a period, you would therefore expect to pay for this.

At the heart, a bank provides essential access to capital for individuals and companies to allow them to invest or spend as needed. Without this money, an individual may never be able to buy a house (reducing demand for housebuilders) or a car (likewise), a company may not be able to build a new more efficient factory or undertake the r&d required to develop the next new widget.

The two sources of capital available to a business are both risky and a bank is needed to mitigate and parcel those risks to effectively match the two sides of the deal. Whether its borrowing in the bond markets, or selling a share of future profit in equities, without a degree of certainty investors and lenders (in many cases individuals such as you and I) would require a far greater return, thereby reducing the efficiency of the process to the company involved. These transactions may require many hundreds of hours from thousands of experienced individuals and so of course there will be a cost involved.

I take pride in the fact that I support British and overseas businesses through share and bond ownership in my pension and savings. This support provides companies the resources needed to grow and generate revenue and contribute to our growing economy.

Prof

Disagree with your definition of bad/rotten services;

Toxic Loans/Mortgages - Loans are loans, they only become an expense when the borrower can no longer pay back. In the case of sub-prime loans in the US, the underlying mortgages are currently performing in line with expectations, defaults at just under 10%, recovery rates at 40-60%, therefore on a portfolio of these mortgages, losses are approx 50% of 10%, or 5% overall. Most packages of these loans have cleared through the markets, those that have not are rolling towards maturity to be paid off.

Toxic Derivatives - Derivatives are an essential risk management tool, used by farmers, manufacturers, exporters, insurers etc. They become a challenge when the other side of the transaction ceases to trade. Example - the outstanding derivatives contracts issued by Lehman Brothers and AIG cleared through the market at an average of 90p in the pound.

Junk Bonds - a nice term for loans to companies that are perceived to be higher risk borrowers. In most cases, loans are paid in full, the UK default rate for loans of this kind is less than 5% over the last 15 years

Endowments - dont know much about them

PPI - very useful insurance, helped me to pay my mortgage for 9 months when i was made redundant 2 years ago, problem is not the product but the sales process that was associated

The concept of good and bad services is too black and white, as it is for maunfacturing. All business activity has an associated cost, the economic principle is to understand the benefit vs the cost. In terms of society, the importance should be placed on adequate consumer protection to protect the buyer of certain goods and services that may not have the required information at point of sale.

If only Britain could pontificate its way out of its economic malaise. Enough hot air and puffed up comments here to solve our energy crisis.
Quite simply we need to invest in skills and training in science and technology. Period. Put all our efforts into it. Educate the politicians into realising it. Get elected - don't just talk about what is wrong - start to put it right.

Anonymous 1 needed this 'Off the Record'

Still on Life Support
If anything Switzerland is the exception rather than the rule.
What about Germany and China, as opposed to Greece and the other PIGS?

Prof Eman