But we don't want the sharks to turn on us - it should be demonstrated that 1) they're not being cheated (or robbed) and 2) that their welfare is not being seriously compromised.
Oh, please ... I know bankers in my personal network actively boasting about how they're managing to the play the situation with interest rates to maximise profit without doing anything productive to achieve it.
That doesn't change my point. Those bankers are probably equally unaware of the actual long-term effects this will have. What I mean is that there are no easy fixes for anything and I'm always skeptical of any action driven by populism. The politicians know that people only care about the first stage of effects.
With that said, I'm no different and I wish the same happened in my country. I am however aware that my feelings are short-sighted.
> Those bankers are probably equally unaware of the actual long-term effects this will have.
However, we're aware of the long-term effects not taxing banks enough brings about, so trying something different seems like a good idea, even if we don't know all of the effects until later.
> Guinness actually doesn’t pay any rent for its iconic St. James’s Gate Brewery in Dublin. That’s because the site has been owned by the Guinness family since 1876, and the current lease runs until 2031.
From 1759 to 1876 is 117 years.
FWIW, as far as I can tell, a 9,000 year lease would have conflicted with the rule against perpetuities. Certainly Cadell v Palmer (1833) set the limit as "lives in being plus twenty-one years[1]" and I gather from https://www.lawreform.ie/_fileupload/Reports/rRuleAgainstPer... that something similar have applied in Ireland at the time of Guinness, certainly by 1833.
As an interesting observation, Arthur Guinness II lived 1768-1855 and 21 years later is 1876. I'm now curious about the actual text of the lease, but I can't easily find a copy online.
I don't think the rule against perpetuities ever prohibited the creation of very long leaseholds, so long as the lease itself vested within the period, because the reversion would already have been vested at the grant of the lease. There are plenty of examples of 999-year leases granted in the 19th century for example.
Yes, it looks like you're quite right. Thanks for correcting me!
I've confirmed it with several sources, from several different legal systems:
> The rule is not concerned with the duration of interests. A lease for 999
years does not violate the rule; nor does an estate in fee simple, which may
last for ever. The rule is satisfied if an interest must 'vest' within the per-
petuity period, even though the interest may last beyond it. - http://classic.austlii.edu.au/au/journals/MelbULawRw/1969/19...
> Although a lease may be given for an unlimited term or even in perpetuity, the reversion is clearly not obnoxious to the rule, since it is a vested interest. - in LEASES AND THE RULE AGAINST PERPETUITIES, https://openyls.law.yale.edu/bitstream/handle/20.500.13051/1... (there are many concepts and words I don't understand)
> It’s not related to the rule against perpetutities at all. The rule deals with interests in proprerty which are floating around in a trust, waiting to be vested in someone. They can only float around unvested like this if the terms of the trust require that the must vest in someone within the perpetutity period. - https://davidallengreen.com/2023/03/happily-ever-after-disne...
I was particularly happy about a comment in that last link: "When I was a law student I think I understood the rule against perpetuitities for about an hour – luckily that coincided with my exams."
The interesting thing (to me at least) about the rule against perpetuities is that it never prevented (at least in England) the the one thing you would have thought it was actually aimed at - fee tail estates (ie interests in land which are essentially a series of life tenancies to heirs specified at the original grant) because those were specifically provided for by statute (although other ways to get out of entailed estates were devised).
The idea that banks are private companies in any country is not entirely true. Everyone knows that if a reasonably big bank fails, governments will intervene to protect people's money.
Banks are technically private but won't be valued as much without government protection. So, to some extent, it's not wrong for the government to tax them more than other private companies.
However, a negative consequence of this tax it reduces the bank's incentive to lend money to small and risky companies/startups. This is equivalent to increasing capital gains to 40% - why invest in risky assets if I know I will ever only receive a small percentage of my profits (if any)?
I hate this argument. Business owners don't say "40% taxable gains? Guess I will never make money again" It may surprise you but no matter the restrictions put on size of profit, people will still attempt to make a buck. All that changes is the strategies used and the amount of time REQUIRED to strategize. All of these things sound so horrible, but when most people all over the world won't ever be in a position to think about it, I'm less sympathetic.
See, I would have phrased that as "the UK found ways for oil&gas companies to largely avoid the legislation before they half-heartedly tried to pass it".
so.... if banks make "super profit", doesnt that imply they managed to gouge customers by charging them excess % on their loans and fucked depositors by giving them less % on their deposits?
What has happened across the banking sector is that net interest margins have improved because rates charged on loans have moved up more quickly than rates paid on deposits. That might yet be offset by higher credit losses but it's too early to know. In any case, it's expected that deposit rates will catch up (in fact they already are starting to) and net interest margins will continue to shrink a bit from where we are now.
However, there is also an argument that across the system, bank net interest margins were actually abnormally low for much of the period of zero/sub-zero interest rate policy. Essentially there are two reasons for this:
- There was a pretty effective zero (or close to zero) bound on the interest rates they could pay on deposits. Even before rates were negative this would have compressed net interest margins as banks typically paid below the policy rate on much of their deposit base historically.
- Large amounts of central bank liquidity added to the system (through all the various programmes - LTROs etc) allowed weaker banks to fund themselves more cheaply, leading in turn to lower interest rates charged on lending than a market without this additional liquidity would have led to
In a way, you can see this in the fact that the stock market consistently priced banks at a meaningful discount to book value for a long period of time.
The effects of this net interest margin compression were also not spread evenly across the sector. Weaker banks arguably suffered from these effects much less than stronger banks and perhaps even saw a net benefit.
Banks (and bankers) were still making ALOT of money even during this period with 'abnormally low margins'. Banks are government supported essential services and giant profits from this sector are parasitic on society and the rest of the economy. People hate taxes sure, but being charged an overdraft fee because a bank algorithm withdrew funds for your bills before depositing funds from your paycheque is something people also hate.
In Europe banks give 2-2.5% on deposits these days while real inflation is in double digits, at least.
When US banks give double the yield on deposits you know something's off.
That's not comparable at all to 4.80% APY savings and checking accounts in the U.S. right now with far more flexible rules.
This kind of return on ultra flexible accounts is basically unheard of in most of Europe in recent memory as far as I know (born & lived in Europe as recently as 2019). What you describe are called Certificate of Deposit (CDs) in the U.S. and you can get 5.50% for those in August 2023 [1].
If you define UK as Europe still, then yes, you can get an easy access(withdraw whenever you want) saving account with 5% interest without any issue. Or 6%+ if you're willing to lock the money for some time:
That depends what you mean by customers and "gouged".
The vast majority of deposits come from companies and ultra wealthy individuals. Your average human customer is a borrower.
You also have to remember the regime we were and are in: 2 years ago, banks borrowed or paid depositors .5% and charged borrowers 1%. A shitty .5% gross margin.
Now, if they borrow at 4% and charge 6% that's 4x the return (2% Vs .5%). But it's also (a) move average historically and (b) smaller as a spread.
My grasp of capitalist theory is somewhat lacking but is this the point where the invisible hand would conjure up a competitor whith lower rates and higher pay outs, taking business from the gouging banks?
Those gouging banks could immediately use their scale to undercut that competitor, killing it, then return to whatever they were doing.
Considering how much of an upfront investment (not just in pure cash, but also in agreements, infrastructure and operations) becoming anything more than a basic savings bank is, the risk is very great.
Likely existing players can go pretty far before before the risk/reward of creating a new bank checks out.
The real question is why those existing banks aren't trying to undercut each other. Maybe there's some pressure and risks that make them behave this way in the current economy, or maybe it's good old price fixing.
They do undercut each other. Interest rates respond directly to interest rate changes from central banks and commercial savings banks operate on thin margins. It is not price fixing for people to make large profits.
Competition relies on the ability for new players to enter the market. That's very difficult in highly regulated industries like banking. Some of those regulations exist for good reasons. Many of them are not. For example, there is no evidence that the US-pushed anti-money-laundering rules that every country has been essentially forced to adopt have resulted in any reduction of criminal activity, anywhere, ever. I'm not exaggerating when I say that. Nobody has ever demonstrated their effectiveness in stopping crime, which was what we were told they would do. And they're a huge compliance cost for banks, worldwide.
It's not really fair for the state to impose huge regulatory hurdles that make competition impossible and then for leftists to go 'hurr but what about the invisible hand meme now???', when that obviously relies on FREE MARKETS, which we increasingly do not have.
No, you can't use "invisible hand" theories in the current economy because the hand is very visibly the government when it comes to bank monetary policy. Any claim that world economies are anything like the markets Adam Smith envisioned would be completely thrown out the window after 2008. They were already on very tenuous grounds.
Or maybe another way to look at it this: the invisible hand of force is yet another invisible hand operating in the markets.
It also implies a booming, healthy economy where more people want money to start businesses. Also, you can choose your tyrant. If the bank you're at offers you shitty deals, switch the bank.
Nobody forces you to accept bad deals. By the way, do you have time to talk about this amazing money-doubling service I've created?
> It also implies a booming, healthy economy where more people want.money to start businesses
Lol, have you ever been to Italy...? Banks will not lend to you unless you're quite rich already. Catholicism says debit bad, and the country is pretty conservative as a whole.
Italian banks making money implies two things: them screwing consumers (famously called literally "available cattle", il parco buoi, in local finance circles) and rich people getting richer.
Kind of surprised to read someone talking wrongly with that much certainty.
Catholicism isn't about "debit bad", it is about "interest bad" and this only applies to catholics owning banks. Historically this has left jews in Italy running banks and abusing its citizens (that cattle, or more accurately "goy" in native language of those bank owners) just fine since centuries.
Please remember that the Vatican created its own bank (financial group) to escape the jewish monopoly on banks. Within the catholic circles you'd hear them now promoting Santander as catholic-friendly option in Europe for normal citizens to escape that monopoly. Money lending isn't an issue within European catholic groups as long as it avoids going overboard with interests.
??? have YOU ever been to italy?
from my experience banks are totally going to lend you money for you mortgage if you have a non-temporary contract that covers 80% of your house cost.
you just need to have roughly 30% of the house cost cash and a stable job that pays enough, but with a 1.3k net salary (median income) and 30k you can totally buy a 110k home
talking about the north, if you live in the south just move already xd
Mortgages are not business banking. Mortgages are fine, because if you don't pay the bank takes your house - possibly the most valuable asset category in the country.
> Catholicism says debit bad, and the country is pretty conservative as a whole.
From Wikipedia:
"The present era of banking can be traced to medieval and early Renaissance Italy, to the rich cities in the centre and north like Florence, Lucca, Siena, Venice and Genoa. The Bardi and Peruzzi families dominated banking in 14th-century Florence, establishing branches in many other parts of Europe."
. . .
"The word bank was taken into Middle English from Middle French banque, from Old Italian banco, meaning "table", from Old High German banc, bank "bench, counter". Benches were used as makeshift desks or exchange counters during the Renaissance by Florentine bankers, who used to make their transactions atop desks covered by green tablecloths."
highly religious countries trend more conservative.
Italy is a highly conservative country.
Not sure if that explains their financial problems, probably not.
on edit: An Italian coworker just pointed out he wouldn't say Italy was very conservative, which I guess in a lot of ways is true - especially when compared to U.S and some other countries.
Maybe actually the 'Conservative' - 'Liberal' labeling doesn't work well in this case, for example Italians believe in free health care and in my experience do a better job at it than Denmark. In the U.S free health care is "anti-conservative"
I wouldn’t define Italy as highly conservative especially the north where most of economic activity is concentrated. If we did that we’d have to say that some Eastern European countries are “ultra” conservative.
> Not sure if that explains their financial problems, probably not.
I would say Switzerland is pretty conservative as well (if not more in some aspects but less in others)
To expand a bit: Italy is economically conservative. People don't like to invest, banks don't like to lend to businesses, and when businesses fail (which is just part of the capitalism game) everyone cries for the State to make them whole. Most people favour long-term assets like real estate, and as soon as any profit is generated it is typically "privatized" rather than reinvested.
Obviously I'm painting with a very broad brush. There are virtuous businesses, like anywhere; and it's still a G8 country with a massive economy. But it's not a country that, as a whole, values economic risk-taking. Somewhat ironically, I think we were more daring when the overall system was less free-market-oriented (the Italian State used to own a lot of large "strategic" businesses directly, up until the '90s), maybe because rich folks had to show they were better than the State at running things.
On social issues, it's a different (and very complex) story.
your next question might be "so...whats islamic banking then". the answer is simple. when you can't fight in a free market so what you do is change the market so that customers automatically opt for your "superior" product as opposed to the competition.
You can read up on this by finding "why need for islamic banking" arose. the problem didn't exist till then so someone just literally invented it and then sold a solution
> While Muslims agree that riba is prohibited, not all agree on what precisely it is.[2][3] It is often used as an Islamic term for interest charged on loans,[Note 1] and the belief this is based on — that there is a consensus among Muslims that all loan/bank interest is riba — forms the basis of a $2 trillion Islamic banking industry
This is enough to negate what you said here:
>it does not. there is absolutely no basis for "islam forbits interest".
Could you explain what you mean here?
>the problem didn't exist till then so someone just literally invented it and then sold a solution
What problem didn't exist and what was invented and what was the solution?
Sorry - I was just born there, spent a few decades, and still go back once or twice a year. Obviously mine was a bit of a throwaway comment, but you can't deny that the banking sector in Italy is vergognoso, and one of the reasons the country continues to stutter economically since the '90s. To be fair, they are not the only one - the Italian elite is, as a whole, pretty bad.
What if the banking system is dominated by an oligopoly (the situation throughout most of Europe) and they are all offering the same deal?
> money to start businesses
What proportion of bank lending is that? Close to insignificant.. Pretty much all small businesses/low collateral loans are backed by governments which are already pure profit for the banks
July 20, 2008 -> "...it's a safe banking system, a sound banking system. Our regulators are on top of it. This is a very manageable situation..." - Henry Paulson
November 20, 2008 -> "...We are working through a severe financial crisis caused by many factors, including government inaction and mistaken actions, outdated U.S. and global financial regulatory systems, and by the excessive risk-taking of financial institutions..." - Henry Paulson
The US got paid back and then some. Not at all the same as an arbitrary ad-hoc tax on success.
Should the Silicon Valley banks that have recently failed also pay a windfall tax? And if not, why tax success? Because it's clearly not a 'windfall' if it only goes to people that made good predictions and not ones that made bad predictions.
https://www.theguardian.com/business/live/2023/aug/09/italy-...