ICM’s monthly poll for the Guardian has finally appeared (it was conducted on the Tuesday and Wednesday before Chistmas, but presumably held back till today’s paper when there is normally no proper news to report!). Topline figures, with changes from the ICM/Sunday Telegraph poll straight after the veto are CON 37%(-3), LAB 36%(+2), LDEM 15%(+1).

The rest of the poll had some questions on economic optimism (unremittingly negative, as usual), and on leadership qualities. On overall approval Cameron’s net rating is plus 5, Miliband minus 17, Clegg minus 19. On the figures shown in the Guardian 55% of people think Cameron has “the courage to say what is right rather than what is popular”, 50% think he is “good in a crisis”, only 34% think he “understands people like me”. For Miliband 41% think he has “the courage to say what is right rather than what is popular”, 37% think he “understands people like me”, 21% think he is “good in a crisis”.


325 Responses to “ICM/Guardian – CON 37, LAB 36, LDEM 15”

1 5 6 7
  1. Richard

    I cannot comment on your first para. I am not a banking analyst.

    Re your second para , so far as I am aware the only entity which can create money is a Central Bank. I therefore assume that , for UK, the BoE manages & controls our Money Supply.

    So far as I understand it there are two official measures of money in UK-Mo & M4.

    But I do not understand the difference between the two.

    Do you ?

    Report comment

  2. Colin

    Economists have argued for centurys about the nature of money and how to define the quantity thereof which was why I was surprised that you ventured an opinion on “invented” money because when you think about it all money is invented, a ten pound note is only a pretty piece of paper but because we all agree that it is worth the same as a good Indian takeaway meal, it is. But if we should stop believing that fiction that its only productive uses would be as wallpaper or firelighters. The digital expressions of money have even less intrinsic worth. Of course in the old days a ten pound note was redeemable for a fixed quantity of gold but that’s was way back in the early 70s, even earlier a pound was the value of a pound(14 oz, I believe, which is odd)of silver.

    M0 is the quantity of notes and coins in circulation also known as narrow money. Economists have argued about what should be included in the definition of money but notes and coins they can all agree on. M4 is the broadest definition of money used by the BoE and includes all deposits private and wholesale, plus certificates of deposit. Interestingly other countries have more inclusive measures of money and I’m sure that the BoE used to publish other measures particualy M3, from my point of view their broad money measure is woefully inadequate, but it does avoid the problem of counting money twice as in counting loans and assets when classical economics as bill Patrick will point out says that they cancel each other out, my loan is your asset when I pay back my loan your asset disappears(assuming I pay) but in reality both the loan and the asset spend like money, I can use my loan to buy things with and you can use your asset to purchase other things with or use it as collateral to borrow money. So I have no problem with counting twice because in the real world that’s exactly what happens.

    If you define the quantity of money as m0 then it would be fair to say that the BoE has absolute control over the money supply because they are the only ones who can issue notes and coins. If you use the m3 definition then you could still say that the BoE has a reasonable amount of control. But if you include everything and anything which spends like money, then they have absolutely no control whatsever, because when a bank makes a loan they create money in the form of the loan and a counterbalancing asset. Which in theory cancel each other out but in practice both are money, even unorthodox economists will disagree with this but as far as I can see this is true in practice. A hundred thousand pound loan is balanced by a hundred thousand pound asset, neither of them existed before the signature on the loan agreement, so two hundred thousand pounds has been created out of nothing. If you include derivatives which I feel you must, then the situation really gets out of control because investment banks(and nearly all banks are because of the lack of legally mandated separation) create derivatives in almost unlimited quantitys

    I think I will stop here and wait for bill to give his orthodox view. I must admit that I had to look m4 up because its not used elsewhere, I’m shocked that they use such a restrictive measure, its no wonder that they didn’t see any trouble on the horizon and now I’m even more fearful of the future.

    Report comment

  3. @RiN,

    Surely asset price inflation causes at least as much “invented money” as anything the financial institutions do?

    All other things being equal, if the dusty old painting in my attic that I bought for £100 suddenly turns out to be a lost Van Gogh worth £10m, then the stock of assets in the world has just increased in value by £9,999,900. Something similar has happened to real estate values, but on a far grander scale.

    Report comment

  4. Syzygy “Reputedly, GO has a ‘three-dimensional chess board’, a hybrid Star Trek/New Labour Grid. The first layer is the day to day narrative; the second is directed towards the GE; and the third is focused on creating permanent Conservative thinking in the UK (a la Mrs Thatcher’s dream).”

    Loved the idea of Ed’s 3D chessboard – and visualisation of possible moves for 2012.
    Great to see so many old-stagers, so Hi to Syzygy Sue, Su Marsh, Hooded Man, Colin , Old Nat, Dawve etc etc.
    I thought Hooded had another name, not Kit if my memory serves me well.
    Happy New Year to all.. May the Real politics begin!
    Pam @earwiggle

    Report comment

  5. And hi to RIN too, very knowledgeable and sensible as always, if misplaced…
    All we need is Howard!

    Report comment

  6. Richard

    Thanks for that.

    RE
    “but in reality both the loan and the asset spend like money, I can use my loan to buy things with and you can use your asset to purchase other things with or use it as collateral to borrow money.”

    I disagree.

    If I buy an asset (with a life ) with borrowed money, they do cancel out-at least they do once the loan equals the asset value-who lends 100% + of asset value now?

    Re:-
    ” A hundred thousand pound loan is balanced by a hundred thousand pound asset, neither of them existed before the signature on the loan agreement, so two hundred thousand pounds has been created out of nothing.”

    I disagree-the asset clearly existed-it was just owned by someone else. I think the purchase of a £1m house with a £1million loan patently does not “create” £2m of new money.

    RE Derivatives-which I know little about -I noticed in the Bank Balance Sheets which I referred you to that they cancel out-they are shown on both sides of bank balance sheets.

    Report comment

  7. Richard

    @”I’m shocked that they use such a restrictive measure, its no wonder that they didn’t see any trouble on the horizon”

    What they missed was the real estate price bubble & associated Credit bubble.

    They missed it because under the Tripartite regulatory regime , no one had a brief on asset prices.

    The new macroprudential body, the Financial Policy Committee, (and a new micro-prudential supervisor, the Prudential Regulation Authority ) address that shortcoming, and implementing Vickers should help place the risk in Investment Banking activities firmly with shareholders.

    There is a raft of stuff coming through-both domestically & in EU, on enhanced liquidity requirements for Banks.

    I must say I was pretty surprised, looking at those Bank Balance Sheets , at the gearing levels. But I’m more familiar with non-banking balance sheets.

    Report comment

  8. Richard IN

    What a superb essay .. a very clear explanation of how the creation of money has been privatised, and why neo-classical economists get it so wrong. Far from being a free-market, we have been monopolised by the ‘owners’ of the 147 global financial players who control 40% of the economy.

    More please!!

    Report comment

  9. Colin

    “Re:-” A hundred thousand pound loan is balanced by a hundred thousand pound asset, neither of them existed before the signature on the loan agreement, so two hundred thousand pounds has been created out of nothing.”

    I disagree-the asset clearly existed-it was just owned by someone else. I think the purchase of a £1m house with a £1million loan patently does not “create” £2m of new money.”

    The loan is money in my hand which can be used to buy a fixed asset like a house but for the bank the loan is an asset which can and often is used to borrow money from another bank, it can bundled together with other assets(loans) sliced and diced(mortgage backed securitys). If I borrow one million and then the bank uses the mortgage agreement to borrow one million from another bank which it turn uses that agreement to borrow one million from yet another bank, and so on to infinity, what limit is there to the creation of money? You will say that this can’t happen but it can and it does. This is why I say that in practice both the loan and the asset(not the house but the bookkeeping entry) are in fact newly created money because they can both be used as such. In the economics textbooks 2+2=4 but in real life 2+2=anything you want, at least until the music stops.

    Report comment

  10. Richard.

    @”If I borrow one million and then the bank uses the mortgage agreement to borrow one million from another bank which it turn uses that agreement to borrow one million from yet another bank, and so on to infinity, what limit is there to the creation of money?”

    I don’t think that is “creating money”.

    Its just originating a debt & selling it on.

    Wherever it ends you have ( in your example) -one debtor ( you) ; and one creditor ( a bank holding your loan with your asset as collateral)

    Think of it in sequence.

    You -receive £1m
    Bank A -pays out £1m & has a mortgage asset of £1m

    Bank A sells the mortgage to Bank B for £1m.Bank A is now back where it was -£1m out to you-£1m in from Bank B. Bank B is down £1m & owns your mortgage.

    Net result-you owe £1m
    Bank B is owed £1m against your collateral.
    Bank A is back where it was before it lent you £1m.

    I ignore in the above any margin made by Bank A when selling the mortgage on to Bank B; and any relationship Bank A retains with you in respect of performance guarantees.

    Report comment

  11. Funnily enough Richard, I’m just reading The Big Short, by Michael Lewis.

    He describes the stage at which “originate & sell” sub-prime mortgage lenders appeared. An archetype was Nova Star, which originated mortgages , parcelled them into bonds & sold the latter on ( taking a margin obviously).

    The bond packages were identified by year of origination, which allowed some diligent research into bond integrity , by refering to default rate data over time -and indeed lending standards.
    The researcher ( Michael Burry) could thus track the declining worth of Nova Star mortgage bonds………when their purchasers could not, because the FICO ( credit rating) was static.

    Burry did this research in order to find a way in which he could short sub-prime mortgage bonds , because it was obvious to him that they were becoming progressively impaired-something not so obvious to the major banks who bought them !!!!!!!

    Report comment

  12. Richard.

    I will agree that the purpose of “originate & sell” was to keep the pot boiling, by effectively opening up more & more sources of mortgage finance .

    The end buyers of mortgage backed securities were not in the business of & didn’t have the facility to, sell mortgages. But they had funds to invest in what they thought were safe & lucrative mortgage debts.

    The originators were in the mortgage business & knew how to find the gullible customers & sell to them. Parcelling into bonds & selling on relieved them of the difficulties of raising more & more finance & leveraging their own balance sheets. It also allowed them to take a sure margin & pass the risk on to some sap investment bank.

    Report comment

  13. ‘You -receive £1m
    Bank A -pays out £1m & has a mortgage asset of £1m
    Bank A sells the mortgage to Bank B for £1m.Bank A is now back where it was -£1m out to you-£1m in from Bank B. Bank B is down £1m & owns your mortgage.’

    Aren’t you leaving out the interest payments which will be due and fractional reserve banking?

    You -receive £1m
    Bank A -pays out £1m & has a mortgage asset of £1m and the expectation of 250k interest over lifetime of loan.
    Bank A sells the mortgage to Bank B for £1.2m. Bank A now has £1.05m which with fractional reserve banking they can multiply up to loan out for an even larger no. of mortgages. Bank B is down £1.2m & owns your mortgage… but Bank A has already realised part of your future pay before you have earned it, which can be used to realise other mortgage holder’s future earnings before they too have come into existence.

    I appreciate Colin is saying this when he says “It also allowed them to take a sure margin & pass the risk on to some sap investment bank.” but isn’t the early realisation of interest payments which may or may not be forthcoming, and the capacity for any sum of the reserve holding by Bank A, to be lent out in for many times its value, through fractional reserve banking, the place where previously non-existent money is created.

    Maybe I am being stupid but why would Bank A sell the mortgage to Bank B without a profit/opportunity for themselves?

    Isn’t this what they mean when the talk about Ponzi style banking?

    Report comment

  14. Sue

    @”Aren’t you leaving out the interest payments which will be due ”

    Yes-I said so. They are not relevant to whether “originate &sell” somehow multiplies money supply for ever & ever-which it doesn’t.

    @”Bank A sells the mortgage to Bank B for £1.2m.”

    Do they ?-I doubt it. Bank B would be mad to pay up front for an income stream over some years , part of which may not transpire due to default or early closure.

    @”Maybe I am being stupid but why would Bank A sell the mortgage to Bank B without a profit/opportunity for themselves?”

    They wouldn’t.

    In general it is mortgage originators who are selling on-by packaging the mortgages they sold , into bonds.

    They obviously take a margin somewhere in the deal. I don’t know enough about it to know by what means.

    The main point I’m trying to make is that one property only supports loan/s to the level of it’s value.Not multiples of it’s value time after time , as RiN seems to imagine.

    Report comment

  15. SUE

    @”Isn’t this what they mean when the talk about Ponzi style banking?”

    No.

    “A Ponzi scheme is a fraudulent investment operation that pays returns to its investors from their own money or the money paid by subsequent investors, rather than from any actual profit earned by the individual or organization running the operation. ”

    Wiki

    The latest & biggest Ponzi scheme was run by Bernard Madoff.

    Wiki gives this interesting quote :-

    “I was astonished. They never even looked at my stock records. If investigators had checked with the Depository Trust Company, a central securities depository, it would’ve been easy for them to see. If you’re looking at a Ponzi scheme, it’s the first thing you do.” Madoff said in the June 17, 2009, interview that SEC Chairman Mary Schapiro was a “dear friend,” and SEC Commissioner Elisse Walter was a “terrific lady” whom he knew “pretty well.”[54″

    THere aren’t any assets to speak of in a Ponzi scheme-You pay me £1m to invest. I keep x% & pay the rest to existing “investors” & tell them its their fantastic dividend from my brilliant investments.
    THen I keep repeating it .for as long as I can find new suckers to “invest”

    Report comment

  16. Sue

    No-a P*nzi scheme is something else entirely.

    I posted an explanation but it got moderated.

    You pay the existing investor with the next investor’s subscription-keep a bit for yourself-tell your “investors” what great returns you are achieving-and keep it going till you run out of new suckers.

    Google P*nzi Scheme & Bernard Madoff

    Report comment

  17. Sue.

    Re your last question.

    The answer is no.

    My explanation was moderated.

    Google for it .

    Report comment

  18. Thank you for taking the trouble Colin. I will google and feel guilty for getting you moderated :(

    Report comment

  19. Colin

    I borrow one million from bank A. Now I have a million and bank A has a piece of paper worth a million. Bank A uses the peice of paper as collateral for a one million loan from bank B. Now I have a million and bank A has a million and bank B has a piece of paper worth a million. This actually happens!! in the UK there is no limit to how often the same loan agreement can be used as collateral, the average is 4 times. In the meantime bank A is using the million they borrowed from bank B to make more loans but it is not just lending out the million but instead is leveraging that million ten times of more, this is how you end up with banks leveraged 60 or 70 times or more

    Report comment

  20. Richard

    @”Now I have a million and bank A has a million ”

    No

    Bank A doesn’t.

    Bank A paid you £1million & received £1million from Bank B.

    At the end of your sequence -you have £1million.
    Bank B is down £1million & has a loan asset with collateral of your house.

    Bank A is cash neutral on these transactions-it is in the same position it was before it loaned £1million to you.

    Leverage is a separate issue.

    By the way leverage is merely a way of expressing the relationship between core permanent capital ( share capital + retained profits) and loan capital.

    In the bank balance sheets I referred you to the leverage on permanent capital at 31/12/10 was :-

    HSBC 23.9
    HBOS 23.3
    Lloyds TSB 20.1

    In this document you will see the leverage multiples of major Banks from 1995 to 2008.

    You really should stop fantasising.

    SOME banks are guilty of very bad practice.

    Bank liquidity levels have been inadequate.

    Both of these issues are being addressed-and the world will be a better place for it.

    But borrowers need to learn lessons too Richard.

    Report comment

  21. Richard

    forgot the link !!

    h ttp://www.worldbank.org/financialcrisis/pdf/levrage-ratio-web.pdf

    Sue no worries-remember to look up Bernard Madoff :-)

    Report comment

  22. Colin

    Bank A digitally created the million it loaned to me, bank B digitally created the million it lent to bank A. The balance sheet of bank A shows a net of zero, the balance sheet of bank B shows a net of zero and my balance sheet shows a net of zero, but the fact remains that two million is floating around in the economy which wasn’t there before. Now this is a simplistic model, it does not include interest charges and it does not include reserve requirements. But it illustrates what actually happens not what should happen in theory. On paper no money has been created but in real life there is an extra two million bidding up property prices

    You say that some banks are guilty of bad practice, I disagree! banking is bad practice by its very nature.

    Report comment

  23. Richard

    THanks

    I think your first paragraph is complete nonsense.

    I think your second paragraph is bonkers-but it tells me why I have been wasting my breath.

    Glad this is over :-)

    Report comment

  24. On banking and money creation I’d recommend the “Money as Debt” series by Paul Grignon, which provides a thought provoking analysis:
    http://www.bbc5.tv/video/money-debt
    http://www.bbc5.tv/video/money-debt-ii
    http://www.youtube.com/watch?v=_2LjbBfh7Ug

    Report comment

  25. Richard

    I’m well into Michael Lewis’ ” The Big Short” now.

    The story of the exploitation of housing finance for US low income & migrant workers which lead to the Banking crisis is utterly incredible.

    Originate & Sell mortgages. Mortgage backed Bonds.
    Credit Default Swaps, Collateralised Debt Obligations…

    The “originators” like Long Beach Savings.
    The converters of mortgages into bonds like Goldman Sachs.
    The quite incredible world of AIG and it’s insurance swaps on bonds & CDOs.

    These people did-as you have said-make home loans a never ending opportunity to take another margin from mortgage derivatives.

    This was indeed “bad practice” -but it wasn’t banking.

    It was mad venality & greed mixed with sheer incompetence , lack of understanding & a massive shorting by the few people who always new this was a pile of straw.

    Report comment

1 5 6 7