10.01.08

The Financial Situation

Posted in UK, Jeremy Jacobs, 2008, Margate, Presenting at 11:25 am by Jeremy Jacobs

London, UK

Presenting Lord Matt of Margate who explains it all here. Take a deep breath -

“Why bread is more expensive and who is to blame”?

Sir Alan Sugar may be right to describe the current economic crisis as a “mad financial Disneyworld” but to optimistically suggest that the Tesco value financial management is over is perhaps taking things a bit far. The worst might be behind us but the full brunt of the headless chicken’s actions is yet to be felt. The headless chickens of course being panicking governments whose answer is to throw money at the groups that caused the problem in the first place.

Let us be quite honest here the only way to solve the current World Economic Crisis (oh wait that was 1920’s to 1930’s) the Global Economic Crisis is to slap down the abusers and lend a hand to the victims.

We are all used to people crying “doom, all is doom” like a dodgy, third rate, stereotype of an end times prophet (or is that profit?) but there are some facts behind all this.

The value of money has fallen, is falling and will continue to fall. We see this in the increase in prices. How does this work?

Money can be considered to be like shares in a company but rather than a slice of the profits you own a slice of the country’s value.

Let us imagine Blogarus PLC which has issued 100 shares to Bob and Fred. Bob has 75 shares and Fred has 25 for which they paid £10 per share. When Chairman Bob issues ten thousand pounds (£10,000) of dividends he gets to take home £7,500 and Fred gets £2,500.

Now Bob thinks that Geekoblog PLC could be purchased for £100,000 and so issues 10,000 new shares at £10 each. Fred purchases 1,000 and a consortium of faceless names take the other 9,000. Quite aside from how the market might react t all this let us assume that for some reason a share remains at £10 - perhaps the company is too small to notice.

Sadly Bob’s plans for Geekoblog fall through and so to cheer himself up he issues £50,000 of dividend so he can take a holiday. Bob is therefore a bit shocked when he finds that his shares only grant him £371.29.

This is why in all honesty the value price per share would have crashed to an all time low.

The exact same thing has happened to the US and UK currencies. By issuing billions of new money in aid the natural trading has caused the value of the individual pound to plummet. Naturally we see this as a rise in food prices and our leaders blame the housing crash for it.

Let’s take a different illustration. On the imaginary island of Fanasticon live a peaceful village of assorted people. They are ruled from a building called the Matticon by the local Lord. They have no outside contact and as far as they are aware they are the only people in existence.

They use for purpose of trade a rare bean shaped stone called the bean. For as long as anyone can remember the price of a loaf of bread was two beans. Farmer Bob buys a cow each year from Farmer Fred for twenty-nine beans, Farmer Bob pays Mr Butcher six beans to cut the animal into meal sized slices and pays George Iceman sixteen beans to keep the meat fresh.

There are known to be six hundred and twenty seven beans in use. Tax is one bean a year (less than a loaf of bread).Everyone is reasonably content.

One day Farmer Jones is digging in a disused part of his land when he uncovers his great great great grandfather’s bean mine. In just a few weeks Farmer Jones is fantastically rich. He pays whatever his friends ask to have them work for him and he thinks life is good.

Now the amount of ice space available from George Iceman is limited and when Farmer Jones and his friends start buying it all to keep their food in George realises he can make a profit and raises the price to meet the new demand. This causes a problem for Bill the Baker who has to start charging three beans for bread to cover his new costs.

With the price of bread gone up Farmer Bob, Farmer Harris and Smith Smithy all realise that they might as well fill their space of reserved ice with fresh cow. Farmer Fred was not expecting an off season rush and charges first forty and then sixty beans per cow.

This causes a rush on the remaining ice and the price of bread rises to six beans while the average price of cow reaches ninety beans. The ice space now costs seventy beans causing people with spare capacity to start renting it out.

Mean while Farmer Grainman finds that he can’t afford to keep eating meat from Bud Butcher because the price of meat is very high. So he starts charging two beans a sack instead of one. This causes the price of bread to go up again to cover the new costs.

Farmer Fred starts selling cows that have yet to be born yet for a third of the price of current cows and people rush to buy them before the price goes up again. Soon all the savings have been raised and people are buying and selling beef futures and speculating in ice space.

The Matticon raises the tax to nine beans which is just over one half the price of bread. Farmer Jones, George and Farmer Fred now have more money than they had ever dreamed of but now the bubble bursts and people are going hungry unable to afford bread, ice or beef. There is a food shortage and worse still people are having trouble paying their taxes.

The value of ice space starts to fall and Beef futures trading winds down. As it does Farmer Fred discovers that he owes a lot of cows but is not getting enough beans to cover his basic costs. He sells off his entire stock and his liabilities and runs away to live in the jungle. The new owner has no interest in honouring the promises of the other guy and the Matticon has a difficult case to arbitrate.

Farmer Jones eventually finds that his standard of living is largely unchanged but everyone else is now really poor. To help out Jones donates seven hundred beans to Matticon to buy bread for the hungry.

It’s no good and eventually people stop trusting the bean and start swapping things directly. Later that year the bean is dropped as a tool of trade and replaced with photographs of the Matticon.

The same thing has been happening to us but because the world is so much bigger than the imaginary village of Fanasticon we may be unaware of the connections that creating a few billion in local currency has with the fact that a loaf of bread is now 89p to £1.60 when is was once £0.40p to £0.90p.

Our leaders did that to us by trying to help out by paying the guys that caused the problem. That’s why we have Tesco value financial control rather than a quality brand. Things are unlikely to change and we the common folk will now pay directly for the trading and profit that some very rich people will get to keep.

Every time you go to the pumps to fill your car, every time it hurts the wallet to buy food - you are directly paying for the money that some fat cat has been licking up into his fat bulging wallet. They get the wealth and we pay for it. We are like Farmer Bob and his friends just trying to keep our heads above water while the Farmer Jones’s of this world leach all the value from our cash without us even noticing.

Did you enjoy reading this? Good, then you’ll like this from Geoff Burch, posted on this  site a few weeks ago -

Speaker & Business Guru, Geoff Burch recently posted this story on his blog:

THE NUMPTIES
THE SAD STORY OF THE NUMPTIES

As a Martian, it is very difficult to explain the tragedy of the sad little folk known as the Numpties but let me try.

First a bit of background. Sometime ago, the Numpties who live in Numptie land worked very very hard making things. A long time before that, they lived very simply growing stuff and eating it but it is always wet and drear in Numptie land and this created an itch they could never scratch - in other words the Numpties always wanted more so they started to make things. The cleverer Numpties invented artful things such as Bykees, machines that Numpties could sit on and, by whirling their legs round, they could travel faster. Numpties love to go faster - to where I never really understood - but by golly they got there quicker and quicker. Some Numpties were artful at making money; some were artful at making bykee bits. The ones that had the money made the ones that built the bykees work very hard for just a little bit of the money. This, some Numpties said, was unfair and they got very cross and sometimes refused to get out of bed to make bykees, which made the rich ones cross and worried. Then someone invented the haulers - big metal boxes that burned the underground stuff that the desert people had but didn’t want because they had bumpy animals to ride around on. These haulers meant that rich Numpties could whiz about even faster without whirling their legs around and they soon got the clever Numpties to work in big sheds making Haulers. The clever ones got even crosser because they wanted Haulers so that they could whiz about without whirling their legs.

Now it is at this point that we have to understand the Numpties obsession with money. Money is little bits of paper with a number painted on it and a picture of their Queen, but that simple description cannot give you a clue of how important these bits of paper are. There is a strictly limited amount of this paper which is literally a measure of the Numpties life. If a Numptie makes bykees for one hour, he will receive a piece of this paper. At the end of his life the number of these bits of paper that he has is literally his score and his value - and the more bits of paper he gets each hour say how valuable and important he is.

A time came that clever Numpties were getting so tired, grumpy and difficult that they had forced the rich Numpties to pay them ten bits of paper for every hour that they spent making bykees and haulers. As a bykee takes twenty hours to build, it cost two hundred bits of paper to make, but to buy a bykee also costs two hundred bits of paper so the rich Numpties started to stop being rich. They wailed and gnashed their teeth and fought with the clever Numpties. Then they discovered a far-off land where lived some people called Ayshuns who not only were extra clever at making stuff, but were very poor and never expected ever to be rich - or even own a bykee. They hardly ever even saw a Hauler. The rich Numpties asked the Ayshuns if they could make bykees. They said they could and would for just one piece of paper each hour. This meant it cost just twenty pieces of paper to build a bykee which left a hundred and eighty pieces for the rich Numpties who of course became richer and richer.

I know you are wondering that if all the other Numpties have no jobs, how can they buy the bykees? Well, now we come to the really weird thing about Numpties. Because their bits of paper are so important to them and ultimately are the value of their whole life, before they die and things are totaled up they scuttle about collecting stuff like nuts and wood and rocks and other things that they try and compare in value to their bits of paper. As I have said, Numptie land is very wet and muddy - in fact there has always been plenty of mud so the Numpties build their shelters of mud. They claim a patch of mud and pile up lumps of baked mud on it. Of course this takes time and to a Numptie time is bits of paper and their pile of mud is even more value to them than their bykee or even hauler. They buy and sell these piles of baked mud for sometimes more than the paper it cost them. This makes them feel safe and happy.

Every now and again, the Numpties choose a parent. For some time, the Numpties had a horrid strict parent who would smack them when they were naughty and wouldn’t let them have the things they wanted. This parent could see that if the Numpties didn’t work harder for less bits of paper they would all be in trouble. She made the Numpties feel very dark and sad and grumpy so when they got the chance they elected a new parent who would be nice to them. Because he smiled all the time and was always nice they called him Toe-knee (I know, it doesn’t make sense, but that’s Numpties for you). Toe-knee loved to be loved and said that every day would be cringle day and if every Numptie would put up a tree, Toe-knee would leave a present every day. True to his word, Toe-knee left train sets, dolls’ houses and even bykees. This made the Numpties very happy and time and time again they chose him as their parent.

At about this time some bad folk did a dreadful thing by getting poo (yes, poo!) and convincing Numpties that it was worth paper. Afterwards this crime was called the Plop Con bubble and it worked like this. Numpties biggest failing is believing someone is doing better than them and it drives them crazy. The bad folk would stand with a bucket of poo and the Numpties would point and laugh. “Ha Ha, why have you got poo? You are stupid!” They would reply, “I gave ten pieces of paper for this poo and it is now worth twenty pieces. You are the stupid one because you have got no poo and I have doubled my money, ha ha!” The next day, this person would have two buckets of poo and would say, “I gave twenty pieces of paper for the second bucket and now they are worth forty pieces each. You sure are missing the boat!”

This went on until the buckets of poo reached one hundred and even two hundred pieces of paper. The Numpties believed that if they didn’t hurry they couldn’t even afford one bucket and had to borrow just to buy one, but they thought what an easy way to make pieces of paper. The bought and sold these buckets and with the extra they bought bykees and haulers and were happy. Toe-knee was happy because a lot of the poo profit came his way and he explained that because underneath it all nobody did any work, they had now got a surface economy which would make everyone happy but in the Numptie society there are very annoying folk called Smart Harris’s who tell the truth and that is very inconvenient.

One day a Smart Harris pointed to a Numptie and said, “That is just a bucket of poo and it’s worthless.” With that, all the Numpties scampered about crying, “Urgh, poo!” and lots of them lost all their paper. The bykee makers had thousands and thousands of bykees coming in from the Ayshuns and were worried that Numpties with no paper could not buy bykees. But, their parent, kind Toe-knee smiled and said, “The Plop Con bubble gives me an idea! The magic of paper from poo only failed because it was poo but baked mud - now that’s another thing. We could raise the value of baked mud shelters for ever>”

Everyone who heard this clapped and cheered because nobody really wanted to go back to working hard again, as they liked the surface economy. Soon baked mud was gaining value faster than poo ever had and because most of the grown-up Numpties already had a shelter of baked mud that had cost them very little and now was worth lots, they felt very rich. They borrowed money to buy big treats, bykees and haulers for themselves. The bykee makers didn’t know what to do with the huge amount of extra paper they were making. Kind Toe-knee said to them kindly that they were making too much and he would have to take a bigger share if they didn’t do something with it.

At this time the old clever Numpties said to their children, “Don’t be clever and work hard and be poor like us. Instead have clean hands and be rich.”

So when the big sheds that made things shut, Toe-knee was not sad. He called them Universe Cities - places of excellence - where Numptie children went and did team-building, management, Numptie resources and all kinds of other completely useless things. The bykee folk built big glass towers with their extra paper and filled them with eager young Numpties who didn’t want to be clever and work with their hands. They were paid lots to go out and buy bykees and haulers. The boy and girl Numpties wanted families of their own and they needed baked mud shelters which were now very expensive but they could borrow paper from lenderers and it didn’t matter how much they borrowed because their baked mud was always worth more. Sometimes it became worth more so fast it earned more than they did, so some Numpties borrowed twice as much and bought two lots of baked mud just to watch it grow. The lenderers made paper by asking for extra paper on top of that borrowed, but because paper was limited they sometimes couldn’t get enough to lend. At the same time the Ayshuns had too much paper so the lenderers sold the debt to them for a profit and could start all over again.

Lenderers were not always good and in a far off land lived the Merry Cans who in a lot of ways were stranger than the Numpties. Their land was much much bigger but they still treasured their patches of mud - so much so that they always walked about with their sleeves rolled up and if a stranger went on their patch of mud they were allowed to kill them, because they said it was their right to have bare arms. But they had a lot of poor folk who, you would think, no one in their right mind would lend money to. Then some wicked lenderers thought a nasty but clever thought. If poor folk found it hard to borrow, you could charge them even more which was very profitable, even though it made them poorer. Then they would get so poor that they couldn’t pay and you could take their patch of mud away and have it for yourself. Very very very profitable.

Remember how the Numpties always think that someone is doing better than them? Well Numptie lenderers were jealous of the Merry Can lenderers and paid lots to get a share of the poor peoples’ mud. Then strange things started to happen. First, because everyone was getting rich, the Merry Cans, the Numpties and even the Ayshuns, all bought bigger and bigger haulers. The desert people, who had the underground stuff, realized that it was running out and charged more. Toe-knee said “This is bad. underground stuff costs more than food so we must burn food in our haulers.” Which made food very dear and the poor folk went hungry. Because the poor people couldn’t eat and at the same time buy the mud, they gave their mud back to the lenderers. Then Smart Harris said, “That is mud, its not worth anything!” The Numpties decided to go to the lenderers and get their money back but when they got there the lenderer had gone and so had the money. Toe-knee said, “Don’t worry, I will pay what the lenderers owe you.” But secretly he was very worried. He had a sour goblin that helped him to look after the money. He knew the goblin had always wanted his turn at being parent so with a smile he gave him the keys and ran off. When the goblin and the Numpties got into Toe-knee’s room, they found all the tons and tons of unpaid bills for all of the presents.
“Well” said the goblin, “No more presents - I can’t even afford to pay for this lot.”

“We hate you” said the Numpties, “We need a new parent”

This is when they realized that the values of their patches of mud had started to fall and fall because anyone can see (except a Numptie) that an economy based on the value of mud, where nobody works, well just doesn’t work! The Ayshuns didn’t fare much better because they had put all their money into making bykees that now no one wanted to buy, so they were ruined too. Everyone cut, “Toe-knee was nice, let’s find him and ask him what to do.”

“Well” said Toe-knee, “There is not enough of anything to go round, there are too many of us and we hate to work hard to live. The solution is simple, we should eat each other.”

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