Loss of income caused by banks as bad as a ‘world war’
Loss of income caused by banks as bad as a‘world war’Philip Aldricktelegraph.co.ukDecember 3, 2012The financial crisis has been as economically devastating as a world war and may still be aburden on “our grandchildren”, atop Bank of England official hassaid.Andy Haldane, the Bank’s executivedirector for financial stability, addedthat public anger at the banks wasfully justified and that pay in theindustry remained too high.“In terms of the loss of incomes andoutputs, this is as bad as a world war,”he said.
Loss of income caused by banks as bad as a ‘world war’ Philip Aldrick telegraph.co.uk December 3, 2012 The financial crisis has been as economically devastating as a world war and may still be a burden on “our grandchildren”, a top Bank of England official has said. Andy Haldane, the Bank’s executive director for financial stability, added that public anger at the banks was fully justified and that pay in the industry remained too high. “In terms of the loss of incomes and outputs, this is as bad as a world war,” he said. “It would be astonishing if people weren’t asking big questions about where finance has gone wrong. “If we are fortunate, the cost of the crisis will be paid for by our children. More likely it will still be being paid for by our grandchildren. There is every reason why the general public ought to be deeply upset by what has happened – and angry.” Four years since the crisis struck, the economy is still 3pc smaller than at its peak. The scale of the problems will be exposed again on Wednesday when the Chancellor updates the country on the economic outlook and his austerity plans. To boost “growth, job creation, exports, investment, and business confidence”, George Osborne needs to be “bold” in his mini-Budget, the British Chambers of Commerce said as it downgraded its growth forecasts for next year and 2014. The business group cut its 2013 forecast from 1.2pc to 1pc and from 2.2pc to 1.8pc in 2014, blaming the deteriorating global economy and the prospect of more austerity as the Chancellor responds to the worsening public finances. However, it raised its forecast for this year from a contraction of 0.4pc to a contraction of just 0.1pc. Manufacturers offered Mr Osborne some respite ahead of Wednesday, though, after factory output in November turned out to be better than expected. Activity contracted in the month, but it was the smallest decline since August and less than had been predicted. According to the Markit/CIPS Purchasing Managers’ Index, manufacturing activity jumped to 49.1 in November from October’s downwardly revised 47.3, beating the consensus of 48. A reading below 50 indicates contraction. The survey found that demand remains weak and new export orders are down. Mr Haldane told BBC Radio 4’s The World at One that banks remained one of the major impediments to the recovery because they need to own up to their bad debts to restore confidence and get credit flowing again. Failure to come clean would mean “the fog will persist”, he said. “Investors will be much less willing to put their money into the banking system. They will lack confidence in the banking system and will either charge very high rates for lending that money to banks or will just withdraw their money entirely,” he said. “More could and should be done to get lending moving as a springboard to getting the economy moving.” He added that bankers pay had been “ratcheting down” but that there was “still some way to travel”. “Back in 1980, your average investment banker was paid the same as your average lawyer or doctor. By the time we got to 2006, they were being paid four times as much,” he said. “Have we got further to travel south? I suspect probably yes.” He also admitted that “with 20-20 hindsight” the Bank should have done more to deflate the bubble ahead of recession. Dollar-Less Iranians Discover Bitcoin Virtual Currency Max Raskin Bloomberg December 3, 2012 Under sanctions imposed by the U.S. and its allies, dollars are hard to come by in Iran. The rial fell from 20,160 against the greenback on the street market in August to 36,500 rials to the dollar in October. It’s settled, for now, around 27,000. The central bank’s fixed official rate is 12,260. Yet there’s one currency in Iran that has kept its value and can be used to purchase goods from abroad: bitcoins, the online- only currency. Created in 2009 by a mysterious programmer named Satoshi Nakamoto, bitcoins behave a lot like any currency. Their value is determined by demand, and they can be used to buy stuff. Bitcoin transactions are encrypted and handled by a decentralized global network of tens of thousands of personal computers. Merchants around the world accept the currency, from a bakery in San Francisco to a dentist in Finland. Individuals who own bitcoins and wish to exchange them for physical currencies like euros or dollars can use exchange sites such as localbitcoins.com, a Finland-based site founded by Jeremias Kangas. “I believe that bitcoin is, or will be in the future, a very effective tool for individuals who want to avoid sanctions, currency restrictions, and high inflation in countries such as Iran,” Kangas wrote in an e-mail. The advantage for Iranians is that bitcoins can be swapped for dollars that can then be kept outside the country. Another plus: Regulators can’t easily track the transactions, since bitcoins aren’t issued from a central server. Bitcoin users can conduct business on virtual private networks, which hide customers’ identities. At online store coinDL.com, shoppers can use bitcoins to buy Beyond Matter, the latest album from Iranian artist Mohammad Rafigh. Anyone in the U.S. downloading songs, which fetch .039 bitcoins or 45¢ each, risks violating U.S. sanctions. That doesn’t bother Rafigh, who’s studying computer engineering as well as playing music. “Bitcoin is so interesting for me,” Rafigh wrote in an e-mail. “I wish the culture of using digital money spreads all over the world, because it does not have any dependency on anything like politics.” Rafigh has translated some bitcoin software into Farsi for his friends. “I love Iran, and if bitcoin is good for me, it can be good for more Iranians like me.” Iranian-American bitcoin consultant Farzad Hashemi recently traveled to Tehran and talked up bitcoin to his friends. “They are instantly fascinated by it,” he says. “It’s a flash for them when they realize how it can solve their problems.” Iranians working or living abroad can send bitcoins to their families, who can use one of the online currency matchmaking services to find someone willing to exchange bitcoins for euros, rials, or dollars. Bitcoins are useful to Iranians wishing to move their money abroad, either to children studying in Europe or America or simply to stash cash in a safe place. As the value of the rial plunges, many Iranians are trying to acquire foreign currencies. “We have no idea what will happen,” says Amir-Hossein Madani, who says he’s traded tens of millions of street market dollars in Tehran over the past two years. “These days prices change every 10 minutes.” The uncertainty has led some Iranian software developers to ask clients to pay them in bitcoins. “Anyone with a computer is able to own, send, and receive them. You can be at an Internet cafe in Iran and managing a bitcoin account,” says Jon Matonis, a founding board member of the Bitcoin Foundation, a Seattle nonprofit that promotes the currency. The exchange rate in Iran is 332,910 rials per bitcoin. It isn’t known how many Iranians use bitcoins to skirt sanctions. According to localbitcoins’ Kangas, 32 people in Iran have contacted each other through his site. An internal FBI report in April expressed concern over the online currency. The report was leaked to Wired and Betabeat. “Since Bitcoin does not have a centralized authority, law enforcement faces difficulties detecting suspicious activity, identifying users, and obtaining transaction records—problems that might attract malicious actors to Bitcoin,” says the report. For now, Iranians are using bitcoins to maintain a fragile connection to the outside world. The bottom line: Iranians are resorting to virtual currency to move money into and out of the country in a way that Western authorities find hard to detect. 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