And they're off! Again!

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Businesses accumulate wealth according to the ability of the manager to expand it.
A plumber or other tradesman may limit that to what he can earn himself, he has low overheads, no wages, if he expands and takes on overheads his wealth could easily fall.

A supermarket expands because it can become more efficient than a high street retailer and provide lower prices to attract more customers, there is no limit as long as it remains efficient.
However companies don’t have “wealth” it’s the shareholders that own the wealth, the shares go up or down in value and can only be taxed when they are sold or transferred.

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Thank you for explaining that to me (and maybe others too) David49.
Very patient & kindof you.

See MaizieD?
Not too onerous is it to be nice?

FriedGreenTomatoes2

Thank you for explaining that to me (and maybe others too) David49.
Very patient & kindof you.

See MaizieD?
Not too onerous is it to be nice?

David has just explained how companies accumulate 'wealth', but not how they 'create it'.

I'd like to know how they 'create it'. 'Creation' implies extra wealth. Where does this 'extra' wealth come from?

If we are to admire companies for 'creating' wealth the implication is that we must admire them because they add to the wealth of the nation. The question I'm asking is how do they add to the wealth of the nation, how do they increase it?

I'm not being sarcastic or mean. I'm just asking a simple question.

Ah, okay MaizieD thank you. Sorry for before. I’m probably a bit touchy today. Ignore me.

I’m not sure I’m any clearer on this though. In a simplistic way (for a bear of little understanding) I would just have assumed the bottom line would be:

Company does well = makes profits = hires more people.
That’s creating wealth for the country (I think) as those employees will spend money back into the UK economy.

OTOH by the same rule businesses could just decide not to grow bigger and simply accumulate wealth (either for themselves as owners - and why not if they so choose - or to pay bigger dividends to shareholders (who MIGHT spend it?)

It’s complicated.
I need a coffee.

Cons are that it probably makes party politics worse

for anyone who speaks French, that is the best comment ever! Oh yes, the do, for sure.

30 hours a week - but the pensionable age has been raised to 64 instead of 62. Not sustainable, we all know that, and I am sure they know too. But both the extreme left, and extreme right would rather scupper the country. Tragic indeed.

Creating wealth for the nation.

A company can create wealth by exploiting natural resources and labour, creating a product or service that can be exported it does not increase national wealth if it is consumed at home. Much of the wealth in the UK was created by exploiting Coal and Iron in the 19th century when we were the workshop of the world
It needs to pay taxes in the UK because a foreign owned company may well increase employment but any company profit goes elsewhere.

Norway is a wealthy country because it exports its resources rather than consumes them, therefore is able to provide better services to the population

FriedGreenTomatoes2

Ah, okay MaizieD thank you. Sorry for before. I’m probably a bit touchy today. Ignore me.

I’m not sure I’m any clearer on this though. In a simplistic way (for a bear of little understanding) I would just have assumed the bottom line would be:

Company does well = makes profits = hires more people.
That’s creating wealth for the country (I think) as those employees will spend money back into the UK economy.

OTOH by the same rule businesses could just decide not to grow bigger and simply accumulate wealth (either for themselves as owners - and why not if they so choose - or to pay bigger dividends to shareholders (who MIGHT spend it?)

It’s complicated.
I need a coffee.

You describe how a company might promote growth in the economy, but not how it 'creates' wealth, if by 'wealth' you mean 'money'. Growth is different from wealth creation.

In every transaction there is a gainer and a loser. You buy something, the company you buy it from gains your money, which adds to its profits, but you lose the money you paid. So that is a zero sum transaction. The company hasn't 'created' any wealth, it's just taken some of yours.

Fleurpepper

*Cons are that it probably makes party politics worse*

for anyone who speaks French, that is the best comment ever! Oh yes, the do, for sure.

30 hours a week - but the pensionable age has been raised to 64 instead of 62. Not sustainable, we all know that, and I am sure they know too. But both the extreme left, and extreme right would rather scupper the country. Tragic indeed.

Thats indeed what they are doing with that unholy alliance. It must be perfectly clear that whilst its all very nice having 30 hour weeks and early pension age its not viable economically.

“In every transaction there is a gainer and a loser. You buy something, the company you buy it from gains your money, which adds to its profits, but you lose the money you paid. So that is a zero sum transaction. The company hasn't 'created' any wealth, it's just taken some of yours.”

That’s true if it’s consumed at home if it is exported the nation gains because it imports less and can tax the resources.

The increased wealth of a nation isn’t the same a growth, growth has a monetary value, £100m + 2% growth = £102m, although to be a benefit growth has to exceed inflation.
We tend to use Gross Domestic Product as growth measure it’s the economic activity in the past year, wealth is much more, it includes the capital value of assets and infrastructure within the nation, less liabilities.

As we import far more than we export, David, that hardly applies to the UK. Norway, perhaps..

The 'values of assets' isn't necessarily a concrete monetary value. Their paper value can go up or down but ultimately their monetary value is what people are prepared to hand over in hard cash for them.
For example, a company's shares are 'assets'. But if the company goes broke those 'assets' become monetarily worthless. The shareholders has nothing (though the person they were bought from has some actual money...)

I’m just glad I’m not Rachel Reeves … 😄
Thank you MaizieD and David49.

MaizieD

As we import far more than we export, David, that hardly applies to the UK. Norway, perhaps..

The 'values of assets' isn't necessarily a concrete monetary value. Their paper value can go up or down but ultimately their monetary value is what people are prepared to hand over in hard cash for them.
For example, a company's shares are 'assets'. But if the company goes broke those 'assets' become monetarily worthless. The shareholders has nothing (though the person they were bought from has some actual money...)

Because we import so much is the reason borrowing is high and government services are poorer than we would like.

Indeed a company may have virtually no capital assets, it may rent or lease all its resources, it just has current assets and liabilities, shareholders will have effectively guaranteed whatever working capital it needs. They hope the company will flourish and be able to pay a dividend and share prices rise, that’s risk they take.

Just like yours or mine, national wealth is the value of all assets less liabilities like mortgages or debt. Not just government borrowing but personal and commercial borrowing too, BoE controls this through minimum lending rate, we saw in 2008 the banks lost control of borrowing and had to be rescued.

I’m sure total indebtedness of the UK is recorded somewhere but not generally publicized, the focus is on the current government borrowing in relation to GDP, at present close to 1 yrs GDP (100%), the population is demanding more than the nation is earning.

David49

MaizieD

As we import far more than we export, David, that hardly applies to the UK. Norway, perhaps..

The 'values of assets' isn't necessarily a concrete monetary value. Their paper value can go up or down but ultimately their monetary value is what people are prepared to hand over in hard cash for them.
For example, a company's shares are 'assets'. But if the company goes broke those 'assets' become monetarily worthless. The shareholders has nothing (though the person they were bought from has some actual money...)

Because we import so much is the reason borrowing is high and government services are poorer than we would like.

Indeed a company may have virtually no capital assets, it may rent or lease all its resources, it just has current assets and liabilities, shareholders will have effectively guaranteed whatever working capital it needs. They hope the company will flourish and be able to pay a dividend and share prices rise, that’s risk they take.

Just like yours or mine, national wealth is the value of all assets less liabilities like mortgages or debt. Not just government borrowing but personal and commercial borrowing too, BoE controls this through minimum lending rate, we saw in 2008 the banks lost control of borrowing and had to be rescued.

I’m sure total indebtedness of the UK is recorded somewhere but not generally publicized, the focus is on the current government borrowing in relation to GDP, at present close to 1 yrs GDP (100%), the population is demanding more than the nation is earning.

You're moving away from the original point, though. Which was the creation of actual money. The paper value of an asset isn't actual money. It someone or something may appear to be valuable on paper, but realising that value requires actual money to change hands.

When the money changes hands it doesn't add anything to the actual quantity of money held over all in 'the nation'. Money creation is only creation if it adds actual money to the stock of money already in existence.

we saw in 2008 the banks lost control of borrowing and had to be rescued.

It was the banks that were doing the lending! Saying they 'lost control of borrowing makes them sound like innocent victims... They were the flipping villains of the piece...they were out of control...

It was said at the time they were ‘too big to fail’. So the taxpayers bailed them out. Or the government threw money at them, I’m not sure which. Perhaps we should have let Barclays (and others) go to the wall?

For now, Barnier will continue on as interim prime minister until Macron picks his successor. At the same time, France is careening toward a key budget deadline on December 21. If the country doesn’t have a spending plan in place by the winter solstice, the government will face a shutdown unless lawmakers pass a “fiscal continuity law,” which would keep it temporarily funded at 2024 levels.

Deregulation allowed banks to take too many risks
They did just that

FriedGreenTomatoes2

It was said at the time they were ‘too big to fail’. So the taxpayers bailed them out. Or the government threw money at them, I’m not sure which. Perhaps we should have let Barclays (and others) go to the wall?

If Barclays (and RBS) had been allowed to go to the wall a very very large number of people would have found their bank accounts empty. Prompt government action prevented that and the govt now guarantees that they will compensate account holders up to £85,000 should their bank fail. They've done this by putting the necessary amount into the commercial banks' reserve accounts. Which is reassuring. What is annoying though, is that the BoE pays interest on those reserve accounts! So the banks are, in effect, being 'rewarded' for their stupidity😱

MaizieD

FriedGreenTomatoes2

It was said at the time they were ‘too big to fail’. So the taxpayers bailed them out. Or the government threw money at them, I’m not sure which. Perhaps we should have let Barclays (and others) go to the wall?

If Barclays (and RBS) had been allowed to go to the wall a very very large number of people would have found their bank accounts empty. Prompt government action prevented that and the govt now guarantees that they will compensate account holders up to £85,000 should their bank fail. They've done this by putting the necessary amount into the commercial banks' reserve accounts. Which is reassuring. What is annoying though, is that the BoE pays interest on those reserve accounts! So the banks are, in effect, being 'rewarded' for their stupidity😱

When you owe £1000 you have a problem
When you owe £1m the bank has a problem
When a bank owes £1billion the government has a problem

Deregulation caused it, Blair and Brown supported and maintained it, and it came back to bite them.
At the peak self certified mortgages were being brokered at 120% of value, the broker (IFA) of course got a fat commission.
The FSA sat on their fat backsides and watched it happen.