Ritchie on bank profits

The answer to the second question leads to the answer to the first question. And the answer is easy to provide. You provide the banks with their profit. They effectively tax you, your assets and your future to hoover up the cash they then use to pay bonuses, and to declare as profits sums disproportionate to any risk they take and any contribution they make to society, well being or the economy.

Well, yes.

This is how a capitalist economy works. Profits are the result of people voluntarily spending their money on the goods and services which you voluntarily supply. This is as true of banks providing banking services as it is of retired accountants providing reports for the TUC and of members of the shadowy international scandium oligopoly  providing the scandium which you use in those new lovely halide bulbs you\’ve installed in hte fitted kithen.

And?

We know banks get a hidden subsidy when doing so becasue as consumers we compare VAT inclusive prices – but the price banks charge for their services don’t include VAT which they don’t charge. And I am quite sure that the banks exploit that. They charge the price they would if VAT was included and pocket the difference themselves. And there’s nothing but a change in VAT law or a Robin Hood Tax to stop them doing so, so they’re exploiting you again.

Now that would be fascinating if true. For it would mean that there must be collusion among the banks. Or if not that, at least insufficient competition to stop such a result coming about by non-collusive means.

Ritchie is saying here that all banks charge 20% too much for their services: that no one at all, not even banks desperate (as they are in these times) to attract more private accounts, has noted this and tried to exploit this overcharging.

Naaah, I don\’t think so, no, do you?

(something that is almost inevitable as UK pension funds still insist on investing almost 70% of their assets in equities – that is shares – even though the average rate on shares over the last decade is 0% and very few fund managers do as well as the average rate of return – a fact that is when you think about it inevitable when management costs are taken into account.)

Oh dear, we\’ve corrected Ritchie on this before. He\’s looking solely at the capital return to holding shares. He\’s entirely missed the dividend yield. Again. Blimey, last time we even managed to get him to correct his mistake. Ho hum.

So who pays for bank profits? You do. Or as an economist  would put it, the incidence of this excessive profit is on you, the ordinary person in the UK.

Sure, the incidence of profits is on the consumer. What the hell does he expect? That\’s there\’s a magic profit tree that means that profits don\’t come from what people fork over for the goods and services they get in return?

Those same economists love talking incidence when it comes to taxes on banks – they ignore it when it comes to charges.

Who is ignoring what?

7 comments on “Ritchie on bank profits

  1. “And I am quite sure that the banks exploit that.”

    He has become a parody of himself. Paranoid that the banks must be exploiting us. It’s only a small step to blaming a cabal of Zionist bankers for inflation.

  2. Its hard to see banks getting away with charging 20% more than they need to when the likes of Tesco and Virgin are sniffing around the sector.

    And what about the Co-op bank? I can’t see them joining some capitalist conspiracy to screw their customers.

  3. Yeah, it’s been a long time since I did my exams, but even I can remember that financial services are VAT exempt, not zero rated for VAT.

    Without getting too technical this means they’re sort of outside the VAT system. By contrast, zero rated companies are inside the system, but charge VAT at 0%.

    An exempt company needn’t register for VAT if they make only exempt supplies. And, crucially, they’re not allowed to reclaim input VAT on purchases used to produce exempt supplies. So it’s pure, weapons-grade Ritchiebollocks to claim that they can buy lots of luvverly inputs without VAT, then charge us “VAT” and pocket those profits. Even without the valid economic argument you give. Oops!

  4. @Christie Malry: Does that mean that any purchases a Bank makes has VAT at the full rate, and none of it can be reclaimed whatsoever? All those expensive IT systems, building repairs and maintenance, travel expenses etc etc all pay full VAT?

    If thats the case they must be paying a shed load of VAT.

  5. Jim

    It depends on whether they make any standard rated or zero rated supplies. If they don’t, then – yes – they can’t reclaim any of the VAT they pay. If they do, then they get to reclaim a portion, inasmuch as it relates to the production of those standard/zero rated supplies. In practice, HMRC agrees a percentage that’s allowable.

  6. I’m afraid it’s even worse than Murphy says. Not only do the banks take advantage of our assumption that everything includes VAT to overcharge, they take advantage of the fact that we are forbidden from keeping our cash in the mattress and from paying for things in cash, so we are FORCED to use their services. The whole thing IS a Zionist plot!

Leave a Reply

Name and email are required. Your email address will not be published.

This site uses Akismet to reduce spam. Learn how your comment data is processed.