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.
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.
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?