Bank of England cuts interest rate

Thing is its Global and with China Russia not being in bed with UK and The USA we need to be careful.

Watching BBC2 Newsnight why do the candidates for the US Presidency say OIL is a matter of national security, maybe if they stopped and drove smaller cars it wouldnt.
 
Scottly said:
If that's what you think then you don't know much about business at all.
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Show me a business (or person) without a cash buffer and I will show you a business unprepared for the slightest mishap, let alone lean times. It is a pretend business, and the world is now full of them, sadly. As we will shortly begin to see.

As with the 'just in time' ordering systems which guarantee immediate shortages in the slightest crisis, the 'just in time' cashflow system guarantees a built-in need for easy credit. That credit line becomes an essential part of the business, which is why we are now seeing so much panic as credit flows creak to a halt.

The business world has gone slowly mad. It's time for sanity to be restored, no matter how painful that might be.

Andrew McP
 
Andrew_McP said:
Show me a business (or person) without a cash buffer and I will show you a business unprepared for the slightest mishap, let alone lean times. It is a pretend business, and the world is now full of them, sadly. As we will shortly begin to see.

As with the 'just in time' ordering systems which guarantee immediate shortages in the slightest crisis, the 'just in time' cashflow system guarantees a built-in need for easy credit. That credit line becomes an essential part of the business, which is why we are now seeing so much panic as credit flows creak to a halt.

The business world has gone slowly mad. It's time for sanity to be restored, no matter how painful that might be.

Andrew McP
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I agree with you on this - but you can't blame businesses for doing it, they are just responding to the system. Look at Manchester United, they had tonnes of cash sitting around that they didn't know what to do with, so Malcolm Glazer decides to borrow a load of money, buy them, then use Manchester United's cash to pay off his loan, then transfers his loan to Manchester United. It's disgusting.

Personally in the next couple of years I'm expecting some big companies that were the subject of leveraged buyouts (i.e. see above) by Private Equity firms to start failing when they can't pay back the loans that were taken out to buy them. You even had the PE companies proudly boasting that the companies they had taken over used to have too small a debt, and now they had the "right amount of debt" - time will tell.
 
Andrew_McP said:
Show me a business (or person) without a cash buffer and I will show you a business unprepared for the slightest mishap, let alone lean times. It is a pretend business, and the world is now full of them, sadly. As we will shortly begin to see.
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Show me a business with a large cash buffer and I'll show you tetchy stockholders, a board with no sense of direction, and a pack of wolves circling looking for a bargain acquisition.

The company exists to maximise profits for those with a share in the business. Maintaining a large cash reserve absolutely does not do that, and any board that countenances such an approach knows full well the risks they are running.

I suggest you at least pick up a business textbook before you start critiquing methods which have been in use for decades with no adverse effects. There has never really been a financial crisis where otherwise sound companies have had trouble getting short term credit.
 
Show me a business with a large cash buffer and I'll show you tetchy stockholders, a board with no sense of direction, and a pack of wolves circling looking for a bargain acquisition.
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Afaik, large technologies companies (as an example) keep hold of a cash buffer. They may use this to respond to changes in the market - e.g; the requirement to aquire another company to remain competitive. Or to invest in some new technology they are researching, etc.
 
scorza said:
I agree with you on this - but you can't blame businesses for doing it, they are just responding to the system.
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Perhaps you're right, and standing out from the crowd (making yourself less profitable on the surface but more sustainable in the long term) is very hard to do in a cut-throat capitalist environment. But that's how almost every bank ended up following this crazy selling-on of debt system which allowed the poison to spread throughout the world. Maybe their shareholders would've squealed if profitability had suffered, but maybe they'd be one of the survivors now, buying up their broken competitors at a heavy discount.

The point is that 'I had to do it because everyone else was doing it' is not a defence in law, and it's not a defence I recognise as valid for banks or businesses either. I will accept though that there has been a massive failure of regulation here. However that brings the blame back to the electorate. Who would've voted this decade for politicians who said it's time to stop lending so much... retail sales and jobs must fall, house prices must stabilise or even fall to ensure long term stability of the UK economy.

Virtually nobody, because everyone wants good times to last forever. Which is why things just keep going Wile-E-Coyote-style until everyone realises they've run out of cliff top.

The lesson which everyone ought to learn from this, especially those of you reading this at the start of your working lives (or earlier!) is that all human endeavour is cyclical. No matter how well intentioned the people trying to make systems work, they always fail eventually, because you can't fight the instincts which drive all of us to some degree or other.

Pay attention to the cycles and you will have a far easier passage through life than those who ignore it and get the timing wrong. You might get lucky anyway, but you probably won't. That's how the big money gets to be big... by taking it from the little guys.

At least this time the big money got very badly stung as well. In that sense the credit crunch is being financially democratic. Which, ironically, is why it's so dangerous.

Andrew McP... wishing he'd taken all this stuff seriously when he was much younger. :-)
 
NathanE said:
Microsoft has a few billion in the bank. Loads of companies have millions in the bank to be honest :confused: Not exactly uncommon.
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Don't confuse having billions or millions in the bank with having that much in the equivilent of a current account.

Easy access to credit allows for quick and available cash in the current account, and that's what businesses need for day to day expenses.
 
scorza said:
Indeed they do. Just dug out this article from 2002 criticising them for having so much cash :p

http://money.cnn.com/2002/04/12/pf/agenda_msft/
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And like I mentioned a few posts back, they're getting rid of all their spare cash by buying back billions of public stock. The main reason they had so much lying around recently was because of their attempt to buy Yahoo, now that has failed having so much cash on hand is more of a liability than an asset.
 
HEADRAT said:
The LIBOR rate hasn't changed, the Bank of England has lost all control of Interest Rates, they could drop it to 2% but if banks don't follow then it's meaningless.
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The other measures taken by the various governments to stabilise the banking system should help there, but they take more time to come to fruition. In the meantime, it's helping consumers and businesses to reduce rates.
 
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