How does the square mile generate money?

[jsmoke]

It apparently generates a large amount of the overall tax revenue.

There's trading, auditing, banks, private equity and hedge funds I get that but how and where from do they generate their money?

 

[jsmoke]

Indeed - Charging Interest, Charging Fees, Buying low and selling high etc...

But what are they buying/selling?

Does that not mean other countries are making a loss?

 

[jsmoke]

By fooling people!



The idea that they are buying and selling something that is important and actually has a value.

The funny thing is that it sort of works,

Even though it is total nonsense!

(Like Bitcoins, Carbon credits, and all the other nonsense!)

:/

Give me an example. I know city analysts try and get their clients to buy stock/shares for example I can understand that however what else goes on, surely it's just a central point for money matters and these companies could be spread out all over the country. So to say that the city is a key assets to tax revenue is a bit false it's more a case of it's a central hub.

 

[jsmoke]

How do you know it's "a bit false" when you don't even know what they do?

Isn't that a bit ironic?

I suppose it is.

 

[jsmoke]

So basically a ponzi scheme.

 

[jsmoke]

But you don't know what they do….

It's getting clearer, selling future prices, gilts, bonds, stocks, anything that a market can be created for. Does the Internet not kill a lot of business for these companies, online trading and the like.

 

[jsmoke]

I've seen the film but a good while ago also read bits of cityboy but again a good while ago. I forget.

 

[jsmoke]

Good answer. The heart of the beast then.

 

[jsmoke]

Well good luck recruiting people if you relocate a bank to say Skegness... You'll get some IT stuff perhaps located to the likes of Birmingham, Glasgow etc.. IIRC one bank might have some front office sales staff in Brum too. But most of the revenue is generated in the city.

I'm not really sure what you're asking here though I mean in the OP you've already listed various areas that make money no - are you confused about how these areas make money?



re: Trading - what are you referring to - if you're talking about banks then they might be acting as intermediaries, providing clearing/brokerage services, they might be providing a market/acting as a counterparty. And in the latter case they might well be creating products tailored to a client's requirements too. There are various exchanges based in London too.

Auditing - the auditors charge a fee for their services.

Private equity - they invest in companies, they sell the company on later for a higher price or via an IPO, they make money. simples...

Hedge funds - they're hardly the only people in the asset management game, there are much, much larger traditional asset management firms out there too. But hedge funds charge a fee for managing your money and also take a performance fee from the profits... you'll often hear 2 and 20 quoted, as in they have a 2% annual fee and take 20% of the profits too. In reality there is quite a bit of variation here in terms of fees and how they are structured.

You're also missing the insurance industry, commodities, consultancy firms, investment banking and law firms.

The point is, are they creating money or redistributing money. AFAIK, only banks through fractional reserve banking or the BOE
through printing money (QE etc) can actually create money.

If they're not creating money yet both clients and the city are getting richer each year then where is the extra money coming from.

 

[jsmoke]

How does a hair dresser make money?

You fundamentally don't understand how services work. Most of the public don't, even though most work in the sector.

We have enough food and land to feed ourselves (at least globally). The next most valuable resource is our time to build things or perform services for others. This time dependent on the person's skills is worth a lot of money. 1 day of a person's time might be worth 10 days of someone else's time. A company might decide to employ a few hundred people with different qualities at different rates of pay to provide a specific service. That company, even after paying staff and costs may have money left over called profits.

Effectively what humanity does through money is exchange skills with each other. Natural resources such as land and what's found on that land would be endowments that some people may own.

The reason the square mile makes so much money is because we collectively (as consumers, shareholders, owners of assets) are willing to pay the companies based there a lot of money for their services because they employ the people with the skills we need.

Well we do import about 60% of our food so we'd need to drastically change our standards of we were going to feed ourselves but that's a different topic.

So what your saying is it's the ground level workers that create the economy the joiners and plumbers, engineers etc.

 

[jsmoke]

Is this thread serious? lol

Go and eat some frogs.

 

[jsmoke]

Money is created all the time. There's more money today than there was yesterday. There'll be more money tomorrow than there is today. Your mistake is to think of money as something finite that must be found and if one person gains money, someone else somewhere must have lost that money. That's not how it works. You can confirm this with a trivial observation by comparing the amount of money (£'s, $'s, whatever) in circulation on a year by year basis.

And if you're about to conflate money with wealth (which would be fallacious for a few reasons), then I'll forestall it by saying wealth gets created every day too. Usually with the input of credit. A pile of stone, timber and a lump of copper? Low wealth. The same materials in a house with electricity - much greater wealth. And the transformation accomplished by the input of credit. Credit being a formal quantification of trust. Trust is one of the most valuable qualities our species needs. Financial traders commodify and trade in that quality.

So it all boils down to rocks and timber. I knew money was both created and destroyed. The economy has to be continually growing for this system to work. However there must be a critical point in the future when things are saturated(goods and services) too many people, houses and not enough resources or jobs.

 

[jsmoke]

You should read freakonomics, it gives you a lot of info that you might find useful.

Money is created daily, and it is done so to encourage spending. This is also a reason why bank lending becomes "easier" or less costly to the public and also why interest rates are so low. It encourages people to use the money they have. This whole BS finance industry is propped up and balanced by a **** ton of people trying to make everyone spend, growing a false economy and the circle continues.

I watched the doc but again years ago. I get the picture again so it's arguably OK to be rich as your money is being used by the banks anyway.