Gerard Jackson, in The Market Oracle today, rehearses the economic explanation for what's going on between America and China. He lays the blame on the expansion of credit in the US monetary system, rather than sinister Chinese intentions.
That's not to say that some in China don't see the weakening of America - and the West generally - as a bonus. National pride can be underestimated.
But the real question is whether our democracies can take really tough decisions now, in order to prevent a much greater disaster later.
Monday, August 27, 2007
Friday, August 24, 2007
Enduring Power of Attorney: "October the first is too late"
...to quote the title of a Fred Hoyle novel.
There are big difficulties in handling the affairs of someone who has become mentally incapacited. Even a spouse is not automatically assumed to have the right to sell or otherwise manage property belonging to the affected person - or jointly owned with him/her.
This is where an Enduring Power of Attorney comes in. It gives advance permission for someone to look after your investments and other possessions, if you can't. (This permission can be altered or withdrawn before that event.)
Why not simply use an ordinary power of attorney? Because this power is given on the legal understanding that you can step in and reassume control whenever you wish. Obviously, if you're in a coma, you can't, so normal power of attorney ceases to have effect in such circumstances.
Does it matter? Yes: as well as physical, there can be financial abuse of the mentally disabled and other legal minors, which is why these matters come under the Court of Protection (within the Chancery division - remember Dickens' "Bleak House", which exposed legal abuses of protected persons' estates?)
Is this a rare eventuality that you can afford to ignore? No. Here's some statistics:
Although there are no precise statistics about the number of people who may lack capacity in the country, the Mental Capacity Act Implementation Programme has estimated a range of 1 – 2 million, including some of the following:
• Over 700,000 people with dementia (rising to 840,000 by 2010)
• 145,000 people with severe learning disability and 1.2 million with mild to moderate learning disability
• 1% of the population with schizophrenia, 1% with bipolar disorder and 5% with serious or clinical depression at some stage in their lives
• 120,000 people living with the long-term effects of a severe head injury
Source: MHCA Briefing Paper, 2005
At the moment, it's a short and fairly simple form, that only needs the names of your potential attorney/s and a couple of signatures. So it's easy -often part of a legal services package offered by professional will writers - and therefore cheap. 22,508 EPAs were registered with the Public Guardianship Office last year (source: PGO Annual Report 2006-2007). Should the need arise, the named responsible person/s take the form and have it registered with the PGO (see Alzheimer's Society information on EPAs and their successors).
But from October 1st, it will be replaced by "Lasting Power of Attorney". This will be over 20 pages long and much more expensive to arrange - one legal firm estimates up to £600 instead of their current fee of £75 (see Daily Mail article, 22 August).
So it looks like a good idea to do it now.
By the way...
There will be two types of Lasting Power of Attorney. The first is the new and more expensive version of an Enduring Power of Attorney; the second is a form of what is known as an Advance Directive, or "Living Will".
An Advance Directive gives permission to others to make decisions about your healthcare if you're disabled - the life-support machine question, for example. There are serious ethical and religious issues about this, and I'm a bit suspicious of these two quite different legal documents being given the same name from October - it's as though the government is keen to get you to sign away your right to life (e.g. perhaps for budgetary reasons).
And isn't is a little revealing that a Court (of Protection) has been replaced by an Office (of the Public Guardian)? Perhaps part of the airbrushing of the Monarchy out of our Constitution - more revolution by stealth.
There are big difficulties in handling the affairs of someone who has become mentally incapacited. Even a spouse is not automatically assumed to have the right to sell or otherwise manage property belonging to the affected person - or jointly owned with him/her.
This is where an Enduring Power of Attorney comes in. It gives advance permission for someone to look after your investments and other possessions, if you can't. (This permission can be altered or withdrawn before that event.)
Why not simply use an ordinary power of attorney? Because this power is given on the legal understanding that you can step in and reassume control whenever you wish. Obviously, if you're in a coma, you can't, so normal power of attorney ceases to have effect in such circumstances.
Does it matter? Yes: as well as physical, there can be financial abuse of the mentally disabled and other legal minors, which is why these matters come under the Court of Protection (within the Chancery division - remember Dickens' "Bleak House", which exposed legal abuses of protected persons' estates?)
Is this a rare eventuality that you can afford to ignore? No. Here's some statistics:
Although there are no precise statistics about the number of people who may lack capacity in the country, the Mental Capacity Act Implementation Programme has estimated a range of 1 – 2 million, including some of the following:
• Over 700,000 people with dementia (rising to 840,000 by 2010)
• 145,000 people with severe learning disability and 1.2 million with mild to moderate learning disability
• 1% of the population with schizophrenia, 1% with bipolar disorder and 5% with serious or clinical depression at some stage in their lives
• 120,000 people living with the long-term effects of a severe head injury
Source: MHCA Briefing Paper, 2005
At the moment, it's a short and fairly simple form, that only needs the names of your potential attorney/s and a couple of signatures. So it's easy -often part of a legal services package offered by professional will writers - and therefore cheap. 22,508 EPAs were registered with the Public Guardianship Office last year (source: PGO Annual Report 2006-2007). Should the need arise, the named responsible person/s take the form and have it registered with the PGO (see Alzheimer's Society information on EPAs and their successors).
But from October 1st, it will be replaced by "Lasting Power of Attorney". This will be over 20 pages long and much more expensive to arrange - one legal firm estimates up to £600 instead of their current fee of £75 (see Daily Mail article, 22 August).
So it looks like a good idea to do it now.
By the way...
There will be two types of Lasting Power of Attorney. The first is the new and more expensive version of an Enduring Power of Attorney; the second is a form of what is known as an Advance Directive, or "Living Will".
An Advance Directive gives permission to others to make decisions about your healthcare if you're disabled - the life-support machine question, for example. There are serious ethical and religious issues about this, and I'm a bit suspicious of these two quite different legal documents being given the same name from October - it's as though the government is keen to get you to sign away your right to life (e.g. perhaps for budgetary reasons).
And isn't is a little revealing that a Court (of Protection) has been replaced by an Office (of the Public Guardian)? Perhaps part of the airbrushing of the Monarchy out of our Constitution - more revolution by stealth.
Thursday, August 23, 2007
Wells Fargo in deep water
Wells Fargo Stage Coach by Sven Ohrvel Carlson It seems that, encouraged by new US accounting rules, some companies are resorting to optimistic subjective estimates of their own value, in order to reassure their investors. Jonathan Weil reported on this in Bloomberg yesterday.
Let's hope the wheels don't come off! And thanks to Michael Panzner for spotting the article.
Is your money safe in the bank?
Mike Shedlock, in The Daily Reckoning Australia today, raises a point we should all consider - how far your cash deposits are protected by law. This is NOT an academic question - a hard-working and thrifty truck driver has recently lost over $300,000 of his life savings in the Metropolitan Savings Bank in Lawrenceville.
For British savers, here is the current position:
"Financial Services Compensation Scheme
The Financial Services Compensation Scheme (FSCS) was created and put into operation in December 2001. It was brought in to replace the Building Societies Investor Protection Scheme, Deposit Protection Scheme and several other schemes previously in place. The FSCS was introduced to protect customers of firms that go into liquidation or out of business.
The scheme is activated when an authorised firm goes out of business or the Financial Services Authority (FSA) considers that an authorised firm is unable or unlikely to be able to repay their customers.
Most customers are partially protected under this scheme and are entitled to the following amount of compensation:
The compensation limit applies to individuals and covers the total amount of all their deposits held with that firm. Each individual in a joint account is eligible to receive compensation up to the maximum limit in respect of his or her share of the deposit. The FSCS assumes the account is equal and splits it 50:50 unless evidence shows otherwise.”
Source: http://www.moneysupermarket.com/savings/GuideToSavings.asp (accessed 17 Aug 07)
From this you can see that for your savings lodged with any one deposit taker, any excess over £35,000 for a single account holder, or £70,000 for joint (50:50) holders, is not protected.
Some may say, "It can't happen here", but it did in the Isle of Man in 1982, where the Savings & Investment Bank collapsed, losing £42 million of depositors' money. International bank BCCI collapsed in 1991 with debts of £10 billion, hitting 6,500 British depositors - and the legal case against the bank ultimately collapsed as well.
Savings schemes are not safe, either. About £41 million was lost in the Farepak Christmas hamper collapse last year.
The strategy is to know your rights, and to diversify. As Antonio says in The Merchant of Venice:
My ventures are not in one bottom [i.e. ship's keel] trusted,
Nor to one place; nor is my whole estate
Upon the fortune of this present year:
Therefore my merchandise makes me not sad.
For British savers, here is the current position:
"Financial Services Compensation Scheme
The Financial Services Compensation Scheme (FSCS) was created and put into operation in December 2001. It was brought in to replace the Building Societies Investor Protection Scheme, Deposit Protection Scheme and several other schemes previously in place. The FSCS was introduced to protect customers of firms that go into liquidation or out of business.
The scheme is activated when an authorised firm goes out of business or the Financial Services Authority (FSA) considers that an authorised firm is unable or unlikely to be able to repay their customers.
Most customers are partially protected under this scheme and are entitled to the following amount of compensation:
100% of the first £2,000
90% of the next £33,000
The compensation limit applies to individuals and covers the total amount of all their deposits held with that firm. Each individual in a joint account is eligible to receive compensation up to the maximum limit in respect of his or her share of the deposit. The FSCS assumes the account is equal and splits it 50:50 unless evidence shows otherwise.”
Source: http://www.moneysupermarket.com/savings/GuideToSavings.asp (accessed 17 Aug 07)
From this you can see that for your savings lodged with any one deposit taker, any excess over £35,000 for a single account holder, or £70,000 for joint (50:50) holders, is not protected.
Some may say, "It can't happen here", but it did in the Isle of Man in 1982, where the Savings & Investment Bank collapsed, losing £42 million of depositors' money. International bank BCCI collapsed in 1991 with debts of £10 billion, hitting 6,500 British depositors - and the legal case against the bank ultimately collapsed as well.
Savings schemes are not safe, either. About £41 million was lost in the Farepak Christmas hamper collapse last year.
The strategy is to know your rights, and to diversify. As Antonio says in The Merchant of Venice:
My ventures are not in one bottom [i.e. ship's keel] trusted,
Nor to one place; nor is my whole estate
Upon the fortune of this present year:
Therefore my merchandise makes me not sad.
Invisible earnings may disappear
The UK's trading balance has been substantially assisted by the money flowing through the City of London's financial community. Martin Hutchinson's 20 August essay in PrudentBear explores the possibility that the City will eventually lose its eminence, and the loss of revenue will have to be replaced by higher domestic taxation.
Twang money revisited
John Rubino's 19 August article in GoldSeek supports my contention that since credit works like money, a credit contraction destroys money, and this undermines our ability to make sound financial assessments:
"Prudent Bear’s Doug Noland has for years been pointing out that one of the drivers of the credit bubble has been the ever-broadening definition of money. As the global economy expanded without a hic-up, more and more instruments came to be used as a store of value or medium of exchange or even a standard against which to value other things—in other words, as money."
Now that lenders are pulling in their horns, central banks are creating more cash to replace the "loss", and the result must be a dilution of value in the currency.
"Prudent Bear’s Doug Noland has for years been pointing out that one of the drivers of the credit bubble has been the ever-broadening definition of money. As the global economy expanded without a hic-up, more and more instruments came to be used as a store of value or medium of exchange or even a standard against which to value other things—in other words, as money."
Now that lenders are pulling in their horns, central banks are creating more cash to replace the "loss", and the result must be a dilution of value in the currency.
Wednesday, August 22, 2007
UK debts mounting
And Rob Mackrill in today's email edition of The Daily Reckoning reveals that Britain has problems that, relative to the size of our economy, stand comparison with America's:
UK consumer debt now weighs in at £1,345bn - a sum that exceeds our entire output of goods and services, according to accountants Grant Thornton in a note this morning.
Official receivers and trustees in bankruptcy generally seem to do rather well out of this kind of mess - perhaps rather too well.
I had some clients who wound up their firm but pulled out all the stops to collect all debts and pay creditors as much as possible themselves; both clients and creditors benefited far, far more than if they had yielded to the usual arrangements - which I saw in other cases. Ordinary people are shaved going into debt and skinned coming out.
UK consumer debt now weighs in at £1,345bn - a sum that exceeds our entire output of goods and services, according to accountants Grant Thornton in a note this morning.
Official receivers and trustees in bankruptcy generally seem to do rather well out of this kind of mess - perhaps rather too well.
I had some clients who wound up their firm but pulled out all the stops to collect all debts and pay creditors as much as possible themselves; both clients and creditors benefited far, far more than if they had yielded to the usual arrangements - which I saw in other cases. Ordinary people are shaved going into debt and skinned coming out.
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