Finance watches markets plummet
Monday 15th September 2008, 3:00PM BST.
JERSEY’S finance industry was on the edge of its seat this morning as one of the world’s biggest investment banks filed for insolvency.
Investment specialists in the Island were struggling to buoy up optimism against warnings that a recession could be deeper and longer than expected.
Lehman Brothers does not have a presence in Jersey but the collapse has had a global knock-on effect. By mid-morning the markets were continuing to plummet, with the FTSE 100 down by nearly 200 points. Financial services in particular was hard hit, with HBOS shares down 15% and RBS shares down ten per cent.
News also broke today that another US giant, Merrill Lynch, is to be taken over by Bank of America. The firm does have an office in Jersey and employs up to 20 staff. The deal is widely seen as a positive move which will enable Merrill Lynch to survive, following the loss of around £24 billion in write-downs since the start of the year.
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Eggs…..one basket?
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‘JERSEY’S finance industry watches markets plummet’, whilst the Jersey States is accused of failing to control States expenditure.
Luckily, as far as I know, Lehman Brothers are not amongst the overpaid consultants on the States payroll. Nevertheless a salutary lesson on how not to manage your finances.
Bring on Sarah Ferguson.
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Eggs one basket indeed Chris. I have always said over the last few years that the States are investing too much into Finance. It is only a matter of time before jobs start going and i bet it won’t be the ‘J’ cats going first! this of course will create a shortfall in people spending money hence creating job losses in the retail sector. I agree Jersey needs to have Finance but at what cost?
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… and so it begins, and this really is only the beginning. We are about to find out what the States are going to do with this one-trick-pony of an economy and I can guess the results of that one. They will rise to the challenge with the usual vacillation, incompetence and eye-watering stupidity that has been their hallmark for as long as I can remember. And when the finance industry is either gone completely (which could happen) or is massively reduced (which will happen in the next ten years one way or the other) what then for Jersey? As far as I’m concerned, the only way is up. Jersey does not need the Finance Industry, the Finance Industry needs Jersey and we should be making them pay a much higher price for the privilege of exploiting our home and turning our population into wage slaves. And if they don’t like it they can leave, because they are going to anyway and the sooner we learn to live without them the better it will be for us in the long term. The short term pain has started; how will it end?
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Yay, good comments Bruce, get rid this island has so much more going for it than supporting a false economy anyways WE DO NOT NEED THE FINANCE INDUSTRY we gave 500k of taxpayers money to the fins servs comm a couple of months ago the cheek of it!!BTW people arent fooled by the carrot and stick or the verbal diahorrea that comes with it history and market trend is a funny old thing a bit like the world it goes round in circles!!! People actually make sure they are aware these days cos you have to be!!!
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Do you think real people actually have any time for glorified thieves any more?? Wake up!!! you can’t fool all the people all the time..
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Some commented on that the States should take advice from the Private Finance Sector!
While i agree the States do need to review their spending,i think asking for the advice of the Finance industry would be like asking the Lehman Brothers how to invest! The private sector finance company’s are why the world is in a credit crunch heading towards a resession in the first place. They take big pay deals bigger than what the States pay then they lose billions of pounds which then affects all of us on the ground. I would say at the moment that the private sector are just as bad as the public sector and the private sector lose and waste more money than any government. The States just need to tighten its belt and use the resources it already as internaly to make the savings possible, they do have a lot of educated staff who could do it for them!….. and now the report is the Finance Sector are saying the current situation is a good omen! Head and Sand come to mind!!
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I wouldn’t start crying just yet.
Jersey’s finance industry is not totally reliant on the state of the wider financial market.
In difficult times, many people will seek to shore up assets in a stable, well regulated, tax-neutral offshore jursidiction – like Jersey.
Give it a few years, once the majority of the bad debt has effectively been written off in bankruptcies (like Lehmans), the lovely money will start to flow again.
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Is this not simply what happens when the ‘Old Boys’ Club’ put their idiots in charge? It happens in banking, in politics and pretty much everywhere that large amounts of money are exchanging hands.
Banks can lose millions and still pay their Execs million pound bonuses when the rest of us would be fired for making such huge errors of judgement.
Getting a high level job is all about who you know, and how well you spin the BS, it has little to do with actual ability, and NOTHING to do with a sense of morality!
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Jersey is nothing without the finance industry, without that what have you got? tourism? farming? you ‘ve had it too good for too long, don’t bite the hand that feeds you, Jersey’s economy needs the finance industry and much as I hate to say it your government have done a very good job in that respect.
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Obviously there is still going to be a substantial finance industry in the island after the recession that seems to be inevitable.
At this point in time it is really impossible to say how deep or long this recession will be and its effect on the island.
Similarly it is hard to say what the effect of the closure and consolidation of banks in the wider world will have on the finance industry.
I would guess more computers, fewer people and giant ‘one stop banking shops’.
Looking back at the glory days of tourism in the island few then would have predicted its precipitate decline.
The fact is that the future is unknowable and anyone’s view is really just an opinion and subject to any prejudices and wishful thinking that they may indulge in.
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I think that those of you who feel that Jersey doesn’t need the Finance Industry, haven’t thought carefully enough as to what would happen to this Island if suddenly Finance was to leave. The tax raised from Finance has in the past 50 Years or so paid for more of this Island’s infrastructure (through the payment of various taxes) than from any other source. The money that people in Finance earn also trickles down to a lot of people who work in other sectors. The majority of people in Jersey rely in someway on what the Finance Industry contributes to our ecomomy.
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Thank you Peter for trotting out the old ‘Dulce et decorum est’ lie once again – the reason we have had to boost the infrastructure is because of all the extra people that now live in Jersey BECAUSE of the Industry. More schools, more hospital beds, many many many more houses (9,500 more over the next five years wasn’t it?) – if you want an idea of how big a problem this is just try to work out how many people would leave Jersey if I could wave my magic wand and make the Finance Industry disappear. I have heard 20,000 bandied about. What a difference that would make! Cheaper housing, smaller class sizes, much higher quality of life. Yes, big reduction in tax income but much lower costs. Has anyone ever done a serious cost/benefit analysis on Jersey’s main industry? There was an economic model of our economy developed by Strathclyde University a few years ago but I don’t see any published results yet confirming just how critical Finance is to our future. Far from it – it seems to have disappeared. I wonder why?
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Peter. Jersey could actually survive without Finance! Picture this… Finance pulls out except a few high street banks to service the public. All the ‘j’cats employed in Finance would all go home or to another country. Then all the extra people that service the Finance industry would filter back home etc. As spending decreases so does the job force. Building would stop, property prices would drop, more jobs would go…….then when the dust settles The States would not have to find the extra spending to cover all the servcies because the population has droped to around 50,000 or so they dont need the extra taxs form the Finance industry. In all the point i am making is if the population starts shrinking so does the cost of running jersey. We CAN survive without Finance as Jersey as been since for 100s of years until the last decade or so. oh and as the J cats have gone there will be 100% employed!
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Jersey doesn’t owe the industry anything. They are NOT the “hand that feeds you”, they wouldn’t be here if they weren’t getting a relatively free ride. They are businesses, they don’t give a damn about Jersey or feel any loyalty to you.
Many actions have short-term benefits but harm you in the long-run. The influx of people on good salaries (in part due to the industry) is raising house prices, so your young have to leave for the mainland, you get an ageing population creating a greater burden on the taxpayer, you’ll end up having no option but to make the Finance Industry take some of the hit so they’ll just up and leave without a second thought.
Jersey’s future requires hanging on to its young people more than it requires hanging on to the Finance Industry.
And frankly, as someone who has been a tourist here across a number of years, the constant construction work and the excessively built-up look (especially towards the shore) are actually off-putting, little wonder tourism isn’t what it used to be.
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Have you lot not thought about how many Jersey Born people like myself, work in Finance? We didnt all want to be farmers! And no, my parents arn’t English. They and my grandparents are all Jersey Born. The Finance Industry is not full of Ex-pats. There are plenty of us Beans holding senior positions thankyou very much ! The Finance Industry does not get a free ride either . The tax the Financial Institutions pay to the Jersey Treasury is vast
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I’m afraid some people are living in cloud cuckoo land.
There would not be a higher quality of life if the finance industry vanished. There would be nothing to pay for it. I can’t think of one private business in Jersey that doesn’t now rely to an appreciable extent, directly or indirectly, on the business of finance workers.
Apart from housing, the cost of living would not necessarily be lower. For example, distributors will need to cover the increasing cost of shipping to Jersey whilst selling less product and the States will need to rely on higher GST etc. to cover the massive loss in tax revenue.
If it suddenly fell apart, whose to say that the jobless would leave? Most will be entitled to apply for income support and are likely to do so before they even think about leaving. That in turn will mean higher taxes for those still with jobs.
You’d actually have an even worse problem in terms of the ageing population. With no finance industry there would be no jobs here. Because so many other businesses and trades rely on finance, there would be nothing for schooleavers to do here at all. Jersey would become a retirement home.
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G B haven’t you ever been told about the time before the finance industry took over Jersey? Back in the 60s and 70s people had jobs, Jersey was far less crowded and everybody survived quite happily. I know because i was at school in Jersey at that time. The island will not fall to pieces without the finance industry despite what certain people would like us to believe.
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It’s business, if they weren’t getting a ridiculously good deal they wouldn’t be here! Businesses don’t have any loyalty to anyone other than their shareholders.
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Okay GB, so somewhere along the line the island has screwed up and put all their eggs in one basket… does that mean they shouldn’t start reversing the process asap to ensure sustainability? Course it doesn’t. Only a complete fool wouldn’t be creating a back-up plan! When your tourism industry was struggling you had a back-up plan, the growth of the Finance industry. When the Finance industry falters you’ll have no safeguards in place.
Peter, no-one is suggesting that all Beans want to be farmers, but having a situation where so many young Beans have no option but to enter the Finance industry just to afford to stay in Jersey is no better, it’s not a choice.
Jersey needs to give its potential employees real choice. “Work in Finance or leave the island” is not a suitable choice.
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Well if the current convulsions in the Financial Markets were to lead to a reduction in that industry over here, wouldn’t it serve us right? After all until very recently the basis of Jersey’s Finance Industry was the exempt company. This blatant theft vehicle was used to steal the tax base from other countries and the OECD finally forced us to close it down.
Peter is your finance company one of those which administered those opaque securitisation vehicles, CDOs/SIVs/Conduits etc, which have caused so much damage across the markets. Jersey has boomed in the last six years setting up and administering what Warren Buffett called “Financial Weapons of Mass Destruction”.
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We need to realise that some time soon Jersey is going to be without the Finance Industry, one way or the other. This is not an ‘either or’ debate. It will leave or be flushed out. What will be left for us? The States have no economic Plan B – it’s Finance or nothing as far as they are concerned. And I am glad to hear that Peter didn’t want to be a farmer and enjoys finance. I didn’t want to be a banker and had to leave my family and my home to find a life I could feel happy with. I don’t think that’s right, especially as the future of our Island is going to rely heavily on the creativity of many sorts of people, not just accountants and solicitors. Jersey is verging on a monoculture, which any farmer will tell you is a perilous thing. It only takes one predator …
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As a regular visitor _ but also as a true “Channel Island fan” just living “round the corner” in North Brittany _ I am absolutely convinced the people of Jersey will match the current and future problems as they always have done in the past. I remember having seen photographs about agriculture _as far back as the turn of last century_ as well as about street lighting equipment in the sixties or whatever else showing the creativity of the residents. As Victor Hugo once said, your island stimulates creativity. I am entirely convinced of that.
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Jersey can survive without Finance but it would be a rough period of change. Jersey has put its eggs in one basket but like evolution jersey can change as well. One example is Dubai, a dessert in the middle of no where. Because their oil is about to run out in 10-20 years they started this mass investment in Finance and Tourists etc. 10 years ago they would not have dreamed of what it would be like now. They planned for thier future. Jersey can do the same. Don’t follow Bermuda and become an over crowded island where you can not move for cars and people. While Finance is good it’s not the answer.
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Bruce, thank goodness someone is speaking sense.
For many people (like me) entering the Finance industry would be like death from boredom!
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I do agree that jersey should have a back up industry to Finance and I am sad that the tourism industry is not what it used to be. Of course Finance isnt for everyone and I also agree it can be boring but many of us earn our livings from it either directly or indirectly and we should make the most of it whilst it is here. I was told when i left school that working in Finace was a bad choice as it would only be around for 10 years or so. That was 25 years ago and it is still going strong but as I said before, a back up would be good and the States SHOULD be looking at that as a matter of urgency.
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ah if you don’t like Jersey the way it is ‘there’s a boat in the morning’.
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Well said Peter.
Oh the ‘boat in the morning’ line, how trite.
So Bergerac, you think that people who have been born and brought up here should leave the island because they don’t like what is currently happening? Has it crossed your mind that these people pay the salaries of your States members? They have every right to demand that the States represent their views and look out for their best interests, otherwise the people of Jersey should have every right to stop paying their salaries!
The job of the States is to look after the island and its inhabitants and that requires listening to the inhabitants and having an actual democracy (which apparently you don’t). If I didn’t do my job I wouldn’t get paid so why should they?
Of course, your argument is fundamentally flawed anyway because by your reasoning the majority of Iraq, England, Italy, Zimbabwe… and the people of God knows how many other countries would have left their homelands and currently be vagabonds.
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there’s a lot of people not born on the island that pay those salaries as well and that is the line used on them…. 20% tax, Low crime, high standard of living… you won’t find that in many other places, so take the boat if you don’t like it leah! be a vagabond!
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What about potato vodka as a back up plan? At least if it doesn’t take off, we can all get drunk.
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