For the past 10 years I’ve been undecided as to whether Britain should join the European single currency, the Euro.
At first I was leaning towards the Euro, thinking that a level playing field of prices across Europe would encourage competition, making prices more transparent across a larger market, and therefore bring down prices in general.
Then, for a period, I felt that being constrained by a single interest rate for such a large and diverse economy would be harmful and having the flexibility of our own national currencies would assist us in adapting to any challenges we face.
However, since the start of the credit crisis and as the pound falls against a basket of currencies, I’m now leaning back towards the Euro. I’ve realised that governments (particularly our current one!) are too often tempted to print money to inflate their way out of a debt crisis, thus punishing the thrifty and rewarding the reckless.
I think that stability should be the most desirable attribute of a currency. It allows good businesses to concentrate on what they do best, rather than having to worry about the constantly fluctuating value of their imports / exports / savings. It allows people to plan knowing that they can buy a fixed number of goods with their income, and that they can set aside enough for retirement.
So the decision between the Euro and the pound, it would seem, boils down to a simple choice: Stability versus Flexibility.
As Britain and our European neighbours deal with the recession, it’ll be interesting to see which performs best. Countries such as Ireland, Spain and Greece may prefer lower interest rates than the Euro affords them, but if they perform relatively better than Britain does in the medium term, it would suggest stability is more important than flexibility.
Once you’ve found a limited company to invest in, the next step is to complete the legal work required. So what’s involved? Generally the process is as follows (where company refers to the company receiving investment):
- Agree the terms of investment, and make a contract / shareholders agreement based on this.
- Check through the company’s Articles and Memorandum of Association.
- The company should pass an ordinary resolution issuing new share capital if the company does not have enough unallocated shares to complete the desired transaction.
- All parties sign the contract, and then the investor and investee should swap any monetary consideration for a share certificate.
- Finally, the company should inform Companies House of the updated share structure by filling form 123 – increasing nominal share capital (if necessary) and form 88(2) – allocation of shares.
Contract / Shareholders agreement
The contract / shareholders agreement could include:
- Clarity on the ownership of assets. If any company assets are registered personally to the Directors, then they should be transferred to the new company.
- Pre-emption rights to take part in any new share issues on the same terms as other share holders.
- Commitment guarantees from the Directors, e.g. they will work on the project for at least x months, or will relinquish some shares as a penalty if they wish to leave early.
- Details of when the investor expects to be able to take a dividend, e.g. the current Shareholders / Directors can take a remuneration package of up to £x per year, after which the investor may take a dividend.
- Full disclosure of all company assets and liabilities.
Web Filing with Companies House
WebFiling is a secure and reliable way to file your company information. As well as saving you money on your Annual Return (£15), WebFiling allows you to file most of your company information free of charge. This includes changes to your registered office address (form 287) director and secretary changes.
To use Web-Filing you need to follow 2 steps.
- Register for a web filing account, and a security code – this will be emailed to you.
- Apply for an authentication code. A company may already have one if it was set up online, otherwise it will be sent out by post to the registered address.
It’s pretty simple to install phpBB from subversion, but I couldn’t find any instructions online, so I decided to write some.
Firstly, checkout the phpBB 3.0.x branch directory which always contains the latest stable code. You can do this with the following command:
svn checkout http://code.phpbb.com/svn/phpbb/branches/phpBB-3_0_0/phpBB forum
Where forum is the directory you want to install the forum into. Once all the code has been checked out, visit the the forum url in your web browser.
This will take you to an install wizard, which will guide you through the remaining steps. It’s as simple as that!
Our office currently runs standard fluorescent strip lights (1500mm T8 tubes) throughout, with over 60 bulbs across 3 floors. We are considering upgrading all the lights to LED bulbs, in order to save power and to make them compatible with an office automation system (to turn them on and off automatically).
So, how much energy will they save? Well a standard fluorescent bulb consumes about 58w, whereas the new LED bulbs consume around 20W. Therefore over the course of a year I would anticipate the energy savings to be as follows:
||Standard Fluorescent Bulb
|Hours in use
||10 hours per day, 5 days a week, 52 per year
|Hours per year
|Kilowatt hours per year (watts / 1000 * hours)
|Cost per year (at 10p per kWh)
Thus the saving is about £10 per year per bulb.
We are currently asking suppliers to quote us for 60 bulbs, and the prices we have received so far range between £25 to £60 per bulb.
The bulbs are rated for about 50,000 hours of constant usage, which should mean they would last nearly 20 years at the rate of usage we have forecast.
Standard bulbs last about 5,000 hours (2 years) and cost around £2 each.
It looks like the energy saving bulbs should pay for themselves after 3 – 5 years, and return a yield of around 20% thereafter.
Things I haven’t factored in:
- Cost of installation / replacing bulbs (slighty more difficult to initially install, but they last 10 times as long and therefore need less labour to replace).
- Reduced heat from operation – might require less air conditioning in summer months)
If you are having difficulty getting to a particular website, but other websites are working fine then the best way to diagnose the problem is to use a tool called “traceroute”. This tool exists as a command line program on Windows, Linux and Mac’s but for the average user they may find that a bit too complicated, and so in this post I’m going to show an easier way.
Essentially what it does is attempt to send a packet of information from your machine to a web server somewhere else in the world, and then it analyses the path that the packet takes as it moves around the Internet. By looking at the results of this path, you can see where the packet is stopping and therefore which link in the chain is not working.
So, in order to run a traceroute do the following:
1) Visit this site: http://www.mapulator.com/
2) Type the website domain you are trying to connect to as the target host (e.g. pyrosoft.co.uk)
3) Select run from: Your PC
4) Press Trace
This will run a traceroute from your computer to the target website, which can help a techy identify the problem. Once the traceroute is complete, click the “Raw Traceroute” tab in the results section and copy and paste this into an e-mail to your ISP. The results should look something like:
traceroute -n -m 30 -w 5 google.co.uk
1 220.127.116.11 0.455 ms 2.040 ms 0.208 ms
2 18.104.22.168 2.157 ms 2.238 ms 2.298 ms
3 22.214.171.124 2.840 ms 2.680 ms 3.046 ms
4 126.96.36.199 2.789 ms 2.932 ms 2.843 ms
5 188.8.131.52 3.235 ms 3.169 ms 3.209 ms
6 184.108.40.206 13.733 ms 13.821 ms 13.777 ms
7 220.127.116.11 13.830 ms 14.144 ms 13.885 ms
8 18.104.22.168 18.026 ms 22.214.171.124 16.810 ms 126.96.36.199 19.519 ms
9 188.8.131.52 14.270 ms 14.506 ms 14.266 ms
The tool is particularly handy in that it also shows you a visual representation on a Google map of all the hops involved. This is roughly the physical path that your data takes as it passes from your PC to the target website.
As regular readers of my and / or Brendan’s blog and twitter feeds may know, we have been looking into how to set up a bank. The primary reason being that if the Bank of England embarks on a policy of quantitative easing (otherwise known as printing money / helicopter money), then we want to get a piece of the action. We certainly have plenty of ideas for cash yielding investments to spend it on!
Anyway if we get past the formalities and set up our bank, how do we go about borrowing money from the Bank of England?
Unfortunately, I couldn’t quite find a simple answer to this on the Bank of England’s website, but I think the process comes down to the following 3 steps:
If you read through the eligible securities section on their site, you will see that it basically just includes things like government bonds. This is not really much good to us, as we would need to use our cash to buy the bonds in the first place, in order to borrow the same amount back. However, there may be a solution, the Discount Window Facility (DWF).
The purpose of the DWF is to provide liquidity insurance to the banking system. The Discount Window Facility is not intended for firms facing fundamental problems of solvency or viability. Eligible banks and building societies may borrow gilts, for up to 30 days, against a wide range of collateral in return for a fee, which will vary with the collateral used and the total size of borrowings.
Institutions eligible to participate will be banks and building societies that are required to pay cash ratio deposits (CRDs) and which otherwise meet the requirements for eligibility, as determined by the Bank, for the Bank’s Sterling Monetary Framework facilities.
The key point here is that they say they will accept a wide range of collateral in exchange for government bonds (gilts). Presumably, the gilts could then be used to borrow hard cash using their standard lending facilities.
If they are willing to accept poison assets such as dodgy loan books from mortgage lenders, then I don’t see why they wouldn’t accept shares in companies, or loans to businesses.
Issues to solve:
- What is required to become a bank (or more correctly, a monetary financial institutions)?
- Will the bank accept shares in private companies as collateral, or a loan book that is made up of advances to start ups and other small businesses?
- If the loans are for 30 days, can they be rolled over each month?
- Are there any other schemes to borrow money from the BoE on a longer term basis?
Here’s the application form.
I just found a cool tool on the Bank of England site for anyone interested in financial / monetary stats. Basically the Interactive Stats Tool lets you search through a huge amount of statistical releases and then download them in either CSV, Excel, XML or HTML formats.
Here’s some examples of what you can get:
You can even merge multiple datasets together in the same results page:
Here’s some figures on the Money Supply:
If you find any more interesting ones, be sure to post them as a comment!
Ways and Means Advances to HM Government is an entry that appears on the Bank of England’s Balance Sheet. As of the end of 2008, the figure stood at £369,847,840. Prior to 2000, this was basically the Government’s overdraft facility. The Bank of England provided a short term loan to balance the governments day to day spending.
An extract from the Treasury archives says:
When daily central government expenditures, receipts and net borrowings produce an end-of-day shortfall, the fine-tuning is provided by overnight borrowing from the Bank. Essentially this ‘Ways and Means’ advance is made by running down other assets held by the Bank that back the note issue. A daily surplus in turn reduces outstanding Ways and Means borrowings. (If there were no Ways and Means borrowing outstanding, a surplus would be put on deposit with Banking Department). Changes in the level of the Ways and Means advance happens automatically at the end of each day as the Bank calculates central government’s final cash position and adjusts the Ways and Means advance accordingly. Both borrowing and lending is done at the Bank’s 14-day repo rate.
In April 2000 the responsibility for government cash management moved from the Bank of England to the Debt Management Office. The balance of the “Ways and Means” account was frozen and is gradually being repaid. More info can be found in the 2008 Debt and Reserves Management Report:
The Ways and Means Advance is the Government’s overdraft facility from the Bank of England. Before the responsibility for Government cash management was transferred to the DMO, in April 2000, the Bank of England managed the daily changes in the Government’s net cash position by varying the Ways and Means overdraft. To finance changes in the level of this overdraft, the Bank undertook daily operations in the short-term money markets.
However, once the DMO assumed the role of Government cash manager, it no longer needed to use the Ways and Means Advance for this purpose, as the DMO uses market instruments to manage the Government’s cash position. At the time of transition, the outstanding balance of this overdraft was £13.4 billion.
The amount of the Ways and Means Advance was frozen (as announced in 1997 ) at the time of the transition to the new cash management system. At the same time, the Government also expressed its intention to repay the balance of the Ways and Means Advance. This balance was left effectively unchanged at £13.4 billion until January 2008.
In 2007-08, the Government made a partial repayment of £6 billion of the Ways and Means Advance. The rationale for repaying part of the Advance was to provide the Bank of England with additional flexibility to manage its own balance sheet. From the Bank’s perspective, the presence of a large asset that cannot be traded limits its flexibility to manage its balance sheet.
The interesting part is that the BoE uses this asset to back it’s bank note liabilities. So when the government repays the money, it must switch to other assets. This is described in a treasure note as:
Prior to the transfer of cash management from the Bank of England to the Debt Management Office the Ways and Means facility had two functions. It was an overdraft facility for the Government’s cash management function. But it was also an asset backing the Bank’s note issue. The Bank still require assets to back the note issue and would replace a shortfall below £17 billion in the Ways and Means facility with other assets.
As part of my ongoing research into money I’ve been trying to understand the Bank of England’s balance sheet, and while looking through it I noticed an account called Cash ratio deposits.
At first I thought this was something to do with Reserve Requirements (sometimes known as the cash asset ratio or liquidity ratio), where banks need to keep a certain amount of their assets as cash reserves in their vaults or with the central bank in order to be able to service withdrawal demands. However, although the name sounds similar, it is actually something entirely different.
The Cash Ratio Deposit (CRD) Scheme was set up in 1998 as part of the Bank of England Act that passed into law during that year. The purpose of the CRD scheme is described by the Treasury as follows:
Under the cash ratio deposit (CRD) scheme, institutions place non-interest
bearing deposits at the Bank of England. The Bank of England invests these deposits
and the income earned is used to fund the costs of its monetary policy and financial
stability operations, which benefit sterling deposit takers.
It only applies to Banks who’s elligible liabilities exceed £500 million. They must place assets equivalent to 0.11% of these liabilities as non-interest bearing deposits with the Bank of England. As of the end of 2008, the total CRDs listed on the BoE’s balance sheet (the Bank Return) were worth about about £2.5 billion. They aim to make about £100 million a year from investing these funds in order to pay for their financial stability operations.
So why do we have this somewhat complicted scheme instead of a simple fee or using seigniorage income? The Treasury attempt to answer this in a review document from 2003.
Almost universally, central banks fund their activities from general income including that arising from seigniorage (no interest is paid to holders of banknotes) and foreign exchange reserves. In the United Kingdom the income from both these sources passes to the Government: theprofits of note issue are paid in full from the Bank of England to the Treasury, and the Exchange Equalisation Account belongs to the Government, not the Bank of England.
Interesting, the government takes all the profits from printing money in the UK. It would prefer the private banks to pay for these financial stability operations.
A change from cash ratio deposits to a fee-based scheme would require primary legislation.
Is it really that hard?
The BoE looks to make about 6% a year (good luck in 2009!) from investing their CRDs. Why not simply charge institutions with more than £500 million in eligible liabilities – 0.11% * 0.06% of that amount as a fee?
I’m sure it would be a lot less effort than than trying to invest these funds successfully.