Banker Blog #2 Bank of England and Base Rate

As you can see from the picture I snapped, I was recently in London on business and couldn’t resist going to see the Bank of England. Since 2008, it has become an organisation that previously shunned the limelight to being a hot topic, the governor Mark Carney constantly being interviewed and defending bank decisions.

It is common enough to see headlines in the news such as “Bank of England to cut base rate”, “Bank of England threatens to cut base rate” and “2017 could see unexpected rise in base rate”. Often they cut out the base part and discuss rates which is a fairly inaccurate term but they mean the base rate.

These same stories never bother to explain what the base rate means, how it is decided, why someone would raise or lower it. It is left so vague I sometimes wonder if the journalists writing the articles even know. Like a lot of these banking terms, it is very simple.

What is the Bank of England?

The central bank here in the United Kingdom, comparable to the Federal Reserve in the United States, Banque de France in France and Deutsche Bundesbank in Germany.

What does it do?

Like all central banks, it is concerned with the stability of the financial system, currency and managing booms and busts.

What is the base rate?

  • Banks use the base rate in their calculations.
  • Banks will often charge a loan as “base rate + 4%”
  • Banks will have the deposit on their accounts for interest as “base rate + 2%”
  • So lets say the base rate is 1, and your loan is Base rate +4%. Then 1+4%, so 5%.
  • Note- It is possible to have a fixed rate on your loan, where there is no base rate element but most are base rate linked.

Why lower the base rate?

Keeping that in mind, if the central bank wants to encourage growth, it slashes the base rate. That way if you want to start a company, buy a house, buy a car, the loans you take it to do it are very cheap. Slashing the base rate makes loans cheaper. How?

Using our last example-

  • Your loan is Base rate + 4%
  • Base rate before the Brexit referendum was 0.5.
  • Your loan- 0.5+4%, you are paying 4.5% interest on your loan.
  • Base rate post Brexit is cut to 0.25.
  • You loan is Base rate + 4%,
  • Your loan- 0.25 + 4%, you are paying 4.25%
  • So you were paying 4.5%, now you are paying 4.25%, so you will be very happy with the base rate cut. If you have a lot of debt or want to take out a loan but aren’t too sure, big cuts to the base rate will help you.

However, it also means less money is generated by interest. So if you are a millionaire living off the interest in your accounts, you might be cursing a base rate cut.

Cut the base rate to encourage growth and innovation if the economy is stagnant. It makes loans and financing cheaper, so people are more likely to do it.

Why increase the base rate?

If the economy gets too hot, it may need to cool down. People are spending too much, taking out too many loans, the whole thing is just overheating and barrelling forward (think before the 2008 crash). You can allow this to continue but history has shown it results in an extreme crash and even depression. Some countries are okay with this but most aren’t.

Pushing up the base rate makes it better to sit with savings (you get more interest), it makes loans, credit cards etc more expensive, so you will see less start ups and risky business moves.

Think of it this way, making it more expensive to expand and grow lets everyone catch their breath, cool their heads and consider what they are doing. The Bank “takes away the punch bowl when the party gets too crazy” is the analogy I frequently hear.

Let’s use the previous example again.

  • Your loan is Base rate + 4%
  • Base rate is 0.25.
  • Your loan- 0.25+4%, you are paying 4.25% interest on your loan.
  • Base rate is increased to 1%.
  • You loan is Base rate + 4%,
  • Your loan- 1 + 4%, you are paying 5%
  • So you were paying 4.25%, now you are paying 5%. It will take more of your resources to pay for that loan, you will be less inclined to take out more loans or take riskier ventures. You bide your time for a year or two until the base rate is lowered again.

 

What to take from this blog?

The Bank of England website shows all the times the base rate has changed and it isn’t as frequent as you might think. When the base rate change does happen, it will be an attempt to guide the economy. So if a newspaper screams the end is nigh because the base rate is cut, if you have a lot of loans or want to take out a loan, you would actually be pretty happy about that. If you make your money from the interest on your deposits, you would be very annoyed by this.

If the base rate is increased, yes it makes financing more expensive and puts people off loans, but it can also be a good time to stay still and catch your breath a bit, see some decent interest on your savings and bide your time.

I can’t stress this enough, a base rate cut or rise will be good or bad for different people- neither is universally a bad thing.

Further reading

This is a pretty fundamental banking concept, try any university level coursework book and it will go into further detail.

 

Banker Blog #1 What does “too big to fail” mean?

“I hate banks. They do nothing positive for anybody except take care of themselves. They’re first in with their fees and first out when there’s trouble”

Earl Warren, American jurist and politician, who served as the 30th Governor of California and later the 14th Chief Justice of the United States.

I couldn’t disagree with Earl Warren more. Banks provide loans to get businesses off the ground, they give people a place to keep their money other than their mattress, they give people credit and the ability to manage their finances, they work with the police to clamp down on fraud, they work with governments to try and tackle money laundering. I could go on and on.

In the first of a series of blogs on misunderstandings with the banking sector, I wanted to take a break from writing advice to look at “too big to fail” an often used term.

You see it in the news, on internet articles, but what does it really mean?

In the UK we normally refer to the big four, the four largest banks in the country. The Royal Bank of Scotland, HSBC, Lloyds Banking Group and Barclays. It is different in other countries, some may only really have one, others can have hundreds.

Let’s say very broadly they are of roughly equal size, each holding about 25% of the public’s money. Not stock brokers or investment houses, just Joe public and their bank accounts.

If any of these banks were to fail, and the government allowed it to collapse, a quarter of the people would see their savings lost. Imagine the chaos that would plunge the country into. The economy is an interlinked machine, the horror doesn’t end with that. A quarter of the people have less money to spend in restaurants, can’t buy games, can’t buy books, can’t buy cars, so all those industries take a massive hit.  The decline in confidence in the banking sector sees the other 75% of banks struggle against a hesitant public, those failing industries default on their loans and can’t make payments.

A bank of that size collapsing, even one, without exaggeration can ruin a country.

So during the financial crisis of 2008, when some politicians sneered that some banks should be allowed to collapse because there were still others left really didn’t understand the full impact that would have.

That is what too big to fail means. These banks are so gigantic, so totally intertwined with the economy, that if they were to be allowed to fail as a result of their own poor decisions and management, the entire nation would suffer.

No government would allow this to happen for two reasons. Number one, it is safe to say a lot of people in politics do actually care about their fellow citizens. Not all, but a fair amount. They don’t want the people to have to go through that pain. Number two, let’s say you don’t care at all about the suffering of others. Okay, fair enough. But you can kiss re-election goodbye if you allow this to happen, you have to save the bank or your career in the public domain is dead.

Solutions?

  • Financial Services Compensation Scheme

This ensures that up to £85,000 of your savings is guaranteed, even if your bank fails. For some people, this covers their entire savings or at least a majority of it. This means government can be bolder in allowing a bank to fail.

  • Ringfencing

This means that the risky, investment side of banking is broken off from the main bank. This was one of the problems with too big to fail, the folks gambling on the stock market could arrogantly do so because even if they lost all the bank’s money, the government would top it up because if the bank fails, the retail side goes down and people lose their deposits.

Ringfencing breaks it into two. Firstly, the safe, so called “boring” retail and commercial side of banking, focusing on bank accounts, deposits, lending to people and companies (where yours truly earns his daily bread). Secondly, the risky, stock market wheeling and dealing, high risk investments.

So if the investment bankers decide to go crazy, their organisation is separate from the main bank and can be allowed to fail without impacting the public.

  • Force the big four to break up

I disagree with this solution but I have seen it bandied around, most prominently in the run up to the last election, with Labour leader Ed Miliband touting it. Not as disastrous as the Ed Stone (https://en.wikipedia.org/wiki/EdStone)  but not one of this better ideas.

I fear that forcing in organisation to break into ten separate entities could result in several underfunded, undercapitalised and underprepared banks trying desperately to stay afloat and most likely failing.

I haven’t seen any concrete or well articulated reason why this would work yet so I don’t support it.

 

What to take from this blog?

Too big to fail is not a permanent part of banking, it is actually a fairly recent phenomenon, brought to a head in 2008 after a period of insane growth driven off subprime mortgages at the height of an investment bubble.

Despite what some commentators may say, It is not a permanent addition to the banking world and  steps have already been taken to ensure that if a bank makes poor choices, it is allowed to collapse, as it should.

 

Further reading

Too big to fail by Andrew Sorkin

Shredded: Inside RBS the bank that broke Britain by Ian Fraser

Hubris: How HBOS wrecked the best bank in Britain by Ray Perman

# Blog 33 A Love Letter to Horror Part 2

I’m getting ready for a nice dinner and the usual Saturday night horror movie (which is usually preceded by a drama or comedy, War Dogs in this case). Prosecco poured, table set, spicy chicken and rice, bring on an amazing Saturday night.

I was thinking again about why I love horror so much. My first love letter to horror emphasised how I enjoy seeing characters pushed to the extreme in a way only horror can accomplish.

Reason number two of five billion why I love horror is because it mixes with other genres so easily. Tonight we are watching The Twilight Zone Movie, on previous Saturdays we had watched Saw 5, Shaun of the Dead, The Final Girls, Tusk. Each one of these is solidly horror but have such vastly different impacts. Conversely, watching Die Hard, then Lethal Weapon, then The Last Stand all feel pretty much the same. A week of action movies sounds a pretty monotonous exercise to me. A week of horror movies? Sign me up.

Action is generally action. Drama is drama, romance is romance. I tend to find these genres more rigidly defined. Something that calls itself essentially a romance movie will have difficulty moving into other genres.

For example, attempts at some eye rolling humour in an action movie wouldn’t really push it into action/comedy.  You can have a bit of romance in an action movie but it generally fails to land, being regarded as an annoying and unnecessary subplot. Kindergarten Cop is essentially a comedy with really out of place action scenes. You see the point I am making, other genres can have difficulty meshing but not horror.

Horror though has a fluid ability to mix with other genres and do so successfully. A horror film can still solidly be a horror film but with shades of other genres.

Horror and Comedy? Sure, Hot Fuzz, Evil Dead, The World’s End, all great movies.

Horror and science fiction? No problem, The Fly, Alien, Splice.

Horror and romance? Got you there, Pride, Prejudice and Zombies, Warm Bodies.

It goes on and on, horror can mix with films that have strong political or social messages if that is what you are interested in. I would say horror can often explore these topics more successfully than a straight up drama on that same topic.

So you can watch a horror movie every night for a week and run a full gauntlet of emotions. So whoever you have over, I’m willing to bet there is one horror movie they will like.

I don’t feel other genres can say that.

# Blog 32 Neverendum

So here we go again, Indyref2.

I can barely describe how furious this makes me. We had a referendum, 85% turnout which is astounding, we were all told this was a once in a lifetime opportunity, we voted to stay in the United Kingdom- that should have been the end of the discussion for a generation.

The SNP have decided they didn’t like that answer and are going to hold another one.

Why? Well I think you can divide the SNP leadership into three camps: cynic; delusional; and fanatic and each has their own motivations.

  • CYNICS– Having lost a majority government in the Scottish Parliament in the last election and given the generally low opinion and increasing criticism of their governing, this provides a convenient distraction from all that. When we are strangling each other, breaking into unionist and separatist, no one questions what an awful job they are doing, we all get tunnel vision for the referendum. Furthermore, their fragile support is galvanised. Right now a lot of their voters are leaning to the Greens, Scottish Socialist Party, even back to Labour as they find Corbyn radicalism appealing. They are disenchanted after a decade of the SNP in power that the party wasn’t really all that revolutionary. With a referendum led by the SNP, those people fall back into place behind the SNP. After the first referendum there was a tidal wave of support for the SNP but that has cooled now. Best to stoke the flames again. The Cynics don’t care about the Scottish people, Scotland or anything really, besides being in power- many of them would probably vote against independence as the currency situation, an embittered, confrontational devolved government with the Westminster scapegoat is convenient. This is the group I despise the most, the camp Nicola the First Minster would fall into I think. They want indryref2 to stay in power.
  • DELUSIONAL– These people buy into all the propaganda that Scotland will be a paradise once we leave the United Kingdom. Despite all the warnings from banks, companies, senior public figures, they are more convinced by the what could be. Yes, we are successful and wealthy now but we could be even more so. With the greatest respect, these people tend not to have an excellent grasp of economics and business. They could be amazing at something else, a tech expert, a great fiction writer, a talented actor, but they have no head for the real workings of a nation. As such they aren’t persuaded by the volume of data that Scotland would be in for hard times, having a deficit larger than that of Greece. They cherry pick facts and generally shrug off those concerns. They aren’t being cynical or cruel, they just think Scotland will be better off in their own very limited view. I think former First Minter Alex Salmond, who launched the first referendum, comes under this heading. They want indyref2 because they are convinced by the arguments for an independent Scotland.
  • FANATIC– all movements have the extremes and Scottish nationalism is no exception. Fanatics don’t care about anything else other than Scotland tearing itself away from the rest of the UK- many of them don’t want to be part of the EU either. Even if it hurts Scotland, even if we become a third world country, they honesty believe it would be worth it. Waving the saltire and remembering grudges from six hundred years ago is more important than what people will eat or how the country will pay for anything. You can’t reason with these types, many of them are racist, despising the English. If you look back in the history of the SNP you will see many of these delightful sorts although most have been gagged and kept out of the limelight to portray the friendly nationalism the SNP strives for. They want indyref2 because it is the reason they get out of bed in the morning, it is the reason they breathe!

 

To highlight the differences between them, here is a hypothetical example.

I have proof from leading economists that an independent Scotland would be bankrupt within six months. I present it to the SNP cynic, delusional and fanatic. What do they think?

Cynic– they don’t actually expect the referendum to succeed, this is all to ensure the SNP is re-elected and seen by the radical left as a revolutionary party. So they would condemn it, trying to portray themselves as a fanatic no doubt, but they don’t even think the referendum will happen, so it is not a problem.

Delusional– they don’t really base their views on independence on economic figures, it is more a gut feeling, they think vague promises that the Whisky industry is booming, oil will make a comeback and so on easier to understand and digest than some dull economic ramble. So they are unconvinced.

Fanatic– they would first of all call me a traitor and that is about as far as we would get. So what? So what if Scotland is ruined? We will be free from the hated English and that is what really matters. Sacrifices must be made and a few generations with no prospects is an acceptable one.

***

Families, relationships, friendships were all strained during the first referendum which left a bitterly divided country. Now the SNP government has decided we need more of that. I love Scotland too much to be a nationalist.

#Blog 31 Banking and World peace- yes, really

In 1913 the idea of any great power going to war with another was unthinkable. A large part of this was because of how intertwined the banking and financial systems of the world had become. For an extreme example of this, Lloyds of London provided the insurance for the German merchant fleet- so in the event of a war, Lloyds would be honour bound to pay Germany for every ship that sank.

British banks had branches in Germany and profitably lent to their citizens. German banks did business in Russia and the Middle East. Turkish currency flowed into Europe, in Hong Kong, British banks flourished. The flow of money, capital, loans were veins between countries.

Of course, the Great War 1914-1918 did happen. It happened because there are irrational leaders and factors beyond logic (nationalistic fervour, the Kaiser’s desire for an empire to rival the British one, tensions in the Balkans). One of the most dire warnings the Kaiser received was from the German central bank, as war would plunge the various clearing houses and banking relationships into chaos, at immense cost to Germany. In Britain and France, similar warnings were delivered.

My view, and there is plenty of history to support this, is that the more intertwined and connected the banking world is, the harder it becomes to go to war. Not impossible and a deranged enough leader can pursue it but at immense cost to themselves.

Bankers don’t pay much attention to borders, generally having very global outlooks, even more so than most the commercial and political world. Imagine if the US and UK had a major falling out and military tensions were rising. Without a shot being fired, it would be disastrous for both because of the interlinked financial systems. London is the world’s leading city for currency trading, the US could find itself cut off from that, damaging their own currency in value. New York is the leading city for trading shares, the UK would lose access to that, that would be catastrophic here. There are US companies with subsidiaries in the UK, these would have to shut down in the event of war as it is illegal to trade in an enemy nation. Citizens Financial is a large US bank owned by a British bank, if we just closed it down, what about all those people savings and loans? Economic chaos!

If going to war becomes costly, most rational people won’t do it. If going to war is profitable and can be done with minimal cost, then yeah, it becomes a legitimate tool for national advancement.

One of the factors that led to the Islamic State cracking at the seams was the economic war. Yes, the constant fighting and bombing took its tool but it was choking the regime that the currency they tried to invent, the Islamic State Dinar, was so toxic. It failed so totally, being unable to integrate with the global banking system, and was worthless. In the regime’s final days they seem to be relying on real and counterfeited US Dollars (somewhat ironic…). Make no mistake, if the Islamic State had been able to fashion a working financial system, it would be in a far stronger position.

Even now that the UK has voted to leave the EU, no one wants to sever financial ties, rather the main grudge was the EU’s political decisions that didn’t sit well here and also the widespread belief that there was a democratic deficit in the organisation. Already people are looking to see a stronger European Economic Community rise up but to keep politics out of it. Purely economic, I like the idea of that, trading and interdependence but leaving each country alone to devise its own laws and make political decisions as they see fit.

Banking and finance ties the world closer together and has done more to prevent war than all the self-aggrandising politicians, pressure groups, protests and demonstrations put together.

#Blog 30 Nervous

Photo of Lee Johnston

Generally speaking when it comes to the day to day, I don’t consider myself a very nervous person.

I feel in control of my day, I get up at the same time, get my suit and tie on, have the morning chat with my fiancée about what the plan is tonight when we get in and clock in to work.

Part of that is because I do a lot of extra work outside office hours to ensure I know every process, nuance and issue at my work- and given that I work in banking there is always some new problem. I don’t feel nervous though, I like being challenged, it keeps me interested and focused on my work. If I did the same thing day in and day out, I would become very bored.

So when I am in control, I don’t feel nervous, I feel content.

What makes me nervous, what keeps me awake at night are things I can’t influence.

First of all, a second Scottish referendum. After a great deal of soul searching, arguments and bitterness, Scotland voted to stay in the UK. I even went leafleting on a few days, that is how much I believe the Union is worth fighting for. If Scotland had voted to leave, I would have been sad but accepted it, it was stressed constantly that this was a once in a lifetime decision. No one made the decision lightly. The results came in and I cracked open a bottle of champagne, relief was palpable. They say the unionists didn’t really do much celebrating- I think there were a lot of people like me who after weeks of feeling nervous were just relieved it was done.

Then after barely a year, there was already talk of a second referendum. As of 2017, the First Minister is openly discussing indyref2.

It makes me angry, it makes me nervous for the future and I can’t do anything to really impact it. If the First Minister calls it, it will happen. If the second referendum happens, I will be out campaigning for the union again but I don’t want to have to do that. While we argue over independence everything else (the state of the NHS, Police Scotland scandals) all that is just pushed to one side.

Secondly, I am someone who really doesn’t like drama. So when something kicks up with my friends or family (haha who are a volatile lot, something always seems to be happening), I feel on edge and nervous. This is for the same reason as the first point. I feel I cant influence it, I can offer support, I can try to calm things down but if two people fall out, they might need to fight it out themselves.

Nothing wrong with feeling nervous, I would say it is important to know why we feel nervous and try to identify a common cause. I know what my underlying issue is and I can try to tackle that in the future.

 

via Daily Prompt: Nervous

#Blog 29 Stories from real life & Bad Credit Chapter 1

In my last blog, I mentioned how what we come across in our day to day lives can be a great inspiration for stories. Time to put my money where my mouth is and give another example.

I recently finished and am editing my way through my horror novel Bad Credit and wanted to include the first chapter which (as you may have guessed) happened to someone I knew. Now as I often do, I exaggerated it a bit, making it a crucial meeting rather than a night out with some work buddies but the story was a great one to use. I don’t think I could have totally came up with it in a vacuum. Needless to say I have had my fair share of gaffes and mistakes on the front lines haha.

The main thrust of the novel is Tom ends up in debt to a supernatural debt collector, Mr Rox, who wont take no for an answer.

Hope you enjoy it!

BAD CREDIT

Dinner On Me

Tom sat with his three clients in the restaurant, laughing and leaning back comfortably, appearing the epitome of a suave Edinburgh businessman on his way up. A black Hugo Boss suit, white shirt and silver tie, neatly combed hair, a chunky, very visible watch. He oozed wealth.

His three guests, important business people in their own right and a few decades older than the bright young man in his thirties, looked almost shabby by comparison. He had dazzled them with a meal, he had even taken the liberty of ordering for them.  He was a one man event committee, able to wine and dine without missing a beat. Each one of them felt like Tom was totally focused on them alone.

The Discerning Thistle was not the most exclusive restaurant in Edinburgh but it was smack bang in the middle of the city, very visible and fairly expensive, exactly what Tom needed for tonight. There were a dozen circular tables, each full, were crammed with well-dressed men and women chatting away and enjoying the glass front of the restaurant which allowed them to look out at the busy street. It felt like a place to do business, to strike deals, that was the vibe Tom wanted to create.

“Just the bill please,” Tom said in a firm but polite tone to the waiter almost the same age as him. Nights like this made Tom feel powerful, important. He could have flopped out, given up, spent his days taking orders with a nice little bow tie. Not him, not Tom Laing, he was a success. That word was always on his mind, red and glowing with fireworks around it, driving him forward.

“Now folks,” he said in his carefully learned posh accent, “I don’t need the dotted line signed tonight. I’m telling you though that this deal won’t hang around forever. That’s the nature of the markets, you have to hit hard and fast or you might as well not bother. It’s a sprint and if we aren’t first, we’re last.”

Tom was fond of sports metaphors when it came to investing, it seemed anyone could grasp them. A knockout punch when dumping stock to hurt an opponent. A marathon when the investments weren’t turning the sort of profit he was expecting and he had to buy time. A football team to encourage a sense of teamwork and unity. They were simple but they worked.

“We all have things to do, yourselves included. Just man to man, and woman to man of course Sally, are you happy with this?”

“We are,” conceded Jack McGovern, of McGovern Buses.

“With you at the helm Tom, we feel good about this,” smiled Sally, CEO of AC Construction, “I’m not normally the investing type but this seems the right thing to do.”

Bobbing his massive head that sat atop a tartan ascot, Mark, ever the quiet one said nothing. He was a trust fund kid with deep pockets but little business acumen, being at a meeting like this was no doubt his idea of an adventure.

Ensuring business meetings about investments were a bit theatrical was all part of the game. Most investing is done in evenly lit, bland offices over a period of weeks or months. A candle lit restaurant, greasing palms, talking about making a fortune is what people wanted, especially people like Mark who had never worked a day in their life. The illusion had to be maintained.

Moments like this made Tom beam with pride. Here he was, rubbish education, no connections, no one to help him but he had clawed his way through ability and guile for these St Andrews educated twats to regards him as one of them.

Appearances when dealing with these people meant more than raw ability, he had learned that the hard way. Although his title of investment banker at Hagen & Co sounded grandiose, he was on 100% commission, no different than someone working at a telesales centre. He ate what he killed as they said in the office. Landing these clients who were trusting him to invest part of their company funds on safe, low yield choices was exactly what we needed. He would create a brand new portfolio with these three clients, it would see a nice healthy margin and he would get part of that. Everyone wins.

Trust was the key part though. When it came to investments, people had to trust you, to feel that their money was safe with you. Tom knew he had hit that objective, they were eating out the palm of his hand after just a few calls and one pricey dinner. Like shooting classy fish in an expensive barrel.

The waiter came over with a card reader, which he handed to Tom. He quickly punched in his PIN without a second thought and went to turn to the others.

BEEP.

A red light.

“Sorry sir, there seems to be a problem,” smiled the waiter.

“What problem exactly?”

“I think we should talk about this away from your guests,” the young man arched his eyebrows, his eyes worried, but the smile never left his face.

Tom knew he had to quash this and fast, he was losing his audience, “spit it out man, come on.”

“You have insufficient funds on your card.”

His guests looked puzzled at the comment, not sure what to say, and some nosy folk at nearby tables were giving sideways glances, tittering to themselves.

Tom rolled his eyes jokingly at them before turning back to the waiter, whispering in a low growl, clenching the man’s wrist.

“I planned this meal in advance, it comes to £200. I have that on my card, I checked this morning. Your stupid machine isn’t working.”

Perhaps it was stress, Tom hated toffs who put on airs, but he sounded every bit the snide public school boy he wasn’t when he spoke to the waiter.

“Mr McGovern ordered an extra coke between courses. It’s £201.50.”

Tom was dumbfounded. He hadn’t thought anyone would order anything extra, he had ordered everything in advance so he knew his dismal finances could handle it, not because he was a good host as he had pretended.  When he left for the restroom in the middle of the meal, someone had ordered an addition.

“If you pay the remaining £1.50 in cash, that will be fine and you can save face,” the waiters voice dripped with a condescending, almost mockingly tone. Clearly he was enjoying this reversal of fortunes.

“I can’t,” hissed Tom, sweat trickling down the sides of his well shaven face.

“Then I will have to call the police. Everyone pays their bills here and we take maximum penalties against those who do not.”

Bright red, Tom turned to his guests.

“Does anyone have one fifty I can borrow?”

Needless to say none of them called him the next day to manage their finances.

***

#Blog 28 Everyone has an interesting story- everyone

Photo of Lee Johnston

We can be quick to dismiss others as being of little importance or having nothing interesting to say. A business or government official, an established artist, a professor, these people are generally deemed important and as such we are keen to hear their experiences and stories. The waiter, the call centre worker, the small cog in the business world, generally are deemed unimportant, so they can’t have anything interesting to say. There can be a bit of cynicism as well, the jaded belief we have seen everything and there isn’t anything left to learn. When it comes to writing, we can shut ourselves off from the rest of the world because we know all there is and now it is just putting pen to paper.

This is a big mistake though, both in terms of being a person generally but also for your writing. Some of the greatest authors were observers and listeners which is why their work feels so alive.

Interacting and listening to people can give you a peek into how others see the world which will be reflected in your writing. Even if your story is set in a mythical kingdom, you want the people in it to feel real.

A common excuse is “my story isn’t set in the real world, it is a science fiction Star Wars type story, what on earth could I gain listening to a waiter?”

Well, does your universe have restaurants? A casual chat might give you some insight into how it works now you can either invert or use outright.

“No, it’s all set aboard a ship”

Okay, is there a dining area or mess hall on the ship?

“Oh, well yeah. A lot of the characters chat there in between the missions”

That sounds a good idea, some of the crew serve there?

“Yeah”

That was a little thought experiment. Even if they still insist it is not relevant to this story, they might have another one it will be. Nothing makes characters and settings feel more flat and carboard than a lack of spark with the background characters. A book that has one or two flesh and blood characters and they are surrounded by bland props is not fun to read.

Here is an example from my own life.

I was chatting with someone who works in the insurance industry, not a big player by any means. As is the custom, we were swapping stories of our times in the trenches- mass layoffs we had survived, the varying attitudes to business in different parts of Scotland, East coast versus west etc.

I told him a few banking horror stories, he told me a jaw dropping insurance one that inspired the horror story I am working on now Flat Fire. A story I would not have considered if not for his tale.

He explained to me if a child is scalded or burned at a restaurant, they have to do a lot of work ascertaining exactly what happened. In this case, a coffee that was piping hot had been spilled on a kid’s arm, leaving third degree burns.

The reason they have to do so much digging isn’t anything to do with not wanting to pay out the money to victims, it is something a bit more sinister. Some parents have deliberately hurt their children in order to sue. That’s right, some parents will deliberately maim and disfigure their kids for cash. Not even a lot of cash he was telling me.

Now that is a horrifying thought.

Someone damaging their own child, potentially their whole future, for a couple of grand. Most of it to be spent on drugs or booze, they can spend it all in about a week.

My own writing often exaggerates the stories I have heard, so in Flat Fire the scam goes wrong and the kid dies (to return as a vengeful, fire spewing spirit). If I hadn’t struck up a casual conversation with a small cog in an unrelated industry to mine, I would never have come up with this story idea.

So keep talking, keep listening and keep in mind you can find stories everywhere.

Blog #27 Southern States & Eastern Europe

As you know I was recently on a binge of horror movies during some time off work. When you spend an extended time with any genre you notice recurring issues and themes.

You may recall an earlier article where I was saying that hillbillies and the south in general are often very negatively portrayed in horror films with considerable regularity.

And they aren’t the only ones.

Eastern Europe gets a tough time for being depicted as backwards, violent, corrupt- Hostel, Severance, that’s just the two I watched most recently. Usually what happens is some wealthy westerners who show up, enjoy all the booze and sex, then get murdered. Or eaten. Or sacrificed.

I’m not from the United States, and my knowledge of it is quite limited but I am from Europe and find the emergence of this trend an interesting one. How is it that two areas can be characterised by their neighbours in such negative terms?

I have a few ideas.

  • A tumultuous history

Both the Southern States and Eastern Europe have had quite a tumultuous history. Eastern Europe was crushed under the foot of the Soviet Union and had to suffer through a string of tin pot dictators. As if that wasn’t bad enough, it exploded into a string of brutal civil wars, ethnic cleansing. Horror gravitates to places like this, where there has been suffering and pain, the stories come naturally in these sort of settings.

Likewise, the Southern States have been through a lot.  The American civil war most prominently, the reconstruction after which was plagued with violence, the civil rights movement and the raw emotions involved there, terrorism like the Oklahoma City bombing as well as the presence of various militia groups.

Again, my understanding of this is very broad strokes but I do think the reasons are for picking Eastern Europe or the Southern States are similar here- conflict ridden histories that are easily recalled by a casual viewer.

  • Strong criminal element

We can take it for granted in Western Europe our low crime rates compared to other nations and regions.

When the assorted dictatorships collapsed in Eastern Europe and the various civil wars ended, it left a large group of armed, violent people without anything to fight for. Men and women who had killed people, tortured for them governments, massacred whole towns suddenly had to face the idea of a poorly paid 9-5 job while hoping the war crimes tribunals wouldn’t find them. It was only natural they would move into crime and they did so successfully. Europol (the European Interpol type organisation) has been doing a lot to help crack down on it, as is UK legislation like the modern slavery act 2015 which aims at people smuggling coming in from Eastern Europe.

The Southern States have seen cartel violence occasionally spill over the border, the rise of various gangs (both homegrown and foreign), clashes with religious groups like in the Waco siege, some of the most infamous school shootings seem to be associated with the south (Virginia tech, University of Texas shooting). Again, I know shootings have happened in other places but as someone who doesn’t live in the US, I tend to think of the South when I think of these issues.

Crime and horror go hand in hand, which is why so many stories can sit comfortably between the two. Where there is crime, there will be horror. No surprise then that horror stories can be set in the South or the East.

  • Cultural disconnect

Being from Scotland, which has a pretty distinct culture, I can go to England, Wales, Ireland, France, Germany, Canada, America and still generally get the culture and click with it. It is different- but familiar generally. The East though is a very different place. It feels very odd and far removed- nothing wrong with that but I have to be honest, it feels so different.

Likewise, the Northern States have a very unique culture, their own distinct character which is different from their neighbours. As such although the South is near, I’m sure it can feel a very different place.

This difference in culture can put us off balance and raises our guard- ideal if it is a horror story you are going for. More people live outside the South than live in it, that is why it is used. Ditto for Eastern Europe.

  • Nearby but quite mysterious

Eastern Europe is close enough to be vaguely familiar but also shrouded in mystery. Part of that is because it is only recently we have established proper ties with them, before that relations where a bit frosty. We heard about Eastern Europe on the news. Bosnia, Slobodan Milosevic, some outbreak of violence or another. Now we are establishing worthwhile connections which will hopefully continue.

It is becoming increasingly familiar but still retains that air of mystique.

I am sure for many Americans, the South will be the same. A place they hear about but don’t really see too much of or have much interactions with. This makes it ideal fodder for horror. A setting that will be familiar but also strange.

***

Eastern Europe and the Southern States will no doubt continue to be the setting for some great horror films, novels and games.