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The pressure for protectionism

Stephanie Flanders | 14:41 GMT, Friday, 30 January 2009

"History is not destiny", Gordon Brown said in Davos this morning. His aides tell me he was referring to the need for governments to stop talking about the global crisis and start acting.

But this is a day when striking refinery workers have thrown his talk of "British jobs for British workers" back in his face.

He might just as well have been talking about the history of the 1930s - when countries turned to protectionism and the global capital market fell apart. The growing feeling in Davos is that it is history we may be about to repeat.

Gordon Brown in DavosI talked earlier this week about the rise of financial protectionism. Gordon Brown called it "financial mercantilism" in today's press conference and he stood against it.

He said that the banks' return to their home markets was already hitting capital flows to the developing world, and could lead to full-blown protectionism down the road.

He also grimly reminded his audience that "protectionism protects no-one and least of all the poor". And yet, his government's own approach to Britain's banks shows how hard it can be to resist.

We have a huge stake in keeping the global capital market going - global capital is something we need quite a lot of. But British banks have themselves been under pressure to focus scarce lending on borrowers here at home.

The pressure is not always explicit, but it's there - and as much in the City as on Wall Street.

At least one central banker I spoke to here in Davos politely suggested the prime minister might want to get his own mercantilist house in order before lecturing everyone else.

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  • 1. At 3:20pm on 30 Jan 2009, A-warrior wrote:

    So what is the better option, or is the answer different whether you consider short term or long term?

    We're being forced to increase lending in the UK, to the detriment of bank margins and de-leveraging but to the benefit of the UK, but we should also bear in mind the overall benefits of overseas lending to boost demand for exports.

    Which should we focus on?!

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  • 2. At 3:31pm on 30 Jan 2009, John_from_Hendon wrote:

    If "protectionism protects no-one" Gordon Brown today in Davos, then why is the UK pursuing a policy of devaluing sterling?

    They would have of-course argue that they were not it was just the market, but the dramatic decline in sterling is being praised as a help to our exporters - if that is not protectionism what is?

    Interest rates need to be increased to lessen the devaluation of sterling otherwise we are being hypocrites!

    "...the prime minister might want to get his own mercantilist house in order before lecturing everyone else" I agree wholeheartedly, based on the evidence.

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  • 3. At 3:42pm on 30 Jan 2009, simmobb2 wrote:

    Why anyone ever listens to a word this joker utters is utterly beyond me? Do as I say, not as I do seems to be his byword. His sheer hypocrisy is fast becoming legend. When he dares to suggest that global confidence is required I am amazed at his total lack of understanding. Who on earth can have confidence while clowns like him and his darling Alistair are at the helm? I suggest that he and darling Alistair should consider a gap year for at least 12 months leaving strict instructions to the other cabinet bufoons to do nothing (except plot perhaps) until their return, thereby restoring confidence in the British economy at minimal cost to the tax payer.

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  • 4. At 3:42pm on 30 Jan 2009, RuthPlatt wrote:

    It is certainly right that one of the great lessons of the 1930s is the risk of economic crisis leading to protectionism, with all sorts of costs and risks from that - including contributing to the downward spiral to war. So we must be on the guard against protectionism all the time. I was interested to see in Markwell's book about Keynes that Keynes, having been a free trader (who believed that free trade encouraged peace) and then briefly a protectionist of sorts, came to favour free trade again. He thought that, combined with sensible economic policies, it helped to lay a solid foundation for peace.

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  • 5. At 3:50pm on 30 Jan 2009, efan ekoku wrote:

    he needs to get all his house in order before lecturing anyone else.



    In fact, most of Gordon's soundbites seem to be coming back to bite him now...

    British jobs for British people?
    Abolished boom and bust?
    Britain best placed to survive global recession?
    Inflation under 2% with house prices going up 15%?
    Saddam Hussein with WMD's?
    Things can only get better?


    I can't believe he is being allowed to represent our country. I never voted for him to do so and neither did anyone else.

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  • 6. At 3:52pm on 30 Jan 2009, waitingforthepain wrote:

    And no doubt the Europeans will want to point out that competitive devaluations were a part of the 30s too. This man has no shame. How can he think he has anything useful to contribute? He has failed in his duty: to protect the people of the United Kingdom to the best of the State's ability. He has impoverished us all, even those not born yet.

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  • 7. At 3:56pm on 30 Jan 2009, stilllitterarty wrote:

    Great Gordon said "protectionism protects no one least of all the poor"

    By "poor "was he refering to Britain and its stagnant financial casino ?

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  • 8. At 4:15pm on 30 Jan 2009, waitingforthepain wrote:

    What is the point in asking for comments on a blog and then not moderating them for an hour? I won't waste my time again.

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  • 9. At 4:16pm on 30 Jan 2009, Econoce wrote:

    Wow, finally a reasonably balanced blog on the BBC site. We all missed it but he, these are the times that Gordon is saving the world and as with any religion, airing a dissenting view shall not be tolerated.

    And another time it's a lady daring Campbell and Mandy, following Ms Hargreaves's column in The Guardian alst week.

    Walk on, walk on through the rain (with the "rain" being fewer invites to labour drinks parties; not a big price to pay when you enlight the world).

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  • 10. At 4:17pm on 30 Jan 2009, MrTweedy wrote:

    In times of economic hardship, how do you protect against protectionism?

    "Charity begins at home" is a natural reaction.

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  • 11. At 4:26pm on 30 Jan 2009, Guy Croft wrote:

    You talk pretty loosely (doesn't every media commentator - and many posters..) about protectionism.

    What EXACTLY do you mean by protectionism? Frankly the whole idea is surrounded in myth and legend.

    Come clean please.

    GC

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  • 12. At 4:27pm on 30 Jan 2009, deadzebra1 wrote:

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  • 13. At 4:32pm on 30 Jan 2009, fairlopian_tubester wrote:

    How to make an impact.

    In a week when the IMF has declared the UK the worst-placed major economy of this present crisis, one of its chief architects gets up to deliver a lecture to the rest of the world.

    Brown's speech will be remembered for the credibility gap you highlight, the use of words he doesn't understand and for a (priceless) Dom Joly moment: HELLO! NO, I'M IN DAVOS, SAVING THE WORLD!

    If we weren't an international laughing stock before, we certainly are now.

    And what's wrong with protectionism? The USA has been indulging in it for years under the banner of "free trade".

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  • 14. At 4:44pm on 30 Jan 2009, StrikeAChord wrote:

    How does Gordon Browns' professed & much trumpeted support for 'the knowledge economy' square with the inability to get jobs in Britain filled by qualified British workers, when importing workers from Italy suits the French owned company?
    Economics is not a dry subject: it is the cause of grief, as well as projecting or tracking profit.
    With GB spouting away at Davos, whilst the engines of economic growth are dismantled or sourced by imported labour, we are steaming towards the Iceberg eventual meltdown.
    It is not protectionism to expect that locally sourced labour should have a chance of employment in straitened times.

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  • 15. At 4:50pm on 30 Jan 2009, SergeantDigby wrote:

    "History is not destiny"

    How true, how true. You know, maths isn't transcendental idealism either. And latin isn't actually your nemesis.

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  • 16. At 4:50pm on 30 Jan 2009, excellentcatblogger wrote:

    Brown's "policy" of saying something, saying anything rather than do nothing is only worthwhile if he has anything relevant to say. In any large business a senior executive will make a significant contribution when declaring the annual results, setting out the corporate vision or if a major calamity strikes.

    As a rule they do not do day to day communiques. If this is necessary then this will be delegated to an underling; senior managers are more concerned with how daily production fits into the overall strategy. I found Putin's comments interesting as they were more strategic in nature, no doubt in part drawn from his training in the KGB. Is it a coincidence that so many former KGB agents are not just oligarchs but very successful ones but also displaying great acumen?

    At the heart of the UK's problems is a lack of strategy and planning in detail for the future. There is a woolly ambition to have greener power generation, greener transport etc. Blair to his credit did at one point have a vision of public sector investment to nurture an industry, which would subsequently be privatised. This would then become a cyclical generation project.

    Examples:

    North Sea gas and oil will run out in 30 years or so. When new houses are built should they use gas central heating? On the infrastructure side should we build new gas and oil terminals to import gas and oil from elsewhere rather than rely totally on Russia?

    Surface drainage from excessive rain, has not been addressed. Thousands of families in Yorkshire are still living in caravans, 2 years after the massive floods. clearly the bore of thepipes are too narrow to cope with the volumes. Old cities do not flood - the Romans built drains near to rivers that measure 6ft height by 4ft width. Newer cities unfortunately have to cope with 20th century vision..

    Why is solar power given such a bad press? I worked in the south of Brazil (border with Uruguay) 25 years ago and the 4 start hotel I stayed had 15 floors and the solar panels powered lifts, air conditioning kitchens etc. I can only see great opportunities in this area - we have seen in new technology that as sales increase the supply side find greater cost efficiencies and the price drops.

    This is a very frustrating country to live in.

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  • 17. At 4:53pm on 30 Jan 2009, SergeantDigby wrote:

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  • 18. At 4:56pm on 30 Jan 2009, SergeantDigby wrote:

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  • 19. At 4:57pm on 30 Jan 2009, riverside wrote:

    The most important advantage the US has at present is that they are rid of the architect of their troubles, Bush. That give the new broom the chance to act without having to defend previous policies. Meanwhile here in the UK we still need a new broom and there is no acknowledgment that the domestic policies that got us here were flawed. A GE is badly needed.

    This is not the same as any post WW2 recession and there is no sensible forecast of when an upswing will occur, particularly for some big businesses. The current mentality remains one of jumping the gap, of trying indirectly or directly to prop up businesses that floated on the bubble and saw oversupply, and in fact drove overconsumption along at every oportunity. Quite why these agent provocateurs should be assisted deserves questioning.

    The policy conflict at present is between the inherently optomistic, who include HMG, and who claim rebound is shortly due - and the more realistic who are saying rebound will occur when it occurs. Every week the drop in activity exceeds forecasts which are contantly revised. Every week the recovery date is put back. Where is the surprise in this. The bubble has popped and only another bubble will provide rapid return to previous levels.

    Establishment recession projections are not up to the job. They feed through into strategy which then is accidental. Endlessly pushing money into supporting big businesses can only damage the residual economy. It is inevitable that these businesses have to downsize. Why is that not accepted.

    It is fine to jump a gap providing you clearly understand the size of the gap. Otherwise it is a blind man driving off a cliff.

    It is obvious that the need is to allow the housing market to stablise at a new level and to have secure mortgage funding available for first time buyers. This problem started with the housing market and recovery has to start there also. If people are not buying houses, please tell me why you think they will buy other big ticket items. One follows the other, not the reverse.

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  • 20. At 5:13pm on 30 Jan 2009, tuairimiocht wrote:

    "consider a gap year for at least 12 months "

    Jokes about the competence of GB aside, how long should a gap year really be?

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  • 21. At 5:16pm on 30 Jan 2009, tuairimiocht wrote:

    On GB again:

    "I can't believe he is being allowed to represent our country. I never voted for him to do so and neither did anyone else."

    Actually, the voters of Kirkcaldy and Cowdenbeath have voted for him.

    There was one post-war prime minister for whom no-one voted (except a smoky room of political bigwigs): Lord Douglas-Home.

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  • 22. At 5:53pm on 30 Jan 2009, 29finistere wrote:

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  • 23. At 5:59pm on 30 Jan 2009, strangeGraham wrote:

    Before the PM's speach this morning at Davos, on BBC News24, you down graded the importance and PM's motive of the MP for making this speach before you had even heard what he was about to say. - I regard your "I know better than you" attitude as typical of the young "pen pusher journalist" that are now at the BBC.

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  • 24. At 6:09pm on 30 Jan 2009, JohnConstable wrote:

    We often laugh when we read the ridiculous story lines of sundry 'soap' characters but the various things that Gordon Brown and other politicians have said (and worse, done) down the years are often completely contradictory and seem pretty asinine when replayed.

    Which shows that politicians say one thing to one audience and then, sometimes on the very same day, take up some opposite position for a different audience.

    So, for example, Brown has said 'British jobs for British workers' when he was trying to downplay his Scottishness.

    And recently, Brown has stated that protectionism is very bad for the world economy.

    Obama played up 'American jobs for American workers' when on the campaign trail but privately his aides told Canadian politicians that it was just for domestic consumption.

    Nobody knows how this will pan out but serious policy errors now would just prolong the pain.

    Gordon Brown must be very careful or he will be history quite soon.

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  • 25. At 6:12pm on 30 Jan 2009, stanilic wrote:

    I have been toying with the words `History is not destiny' and I am afraid I cannot make any sense of them.

    It would seem that Gordon Brown is keen to follow in the footsteps of that great orator John Prescott in talking rubbish. At least with Prescott you knew he didn't mean it so you could have a good chuckle at an otherwise charming man struggling with his tongue.

    I regret that I have grown tired of Mr. Brown. He is an academic who is too obsessed with his own genius to notice what it happening all around him.

    People speak of hubris; I see something else, something far more destructive, I think it is called betrayal.

    The betrayal of the Labour movement that once was a great dream of the British people. The dream has now become a nightmare. Enough!

    Time for the men in grey suits to lead Mr. Brown to the back benches and commence negotiations with the other main parties for a coalition government. There is work to do and we cannot leave it any longer.

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  • 26. At 6:17pm on 30 Jan 2009, maggiemaggiemaggie wrote:

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  • 27. At 6:21pm on 30 Jan 2009, Joe Melone wrote:

    The problem that has been created is that the great global "free" market has effects that are not always benign. The free market solution is to let businesses go bust, unemployment to rise around the world by millions, or by hundreds of millions, for governments to try to balance their books by matching their spending with their declining taxation incomes, etc, etc. Eventually living standards fall to a point where private investment sees opportunities for profit in cheap labour and capital.

    A proper Keynesian solution is for government (in general) to borrow for the increasing pool of savings and spend to prime growth, this kick-starting private investment at a lower level of unemployment than would otherwise be the case.

    But in order for this to happen governments must co-operate, not compete to strengthen their own position against other countries. Some chance I fear!

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  • 28. At 6:49pm on 30 Jan 2009, JR wrote:

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  • 29. At 7:05pm on 30 Jan 2009, foredeckdave wrote:

    What a waste of breath from Gordon Brown. Protectionism is already here. As others have said, when you pressure the banks to lend domestically then you are already walking on a protectionist path.

    Governments around the World will follow the path. The major driver will change from the politicians, bankers and economists to the streets. If the democratic governments of the world loose the streets then they know that they will loose power.

    look at the present strikes in the UK. The workers are fighting a losing battle - legally anyway. They have no real problem with the Italian workers but they are frightened and annoyed - understandably. For years British workers have seen their jobs disappear in the name of globalisation. Now the so called economic benefits of globalisation are disappearing in front of their eyes leaving them mired in debt and with the weakest employment legislation in Europe! Friends and family are unemployed and the forecasts are for many many more to follow. How are they to survive with their mortgages and loans, massively hiked energy bills and food prices starting to rise again?

    The unions have already taken to the streets in France. It is likely that other EU countries will also see similar protests.

    Given all this our leaders are seen as being weak ( passing blame from one to another) and clueless as to what to do practically. Saving banks for greedy bankers means nothing to the man in the street. Saving "the world" whilst jobs disappear in Britain just appears stupid.

    As the situation worsens, governments who do not protect industries and therefore jobs and give clear national direction are creating an ideal environment for the far right or left.

    The situation with the Italian workers may be the first signal of a very testing time for the EU itself and hence the Euro.

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  • 30. At 7:20pm on 30 Jan 2009, JR wrote:

    re: 20 "Jokes about the competence of GB aside, how long should a gap year really be?"

    Well, mine was nearly 18 months, when you include both summers...

    So yes, i had gap year-and-a-half, technically :)

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  • 31. At 7:34pm on 30 Jan 2009, richardwhiuk wrote:

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  • 32. At 7:51pm on 30 Jan 2009, danfinn wrote:

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  • 33. At 7:55pm on 30 Jan 2009, Simon Ward wrote:

    Surely, if as Brown say, the problems with the UK economy are due to overseas factors then we need Protectionism to protect us from these!?

    Personally, I think some Protectionism is a good thing because it means looking after your own country, which is after all the job the Government was elected to do.

    Protectionism does not mean an end to international trade, it just means doing trade on terms that are mutually beneficial and in our national interest. This government, however, does not want to do anything in the national interest. Blair and Brown would rather gallivant around the globe playing world leaders than do anything for their own country. They launch wars for the US; give away our rebate to the EU, and give foreign aid to countries like India that can afford nuclear weapons and a space program! What have they actually done for this country?

    Brown's version of Globalisation just means taxing the British to pay for their bloated government sector, while allowing business owners to shift jobs overseas.

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  • 34. At 7:56pm on 30 Jan 2009, shireblogger wrote:

    The only protectionism which started this mess was banks protecting themselves from each other because of the huge invisible risks they had been swapping and creating amongst themselves.

    It was not protectionism that caused short term foreign lenders to withdraw their loans from our banks, it was risk of insolvency of the borrowers. Because stupid bank business models matched long term illiquid assets against short term money market borrowing on engorged balance sheets, when the red flag went up governments had no choice for the sake of their reputations and depositors to step in

    Was this protectionist - I say not.

    Having found themselves in the bankers' shoes, politicians now cry " dont beggar thy neighbour" in the next nightmare phase of national fiscal stimulus and bank- loss haemorraging . Now this is where it counts. Even though for public home consumption they announce " lending agreements" to enforce support for their own economies to avoid the riots, they play the protectionist card on the international stage.

    Now Governments need to protect themselves from each other. Full circle, really.

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  • 35. At 7:58pm on 30 Jan 2009, random_thought wrote:

    The key issue is this - free trade may be a good thing, but only if that trade is balanced.

    The root of most of our current problems is two decades of imbalanced trade, getting rapidly worse over the past five or six years.

    If we want to avoid protectionism, then we must make trade in goods and service balance for each country. Then everyone will be confident that for each job lost through imports another will be gained through exports.

    In theory, if the market were allowed to work, net exporters would see their currencies rise until they became uncompetative, net importers would see their currencies fall until they became competative. Things should sort themselves out.

    Why hasn't this happened? Simply because the globalised financial system has got in the way. Flows of "money" around the world have dwarfed the flows of goods and services and the necessary feedback loops have been broken. Exchange rates (when not rigged by the likes of China) are set based on relative interest rates not on balances of trade.

    I just can't help thinking that it is impossible to have a successful system of internationalised trade unless the globalised financial system is brought to an end.

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  • 36. At 8:06pm on 30 Jan 2009, Man in a Shed wrote:

    I wonder if the global economic system doesn't become fundamentally unstable in a down term from the viewpoint of free trade.

    Since cheating is so attractive for each govt don't we have a large scale tragedy of the commons ?

    If this is the case then Brown is standing like King Canute forbidding the tide to come in.

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  • 37. At 8:48pm on 30 Jan 2009, ishkandar wrote:

    "History is not destiny"

    He who does not learn from history is doomed to repeat its mistakes and failures for ever !!

    If nothing else, his statements have created the greatest effect on Britain's credibility gap and contribute massively to a devalued Sterling !!

    Having just returned from France with a (large ?) fistful of Euros, the devalued Sterling certainly didn't hurt me but, in the interest of the general public, this man should go !!

    The way he bumbles along creating one disaster after another makes a bull in a china shop look like an angel dancing on the head of a pin !!

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  • 38. At 8:53pm on 30 Jan 2009, ExcellenceFirst wrote:

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  • 39. At 9:42pm on 30 Jan 2009, stopbailouts wrote:

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  • 40. At 9:47pm on 30 Jan 2009, Jericoa wrote:

    #35 random thought

    You get down to it and it is all so simple isnt it.

    It has been the elephant in the room for years, perfectly obscured by our own refusal to see the obvious through the filter of our 'greed glasses'.

    ENOURMOUS trade Imbalance.

    Giddy Asset price rises 10% plus year on year.

    120% mortgages

    Huge growth in 'non' jobs

    Individuals being paid annual bonuses on top of salary of 10's of millions for creating and selling on debt in various forms!!!

    What on earth were we thinking!!!

    It is absolutely essential that international trade continues as few nations are self sufficient in basic needs for their modern populations anymore, failure is not an option.

    The financial system must become the servant of the real system, not the other way around.

    Bankers should never be allowed to drip honey in the ears of politicians again. This time it will have to become part of the constitution.

    The regulatory system after the 1930's was pretty good, it has been allowed to be slowly eroded as the memory faded and the opportunity to get something for nothing was allowed to be tempting again.

    Jericoa


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  • 41. At 9:47pm on 30 Jan 2009, Economicallyliterate wrote:

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  • 42. At 10:02pm on 30 Jan 2009, strategycall wrote:

    a)
    "protectionism protects no-one and least of all the poor".

    There is no need for the second part of the Brown quote as the ''no-one'' signifies the exclusion of everyone.
    (including the exclusion of the poor in case the Brown script writer missed it)

    b)
    "History is not destiny"

    One must assume therefore, that the Davros audience didn't know how to reference a dictionary until Brown came along to educate them in the mysterious and archaic system of assigning different meaning to different words.

    How the audience of World Leaders must enjoy the patronising lectures by Brown. Now they know how the rest of us feel.

    However as a point for discussion which may be a tad easier than attempting to rationlise 'Quantitative Easing',

    .... if a time traveller journies back in time, then does history not equate with destiny, or even follow destiny ?
    (history is where you have been and destiny is where you are going)

    Answers on a postcard please, to the
    No 10 Think Tank,
    c/o Ministry for Wacky Speeches.

    Recommendation - More science education funding and/or philosophy education funding is obviously needed .
    And a different script writer might help.

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  • 43. At 10:29pm on 30 Jan 2009, Toffeeexile wrote:

    Another great day for Gordon and his gang of buffoons,as we lurch from one disaster to another he continues to spout nothing but hot air. Great on talking, definitely absent on the action stakes. When will he and the rest of the prats currently sitting in Parliament realise that the blame game they practice is getting nobody anywhere. Surely its time to knock some heads together,take the best ideas from all sides of the house to get things moving rather than playing at Party Politics and point scoring. Also stop asking the banks to act but demand and ensure that they release the funds that we the public (against our will) have been forced to present them with in order to kick the economy into life. Finally when job opportunities present themselves make sure that British Workers are first to be given the chance to fill them.

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  • 44. At 11:20pm on 30 Jan 2009, Neil Sutherland wrote:

    Point 1) History is not destiny but if you don't know where you came from, you probably don't have a clue where you're going to.

    Point 2) Brown needs to stop 'acting' and start 'doing'.

    Point 3) When Brown said that 'the banks' return to their home markets was already hitting capital flows to the developing world' he was no doubt referring to where the UK will be after his disastrous mismanagement of our economy since he took charge of the Treasury and the Regulator in 1997.

    Point 4) When Brown said "protectionism protects no-one and least of all the poor", he was talking about the future citizens of the UK.

    How this man, our unelected leader, has the gall to speak on behalf of this once fine country is an affront to democracy. Like Mugabe, he must go immediately.

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  • 45. At 11:34pm on 30 Jan 2009, Neil Sutherland wrote:

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  • 46. At 11:52pm on 30 Jan 2009, Neil Sutherland wrote:

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  • 47. At 00:06am on 31 Jan 2009, foredeckdave wrote:

    In an article with The Daily Telegraph, Brown is calling upon the 'spirit' of the British people to see the nation through this crisis. So there you go folks you heared it from the Leader it's every man for themselves.

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  • 48. At 00:25am on 31 Jan 2009, Ginger Warrior wrote:

    Firstly, may I say it's great to see you back Stephanie. It's nice to see someone who doesn't resort to doomsaying in order to fill a 4 minute slot.

    Secondly, for the people saying 'I didn't vote Brown', what's your point? You know as well as anyone who has even a vague idea of parliamentary democracy that we don't vote for a Prime Minister. The PM isn't our head of state and there's no written constitution to suggest we HAVE to vote a leader.

    This crisis clearly started in America, and the knock-on effect on Europe is a result of global capitalism, thus blaming Gordon Brown for all your financial woes is patently illogical and proves the culture of personal irresponsibility that led us to this situation in the first.

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  • 49. At 00:43am on 31 Jan 2009, sniffthehedgehog wrote:

    Gordon Brown increasingly desperate attempts to serve two very different masters; the financial service industry - here we see 'Flash' Gordon, self-proclaimed saviour of the world, ethical capitalist - on the other hand there is General Gordon, the bully boy, calculating, mercenary leader of New Labour, obsessed with power and his own self-aggrandisement, like a cross between Richard Nixon, Captain Ahab and Glen Bulb (Mark Gatiss's character in the comedy 'Nighty Night'), has he perhaps some strange political 'bipolar disorder'?

    Someone PLEASE stop Gordon Brown from getting in front of a TV camera, speaking at news conferences, and/or announcing any more govt. initiatives, since hardly a day passes without "Deputy Dog's" pointless, disingenuous 'statements' and boring self-promotion.

    “I will not allow house prices to get out of control and put at risk the sustainability of the future; the UK should not return to the instability, speculation and negative equity of the 1980s and 1990s”
    Gordon Brown, Chancellor of the Exchequer, November 1997. Eleven years is far too long going over lessons Gordon tells us HE has learned.

    Although ordinary people couldn't see the economic crisis coming, Gordon Brown should have known from his classic latin lessons, 'In regione caecorum rex est luscus' Desiderius Erasmus, Adagia (III, IV, 96) (1466 - 1536) 'In the land of the blind, the one-eyed man is king'.

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  • 50. At 00:47am on 31 Jan 2009, peterp5622 wrote:

    I just heard that anti-dumping legislation means that duty on imports of steel products from China increases by about 87% on Monday. Is that not a form of protectionism?

    Why does GB say that his government believes in globalisation without protectionism when they are increasing import duties by such a huge percentage?

    Why has this 87% increase in duty not been reported in the financial press?

    Is 87% enough to stop the dumping?

    When steel prices went up in 2006 and 2007 it was apparently because of the enormous demand from China's booming economy. It seems ironic that we should now have to protect against cheap imports from China!

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  • 51. At 01:21am on 31 Jan 2009, JR wrote:

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  • 52. At 02:31am on 31 Jan 2009, strategycall wrote:

    Point of Order if I may Madame Stephanie

    Is it not a matter of etiquette for Editors to provide a modicum of feedback to the many excellent points raised on the individual Editor blogs ?

    A sort of Hansard weekly summary in less than 250 words of interesting points raised perhaps?

    We know that Pesto and Nicko don't do it for the valid reason that the good points in their blogs get swallowed up by the multiple rants.
    The good points tend to be consumed in the Shadow of the Valley of Rantage.

    But there appears to be no valid reason for your goodself to follow such a path of avoidance.

    Any views ?
    I look forward to your considered reply

    regards

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  • 53. At 02:43am on 31 Jan 2009, Po wrote:

    Skilled immigrants can make a very positive contribution to our economy.

    Skilled migrant workers who do not commit to the outrageous expense of settling here usually send or take as much money home to spend in their own country as they can.

    That's a distinction Gordon Brown seems determined not to notice. He speaks of the latter as if they were the former.

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  • 54. At 08:08am on 31 Jan 2009, fennyburgher wrote:

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  • 55. At 09:33am on 31 Jan 2009, soundbitebob wrote:

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  • 56. At 09:37am on 31 Jan 2009, John_from_Hendon wrote:

    When will the adage "when in a hole stop digging" come into play?

    The whole World seems to have undertaken to dig faster when everyone acknowledges that the aim is to be out of the hole.

    At sometime the digging has to stop.

    (for those of you not following my point digging equates to transferring the assets of the prudent to the profligate [and downright fraudulent?] or from savers to 'banks'.)

    The nirvana that is aimed at is increased savings ratios in a balanced economy, but the incentive to save is being crushed faster and more furiously now than it has ever been in history(? - possible exaggeration.)

    Answers on one side of A4 - if you can get it right you will make oodles of dosh!

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  • 57. At 09:43am on 31 Jan 2009, doctordisraeli wrote:

    I didn't vote for Gordon Brown either. I voted knowing that my vote wouldn't make a whit of difference in this constituency which has been represented by a Conservative for as long as I've lived here. Nevertheless I voted and hoped for an overall Labour victory. I also had the expectation that Gordon would subsequently become PM.
    I remember what it was like with a Conservative govt. All the sleeze, mortgages going through the roof, street riots, poll tax, the miners' strike and police taunting miners with wads of notes, loadsamoney- boy-bankers, the first Gulf War.
    That was the point at which my husband started up a small business. I thought he was crazy but he now employs 12 and, oddly enough, it is surviving this. In the last two months exports have doubled. The order book is looking good and there was a sharp up-turn the moment VAT decreased to 15%. Turnover for the last 6 months is the best ever.
    I don't mean to sound insensitive about other people who are obviously suffering in this down-turn but the fact is that, in my view, government measures are working. The VAT decrease did make a difference, being able to negotiate a delay in paying the last quarter's VAT bill helped enormously with cash-flow over the Christmas period. Our personal out-goings have decreased since mortgage payments have gone down so much and the cost of heating oil has fallen dramatically. Houses are selling around here and the prices don't seem to have fallen hugely.
    The banking sector has been at fault - and still is holding things up - but it is not all doom and gloom, especially now Bush has gone.
    I would love to see less carping and negativity on these blogs which seem to me to have been hijacked by professional political workers dedicated to criticising Gordon's every move and I also feel that these demonstrations spreading around the country against foreign workers will be traced back to a similar source to that which master-minded the fuel protests. Incidentally, the fuel protests very nearly sent my husband's business to the wall. The effect was far, far worse than anything we are experiencing now.

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  • 58. At 09:55am on 31 Jan 2009, joehoch wrote:

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  • 60. At 10:10am on 31 Jan 2009, SergeantDigby wrote:

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  • 61. At 10:54am on 31 Jan 2009, SergeantDigby wrote:

    #57

    Some businesses will thrive in the current conditions, but most of them will not.

    I think you have to accept that a lot of the criticism of Gordon Brown is reasonable.

    The banking crisis is largely due to a lack of regulation. Gordon Brown introduced the regulation in this country.

    You can say that it started in the US. But for the same flaws that we have cultured over here, and it has affected our financial system a lot worse than in other countries, though not all. My point here is that it was possible to protect more against the effect from America. We could have done more to prevent this.

    One thing I wonder about is the choice to make the Bank of England responsible for controlling inflation but getting them to concentrate on CPI rather than RPI. I was going to have a look into this out of interest, but haven't had the chance yet.

    I think that because CPI doesn't include the effect house prices, it means that there has been effectively nobody overseeing inflation in the housing market except for the government.

    As we see repossessions rise and negative equity affect millions of homeowners, ask yourself how this arose.

    Remember that it was sub-prime debt that crystallised this situation - mortgages backed by potentially over-valued assets.

    That was prevalent in this country. That's why Northern Rock was hit so hard.

    With regards to the VAT position, I'm sorry but I don't believe that your husbands business, has benefitted overall.

    You say that he was more affected by the fuel protests and he exports which makes me think that your husband relies heavily on transportation. The increase in fuel duty has effectively raised the cost of fuel for business.

    In addition, the exports wouldn't be affected by VAT so the increase in sales would be due to the weakness of the pound.

    As we import more than we export in this country, I think you'll find that overall this is a bad situation and you will begin to see this as new stock comes into the country.

    Bit rambling this, but I thought it was worth questioning some of your points. I thought it was an interesting post.

    Oh, you mentioned the first gulf war as a bad thing and it made me also wonder about your opinion of the second.

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  • 62. At 11:36am on 31 Jan 2009, excellentcatblogger wrote:

    Are these Italian workers brought over to work in the Total refinery classified as Non domiciled in the UK?

    If so, they will not pay UK tax nor make NI contributions. But if they are also out of Italy for a number of months they may not liable to pay Italian income tax either (do not know italian laws). If that was the case then I can well understand the cheaper cost angle.

    Oh, and if they get sick who pays? The UK taxpayer of course. Pull out of the EU and call an election.

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  • 63. At 11:58am on 31 Jan 2009, doctor-gloom wrote:

    Stephanie:

    Brown has only himself to blame. It's been a constant theme in New Labour land to make abstract general statements in speeches that are designed to supply easy sound-bites to the media. Brown claims himself to be a 'doer' rather than a 'talker', but unfortunately old habits die hard with him and his party. All they ever do is talk talk talk, endless yak yak yak without substance. They don't know how to 'do'. Their party has been formed in the image of some 'ten steps to better management' type book. All they know to do is talk. They just don't get it. They've adopted some of the worst habits of many of those they've used to provide them with their new language of change (the management 'gurus' and 'establishment sociologists' [you know who you are]). All this has done is make us all weary of listening to them. we're tired and insulted by sound-bite speeches and we're fed-up with a party that has separated itself from the everyday concerns of ordinary people. They have peddled this utilitarianist trickle-down theory of prosperity for far too long, and have undermined any chance they might have once had of changing UK plc for the better.

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  • 64. At 12:01pm on 31 Jan 2009, PeterSpain wrote:

    I guess several tens of thousands of Brits working in Europe have their heads down at the moment while 600 Italians await their fate with Total.

    Its good to see the oil and gas workers are doing their traditional best to aid in Britain's economic recovery by striking! Perhaps they should try working harder instead.

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  • 65. At 12:05pm on 31 Jan 2009, nautonier wrote:

    Stephanie

    I am very concerned about all of the media reporting from Davos. It appears to me that the bankster political fat cat elite are steering the agenda into preservation of the status quo in terms of that awful 'G' word -'globalisation'.

    I say that 'Globalisation' is one of the worst misnomas afflicting our world and has, overall, led to both huge world populaton growth and poverty in some countries - ask any charity doing overseas work. G Brown says he supports efforts against world poverty but we do not seem to have heard any Charitable in depth coverage on this issue . This is important in terms of poverty/ population growth - it (should) concern us all directly.

    Regarding G Brown's ridiculous and insulting speech - let's hope our UK ''destiny is for him to very soon be 'history'.

    The main problem is that the Davos bankster/fat cat rhetoric is intended to promulgate the 'fear of protectionism' - this also seems to be accepted by some at the BBC as well.

    There is not a shred of evidence that so called 'protectionism' would be damaging or more damaging than what we have now - which is the laxy, sleazy global way of carrying out, regulating and ordering trade without national safeguards doing things rather than action in growing a resource backed currency, strong UK industry, R & D, renewable energy to make ourselves a net exporter of real goods.

    G Brown, the banksters, vultures, financial parasites, bung seekers, free loading internationalists, fat cats are spreading this anti-protectionist rhetoric simply to protect themselves - G Brown has sold Britain down the river - The Yangsee Kiang - the yellow river.

    Some of these globalists are saying on the BBC that the current economic problems are cyclical not structural - These views are going completely unchallenged and this is not balanced or impartial media reporting by the BBC and other media, in my view.

    Are we getting value for money out of our BBC licence fees at this critical time while the banksters grease palms and spread their 'anti protectionist' agenda which leaves them as the beneficiaries of billions of pounds of tax payers money with large amounts of this money now overseas in stead of having been invested in our British industry for Britain as a future net exporter.

    There does not appear to be anyone challenging this dangerous rhetoric - except perhaps David Cameron may be leaving the door open with his carefully guided statements.

    Let's be clear about the terminology - anti globalism is my view, in simple terms, means being anti to what is largely unregulated international trade, banking ( massive cash movements leaving UK exposed), immigration, as coupled with a legal and regulatory framework actually supporting and exacerbating the effects lack of regulation/laws in some areas that seriously disadvantage the majority of the people in a single nation - that's what the Davos back slapping rhetorists need to address.

    We need to talk about EWT - 'ethical world trade' and not globalisation. There is not a single champion of EWT at the conference from what I can hear.

    I'd like to hear someone at Davos say 'British jobs and industry for Britain' - 'this is what Britian and its political economy is going to do going forward in relation to world trade - Catch us (the UK) if you can'. This is not protectionism - this is international competition - surely what is NOW needed in the UK. Ethical world trade and not globalisation would put up solar panels and irrigation into the Sahara desert and allow the countries there to compete on a more level playing field.

    G Brown and his government do not understand resource backed currency and industrial competition - in order to have compete we (all countries) need to have industry and resources that under-pin our/their currency - Brown has now largely missed this opportunity by pouring Billions of pounds into banks in a panic stricken tax/borrow orgy and seemingly has got little in return to build and organise at street level in the UK.

    I say the political fat cats favour keeping and seeing the return of a bloated financial sector because its easier for them to get a bung from a bankster than it is to get one out of a factory boss.

    We need to separate the City of London from Parliament/House of Lords and make these buildings historic buildings open to the public - as sleaze museums - because that is what they are now.

    We need a fresh political economy - separating the political establishment from the city of London - We need a new parliament and a subserviant institution to deal with legislation. We need change to achieve a new worldwide political economy - we need EWT and not the 'G -word'.

    Why is B. Obama - not there in Davos - his vision for a new America will not be built around anything said at Davos - he's already started building the new America from within as a resource backed competition machine. Bloated, lazy, sleaze ridden, fat cat, backward looking globalisation is not within his agenda. His/The American way is that he will speak to his entrepreneurs and industrialists and the banks will serve their needs. Subservience by the banks will also be achieved in the USA by improved regulation.

    What's the matter with your colleagues at the BBC and other media services - Are they still petrified in fear of Alastair Campbell?

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  • 66. At 12:10pm on 31 Jan 2009, doctordisraeli wrote:

    Sergeant Digby.
    Your post is one of the more intelligent ones I have read on these blogs so I will answer in detail.
    I agree that the crisis is largely due to lack of regulation though I had thought that began before 1997 hence my recall of the Loadsamoney mentality during the Thatcher/Major years.
    I cannot defend the sub-prime debacle (but how can Gordon be blamed for that?) or the buy-to-let mortgages. Yet today's post has just arrived and with it an offer to borrow £12000! Ludicrous.

    The VAT decrease genuinely has made a difference. I can't explain why but I am telling the absolute truth when I say that our phones hardly rang at all in the last week of November and went crazy from Dec 1st onwards. There is only one conclusion to draw. On a personal level, we put off buying some stuff in November and bought it in December instead. One saves a bob or two when one can.
    The reason why we nearly went down during the fuel protest was that our staff couldn't obtain enough fuel to get to work. They have fairly unique skills, we are in a rural area and not all live locally (public transport wasn't an option because of Dr Beeching) so orders weren't being completed and paid for but overheads had to be paid. It caused a cash-flow crisis which would have been final if it had gone on any longer.
    VAT is chargeable on goods sold within the EC. In the last two months we have made sizeable sales to Germany, Slovenia, Ireland and The Netherlands. The customers have made savings on the VAT and are happy to do so. Perhaps they would have been happy to pay the extra 2.5%. I don't know what their reasoning is but I suspect it is a combination of the exchange rate and the VAT change which has caused them to make the purchases now. They're paying in sterling and our suppliers are in the UK. It currently represents 60% of our turnover - 30% up on last year. If the relative weakness of the pound against the Euro is a bad thing then why is a French Minister objecting to what she sees as an unfair advantage?
    I'm not saying nobody is hurting. Clearly it is disastrous for many but I'm trying to redress the balance a bit and speaking personally. All the business people we deal with are saying the same as us however and, believe me, it is a major topic of conversation. I only directly know two people who have actually lost jobs. One is a solicitor (!), the other taught in a private school. On the other hand, local farmers are doing well and the tourist industry round here is set for a boom.

    I defend neither Gulf War.

    I will vote Labour in future: always have, always will. My memories of the Thatcher/Major years are bitter. But a party that promised to restore student grants might tempt me......

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  • 67. At 12:15pm on 31 Jan 2009, PeterSpain wrote:

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  • 68. At 12:24pm on 31 Jan 2009, FORENSIC-DEBATE wrote:

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  • 69. At 12:29pm on 31 Jan 2009, John_from_Hendon wrote:

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  • 70. At 1:01pm on 31 Jan 2009, doctordisraeli wrote:

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  • 71. At 1:19pm on 31 Jan 2009, labourbankruptedusall wrote:

    Brown can lecture people as much as he wants; he won't ever be able to get out of this mess while he's in charge because firstly he's too stupid to do what's needed (reduce debt), and secondly nobody has any confidence in the government/him.

    When your business collapses due to massive financial mismanagement and stupidity by the directors, do you allow the directors to hang on to their jobs and try and fix the problem? No, you fire the directors and get in someone else who actually understands business.

    Likewise with governments; when the government is responsible for creating 100% of the problem (no regulation, no understanding of how the financial system works, running up insane levels of public/private debt), then you need to fire the government and elect a new one who'll take a grip on the situation and fix things properly.

    There is absolutely no way to correct this problem from the uk perspective without a change to the uk government.

    The collapse of the pound proves this very point. We're not just losing against the dollar, we're losing against every currency (apart from that of zimbabwe, but we're getting close to mimicking what they're going through economically). This isn't just the speculators trying to make money, this is every other country in the world dropping the pound like a stone because they know we're finished with our current government in charge.

    Election, and a new government; that's the only way out. Fiscal/monetary policies are irrelevant in the uk until that happens.

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  • 72. At 1:49pm on 31 Jan 2009, labourbankruptedusall wrote:

    Regarding the vat changes mentioned in various posts above; something to consider is that the pound started collapsing immediately before the vat change was announced, and then continued collapsing afterwards.

    Speaking from my own business' point of view (essentially being a services exporter), it's the collapse of the pound that's helped our order-books, not the vat reduction.

    The vat reduction's made no difference to us at all; the collapse of uk orders on our books prove that; uk orders have all but dried up because the uk is dead in the water (apart from other exporters that is), but our foreign orders have increased dramatically since the pound started its steep collapse.

    There's no such thing as a domestic uk market at the moment in our business; it simply doesn't exist anymore; the uk has no more money; virtually all our business is now exporting to countries which still have some confidence left in them (usa, canada, australia mostly) - the uk is finished; only exporters will be likely to survive if this goes on for more than another couple of months.

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  • 73. At 1:53pm on 31 Jan 2009, expatinnetherlands wrote:

    Re: #3.

    Excellent posting, I especially agree with the bit about Labour and Darling and Brown doing nothing for a while... they do NOT instill the much needed confidence.

    Only a new government can do that, as we all instinctively know.

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  • 74. At 2:07pm on 31 Jan 2009, derek_frae_glasgi wrote:

    Let's just hope that at some stage in the coming months we dont end up as we did in the 30's.This is the 21st Century and we are governed by politicians who cannot instill confidence, or inspire any great belief.
    What was it " Things can only get better!!"
    Yeh RIGHT!!!

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  • 75. At 2:24pm on 31 Jan 2009, SergeantDigby wrote:

    #66 with regards to the VAT on foreign customers, I had assumed they were VAT registered retailers based outside the UK. That'd be a zero-rated supply of goods and therefore not affected.

    I disagree with your opinion that Gordon Brown cannot be blamed for the sub-prime debacle. Not because he caused the US sub-prime issue, but because he has been irresponsible in creating the same issue over here.

    Note the repeated use of the phrase "it started in America". This is correct. But our economy wouldn't be as damaged if we hadn't been doing exactly the same thing. It started in America and continued over here because we were vulnerable for exactly the same reasons.

    Anyway, thanks for the reply. Pleased to hear you didn't support the second gulf war. Gotta go now. Cheers

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  • 76. At 2:37pm on 31 Jan 2009, doctordisraeli wrote:

    getridofgordonnow - the nom de plume indicates that you have a fixed mind-set but your comments baffle me. Why are you moaning if your exports have increased dramatically? Surely that is a good thing. Ours have too, but we're still getting 40% of our business from the domestic market.
    The pound has been far too high against the dollar for a long time. That was great if you were making a trip to the States but our business hasn't made a sale to the US for about 3 years until recently.
    The pound hasn't collapsed. It is adjusting to something like where it should be against the dollar and is beginning to creep back to something more like normality against the Euro.
    If you export services outside the EC you will not have benefitted from the reduced rate but you have brought money into the country and done our economy some good. We are exporting manufactured goods mainly to private individuals within the EC who are charged UK VAT so our experience in the last two months has been positive regarding the VAT change.
    What your business and ours has brought into the UK economy is terrific and we'll eventually dig our way out of the hole.
    Thank your lucky stars that we have a government that is taking steps to ease matters, take advantage of what is on offer and give it all a chance to work.
    The last thing we need at the moment is an election.

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  • 77. At 4:26pm on 31 Jan 2009, U11002875 wrote:

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  • 78. At 4:50pm on 31 Jan 2009, doctordisraeli wrote:

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  • 79. At 4:53pm on 31 Jan 2009, Neil Sutherland wrote:

    #48 Ginger_Warrior

    You obviously missed the point about elected PM so let's pass over that subject.

    But what I really get fed up about is 'it all started in America' mantra that Gordon and the Brown Noses trot out all the time.

    It is such a puerile statement.

    It is rather like saying 'The First World War started with the assasination of Arch Duke Ferdinand in Sarajevo and therefore that that conflict was the fault of the people of Bosnia and Hersegovina; the Germans were blameless'.

    The bursting of the sub-prime market bubble triggered the event that led us to where we are now. If it hadn't happened in America first, it would only have somewhere else; either way it was something that was inevitable.

    It was always going to happen in America or the UK or Iceland and some other countries whose availability of easy credit was out of control.

    Having said that, the bursting of the sub prime bubble wasn't going to happen in China, it wasn't going to happen in Thailand although let it not be forgotten that every country has been dragged into the downturn.

    Banco Satander has fared better than other banks because of tighter Spanish regulatory controls; if the US and the UK had had the same regulatory controls in place our banks would be in a better shape too.

    There are some governments who can put hand on heart and say it was nothing to do with me. Obama is untainted and is in the clear.

    However Bush, Blair and Brown are not.

    Bush, Blair and Brown are like small children who have been left in a room on their own with a plate of chocolate cake in front of them and told not to eat it.

    On returning to the room you notice the cake is gone and you ask them if they have eaten it.

    Each of them looks you in the eye and says with absolute sincerity that they have not touched it and blame the other, not realising that all the while you can see large smears of chocolate around all their mouths!

    Of these three stooges two have left the stage. Only one to go and it won't be before long.

    And another thing, the next time Brown calls Clarke the 'Shadow Shadow Chancellor' he should be reminded that he is worthy of the same sobriquet because it is a job he has occupied most of the time since assuming Blair's mantle but only when it suits him.

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  • 80. At 5:40pm on 31 Jan 2009, excellentcatblogger wrote:

    Interesting piece in the Telegraph today about EU workers moving to other nations in the EU:

    "One reason why so many EU workers are in Britainis that the UK Government decided not to use transtional powers to restrict access to the labour market to the new east European countries that joined in 2004. Other major economies, notably Germany kept restrictions in place. As a result most Poles and other east Europeans came to this country."

    An estimated 0.5 million Poles have decided to stay in the UK despite the recession. Any population estimates in this country, whether they be the total, EU migrant workers etc are not much more than guesses. To be honest you might as well ask the chimpanzees in London Zoo, as the Government has failed in its duty of counting the numbers of people who enter and leave the country.

    Like it or not the Italian workers are here legally. My reservation is this: is it a level playing field in the rest of the EU? At specialist levels in the jobs market UK workers can and do work in the EU, but if your vocation was a builder, can you really see every member of the EU being as welcome as that old TV show "Auf Wiedersen Pet"?

    More prosaically we need to encourage international trade, as we cannot ignore the plight of the Third World. Trade is the only way for them to better themselves. Handouts from the Dept International Aid and development, are constantly being sent to Africa etc. to no discernible benefit. The EU has a big responsibility in this as CAP prevents food imports and the talk of carbon footprints is disingenuous. Its like saying that the transport of aid is OK, but if the same transport is engaged in trade it is bad as it has a carbon footprint?

    Another thing that needs to be addressed in times when credit is difficult to come by are the standard sales terms on an invoice. It is usually 30 days payment grace from the invoice date. International Trade terms are sometimes longer depending on the journey time. It is crucial that these terms are met and in full.

    Unfortunately some companies in the UK (and some are very successful) have turned this into an art form. It should be illegal to do so, penalties could start as fines and culminate in jail time for the Chief Executives. Apply name and shame tactics: if they are members of CBI or IOD expel them etc. In this respect the whole business community is in this together.

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  • 81. At 5:57pm on 31 Jan 2009, JB wrote:

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  • 82. At 6:01pm on 31 Jan 2009, stevejohnson72 wrote:

    Those criticising Brown miss the point somewhat.We get the politicians we deserve,Our greed,shallow obsession with material goods and willingness to believe more and more of us could get richer forever has been corrected for now.No doubt it will again when we forget this recession,or maybe we will learn. Brown has to talk up the economy,any politician would but at least we are free to criticise,unlike the people of the advancing giant-China. I can't take the Tories seriously when they batter a fellow freemarket fundamentalist.Does anyone believe they would have reined in the banks? I remember before the '97 Election messrs Fortune and Bird conducting a spoof interview in which the Labour politician was asked why his party had adopted Conservative policies," how else to you expect to get Tories to vote for us" was the reply. Many a true word...

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  • 83. At 6:08pm on 31 Jan 2009, Bluematter wrote:

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  • 84. At 6:36pm on 31 Jan 2009, nautonier wrote:

    80. At 5:40pm on 31 Jan 2009, excellentcatblogger wrote:

    Like it or not the Italian workers are here legally. My reservation is this: is it a level playing field in the rest of the EU? At specialist levels in the jobs market UK workers can and do work in the EU, but if your vocation was a builder, can you really see every member of the EU being as welcome as that old TV show "Auf Wiedersen Pet"?

    Hi excellentcatblogger!

    I remember being on a german building site in the time of the early days of that TV programme and a lot has been made in news recently about this nostalgic piece of TV history - as if this should make us happy with the flood gates now being opened to foreign workers.

    The British were there ('welcomed there' is an 'over-statement') because Germany had acute skill shortages at the time, major on-site health and safety issues with german workers taking beer breaks - Yes the german construction workers took beer to work in their flasks on most days. The work was largely very isolated and often with dangerous conditions for British workers. The position was that Germany accepted that the British workers were needed - and the need factor was very high.

    These overseas British workers were accepted only because of these chronic skill shortages and at the time British tradesmen were amongst the best and better than most in Europe. The British workers were only their in relatively small numbers - no more than a thousand or so in total. Germany wasn't invaded by millions of foreign workers as in the UK - the germans would not have stood for that then and I don't think they will stand for it now.

    None of these conditions now apply to foreign construction workers in Britain and there are plenty of British unemployed who would retrain/relocate and do the work if they had to/ were given the opportunity and training.

    We should remember this when the mercantilists of spin and rubbish try and use this powerful but misplaced media imagery in their rhetoric.

    Whoever thought of using this imagery at Davos hasn't got a clue what they are talking about - this is nasty, nasty spin - No wonder the UK is now in such a mess.

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  • 85. At 8:44pm on 31 Jan 2009, labourbankruptedusall wrote:

    82 stevejohnson72

    I think the tories would have kept a closer eye on the banks. When they were in power they did for the uk insurance industry what labour should have been doing for the banks.

    Back in the 90's the tories saw things like the reinsurance loops and other damaging things in the market, and they forced people like Lloyds of London to put their house in order before things got out of hand, and so things were fixed with hardly any pain at all; nobody really noticed but it was fixed. The reason nobody noticed was that the tories fixed it before it became a major problem.

    If you wonder why the insurance market in the uk is relatively unscathed/safe and yet the banks' sheets went mad, it's because the tories corrected the insurance market when they were in power.

    It was only when labour got into power that the regulation went out the window. The tories saw it all and fixed it before it was a problem, then labour got in, ignored every warning, and broke it.

    I know who I'd rather have in charge of overseeing the financial institutions, and it's not the man who thinks that doubling the tax rate for the lowest paid wouldn't adversely effect people on low pay.


    re: 76 doctordisraeli
    The benefit of making money through increased exports due to a low exchange rate is only temporary, because hyperinflation will soon outweigh that benefit when things truly reach a head and the policies get more desperate. So, yes, I'm personally getting more business at the moment because I export, but at the same time I can see the public finances go deeper into the toilet with no hope in sight, so I'm ok for now, but as a country we can't survive like this for much longer. Labour still won't even admit that the root cause of this was too much public/private debt and lack of regulation; that lack of admission means they can't/won't ever fix those root causes.

    Saying that I shouldn't be moaning as I'm doing ok is like telling someone standing on a train-track to stay there because there's no train within 10 feet so he's fine.

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  • 86. At 9:49pm on 31 Jan 2009, cynicalyorkie1 wrote:

    So now Gordon says he doesn't know if his spend, spend, spend approach will work, while he sits there with his financial future safe behind his MP's pension....

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  • 87. At 10:05pm on 31 Jan 2009, foredeckdave wrote:

    This comment was removed because the moderators found it broke the House Rules.

  • 88. At 00:06am on 01 Feb 2009, splendidhashbrowns wrote:

    Protectionism of industry is very important if we are to rebuild, re-tool, and retrain to produce goods that the global market wants and needs (see Japan).
    Protectionism for banks is not good because most of our capital was inflow to this country-hence the drying up of commercial loans. I think that is what Gordon Brown should have said.
    As for un-elected leaders, what about Peter Mandelson, he still thinks he is a Commissar, now there's an unelected leader (for life)!
    I have found a good solution to Gordon Browns pronouncements, I just hit the mute-button every time he appears on the box- it works for me.

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  • 89. At 08:41am on 01 Feb 2009, UK-SILENT-MAJORITY wrote:

    This comment was removed because the moderators found it broke the House Rules.

  • 90. At 12:23pm on 01 Feb 2009, Tony North West wrote:

    He is just looking to blame, someone, anyone other than take his share of the responsibility for this economic problem - namely very light regulation
    I think that its a bit rich him lecturing people on what do do when as soon as the IMF points out the anomolies in what he says he just rejects them out of hand.
    I'm afraid that I'm not listening to him anymore , he may be saying some good stuff but he is discredited in my opinion (what what thats worth..)
    The sad thing is that his hubris will affect this country for the next 20 years and the taxpayer will have to pay for his failings as Chancellor and PM - still I don't expect him to survive t he next election so that is something

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  • 91. At 12:46pm on 01 Feb 2009, Paulsuggestion wrote:

    Suggestion to help with the recession:

    Background:

    House prices seem to be the root cause of the recession.

    Banks and others were lending to customers of poor credit quality, assuming the value of the collateral (houses) would cover them from default. As house prices declined, the banks lost billions. Banks need a level of money to repay deposits, and following the losses, the banks had to get government money to help maintain this level as well as reign in their loans.

    As banks reigned in their loans, people and businesses had less money available to spend and invest, so many businesses have cut back on their activities or closed and laid people off.

    Current problem:

    House prices are still at unsustainably high levels, but no-one know how low they will fall (or when). The banks therefore don't know how much more they will lose, and are reluctant to lend until they have certainty over the losses.

    Businesses and people are therefore also uncertain and are restricting activities until they are certain over availability of bank loans, certain over their jobs and income, and certain that if they buy items, the items won't decline significantly in value.

    Suggestion:

    I think the solution is to leave house prices to market forces, and let them fall to a sensible multiple of income. True, the banks will incur losses, but at least these will be known and governments can help provide money to cover these.

    The benefits will be that certainty will return, banks will start lending again, businesses will be able to make decisions and invest, and people will have the confidence to buy the houses and cars and items the businesses are producing once again.

    Paul S.

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  • 92. At 1:20pm on 01 Feb 2009, Matuta wrote:

    Are we now not suffering from historical decisions? The crash of 1929 was a major contributing factor to World War 2. Post War the European leaders were anxious that such events should not occur again, especially with the growing menace of Russia. The formulation of The Common Market may have looked good at the time. The problem is that more poorer countries have now joined. If you allow Rochdale to join the Premier League, it is only human nature that their players would prefer to play at Old Trafford. If East European workers can come here and earn three times what they could earn at home and take advantage of our benefits system they are going to.
    Millions of decent British people suffer death, deprivation in two wars and now their descendants are being thrown on the scrap heap by an influx of foreign workers

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  • 93. At 2:20pm on 01 Feb 2009, ggaged_for_too_long wrote:

    This comment was removed because the moderators found it broke the House Rules.

  • 94. At 3:23pm on 01 Feb 2009, UK-SILENT-MAJORITY wrote:

    91. At 12:46pm on 01 Feb 2009, Paulsuggestion wrote:
    Suggestion to help with the recession:

    Background:

    House prices seem to be the root cause of the recession.


    Someoone who speaks the same language as me.

    House prices have to be bought back in line with income in order for banks to start borrowing at sensible levels with minimal risk.

    If Bliar & Brown had kept their promise from 97, house prices would not have outstripped income levels.

    This however means massive numbers of negative equity mortgages if house prices do srop to the correct levels.

    However, estate agents, banks and building societies should bare the brunt of the blame for this because of over pricing houses.



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  • 95. At 4:47pm on 01 Feb 2009, pappas26 wrote:

    We as tax payers need to question these banks. The money is not filter to the taxpayer, the banking system is design to take not give for (ex: you can pay a $40,000 car off in 6years something that depreciate in valve; where you buy a house for the same $40,000 and it take 15 or 30yrs. to pay off yes interest rate is the big key, look whose determining this; the banks!!!!!!!!! Anyway way you look at it ; it's legalized loan sharks. The old saying the rich get richer and everyone else gets poorer. Their is no more middle class all of us are the same struggling while corporate America continue to buy unconscious.

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  • 96. At 7:14pm on 01 Feb 2009, nautonier wrote:

    62. At 11:36am on 31 Jan 2009, excellentcatblogger wrote:

    'Are these Italian workers brought over to work in the Total refinery classified as Non domiciled in the UK?'

    I'm no tax expert - but there does appear to be scope for some avoidance /evasion here on income tax, business rates, council and other taxes. Another question - are their lodgings taxable as a benefit in kind? Has any UK agency vetted each invidual's suitability to be in the UK?

    I'd be interested to get the details on that floating cell block they're all hiding in - I'm told that it is difficult to charge business rates on it if it has a single assessment as a hostel or similar and virtually impossible to assess for Council tax purposes - I very much doubt if any of these non doms? are contributing anything to the UK at all - as presumably their salaries are paid overseas which may be one reason why their employer appears to prefer foreign workers as enabling a lower wage rate to be paid as under-cutting local workers.

    I have to mention my view is speculative but I would have thought that the Inland Revenue and all relevant authorities should pay them a visit and check them over also make sure they're not polluting the water.

    This may be giving these 'workers' a sizeable financial advantage in lodgings, accommodation, low rentals and which would not be a level playing field for local workers who have to pay council taxes etc on jobseekers allowance or get evicted or their house re-possessed. This shoots a hole through New Labours' open border/EEC lies spin and nonsense and shows the kind of business and their ethics New Labour are encouraging - may actually be allowing the Italian and US sub-contract employers to break UK laws in the process - by a complex series of tax and possibly other evasions /breaches.

    The whole thing stinks in my view! Needs a full forensic enquiry. I'd send in Customs & Excise and the fraud office police as well as ACAS.

    If Peter Mandelson/ Alan Johnson/ Gordon Brown can get me or some of the 'local protest workers' a job in Italy - I'll go and I'm sure many others would go and give it a try - otherwise they might do better to refrain from speaking (individually and collectively) like the proverbial fool and Senior Professors of Spin. I'd say to the three of them - put the jobs for UK workers where your big mouths are!

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  • 97. At 11:53pm on 01 Feb 2009, JayPee wrote:

    96. nautonier

    I'm not going to go throughe very point you raised, but would just toss out a few general thoughts on this.

    Using non-residents to undertake work is usually a high cost option, actually for reasons you kind of allude to. If you ship people in for a short term contract, typically you have to pay their accomodation and other living expenses, whereas if you hire locally you expect everyone to pay their own rent/mortgage etc. Now a floating barge might not be luxurious, but it isn't free. If the Italian company came in as the lowest bidder, it suggests to me they were willing to accept a lower margin on the work.

    As for the tax etc, I have no idea how Total and their contractors have structured things. The general tax rule is that as an individual you are non-resident if you spend under 183 days in a year in the UK, and less than 365 days over a four year period (ie 90 days-ish a year). I think the Total job will be under 183 days, so they'll be non-resident. They are definitely non-domiciled. These are not guys looking to live out their days in the UK. Conversely, for instance, I remain UK-domiciled, but non-UK resident.

    Non-domiciled and non-resident persons, generally, do not pay tax in the UK. As for whether their employer will pay tax (Corporation Tax), I suspect they will, otherwise everyone would just set up non-UK companies, do all the work in the UK, but invoice (and book all profits) offshore. The fact this doesn't happen, suggests there is no tax benefit. Contrary to what some on here may think, the Revenue isn't staffed entirely by idiots. Such positions are reserved for their political masters.

    Given that this whole thing seems to be covered by EU rules on tendering, I'd be surprised if there aren't also standard rules to cover taxation. Otherwise everyone could undermine the cross-border competiton rules by using their domestic tax regime to make using foreign firms unattractive. So I suspect the tax authorities are rather less bothered about this than anyone else.

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  • 98. At 00:04am on 02 Feb 2009, foredeckdave wrote:

    Please tell me that I have been misreading the posts that suggest that this crisis is due to house prices.

    House prices are just a minor reflection of a major malfunction (you may like to call it fraud) in the global financial system. We are now finding that it is not just a question of quarenteening the 'toxic' debts. The real question now is do we have enough 'good' money to actually cover all of the debts worldwide. In other words by how much has the world overstretched the amount of wealth that is supposed to underpin it.

    This is the true reason why companies big and small around the world are going to crash as the second tsunami wave hits us.

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  • 99. At 01:53am on 02 Feb 2009, hewer2 wrote:

    I am surprised at how negatively Brown is portrayed in the comments. Unlike any other politician he has correctly diagnosed the financial situation and acted quickly to impose solutions. Given that the crisis is very complicated and new problems surfacing daily, it is not surprising that Brown will suggest contradictory/inconsistent actions over time. This should be viewed as a strength, a sign of a pragmatic politician not ruled by rigid ideology. He has understood better than a raft of Nobel prizing winning economists the true depth of the financial crisis and he does not lack the courage to impose radical solutions. This indeed is his finest hour, who would have thought it a year ago for such an uncharismatic figure, but like Churchill in 1945 I doubt he will reap electoral reward.

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  • 100. At 08:44am on 02 Feb 2009, U9461192 wrote:

    It defies belief that anybody would try to decipher what Brown 'mean's when he decries 'financial mercantalism'. Whatever that might be.

    This is a man who denies ever having said 'boom and bust'. He meant 'Tory boom and bust'. And when he said 'British jobs for British workers' he didn't mean 'British jobs for British workers' in the sense that yo might think. Ie that he wanted British jobs for British workers.

    So given that he will bare-faced deny even the simplest of utterances that have passed his vacuous mouth I think we can safely say that when Brown says he deplores 'financial mercantilsm' he is just blowing air and wasting everybody in Davros' time. And ours too.

    How much longer must we labour under this reign of lunacy?

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  • 101. At 08:51am on 02 Feb 2009, U9461192 wrote:

    Please tell me that I have been misreading the posts that suggest that this crisis is due to house prices.

    Nope. It's a house price crash. The whole disaster stems form people in the UK, US, Ireland and much of the Anglo world over-investing (and over-borrowing) in houses to the detriment of everything else. Just as Japan's 'lost decade' stems from insanely soaring land asset values in Japan (it does).

    Of course it suits Brown to peddle his 'credit crunch' twaddle because it detracts from the fact that in the 2005 Labour conference the Maximum Leader gave us his customary understated and modest appraisal of his financial performance when he bragged that he'd seen off a UK housing boom in 2004. The kind of boom that in any other decade would have caused a recession. Guess what Gordon. It did cause a recession. And your cutting interest rates and re-inflating it for an additional two years gave us an even bigger recession.

    No wonder he's so keen to jabber on about 'credit crunch' And started in America. Fact is that for the same reason the US got itself badly into debt (insane lending against over-priced houses) then so did we.

    Spread the word. It's not a 'Credit Crunch' its a House Price Bust. Gordon's Bust.

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  • 102. At 09:06am on 02 Feb 2009, SergeantDigby wrote:

    #99 hewer2

    "it is not surprising that Brown will suggest contradictory/inconsistent actions over time"

    That's a pretty poor defence.

    You are being ironic, surely? You have no previous post history so I can't tell your views on things.

    I've made the same mistake before. Use on of these ;-) to avoid any confusion in future. But just in case not, let me tell you why your argument is poor.

    In order for this to be true, Gordon Brown must acknowledge the inconsistency and correct what he said. To date, he has not done this.

    For example, when he was interviewed on the Today programme he refused to say that he had not got rid of "boom and bust". This would be a simple thing to acknowledge. He wouldn't even accept that this was a "bust". He was talking to Evan Davis, who is qualified, I imagine, to correctly define this as a bust.

    He is not being inconsistent over time. He is being inconsistent in what he says now.

    I'm sorry to say that your opinion appears politically motivated and I encourage you to consider Gordon Brown separately from Labour, if this is the case.

    In my opinion, he appears "psychologically flawed", no question. Check out the stories concerning the Heathrow vote. There are some highly worrying accounts from Labour MPs showing real signs of mental illness. I previously posted some criteria for a definition of mental illness (which got removed). Gordon Brown's persona ticks a lot of these boxes.

    I say "persona" because I don't believe that he is necessarily as portrayed in the media. Personally, I think his persona could be his best side.

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  • 103. At 09:10am on 02 Feb 2009, Peter Johnston wrote:

    If GB means what he says about avoiding protectionism, it raises some questions.

    Which is right?
    1. British firms all over the world win contracts then use their core (British workers). He should acknowledge the right for other companies to do the same here.

    2. Support foreign car companies in Britain to safeguard British jobs.

    3.Support British companies abroad to safeguard jobs belonging to other nationalities and profit being sent back to the UK.

    4. Allow multi-national companies to pay their tax in whichever country they find most advantageous (as in the Guardian today), rather than force them to pay British tax then move abroad.

    Where is the line to be drawn?

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  • 104. At 09:12am on 02 Feb 2009, Peter Johnston wrote:

    This comment was removed because the moderators found it broke the House Rules.

  • 105. At 09:18am on 02 Feb 2009, CaptnSlackbladder wrote:

    Isn't protectionism a real-live example of the Prisoners dilemma from Game Theory?

    In that two prisoners can either accuse each other of a crime and hope for a reduced scentence, or keep quiet and hope the other does as well. If one talks, then the other gets a much worse punishment.

    In Game Theory, the only course of logical action is to accuse the other. Taking the reduced punishment (most likely), but advoiding the worse one.

    So, if you have two countries, both of which can engage in protectionist policies, but if only one does the other seriously loses out. Then the maths dictate that proctectionism is the better course.

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  • 106. At 09:27am on 02 Feb 2009, SergeantDigby wrote:

    #98 fordeckdave

    You appear to suggest that it isn't a housing market led crash but go on to say:

    "The real question now is do we have enough 'good' money to actually cover all of the debts worldwide. In other words by how much has the world overstretched the amount of wealth that is supposed to underpin it."

    Property forms a large proportion of the underpinning wealth.

    The crunch started with the sub-prime crisis.

    Northern Rock was the first UK bank to suffer from this crisis - a bank whose business model was based on providing high percentage loan to value mortgages - mortgages against overpriced property.

    Your statement appears contradictory to me, but I'm no economist so if I've missed the real point please explain.

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  • 107. At 11:09am on 02 Feb 2009, MrTweedy wrote:

    No. 106. SergeantDigby

    People borrowed money to buy assets at high prices, hoping to profit by selling them on at a higher price.

    It is normal for assets to routinely trade for prices much higher than their intrinsic value, which means their price will eventually fall. This boom and bust happens all the time, it is natural. The problem with our current situation is that more money was borrowed than ever before, and the asset prices continued to rise for much longer than is usual.

    Asset prices in the UK and USA were unnaturally high, as they were underpinned by high levels of debt. Unfortunately, much of the debt is itself guaranteed against the assets, and so there is not enough real value in the assets to pay off the debt. It is a vicious circle.

    "Assets" are second hand desirable objects, which are only worth what someone else is prepared to pay. In the recent good times, people were prepared to pay silly money, because borrowing was cheap. This caused a boom in stock markets, corporate bond markets, house prices, and contemporary art markets. Now that no-one wants to buy these so called assets, the house of cards collapses very quickly.

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  • 108. At 11:09am on 02 Feb 2009, nautonier wrote:

    97. At 11:53pm on 01 Feb 2009, JayPee28bpr wrote:

    96. nautonier...

    JayPee28bpr

    Thanks for your comments - we'll have to hope that ACAS look at ALL of the facts and circumstances, but by all accounts the arrangements look to be engineered by the employer for lowering costs to these overseas workers - and if it is the case and is not being offered to British workers then that is not a level playing field. I'm told that there are all kinds of tax dodges associated with anything that floats and at a practical level, the 'beneficiaries' do not set up a proper address/paper trail by 'living there'.

    My experience of these non-dom arrangements is that they're under-paying tax and quite often have a distinct wage/cost advantage and is most unlikely to be a level playing field for local workers.

    Their floating prison ship accommodation may or may not be their choice but it also has lower rent, rent deposit and utility/heating costs associated with?

    As for the politicised, bullied Inland Revenue - I expect they will not be chasing temp foreign workers as these foreigners will be gone/ moved before IR organise themselves do anything and/or in that category of not being pursued for convenience and/or IR is not generally allowed to scrutinise under political correctness in case they're called racist?

    In any case, there are millions of PAYE British fools to otherwise whip with taxes.

    The point is these overseas workers should pay a fair contribution while they are here also - insure their cars, pay road tax, private health, TV licence etc - Does anyone believe/confirm that this is being achieved or is being even remotely policed by this government.

    ... and New Labour say we should avoid Protectionism - HA! HA! HA! - Don't make me laugh!

    This matter needs a full public enquiry and with an urgent reporting remit for the wider implications.

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  • 109. At 11:17am on 02 Feb 2009, agc3167 wrote:

    #106 SergaentDigby

    House prices in themselves are insufficient to explain the current bust. What needs to be considered on top is banks massively over-lending on their assests and supporting massive over-pricing on virtually every asset class immaginable: Shares, Classic Cars, works of art, etc.

    This super high leverage on over-inflated assets (plus some nice accounting sleight of hand) has produced a situation where the amount of money is comparable to the planets GDP.

    This is what has to unwind, and all the imaginary money created by the high leverage levels has to be removed from the system.

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  • 110. At 12:21pm on 02 Feb 2009, sizzlestick wrote:

    As long as there are national borders in this crisis, financial protectionism is capitalism best spokesperson.

    Let it be clearly understood the current global crisis originated from "stupid" Western bankers who thought they could do "socialistic" lending ( sub-prime loans to lesser credit-worthy borrowers) and fund these loans by selling them or borrowing from the private sector with surplus cash.

    What rubbish of a model is this? The whole process of home ownership from land acquisition, house building to selling them are based on real-time market prices except for the mortgages. The main reason the bankers went "socialistic" was because the personal benefits received far outweighed their obligations to shareholders and other owners of their firm's liabilities.

    The socialistic or communist governments succeeded in 'home ownership for the masses' policy is because of forceful acqusition of land and their resultant redistribution to the have-nots. Just go and see Singapore where 80% of the population stay in government-subsidised housing; this was achieved with
    government capital and dictates.

    Giving money to the banks only reinforces bad habits learned during the perod of reckless lending. There will always be available the next rich sucker, in this case, UK's Exchequer. The Banks do not want the 'role of the next rich sucker'. It is the government's destiny.

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  • 111. At 12:51pm on 02 Feb 2009, foredeckdave wrote:

    U9461192 & SergeantDigby

    The house price bubble and the fall in house prices was only the tipping-point for a far deeper malaise in the financial markets. If it were just housing problem then the economies of both UK and USA could have taken the hit and moved on.

    What happened was that, as the housing bubble burst, it revealed that similar malpractice had been happening throughout the international financial system with all types of debt i.e. they had lent far far more than was supported by 'true' value assets.

    This, combined with the final realisation, that the trade imbalances could not be sustained has meant that no financial institution can not trust the value of any paper asset it holds. Hence their inability to properly value the 'assets' they hold and therefore their unwillingness to lend to each other let alone us.

    It has been convenient for the government and the banks to link this whole problem to housing. The real truth is that nobody knows what the true value of anything is any more.

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  • 112. At 1:36pm on 02 Feb 2009, SergeantDigby wrote:

    #107 and #109

    Thanks for the replies.

    So, if I have it right, you're saying that the property market is an example of the issue, as opposed to the cause. I can accept that, but I had thought that property was the main asset class within the group of assets which have excessive finance raised against them.

    I had heard an estimate on the radio of the total worth of the UK, in terms of assets. I can't remember the figures but I had thought that property (realty) was the largest class. I can't seem to find it on the internet.

    Anyway, I understand that (but not how) that debt has been created against value in assets that doesn't exist. It only existed because the availability of credit meant that people would be willing to pay that price for it.

    But, if there is no real definitive value to any asset, how do you value the bottom at which the situation has unwound? Wouldn't this be the point at where there is sufficient debt to sustain the value of the products? And surely then the answer is to create the capacity for debt that is needed to support the value of the assets?

    Also, I wonder how gold has risen in value. Is this a different sort of asset?

    I think I ought to take a course in economics rather than ask questions on here, but I am interested if you have any (simple) answers.

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  • 113. At 2:57pm on 02 Feb 2009, U9461192 wrote:

    111 foredeckdave:

    If it were just housing problem then the economies of both UK and USA could have taken the hit and moved on.

    How so? We had a housing bubble right here in the UK in the late 1980's/early 1990's. It bust and we had a nasty recession. All by ourselves. All on our own. No 'global problem that started in America' to blame it on that time.

    The point is that a housing bubble and bust will cause a nasty recession all by itself. Oh look. It has. I take your point about all the other over-valued assets that were kicking around but the money that allowed those assets to be driven upwards ultimately derived from the insane notional value of all this over-valued property.

    At the bottom of all our woes sits a classic housing bust. It was understandable that places like the US and Ireland had one. After all they'd not really had one for a while and could reasonably claim they were ignorant of the risks they were running. Not so the UK. We'd had one only 15 years previously. We knew the risks we were running which is why websites like houspricecrash etc have been running for years warning of the lunacy at large in the land. But Gordon thought he knew best. he even bragged about what a great job he'd done in 2005 because the property bubble didn't burst. It's all on record.

    He knew the risks. And ignored them. He rode the bubble thinking he could tame by the sheer force of his will. He was wrong. No change there then.

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  • 114. At 3:24pm on 02 Feb 2009, foredeckdave wrote:

    #112 SergeantDigby

    "But, if there is no real definitive value to any asset, how do you value the bottom at which the situation has unwound? Wouldn't this be the point at where there is sufficient debt to sustain the value of the products? And surely then the answer is to create the capacity for debt that is needed to support the value of the assets?"

    That's the nub of the problem. Nobody knows where the bottom will be because nobody can accurately value anything anymore.

    National economies and international relationships are actually based upon trust. If you can't trust your own position then you cannot project trust to others outside of your economy. Hence, the total loss of confidence.

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  • 115. At 3:43pm on 02 Feb 2009, MrTweedy wrote:

    No. 112. SergeantDigby

    In a well run economy, the aim is for households and businesses to generate cash from their earnings, and to save a proportion of this cash for the future. These savings are deposited at a bank. The bank then lends the money to those businesses who can use it to expand their production and reach higher earnings. The business then pays the loan off quickly, in a year or two years, from the proceeds of its higher earnings.

    This model is fairly stable, as businesses and households have cash to fall back on when the economy hits any slow downs along the journey. Because the model is fairly robust, employees are able to borrow long term to buy houses, as the employment market and housing markets are not too volatile, enabling the banks to take the risk on lending money for long periods of 25 years. The loan is secured against the house, which can be sold for a robust price if the borrower defaults. The economy is said to have a stable equilibrium.

    The problem occurs when households, businesses and governments borrow much more than is normal under the model above. Debt is a way of spending tomorrow's earnings today. If tomorrow's earnings are less than expected, then the borrower cannot repay the loan, causing the lending bank to suffer a bad debt if it cannot sell the asset on which the loan is secured. If the bank suffers a bad debt, it cannot lend as much money as before, which can in itself cause a slow down in the economy, as those businesses which need short term finance can no longer obtain it.

    The problem economy usually starts with households being enticed to borrow money to buy assets, by agents and brokers who say the assets can only go up in value and the buyer can then sell for a fat profit. The stockmarket rises, and the corporate bond market rises, and consumers tend to spend more, as they feel their wealth is backed by the perceived value of the assets they own. This makes businesses feel they can easily attain higher profits and they then start borrowing more than is usual. The business managers and owners then take out large bonuses and dividends, leaving the business without sustainable cash reserves.

    Eventually, the debts must be repaid, which means that households and businesses spend less, causing the value of assets and business profits to fall.

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  • 116. At 4:39pm on 02 Feb 2009, derek_frae_glasgi wrote:

    No doubt the economy will be hit again today. Heaven forbid that the South East should come to a grinding halt and those poor bankers and dealers cannot get to their desks in the city!
    Like a good economic forecast , this was predicted and once again the government bodies failed to react.
    Sound familiar???

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  • 117. At 5:11pm on 02 Feb 2009, foredeckdave wrote:

    #113 U9461192

    If this were a simple recession then your argument would be valid. However, like it or not, this is a depression and the causes are far far deeper than a mere housing bubble which will self correct.

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  • 118. At 6:24pm on 02 Feb 2009, twarres wrote:

    Britain is more protectionist than most. The government criticises others countries when they do not like what they do and then suggests working together to ensure we get ahead. Ireland and Iceland have had a lot of criticism.
    Why on earth should the Chinese and Russians have a global economic regulation run by the West? They would be mad to do so.
    Britain (and to a lesser extent America) are not multilingual enough. Why should you buy products that you do not need when the exporter does not bother to speak or write your language, will forever moan about your lack of Human Rights (except when they need an economic favour).
    India gets off lightly.

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  • 119. At 6:36pm on 02 Feb 2009, e2toe4 wrote:

    The questions by Sgt Digby have prompted some very interesting and informative answers.

    This probably won't be one of them...(!) because diving into the different layers beneath the present collapse tends to take the debate into almost abstract areas, where the explanations get less and less satisfyingly 'concrete' and more and more, almost metaphysical.

    The "I promise to pay the bearer on demand" part of the money is really the key one...if enough people start to doubt either the absolute promise..or the on demand part then suddenly all you have left is a grubby rectangle of paper.

    I am not trying to obtusely deny all the technical reasons for the credit crunch and subsequent recession/depression.

    But I feel one area not perhaps being highlighted...but important nevertheless... is the ethical (or even moral) vacuum that gripped large areas of the economic areas of society.

    The Bankers are presently in the frame but the context of their behaviour also includes the almost total evaporation of any notion of wider social responsibility in companies, councils and government.

    Whatever wasn't precisely and exactly provable to be wrong to a sub-atomic level seems to have been judged "perfectly okay then!"

    So the politicians who deploy semantics to deny the clear reality of the things their words have described; don't merely 'wriggle smartly off the hook' but over a period of time they debase totally the entire arena of political debate.

    When Banks charge more in 'fees' to tell someone they are overdrawn ..than the amount they are overdrawn---they can point to the small print in the contract ..but they are destroying the large print in the underlying social contract that supports the 'Terms and Conditions'.

    Equally when large companies totally misuse the direct debit/estimated bill idea to simply improve their cashflow--they don't just employ a smart move in the small print. Over a period of time they simply debase the idea of 'good service' completely.

    Another commonplace is charging premium rate phone charges for 'help' or 'technical support' and extended 'hold techniques' on 0870 numbers where people can pay a £1 to listen to condescending messages that one's call 'is very important to us" before giving up and hanging up... all contribute to that creeping feeling that 'this isn't right'.

    (The warped priorities in artificially extending "service calls" to charge people for seeking help and redress for company or product failures, are echoed in the warping effect of running TV shows that are just designed to generate phone call revenues)

    The New Labour project and the New Tory project alike both dump what ordinary people feel are their 'core beliefs' in favour of focus group, key-voter, issue targeting...and then both wonder why in general the public don't see one millimetre of difference between them.

    See what I mean...not an ounce of economic analysis here!!...Just waffle.... but the bottom line is that when all these big business people, Bankers, Politicians and the like finally combine to tell everyone 'Don't Panic'!!!----- then it's possible that it is PRECISELY this moment, of maximum volume, when people suddenly look up and wonder 'Why should I believe them..they have been lying for years'...and rush to withdraw their cash...stop buying cars ...or whatever it is they are being exhorted NOT to do.

    It isn't "The economy stupid!!".... and never really was---" it's the morality, stupid!"-and the ethical system founded on it---and the debasement of that is one reason that, i my opinion; we now have so many grubby rectangles of paper-and so few nice £20 notes, so to speak----- when the promises simply are not believed the value they support disappears without trace...

    Aplogies for the overlong contribution...but as it's a dated Blog not many will read it I guess....But at least i got it off my chest!

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  • 120. At 8:29pm on 02 Feb 2009, Neil Sutherland wrote:

    #119 e2toe4

    An excellent contribution which gets to the core of where it all went wrong; many are getting too hung up on the economic technicalities which are are right in some respects but irrelevant.

    Morality would have kept the country on course.

    Ethics would have kept the country on course.

    Integrity would have kept the country on course.

    Honesty would have kept the country on course.

    Putting the peolple first would have kept the country on course.

    Principles never change, only the abuse of them.

    Our leaders have a lot to answer for which is why there is no room for bipartisan bloggers anymore; after all Dave's a Tory and pretending not to be one and Gordon's not a socialist although he's doing his best to show that he is.

    The system must be changed and in future there must be no room for deceitful and lying feather nesters.

    I read somewehre today that this sort of change never happens within Parliament; it happens without.

    As in France, the people here are getting restless and when we finally get our act together, this house of cards will fall and the leaders will be sent packing.

    I have no truck with the fools who govern this country and thye majority of fools who rule this this world; they have let so many decent people down.

    At the same time I don't have any truck for the British jobs for British workers and the Johnny Foreigner brigades; you sign up to the EU, you abide by their rules. If the rules are being bent, then you have a case; you don't have a case just because someone is Italian or Portuguese.

    However if these wannabe refinery workers march on London, I will be there as well as I imagine the majority of these bloggers will be too. We will be there with our different points of views but that is no problem as long as principles are upheld, tolerance being one them.

    When Gordon and the Brown Noses are finally sent packing we can all tell him that it was a crisis that started, not in America, but in a little place called Lindsey, North Lincolnshire!

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  • 121. At 10:05pm on 02 Feb 2009, HunkieDunkie wrote:

    #119 e2toe4

    Can't help but agree with your general line...

    There is much more to the truth, the whole truth, and nothing but the truth, that we are being spoonfed by Godro and his NuLabur chums...

    Our Commercial Banks lend money, they do not 'buy in' other banks securitised debt... Have a look at the Securitised paper that is out there... It is staggering...

    Would you like to consider what an RBS promisory note might be worth - based on its current assets? The share price collapse might give a clue...

    The pack of cards is based on confidence... what we have just now is one elaborate confidence 'trick'... If Godro fails to pull it off, we are all doomed...

    Britains never never never shall be slaves...

    Don't believe it...

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  • 122. At 11:41pm on 02 Feb 2009, Peter David Jones wrote:

    Hi Stephanie

    Thank you for a balanced article as many of your colleagues on here seem incapable of one. The truth is Davos must have been embarassing for Gordon Brown re: his requests for our banks to lend more domestically and after having proclaimed " British Jobs for British workers". Even by his standards to then rail at protectionism is breathtaking.

    So many of his sins are coming home to roost. He is not the only cause of current problems as we all know that a major issue was lending in America to people who were never likely to be able to pay. But to quote but one issue Northern Rock was issuing 125% mortgages and the FSA ( promoted by Gordon Brown) was asleep.

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  • 123. At 08:39am on 03 Feb 2009, SensationalJon wrote:

    #119 e2toe4

    That post should be printed and posted to Gordon Brown, David Cameron, the bankers and there ilk. It is absolutely correct and superbly illustrated.

    You identify the problems that nearly everyone who I speak to says. When politicians and then like try to claim "ah, what you thought wasn't what I meant" like with the "British jobs for British workers" and then on the other hand we are told not to panic about the economy it produces the exact opposite. This is the problem that Brown - and Cameron - are going to have. We don't believe Brown and a lot of people remember how harsh the Tories were in the last recession, and things aren't that bad (yet).

    We need a new broom. We need someone like an Obama who can come in and start getting the ethics, morals etc back on track.

    Thanks for posting that - it was a great read.

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  • 124. At 09:11am on 03 Feb 2009, U9461192 wrote:

    117 foredeckdave..

    #113 U9461192

    If this were a simple recession then your argument would be valid. However, like it or not, this is a depression and the causes are far far deeper than a mere housing bubble which will self correct.


    A depression is just a 'bad' recession. The underlying cause remains the same. Massive housing boom followed by massive housing bust. The yanks at least have the excuse that they had no recent historical equivalent. We (Brown) have no such excuse. Hence the government's desire to over-complicate the cause.

    It's a housing bust. A very big housing bust. A contemporaneous housing boom and bust in many of the worlds major economies. What jolly bad luck to have a confluence of such incompetent leadership as Bush and Brown. But there it is.

    Bush has gone but we're still stuck with Brown whose only political 'skill' seems to be the inventiveness of his denials.

    But don't worry it will eventually work through the system as long as nobody does anything really stupid. Like printing money. Oh.

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  • 125. At 09:17am on 03 Feb 2009, U9461192 wrote:

    #123

    We need a new broom. We need someone like an Obama who can come in and start getting the ethics, morals etc back on track.


    That's what Nu Labour told us we were getting in 1997. Lots of razzamatazz... 'Thiiiiings can only get betttter..' Experience proves it was one big fat con. And Obama will prove to be the same disappointment. He's just Blair MkII.

    Just as Brown would have been better advised to warn Bush of the folly of the US housing bubble from the context of our own in 1989 rather than convincing himself he had conquered 'boom and bust' then the US could have saved themselves an awful lot of disappointment by learning the lessons that we have painfully learned of style over substance since 1997.

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  • 126. At 09:30am on 03 Feb 2009, foredeckdave wrote:

    124. U9461192 ,

    I totally disagree with you.

    When the whole world is in a perilous economic state, to cling to the idea that it is just a housing bubble is incredible!

    So, it this depression (and the implications are far worse than a bad recession) ultimately leads to another World War you will name it The House War will you?

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  • 127. At 09:42am on 03 Feb 2009, John_from_Hendon wrote:

    #124 and #113

    On the Causes of the Recession/Depression/Slump

    Here is my twopennyworth:

    When the history is written my opinion is that the causes will found to be complex, but all essentially revolving around the idea that the market will stop anything bad happening as it will self correct and therefore requires no regulation. Call it Thatcherism/Reganomics or what ever.

    The housing bubble is a symptom of the increasing unsoundness of money over the last fifteen to twenty years. (Sound money by my definition is money that has a reasonable cost and gives a reasonable return, along with reasonable rates of pay to labour.)

    Bush and Brown just carried on with the prevailing orthodoxy as they were assured by the 'experts' of the Fed and the Bank of England that all was well with the prevailing orthodoxy.

    It is the promulgators of this erroneous economic philosophy who are at the bottom of the economic catastrophe. People like Milton Friedman and the 'Boys from Chicago', but on the other hand they too were influenced by personal greed and Nobel prizes!

    I do however think that the Good and the Great in the regulation business have a special culpability, i.e. the Governor of the Bank of England the the head of the Fed.

    We are unfortunately living through a catastrophe caused by adhering to a pseudo-scientific economic paradigm that was frankly wrong.

    This is why I do not see that it is an intellectually tenable situation to retrain the services of any of the people who have been in change of regulation to help us work through to a new era of sound money. They just do not understand either what has happened or what is to be done about it.

    This is also why I advocate a plan to return to sound money as soon as possible - and further that this plan should be made public as this will have the twin advantages of causing long term borrowers not to borrow that which they cannot afford to repay and also that the savers and investors will not batten down the hatches so violently that they exacerbate the downturn.

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  • 128. At 09:49am on 03 Feb 2009, SergeantDigby wrote:

    Cheers for the replies Mr Tweedy, Foredeckdave and e2toe4. Just been reading them.

    I am feeling very existential this very moment in time, everything being dependent on confidence alone.

    However, there must be some sort of systemic friction which prevents prices fluctuating on the whim of whatever somebody is willing to pay?

    I mean, businesses have profit margins they cannot survive outside of and people cannot sell their houses if they cannot pay off the mortgage.

    Now, a lot of the government action has been to attempt to prevent repossessions, administration and receiverships. This has been a stalling tactic to buy time for credit to start moving again.

    Now, is this helping the situation or making it worse? Is this, metaphorically, putting a brake on it or procrastinating?

    If the natural value of things needs to be found before we things will get better, aren't we better allowing this to happen?

    I mean, this is a form of "survival of the fittest" at the moment. By helping the weak structures, businesses and individuals survive (financially speaking) are we actually building structural flaws into our economy?

    Should we actually be letting natural selection take place?

    From the government's perspective, is doing nothing actually the right thing to do?

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  • 129. At 09:50am on 03 Feb 2009, U9461192 wrote:

    #126

    I totally disagree with you.

    When the whole world is in a perilous economic state, to cling to the idea that it is just a housing bubble is incredible!


    I find it incredible that anybody could fail to see that the underlying problem has been a housing bubble that has bust. All the sub-prime stuff that we're being told was the problem is actually sitting on top of the housing bubble. If it wasn't for a housing bubble there would have been no sub-prime debacle. Sub-prime (in that it ever made any sense) only made 'sense' by assuming onward and upward house price increases. A housing bubble.

    All the other exotic bonds and mortgage bonds and all that buffoonery likewise were sitting on onward and upward house price assumptions.

    Housing boom. Housing bust. Oh woe, if only we could have seen it coming. Oh calamity, if only we had had an example in recent history as to how all this might end.

    Oh.

    Credit Crunch? Baloney. Housing bubble. You know it. I know it. Brown knows it.

    The House War?

    In the same sense that WWII is the Wall Street Crash War.

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  • 130. At 09:57am on 03 Feb 2009, U9461192 wrote:

    #127

    but all essentially revolving around the idea that the market will stop anything bad happening as it will self correct and therefore requires no regulation. Call it Thatcherism/Reganomics or what ever.

    Careful. Shades of the BBC's non-partisan defence of Brown on the day he finally pulled his finger out and rescued the banks. You remember? It wasn't 'Failure of Brown's regulatory system' or 'Brown's regulatory system humiliated'. It was 'Failure of Thatcherism' complete with handy archive footage of pin-striped yuppies and girls with big perms and huge shoulder pads.

    Anybody would think that the Labour party hadn't been in power since 1997.

    The BBC single-handedly turmed Labour's 20% lag in the polss into a mere 5% lag - the so-called 'Brown Bounce' by their partisan reportage. Which is why although I take great hope from news that Brown is again 15% adrift I fear for what the forces of misinformation are capable of.

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  • 131. At 10:13am on 03 Feb 2009, U9461192 wrote:

    #128

    Now, a lot of the government action has been to attempt to prevent repossessions, administration and receiverships. This has been a stalling tactic to buy time for credit to start moving again.

    Just cynical moves to attempt to avoid 'beating' the records set by the Tory housing bust of 1989. The simplest and quickest way to get through this housing bust would be to establish a real 'floor' for house prices instead of keeping them artificially inflated by historically low interest rates. Those low rates are just pure politics. Defer the slide in house prices. Attempt to avoid 'record' repossession numbers.

    Let's suppose though that house prices were overnight to revert to 50% of their peak value (about 'fair' price). Okay those who over-paid in the last few years and lost their job would face repossession. Shame.

    But the other 95% of the population would just continue to pay their mortgage. New first time buyers could actually qualify for a mortgage. They'd have more reasonable monthly payments on their fairly priced asset. They could afford to have kids.

    All this government is doing is prolonging the bust. Buying themselves time while they attempt to 'shape the narrative' that we 'need' is 'fiscal easing'. Ie print money. Devalue the currency. Inflate away all our debt. To hell with prudence. Borrow as much as you like and when the wheels come off the government will just print free money and make it all better again.

    See Zimbabwe for how well that works.

    The government is keen to spin the notion that these are exceptional circumstances that require exceptional actions. They are only exceptional in the sheer scale of stupidity that it took to get us here. But the sure-fire way to get out of this is to tell the truth, tighten our belts and pay off our debts. And, yes, take our beating. Anything else is just wishful thinking and a last throw of the dice by a soon-to-be ex-PM, the discredited Gordon Brown.

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  • 132. At 10:55am on 03 Feb 2009, calcination wrote:

    Sergeant Digby #128- prices will always fluctuate to some extent depending on how much people are willing to pay and what money is available to pay with. It is how the system is supposed to work.

    In theory you could prevent mass misery by forcing people to reschedule their debts until they are able to pay them off, whilst still keeping them in their houses. It would be better than chucking them out into the street and adding to those needing social housing, which thanks to Brown (And others) is in a poor state.

    Inflating away our debt on the scale of Zimbabwe is unlikely to happen. The gvt can add a few billion here and there and it won't make much difference to inflation, despite what people talk about it bringing down the system. If adding to the money supply was so bad, why let it happen the way it has done the last 8 years?

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  • 133. At 11:13am on 03 Feb 2009, SergeantDigby wrote:

    U9461192

    That's really what I was asking. Thanks for the answer.

    With regards to Gordon Brown, I cannot assess how culpable he is. I am no economist, that's for certain.

    However, I know that out of the entire UK, Gordon Brown is the only person who can take responsibility for the current position.

    I am not saying "take the blame". Responsibility is a much wider attribute.

    By diverting blame to "America", he is denying people the opportunity to vent their grievances and denying his responsibility. I cannot see how UK citizens can feel "in control" with such a response.

    We have no control over "America", but we do have control over our elected representatives.

    This is where the issue of morality hits home a bit, because I think that confidence could be partially restored by somebody taking responsibility. And that does mean accepting criticism for what has gone before.

    If Gordon Brown will not do it, who else can?

    I am not saying he should resign, but I don't think he has much else to offer right now.

    I think at this point in time he cannot see it, but if he doesn't put the country's need above his desire to be PM, he will continue to pay the price with both our well-being and his own reputation.

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  • 134. At 11:28am on 03 Feb 2009, MrTweedy wrote:

    No. 128 SergeantDigby

    The best way of solving an asset bubble is never to allow one to develop in the first place. After the depression of the 1930s, world leaders put in place rigorous financial legislation which successfully protected the world economy from asset bubbles.

    However, Tony Blair and his counterpart in the USA (I think it was Bill Clinton), were persuaded by the theory that "hey, we haven't had a large asset bubble since 1929, all this financial regulation is just getting in the way". People had forgotten about the risks of large asset bubbles, and felt that the safety regulation was holding back the expansion of a globalised capital market.

    The financial legislation which had protected the world since the 1940s was then swept away and withdrawn by Mr Blair and the US government. The result is another asset bubble on a similar scale to the 1929 Wall Street Crash. The whole world is now threatened with a severe recession, or downright depression.

    Unfortunately, I believe that world governments will not be able to stop the consequences of this current crisis.
    The damage done to the world economy is largely irreversible and will be paid for over many years to come.

    The attempts by the US and UK governments to keep the banks afloat are wholly necessary. However, the level of bad debts suffered by the banks will be enormous. This means the banks will not want to lend to anyone who is considered a credit risk in the future. People with negative equity will not be able to move up the housing ladder, as their mortgages will be larger than the value of their houses. Businesses who cannot generate cash will find it hard to borrow to keep afloat.
    Demand for goods and services in the global economy will fall, as consumers and businesses are forced to cut their cloth according to their means. This will cause high level of unemployment.

    The government cannot replace the private sector as the generator of wealth, hence the government cannot prevent the recession/ depression now that it has started. Indeed, the government could be making things worse by its attempts to prevent the markets finding a bottom. The bottom will eventually be found anyway, but the recession could be prolonged by governments attempting to spread the pain over many years to come.

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  • 135. At 12:26pm on 03 Feb 2009, foredeckdave wrote:

    This comment was removed because the moderators found it broke the House Rules.

  • 136. At 1:59pm on 03 Feb 2009, John_from_Hendon wrote:

    #130. U9461192 wrote:

    "Careful...."

    I did not say and am not saying that those who claim leadership are not culpable or should escape blame, but what I am saying is that the blame also lies with the previous regimes and I think more importantly with the civil servants and so called professionals and advisers who designed the system that caused the problem.

    No British government, since the late 1970's is without blame - i.e. both the Tories and Labour. I see neither party being any fitter than the other to 'lead' us out of this mire. If I had to choose I would want a government of national unity that also included the Liberal Democrats second choice would be a coalition with the LDs.

    I think it is naive to think that the Tories have any better answers than Labour as both are so deeply wedded to the failed economic paradigm.

    However, I am essentially only interested in 'vengeance' where it will help in fixing the problem - hence my view that the apparatchiks who ran the system need replacing and are unfit to manage the recovery.

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  • 137. At 2:32pm on 03 Feb 2009, calcination wrote:

    SergeantDigby #133 brings up control- that is an important point. IIRC studies show that depression and health can be roughly correlated to how much control you feel you have over your life and what you do. More control, less depression and ill health. Less control, more depressed etc.

    And in a globalised world with politicians only listening to rich people or pressure groups (Hence the rise of the BNP) you have less control over your life than you used to or feel you aught to. It doesn't matter when things are going well, but when the stability you've spent the last decade building for youself suddenly goes, well, you see some of the responses on here.

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  • 138. At 2:55pm on 03 Feb 2009, StephenG wrote:

    #136
    "No British government, since the late 1970's is without blame - i.e. both the Tories and Labour."

    I fear you need to read some history - the British economy was going to hell in a handcart long before the late 70s (unless you really meant to refer to the 1870s - that would be more like it)

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  • 139. At 4:22pm on 03 Feb 2009, U9461192 wrote:

    #135 foredeckdave

    U9461192 you need a new 'handle'. I would suggest MYOPIC.

    Tut tut. No need to be rude just 'cos others don't fall for the Labour Party misinformation.

    if you stopped ranting and thought about what you were reading you just might learn something.

    The only thing to be learned is how desperate this current apology for a government is that we are all sufficiently confused and misinformed so that we forget who was actually in charge of the ship of state for the past 12 years. We're all supposed to swallow these helpful analogies about Brown being just the man to pilot/captain/drive the bus 'coz he's got the 'experience'.

    Too bad he didn't use all his self-proclaimed experience all gained 'on the job' to avoid steering us into such a financial hurricane in the first place. Too bad too that since he was such a magnificent and experienced captain he didn't think it worthwhile getting on the blower to the USS America and warn them off as well.

    As I've said before. The only true gift Brown appears to have is explanations as to why none of this debacle is his fault. It's all the banks fault (for lending too much money against over-valued housing assets - that housing bubble you don't want to acknowledge). Or it's all the yanks fault (for lending too much money against over-valued housing assets - again, that housing bubble you don't want to acknowledge).

    It's a housing bubble and bust. It really is that simple.

    Of course it suits Brown and the Labour Party to throw up chaff about 'sub-prime' and CDO's and whatever to suggest that well, it all got a bit complex and really, nobody could have seen this coming..... and anyway it certainly wasn't our fault or oversight. No sirreeee.

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  • 140. At 4:35pm on 03 Feb 2009, U9461192 wrote:

    SeargentDigby

    However, I know that out of the entire UK, Gordon Brown is the only person who can take responsibility for the current position.

    EXACTLY!! When the economy was going 'great'. Ie we were all borrowing 100bn a year to spend on foreign holidays, German cars and over-priced houses then good ol' Gordon would pop up every budget day to tell us all how clever he was and, just for good measure, to really nail on our collective cleverness then he too would be borrowing 40bn this year to pay the nurses.

    Way-hay. We've collectively borrowed and squandered another 150bn quid from our future. Feel the cleverness. Just feel the quilted luxury of my miracle economic robes. Aren't I clever? Miracle chancellor me. That's why I had made these 'miracle' robes.

    Now he has been unmasked as nothing more than a fraud. A naked chancellor prancing about the world stage. Oi Gordon. Get some clothes on! You're embarrassing us all.

    But instead of 'fessing up and dressing in sackcloth and ashes for his part in the destruction of the UK economy he's still prancing about naked telling us that we just have to believe in his miracle robes and they'll magically reappear. After all he can still see them. If you can't see them it must be you who is wrong. If the IMF can't see them then obviously it is the IMF who is at fault.

    So basically on Gordon's list of folk to blame, in no particular order, are... the yanks, the banks (particularly RBS), the IMF, the failure of history to provide an example for him to follow to lead us out of this debacle, the IMF, the Tories and anybody at all who disagrees with him.

    Essentially it's all our fault.

    Thanks for your time Brown. We'll let you know.

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  • 141. At 5:05pm on 03 Feb 2009, John_from_Hendon wrote:

    #138. chivalrousStephenG wrote:

    "#136
    "No British government, since the late 1970's is without blame - i.e. both the Tories and Labour."

    I fear you need to read some history - the British economy was going to hell in a handcart long before the late 70s (unless you really meant to refer to the 1870s - that would be more like it)"


    If you are referring to the long term decline of the UK I can agree with you. However it is my opinion that the root cause of the present problems stems from the concept 'light' regulation instituted as an act of policy progressively by Mrs Thatcher's government on the 'intellectual' grounding of Milton Friedman.

    It is not history to me I lived through the post war era, rationing, Suez, the winter of discontent and the IMF bailing out of Sterling, Harold Wilson's infamous 'Pound in your pocket speech', etc. etc.

    If we had retained more regulation over the banks and financial institutions, or were more intelligent about such things, then we may have averted the present crisis - so I refute your criticism.

    I would ask you one question - under whose management was there a philosophical shift to reduce regulation? I do not think anybody could come up with any other rational answer based on the facts, other than Mrs Thatcher's regime.

    This is why I see the present incumbents in the roles of regualtors as a major part of the problem and take the very firm position that they should all go.

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  • 142. At 6:14pm on 03 Feb 2009, StephenG wrote:

    #141

    Thank you - a very interesting response. I can't recall so much of our sad recent history as you but it still seems pretty familiar.

    I was indeed thinking of the long term relative decline of the UK, reducing industrial base, increased reliance on first overseas investments, then services in general and latterly financial services in particular to balance our books, the totemic determination over decades (at least from from the return to the Gold standard in 1925/26) to maintain a high sterling exchange rate as if that on its own would induce economic strength, the failure since at least the 1870s of UK schools to give sufficient technical and scientific content to education.

    We could go on and on with this litany but my real point is that it is this background which made us so excessively dependent on the single industry of finance - like a S Wales pit village written large. I would agree that we need a clean sweeep of the Regulators and of the financial institutions. There are some outstanding examples of well paid culprits who are still coining it in. I would not agree tugh that light regulation is the cause of the problem. the FSA and its predecessors have imposed vast reams of it, rather the regulation has seemingly been incompetent.

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  • 143. At 7:57pm on 03 Feb 2009, John_from_Hendon wrote:

    #142.

    I wonder if the incompetent regulation of which you write is deliberately so?

    Why 1870 - are you thinking of the 1870 Education Act I recall a lecture on the subject in 1970 or 1971 delivered by Asa Briggs - a very important piece of regulation if I recall correctly. The start of widespread proper education.

    I prefer to recall the 1871 Bank Holiday Act!

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  • 144. At 11:56pm on 03 Feb 2009, foredeckdave wrote:

    How far back do we go - The Great Reform Bill (1832) or Repeal of the Corn Laws (1847)?

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  • 145. At 08:59am on 04 Feb 2009, MrTweedy wrote:

    No. 141 John_from_Hendon

    You are right that Margaret Thatcher and Ronald Reagan introduced lighter regulation in the 1980s. However, it was Bill Clinton's administration in 1999 which abolished the Glass-Steagall Act of 1933. This allowed US retail banks to borrow money for the first time, rather than relying wholly on their depositers for funds. Tony Blair's government then copied the idea, allowing British banks to begin borrowing in 2001.

    This borrowing of cheap money from Japan and China caused the huge asset price inflation of recent years, and hence the current crisis.

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  • 146. At 09:29am on 04 Feb 2009, U9461192 wrote:

    145.. MrTweedy

    Dead right.

    This borrowing of cheap money from Japan and China caused the huge asset price inflation of recent years, and hence the current crisis.

    And which asset in particular? C'mon now, it's on the tip of everybodies tongue. C'mon, spit it out....

    Houses. There. Don't y'all feel better now?

    House price boom and bust. Bigger and better and more widespread than the Tories puny 1989 effort but a house price boom and bust nonetheless.

    All the diversionary 'it was the banks, it was the yanks' garbage from Brown and his apologists is just pure moonshine. An effort to over-complicate the picture so that the government and treasury and political and economic commentators can kid on to themselves it was just all too awfully complex for any one person to unravel. Which is why they 'never saw it coming'.

    The sad fact is that the reasons for this worldwide property slump 'that started in America' are so screamingly obvious it looks like another example of 'group-think' as to why so few people seem able to acknowledge it even after it has been pointed out.

    They couldn't see it coming no matter how many times it was pointed out and now that it has arrived they still can't bring themselves to admit that actually, it really is that simple.

    Housing bubble. Housing crash.

    It's that simple.

    And we're doomed to spend longer thrashing around looking for a 'solution' because uniquely in the UK we have a PM who dare not admit the simple reason for our economic predicament. So he's having to invent all kinds of bogeymen and scenarios to blame and then implementing policy to 'address' these proclaimed bogeymen while completely ignoring the underlying problem.

    Quite the opposite. All his efforts are directed to propping up the insanely over-valued price of property. Even as it lost 20% in a single year.

    So we have interest rates slashed to enable folk to keep up the payment on their insanely over-priced old nail. We have banks exhorted to return lending to 2007 levels. We have banks coerced into mortgage holidays for those who lose their jobs. All for the purely political reasons of avoiding 'beating' the Tories 1989 record on repossessions but completely counter-productive in terms of addressing the underlying problem. The reason we're actually in a recession. the reason nobody has got any spare money to pump into our consumer economy. The insanely over-valued cost of housing.

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  • 147. At 10:17am on 04 Feb 2009, MrTweedy wrote:

    No. 146 U9461192

    You are right, it is a house price boom and bust. However, it doesn't stop there. All other assets are also suffering the same fate, including:

    (i) Stock markets
    (ii) Corporate bond markets
    (iii) Government bond markets (this bubble is still building)
    (iv) Contemporary art market
    (v) Commercial property market
    (vi) Consumer credit market
    (vii) Corporate profits based on artificial growth underpinned by cheap borrowing, underpinned by the asset bubbles
    (viii) Corporate dividends based on corporate profits based on artificial growth..
    (ix) Even relatively low unemployment levels were directly related to the above

    So, you need not stop at just house prices.



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  • 148. At 3:04pm on 04 Feb 2009, jurassicflood wrote:

    One man's protectionism is another man's sustainability. On the one hand we are being told keep things local, remember food miles, air miles, etc. and the next we are being told don't be too insular. Who is right?

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  • 149. At 6:01pm on 06 Feb 2009, StephenG wrote:

    143. At 7:57pm on 03 Feb 2009, John_from_Hendon wrote:

    Why 1870 - are you thinking of the 1870 Education Act I recall a lecture on the subject in 1970 or 1971 delivered by Asa Briggs - a very important piece of regulation if I recall correctly. The start of widespread proper education.

    Sorry for the delay in responding - I haven't had access to a computer for a few days!

    I was indeed thinking of the 1870 Act - though it introduced national elementary education (in England & Wales I believe), we missed the opportunity to establish a robust system of secondary education with a high technical content, such as Germany already had at that time.

    The 1944 Education Act finally sought to correct this but was never properly implemented in that there were never as many Grammar Schools as anticipated and the planned Technical schools scarcely appeared at all. Then of course we had the 1980s City Technology Colleges, now supplanted by City Acadademies which sound very impresive but don't really seem to cut the mustard.

    With this sort of background, how can we be capable of competing globally in anything except mendacity and inventing a convincing narrative?

    As to the banking regulations, I couldn't comment as to whether they were deliberately incompetent except that I tend to think that that would require a rather compex conspiracy

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